FASTNET CORP, S-1, 1999-08-18

FASTNET CORP
S-1, 1999-08-18

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1999
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

FASTNET CORPORATION

(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
PENNSYLVANIA 7379 23-2767197
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code No.) Identification Number)
</TABLE>

TWO COURTNEY PLACE--SUITE 130
3864 COURTNEY STREET
BETHLEHEM, PA 18017
(610) 266-6700

(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

DAVID K. VAN ALLEN
CHIEF EXECUTIVE OFFICER
FASTNET CORPORATION
TWO COURTNEY PLACE--SUITE 130
3864 COURTNEY STREET
BETHLEHEM, PA 18017
(610) 266-6700

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
STEPHEN M. GOODMAN, ESQ. LORRAINE MASSARO, ESQ.
MORGAN, LEWIS & BOCKIUS LLP MORRISON & FOERSTER LLP
1701 MARKET STREET 1290 AVENUE OF THE AMERICAS
PHILADELPHIA, PA 19103 NEW YORK, NY 10104
(215) 963-5000 (212) 468-8000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) THE REGISTRATION FEE
<S> <C> <C>
Common Stock, no par value per share........................... $50,000,000 $13,900
</TABLE>

(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
UNDERWRITERS MAY NOT CONFIRM SALES OF THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 18, 1999

PROSPECTUS

[LOGO]

COMMON STOCK

This is the initial public offering of shares of FASTNET Corporation's
common stock. We expect that the initial public offering price will be between
$ and $ per share.

We have applied to list the common stock on the Nasdaq National Market under
the symbol FSST.

INVESTING IN OUR SHARES INVOLVES A HIGH DEGREE OF RISK. SEE RISK FACTORS
BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER
BEFORE YOU INVEST IN THE COMMON STOCK BEING SOLD WITH THIS PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------ ------------------
<S> <C> <C>
Initial public offering price........................................... $ $
Underwriting discounts and commissions.................................. $ $
Proceeds, before expenses, to us........................................ $ $
</TABLE>

The underwriters may purchase up to an additional shares of common
stock from us at the initial public offering price less underwriting discounts
solely to cover over-allotments.

ING BARINGS

SOUNDVIEW TECHNOLOGY GROUP

FAC/EQUITIES

The date of this prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................... 4
Risk Factors..................................... 9
Use of Proceeds.................................. 19
Dividend Policy.................................. 19
Forward-Looking Statements....................... 19
Capitalization................................... 20
Dilution......................................... 22
Selected Financial Data.......................... 23
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 25

<CAPTION>
PAGE
-----
<S> <C>
Our Business..................................... 33
Management....................................... 46
Certain Transactions............................. 52
Principal Shareholders........................... 53
Description of Capital Stock..................... 54
Shares Eligible for Future Sale.................. 57
Underwriting..................................... 59
Legal Matters.................................... 62
Experts.......................................... 62
Where You Can Find Additional Information........ 62
Index to Financial Statements.................... F-1
</TABLE>

Information contained on FASTNET's Web site does not constitute part of this
prospectus.

FASTNET-Registered Trademark- and the FASTNET logo are registered United
States trademarks. Total Managed Security-TM- and CC/vpn-TM- are trademarks of
FASTNET. Other trademarks and tradenames appearing in this prospectus are the
property of their respective owners.

You should rely only on the information contained in this prospectus. We
have not authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should
not rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business and financial condition may
have changed since that date.

UNTIL , 1999 ALL DEALERS SELLING SHARES OF THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS AND SUBSCRIPTIONS.

3
<PAGE>
PROSPECTUS SUMMARY

THIS PROSPECTUS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE
IN THIS PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU
SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS SECTION STARTING ON PAGE 9 AND
THE FINANCIAL STATEMENTS, BEFORE MAKING AN INVESTMENT DECISION.

FASTNET

OVERVIEW

We are a growing Internet service provider targeting small and medium sized
enterprises in selected high growth markets in the mid-Atlantic area of the
United States. We have been providing Internet access services to our customers
since 1994. We supplement our dedicated Internet access services with a
comprehensive suite of enhanced products and services that are designed to meet
the expanding needs of our customers and increase our revenue per customer. The
services we provide include:

- INTERNET ACCESS SERVICES--connectivity to our regional networks that
provides our customers access to the Internet;

- TOTAL MANAGED SECURITY--electronic protection for a customer's computer
network;

- WEB HOSTING SERVICES--shared and dedicated hosting, collocation and
hosting of Internet applications;

- VIRTUAL PRIVATE NETWORK--a secure seamless network connecting a company's
remote offices, employees and customers via our CC/vpn product;

- UNIFIED MESSAGING--remote access to faxes, paging messages and e-mail
messages through a single Internet application; and

- TOTAL MANAGED BACKUP AND RECOVERY SERVICES--Internet-enabled backup and
recovery services for a company's data network through off-site data
storage.

We have developed a highly reliable and scalable network architecture that
is designed to be efficiently deployed and operated in each of our target
markets. Our network architecture is designed around our customer network
facilities, which we call CNFs. We construct at least one CNF in each region in
which we operate. A CNF is a high capacity data center that provides our
customers with not less than two direct connections to the Internet as well as
access to our enhanced products and services. Each CNF is connected to our
centralized network operating center, which monitors our network and provides
additional redundancy.

We currently have three CNFs in operation servicing the regions in and
around Allentown, Pennsylvania and Harrisburg, Pennsylvania; and the secondary
markets surrounding Philadelphia, Pennsylvania. We are in the process of
constructing four additional CNFs to service the regions in and around Jersey
City, New Jersey and Scranton/Wilkes Barre, Pennsylvania; and the secondary
markets surrounding Washington, D.C. and Pittsburgh, Pennsylvania. We anticipate
that these CNFs will be fully-operational during the fourth quarter of 1999.

4
<PAGE>
OUR CUSTOMERS

We target primarily small and medium sized enterprise customers located in
selected high growth secondary markets. These markets are typically smaller than
the 100 most populated U.S. metropolitan markets. We believe that these
secondary markets will continue to experience high population and economic
growth. Small and medium sized enterprises are often concentrated in these
markets to avoid the higher cost associated with locating in a metropolitan
area. We target small and medium sized enterprises for the following reasons:

- We believe that these enterprises increasingly need high-speed data and
Internet connections to access business information and to communicate
more effectively with employees, customers, vendors and business partners.

- A relatively small percentage of these enterprises currently utilize the
Internet. This number is increasing rapidly. The small and medium sized
enterprise segment is expected to be one of the fastest growing segments
of the Internet industry.

- Many of these enterprises lack the resources and expertise to develop,
maintain and expand, on a cost-effective basis, the facilities and network
systems necessary for successful Internet operations.

- These enterprises often prefer an Internet service provider with
locally-based personnel who are available to assist in developing and
implementing their growing use of the Internet and to respond to technical
problems in a timely manner.

- We believe that these enterprises rely more heavily on their Internet
service provider than larger enterprises and tend to change Internet
service providers relatively infrequently.

OUR GROWTH STRATEGY

Our goal is to be the premier provider of Internet access and enhanced
Internet products and services to small and medium sized enterprises in our
target markets. Key elements of our strategy include:

LEVERAGING CUSTOMER RELATIONSHIPS TO MARKET ENHANCED SERVICES. We offer a
comprehensive suite of enhanced products and services to meet the expanding
needs and complexity of our customers' Internet operations. This strategy allows
us to increase revenue per customer and maintain high customer retention by
strengthening our customers' relationships with us.

LEVERAGING OUR CENTRALIZED SALES AND MARKETING OPERATIONS TO TAKE ADVANTAGE
OF ECONOMIES OF SCALE. We use our centralized sales and marketing staff to help
implement our regional strategy cost-effectively. We intend to hire and train
additional local sales and marketing personnel within our target regions to
complement the core of our sales and marketing staff, which will continue to be
concentrated in one centralized location to maximize efficiency. These
regionally located employees add local market knowledge, expertise and
familiarity to our sales and marketing efforts. This allows us to maintain a
field presence in each of our regions, while maximizing the utilization of our
central operations, where the majority of our employees are located.

ENTERING INTO STRATEGIC RELATIONSHIPS AND MAKING SELECTED ACQUISITIONS. We
intend to enter into strategic relationships and to make acquisitions to expand
our suite of enhanced products and services.

5
<PAGE>
As part of our growth strategy, we recently acquired Internet Unlimited, Inc., a
provider of Web hosting and collocation services.

Our headquarters are located at Two Courtney Place, Suite 130, 3864 Courtney
Street, Bethlehem, Pennsylvania 18017 and our telephone number is (610)
266-6700.

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by FASTNET.............. shares
Common stock to be outstanding after this
offering................................... shares
Over-allotment option........................ shares
Use of proceeds.............................. For working capital, capital expenditures for
the construction of additional CNFs, the
expansion of our sales and marketing
capabilities, other general corporate
purposes and potential strategic
acquisitions. See the section entitled Use of
Proceeds for more information.
Proposed Nasdaq National Market symbol....... FSST
</TABLE>

Please see the section of this prospectus entitled Capitalization for a more
complete discussion regarding the outstanding shares of FASTNET common stock and
warrants and options to purchase shares of FASTNET common stock and other
related matters.

RISK FACTORS

Investing in our shares of common stock involves a high degree of risk. You
should read the section entitled Risk Factors beginning on page 9 as well as the
other cautionary statements throughout this prospectus to ensure you understand
the risks associated with an investment in our common stock.

ADDITIONAL INFORMATION

For additional information concerning the common stock, see the sections of
this prospectus entitled Description of Capital Stock and Where You Can Find
Additional Information.

6
<PAGE>
SUMMARY FINANCIAL INFORMATION

The statement of operations data set forth below is presented on an actual
basis for the years ended December 31, 1996, 1997 and 1998 and for the six
months ended June 30, 1998 and 1999. The balance sheet data set forth below is
presented on an actual basis as of June 30, 1999. The statement of operations
data for the years ended December 31, 1998 and for the six months ended June 30,
1999 is also presented on a pro forma basis to reflect the following events:

- the issuance of 546,984 shares of common stock in connection with the
acquisition of Internet Unlimited, Inc. on July 30, 1999, as if it had
occurred at the beginning of each period;

- the conversion of a $3.1 million note payable into 2,033,334 shares of
common stock, which will automatically occur immediately prior to
consummation of this offering, as if it had occurred on May 28, 1998, the
date on which the note was issued; and

- the conversion of a $1.0 million note payable and associated accrued
interest into 142,431 shares of series A convertible preferred stock in
August 1999, and the conversion of such shares into 142,431 shares of
common stock, which will automatically occur immediately prior to
consummation of this offering, as if each had occurred on May 14, 1999,
the date the note was issued.

The balance sheet data as of June 30, 1999 is also presented on a pro forma
basis to reflect the following events as if they had occurred on June 30, 1999:

- the issuance of 546,984 shares of common stock in connection with the
acquisition of Internet Unlimited, Inc. on July 30, 1999;

- the issuance of 666,198 shares of series A convertible preferred stock in
August 1999;

- the conversion of a $3.1 million note payable into 2,033,334 shares of
common stock, which will automatically occur immediately prior to
consummation of this offering;

- the conversion of a $1.0 million note payable and associated accrued
interest into 142,431 shares of series A convertible preferred stock in
August 1999; and

- the conversion of all outstanding shares of series A convertible preferred
stock into 808,629 shares of common stock, which will automatically occur
immediately prior to consummation of this offering.

In addition, the balance sheet data as of June 30, 1999 is also presented on
a pro forma as adjusted basis to reflect the events described above as well as
the sale of shares of common stock in this offering (assuming that the
underwriters' over-allotment option is not exercised) at an assumed initial
public offering price of $ and our application of the estimated net
proceeds of this offering as described in Use of Proceeds.

The pro forma results are not necessarily indicative of the results of
operations or financial position of FASTNET had the events described above
occurred at the dates described above.

7
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------- -------------------------------------
1998 1999
------------------------ ------------------------
1996 1997 ACTUAL PRO FORMA 1998 ACTUAL PRO FORMA
---------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $1,942,607 $ 3,670,614 $ 5,527,979 $ 6,248,984 $ 2,655,182 $ 3,549,015 $ 4,215,026
Operating expenses:
Costs of revenues....................... 1,162,011 2,333,919 3,241,741 3,448,857 1,542,353 2,116,138 2,259,134
Selling, general and administrative..... 793,336 1,445,224 3,067,740 3,516,740 1,177,104 2,154,680 2,639,977
Depreciation and amortization........... 78,804 177,375 346,568 1,539,121 140,384 247,796 860,451
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses................ 2,034,151 3,956,518 6,656,049 8,504,718 2,859,841 4,518,614 5,759,562
---------- ----------- ----------- ----------- ----------- ----------- -----------
Operating loss.......................... (91,544) (285,904) (1,128,070) (2,255,734) (204,659) (969,599) (1,544,536)
Other expenses, net..................... (23,680) (36,162) (146,220) (39,975) (47,436) (110,842) (19,484)
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss................................ $ (115,224) $ (322,066) $(1,274,290) $(2,295,709) $ (252,095) $(1,080,441) $(1,564,020)
---------- ----------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- ----------- -----------
Basic and diluted net loss per common
share................................. $ (0.01) $ (0.03) $ (0.14) $ (0.22) $ (0.02) $ (0.15) $ (0.16)
---------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted average number of common shares
outstanding........................... 11,575,000 11,575,000 8,880,833 10,613,929 10,761,666 7,000,000 9,615,381
---------- ----------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 524,671 $4,920,117
Working capital (deficit)................................... (5,878,946) 1,846,580
Total assets................................................ 4,322,194 13,532,068
Shareholders' (deficit) equity.............................. (3,575,397) 8,825,914
</TABLE>

The foregoing tables should be read in conjunction with the historical
financial information of FASTNET and Internet Unlimited, Inc. and the unaudited
pro forma combined financial information contained elsewhere in this prospectus.
See the sections entitled Selected Financial Data and Management's Discussion
and Analysis of Financial Condition and Results of Operations for additional
information.

8
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.

RISKS RELATED TO OUR BUSINESS

WE HAVE LIMITED OPERATING AND FINANCIAL DATA UPON WHICH TO EVALUATE US.

We began operations in May 1994 and therefore have only limited operating
and financial data. In addition, we have only recently begun to implement our
current business strategy of targeting small and medium sized enterprises in
high growth secondary markets. Because of our relatively brief operating history
and because we have only just begun to expand beyond the mid-Atlantic area, the
evaluation of our business prospects is difficult.

WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.

We incurred net losses of approximately $115,000 for the year ended December
31, 1996, approximately $322,000 for the year ended December 31, 1997,
approximately $1.3 million for the year ended December 31, 1998 and
approximately $1.1 million for the six months ended June 30, 1999 resulting in
an accumulated deficit of approximately $3.0 million at June 30, 1999. On a pro
forma basis, assuming that the acquisition of Internet Unlimited was consummated
on January 1, 1998, we would have incurred net losses of approximately $2.3
million for the year ended December 31, 1998 and approximately $1.6 million for
the six months ended June 30, 1999. We expect to continue to operate at a net
loss as we incur costs related to expanding our regional network, expanding our
product and service offerings, and establishing brand-name recognition in our
new regions of operation. The extent to which we experience continued losses
will depend upon a number of factors, including the following:

- our successful expansion into target regions;

- our successful implementation of our sales and marketing strategy;

- competitive developments in the marketplace;

- customer demand for our Internet access and enhanced products and
services;

- our ability to attract, retain and motivate qualified personnel; and

- our ability to develop and upgrade our products and technologies more
rapidly than our competitors.

In order to achieve profitability, we must develop and market products and
services that gain broad commercial acceptance by small and medium sized
enterprises and residential customers in our target regions. We cannot give any
assurances that our products and services will ever achieve broad commercial
acceptance among our customers. Although our revenues have increased each year
since we began operations, we cannot give any assurances that this growth in
annual revenues will continue or lead to our profitability in the future.
Therefore, we cannot predict whether we will obtain or sustain positive
operating cash flow or generate net income in the future.

OUR OPERATING RESULTS FLUCTUATE DUE TO A VARIETY OF FACTORS AND ARE NOT A
MEANINGFUL INDICATOR OF FUTURE PERFORMANCE.

Our operating results have fluctuated in the past and may fluctuate
significantly in the future, depending upon a variety of factors, including the
incurrence of capital costs and the introduction of new products and services.
Additional factors that may contribute to the variability of our operating
results include:

- the pricing of Internet access and related enhanced products and services
that we offer;

9
<PAGE>
- our customer retention rate;

- changes in pricing policies and product offerings by our competitors; and

- changes in demand for Internet access and enhanced products and services.

Our revenues may also fluctuate. In response to competitive pressures, we
may take certain pricing or marketing actions that could harm our business and
results of operations. Therefore, we believe that period-to-period comparisons
of our operating results are not necessarily meaningful and cannot be relied
upon as indicators of future performance. If our operating results in any future
period fall below the expectations of common stock analysts and investors, the
market price of our common stock would likely decline.

OUR EXPANSION EFFORTS MAY NOT BE SUCCESSFUL IN OUR NEW TARGET REGIONS BECAUSE
OUR BUSINESS GROWTH STRATEGY IS LARGELY UNTESTED.

Our growth strategy includes building CNFs in high growth secondary markets
where we do not currently operate. In each market, we will target primarily
small and medium sized enterprise customers. Since our growth strategy is
largely untested, we cannot give any assurances that we will be able to
successfully implement it in our target regions.

Our success will depend upon:

- our ability to identify attractive target regions outside of the
mid-Atlantic area;

- our ability to rapidly deploy additional CNFs; and

- our ability to replicate our sales and marketing efforts.

Our ability to successfully implement our business strategy, and the
expected benefits to be obtained from our strategy, may be adversely affected by
a number of factors, such as unforeseen costs and expenses, technological
change, economic downturns, competitive factors or other events beyond our
control.

A SMALL NUMBER OF OUR CUSTOMERS ACCOUNT FOR A SIGNIFICANT PORTION OF OUR TOTAL
REVENUES AND THE LOSS OF ANY OF THESE COULD HARM OUR RESULTS OF OPERATIONS.

We derive a significant portion of our revenues from a small number of our
enterprise customers. For example, Lucent Technologies, Inc. accounted for 10%
of total revenues for the six months ended June 30, 1999 and 9% of total
revenues for the fiscal year ended December 31, 1998 and Microsoft's WebTV
Networks, Inc. accounted for 20% of total revenues for the six months ended June
30, 1999 and 9% of total revenues for the fiscal year ended December 31, 1998.
On a pro forma basis, assuming that the acquisition of Internet Unlimited was
consummated on January 1, 1998, Lucent Technologies would have accounted for 8%
of total revenues for the six months ended June 30, 1999 and 8% of total
revenues for the fiscal year ended December 31, 1998 and Microsoft's WebTV
Networks, Inc. would have accounted for 16% of total revenues for the six months
ended June 30, 1999 and 8% of total revenues for the fiscal year ended December
31, 1998. We expect that a significant portion of our revenues will continue to
be derived from a limited number of customers which may vary from year to year.
Our agreement with Lucent Technologies is a service contract with a one year
term, which automatically renews on a monthly basis until such time as it is
renegotiated or terminated. Our agreement with Microsoft's WebTV Networks may be
terminated upon 120 days notice.

WE MAY BE UNABLE TO EXPAND OUR SALES, TECHNICAL SUPPORT AND CUSTOMER SUPPORT
INFRASTRUCTURE, WHICH MAY HINDER OUR ABILITY TO GROW AND MEET CUSTOMER
DEMANDS.

We rely upon our centralized sales force and regional marketing managers to
sell our products and services in our new regions. We serve our existing
customers through our sales, technical support and customer support staff. If we
are unable to expand our sales force and our technical support and customer
support staff, our business would be harmed because this would limit our ability
to obtain

10
<PAGE>
new customers, sell products and services and provide existing customers with a
high level of technical support.

OUR FAILURE TO MANAGE OUR GROWTH AND EXPANSION EFFECTIVELY COULD PUT A
SIGNIFICANT STRAIN ON OUR RESOURCES.

Our business strategy depends on our ability to rapidly deploy our CNFs into
target regions. This growth will increase our operating complexity as well as
the level of responsibility for both existing and new management personnel. As a
result, in order to manage our growth, we must, among other things:

- continue to implement and improve our operational, financial and
management information systems;

- hire and train qualified personnel; and

- continue to expand and upgrade our network infrastructure and services.

We cannot assure you that our management, technical and customer support,
and marketing and sales personnel will be sufficient to facilitate or meet the
demands of any future growth.

IF WE ARE UNABLE TO OBTAIN THE ADDITIONAL CAPITAL REQUIRED TO CONTINUE TO
RAPIDLY EXPAND INTO OUR TARGET REGIONS, WE MAY BE REQUIRED TO MODIFY OUR
GROWTH AND OPERATING PLANS.

Our business strategy depends on our ability to rapidly expand into our new
regions, which requires significant capital resources. We anticipate that our
cash requirements for 1999 will include expenditures for some or all of the
following purposes:

- building additional CNFs;

- expanding our sales and marketing capabilities;

- developing enhanced product and service offerings;

- making acquisitions; and

- financing working capital and general corporate purposes.

If the net proceeds from this offering are not sufficient to meet our cash
requirements, we will need to seek additional capital from public or private
equity and debt sources to fund our growth and operating strategies. We cannot
be certain that we will be able to raise additional capital in the future on
terms acceptable to us or at all. If alternative sources of financing are
insufficient or unavailable, we may be required to modify our growth and
operating plans in accordance with the extent of available financing.

WE FACE SIGNIFICANT AND INCREASING COMPETITION IN OUR INDUSTRY WHICH COULD CAUSE
US TO LOWER PRICES RESULTING IN REDUCED REVENUES.

The growth of the Internet access and related services market and the
absence of substantial barriers to entry have attracted many start-ups as well
as existing businesses from the telecommunications, cable, and technology
industries. As a result, the market for Internet access and related services is
very competitive. We anticipate that competition will continue to intensify as
the use of the Internet grows. Current and prospective competitors include:

- national, regional and local ISPs, including providers of free dial-up
Internet access;

- national and regional long distance and local telecommunications carriers;

- cable operators and their affiliates;

- providers of Web hosting, collocation and other Internet-based business
services;

- computer hardware and other technology companies that bundle Internet
connections with their products; and

- terrestrial wireless and satellite Internet service providers.

11
<PAGE>
As a result of an increase in the number of competitors, and vertical and
horizontal integration in the industry, we currently face and expect to continue
to face significant pricing pressure and other competition in the future.
Advances in technology and changes in the marketplace and the regulatory
environment will continue, and we cannot predict the effect that ongoing or
future developments may have on us or the pricing of our products and services.

We believe that the following are the primary competitive factors in our
market:

- pricing;

- quality and breadth of products and services;

- ease of use;

- personal customer support and service; and

- brand awareness.

Many of our competitors have significantly greater market presence,
brand-name recognition, and financial resources than we do. In addition, all of
the major long distance telephone companies, also known as interexchange
carriers, offer Internet access services. The recent reforms in the federal
regulation of the telecommunications industry have created greater opportunities
for local exchange carriers, including incumbent local exchange carriers and
competitive local exchange carriers, to enter the Internet access market. In
order to address the Internet access requirements of the current business
customers of long distance and local carriers, many carriers are integrating
horizontally through acquisitions of or joint ventures with Internet service
providers, or by wholesale purchase of Internet access from Internet service
providers. In addition, many of the major cable companies and other alternative
service providers, such as those companies utilizing wireless and
satellite-based service technologies, have announced their plans to offer
Internet access and related services. While few of these larger companies have
focused on our key customer base of small and medium sized enterprises in our
target markets, it is possible that they will do so in the future. Accordingly,
we may experience increased competition from traditional and emerging
telecommunications providers. Many of these companies, in addition to their
substantially greater network coverage, market presence, and financial,
technical and personnel resources, also already provide telecommunications and
other services to many of our target customers. Furthermore, they may have the
ability to bundle Internet access with basic local and long distance
telecommunications services, which we do not currently offer. This bundling of
services may harm our ability to compete effectively with them and may result in
pricing pressure on us that would reduce our earnings.

OUR GROWTH DEPENDS ON THE CONTINUED ACCEPTANCE BY SMALL AND MEDIUM SIZED
ENTERPRISES OF THE INTERNET FOR COMMERCE AND COMMUNICATION.

Our products and services are designed primarily for the rapidly growing
number of business users of the Internet. Commercial use of the Internet by
small and medium sized enterprises is still in its early stages. Despite growing
interest in the commercial uses of the Internet, many businesses have not
purchased Internet access and related services for several reasons, including:

- lack of inexpensive, high-speed connection options;

- a limited number of reliable local access points for business users;

- lack of affordable electronic commerce solutions;

- limited internal resources and technical expertise;

- inconsistent quality of service; and

- difficulty in integrating hardware and software related to Internet based
business applications.

12
<PAGE>
In addition, we believe that many Internet users lack confidence in the
security of transmitting their data over the Internet, which has hindered
commercial use of the Internet. Technologies that adequately address these
security concerns may not be developed.

The adoption of the Internet for commerce and communication applications,
particularly by those enterprises that have historically relied upon alternative
means, generally requires the understanding and acceptance of a new way of
conducting business and exchanging information. In particular, enterprises that
have already invested substantial resources in other means of conducting
commerce and exchanging information may be reluctant or slow to adopt a new
strategy that may make their existing personnel and infrastructure obsolete. If
the market for Internet access and enhanced services fails to develop as
expected, our business will be adversely affected.

OUR SUCCESS DEPENDS ON THE CONTINUED DEVELOPMENT OF INTERNET INFRASTRUCTURE.

The recent growth in the use of the Internet has caused periods of
performance degradation, requiring the upgrade by providers and other
organizations with links to the Internet of routers and switches,
telecommunications links and other components forming the infrastructure of the
Internet. We believe that capacity constraints caused by rapid growth in the use
of the Internet may impede further development of the Internet to the extent
that users experience increased delays in transmission or reception of data or
transmission errors that may corrupt data. Any degradation in the performance of
the Internet as a whole could impair the quality of our products and services.
As a consequence, our future success will be dependent upon the reliability and
continued expansion of the Internet.

WE RELY ON A LIMITED NUMBER OF VENDORS AND SERVICE PROVIDERS, SOME OF WHICH ARE
OUR COMPETITORS. THIS MAY ADVERSELY AFFECT THE FUTURE TERMS OF OUR
RELATIONSHIPS.

We rely on other companies to supply key components of our network
infrastructure, which are available only from limited sources. For example, we
currently rely on routers, switches and remote access devices from Lucent
Technologies, Inc., Cisco Systems, Inc. and Nortel Networks Corporation. We
could be adversely affected if any of these products were no longer available on
commercially reasonable terms, or at all. From time to time, we experience
delays in the delivery and installation of these products and services, which
can lead to the loss of existing or potential customers. We do not know that we
will be able to obtain such products in the future cost-effectively and in a
timely manner. Moreover, Sprint Communications Company, L.P., MCI WorldCom, Inc.
and UUNET Technologies, Inc., our primary backbone providers, also sell products
and services that compete with ours. Our agreements with our primary backbone
providers are fixed price contracts with terms ranging from one to three years.
Our relationship with these backbone providers could be adversely affected as a
result of our direct competition with them. Failure to renew these relationships
when they expire or enter into new relationships for such services on
commercially reasonable terms or at all could harm our business, financial
condition and results of operations.

WE DEPEND ON KEY PERSONNEL AND COULD BE HARMED BY THE LOSS OF THEIR SERVICES
BECAUSE OF THE LIMITED NUMBER OF QUALIFIED PEOPLE IN OUR INDUSTRY.

Our success depends in part upon the continued service and performance of
our senior management personnel and other key employees who possess industry
expertise and technical knowledge of our operations. Competition for
highly-qualified employees in the Internet services industry is intense because
there is a limited number of people with a strong knowledge of and significant
experience in our industry. Our success will depend to a significant degree upon
our ability to attract, train and retain highly skilled management, technical,
marketing and sales personnel and upon the continued contributions of such
people. Since it is difficult and time consuming to identify and hire highly
qualified employees, we cannot assure you of our ability to do so. In addition,
we may not be able to retain our current key employees. We currently do not have
employment agreements with any of our key employees. The loss of the services of
one or more of our key personnel and our

13
<PAGE>
failure to attract additional highly qualified personnel could impair our
ability to expand our operations and provide a high level of service to our
customers. We carry key employee life insurance only for David K. Van Allen, our
chief executive officer.

ANY FUTURE ACQUISITIONS MAY DISRUPT OUR OPERATIONS, AND WE MAY NOT REALIZE THE
EXPECTED BENEFITS.

We may seek to acquire companies that offer us the opportunity to obtain
complementary products and services. Acquisitions may result in the following,
any of which could harm our operating results or the trading price of our common
stock:

- diversion of management's attention;

- issuances of equity securities that may dilute your ownership interest in
us;

- cash payments or assumption of debt or other liabilities of the companies
we acquire;

- large one-time write-offs and amortization expenses related to goodwill
and other intangible assets; and

- negative changes to our financial model.

In addition, acquisitions involve many risks and challenges, including:

- difficulties in assimilating technologies, products, personnel and
operations;

- risks of entering markets in which we have no or limited prior experience;
and

- loss of key employees of acquired companies.

WE MAY BE UNABLE TO RETAIN OUR CUSTOMERS, WHICH COULD HARM OUR RESULTS OF
OPERATIONS.

We believe our long-term success largely depends on our ability to retain
our existing customers while continuing to attract new customers. Our customers
may switch to our competitors' services if we are unable to compete on the basis
of price, performance, quality of customer support and breadth of our enhanced
product and service offerings. Any decline in customer retention rates could
harm our results of operations.

WE COULD EXPERIENCE SYSTEM FAILURES AND CAPACITY CONSTRAINTS, WHICH COULD RESULT
IN THE LOSS OF OUR CUSTOMERS OR LIABILITY TO OUR CUSTOMERS.

The continued operation of our network infrastructure depends upon our
ability to protect against:

- downtime due to malfunction or failure of hardware or software;

- overload conditions;

- power loss or telecommunications failures;

- human error;

- natural disasters; and

- sabotage or other intentional acts of vandalism.

Any of these occurrences could result in interruptions in the services we
provide to our customers and require us to spend substantial amounts of money
repairing and replacing equipment. Although we do not guarantee uninterrupted
service, we could still incur significant liability to our customers for any
damages they suffer due to any system downtime as well as the possible loss of
customers.

14
<PAGE>
OUR NETWORK MAY EXPERIENCE SECURITY BREACHES WHICH COULD DISRUPT OUR SERVICES.

Our network infrastructure may be vulnerable to computer viruses, break-ins
and similar disruptive problems caused by our customers or other Internet users.
Computer viruses, break-ins or other problems caused by third parties could lead
to interruptions, delays or cessation in service to our customers. There
currently is no existing technology that provides absolute security, and the
cost of minimizing these security breaches could be prohibitively expensive. We
may face liability to customers for such security breaches. Furthermore, such
incidents could deter potential customers and adversely affect existing customer
relationships.

WE FACE POTENTIAL LIABILITY FOR INFORMATION DISSEMINATED THROUGH OUR NETWORK.

It is possible that claims could be made against Internet service providers
in connection with the nature and content of the materials disseminated through
their networks. The law relating to the liability of Internet service providers
due to information carried or disseminated through their networks is not
completely settled. While the U.S. Supreme Court has held that content
transmitted over the Internet is entitled to the highest level of protection
under the U.S. Constitution, there are federal and state laws regarding the
distribution of obscene, indecent, or otherwise illegal material, as well as
material that violates certain intellectual property rights which may subject us
to liability. Several private lawsuits have been brought in the past and are
currently pending against other entities which seek to impose liability upon
Internet service providers as a result of the nature and content of materials
disseminated over the Internet. If any of these actions succeed, we might be
required to respond by investing substantial resources or discontinuing some of
our service or product offerings, which could harm our business.

NEW LAWS AND REGULATIONS GOVERNING OUR INDUSTRY COULD HARM OUR BUSINESS.

The Internet access industry is in a period of uncertain change which could
affect the regulatory treatment of Internet service providers including Internet
access providers. Thus, although we are not currently subject to direct
regulation by the Federal Communications Commission or any other federal or
state agency, other than regulations applicable to businesses generally, we
cannot say that we will remain unregulated in the future. In addition, changes
in the legal and regulatory environment relating to our market could increase
the likelihood or scope of additional viable competitors. The costs associated
with our products and services could also be affected by these legal and
regulatory changes. For example, the Federal Communications Commission has
announced that it is considering whether the provision of phone-to-phone
Internet protocol telephony should be classified as a basic telecommunications
service. State public utility commissions may also examine this issue. If we
decide to offer Internet protocol telephony services and if Internet protocol
telephony is classified as a telecommunications service, this will materially
affect our cost structure since we would likely be subject to additional charges
such as access charges and universal service fund contributions applicable to
telecommunications providers.

Access charges are assessed by local telephone companies on long-distance
companies for the use of the local telephone network when the local telephone
company originates and terminates long-distance calls, generally on a per-minute
basis. While the Federal Communications Commission has determined that Internet
service providers should be exempt from paying access charges and has announced
as recently as March of this year its commitment to this principle, this
determination may be revisited should the Federal Communications Commission
conclude that some services provided by Internet service providers are the
functional equivalent of basic telecommunications services. This would increase
our costs of providing dial-up service and could have a material adverse effect
on our business, financial condition and results of operation.

15
<PAGE>
Moreover, a ruling that our services are telecommunications services may
compel a reconsideration by the Federal Communications Commission of its ruling
that Internet service providers are not required to pay a percentage of their
gross revenues as a contribution to the federal universal service fund. The
federal universal service fund was established to replace current local rate
subsidies and to meet other public policy objectives, such as providing access
to enhanced communications systems for schools, libraries and health care
providers. If the Federal Communications Commission were to require Internet
access providers to contribute to the universal service fund, there is no
assurance that we would recover these costs from our customers. In addition, the
Federal Communications Commission has not determined conclusively whether or not
Internet backbone service, which is an essential component of Internet access,
is subject to the universal service fund contribution requirement. A ruling that
backbone service is subject to such contributions will likely raise our costs as
our Internet backbone suppliers seek to recover their costs.

Changes in the way our suppliers are regulated could affect our business as
well. For example, the Federal Communications Commission recently determined
that most dial-up calls placed by subscribers to Internet service providers
should be classified as interstate calls. Previously, all of these calls were
deemed to be local and thus the carrier that terminated them was eligible for
payment from the carrier serving the calling party under a reciprocal
compensation plan that is part of most interconnection agreements between local
telephone carriers. The reclassification of these calls as interstate could
ultimately remove them from the reciprocal compensation payment requirement,
meaning that our telephone carrier would not be paid by the originating carrier
to terminate traffic delivered to us. The Federal Communications Commission has
launched an inquiry to determine a federal cost-based mechanism for covering the
costs of terminating calls to Internet service providers, but in the interim
state commissions will determine whether carriers will receive compensation for
such calls. If new compensation mechanisms increase the costs to carriers for
terminating calls to Internet service providers or if states eliminate
reciprocal compensation payments, the affected carriers could increase the price
of service to Internet service providers in order to recover such costs. This
could have a material adverse effect on our business, financial condition and
results of operation.

The Federal Communications Commission is also considering measures that
could stimulate the development of high-speed telecommunications facilities and
make it easier for operators of these facilities to obtain access to customers
by requiring incumbent telephone companies to provide access to their
rights-of-way and wiring located within multiple tenant buildings. In addition,
the Federal Communications Commission is considering requiring owners of
multiple tenant buildings to provide competing service providers
nondiscriminatory access to their buildings. Such regulatory measures could
enhance the competitive viability of Internet service providers that are
affiliated with the providers of these high-speed facilities.

Finally, the issue of Internet service provider access to the infrastructure
deployed by cable television operators is being considered at the local and
federal levels. Several municipal franchising authorities have required
franchised cable companies to provide competing Internet service providers open
access to their cable infrastructure. However, the Federal Communications
Commission has recently filed a brief in federal court addressing the open
access issue in which it voiced its opposition to such local regulation,
preferring instead a uniform national policy on the issue of open access. Also,
an Internet service provider has recently sought a ruling from the Federal
Communications Commission that, pursuant to Section 612 of the Communications
Act, cable operators should be required to lease to competitors a 6 MHz channel
to be used to provide Internet services. Section 612 of the Communications Act
requires cable operators to provide leased access to competitors seeking to
provide video service. The Internet service provider seeking this Federal
Communications Commission ruling claims that almost all Internet services
involve video services, such as streaming technology, and therefore qualify for
leased access rights under Section 612. The outcome of these efforts to compel

16
<PAGE>
open access and leased access will affect our business, by either increasing or
foreclosing Internet service provider access rights to the cable television
infrastructure.

POTENTIAL YEAR 2000 PROBLEMS COULD HARM OUR BUSINESS.

Many computer systems are not capable of distinguishing 21(st) century dates
from 20(th) century dates. As a result, beginning on January 1, 2000, computer
systems and software used by many companies and organizations in a wide variety
of industries will produce erroneous results or fail unless they have been
modified or upgraded to process date information correctly. Our operations could
be disrupted and our financial condition could be adversely affected if our
customers and third-party providers do not ensure that their hosted hardware and
software is year 2000 compliant. Our Web hosting and collocation services could
be adversely affected if Internet Unlimited, Inc., our recent acquisition, is
not year 2000 compliant. In addition, if the actual costs of implementing our
year 2000 program significantly exceed our estimates, it may have a material
adverse effect on our business, financial condition or results of operations.

RISKS RELATED TO THIS OFFERING

OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY BE UNABLE TO RESELL YOUR SHARES AT
OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.

Prior to this offering, no public market existed for our common stock. We
have applied to the Nasdaq National Market to list our common stock, but we do
not know whether an active trading market will develop or continue after this
offering. The initial public offering price of our common stock will be
determined through negotiations among us and the representatives of the
underwriters and may not be indicative of the trading price of our common stock
in the open market. The market price for our shares of common stock is likely to
be volatile, and, if you decide to purchase our shares, you may be unable to
resell your shares at or above the initial public offering price due to a number
of factors, including:

- actual or anticipated variations in quarterly operating results;

- the loss of significant customers;

- changes in earnings estimates by analysts;

- announcements of technological innovations by us or our competitors;

- general conditions in the Internet services industry; and

- other events or factors that negatively affect the stock market in
general.

In addition, the stock market has experienced extreme price and volume
fluctuations that have affected the market price of many companies in industries
similar to or related to ours and that have been unrelated to these companies'
operating performances. These broad market fluctuations could reduce the market
price of our common stock. Furthermore, our operating results and prospects may
be below the expectations of public market analysts and investors which could
lead to a material decline in the price of our common stock.

In addition, in the past, following periods of volatility in the market
price of a company's securities, class action litigation has often been
instituted against such companies. Such litigation, if instituted, could result
in substantial costs and a diversion of management's attention and resources.

17
<PAGE>
OUR OFFICERS, DIRECTORS AND AFFILIATES WILL BE ABLE TO CONTROL MATTERS REQUIRING
SHAREHOLDER APPROVAL, AND MAY HAVE INTERESTS THAT DIFFER FROM OUR INVESTORS.

Following the closing of this offering, our officers, directors and
affiliated entities together will beneficially own approximately % of the
outstanding shares of our common stock, % if the underwriters'
over-allotment option is exercised in full. As a result, these shareholders will
be able to control all matters requiring shareholder approval and, thereby, our
management and affairs. These shareholders may have interests that differ from
our investors. Matters that typically require shareholder approval include:

- election of directors;

- approval of a merger or consolidation; and

- approval of a sale of all or substantially all our assets.

In addition, this concentration of ownership may delay, deter or prevent
acts that would result in a change of control, which in turn could reduce the
market price of our common stock.

WE WILL HAVE BROAD DISCRETION AS TO USE OF PROCEEDS FROM THIS OFFERING.

We have broad discretion as to the use of the proceeds from this offering
without prior shareholder approval and our failure to apply these proceeds
effectively could cause our business to suffer. Accordingly, you will have to
rely on our management to properly apply the proceeds. As of the date of this
prospectus, we do not plan to use the proceeds from this offering other than for
implementation of our regional growth program, working capital and general
corporate purposes. We may use the proceeds in future strategic acquisitions of,
or investments in, businesses that offer us the opportunity to obtain additional
enhanced products and services. Until the need arises, we plan to invest the net
proceeds from this offering in short-term, interest-bearing, investment-grade
securities.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

Sales of a substantial number of shares of common stock in the public market
following this offering and the expiration of lock-up arrangements with the
underwriters could reduce the market price of our common stock. All the shares
sold in this offering will be freely tradable. The remaining shares of common
stock outstanding after this offering will be available for sale in the public
market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OF AVAILABILITY FOR SALE
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
shares............................................ , 1999 (date of this prospectus)

shares............................................ , 2000 (180 days after the date of this prospectus)

shares............................................ At various times thereafter upon the expiration of
holding periods
</TABLE>

We have granted options to purchase shares of our common stock under our
equity compensation plan, and intend to register the shares of common stock
issuable or reserved for issuance under the plan within 180 days after the
consummation of this offering.

NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.

The initial public offering price is substantially higher than the book
value per share of our common stock. Investors purchasing our common stock in
this offering will, therefore, incur immediate dilution of $ in net
tangible book value per share of our common stock on a pro forma basis assuming
the acquisition of Internet Unlimited, the sale of series A convertible
preferred stock,

18
<PAGE>
the conversion of all outstanding shares of series A convertible preferred stock
into shares of common stock and no exercise of the underwriters' over-allotment
option. This dilution figure deducts the estimated underwriting discounts and
commissions and estimated offering expenses payable by us from the initial
public offering price. Investors will incur additional dilution upon the
exercise of outstanding stock options.

WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS THAT COULD DELAY OR PREVENT AN
ACQUISITION AND COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.

Our articles of incorporation and bylaws and certain provisions of
Pennsylvania law may make it difficult to effect a change of control and to
replace our incumbent management. The existence of these provisions may
collectively have a negative impact on the price of the common stock, may
discourage third-party bidders from making a bid for us or may reduce any
premiums paid to shareholders for their common stock. In addition, our board of
directors has the authority to fix the rights and preferences of, and to issue
shares of, our preferred stock, which may have the effect of delaying or
preventing a change in control of us.

USE OF PROCEEDS

We expect to receive approximately $ million in net proceeds from the
sale of the shares of common stock in this offering, assuming that the
initial public offering price is $ per share, after deducting the estimated
underwriting discount and commissions and offering expenses. We expect to
receive approximately $ million in net proceeds if the underwriters'
over-allotment option is exercised in full, after deducting the estimated
underwriting discount and commissions and offering expenses.

We intend to use the net proceeds of this offering for working capital and
other general corporate purposes, including the construction of additional CNFs
in our target regions, the expansion of our sales and marketing capabilities and
capital expenditures made in the ordinary course of business. We may also use a
portion of the net proceeds to acquire additional businesses, products and
technologies or to establish joint ventures that we believe will complement our
current or future business. However, we have no specific plans, agreements or
commitments, oral or written, to do so. The amounts that we actually expend for
working capital purposes will vary significantly depending on a number of
factors, including future revenue growth, if any, and the amount of cash we
generate from operations. As a result, we will retain broad discretion in the
allocation of the net proceeds of this offering. Pending the uses described
above, we will invest the net proceeds in short-term, interest-bearing,
investment-grade securities.

DIVIDEND POLICY

We have never paid cash dividends on our common stock. We currently intend
to retain any future earnings to fund the development and growth of our
business. Therefore, we do not anticipate paying any cash dividends in the
foreseeable future.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements which involve risks and
uncertainties. These forward-looking statements are often accompanied by words
such as believes, anticipates, plans, expects and similar expressions. These
statements include, without limitation, statements about the market opportunity
and our growth strategy. These statements may be found in the sections of this
prospectus entitled Prospectus Summary, Risk Factors, Use of Proceeds,
Management's Discussion and Analysis of
Financial Condition and Results of Operations, Our Business and in this
prospectus generally. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including all the risks discussed in Risk Factors and elsewhere in this
prospectus.

19
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of June 30, 1999. We
present capitalization:

- on an actual basis;

- on a pro forma basis to reflect the issuance of 546,984 shares of common
stock in connection with the acquisition on July 30, 1999 of Internet
Unlimited, the sale of 666,198 shares of series A convertible preferred
stock for net proceeds of $4.4 million which occurred in August 1999, the
conversion of a $1.0 million note payable and associated accrued interest
into 142,431 shares of series A convertible preferred stock which occurred
in August 1999, and the conversion of all outstanding shares of series A
convertible preferred stock into 808,629 shares of common stock and the
conversion of a $3.1 million note payable into 2,033,334 shares of common
stock; both conversions will automatically occur immediately prior to the
consummation of this offering; and

- on a pro forma as adjusted basis to reflect events described in the
previous bullet point as well as the sale of shares of common stock
in this offering at an assumed initial public offering price of $ per
share and our application of the estimated net proceeds of $ as
described in Use of Proceeds, assuming no exercise of the underwriters'
over-allotment option.

This table should be read in conjunction with the historical financial
information of FASTNET and Internet Unlimited, and the unaudited pro forma
combined financial information contained elsewhere in this prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
---------- ----------- ----------
<S> <C> <C> <C>
Current portion of long-term debt and lease
obligations......................................... $4,114,445 $ 60,020 $
---------- ----------- ----------
Long-term debt and capital lease obligations,
excluding current portion........................... 157,482 168,188
Shareholders' equity (deficit):
Preferred stock, no par value, 10,000,000 shares
authorized, no shares issued and outstanding actual;
9,191,371 shares authorized and no shares issued and
outstanding pro forma and pro forma as adjusted..... -- -- --
Common stock, no par value per share, 50,000,000
shares authorized, 7,000,000 shares issued and
outstanding actual; 10,388,947 issued and
outstanding pro forma; and issued and
outstanding pro forma as adjusted................... 545,368 12,946,679
Deferred compensation................................. (109,765) (109,765) (109,765)
Accumulated deficit................................... (3,011,000) (3,011,000) (3,011,000)
Treasury stock, at cost............................... (1,000,000) (1,000,000) (1,000,000)
---------- ----------- ----------
---------- ----------- ----------
Total shareholders' equity (deficit).............. (3,575,397) 8,825,914
---------- ----------- ----------
---------- ----------- ----------
Total capitalization (deficit).................. $(3,417,915) $ 8,994,102 $
---------- ----------- ----------
---------- ----------- ----------
</TABLE>

This table is based on shares outstanding as of June 30, 1999 and does not
include;

- 565,000 shares of our common stock issuable upon the exercise of
outstanding options that have been granted under our equity compensation
plan at a weighted average exercise price of $1.70 per share, of which
options to purchase 295,000 shares of common stock are currently
exercisable at a weighted average exercise price of $1.52 per share;

20
<PAGE>
- 20,000 shares of our common stock issuable upon the exercise of options
that have been granted under our equity compensation plan from June 30,
1999 to the date of this prospectus at a weighted average exercise price
of $7.13 per share;

- 415,000 shares of our common stock available for grant under our equity
compensation plan as of the date of this prospectus; and

- 1,000,000 shares of our common stock issuable upon the exercise of a
warrant issued to H&Q You Tools Investment Holding, L.P. that is
exercisable at an exercise price of $1.50 per share.

21
<PAGE>
DILUTION

As of June 30, 1999, we had a net tangible deficit of approximately $3.6
million or $0.51 per share of common stock. Net tangible deficit per share
represents the amount of our total tangible assets reduced by the amount of our
total liabilities, divided by the number of shares of common stock outstanding.
As of June 30, 1999, our net tangible book value was $8.8 million or $0.85 per
share; assuming on a pro forma basis, the issuance of 546,984 shares of common
stock in connection with the acquisition of Internet Unlimited, which occurred
on July 30, 1999, the sale of 666,198 shares of series A convertible preferred
stock for net proceeds of $4.4 million which occurred in August 1999, the
conversion of a $1.0 million note payable and associated accrued interest which
occurred in August 1999 into 142,431 shares of series A convertible preferred
stock, the conversion of all outstanding shares of series A convertible
preferred stock into 808,629 shares of common stock and the conversion of a $3.1
million note payable into 2,033,334 shares of common stock. Both conversions
will automatically occur immediately prior to the consummation of this offering.
As of June 30, 1999, our pro forma net tangible book value, on a pro forma as
adjusted basis for the factors listed in the preceding sentence and for the sale
of shares in this offering, assuming no exercise of the underwriters'
over-allotment option, based on an assumed initial public offering price of $
per share and after deducting the underwriting discounts and commissions and
other estimated offering expenses, would have been approximately $ per share.
This represents an immediate increase of $ per share to existing
shareholders and an immediate dilution of $ per share to new investors. The
following table should be read in conjunction with the historical financial
information of FASTNET and Internet Unlimited and the unaudited pro forma
combined financial information contained elsewhere in this prospectus. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
---------
Pro forma net tangible book value per share at June 30, 1999..... $ 0.85
---------
Pro forma increase per share attributable to new investors.......
Pro forma as adjusted net tangible book value per share after the
offering...........................................................
---------
Dilution per share to new investors.................................. $
---------
---------
</TABLE>

The following summarizes as of June 30, 1999, the differences between the
total consideration paid and the average price per share paid by the existing
shareholders and the new investors with respect to the number of shares of
common stock purchased from us based on an assumed initial public offering price
of $ per share assuming the pro forma adjustments described in the
paragraph above.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing shareholders................................. 10,388,947 $ 12,767,789 $ 1.23
New investors.........................................
------------ --- ------------- -----
Total............................................. 100% 100%
------------ --- ------------- -----
------------ --- ------------- -----
</TABLE>

The above information is based on shares outstanding as of June 30, 1999 and
does not include:

- 20,000 shares of our common stock issuable upon the exercise of options
that have been granted under our equity compensation plan from June 30,
1999 to the date of this prospectus at a weighted average exercise price
of $7.13 per share;

- 415,000 shares of our common stock available for grant under our equity
compensation plan as of the date of this prospectus; and

- 1,000,000 shares of our common stock issuable upon the exercise of a
warrant issued to H&Q You Tools Investment Holding, L.P. that is
exercisable at an exercise price of $1.50 per share.

22
<PAGE>
SELECTED FINANCIAL DATA

The tables that follow present portions of our financial statements and are
not complete. You should read the following selected financial data in
conjunction with our Financial Statements and related Notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations and unaudited pro forma financial information included elsewhere in
this prospectus. The statement of operations data for the years ended December
31, 1996, 1997, and 1998, and the balance sheet data as of December 31, 1996,
1997 and 1998 are derived from our Financial Statements that have been audited
by Arthur Andersen LLP, independent auditors, which are included elsewhere in
this prospectus. The statement of operations data for the period from inception
(May 10, 1994) to December 31, 1994 and the year ended December 31, 1995 and the
six months ended June 30, 1998 and 1999 and the balance sheet data as of
December 31, 1994 and 1995 and June 30, 1999 are derived from unaudited
Financial Statements and include all adjustments, consisting only of normal
recurring adjustments, that we consider necessary for a fair presentation of our
financial position and operating results for that period. Historical results are
not necessarily indicative of future results. See Note 2 of Notes to Financial
Statements and Note 2 of Notes to Unaudited Pro Forma Financial Information for
an explanation of the method used to calculate pro forma basic and diluted loss
per share. See the section entitled Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations for more
information.

The statement of operations data for the years ended December 31, 1998 and
for the six months ended June 30, 1999 is also presented on a pro forma basis to
reflect the following events:

- the issuance of 546,984 shares of common stock in connection with the
acquisition of Internet Unlimited, Inc. on July 30, 1999, as if it had
occurred at the beginning of each period;

- the conversion of $3.1 million note payable into 2,033,334 shares of
common stock, which will automatically occur immediately prior to
consummation of this offering, as if it had occurred on May 28, 1998, the
date on which the note was issued; and

- the conversion of $1.0 million note payable and associated accrued
interest into 142,431 shares of series A convertible preferred stock in
August 1999, and the conversion of such shares into 142,431 shares of
common stock, which will automatically occur immediately prior to
consummation of this offering, as if each had occurred on May 14, 1999,
the date the note was issued.

The balance sheet data as of June 30, 1999 is also presented on a pro forma
basis to reflect the following events as if they had occurred on June 30, 1999:

- the issuance of 546,984 shares of common stock in connection with the
acquisition of Internet Unlimited, Inc. on July 30, 1999;

- the issuance of 666,198 shares of series A convertible preferred stock in
August 1999;

- the conversion of $3.1 million note payable into 2,033,334 shares of
common stock, which will automatically occur immediately prior to
consummation of this offering;

- the conversion of $1.0 million note payable and associated accrued
interest into 142,431 shares of series A convertible preferred stock in
August 1999; and

The pro forma results are not necessarily indicative of the results of
operations or financial position of FASTNET had the events described above
occurred at the dates described above.

23
<PAGE>

<TABLE>
<CAPTION>
PERIOD
FROM
INCEPTION YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
(MAY 10, -------------------------------------------------------------- -------------------------------------
1994) TO 1998 1999
DECEMBER ------------------------ ------------------------
31, 1994 1995 1996 1997 ACTUAL PRO FORMA 1998 ACTUAL PRO FORMA
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Revenues........ $ 77,176 $ 448,804 $1,942,607 $ 3,670,614 $ 5,527,979 $ 6,248,984 $ 2,655,182 $ 3,549,015 $ 4,215,026
Operating
expenses:
Costs of
revenues...... 75,768 313,104 1,162,011 2,333,919 3,241,741 3,448,857 1,542,353 2,116,138 2,259,134
Selling, general
and
administrative... 78,991 243,525 793,336 1,445,224 3,067,740 3,516,740 1,177,104 2,154,680 2,639,977
Depreciation and
amortization... 6,448 23,193 78,804 177,375 346,568 1,539,121 140,384 247,796 860,451
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Total
operating
expenses.. 161,207 579,822 2,034,151 3,956,518 6,656,049 8,504,718 2,859,841 4,518,614 5,759,562
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Operating
loss.......... (84,031 ) (131,018) (91,544) (285,904) (1,128,070) (2,255,734) (204,659) (969,599) (1,544,536)
Other expenses,
net........... 680 (4,610) (23,680) (36,162) (146,220) (39,975) (47,436) (110,842) (19,484)
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss........ $ (83,351 ) $ (135,628) $ (115,224) $ (322,066) $(1,274,290) $(2,295,709) $ (252,095) $(1,080,441) $(1,564,020)
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Basic and
diluted net
loss per
common
share......... $ (.02 ) $ (.01) $ (0.01) $ (0.03) $ (0.14) $ (0.22) $ (0.02) $ (0.15) $ (0.16)
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted average
number of
common shares
outstanding... 5,450,000 9,537,500 11,575,000 11,575,000 8,880,833 10,613,929 10,761,666 7,000,000 9,615,381
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 ACTUAL PRO FORMA
-------- --------- --------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... 2,401 6,113 $ 28,591 $ 88,981 $ 256,782 $ 524,671 $ 4,920,117
Working capital deficit................. (95,682) (209,282) (552,418) (1,447,138) 4,356,637 (5,878,946) 1,846,580
Total assets............................ 64,413 288,205 822,953 1,683,345 3,226,841 4,322,194 13,532,068
Shareholders' (deficit) equity.......... (39,352) (94,900) (210,203) (532,269) (2,564,081) (3,575,397) 8,825,914
</TABLE>

24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH OUR
FINANCIAL STATEMENTS AND THE RELATED NOTES TO THE FINANCIAL STATEMENTS APPEARING
ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING INCLUDES A NUMBER OF FORWARD-LOOKING
STATEMENTS THAT REFLECT OUR CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND
FINANCIAL PERFORMANCE. WE USE WORDS SUCH AS ANTICIPATE, BELIEVES, EXPECTS,
FUTURE, AND INTENDS, AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING
STATEMENTS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH APPLY ONLY AS OF THE DATE OF THIS PROSPECTUS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR OUR
PREDICTIONS. FOR A DESCRIPTION OF THESE RISKS, SEE THE SECTION ENTITLED RISK
FACTORS.

OVERVIEW

We began providing Internet access services to our customers in 1994. We
target primarily small and medium sized enterprise customers located in selected
high growth secondary markets. We currently provide our customers with Internet
access and enhanced products and services in the mid-Atlantic area of the United
States. We have designed our comprehensive suite of enhanced products and
services to meet the expanding needs of our customers and to increase our
revenue per customer. The products and services we provide include:

- Internet access services;

- Total Managed Security;

- Web hosting services;

- Virtual private networks;

- Unified messaging; and

- Total managed backup and recovery services.

In 1998, we began to implement our current strategy of providing Internet
access and enhanced products and services to small and medium sized enterprises
in selected high growth markets. In order to fund this strategy, we decided to
seek financing through the issuance of additional equity and debt.

- In May 1998, we raised approximately $3.3 million in a private debt and
equity financing, of which approximately $1.5 million was used to retire
debt and repurchase outstanding shares of our common stock. We used the
remainder of the proceeds to advance our business plan.

- In May 1999, we raised $1.0 million from H&Q You Tools Investment Holding,
L.P. through the issuance of a convertible note. The principal and accrued
interest on this note were converted in August 1999 into 142,431 shares of
series A convertible preferred stock at $7.13 per share. In August 1999,
we sold 666,198 shares of series A convertible preferred stock at $7.13
per share for net proceeds of approximately $4.4 million to a group of
investors including Lucent Technologies, Inc. All of the outstanding
preferred stock will convert automatically into an equivalent number of
common shares immediately prior to the consummation of this offering.

On July 30, 1999 we acquired Internet Unlimited, Inc., a Web hosting and
collocation company located in Bethlehem, Pennsylvania. As a result of this
acquisition, we increased the number of customers using our Web hosting services
and supplemented our management and technical expertise. On a pro forma basis,
assuming that the acquisition of Internet Unlimited occurred on January 1, 1998,
for the year ended December 31, 1998, our revenues would have been $6.2 million
and our net loss would have been $2.3 million and for the six months ended June
30, 1999, our revenues would have been $4.3 million and our net loss would have
been $1.6 million.

25
<PAGE>
RESULTS OF OPERATIONS

We have historically derived a majority of our revenues from our enterprise
customers. Our customers purchase Internet access, Web hosting services and
other enhanced products or services either individually or as part of a bundled
solution. Typically, our customers sign annual service contracts that set forth
their charges for recurring services, and may include one time set up fees. We
offer our customers monthly, quarterly, semi-annual and annual service periods
and provide discounts to our customers for prepayment and for purchase of
bundled services. In most cases, our customers are invoiced 30 days prior to the
start of their service period. In only a limited number of instances are our
customers invoiced after services have been provided. Revenues are recognized as
services are rendered. Amounts billed relating to future periods are recorded as
deferred revenue and recognized as services are rendered.

Dedicated Internet access, virtual private networking and dial-up Internet
access together represent more than 60% of our revenues in each period
presented. Our dedicated Internet access revenue has grown in each period and
represented approximately $1.4 million in 1996, $1.7 million in 1997 and $2.9
million in 1998. In addition, for the six months ended June 30, 1999, dedicated
Internet access revenue represented $1.6 million. Revenues from our virtual
private networking service, which we began offering in 1997, were $632,000 for
the year ended December 31, 1998 and $840,000 for the six months ended June 30,
1999. This increase in virtual private networking revenues is primarily
attributable to the increase in Microsoft's WebTV Networks' customers utilizing
this service. Dial-up access revenues increased from approximately $174,000 in
1996 to approximately $719,000 in 1998 and approximately $600,000 in the six
months ended June 30, 1999. This growth is primarily attributable to expansion
of our customer base and increased sales and marketing efforts.

Our primary focus is on generating recurring revenues from small and medium
sized business customers. Currently, revenues from enterprise customers
represent more than 85% of total revenues. During the years ended December 31,
1997 and 1998, revenues from the sale of our enhanced products and services
represented between 10% and 16.0% of our total revenues. On a pro forma basis
assuming our acquisition of Internet Unlimited occurred on January 1, 1998,
enhanced products and services revenues would have been 21% of revenues in the
year ended December 31, 1998 and 26% of revenues in the six months ended June
30, 1999. We anticipate that enhanced products and services revenues will
increase as a percentage of our total revenues in the future.

As our revenues have grown, we have increased the number of our employees,
expanded our facilities and infrastructure, and increased our sales and
marketing efforts. We had 19 employees at December 31, 1996, 33 employees at
December 31, 1997, 41 employees at December 31, 1998 and 52 employees at June
30, 1999. As of December 31, 1996 we operated our network operations center, or
NOC, and one CNF. As of June 30, 1999, we had expanded the capabilities of the
NOC and had three CNFs in operation with four additional CNFs in construction.
Our advertising expenditures increased from $104,000 in 1996 and $243,000 in
1997 to $625,000 in 1998 and $210,000 in the six months ended June 30, 1999. We
expect to continue to increase the number of our employees, to expand our
facilities and infrastructure, and to increase our sales and marketing efforts.
As a consequence, we expect operating expenses to continue to increase for the
foreseeable future.

Cost of revenues consists primarily of Internet access and
telecommunications charges. These charges are the costs of directly connecting
to Internet backbone providers. Cost of revenues also includes the cost of third
party hardware and software sold, payroll and related expenses for engineering,
and rental expense on leased network and CNF equipment.

Selling, general and administrative expense consists primarily of payroll
and related expenses for personnel engaged in marketing, selling, customer
service, accounting, management, and administrative functions. Selling, general
and administrative expense includes office space rent, advertising, promotion,
insurance, professional fees, as well as other general corporate expenses.

26
<PAGE>
The following table sets forth statement of operations data as a percentage
of revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED JUNE
DECEMBER 31, 30,
--------------------- -------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues........................................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Operating Expenses:
Cost of revenues................................................................ 59.8 63.6 58.6 58.1 59.6
Selling, general and administrative............................................. 40.8 39.4 55.5 44.3 60.7
Depreciation and amortization................................................... 4.1 4.8 6.3 5.3 7.0
----- ----- ----- ----- -----
104.7 107.8 120.4 107.7 127.3
----- ----- ----- ----- -----
Operating loss.................................................................. (4.7) (7.8) (20.4) (7.7) (27.3)
Other expense, net.............................................................. (1.2) (1.0) (2.7) (1.8) (3.1)
----- ----- ----- ----- -----
Net loss........................................................................ (5.9)% (8.8)% (23.1)% (9.5)% (30.4)%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998

REVENUES. Revenues increased by $894,000, or 34%, to $3.5 million for the
six months ended June 30, 1999, compared to $2.7 million for the six months
ended June 30, 1998. This increase in revenues is primarily attributable to an
increase in the number of customers using our dedicated Internet access services
and a 409% increase in virtual private network revenues from $165,000 for the
period ended June 30, 1998 to $840,000 for the period ended June 30, 1999. This
increase in virtual private networking revenues is primarily attributable to the
increase in revenues from one customer, Microsoft's WebTV Networks. Our enhanced
products and service revenues increased by 22% for the period ended June 30,
1999 over the same period in 1998. Our dial-up customer base continued to grow
over the comparable period, resulting in an increase in dial-up revenues of 67%
for the period ended June 30, 1999 over the same six-month period in 1998. These
increases in revenues were partially offset by a decline in the sales of third
party hardware and software from 18.8% of revenues in the six months ended June
30, 1998 to 2.2% of revenues in the six months ended June 30, 1999. In the six
months ended June 30, 1998, we sold a significant amount of third party hardware
and software as part of an installation for one of our major customers. During
these periods, we derived a significant portion of our revenues from Microsoft's
WebTV Networks, Lucent Technologies and the State of Delaware. Microsoft's WebTV
Networks represented 20% and Lucent Technologies represented 10% of total
revenues for the six months ended June 30, 1999. The State of Delaware
represented 11% of total revenues for the six months ended June 30, 1998. On a
pro forma basis, assuming our acquisition of Internet Unlimited occurred prior
to January 1, 1999, revenues would have been $4.2 million for the six months
ended June 30, 1999.

COST OF REVENUES. Cost of revenues increased by $574,000, or 37%, to $2.1
million for the six months ended June 30, 1999, compared to $1.5 million for the
six months ended June 30, 1998. As a percentage of revenues, cost of revenues
increased to 59.6% for the six months ended June 30, 1999 from 58.1% for the six
months ended June 30, 1998. This increase was primarily attributable to the
increase in Internet access and telecommunications charges, increased rental
expense on leased equipment, and an increase in payroll and related expenses for
engineers associated with our increased revenues. On a pro forma basis, assuming
our acquisition of Internet Unlimited occurred prior to January 1, 1999, cost of
revenues would have been $2.3 million for the six months ended June 30, 1999.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased by $978,000, or 83%, to $2.2 million for the six months ended
June 30, 1999 compared to $1.2 million for the six months ended June 30, 1998.
As a percentage of revenues, selling, general and administrative

27
<PAGE>
expenses increased to 60.7% for the six months ended June 30, 1999 from 44.3%
for the six months ended June 30, 1998. This increase is primarily attributable
to the increase in selling, general and administrative personnel from 34 at June
30, 1998 to 43 at June 30, 1999, and a 42% increase in advertising expense from
$147,000 in the six months ended June 30, 1998 to $210,000 in the six months
ended June 30, 1999. As a result of the increase in personnel, all related
general and administrative expenses increased. On a pro forma basis, assuming
our acquisition of Internet Unlimited occurred prior to January 1, 1998,
selling, general and administrative expenses would have been $2.6 million for
the six months ended June 30, 1999.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$108,000 or 77%, to $248,000 for the six months ended June 30, 1999, compared to
$140,000 for the six months ended June 30, 1998. This increase was primarily
attributable to the purchase of equipment necessary to support the expansion of
our network. On a pro forma basis, assuming our acquisition of Internet
Unlimited occurred prior to January 1, 1999, depreciation and amortization,
including the amortization of intangible assets associated with the Internet
Unlimited acquisition, would have been $860,000 for the six months ended June
30, 1999.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

REVENUES. Revenues increased by $1.8 million, or 51%, to $5.5 million for
the year ended December 31, 1998 from $3.7 million for the year ended December
31, 1997. This increase in revenues resulted from an overall increase in the
number of customers using our dedicated Internet access services and from an
almost 2,000% increase in virtual private networking revenues for the year ended
December 31, 1998, compared, to the year ended December 31, 1997. Our sales of
third party hardware and software declined from 22.5% of revenues for the year
ended December 31, 1997 to 11.8% of revenues for the year ended December 31,
1998, primarily because we sold a significant amount of third party hardware and
software as part of an installation for one of our major customers in 1997. Our
dedicated Internet access revenues increased by $1.2 million, or 73%, in 1998
compared to 1997. Our dial-up customer base continued to increase in 1998
compared to 1997, resulting in dial-up revenues increasing $145,000, or 25%, in
1998 compared to 1997. During the year ended December 31, 1998, no customer
represented in excess of 10% of total revenues. During the year ended December
31, 1997, Lucent Technologies represented 23% and Vanguard Cellular One
represented 13% of total revenues. On a pro forma basis, assuming our
acquisition of Internet Unlimited occurred on January 1, 1998, revenues would
have been $6.2 million for the year ended December 31, 1998.

COST OF REVENUES. Cost of revenues increased by $908,000, or 39%, to $3.2
million for the year ended December 31, 1998 from $2.3 million for the year
ended December 31, 1997. This increase was primarily attributable to the
increase in Internet access and telecommunications charges, and increased rental
expense on leased equipment. As a percentage of revenues, cost of revenues were
58.6% for the year ended December 31, 1998, compared to 63.6% for the year ended
December 31, 1997. This decrease in cost of revenues as a percentage of revenues
resulted from a shift in our revenue mix. In the year ended December 31, 1997,
revenues from sales of third party hardware and software, which have lower
margins than our service revenues, were 22.5% of revenues, as compared to 11.8%
in the year ended December 31, 1998. On a pro forma basis, assuming our
acquisition of Internet Unlimited occurred on January 1, 1998, cost of revenues
would have been $3.4 million for the year ended December 31, 1998.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased by $1.7 million, or 112%, to $3.1 million for the year ended
December 31, 1998 from $1.4 million for the year ended December 31, 1997. As a
percentage of revenues, these expenses were 55.5% for the year ended December
31, 1998, compared to 39.4% for the year ended December 31, 1997. This increase
in

28
<PAGE>
selling, general and administrative expense in dollars and as a percentage of
revenues is primarily attributable to the increase in selling, general and
administrative personnel from 28 at December 31, 1997 to 35 at December 31,
1998, and a 157% increase in advertising expense from $243,000 in the year ended
December 31, 1997 to $625,000 in the year ended December 31, 1998. On a pro
forma basis, assuming our acquisition of Internet Unlimited occurred on January
1, 1998, selling, general and administrative expenses would have been $3.5
million for the year ended December 31, 1998.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$170,000, or 95%, to $347,000 for the year ended December 31, 1998 from $177,000
for the year ended December 31, 1997. This increase was primarily attributable
to the purchase of equipment necessary to support the expansion of our network.
On a pro forma basis, assuming our acquisition of Internet Unlimited occurred on
January 1, 1998, depreciation and amortization, including the amortization of
intangible assets associated with the Internet Unlimited acquisition, would have
been $1.5 million for the year ended December 31, 1998.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

REVENUES. Revenues increased by $1.8 million, or 89%, to $3.7 million for
the year ended December 31, 1997, from $1.9 million for the year ended December
31, 1996. For the year ended December 31, 1997, our sales of hardware and
software increased by $425,000, or 106%, compared to the year ended December 31,
1996. Our 1997 dedicated Internet access revenues grew by $327,000, or 24%,
compared to 1996. As a result of growth in our dial-up customer base in 1997,
our dial-up revenue increased $400,000, or 230%, over 1996. During the year
ended December 31, 1997, Lucent Technologies, Inc. represented 23% of total
revenues compared to 18% of total revenues for the year ended December 31, 1996.
During the year ended December 31, 1997, Vanguard Cellular Systems, Inc.
represented 13% of our total revenues.

COST OF REVENUES. Cost of revenues increased by $1.1 million, or 101%, to
$2.3 million for the year ended December 31, 1997, from $1.2 million for the
year ended December 31, 1996. In 1997, we began leasing equipment through
operating leases. Equipment lease expense was $172,000 in 1997. As a percentage
of revenues, these expenses were 63.6% for the year ended December 31, 1997,
compared to 59.8% for the year ended December 31, 1996. This increase was
primarily attributable to the increase in Internet access and telecommunications
charges, and rental expense on leased equipment.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased by $652,000, or 82%, to $1.4 million for the year ended
December 31, 1997, from $793,000 for the year ended December 31, 1996. This
increase was primarily due to the growth in selling, general, and administrative
personnel from 15 at December 31, 1996 to 28 at December 31, 1997. Advertising
expense increased by $139,000, or 134%, for the year ended December 31, 1997,
compared to the year ended December 31, 1996.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$98,000, or 125%, to $177,000 for the year ended December 31, 1997 from $79,000
for the year ended December 31, 1996. This increase was primarily attributable
to the purchase of equipment necessary to support the expansion of our network.

29
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Our business plan has required, and is expected to continue to require,
substantial capital to fund operations, capital expenditures, expansion of sales
and marketing capabilities and acquisitions. The following is a table setting
forth our cash flow activities:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows provided by (used in)
operating activities............... $ 175,518 $ 483,415 $(613,979) $(762,326) $ 11,989
Cash flows used in investing
activities......................... (331,153) (690,352) (899,996) (198,915) (738,321)
Cash flows provided by financing
activities......................... 178,113 267,327 1,681,776 1,659,118 994,221
--------- --------- --------- --------- ---------
Net increase in cash and cash
equivalents........................ $ 22,478 $ 60,390 $ 167,801 $ 697,877 $ 267,889
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

To date, we have satisfied our cash requirements primarily through debt and
equity financings. In May 1998, we issued 1,000,000 shares of our common stock,
a convertible promissory note in the amount of approximately $3.1 million to H&Q
You Tools Investment Holding, L.P. and a warrant to purchase 1,000,000 shares of
our common stock at an exercise price of $1.50 per share to H&Q You Tools
Investment Holding, L.P. for an aggregate of approximately $3.3 million in cash.
In connection with this financing, we granted H&Q You Tools Investment Holding,
L.P. a security interest in substantially all of our assets. H&Q You Tools
Investment Holding, L.P. has committed to convert this note into 2,033,334
shares of our common stock and release its security interest immediately prior
to the consummation of this offering. We used a portion of the proceeds from
this financing to repurchase outstanding shares of our common stock representing
50% of our then outstanding shares of common stock for $1.0 million.

In May 1999, we issued a $1.0 million convertible note to H&Q You Tools
Investment Holding, L.P. for $1.0 million in cash. The principal amount of this
note and accrued interest was converted into 142,431 shares of series A
convertible preferred stock at $7.13 per share in August 1999. In July 1999, we
used a portion of the proceeds from this financing to acquire Internet
Unlimited, Inc. a provider of Web hosting and collocation services, for $400,000
in cash and 546,984 shares of common stock.

In August 1999, we sold 666,198 shares of series A convertible preferred
stock to purchasers including Lucent Technologies, Inc. at $7.13 per share. The
net proceeds from these sales of series A convertible preferred stock were
approximately $4.4 million. All of the outstanding preferred stock will
automatically convert into common stock immediately prior to the consummation of
this offering.

In August 1999, we entered into a master lease agreement with Ascend Credit
Corporation for a $20 million equipment lease facility. Under this arrangement,
we lease equipment necessary for the construction of our CNFs. Currently, we
have approximately $18.0 million available under this facility. In order to
complete the four CNFs currently being constructed and the related expansion of
our NOC, we anticipate that we will require an aggregate of approximately $1.1
million, of which approximately $500,000 will be funded through our Ascend
equipment lease facility.

As of June 30, 1999, our cash and cash equivalents were $524,671. We believe
that the net proceeds from this offering, together with our existing cash and
cash equivalents, and available financing under the $20 million equipment lease
facility, will be sufficient to meet our working capital and capital expenditure
requirements for at least the next 12 months. Thereafter, we may be required to
seek additional sources of financing. We may also be required to raise
additional financing before such time. If additional funds are raised through
the issuance of equity securities, our existing shareholders may experience
significant dilution. Furthermore, additional financing may not be

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available when needed or, if available, such financing may not be on terms
favorable to us or our shareholders. If such sources of financing are
insufficient or unavailable, or if we experience shortfalls in anticipated
revenue or increases in anticipated expenses, we may need to slow down or stop
the expansion of our regional deployment, including our CNFs and reduce our
marketing and development efforts. Any of these events could harm our business,
financial condition or results of operations.

IMPACT OF THE YEAR 2000 ISSUE

Many computer programs have been written using two digits rather than four
to define the applicable year. This poses a problem at the end of the century
because these computer programs may recognize a date using 00 as the year 1900
rather than the year 2000. This, in turn, could result in major system failures
or miscalculations, and is generally referred to as the year 2000 issue. We have
formulated and, to a large extent, implemented a plan to address our year 2000
issues.

During 1998, we established a year 2000 compliance program to coordinate our
efforts to resolve our year 2000 issues. We are addressing our year 2000 issues
through a comprehensive assessment of both our internal systems and the systems
of our external partners and suppliers.

INTERNAL SYSTEMS ASSESSMENT AND REVIEW

Our internal systems assessment and review consists of four-phases, which we
expect to complete by the end of the third quarter of 1999:

- ASSESSMENT--We have conducted an inventory of our existing systems,
performed risk assessment on these systems, prioritized the importance of
these systems, and determined appropriate allocation of resources. This
assessment is substantially complete.

- ANALYSIS AND PLANNING--We have selected corrective methods where needed,
developed appropriate test standards, determined conversion sequences
where needed, and established a detailed timeline for correcting any known
year 2000 problems. This analysis and planning is substantially complete.

- CONVERSION AND TESTING--We are developing and modifying operating codes,
purchasing or installing vendor-provided solutions and conducting unit and
system tests. Our conversion and testing phase is substantially complete.

- IMPLEMENTATION--We have begun modifying previously non-compliant systems,
installing third party solutions, updating operational procedures, and
training our employees as needed. This implementation phase is
substantially complete.

We also face risks from customer-provided hardware and software that we host
in our data centers that in many cases has been customized by outside service
providers or customer personnel. While we inform our customers that they are
responsible for year 2000 compliance of their hosted hardware and software, we
cannot assure you that our customers will take the steps necessary to achieve
year 2000 compliance. The failure of our customers and third-party providers to
ensure that their hosted hardware and software is year 2000 compliant could
disrupt our operations and materially adversely affect our financial condition
and operating results.

EXTERNAL SYSTEMS ASSESSMENT AND REVIEW

We have also conducted a four-phase review of the systems of our partners,
suppliers, and other third parties (including equipment providers and other
telecommunications service providers) to assess their year 2000 compliance
efforts. The first phase, which is completed, included identifying our critical
partners, suppliers, and vendors. This phase involved requesting information
from these critical partners, analyzing their responses, studying their
published year 2000 statements, performing our own

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risk assessments, prioritizing the importance of potential non-compliant systems
and determining appropriate allocation of resources.

Our second phase includes developing personal contacts with critical
partners' year 2000 staff, articulating our concerns and requesting assistance
from them with respect to their products. This phase is substantially complete.
Our third phase includes receiving information from responses to our requests
for assistance, researching Web sites, making phone contacts and summarizing the
results of the information that we receive. Finally, our fourth phase includes
actively evaluating different systems, testing critical partners' year 2000
updates, reviewing such information with our management team and identifying any
additional resources that may be needed. We believe that phases three and four
of our review will be substantially complete prior to the end of the third
quarter of 1999.

We have reviewed and analyzed the year 2000 compliance of Internet
Unlimited, Inc., which we acquired in July 1999. We are in the process of
integrating Internet Unlimited into our operations. We do not believe that this
integration of their systems with ours will have an adverse effect on our year
2000 compliance status.

During the year ended December 31, 1998, we spent over $750,000 in
connection with the upgrade and continuing build-out of our technical operations
and network. We believe that all of this newly acquired equipment is year 2000
compliant. We have incurred costs and expect to incur additional costs in 1999
in connection with our year 2000 program, which we believe will not be material.
In addition, we have implemented a new billing and customer care system, as part
of our business strategy, which we believe to be year 2000 compliant.

We currently believe that our most likely worst case scenario related to the
year 2000 issue is associated with concerns with our partners' and suppliers'
products and software. If one or more of our partners or suppliers experience
year 2000 problems which result in decreased Internet usage and that delay or
interfere with our ability to receive or transmit our customers' data, our
business and operations could be adversely affected.

We believe that our plan to address year 2000 issues will be fully executed
prior to January 1, 2000; however, any failure of this plan could have a
material adverse effect on our operating results. Despite the testing performed
by us and our vendors, our products, services and systems may contain undetected
errors or defects associated with year 2000 date functions. In the event any
material errors or defects are not detected and fixed, or third parties cannot
timely provide us with products, services or systems that meet the year 2000
requirements, our operating results could be materially adversely affected. We
cannot guarantee that we will be able to timely and successfully modify our
products, services and systems to comply with year 2000 requirements if we have
failed to accurately assess, test and correct year 2000 issues. Known or unknown
errors or defects that affect the operation of our products, services or systems
could result in a delay in the receipt of payment, interruption of network
services, cancellation of customer contracts, diversion of development
resources, damage to our reputation and litigation costs. We cannot guarantee
that these or other factors relating to year 2000 compliance issues will not
have a material adverse effect on our business.

We have prepared a contingency plan in the event that any of our products,
services or systems remain non-compliant as of December 31, 1999. As part of
this contingency plan, we may replace any non-compliant partners, suppliers or
other third party providers with those with demonstrated year 2000 compliance.

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OUR BUSINESS

GENERAL

We are a growing Internet service provider, or ISP, targeting small and
medium sized enterprises in selected high growth markets in the mid-Atlantic
area of the United States. We have been providing Internet access services to
our customers since 1994. We supplement our dedicated Internet access services
with a comprehensive suite of enhanced products and services that are designed
to meet the expanding needs of our customers and increase our revenue per
customer. The services we provide include:

- Internet access services;

- Total Managed Security;

- Web hosting services;

- virtual private networks;

- unified messaging; and

- total managed backup and recovery services.

On July 30, 1999, we acquired Internet Unlimited, Inc., a Web hosting and
collocation company. As of June 30, 1999, pro forma for the acquisition of
Internet Unlimited, we provided Internet access and enhanced products and
services to approximately 170 small and medium sized enterprises and
approximately 12,760 dial-up customers in the mid-Atlantic area. We also provide
Web hosting services to approximately 2,780 customers. We have specifically
targeted small and medium sized enterprises because of their growing Internet
needs and limited technical resources and operating scale. We target markets
that are typically smaller than the 100 most populated U.S. metropolitan
markets. We call these secondary markets. Small and medium sized enterprises are
often concentrated in these markets to avoid the higher costs associated with
locating in a metropolitan area. We believe that these enterprises are currently
underserved by national and local ISPs.

We believe that we can continue to provide high quality Internet services to
small and medium sized enterprises at a competitive price because we have
developed a cost-effective and highly efficient regional strategy. Our highly
reliable and scalable network architecture is designed to be deployed and
operated in each of our target markets cost effectively. Our network features
advanced switches and routers and other value-added components that are
typically associated with national providers. However, our regional network
strategy enables us to eliminate many of the high cost network transport and
interconnect elements typically associated with a national network. We have
centralized our network monitoring and management, call center support, sales
management and back office functions in order to realize cost savings and
economies of scale. Our CNF infrastructure and local sales support are
regionally located in order to provide cost savings to our customers and a
higher quality of customer service. We intend to duplicate this network
architecture in targeted high growth secondary markets across the mid-Atlantic
and northeastern United States and, eventually, across the entire country.

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OUR MARKET OPPORTUNITY

OVERVIEW. The Internet has become an important global medium enabling
millions of people to obtain and share information and conduct business
electronically. Its expanded use has made the Internet a critical tool for
information and communications for many users. Internet access and enhanced
Internet services, including Web hosting and electronic commerce services,
represent two of the fastest growing segments of the telecommunications services
market. International Data Corporation estimates that at the end of 1997 there
were over 38 million Web users in the United States and over 68 million
worldwide, and projects that by the end of 2002 the number of Web users will
increase to over 135 million in the United States and over 319 million
worldwide. The availability of Internet access, advancements in technologies
required to navigate the Internet, and the proliferation of content and
applications available over the Internet have attracted a rapidly growing number
of Internet users.

GROWTH IN BUSINESS USE OF THE INTERNET. The dramatic growth in Internet
usage in recent years, combined with enhanced functionality, accessibility and
security, has made the Internet increasingly attractive to businesses as a
medium for communication and commerce. For many businesses, the Internet has
created a new communication and sales channel which enables large numbers of
geographically dispersed organizations and consumers to be reached quickly and
cost-effectively. IDC estimates that the number of consumers buying goods and
services on the Internet will grow from 17.6 million in 1997 to 128.4 million in
2002, and that the total value of goods and services purchased over the Internet
will increase from approximately $12 billion in 1997 to approximately $426
billion by 2002.

Businesses are increasingly adding a variety of enhanced services and
applications to their basic Internet access, Web sites and e-commerce
applications in order to more fully capitalize on the power of the Internet.
These services and applications allow them to more efficiently and securely
communicate company information, expand and enhance their distribution channels,
increase productivity through back-office automation, ensure reliability and
reduce costs.

- DEMAND FOR INTERNET ACCESS SERVICES. The Internet continues to increase
in size and importance as its role in integral business operations
expands. Internet access services represent the means by which ISPs
interconnect their customers to the Internet or corporate intranets and
extranets. According to Forrester Research, Internet access revenues from
businesses are expected to increase from less than $1 billion in 1997 to
more than $16 billion in 2002. Because small and medium sized enterprises
often lack the technical capabilities and operational scale to implement
their Internet operations, these enterprises often seek assistance from
third-party service providers.

- DEMAND FOR WEB HOSTING SERVICES. As Internet Web sites become
increasingly critical to businesses, many businesses are seeking to
outsource to ISPs services such as Web hosting, collocation and file
transfer protocol data storage and retrieval.

- DEMAND FOR SECURE PRIVATE NETWORKS. As businesses increasingly rely on
the Internet for communication and commerce, concerns relating to the
security of their internal and proprietary information, data loss and
reduced transmission speed has led those businesses to demand Internet
services that include the ability to provide electronic security
monitoring and threat responses.

THE SMALL AND MEDIUM SIZED ENTERPRISE MARKET. We have specifically targeted
small and medium sized enterprises because:

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- We believe that a relatively small percentage of these enterprises
currently utilize the Internet. This number is increasing rapidly. The
small and medium sized enterprise segment is expected to be one of the
fastest growing segments of the Internet industry.

- We believe that these enterprises rely more heavily on their Internet
service provider than larger enterprises and tend to change Internet
service providers relatively infrequently.

INTERNET SERVICES IN SECONDARY MARKETS. Small and medium sized enterprises
are often concentrated in secondary markets to avoid the higher costs associated
with locating in a metropolitan area. We define a secondary market as typically
smaller than the 100 most populated U.S. metropolitan markets. However, national
ISPs have historically placed their largest points of presence, or POPs, only in
or around densely populated major cities. A POP is an access point at which
customers in a traditional ISP network architecture can connect to data circuits
in order to obtain Internet access and other services. Customers that are
located within a few miles from these POPs often receive cost savings on their
access pricing. However, customers located in secondary markets that are 20 to
75 miles away from these POPs have typically been charged higher prices for
Internet access services.

We believe that small and medium sized enterprises located in high growth
secondary markets are currently underserved by both national and local providers
of Internet access and related services. National ISPs typically lack the local
presence to provide local support. Local ISPs, on the other hand, often lack the
requisite scale and resources to provide a full range of services at acceptable
quality and pricing levels.

OUR SOLUTION

We believe that we offer our customers a comprehensive solution to their
Internet access and enhanced products and services needs. Key aspects of our
solution include:

TECHNOLOGY PLATFORM. Our network architecture is designed around our CNF
that we construct in each region in which we operate. A CNF is a high capacity
data center that provides our customers with redundant connections to the
Internet through connections to not less than two independent Internet backbone
networks. This assures our customers of fewer delays in accessing the Internet
and continued service should one of the backbone networks fail. In addition, our
CNFs feature redundant power and climate control systems, and are continuously
monitored through a connection to our network operations center, or NOC. This
connection allows us to monitor and control regional CNF operations 24
hours-a-day, 7 days a week, which allows our staff to be immediately alerted and
responsive to problems as they arise. This control of our network infrastructure
also allows us to improve quality of service by minimizing network downtime. The
NOC also provides an additional level of redundancy of Internet connectivity. In
the event that both independent Internet backbone networks to which a CNF is
connected fail, customer traffic can be routed to the Internet through the NOC
to minimize service interruptions. Likewise, a CNF will continue to function
even if its connection to the NOC fails.

[Diagram appears here illustrating connections between the customers, CNFs,
the NOC and the backbone providers]

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COMPREHENSIVE SUITE OF SERVICES. We seek to provide small and medium sized
enterprises with a single source for their Internet service needs. Our
comprehensive suite of services enables our customers to easily and more
cost-effectively address their Internet needs without developing solutions
internally or assembling services from multiple vendors, including resellers,
other Internet service providers and information technology service providers.
We offer our services in customized bundles through a single network connection
and provide our customers with technical support and management expertise.

HIGH QUALITY CUSTOMER SUPPORT AND SERVICE. We focus on providing our
customers with high quality support and service in order to maintain customer
loyalty and maximize retention. Our focus on regional marketing and regional
network access enables us to provide the personalized service and attention that
small and medium sized enterprises often require. In addition, we believe that
customer satisfaction is critical to our success in selling our enhanced
products and services. We provide around-the-clock customer support, real-time
monitoring of all circuits and services and high quality customer service.

PLUG AND PLAY EASE OF INSTALLATION. In order to simplify what is sometimes
a technically challenging installation, we have designed and continue to enhance
our products and services to provide our customers with plug and play
installation. We ship pre-configured equipment to our customers that, in most
cases, is ready for installation. In the event that a customer requires
assistance, the customer can contact our engineering installation department,
where the customer is guided through the installation process at no additional
charge. In addition, many of our enhanced products and services require no
additional hardware and can be installed through the customer's existing
connection to our CNF.

COST SAVINGS TO OUR CUSTOMERS. We believe that our Internet solutions are
more cost-effective than in-house solutions because our customers would need to
make significant expenditures for equipment, personnel and dedicated bandwidth
to match our level of performance and reliability. Furthermore, we believe that
our Internet services are competitively priced relative to other ISPs that
compete in our current markets. Because we position our CNFs close to secondary
markets, we often are able to utilize shorter circuits than those used by
national providers and do not need to rely on national or international
transport circuits, which are generally higher cost than regional circuits.
Furthermore, because our CNFs support only our data products, we do not incur
expenses related to telephony equipment, long-distance switches and other voice
services.

OUR STRATEGY

REPLICATING OUR MODEL RAPIDLY IN SELECTED SECONDARY MARKETS. We intend to
expand into selected high growth secondary markets by replicating our regional
network and marketing model. Our network architecture and scalable sales and
marketing plan are designed to allow us to penetrate additional regions rapidly
and cost-effectively. By focusing on smaller regions, we are able to build our
regional networks more quickly than if we were to build a contiguous national
network. Our CNFs are modular and use non-proprietary standards-based equipment
that can be obtained from multiple vendors. This allows for a simpler design,
easier duplication and cost savings. We also implement a flexible marketing
model in each region that addresses the particular product and service needs of
our target customers in that region. In order to successfully replicate our
model in our target regions, we must:

- IDENTIFY ATTRACTIVE REGIONS. We target regions that are typically growing
rapidly and have a large concentration of small and medium sized
enterprises. Our focus has been on regions outside of major metropolitan
cities located in the mid-Atlantic area of United States. We intend to
expand

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throughout the mid-Atlantic United States and enter into target regions in
the northeastern United States and, eventually, throughout the entire
country.

- RAPIDLY BUILD ADDITIONAL CNFS. Our network architecture is easily
replicated in each target region. Each of our CNFs requires virtually the
same equipment, physical space and redundancy regardless of the region. As
a result, we can pre-fabricate many of the elements required to deploy a
CNF and also take advantage of volume pricing for our equipment.

- CONTINUE OUR HIGHLY FOCUSED SALES AND MARKETING EFFORTS. We have
established a sales and marketing strategy based upon a centralized sales
staff with active local support. We will continue to market our products
and services in our target regions through a combination of highly focused
local advertising, brand awareness campaigns and a focused sales effort.
We tailor our marketing efforts to each region to utilize the most
cost-effective methods of advertising and to address local preferences. As
a result, we generally do not incur the significant expenses related to
broad-based national media and advertising campaigns.

LEVERAGING CUSTOMER RELATIONSHIPS TO MARKET ENHANCED SERVICES. We offer a
portfolio of enhanced products and services to meet the expanding needs and
complexity of our customers' Internet operations. This strategy allows us to
increase revenue per customer and maintain high customer retention by
strengthening our customers' relationships with us.

LEVERAGING CENTRALIZED SALES AND MARKETING OPERATIONS TO TAKE ADVANTAGE OF
ECONOMIES OF SCALE. We use our centralized sales and marketing staff to help
implement our regional strategy cost-effectively. We intend to hire and train
additional local sales and marketing personnel within our target regions to
compliment the core of our sales and marketing staff which will continue to be
concentrated in one centralized location to maximize efficiency. These
regionally located employees add local market knowledge, expertise and
familiarity to our sales and marketing efforts. This allows us to maintain a
field presence in each of our regions, while maximizing the utilization of our
central operations, where the majority of our employees are located.

ENTERING INTO STRATEGIC RELATIONSHIPS AND MAKING SELECTED ACQUISITIONS. We
seek to enter into multiple strategic relationships to obtain technology. It has
been our experience that having multiple vendors improves our ability to meet
our customers' needs efficiently and in a cost-effective manner. We intend to
enter into strategic relationships and to make acquisitions to expand our suite
of enhanced products and services. As part of this strategy, we have recently
acquired Internet Unlimited, Inc., a provider of Web hosting and collocation
services. We have relationships with numerous vendors, including Lucent
Technologies, WatchGuard Technologies, Inc. and Mirapoint, Inc. We intend to
make strategic acquisitions that enable us to offer additional enhanced products
and services to our customers. We may also enter into strategic relationships
with third-party service providers to enable them to deliver their Internet
products and services directly to our customers.

SALES AND MARKETING

As of July 31, 1999, we employed 20 sales and marketing professionals at our
corporate headquarters. This group comprises our centralized sales and marketing
team and is responsible for contacting potential and existing customers within
each region. Our sales team also works with our regional marketing managers to
offer enhanced products and services to existing customers and ensure overall
customer satisfaction. In order to maximize the efficiency of our sales process,
we have developed a uniform set of sales procedures, which our sales staff has
been trained to implement.

We use targeted marketing and media advertising to develop brand awareness
and supplement these efforts with our highly customized sales process and
personalized customer service. Through our regional marketing managers, we seek
to develop strong customer relationships within local communities.

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Our regional marketing managers will also provide assistance and support to
our centralized sales staff. This enables us to evaluate customers' needs more
effectively, to design customized solutions and to reinforce our local presence
as a value-added provider of enhanced Internet services. Our regional marketing
managers also identify market trends, provide constant data regarding changes in
the competitive landscape and also may identify and initiate contact with new
customers. In addition, our regional marketing managers attend trade shows and
Chamber of Commerce events, as examples, to further reach the targeted small and
medium sized enterprises in each region.

We also maintain a Web site (WWW.FAST.NET), which provides Internet users
information about us and the opportunity to obtain answers to some frequently
asked questions. Through our Web site, customers can also learn how to obtain
Internet access and enhanced products and services through a FASTNET connection.

PRODUCTS AND SERVICES

We offer a comprehensive Internet solution to our customers, which includes
dedicated and dial-up Internet access and enhanced Internet products and
services. Our dedicated Internet access offering is available at speeds that
range from 56 kilobits per second to 45 megabits per second. Dedicated Internet
access can be delivered through standard telephony circuits, such as T-1 through
T-3 digital circuits, digital subscriber line technology, also known as DSL, or
wireless connections. Our dedicated Internet access provides our customers with
always-on connectivity to the Internet as well as access to our enhanced
Internet products and services. In addition, we offer dial-up Internet access to
customers, which provides lower cost, lower bandwidth connectivity to the
Internet. To ensure maximum availability and reliability of our products and
services, our facilities feature backup power and redundant bandwidth.

We offer enhanced Internet products and services to our customers on a
monthly recurring fee basis including:

- TOTAL MANAGED SECURITY SERVICES--We address our customers' concerns about
the security of data transmitted over the Internet by offering various
levels of protection through our Total Managed Security services. These
services will provide security to a company's network, including local
area networks and wide area networks, from unauthorized access by external
sources. In addition, as part of our services, our NOC personnel provide
24 hours-a-day, seven days-a-week monitoring and threat response. We
incorporate third-party products from WatchGuard Technologies, Inc. and
Nokia Corporation into our security solution and we continually evaluate
third-party products to meet the future needs of our customers. These
products include Web content filtering, mail filtering and detailed log
file generation.

- WEB HOSTING SERVICES--We provide a wide range of content hosting services,
including shared and dedicated hosting on our servers for customer Web
sites as well as collocation hosting of customer supplied servers in our
facilities. Entry level shared server Web hosting provides our customers
with a managed and pre-configured system at a reasonable cost. The
customer simply adds its content through an interface such as FTP (file
transfer protocol) or, in a growing number of cases, through Microsoft's
FrontPage extensions. Server collocation allows customers to place their
own servers within our facilities. Upon request, we can sell servers to
the customer and maintain them for an additional fee.

- VIRTUAL PRIVATE NETWORK SERVICES--When an enterprise customer wants to
enable remote or off-site access to its computer network, the enterprise
commonly uses a form of a virtual private network connection. A virtual
private network provides a convenient and secure computer connection from
a remote location back to the company's main computer network. We provide
customers with our CC/vpn product, which enables them to control many
aspects of their

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configuration, such as user profile changes and security functions,
through a private Web-based interface.

- UNIFIED MESSAGING SERVICES--The Internet has been the catalyst for a
variety of convenient Web-based communications services, such as e-mail,
computer-based faxing and paging. In many cases, each of these services
requires the user to access individual applications to view messages.
Unified messaging combines messaging services and allows a user to view
all messages through one application. We provide our customers with a user
friendly unified messaging service that is based on Internet protocol
standards. We believe that we will be able to offer our unified messaging
services in the future with enhancements such as voicemail and other
multimedia tools.

- TOTAL MANAGED BACKUP AND RECOVERY SERVICES--We provide Internet-enabled
backup and recovery services for a company's data network through off-site
data and storage. We believe that many small and medium sized businesses
lack a scheduled computer data back-up routine, which may leave them
vulnerable to data loss. Our total managed backup and recovery product is
simple to use and can be easily installed on most servers and desktop
computers. By using this service, our customers can schedule automatic
data back-ups to our servers located within our network. Typically, the
customer accesses our server over the customer's connection to our CNF. In
most cases, this eliminates the need for the customer's data to be
transmitted over the Internet. For a further level of security, we encrypt
the customer's data before transmission to the storage servers. We encrypt
the customer's data before it is transmitted to the storage servers where
it remains in a secret encrypted form. These total managed backup and
recovery services effectively provide our customers convenient and secure
off-site storage of their data.

We have agreements with our customers for our services that are typically
for a one year term that after expiration will automatically convert to a
monthly term until the agreement is either terminated upon 30 days notice or
renewed for a new one year term. We bill our customers on a monthly basis and in
certain circumstances we offer discounts for prepayment. We offer each of our
services individually or as part of a bundled solution. Our customers receive
additional discounts from us if they purchase more than one of our services.

NETWORK ARCHITECTURE AND INFRASTRUCTURE

Our network architecture is designed to provide our customers with reliable,
high speed Internet access as well as our comprehensive suite of enhanced
products and services. Key components of our network are:

CUSTOMER NETWORK FACILITY. The core of each of our regional networks is the
CNF. Each CNF is designed to operate as a stand-alone, self-contained Internet
services facility capable of supporting our full range of products and services
to meet the needs of our customers in each region. Dedicated access customers in
each region connect to one of our CNFs using high speed data circuits provided
by an incumbent local exchange carrier or competitive local exchange carrier.
Our dial-up customers connect to our network using either 56K modem or digital
ISDN circuits. We have agreements with or use facilities of a number of local
exchange carriers, including AT&T Corporation (through its subsidiary Teleport
Communications Group), Bell Atlantic Corporation, Hyperion Communications of New
Jersey, LLC and NEXTLINK Pennsylvania, Inc.

Each CNF has access to at least two Internet backbone providers. We have
agreements with a number of national Internet backbone providers, including MCI
WorldCom Inc., UUNET Technologies, Inc. and Sprint Communications Company, L.P.
This provides redundancy and high reliability in the event that any of our
backbone providers should experience network difficulties. Our agreements with
our backbone providers are fixed price agreements that typically have a term of
one to three years. Some of these agreements additionally include options to
renew on a monthly or yearly basis. We are

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billed by all of our backbone providers monthly and are generally charged
according to the number of services that we choose to subscribe to in addition
to initial installation fees. Since we maintain a carrier-independent design, we
have the flexibility to select the most reliable and lowest cost provider in
each region.

NETWORK OPERATION CENTER. Each CNF is connected to our NOC. The NOC
monitors the operation of each device connected to our network and provides
instantaneous notification of any faults or failures. This monitoring process is
designed to ensure that we are in position to react quickly to restore
operations in the event of technical problems. In addition, the connection
between the NOC and the CNFs provides an additional level of redundancy for
customer traffic if needed. Since each CNF is connected to the Internet
independently from the NOC, connections from a CNF to the NOC typically do not
require the same expensive high capacity or high bandwidth transport facilities
that link CNFs to the Internet. As a result, we reduce our costs of backbone
transport.

EQUIPMENT. We purchase our equipment from a number of vendors to take
advantage of beneficial pricing and improvements in technology and performance.
We currently use routers from Cisco Systems, Inc., such as the 7500 series, that
are equipped with redundant components including route switching processors and
power supplies for added reliability. We sell both Cisco Systems, Inc. and
Nortel Networks Corporation (Bay Networks) routers to our customers for use as
customer premise equipment. Our dial-up Internet access, as well as our virtual
private network services for 56K analog and 128K ISDN use Lucent Technologies
(Ascend) TNT remote access servers. Our networks also utilize and rely on
switches, hubs and other connection devices, which we purchase from a number of
different manufacturers. Our enhanced products and services are supported by Sun
Microsystems, Inc. UNIX-based and Microsoft Windows NT-based servers located at
our CNFs.

PEERING ARRANGEMENTS. Peering is the act of exchanging data across
networks, typically at specific, defined locations. Peering allows traffic from
one network to be delivered to an address located on another network. In
general, our contracts with our Internet backbone providers include peering
arrangements at the public peering points on the Internet. We may decide in the
future to supplement these public peering arrangements with private peering
agreements with other service providers if we determine that these would improve
our service and provide economic and/or technological benefits.

CUSTOMERS

Our customer base consists primarily of small and medium sized enterprises
and dial-up customers located in high growth secondary markets. As of June 30,
1999, pro forma for the acquisition of Internet Unlimited, we provided Internet
access and enhanced services to approximately 170 small and medium sized
enterprises and approximately 12,760 dial-up customers in the mid-Atlantic area.
We also provided Web hosting services to approximately 2,780 customers. While we
have not concentrated our sales and marketing efforts on Fortune 500 companies,
we provide our Internet solutions to a number of large enterprises. Lucent
Technologies, Inc. accounted for 10% of total revenues for the six months ended
June 30, 1999 and 9% of total revenues for the fiscal year ended December 31,
1998 and Microsoft's WebTV Networks, Inc. accounted for 20% of total revenues
for the six months ended June 30, 1999 and 9% of total revenues for the fiscal
year ended December 31, 1998. On a pro forma basis, assuming that the
acquisition of Internet Unlimited was consummated at the beginning of each
period, Lucent Technologies would have accounted for 8% of total revenues for
the six months ended June 30, 1999 and 8% of total revenues for the fiscal year
ended December 31, 1998 and Microsoft's WebTV Networks, Inc. would have
accounted for 16% of total revenues for the six months ended June 30, 1999 and
8% of total revenues for the fiscal year ended December 31, 1998. We expect that
a significant portion of our revenues will continue to be derived from a limited
number of customers which may vary from year to year.

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<PAGE>
CUSTOMER AND TECHNICAL SUPPORT

We believe superior customer and technical support is critical to our
ability to retain existing customers and attract new customers. Our customers
depend on the speed and reliability of our network and our ability to keep them
connected to the Internet at all times. The knowledge and service orientation of
our local customer and technical support personnel are key elements in our
ability to assist our customers in quickly resolving their problems.

To address individual customer problems, we provide customer technical
support 24 hours-a-day, seven days-a-week. Our customers also have the ability
to reach our customer support representatives by e-mail or schedule a telephone
appointment at a time that is convenient to the customer. In addition, our local
customer representatives are also available to respond to individual customer
needs and provide direct customer support within their designated area. Our
strategy of creating a partnership between local support teams and a central
call center enables us to capture economies of scale, improve quality and
responsiveness and increase productivity, while allowing local personnel to
focus on relationships with customers.

COMPETITION

The Internet services market is extremely competitive and highly fragmented.
We face competition from numerous types of ISPs, including national ISPs, and
anticipate that competition will only intensify in the future as the ISP
industry consolidates. We believe that the primary competitive factors in the
Internet services market include:

- pricing;

- quality and breadth of products and services;

- ease of use;

- personal customer support and service; and

- brand awareness.

We believe that we have competed favorably based on these factors, particularly
due to our:

- regionally focused operating strategy;

- superior customer support and service;

- high performance; and

- competitive pricing.

Our current competitors include many large companies that have substantially
greater market presence, brand-name recognition and financial resources than we
do. Some of our local or regional competitors may also enjoy greater recognition
within a particular community. We currently compete, or expect to compete, with
the following types of companies:

- national Internet service providers, such as PSINet, Inc. and Concentric
Network Corporation;

- providers of Web hosting, collocation and other Internet-based business
services, such as Verio, Inc.;

- numerous regional and local Internet service providers, some of which have
significant market share in their particular market area;

- established on-line service providers, such as America Online, Inc.;

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<PAGE>
- computer hardware and other technology companies that provide Internet
connectivity with their or other products, including the International
Business Machines Corporation and Microsoft Corporation;

- national long distance carriers such as AT&T Corporation, MCI WorldCom,
Inc., Qwest Communications International Inc. and Sprint Communications
Company, L.P.;

- regional Bell operating companies and local telephone companies;

- providers of free Internet service, including NetZero, Inc. and MicroWorkz
Computer Corporation

- cable operators or their affiliates, including At Home Corporation and
Time Warner Entertainment Company, L.P.;

- terrestrial wireless and satellite Internet service providers; and

- nonprofit or educational ISPs.

Many of the major cable companies and some other Internet access providers
have begun to offer or are exploring the possibility of offering Internet
connectivity through the use of cable modems. Cable companies, however, are
faced with large-scale upgrades of their existing plant, equipment and
infrastructure in order to support connections to the Internet backbone via
high-speed cable access devices. We believe that there is a trend toward
horizontal integration through acquisitions or joint ventures between cable
companies and telecommunications carriers. Other alternative service companies
have also announced plans to enter the Internet connectivity market with various
wireless terrestrial and satellite-based service technologies. In addition,
several competitive local exchange carriers and other Internet access providers
have launched national or regional digital subscriber line programs providing
high speed Internet access using the existing copper wire telephone
infrastructure. Several of these competitive local exchange carriers have
announced strategic alliances with local, regional and national service
providers to provide broadband Internet access. These developments could harm
our business.

Recently, several national access providers have begun to offer dial-up
Internet access for free or at substantial discounts to prevailing rates, which
may result in significant pricing pressure for dial-up Internet access services.
We also believe that manufacturers of computer hardware and software products,
media and telecommunications companies and others will continue to enter the
Internet services market, which will also intensify competition, especially for
dial-up access providers.

GOVERNMENT REGULATION

We provide Internet access, in part through transmissions over public
telephone lines. These transmissions are governed by regulations and policies
establishing charges, terms and conditions for communications. As an Internet
provider, we are not currently regulated directly by the Federal Communications
Commission or any other agency, other than regulations applicable to businesses
generally. We could, however, become subject in the future to regulation by the
Federal Communications Commission and/or other regulatory agencies if we become
classified as a provider of basic telecommunications services. These regulations
could affect the charges that we pay to connect to the local telephone network
or for other purposes. For example, currently, Internet access providers, unlike
long distance telephone companies, are not required to pay carrier access
charges. Access charges are assessed by local telephone companies on
long-distance companies for the use of the local telephone network when the
local telephone company originates and terminates long-distance calls, generally
on a per-minute basis. The payment of access charges has been a matter of
continuing dispute, with long-distance companies complaining that the charges
are substantially in excess of actual costs and local telephone companies
arguing that access charges are justified to subsidize lower local

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<PAGE>
rates for end users and other purposes. In May 1997, the Federal Communications
Commission reaffirmed its decision that Internet access providers should not be
required to pay access charges. Subsequent statements issued by the Federal
Communications Commission have not altered this conclusion. A requirement by the
Federal Communications Commission that we pay access charges could have a
significant impact on our costs of providing service.

The Federal Communications Commission also has concluded that Internet
access providers should not be required to contribute to a new universal service
fund established to replace current local rate subsidies and to meet other
public policy objectives, such as providing access to enhanced communications
systems for schools, libraries and health care providers. As a result, unlike
other telecommunications providers, Internet access providers do not have to
contribute a percentage of their revenues to the federal universal service fund
and are not expected to be required to contribute to similar funds being
established at the state level. Both the access charge issue and the universal
service treatment of Internet access providers, however, are the subjects of
further Federal Communications Commission proceedings and could change.
Telephone companies are actively seeking reconsideration or reversal of the
relevant Federal Communications Commission decisions and their arguments are
gaining support as Internet-based telephony begins to compete with conventional
telecommunications services. We cannot predict how these matters will be
resolved but we could be adversely affected if, in the future, Internet service
providers are required to pay access charges or contribute to universal service
support.

In addition, to the extent that an end user's call to an Internet access
provider is considered local rather than long distance, the local telephone
company that serves the Internet service provider may be entitled to reciprocal
compensation from the calling party's local telephone company. Reciprocal
compensation is a reimbursement mechanism between telephone companies whereby
the carrier that terminates a call is eligible for payment from the carrier
serving the calling party. To the extent that a call to an Internet service
provider is considered local, the local telephone company serving an Internet
service provider would be entitled to reciprocal compensation. This payment of
reciprocal compensation reduces the local telephone company's costs and
ultimately reduces the internet service provider's costs. However, the Federal
Communications Commission recently determined that most, but not all, traffic to
an Internet access provider is interstate rather than local in nature. This
determination could potentially eliminate the payment of reciprocal compensation
to the local telephone companies that serve us, which ultimately may affect our
costs. There is a pending proceeding at the Federal Communications Commission to
determine appropriate compensation mechanisms for such calls and has ruled that
state commissions, in the interim, may determine under what circumstances
reciprocal compensation should be paid. To date, most states considering the
issue have upheld reciprocal compensation for calls placed to Internet service
providers. If new compensation mechanisms increase the costs to carriers that
terminate calls to Internet service providers or if states eliminate reciprocal
compensation payments for calls to Internet service providers, the affected
carriers could increase the price of service to Internet service providers to
compensate, which could have a material adverse effect on our business,
financial condition and results of operation.

Finally, the issue of Internet service provider access to the infrastructure
deployed by cable television operators is being considered at the local and
federal levels. Several municipal franchising

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authorities have required franchised cable companies to provide competing
Internet service providers open access to their cable infrastructure. However,
the Federal Communications Commission has recently filed a brief in federal
court addressing the open access issue in which it voiced its opposition to such
local regulation, preferring instead a uniform national policy on the issue of
open access. Also, an ISP has recently sought a ruling from the Federal
Communications Commission that, pursuant to Section 612 of the Communications
Act, cable operators should be required to lease to competitors a 6 MHz channel
to be used to provide Internet services. Section 612 of the Communications Act
requires cable operators to provide leased access to competitors seeking to
provide video service. The Internet service provider seeking this Federal
Communications Commission ruling claims that almost all Internet services
involve video services, such as streaming technology, and therefore qualify for
leased access rights under Section 612. The outcome of these efforts to compel
open access and leased access will affect our business, by either increasing or
foreclosing Internet service provider access rights to the cable television
infrastructure.

The law relating to the liability of Internet service providers and online
service providers due to information disseminated through their networks is not
completely settled. While the U.S. Supreme Court has held that content
transmitted over the Internet is entitled to the highest level of protection
under the U.S. Constitution, nevertheless, there are federal and state laws
regarding the distribution of obscene, indecent, defamatory or otherwise illegal
material, as well as materials that infringe on certain intellectual property
rights, that may subject us to liability. These risks are mitigated by two
federal laws. In 1996, Congress immunized Internet service providers and online
service providers from liability for defamation and similar claims arising from
materials the Internet service providers and online service providers did not
create, but merely distributed without knowing or having had reason to know of
their defamatory nature. Likewise, in 1998, Congress created a safe harbor from
copyright infringement liability for Internet service providers and online
service providers arising from materials placed on the Internet service
provider's or online service provider's network by third parties so long as
certain basic requirements are satisfied.

Due to the increasing popularity and use of the Internet, it is possible
that additional laws and regulations may be adopted with respect to the
Internet, covering issues such as the sale of alcohol and firearms, content,
user privacy, pricing and trademark or copyright infringement. Laws and
regulations potentially affecting us have been adopted, and may be adopted in
the future, by federal and state governments, as well as by foreign governments.
We cannot predict the impact, if any, that recent and any future legislative or
regulatory changes or developments may have on our business, financial condition
and results of operations. Changes in the regulatory environment relating to the
Internet access industry, including regulatory changes that directly affect
telecommunications costs or increase the likelihood or scope of competition from
regional telephone companies or others, such as open access to cable
infrastructure, could have a material adverse effect on our business.

INTELLECTUAL PROPERTY

We have developed and acquired certain proprietary rights for which we have
sought and will continue to seek federal, state and local protection. We rely on
a combination of copyright, trademark and trade secret laws to protect our
proprietary rights, particularly related to our names and logos. FASTNET and our
associated logo are names and marks which belong to us. In addition, we have
registered FASTNET and its associated logo, and have additional registrations
pending for names and marks, under which we do business at local levels within
our region. We have each of our employees enter into an inventions agreement
pursuant to which each agrees that any intellectual property rights developed
while in our employment belong to us.

In connection with the delivery of some of our services, we bundle third
party software in our products for customers using personal computers operating
on the Microsoft Windows or Apple Macintosh platforms. While some of the
applications included in our start-up kit for access services

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subscribers are shareware that we have obtained permission to distribute or that
are otherwise in the public domain and freely distributable, certain other
applications included in the start-up kit have been licensed where necessary. We
currently intend to maintain or negotiate renewals of all existing software
licenses and authorization as necessary, although we cannot be certain that such
renewals will be available to us on acceptable terms, if at all. We may also
enter into additional licensing agreements in the future for other applications.

EMPLOYEES

As of July 31, 1999, we had a total of 72 employees, including 70 full-time
employees and two part-time employees. Of these employees, 14 people were in
engineering, 38 people in general and administrative positions, including
executives, customer support, facilities-based transport and accounting/billing
and 20 people in sales and marketing.

We are not a party to any collective bargaining agreements covering any of
our employees, have never experienced any material labor disruption and are
unaware of any current efforts or plans to organize our employees. We consider
our relationships with our employees to be good.

PROPERTIES

Our principal administrative, marketing, sales and technical support
facilities and our Network Operating Center are located at our headquarters in
Bethlehem, Pennsylvania. As of July 31, 1999 we leased approximately 41,470
square feet of office space under a lease which ends July 22, 2006. We paid
aggregate rent of approximately $90,000 for the year ended December 31, 1998 for
our Bethlehem facility.

We also lease space for our CNFs at the following two locations:

<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE LEASE EXPIRATION 1998 ANNUAL RENTS
- ------------------------ ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Philadelphia, 1,100 January 1, 2002 $19,200
Pennsylvania

Holland Township, New 1,700 June 15, 2004 $1,200
Jersey
</TABLE>

In addition, as part of our acquisition of Internet Unlimited, we assumed a
lease for an additional 15,000 square feet of office space in Bethlehem,
Pennsylvania. Internet Unlimited paid approximately $34,000 in rent for the year
ended December 31, 1998 under this lease, which expires March 31, 2004. Our
annual rents are subject to adjustments. We anticipate that we will require
additional space for CNFs as we expand, and we believe that we will be able to
obtain suitable space as needed on commercially reasonable terms.

LEGAL PROCEEDINGS

We are not involved currently in any pending legal proceedings that either
individually or taken as a whole, will have a material adverse effect on our
business, financial condition and results of operations.

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<PAGE>
MANAGEMENT

The following table sets forth information about our executive officers and
directors as of the date of this prospectus.

EXECUTIVE OFFICERS AND DIRECTORS

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
David K. Van Allen................................... 40 Chief Executive Officer and Director
Sonny C. Hunt........................................ 38 President and Director
Stanley F. Bielicki.................................. 54 Chief Financial Officer
Rafe Scheinblum...................................... 47 Executive Vice President--Operations
Phillip L. Weller.................................... 39 Executive Vice President--Engineering
Douglas L. Michels................................... 45 Director
</TABLE>

DAVID K. VAN ALLEN has served as the chief executive officer and chairman of
the board of directors of FASTNET since May 1994. Mr. Van Allen co-founded
FASTNET together with Mr. Hunt in May 1994. From March 1991 until May 1994, Mr.
Van Allen formed and managed his own company, Van Allen & Associates, which
provided computer network services to businesses. From July 1988 until February
1991, Mr. Van Allen was a manager with Tandy Corporation, a manufacturer and
vendor of consumer electronics. From April 1986 until June 1988, Mr. Van Allen
was a chief design engineer with Texar Inc., a provider of hardware to the radio
broadcast industry. From January 1984 until March 1986, Mr. Van Allen was a
consultant with Motorola Corporation, a manufacturer of electronic equipment and
developer of communications and computer systems, where he focused on designing
and marketing audio processing systems.

SONNY C. HUNT has served as president and a member of the board of directors
of FASTNET since May 1994. Mr. Hunt co-founded FASTNET together with Mr. Van
Allen in May 1994. From June 1991 until May 1994, Mr. Hunt formed and managed
his own company, HS&T, a provider of hardware, software and training services.
From December 1987 until June 1991, Mr. Hunt, was a programmer for Nexus Inc., a
developer of word processors and other multi-user software tools for business,
and in June 1991, he acquired the company. From August 1985 until December 1987,
Mr. Hunt was a programmer for The Small Computer Company, a database software
developer. Mr. Hunt attended George Mason University and has completed advanced
courses in computer programming.

STANLEY F. BIELICKI has served as chief financial officer of FASTNET since
February 1997. From March 1984 until February 1997, Mr. Bielicki maintained a
private practice as a financial advisor, specializing in small and medium sized
businesses. Mr. Bielicki is a certified public accountant and holds a B.S. in
microbiology from Ohio State University and a M.B.A. from Southern Illinois
University.

RAFE SCHEINBLUM has served as executive vice president of operations of
FASTNET since July 1996. From September 1989 until June 1996, Mr. Scheinblum
formed and managed his own company, Double Click Computers. Mr. Scheinblum holds
a B.F.A. in theatrical design from Windham College.

PHILLIP L. WELLER has served as executive vice president of engineering of
FASTNET since November 1996. From June 1991 until November 1996, Mr. Weller was
a project manager and senior developer with AT&T Microelectronics/Lucent
Technologies, where he participated in the development of new and modern message
handling systems. From June 1980 until June 1991, Mr. Weller was a circuit
designer with AT&T Bell Laboratories, a developer of voice, data and video
telecommunications, in its Very Large Scale Integration division. Mr. Weller
holds an A.A.S. in electronics technology from Lehigh County Community College,
a B.S. in computer science from Moravian College and a M.S. in engineering
science from Pennsylvania State University.

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<PAGE>
DOUGLAS L. MICHELS has served as a member of the board of directors of
FASTNET since October 1998. Mr. Michels currently serves as the President, Chief
Executive Officer and a director of The Santa Cruz Operation, Inc., which
provides UNIX-based, open system software, where he has held various positions
since 1979. Mr. Michels co-founded The Santa Cruz Operation, Inc. in 1979. Mr.
Michels holds a B.S. in computer and information science from the University of
California, Santa Cruz.

Our executive officers are elected by and serve at the discretion of our
board of directors. There are no family relationships among our directors and
officers.

BOARD COMMITTEES

We established an audit committee and a compensation committee. The
compensation committee consists of Mr. Van Allen and Mr. Michels. The
compensation committee:

- reviews and approves the compensation and benefits for our executive
officers and grants stock options under our stock option plans, and

- makes recommendations to the board of directors regarding such matters.

The audit committee consists of Mr. Hunt and Mr. Michels. The audit
committee:

- reviews the results and scope of the audit and other services provided by
our independent auditors, and

- reviews and evaluates our audit and control functions.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of FASTNET and administering various incentive compensation and
benefit plans. The compensation committee consists of Mr. Van Allen and Mr.
Michels. Mr. Van Allen participates in all discussions and decisions regarding
salaries and incentive compensation for all employees and consultants of
FASTNET, other than himself. No interlocking relationship exists between any
member of FASTNET's compensation committee and any member of any other company's
board of directors or compensation committee.

DIRECTOR COMPENSATION

We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. No member of our
board of directors currently receives any additional cash compensation.

On March 3, 1999, we granted Mr. Michels, a member of our board of
directors, an option to purchase 100,000 shares of our common stock at an
exercise price of $1.50 per share, which expires on March 3, 2009. The option
became immediately exercisable on the date of grant.

EXECUTIVE COMPENSATION

The table below summarizes information concerning the compensation awarded
to, earned by, or paid for services rendered to FASTNET in all capacities during
the fiscal year ended December 31, 1998 by:

- our chief executive officer; and

- our executive officers whose salary and bonus for that fiscal year
exceeded $100,000 and who served as an executive officer of FASTNET during
that fiscal year.

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<PAGE>
Other than the salary and bonus described in the table below, we did not pay
any executive officer named in the Summary Compensation Table any fringe
benefits, perquisites or other compensation in excess of either $50,000 or 10%
of the total of his salary and bonus during the fiscal year ended December 31,
1998.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- --------------------------------------- --------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
David K. Van Allen..................... 1998 33,800 70,000 -- 2,705
CHIEF EXECUTIVE OFFICER
Sonny C. Hunt.......................... 1998 76,154 54,699 -- --
PRESIDENT
Phillip L. Weller...................... 1998 95,000 35,000 2,308 --
EXECUTIVE VICE PRESIDENT -ENGINEERING
Rafe Scheinblum........................ 1998 72,700 48,403 3,060 --
EXECUTIVE VICE PRESIDENT--OPERATIONS
</TABLE>

The amount listed under All Other Compensation for Mr. Van Allen represents
a life insurance policy on Mr. Van Allen, for which Kathryn Van Allen, Mr. Van
Allen's wife, is a co-beneficiary with FASTNET.

OPTION GRANTS IN LAST FISCAL YEAR

During the 1998 fiscal year, no stock options were granted to our executive
officers named in the summary compensation table and, as of December 31, 1998,
there were no outstanding stock options.

On March 3, 1999, we granted each of Mr. Bielicki, Mr. Scheinblum and Mr.
Weller options to purchase 100,000 shares of our common stock at an exercise
price of $1.50 per share. Under the terms of these option agreements, 50% of the
options vested on the date of grant, an additional 25% vest on March 3, 2000 and
the final 25% vest on March 3, 2001. These options expire on March 3, 2009.

EQUITY COMPENSATION PLAN

We have adopted the FASTNET Corporation 1999 Equity Compensation Plan,
effective as of March 3, 1999. The plan provides for grants of incentive stock
options, nonqualified stock options, and restricted stock to our designated
employees, advisors and consultants, and to non-employee directors. By
encouraging stock ownership, we seek to motivate such individuals to contribute
materially to our success.

GENERAL. The plan authorizes up to 1,000,000 shares of common stock for
issuance under the terms of the plan. No more than 500,000 shares in the
aggregate may be granted to any individual in any calendar year. If options
granted under the plan expire or are terminated for any reason without being
exercised, or shares of restricted stock are forfeited, the shares of common
stock underlying such grant will again be available for purposes of the plan.

ADMINISTRATION OF THE PLAN. A compensation committee administers and
interprets the plan. The compensation committee consists of two or more persons
appointed by the board of directors from among its members, each of whom must be
a non-employee director as defined by Rule 16b-3 under the Securities Exchange
Act of 1934, and an outside director as defined by Section 162(m) of the

48
<PAGE>
Internal Revenue Code of 1986 and related U.S. Treasury Regulations. The
compensation committee has the sole authority to:

- determine the individuals to whom grants shall be made under the plan;

- determine the type, size and terms of the grants to be made to each such
individual;

- determine the time when the grants will be made and the duration of any
applicable exercise or restriction period, including the criteria for
vesting and the acceleration of vesting;

- determine the total number of shares of common stock available for grants;
and

- deal with any other matters arising under the plan.

The compensation committee may require a grantee to execute a shareholder's
agreement with terms that the compensation committee deems appropriate.

GRANTS. Grants under the plan may consist of:

- options intended to qualify as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code;

- nonqualified stock options that are not intended to qualify; and

- restricted stock.

ELIGIBILITY FOR PARTICIPATION. Grants may be made to any of our employees
or employees of our subsidiaries and to any non-employee member of the board of
directors. Key consultants and advisors who perform services for us or any of
our subsidiaries are eligible if they render bona fide services, not as part of
the offer or sale of securities in a capital-raising transaction. As of June 30,
1999, options to purchase 565,000 shares of common stock were outstanding under
the plan.

OPTIONS. Incentive stock options may be granted only to employees. Any
stock option will become a nonqualified stock option if the aggregate fair
market value of common stock on the date of grant under which incentive stock
options are exercisable for the first time by the grantee during the calendar
year, under all of our stock option plans, exceeds $100,000. Nonqualified stock
options may be granted to employees, non-employee directors, and key advisors.
The exercise price of common stock underlying an option will be determined by
the compensation committee and may be equal to, greater than, or less than the
fair market value; provided that:

- the exercise price of an incentive stock option will be equal to or
greater than the fair market value of a share of common stock on the date
such incentive stock option is granted;

- the exercise price of an incentive stock option granted to an employee who
owns more than 10% of the common stock may not be less than 110% of the
fair market value of the underlying shares of common stock on the date of
grant;

- if required by state law, the exercise price of a nonqualified stock
option granted to any individual may not be less than 85% of the fair
market value of the underlying shares of common stock on the date of
grant; and

- if required by state law, the exercise price of a nonqualified stock
option granted to any individual who owns at least 10% of the common stock
may not be less than 110% of the fair market value of the underlying
shares of common stock on the date of grant.

The participant may pay the exercise price:

- in cash;

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<PAGE>
- with the approval of the compensation committee, by delivering shares of
common stock owned by the grantee and having a fair market value on the
date of exercise equal to the exercise price of the grant; or

- by such other method as the compensation committee shall approve,
including payment through a broker in accordance with procedures permitted
by Regulation T of the Federal Reserve Board.

Options vest according to the terms and conditions determined by the
compensation committee and specified in the grant instrument. Options are
nontransferable during the grantee's lifetime; provided that, nonqualified stock
options may be transferred to family members, or for the benefit of family
members, according to the terms determined by the compensation committee and as
specified in the grant instrument.

The compensation committee will determine the term of each option up to a
maximum of ten years from the date of grant, except that the term of an
incentive stock option granted to an employee who owns more than 10% of the
common stock may not exceed five years from the date of grant. The compensation
committee may accelerate the exercisability of any or all outstanding options,
at any time, for any reason.

RESTRICTED STOCK. The compensation committee will determine the number of
shares of restricted stock granted to a participant, but may not exceed the
maximum plan limit described above. Grants of restricted stock will be
conditioned on such performance requirements, vesting provisions, transfer
restrictions or other restrictions and conditions as the compensation committee
may determine in its sole discretion. The restrictions will remain in force
during a restricted period set by the compensation committee. Unless the
compensation committee determines otherwise:

- if the grantee is no longer employed by us during the restriction period
or if any other conditions are not met, the restricted stock grant will
terminate as to all shares covered by the grant for which the restrictions
are still applicable, and those shares must be immediately returned to us;
and

- during the restriction period, restricted stock may not be sold, assigned,
transferred or otherwise disposed of and will not have voting rights or
dividend rights.

AMENDMENT AND TERMINATION OF THE PLAN. The compensation committee may amend
or terminate the plan at any time, except that, it may not make any amendment
that requires shareholder approval pursuant to Rule 16b-3 of the Securities
Exchange Act of 1934 or Section 162(m) of the Internal Revenue Code without
shareholder approval. The plan will terminate on the day immediately preceding
the tenth anniversary of its effective date, unless the compensation committee
terminated the plan earlier or extends it with approval of the shareholders.

ADJUSTMENT PROVISIONS. Upon certain transactions identified in the plan,
the compensation committee may appropriately adjust:

- the maximum number of shares available for grants;

- the maximum number of shares that any participant may be granted in any
year;

- the number of shares covered by outstanding grants;

- the kind of shares issued under the plan; and

- the price per share or the applicable market value of such grants.

CHANGE OF CONTROL. Upon a change of control, the compensation committee may
determine that:

- all outstanding options will immediately vest; and

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<PAGE>
- the restrictions and conditions on all outstanding restricted stock will
immediately lapse.

Upon a change of control where we are not the surviving entity or where we
survive only as a subsidiary of another entity, unless the compensation
committee determines otherwise, all outstanding grants will be assumed by or
replaced with comparable options or stock by the surviving corporation. In
addition, the compensation committee may

- require that grantees surrender their outstanding options in exchange for
payment by us, in cash or common stock, at an amount equal to the amount
by which the then fair market value of the shares of common stock subject
to the grantee's unexercised options exceeds the exercise price of those
options; and/or

- after giving grantees an opportunity to exercise their outstanding
options, terminate any or all unexercised options.

A change of control is defined to have occurred if:

- any person other than persons who are our shareholders as of the effective
date of the plan becomes a beneficial owner, directly of indirectly, of
common stock representing more than 50% of the voting power of the
then-outstanding shares of common stock; the terms person and beneficial
owner are each defined in the Securities Exchange Act of 1934; or

The shareholders or the directors, as appropriate, approve:

- any merger or consolidation of us with another corporation where the
shareholders, immediately prior to such transaction, will not beneficially
own, immediately after the transaction, shares entitling such shareholders
to more than 50% of all votes to which all shareholders of the surviving
corporation would be entitled to in the election of directors, without
consideration of the rights of any class of stock to elect directors by a
separate class vote;

- the sale or other disposition of all or substantially all of our assets;
or

- our liquidation or dissolution.

SECTION 162(M). Under Section 162(m) of the Internal Revenue Code, we may
be precluded from claiming a federal income tax deduction for total remuneration
in excess of $1.0 million paid to the chief executive officer or to any other of
our four most highly compensated officers in any one year. Total remuneration
would include amounts received upon the exercise of stock options granted under
the plan and the value of shares received when the shares of restricted stock
became transferable or such other time when income is recognized. An exception
does exist, however, for performance-based compensation, including amounts
received upon the exercise of stock options pursuant to a plan approved by
shareholders that meets certain requirements. The plan has been approved by
shareholders and is intended to make grants of options thereunder by meeting the
requirements of performance-based compensation. Awards of restricted stock
generally will not qualify as performance-based compensation.

LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS AND INDEMNIFICATION

LIMITATION OF LIABILITY.

Our articles of incorporation provides that our officers and directors will
not be personally liable to us or our shareholders for monetary damages
resulting from a breach of fiduciary duty except for:

- any breach of the duty of loyalty to the corporation or its shareholders,

- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,

51
<PAGE>
- unlawful payments of dividends or unlawful stock repurchases or
redemptions, or

- any transaction from which the director derived an improper personal
benefit.

This limitation of liability does not apply to non-monetary remedies that
may be available, such as injunctive relief or rescission nor does it relieve
our officers and directors from complying with federal or state securities laws.

INDEMNIFICATION.

Our articles of incorporation provide that we will indemnify our directors
and executive officers and may indemnify our other corporate agents, to the
fullest extent permitted by Pennsylvania law. Section 1741 of the Pennsylvania
corporate laws provides the power to indemnify any office or director acting in
his capacity as our representative who was, is or is threatened to be made a
party to any action or proceeding for expenses, judgments, penalties, fines and
amounts paid in settlement in connection with such action or proceeding. The
indemnity provisions apply whether the action was instituted by a third party or
arose by or in our right. Generally, the only limitation on our ability to
indemnify our offices and directors is if the act violates a criminal statute or
if the act or failure to act is finally determined by a court to have
constituted willful misconduct or recklessness.

CERTAIN TRANSACTIONS

In May 1998, we sold 1,000,000 shares of our common stock for an aggregate
purchase price equal to $200,000 and issued a secured note for cash in the
principal amount of $3.1 million and a warrant to purchase 1,000,000 shares of
our common stock to H&Q You Tools Investment Holding, L.P. The note bears
interest at a rate equal to 7% per annum and matures on January 31, 2001. H&Q
You Tools may convert the note into our common stock at any time prior to
maturity of the note and has agreed with us to convert the note immediately
prior to the closing of this offering. The warrant is currently exercisable at
an exercise price of $1.50 per share and expires in May 2005.

In May 1999 we issued a second secured note for cash in the principal amount
of $1.0 million to H&Q You Tools Investment Holding, L.P. The note bears
interest at a rate equal to 7% per annum and matures on May 15, 2000. H&Q You
Tools has converted this note into 142,431 shares of series A preferred stock at
a conversion price equal to $7.13 per share.

In August 1999, Lucent Technologies, Inc. purchased 280,505 shares of series
A convertible preferred stock and H&Q You Tools Investment Holding, L.P.
purchased 142,431 shares of series A convertible preferred stock, at a price of
$7.13 per share. The shares issued to H&Q You Tools Investment Holding, L.P.
were in exchange for the cancellation of their $1.0 million secured term note
and accrued interest on the note. These shares of series A convertible preferred
stock are convertible into shares of common stock at any time at the option of
the holders and all of the series A convertible preferred stock will
automatically convert into our common stock immediately prior to the closing of
this offering.

We also entered into a rights agreement with the holders of series A
convertible preferred stock, granting them registration rights, other than in
connection with this offering, of the common stock issuable upon conversion of
their preferred stock.

On October 10, 1998, we made an unsecured loan of $50,000 at 6% interest per
year to David K. Van Allen, our chief executive officer and a director. In
addition, in 1997 and 1998, we made unsecured loans totaling $19,400, each at 6%
interest per year, to Kathryn Van Allen, the wife of David K. Van Allen. All of
these notes mature upon consummation of this offering. If this offering is not
consummated prior to January 1, 2000, the notes will become due and payable
pursuant to an agreed upon payment schedule.

52
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding the beneficial
ownership of FASTNET's common stock as of July 31, 1999, and as adjusted to
reflect the sale of common stock in this offering, by:

- each person or entity who is known by us to own beneficially more than 5%
of FASTNET's outstanding common stock;

- each of the executive officers set forth on the summary compensation table
on page 48;

- each director of FASTNET; and

- all directors and executive officers as a group.

Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table have sole voting and investment power with
respect to all shares of common stock held by them. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to
options or warrants held by that person that are currently exercisable or will
become exercisable within 60 days of July 31, 1999 are deemed outstanding, while
such shares are not deemed outstanding for purposes of computing percentage
ownership of any other person. Applicable percentage ownership in the following
table is based on 10,388,947 shares of common stock outstanding and
shares immediately following the completion of this offering. The number of
options represents stock options that are exercisable within 60 days of July 31,
1999. To the extent that any shares are issued upon exercise of options,
warrants or other rights to acquire FASTNET's capital stock that are presently
outstanding or granted in the future or reserved for future issuance under
FASTNET's equity compensation plan, there will be further dilution to new public
investors.

In addition, the following table reflects:

- the issuance of 666,198 shares of series A convertible preferred stock in
August 1999;

- the exchange of a $1.0 million note payable and associated accrued
interest for 142,431 shares of series A convertible preferred stock in
August 1999;

- the conversion of a $3.1 million note payable into 2,033,334 shares of
common stock, which will automatically occur immediately prior to
consummation of this offering;

- the conversion of all outstanding shares of series A convertible preferred
stock into 808,629 shares of common stock which will automatically occur
immediately prior to this offering; and

- no exercise of the underwriters' over-allotment option.
<TABLE>
<CAPTION>
PRIOR TO OFFERING AFTER OFFERING
---------------------------------------------- ---------------------------------
OPTIONS AND OPTIONS AND
NAME SHARES WARRANTS TOTAL PERCENT SHARES WARRANTS TOTAL
- -------------------------------------- --------- ----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
5% SHAREHOLDERS
H&Q You Tools Investment Holding, %
L.P................................. 3,175,765 1,000,000 4,175,765 36.7 3,175,765 1,000,000 4,175,765
One Bush Street
San Francisco, CA
94104

EXECUTIVE OFFICERS AND DIRECTORS
David K. Van Allen.................... 2,825,000 -- 2,825,000 27.2% 2,825,000 -- 2,825,000
Sonny C. Hunt......................... 2,725,000 5,000 2,730,000 26.3% 2,725,000 5,000 2,730,000
Rafe Scheinblum....................... 175,000 50,000 225,000 2.2% 175,000 50,000 225,000
Phillip L. Weller..................... 175,000 50,000 225,000 2.2% 175,000 50,000 225,000
Stanley F. Bielicki................... 100,000 50,000 150,000 1.4% 100,000 50,000 150,000
Douglas L. Michels.................... -- 100,000 100,000 1.0% -- 100,000 100,000
All directors and executive officers
as a group (6 persons).............. 6,000,000 255,000 6,255,000 60.3% 6,000,000 225,000 6,255,000

<CAPTION>
NAME PERCENT
- -------------------------------------- -----------
<S> <C>
5% SHAREHOLDERS
H&Q You Tools Investment Holding,
L.P.................................
One Bush Street
San Francisco, CA
94104
EXECUTIVE OFFICERS AND DIRECTORS
David K. Van Allen....................
Sonny C. Hunt.........................
Rafe Scheinblum.......................
Phillip L. Weller.....................
Stanley F. Bielicki...................
Douglas L. Michels....................
All directors and executive officers
as a group (6 persons)..............
</TABLE>

53
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

At the closing of the offering our authorized capital stock will consist of
50,000,000 shares of common stock, no par value per share, and 10,000,000 shares
of preferred stock, no par value per share.

The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our articles of
incorporation and bylaws and by the applicable provisions of Pennsylvania law.

Our articles of incorporation and bylaws contain certain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and which may have the effect of delaying,
deferring, or preventing a future takeover or change in control of FASTNET
unless such takeover or change in control is approved by the board of directors.

COMMON STOCK

As of July 31, 1999, there were 7,546,984 shares of common stock outstanding
which were held of record by 9 shareholders. There will be shares of
common stock outstanding (assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants) after
giving effect to the sale of common stock in this offering and the conversion of
all of the outstanding shares of series A preferred stock.

Holders of common stock are entitled to one vote per share on all matters to
be voted upon. Holders of common stock do not have cumulative voting rights.
Holders of common stock are entitled to receive dividends as may be declared
from time to time by the board of directors out of funds legally available for
the payment of dividends, subject to the preferences that apply to any
outstanding preferred stock. See the section entitled Dividend Policy for more
information. In the event of liquidation, dissolution or winding up of FASTNET,
the holders of common stock are entitled to share proportionately in all assets
remaining after payment of liabilities, subject to distribution rights of any
then outstanding preferred stock. The common stock has no preemptive or
conversion rights and no additional subscription rights. There are no redemption
or sinking fund provisions applicable to the common stock. All outstanding
shares of common stock are fully paid and nonassessable. The shares issued in
this offering will be fully paid and nonassessable.

PREFERRED STOCK

Our articles of incorporation authorize the board of directors, without
shareholder action, to designate and issue preferred stock. The board may
designate the price, rights, preferences and privileges of the preferred shares,
which may be greater than the rights of the common stock. It is not possible to
state the actual effect of the issuance of any shares of preferred stock upon
the rights of holders of common stock until the board determines the specific
rights of the preferred stock. However, possible effects of issuing preferred
stock with voting and conversion rights include:

- restricting dividends on common stock;

- diluting the voting power of common stock;

- impairing the liquidation rights of the common stock;

- delaying or preventing a change of control of FASTNET without shareholder
action; and

- lowering the market price of common stock.

We have no present plans to issue any additional shares of preferred stock.

54
<PAGE>
COMMON STOCK WARRANTS

H&Q You Tools Investment Holding, L.P. holds a warrant to purchase up to
1,000,000 shares of our common stock at an exercise price of $1.50 per share.
This warrant is currently exercisable and will remain exercisable until May 30,
2005.

The exercise price and the number of shares of common stock issuable upon
the exercise of the warrant may be adjusted upon the occurrence of a stock
split, stock dividend, reorganization, reclassification or merger.

REGISTRATION RIGHTS

Lucent Technologies, Inc. and H&Q You Tools Investment Holding, L.P. and the
other holders of our series A convertible preferred stock are entitled to
registration rights with respect to their securities pursuant to a registration
rights agreement. The agreement grants three types of registration rights:

- REQUESTED REGISTRATION. The holders of the registrable securities may
require us to use our best efforts to prepare a registration statement and
other related documents which would permit the sale of their registrable
securities. We only need to prepare the registration statement and related
documents if at least 20% of the registrable securities are to be
registered. We are obligated to pay the expenses incurred in a requested
registration.

- FASTNET REGISTRATION. If we elect to register any of our shares of common
stock in any future public offerings, the holders of the registrable
securities are entitled to include their shares in the registration. We
have the right to reduce the number of shares to be registered in view of
market conditions, but to not less than 30% of any offering after this
offering. We are obligated to pay the expenses incurred in this type of
registration.

- REGISTRATION ON FORM S-3. Holders of the registrable securities may
require that we register their shares for public resale on Form S-3, if we
are eligible to use Form S-3 and the value of the securities to be
registered is at least $500,000. We could be required to make two
requested S-3 registrations in any one-year period. We are obligated to
pay the expenses incurred in a registration on Form S-3.

The holders of these registration rights have entered into lock-up
agreements with the underwriters and have no registration rights with respect to
this offering.

PENNSYLVANIA ANTI-TAKEOVER LAW AND PROVISIONS IN OUR CHARTER AND BYLAWS

Provisions of Pennsylvania law, our articles of incorporation and bylaws
could make the acquisition of FASTNET by proxy contest or otherwise and the
removal of incumbent officers and directors more difficult. These provisions are
intended to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to control FASTNET to first negotiate with us.
We believe that the benefits provided to FASTNET by allowing us to negotiate
with an unfriendly or unsolicited acquiror outweigh the disadvantages of
discouraging such proposals since we will have the opportunity to negotiate
improved terms. These provisions deter transactions not approved by the board,
and could have the effect of discouraging tender offers which may provide a
premium over the market price of our shares of common stock. Consequently, these
provisions may also inhibit fluctuations in the market price of our shares
resulting from actual or rumored takeover attempts.

PENNSYLVANIA LAW. Generally, subchapters 25E, F, G, H, I and J of the
Pennsylvania corporate laws place certain procedural requirements and establish
certain restrictions upon the acquisition of voting shares of a corporation
which would entitle the acquiring person to cast or direct the casting of a
certain percentage of votes in an election of directors. Subchapter 25E of the
Pennsylvania corporate laws provides generally that, if a company were involved
in a control transaction, shareholders of the company would have the right to
demand from a controlling person or group payment of the fair value of their
shares. For purposes of subchapter 25E, a controlling person or group is a
person or group of

55
<PAGE>
persons acting in concert that, through voting shares, has voting power over at
least 20% of the votes which shareholders of the company would be entitled to
cast in the election of directors. A control transaction arises, in general,
when a person or group acquires the status of a controlling person or group.

In general, Subchapter 25F of the Pennsylvania corporate laws delays for
five years and imposes conditions upon business combinations between an
interested shareholder and us. The term business combinations is defined broadly
to include various merger, consolidation, division, exchange or sale
transactions, including transactions utilizing our assets for purchase price
amortization or refinancing purposes. An interested shareholder, in general,
would be a beneficial owner of at least 20% of our voting shares.

In general, subchapter 25G of the Pennsylvania corporate laws suspends the
voting rights of the control shares of a shareholder that acquires for the first
time 20% or more, 33 1/3% or more, or 50% or more of a company's shares entitled
to be voted in an election of directors. The voting rights of the control shares
generally remain suspended until such time as the disinterested shareholders of
the company vote to restore the voting power of the acquiring shareholder.

Subchapter 25H of the Pennsylvania corporate laws provides in certain
circumstances for the recovery by a company of profits made upon the sale of its
common stock by a controlling person or group if the sale occurs within 18
months after the controlling person or group became a controlling person or
group and the common stock was acquired during such 18 month period or within 24
months before such period. In general, for purposes of Subchapter 25H, a
controlling person or group is a person or group that:

- has acquired;

- offered to acquire; or

- publicly disclosed or caused to be disclosed an intention to acquire
voting power over shares that would entitle such person or group to cast
at least 20% of the votes that shareholders of the company would be
entitled to cast in an election of directors.

If the disinterested shareholders of a company vote to restore the voting
power of a shareholder who acquires control shares subject to Subchapter 25G,
such company would then be subject to subchapters 25I and J of the Pennsylvania
corporate laws. Subchapter 25I generally provides for a minimum severance
payment to certain employees terminated within two years of such approval.
Subchapter 25J, in general, prohibits the abrogation of certain labor contracts
prior to their stated date of expiration.

The above descriptions of subchapters of the Pennsylvania corporate laws
summarize the material anti-takeover provisions contained in the Pennsylvania
corporate laws but are not a complete discussion of those provisions.

OUR CHARTER DOCUMENTS. Our articles of incorporation and bylaws do not
provide for cumulative voting in the election of directors. The authorization of
undesignated preferred stock makes it possible for the board of directors to
issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change control of FASTNET. These and other
provisions are intended to enhance continuity and stability in the composition
of the board of directors and to reduce the vulnerability to unsolicited or
hostile takeovers, and could delay changes in the control or management of
FASTNET. The amendment of any of these provisions requires approval by holders
of 66 2/3% of the outstanding common stock.

TRANSFER AGENT

The transfer agent and registrar for the common stock is StockTrans, Inc.,
Ardmore, Pennsylvania.

NATIONAL MARKET LISTING

We have applied to list our common stock on the Nasdaq National Market under
the symbol FSST.

56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have outstanding shares of
common stock based upon shares outstanding at , 1999, (assuming no
exercise of the underwriters' over-allotment option). Excluding the shares
of common stock offered hereby and assuming no exercise of the underwriters'
over-allotment option, as of the effective date of this registration statement,
there will be shares of common stock outstanding of which will
be freely tradeable without restriction in the public market unless such shares
are held by affiliates as defined in Rule 144(a). The remaining shares of common
stock to be outstanding after the offering will be restricted shares under the
Securities Act of 1933. All restricted shares are subject to lock-up agreements
with the underwriters pursuant to which the holders of the restricted shares
have agreed not to sell, pledge or otherwise dispose of such shares for a period
of 180 days after the date of this prospectus. Beginning 180 days after the
effective date of this registration statement, approximately
restricted shares will become eligible for sale in the public market when the
underwriters' lock-up agreements expire (unless the underwriters elect, in their
sole discretion, to release these shares from the lock-up agreements earlier).
In addition to the restricted shares described above, after such 180(th) day,
approximately additional restricted shares will become available for
sale at various times pursuant to Rule 144. The general provisions of Rule 144
are described below. Most of the restricted shares that will become available
for sale in the public market beginning 180 days after the effective date will
be subject to certain volume and other resale restrictions pursuant to Rule 144
because the holders are affiliates of FASTNET. ING Barings LLC may release the
shares subject to the lock-up agreements in whole or in part at any time with or
without notice. However, ING Barings LLC has no current plans to do so.

In general, under Rule 144, an affiliate of FASTNET, or person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least one year, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of (a) 1% of the then outstanding shares
of our common stock (approximately shares immediately after this offering,
assuming no exercise of the underwriters' over-allotment option) or (b) the
average weekly trading volume during the four calendar weeks preceding the date
on which notice of the sale is filed with the Securities and Exchange
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice and availability of current public
information about us. A person (or persons whose shares are aggregated) who is
not deemed to have been an affiliate of FASTNET at any time during the 90 days
immediately preceding the sale and who has beneficially owned his or her shares
for at least two years is entitled to sell such shares pursuant to Rule 144(k)
without regard to the limitations described above.

As of , 1999, H&Q You Tools Investment Holding, L.P. held a
warrant to purchase 1,000,000 shares of common stock. In addition, 1,000,000
shares were reserved for issuance under our equity compensation plan, of which
options to purchase 565,000 shares were then outstanding and 290,500 options to
purchase shares of common stock were then exercisable. Beginning 180 days after
the date of this prospectus, approximately shares issuable upon the
exercise of vested options will become eligible for sale and shares issued
pursuant to our equity compensation plan will be eligible for resale.

The holders of 666,198 shares of our series A preferred stock are entitled
to registration rights with respect to the shares of common stock issuable upon
the conversion of the preferred stock. If such holders, by exercising their
registration rights, cause a large number of shares to be registered and sold,
it could have an adverse effect on the market price for our common stock.

We intend to file, within 180 days after the date of this prospectus, a Form
S-8 registration statement under the Securities Act to register shares issued
pursuant to stock purchase agreements under our equity compensation plan and
shares issued in connection with option exercises. Shares of

57
<PAGE>
common stock issued pursuant to our equity compensation plan or upon exercise of
options after the effective date of the Form S-8 will be available for sale in
the public market, subject to Rule 144 volume limitations applicable to
affiliates and lock-up agreements.

LOCK-UP AGREEMENTS

All officers and directors and holders of our common stock, warrant and
options to purchase common stock have agreed pursuant to lock-up agreements
that, among other things, they will not offer, sell, contract to sell, pledge,
grant any option to sell, or otherwise dispose of, directly or indirectly, any
shares of common stock or securities convertible or exchangeable for common
stock, or warrant or other rights to purchase common stock for a period of 180
days after the date of this prospectus without the prior written consent of ING
Barings LLC.

58
<PAGE>
UNDERWRITING

Subject to the terms and conditions in an underwriting agreement, dated
, 1999, the underwriters named below, who are represented by ING
Barings LLC, SoundView Technology Group, Inc. and FAC/Equities, a division of
First Albany Corporation, have severally agreed to purchase from FASTNET the
number of shares of common stock set forth opposite their names below.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------------------------------------------------------------------------------- -----------------
<S> <C>
ING Barings LLC......................................................................
SoundView Technology Group, Inc......................................................
FAC/Equities, a division of First Albany Corporation.................................
-------

Total..........................................................................
-------
-------
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock of
this offering are subject to approval by their counsel of certain legal matters
and to certain other conditions. The underwriters are obligated to purchase and
accept delivery of all the shares of common stock (other than those shares
covered by the over-allotment option described below) if any are purchased.

The underwriters propose initially to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to certain dealers (including the
underwriters) at such price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may re-allow, to certain other dealers,
a concession not in excess of $ per share. After the initial offering of the
shares of common stock, the public offering price and other selling terms may be
changed by ING Barings LLC at any time without notice.

The following table shows the underwriting fees to be paid to the
underwriters by FASTNET in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
------------- -------------
<S> <C> <C>
Per share.......................................................... $ $
Total.............................................................. $ $
</TABLE>

Other expenses of this offering (including the registration fees and the
fees of financial printers, counsel and accountants) payable by FASTNET are
expected to be approximately $ million.

FASTNET has granted to the underwriters an option, exercisable within 30
days after the date of this prospectus, to purchase, from time to time, in whole
or in part, up to a total of additional shares of common stock at the
public offering price less the underwriting discounts and commissions. The
underwriters may exercise this option solely to cover over-allotments, if any,
made in connection with this offering. To the extent that the underwriters
exercise this option, each underwriter will become obligated, subject to certain
conditions, to purchase its pro rata portion of such additional shares based on
such underwriter's percentage underwriting commitment as indicated in the table
above.

FASTNET has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the underwriters may be required to make in respect of any of
those liabilities.

Each of FASTNET, its executive officers, directors and shareholders has
agreed, subject to certain exceptions, not to: (1) issue, offer, pledge, sell,
contract to sell, sell any option or contract to purchase,

59
<PAGE>
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of common stock or any securities convertible into, exercisable or exchangeable
for, or represent the right to receive common stock, or (2) grant any options or
warrants to purchase common stock or enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any common stock (regardless of whether any of the transactions
described in the first or second clause is to be settled by the delivery of
common stock, or such other securities, in cash or otherwise) for a period of
180 days after the date of this prospectus without the prior written consent of
ING Barings LLC. In addition, during such period, we also agreed not to file any
registration statement with respect to (other than a Form S-8 registration
statement in connection with shares received under a FASTNET stock plan, stock
ownership plan, employment agreement or dividend reinvestment plan), and each of
its executive officers, directors and shareholders have agreed not to make any
demand for, or exercise any right with respect to, the registration of any
shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock without the prior written consent of ING Barings.

At the request of FASTNET, the underwriters have reserved for sale, at the
initial public offering price, shares of common stock offered hereby to be
sold to certain directors, officers and employees of FASTNET and other persons
who have expressed an interest in purchasing such shares. The number of shares
of common stock available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares which are
not orally confirmed for purchase within one day of the pricing of this offering
will be offered by the underwriters to the general public on the same terms as
the other shares offered by this prospectus.

Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
offered hereby in any jurisdiction where action for that purpose is required.
The shares of common stock offered hereby may not be offered or sold, directly
or indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about, and to observe, any restrictions
relating to the offering of the common stock and the distribution of this
prospectus. This prospectus is not an offer to sell or a solicitation of an
offer to buy any shares of common stock offered hereby in any jurisdiction in
which such an offer or solicitation is unlawful.

We have been informed that the underwriters do not intend to confirm sales
to any accounts over which they exercise discretionary authority without the
prior written approval of the customer.

Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price will be determined by
negotiations between us and the representatives of the underwriters. Among the
factors to be considered in determining the initial public offering price are:

- the history of and prospects for our business and the industry in which we
compete;

- an assessment of our management and the present state of our development;

- our past and present revenues, earnings and cash flows;

- our prospects for growth, revenues, earnings and cash flows;

- the current state of the economy in the United States and the current
level of economic activity in the industry in which we compete and in
related or comparable industries; and

60
<PAGE>
- currently prevailing conditions in the securities markets, including
current market valuations of publicly traded companies which are
comparable to FASTNET.

FASTNET has applied to list the common stock on the Nasdaq National Market,
under the symbol FSST.

Until the distribution of FASTNET's common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase the common stock. As an
exception to these rules, the representatives of the underwriters are permitted
to engage in certain transactions that stabilize the price of the common stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the common stock.

If the underwriters create a short position in the common stock in
connection with the offering, I.E., if they sell more shares of the common stock
than are set forth on the cover pages of this prospectus, the representatives of
the underwriters may reduce that short position by purchasing the common stock
in the open market. The representatives of the underwriters may elect to reduce
any short position by exercising all or part of the over-allotment option
described above.

The representatives of the underwriters may also impose a penalty bid on
certain underwriters and selling group members. This means that if the
representatives purchase shares of the common stock in the open market to reduce
the underwriters' short position or to stabilize the price of the common stock,
it may reclaim the amount of the selling concession from the underwriters and
selling group members who sold those shares as part of the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of the common stock to the extent that it
were to discourage resales of the common stock.

Neither FASTNET nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
FASTNET nor any of the underwriters makes any representation that the
representatives of the underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

61
<PAGE>
LEGAL MATTERS

Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania will provide us an
opinion relating to the validity of the common stock issued in this offering.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Morrison & Foerster LLP, New York, New York.

EXPERTS

FASTNET's financial statements, as of December 31, 1997 and 1998 and for the
years ended December 31, 1996, 1997 and 1998, included in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of such firm as experts in giving said report.

Internet Unlimited's financial statements, as of December 31, 1997 and 1998
and for the years ended December 31, 1997 and 1998, included in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of such firm as experts in giving said report.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to our common stock. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information described in the registration statement or the exhibits and
schedules which are part of the registration statement. For further information
with respect to FASTNET and the common stock, refer to the registration
statement and the related exhibits and schedules. You may read and copy any
document we file at the Securities and Exchange Commission's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
about the public reference rooms. Our Securities and Exchange Commission filings
are also available to the public from the Securities and Exchange Commission's
web site at HTTP://WWW.SEC.GOV. Upon completion of this offering, we must comply
with the information and periodic reporting requirements of the Securities
Exchange Act and will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission. These periodic reports,
proxy statements and other information will be available for inspection and
copying at the Securities and Exchange Commission's public reference room and
the web site of the Securities and Exchange Commission. We maintain a web site
at HTTP://WWW.FAST.NET.

This prospectus includes statistical data regarding the Internet industry.
We obtained or derived the data from sources including International Data
Corporation and Forrester Research. These industry publications generally
indicate that they have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of such
information. While we believe those industry publications to be reliable, we
have not independently verified such data and you should not place undue
reliance on the data. We also have not sought the consent of any of these
organizations to refer to their reports in this prospectus.

62
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
UNAUDITED PRO FORMA FINANCIAL INFORMATION

Basis of Presentation................................................................ F-2
Unaudited Pro Forma Statement of Operations--Year Ended December 31, 1998............ F-3
Unaudited Pro Forma Statement of Operations--Six Months Ended June 30, 1999.......... F-4
Unaudited Pro Forma Balance Sheet--June 30, 1999..................................... F-5
Notes to Unaudited Pro Forma Financial Information................................... F-6

FASTNET CORPORATION

Report of Independent Public Accountants............................................. F-8
Balance Sheets....................................................................... F-9
Statements of Operations............................................................. F-10
Statements of Shareholders' Deficit.................................................. F-11
Statements of Cash Flows............................................................. F-12
Notes to Financial Statements........................................................ F-13

INTERNET UNLIMITED, INC.

Report of Independent Public Accountants............................................. F-21
Balance Sheets....................................................................... F-22
Statements of Operations............................................................. F-23
Statements of Shareholders' Deficit.................................................. F-24
Statements of Cash Flows............................................................. F-25
Notes to Financial Statements........................................................ F-26
</TABLE>

F-1
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

BASIS OF PRESENTATION

On July 30, 1999 FASTNET Corporation ("FASTNET") acquired all of the
outstanding capital stock of Internet Unlimited, Inc. ("Internet Unlimited"), a
provider of Web hosting and collocation services for $400,000 in cash and
546,984 shares of FASTNET Common stock valued at $7.13 per share (the
"Acquisition"). (FASTNET and Internet Unlimited are collectively referred to as
the "Combined Company") The Acquisition will be accounted for as a purchase by
FASTNET pursuant to Accounting Principles Board Opinion No. 16, "Business
Combinations" ("APB 16").

In August 1999, FASTNET sold an aggregate of 666,198 shares of Series A
Convertible Preferred stock ("Series A Preferred") to investors at $7.13 per
share. The proceeds from the sales of the Series A Preferred were $4,439,992,
net of offering costs of $310,000. On August 3, 1999 the principal and accrued
interest on a $1,000,000 note payable to H&Q You Tools Investment Holding, L.P.
converted into shares of Series A Preferred. All of these outstanding shares of
Series A Preferred will automatically convert into 808,629 shares of Common
stock immediately prior to the consummation of FASTNET's initial public offering
(the "Offering"). In addition, H&Q You Tools Investment Holding, L.P. has
committed to convert a $3,050,000 convertible note into 2,033,334 shares of
Common stock upon the consummation of the Offering. The sales of the Series A
Preferred, the conversion of the notes payable and accrued interest, and the
conversion of the Series A Preferred are collectively referred to as the
"Financing Transactions."

The Pro Forma Balance Sheet reflects the application of the purchase method
of accounting pursuant to APB 16 for the Acquisition. The purchase price was
$4,299,996 excluding costs of approximately $75,000. The application of the
purchase method of accounting will result in approximately $4,465,228 in excess
of purchase price over net tangible deficit acquired as of June 30, 1999. Based
on a preliminary analysis completed by management, it expects to allocate
$2,000,000 of this amount to customer list and the remaining amount of
$2,465,228 to goodwill. Customer list and goodwill are expected to be amortized
on a straight-line basis over 3 and 5 years, respectively. The final allocation
of the purchase price and the assignment of useful lives are subject to change.

The Pro Forma Balance Sheet also reflects (i) the sale of the Series A
Preferred, (ii) the conversion into Series A Preferred of the $1,000,000 H&Q You
Tools Investment Holding, L.P. note and accrued interest thereon and (iii) the
conversion of all of the outstanding Series A Preferred stock and the conversion
of the $3,050,000 H&Q You Tools Investment Holding, L.P. note into Common stock,
both of which will occur automatically immediately prior to the consummation of
the Offering.

The Pro Forma Statements of Operations reflect the amortization of customer
list and goodwill of $1,159,713 for the year ended December 31, 1998 and
$579,857 for the six months ended June 30, 1999 and the removal of interest
expense related to the notes payable to H&Q You Tools Investment Holding, L.P.
which have been or will be converted into Common stock.

We present the pro forma amounts below for informational purposes only.
These pro forma amounts are not necessarily indicative of the results of
operations of the Combined Company that would have actually occurred had the
Acquisition been consummated as of January 1, 1998 and if the notes payable had
been converted on the date the notes were issued or of the financial condition
of the Combined Company had the Acquisition and the Financing Transactions been
consummated as of June 30, 1999 or of the future results of operations or
financial condition of the Combined Company. The unaudited pro forma statements
of operations and the unaudited pro forma combined balance sheet do not reflect
any synergies FASTNET expects to realize as a result of the Acquisition, in
particular, the elimination of costs associated with duplicative operating and
administrative activities. FASTNET cannot assure that such synergies will be
realized.

F-2
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
PRO FORMA
INTERNET ADJUSTMENTS
FASTNET UNLIMITED (SEE NOTE PRO FORMA
HISTORICAL HISTORICAL 3) COMBINED
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES................................................. $ 5,527,979 $ 721,005 $ 6,248,984
------------- ---------- -------------

OPERATING EXPENSES:
Cost of revenues....................................... 3,241,741 207,116 3,448,857
Selling, general and administrative.................... 3,067,740 449,000 3,516,740
Depreciation and amortization.......................... 346,568 32,840 1,159,713 1,539,121
------------- ---------- -------------
6,656,049 688,956 8,504,718
------------- ---------- -------------
Operating income (loss).............................. (1,128,070) 32,049 (2,255,734)
------------- ---------- -------------

OTHER INCOME (EXPENSES):
Interest income........................................ 15,256 -- 15,256
Interest expense....................................... (166,831) (18,297) 124,542 (60,586)
Other.................................................. 5,355 -- 5,355
------------- ---------- -------------
(146,220) (18,297) (39,975)
------------- ---------- -------------

NET INCOME (LOSS)........................................ $ (1,274,290) $ 13,752 $ (2,295,709)
------------- ---------- -------------
------------- ---------- -------------

BASIC NET LOSS PER COMMON SHARE.......................... $ (0.14) $ (0.22)
------------- -------------
------------- -------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
(Note 2)............................................... 8,880,833 1,733,096 10,613,929
------------- ----------- -------------
------------- ----------- -------------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

F-3
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
PRO FORMA
INTERNET ADJUSTMENTS
FASTNET UNLIMITED (SEE NOTE PRO FORMA
HISTORICAL HISTORICAL 3) COMBINED
------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
REVENUES................................................. $ 3,549,015 $ 666,011 $ 4,215,026
------------- ---------- -------------

OPERATING EXPENSES:
Cost of revenues....................................... 2,116,138 142,996 2,259,134
Selling, general and administrative.................... 2,154,680 485,297 2,639,977
Depreciation and amortization.......................... 247,796 32,798 579,857 860,451
------------- ---------- -------------
4,518,614 661,091 5,759,562
------------- ---------- -------------
Operating income (loss).............................. (969,599) 4,920 (1,544,536)
------------- ---------- -------------

OTHER INCOME (EXPENSES):
Interest income........................................ 10,746 -- 10,746
Interest expense....................................... (121,588) (22,392) 113,750 (30,230)
------------- ---------- -------------
(110,842) (22,392) (19,484)
------------- ---------- -------------

NET LOSS................................................. $ (1,080,441) $ (17,472) $ (1,564,020)
------------- ---------- -------------
------------- ---------- -------------

BASIC NET LOSS PER COMMON SHARE.......................... $ (0.15) $ (0.16)
------------- -------------
------------- -------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
(Note 2)............................................... 7,000,000 2,615,381 9,615,381
------------- ----------- -------------
------------- ----------- -------------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

F-4
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET

JUNE 30, 1999

<TABLE>
<CAPTION>
INTERNET PRO FORMA
FASTNET UNLIMITED ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (SEE NOTE 3) COMBINED
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 524,671 $ 45,454 4,349,992 $ 4,920,117
Accounts receivable, net of reserve................... 1,201,120 112,124 1,313,244
Other current assets.................................. 135,372 15,813 151,185
------------- ----------- -------------
Total current assets................................ 1,861,163 173,391 6,384,546
------------- ----------- -------------
PROPERTY AND EQUIPMENT, net............................. 2,232,160 210,961 2,443,121
INTANGIBLE ASSETS....................................... -- -- 4,465,228 4,465,228
OTHER ASSETS............................................ 228,871 10,302 239,173
------------- ----------- -------------
$ 4,322,194 $ 394,654 $ 13,532,068
------------- ----------- -------------
------------- ----------- -------------

LIABILITIES AND
SHAREHOLDERS DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt..................... $ 4,072,607 $ -- (4,061,323) $ 11,284
Current portion of capital lease obligations.......... 41,838 6,898 48,736
Due to shareholder.................................... -- 154,554 154,554
Accounts payable and accrued expenses................. 2,126,325 41,306 385,000 2,552,631
Deferred revenues..................................... 1,499,339 271,422 1,770,761
------------- ----------- -------------
Total current liabilities........................... 7,740,109 474,180 4,537,966
------------- ----------- -------------
LONG-TERM DEBT.......................................... 43,412 -- 43,412
------------- ----------- -------------
CAPITAL LEASE OBLIGATIONS............................... 114,070 10,706 124,776
------------- ----------- -------------
SHAREHOLDERS' DEFICIT:
Common stock.......................................... 545,368 93,800 12,307,511 12,946,679
Deferred compensation................................. (109,765) -- (109,765)
Accumulated deficit................................... (3,011,000) (154,032) 154,032 (3,011,000)
Less--Treasury stock, at cost......................... (1,000,000) (30,000) 30,000 (1,000,000)
------------- ----------- -------------
Total shareholders' (deficit) equity................ (3,575,397) (90,232) 8,825,914
------------- ----------- -------------
$ 4,322,194 $ 394,654 $ 13,532,068
------------- ----------- -------------
------------- ----------- -------------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

F-5
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

1. SIGNIFICANT ACCOUNTING POLICIES:

There are currently no material differences in the Companies' significant
accounting policies, therefore, no consideration has been given to conforming
the Companies' significant accounting policies in this pro forma presentation.
The Companies do not expect to have material changes to current accounting
policies in connection with the transaction. For further information on the
Companies significant accounting policies, see notes to the consolidated
financial statements of the Companies, included elsewhere in this proxy
statement.

2. LOSS FROM CONTINUING OPERATIONS PER COMMON SHARE:

The Combined Company has presented its net loss per common share for the
year ended December 31, 1998 and for the six months ended June 30, 1999 pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share."

Basic net loss per common share was computed by dividing the net loss by the
weighted average number of shares of Common stock outstanding during the year
ended December 31, 1998 and the six months ended June 30, 1999. Diluted loss per
common share has not been presented, since the impact on loss per share using
the treasury stock method is anti-dilutive due to the Combined Company's losses.
The shares used in computing pro forma combined net loss per share reflects the
following:

- Actual weighted average common shares outstanding for the periods
presented.

- Common shares issued for the Acquisition as if the transaction occurred on
January 1, 1998.

- Common shares issued for the conversion of the principal and accrued
interest on a $1,000,000 note payable to H&Q You Tools Investment Holding,
L.P. as if such conversion occurred on May 14, 1999, the date of the
original issuance of the note.

- Common shares to be issued for the conversion of the $3,050,000
convertible note payable to H&Q You Tools Investment Holding, L.P. upon
the consummation of the Offering as if such conversion occurred on May 28,
1998, the date of the original issuance of the note.

3. PRO FORMA ADJUSTMENTS:

The Pro Forma Balance Sheet reflects the application of the purchase method
of accounting pursuant to APB 16 for the Acquisition. The purchase price was
$4,299,996 excluding transaction costs of approximately $75,000. The application
of the purchase method of accounting will result in approximately $4,465,228 in
excess of purchase price over net tangible deficit acquired as of June 30, 1999.
Based on a preliminary analysis completed by management, it expects to allocate
$2,000,000 of this amount to customer list and the remaining amount of
$2,465,228 to goodwill. Customer list and goodwill are expected to be amortized
on a straight-line basis over 3 and 5 years, respectively. The final allocation
of the purchase price and the assignment of useful lives are subject to change.

F-6
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (CONTINUED)

3. PRO FORMA ADJUSTMENTS: (CONTINUED)

<TABLE>
<S> <C>
COMPUTATION OF PRO FORMA PURCHASE PRICE OF INTERNET UNLIMITED

Issuance of 546,984 shares of Fastnet Common stock at $7.13 per share.......... $3,899,996
Cash paid...................................................................... 400,000
Transaction costs.............................................................. 75,000
----------
Pro forma purchase price..................................................... 4,374,996
Add- Deficit of Internet Unlimited at June 30, 1999.......................... 90,232
----------
Excess pro forma purchase price.............................................. $4,465,228
----------
----------
Preliminary Allocation of Excess Purchase Price
Customer list (3 year life).................................................. $2,000,000
Goodwill (5 year life)....................................................... 2,465,228
----------
$4,465,228
----------
----------
SUMMARY OF PRO FORMA BALANCE SHEET ADJUSTMENTS

Cash
Sales of Series A Preferred.................................................. $4,749,992
Payment of cash to acquire Internet Unlimited................................ (400,000)
----------
Pro forma increase in cash................................................. $4,349,992
----------
----------
Accrued expenses
Series A Preferred offering costs............................................ $ 310,000
Internet Unlimited transaction costs......................................... 75,000
----------
Pro forma increase in accrued expenses..................................... $ 385,000
----------
----------
Debt
Conversion of H&Q You Tools Investment Holding, L.P., $1,000,000 note and
accrued interest into Series A Preferred................................... (1,011,323)
Conversion of H&Q You Tools Investment Holding, L.P., $3,050,000 note into
Common stock............................................................... (3,050,000)
----------
Pro forma decrease in debt................................................. $(4,061,323)
----------
----------
Common stock
Acquisition of Internet Unlimited............................................ $3,899,996
Conversion of Series A Preferred into Common stock........................... 5,761,315
Conversion of H&Q You Tools Investment Holding, L.P. $3,050,000 note into
Series A Preferred......................................................... 3,050,000
Offering costs............................................................... (310,000)
Elimination of Internet Unlimited Common stock............................... (93,800)
----------
Pro forma increase in Common stock......................................... $12,307,511
----------
----------
Accumulated deficit
Elimination of Internet Unlimited accumulated deficit........................ $ (154,032)
----------
----------
Treasury stock
Elimination of Internet Unlimited treasury stock............................. $ (30,000)
----------
----------
</TABLE>

F-7
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To FASTNET Corporation:

We have audited the accompanying balance sheets of FASTNET Corporation (a
Pennsylvania Corporation) as of December 31, 1997 and 1998, and the related
statements of operations, shareholders' deficit and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FASTNET Corporation as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.

/s/ Arthur Andersen LLP

Philadelphia, Pa.,
August 17, 1999

F-8
<PAGE>
FASTNET CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 88,981 $ 256,782 $ 524,671
Accounts receivable, net of allowance of $14,442, $17,187 and
$17,187............................................................. 449,662 878,523 1,201,120
Other current assets.................................................. 71,759 135,478 135,372
------------ ------------ ------------
Total current assets.............................................. 610,402 1,270,783 1,861,163
------------ ------------ ------------
PROPERTY AND EQUIPMENT, net............................................. 1,047,402 1,741,635 2,232,160
OTHER ASSETS............................................................ 25,541 214,423 228,871
------------ ------------ ------------
$ 1,683,345 $ 3,226,841 $ 4,322,194
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND
SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Line of credit........................................................ $ 217,489 $ -- $ --
Current portion of long-term debt..................................... 248,857 3,061,283 4,072,607
Current portion of capital lease obligations.......................... 31,206 52,921 41,838
Accounts payable...................................................... 879,174 1,289,156 1,827,683
Accrued expenses...................................................... 58,761 338,896 298,642
Deferred revenues..................................................... 622,053 885,164 1,499,339
------------ ------------ ------------
Total current liabilities......................................... 2,057,540 5,627,420 7,740,109
------------ ------------ ------------
LONG-TERM DEBT.......................................................... 127,272 44,816 43,412
------------ ------------ ------------
CAPITAL LEASE OBLIGATIONS............................................... 30,802 118,686 114,070
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS' DEFICIT:
Preferred stock (Note 6).............................................. -- -- --
Common stock (Note 6)................................................. 124,000 366,478 545,368
Deferred compensation................................................. -- -- (109,765)
Accumulated deficit................................................... (656,269) (1,930,559) (3,011,000)
Less- Treasury stock, at cost......................................... -- (1,000,000) (1,000,000)
------------ ------------ ------------
Total shareholders' deficit....................................... (532,269) (2,564,081) (3,575,397)
------------ ------------ ------------
$ 1,683,345 $ 3,226,841 $ 4,322,194
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-9
<PAGE>
FASTNET CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES.............................. $ 1,942,607 $ 3,670,614 $ 5,527,979 $ 2,655,182 $ 3,549,015
------------- ------------- ------------- ------------- -------------
OPERATING EXPENSES:
Cost of revenues (see Note 2)....... 1,162,011 2,333,919 3,241,741 1,542,353 2,116,138
Selling, general and
administrative.................... 793,336 1,445,224 3,067,740 1,177,104 2,154,680
Depreciation and amortization....... 78,804 177,375 346,568 140,384 247,796
------------- ------------- ------------- ------------- -------------
2,034,151 3,956,518 6,656,049 2,859,841 4,518,614
------------- ------------- ------------- ------------- -------------
Operating loss.................. (91,544) (285,904) (1,128,070) (204,659) (969,599)
------------- ------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income..................... 1,151 1,305 15,256 6,831 10,746
Interest expense.................... (18,587) (38,368) (166,831) (54,521) (121,588)
Other............................... (6,244) 901 5,355 254 --
------------- ------------- ------------- ------------- -------------
(23,680) (36,162) (146,220) (47,436) (110,842)
------------- ------------- ------------- ------------- -------------
NET LOSS.............................. $ (115,224) $ (322,066) $ (1,274,290) $ (252,095) $ (1,080,441)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
BASIC AND DILUTED NET LOSS PER COMMON
SHARE............................... $ (0.01) $ (0.03) $ (0.14) $ (0.02) $ (0.15)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING.................. 11,575,000 11,575,000 8,880,833 10,761,666 7,000,000
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-10
<PAGE>
FASTNET CORPORATION

STATEMENTS OF SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>
COMMON STOCK
---------------------- DEFERRED ACCUMULATED TREASURY
SHARES AMOUNT COMPENSATION DEFICIT STOCK TOTAL
---------- ---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996.............. 480 $ 124,000 $ -- $ (334,203) $ -- $ (210,203)
Net loss.............................. -- -- -- (322,066) -- (322,066)
---------- ---------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997.............. 480 124,000 -- (656,269) -- (532,269)
Purchase of treasury stock............ (240) -- -- -- (1,000,000) (1,000,000)
24,115-for-1 stock split.............. 5,787,370 -- -- -- -- --
Sale of Common stock.................. 1,000,000 200,000 -- -- -- 200,000
Issuance of Common stock to employees
for compensation.................... 212,390 42,478 -- -- -- 42,478
Net loss.............................. -- -- -- (1,274,290) -- (1,274,290)
---------- ---------- ------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1998.............. 7,000,000 366,478 -- (1,930,559) (1,000,000) (2,564,081)
Issuance of Common stock options below
fair value (unaudited).............. -- 178,890 (178,890) -- -- --
Amortization of deferred compensation
(unaudited)......................... -- -- 69,125 -- -- 69,125
Net loss (unaudited).................. -- -- -- (1,080,441) -- (1,080,441)
---------- ---------- ------------- ------------- ------------- -------------
BALANCE, JUNE 30, 1999 (unaudited)...... 7,000,000 $ 545,368 $ (109,765) $ (3,011,000) $ (1,000,000) $ (3,575,397)
---------- ---------- ------------- ------------- ------------- -------------
---------- ---------- ------------- ------------- ------------- -------------
</TABLE>

The accompanying notes are an integral part of these statements.

F-11
<PAGE>
FASTNET CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- ----------------------
1996 1997 1998 1998 1999
--------- --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss............................ $(115,224) $(322,066) $(1,274,290) $ (252,095) $(1,080,441)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities-
Depreciation and amortization..... 78,804 177,375 346,568 140,384 247,796
Stock-based compensation
expense......................... -- -- 42,478 42,478 --
Amortization of deferred
compensation.................... -- -- -- -- 69,125
Changes in operating assets and
liabilities--
Decrease (increase) in assets--
Accounts receivable........... (176,554) (216,190) (428,861) (250,961) (322,597)
Other current assets.......... 4,603 (88,079) (252,601) (303,829) (14,342)
Increase (decrease) in
liabilities--
Accounts payable and accrued
expenses.................... 277,067 533,819 689,616 (301,911) 498,273
Deferred revenues............. 106,822 398,556 263,111 163,608 614,175
--------- --------- ---------- ---------- ----------
Net cash provided by (used
in) operating
activities................ 175,518 483,415 (613,979) (762,326) 11,989
--------- --------- ---------- ---------- ----------
INVESTING ACTIVITIES:
Purchases of property and
equipment......................... (331,153) (690,352) (899,996) (198,915) (738,321)
--------- --------- ---------- ---------- ----------
FINANCING ACTIVITIES:
Proceeds from long-term debt........ 381,873 215,599 3,344,000 3,300,000 1,000,000
Repayments of long-term debt........ (296,960) (46,049) (615,920) (609,258) (3,259)
Repayments of capital lease
obligations....................... (3,800) (22,712) (28,815) (14,135) (2,520)
Net borrowings (repayments) of line
of credit......................... 97,000 120,489 (217,489) (217,489) --
Purchase of treasury stock.......... -- -- (1,000,000) (1,000,000) --
Proceeds from sale of Common
stock............................. -- -- 200,000 200,000 --
--------- --------- ---------- ---------- ----------
Net cash provided by
financing activities...... 178,113 267,327 1,681,776 1,659,118 994,221
--------- --------- ---------- ---------- ----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS......................... 22,478 60,390 167,801 697,877 267,889
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD........................... 6,113 28,591 88,981 88,981 256,782
--------- --------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD.............................. $ 28,591 $ 88,981 $ 256,782 $ 786,858 $ 524,671
--------- --------- ---------- ---------- ----------
--------- --------- ---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-12
<PAGE>
FASTNET CORPORATION

NOTES TO FINANCIAL STATEMENTS

(INFORMATION AS OF JUNE 30, 1999, AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998, IS UNAUDITED)

1. THE COMPANY:

FASTNET Corporation (formerly You Tools Corporation) ("FASTNET" or the
"Company"), a Pennsylvania corporation, has been providing Internet access
services to its customers since 1994.The Company is a growing Internet services
provider targeting small and medium sized enterprises in selected high growth
secondary markets in the mid-Atlantic area of the United States. The Company
complements its Internet access services by delivering a wide range of enhanced
products and services that are designed to meet the needs of its target customer
base.

As of June 30, 1999, the Company had a working capital deficit of $5,878,946
and accumulated losses of $3,011,000. The Company has incurred losses since
inception and continues to incur losses in 1999. The Company intends to expand
its operation into new regions in the northeastern United States and eventually
across the entire country. To do so, the Company plans to construct and deploy
new facilities, increase its sales and marketing operations and enhance its
internal systems. The Company is subject to those risks associated with
companies in the early stages of development. The Company's future results of
operations involve a number of risks and uncertainties. Factors that could
affect the Company's future operating results and cause actual results to vary
materially from expectations include, but are not limited to, dependence on
major customers, risks from competition, new products and technological change,
dependence on key personnel, and potential year 2000 issues.

In August 1999, FASTNET sold 666,198 shares of Series A Convertible
Preferred stock ("Series A Preferred") to certain investors at $7.13 per share.
The Series A Preferred will convert into Common stock immediately prior the
consummation of FASTNET's initial public offering. The proceeds from the sales
of the Series A Preferred were $4,439,992, net of offering costs of $310,000.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL STATEMENTS

The financial statements for the six months ended June 30, 1998 and 1999 are
unaudited, and in the opinion of management, include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial position as of June 30, 1999 and the results of its operations for the
six months ended June 30, 1998 and 1999. The results of operations for the six
months ended June 30, 1999 are not necessarily indicative of the results to be
expected for the entire year.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-13
<PAGE>
FASTNET CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are
provided on the straight-line basis over the estimated useful lives of the
respective assets, which range from 5 to 7 years. Maintenance, repairs and minor
replacements are charged to expense as incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts of financial instruments held by the Company, which include
cash equivalents, accounts receivable, other current assets, accounts payable,
accrued expenses and deferred revenue, are reflected in the accompanying
financial statements at fair value due to the short-term nature of those
instruments. The carrying amount of long-term debt approximates fair value on
the balance sheet dates.

IMPAIRMENT OF LONG-LIVED ASSETS

In 1996, the Company adopted Statement of Financial Accounting Standard
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." The Company reviews its long-lived assets,
primarily property and equipment, for impairment, whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows, without
interest charges, will be less than the carrying amount of the assets.
Impairment is measured at fair value. There have been no such asset impairments.

REVENUE RECOGNITION

Revenues include one-time and ongoing charges to customers for accessing the
Internet. One-time charges relate to porting, initial connection or other
related fees and are recognized as revenue when the Company completes the
process, typically when the customer is set up for initial or expanded service.
The Company recognizes ongoing access revenue over the period the services are
provided. The Company offers contracts for Internet access that are generally
paid for in advance by customers. The Company has deferred revenue recognition
on these advance payments and recognizes this revenue on a straight-line basis
over the service period.

Revenues also include revenues from the resale of products, including
hardware and software, revenues derived from web hosting services and other
revenues. The Company recognizes product sales revenue when the equipment is
shipped to the customer. The Company derived revenues from third party hardware
and software sales of $397,535, $824,276, $652,508, $499,462 and $79,509 for the
years ended December 31, 1996, 1997, and 1998, and the six months ended June 30,
1998 and 1999, respectively. The Company sells its Web hosting and related
services for contractual periods ranging from one to twelve months. These
contracts generally are cancelable by either party without penalty. Revenues
from these contracts are recognized ratably over the contractual period as
services are provided. Incremental fees for excess bandwidth usage and data
storage are billed and recognized as revenues in the period customers utilized
such services. Revenues include network installation, maintenance and consulting
services. These services are provided on a time-and-material basis and revenues
are recognized based upon time (at established rates) and other direct costs as
incurred.

F-14
<PAGE>
FASTNET CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

ADVERTISING

All advertising costs are expensed as incurred. Advertising expenses for the
years ended December 31, 1996, 1997 and 1998 and the six months ended June 30,
1998 and 1999 amounted to $105,053, $243,104, $625,264, $147,264 and $209,960,
respectively.

COST OF REVENUES

Cost of revenues includes telecommunications charges and other charges
incurred in the delivery and support of services, including personnel costs in
the Company's operations support function, as well as equipment costs related to
hardware and software sales. The telecommunications component of cost of
revenues was $671,578, $395,002, $651,526, $965,170 and $1,719,681 for the years
ended December 31, 1996, 1997, and 1998, and the six months ended June 30, 1998
and 1999, respectively. The third party hardware and software component of cost
of revenues was $421,825, $561,951, $669,009, $475,748 and $50,951 for the years
ended December 31, 1996, 1997, and 1998, and the six months ended June 30, 1998
and 1999, respectively.

INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities and are measured using enacted tax rates
that are expected to be in effect when the differences reverse.

At December 31, 1998, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $1,450,000. The net operating loss
carryforward will begin to expire in 2010. The Company's utilization of its loss
carryforward could be limited pursuant to the Tax Reform Act of 1986, due to
cumulative changes in ownership in excess of 50%.

The Company has a net deferred tax asset primarily related to the net
operating loss carryforward and timing differences between the financial
reporting and tax accounting treatment of certain expenses. Due to the Company's
history of operating losses, the realization of the deferred tax asset is
uncertain. The Company has; therefore, provided a full valuation allowance
against the net deferred tax asset.

NET LOSS PER COMMON SHARE

The Company has presented net loss per share pursuant to SFAS No. 128,
"Earnings per Share," and the Securities and Exchange Commission Staff
Accounting Bulletin No. 98. Basic loss per share was computed by dividing net
loss by the weighted average number of shares of Common stock outstanding during
the period. Diluted loss per share has not been presented, since the impact on
loss per share using the treasury stock method is antidilutive due to the
Company's losses.

F-15
<PAGE>
MAJOR CUSTOMERS

The Company derived revenues of approximately 18% from its largest customer
for the year ended December 31, 1996, 23% and 13% from its two largest customers
for the year ended December 31, 1997, 11% from its largest customer for the six
months ended June 30, 1998, and 20% and 10% from its two largest customers for
the six months ended June 30, 1999. The Company had no other customer which
exceeded 10% of revenues in 1996, 1997, 1998 or the six months ended June 30,
1998 and 1999.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash balances and trade receivables. The
Company invests its excess cash with federally insured banks. The Company does
not require collateral from its customers.

SUPPLEMENTAL CASH FLOW INFORMATION

For the years ended December 31, 1996, 1997 and 1998, and the six months
ended June 30, 1998 and 1999, the Company paid interest of $18,540, $36,281,
$171,101, $58,208 and $112,383, respectively. For the years ended December 31,
1997, 1998 and for the six months ended June 30, 1998, the Company paid income
taxes of $23,069, $103,187 and $85,581, respectively; these amounts are included
in other current assets in the accompanying balance sheets at June 30, 1999, as
the Company expects these amounts to be refunded. For the year ended December
31, 1996 and for the six months ended June 30, 1999, the Company paid no income
taxes.

STOCK-SPLIT

On May 28, 1998, the Company effected a 24,115-for-1 split. This stock split
has been recorded as an equity transaction in 1998.

3. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1997 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Equipment........................................... $ 920,610 $ 1,591,667 $ 2,063,766
Computer equipment.................................. 272,084 359,095 456,687
Computer software................................... 77,745 133,385 177,390
Furniture and fixtures.............................. 52,004 153,510 209,100
Leasehold improvements.............................. 14,209 125,109 204,806
------------ ------------ ------------
1,336,652 2,362,766 3,111,749

Less--Accumulated depreciation and amortization..... (289,250) (621,131) (879,589)
------------ ------------ ------------
$ 1,047,402 $ 1,741,635 $ 2,232,160
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1996,
1997 and 1998, and the six months ended June 30, 1998 and 1999 was $78,804,
$177,375, $346,568, $140,384 and $247,796, respectively. The net carrying value
of property and equipment under capital leases was $79,919, $188,883 and
$166,372 at December 31, 1997 and 1998 and June 30, 1999, respectively.

F-16
<PAGE>
4. LINE OF CREDIT:

The Company had a $500,000 line of credit with a bank. The line was paid in
full in May 1998 with the proceeds from a convertible note (see Note 5) and was
immediately cancelled.

5. DEBT:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1997 1998 1999
----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Convertible Notes Payable.......................... $ -- $ 3,050,000 $ 4,061,323
Demand Note Payable................................ 200,000 -- --
Term Loans......................................... 176,129 56,099 54,696
----------- ------------- -------------
376,129 3,106,099 4,116,019
Less--Current portion.............................. (248,857) (3,061,283) (4,072,607)
----------- ------------- -------------
$ 127,272 $ 44,816 $ 43,412
----------- ------------- -------------
----------- ------------- -------------
</TABLE>

On May 28, 1998, the Company sold a $3,050,000 convertible note (the
"Convertible Note"), and a warrant to purchase 1,000,000 shares of Common stock
at an exercise price of $1.50 per share to an investor. The investor also
purchased 1,000,000 shares of Common stock (see Note 6). The Black-Scholes
pricing model calculated a minimal value for the warrants; therefore, no
proceeds were assigned to the warrant.

The Convertible Note bears interest at 7% and is convertible into Common
stock at the option of the investor at any time prior to maturity at $1.50 per
share subject to adjustment, as defined. The Convertible Note is secured by
substantially all of the assets of the Company. Interest on the Convertible Note
is payable quarterly in arrears. The Convertible Note matures on November 30,
1999. On August 9, 1999, the investor agreed to extend the maturity of the
Convertible Note to January 31, 2001. The investor also agreed to convert the
Convertible Note into 2,033,334 shares of Common stock immediately prior to the
consummation of the Offering.

On May 14, 1999, the Company sold a $1,000,000 convertible note to an
investor (the "May 14(th) Convertible Note"). The May 14(th) Convertible Note
bears interest at 7%, and both principal and accrued interest are convertible at
the option of the holder at any time prior to maturity at rates subject to
adjustment based on the future sales price of the Company's Common stock.
Accrued interest at June 30, 1999 was $11,323 and such amount has been recorded
as debt on the accompanying balance sheet. In August 1999, this investor
converted the May 14(th) Convertible Note together with accrued and unpaid
interest on the note into 142,431 shares of Series A Preferred.

In 1997, the Company received a $21,873 term note from a financing company,
bearing interest at 10.75%. The outstanding balance at December 31, 1998 was
$14,772.

In 1998, the Company received a $44,000 term note from a bank, bearing
interest at 9%. The outstanding balance at December 31, 1998 was $41,828. Future
maturities on this term note are $7,096, $8,200, $8,969, $9,811, and $7,752 and
are due in 1999, 2000, 2001, 2002, and 2003, respectively.

In 1998, the Company received a $250,000 note from a customer bearing 7.5%
interest. The note was paid off in May 1998.

In 1997, the Company issued a $200,000 demand note bearing 8.0% interest to
a company controlled by a shareholder of FASTNET. The note was repaid in May
1998 with the proceeds from the Convertible Note.

F-17
<PAGE>
6. SHAREHOLDERS' EQUITY:

COMMON STOCK

The Company has 50,000,000 authorized shares of no par value Common stock.
The Company had 480 shares (pre stock-split) outstanding on December 31, 1997
and 7,000,000 shares outstanding on December 31, 1998.

In May 1998, the Company purchased 240 shares (pre stock-split) of Common
stock from certain employee shareholders (the "Sellers") of the Company.
Subsequently in May 1998, the Company completed the 24,115-for-1 stock split and
sold 1,000,000 shares to an investor. The Company has recorded the purchase from
the Sellers as a purchase of treasury stock. Also, in May 1998, the investor
purchased a $3,050,000 note from the Company and received a warrant to purchase
1,000,000 shares of Common stock for $1,500,000 (see Note 5). Also in May 1998,
the Company issued 212,390 shares of fully vested Common stock to certain
employees. In connection with issuing these vested shares, the Company charged
$42,478 to compensation expense, the value of the 212,390 shares. This expense
is included within selling, general and administrative expenses in the
accompanying statements of operations.

PREFERRED STOCK

The Company has 10,000,000 authorized shares of no par value Preferred
stock. The Company designated and issued 808,629 shares as Series A Preferred in
August 1999 (see Note 1).

COMMON STOCK OPTIONS

In March 1999, the Company approved the 1999 Equity Compensation Plan (the
"1999 Plan"). The 1999 Plan provides for the issuance of up to 1,000,000 shares
of Common stock for incentive stock options ("ISOs"), nonqualified stock options
("NQSOs") and restricted shares. ISOs are granted with exercise prices at or
above fair value as determined by the Board of Directors. NQSOs are granted with
exercise prices determined by the Board of Directors. Each option expires on
such date as the Board of Directors may determine, generally ten years.

The Company applies Accounting Principal Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and the related interpretations in
accounting for options issued under the 1999 Plan. Accordingly, compensation
expense is recognized for the intrinsic value (the difference between the
exercise price and the fair value of the Company's stock) on the date of grant.
Compensation, if any, is deferred and charged to expense over the respective
vesting period. Deferred compensation of $178,890 was recorded as additional
paid-in capital for the six months ended June 30, 1999, and the resulting
amortization expense as a result of its amortization was $69,125 in the same
period.

Under SFAS No. 123, "Accounting for Stock-Based Compensation," compensation
cost related to stock options granted to employees is computed based on the
value of the stock option at the date of grant using an option valuation
methodology, typically the Black-Scholes pricing model. SFAS No. 123 can be
applied either by recording the fair value of the options or by continuing to
record the APB No. 25 value and disclosing the SFAS No. 123 impact on a pro
forma basis. The Company has elected the disclosure method of SFAS No. 123.

F-18
<PAGE>
6. SHAREHOLDERS' EQUITY: (CONTINUED)
Information with respect to outstanding options under the 1999 Plan is as
follows:

<TABLE>
<CAPTION>
OPTIONS
AVAILABLE AVERAGE
FOR OUTSTANDING EXERCISE
GRANT OPTIONS PRICE RANGE PRICE
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Plan inception, March 3, 1999............ 1,000,000 -- $ -- $ --
Granted................................ (565,000) 565,000 $1.50-$2.50 $ 1.70
------------ ----------- ------------- -----
Outstanding, June 30, 1999............... 435,000 565,000 $1.50-$2.50 $ 1.70
------------ ----------- ------------- -----
------------ ----------- ------------- -----
</TABLE>

As of June 30, 1999, there were 295,000 options vested under the 1999 Plan.

WARRANTS

In May 1998, the Company issued a warrant to an investor to purchase
1,000,000 shares of Common stock at an exercise price of $1.50 per share (see
Note 5). This warrant is currently exercisable and expires in May 2005.

7. COMMITMENTS AND CONTINGENCIES:

LEASES

The Company leases office space and equipment under capital and operating
leases expiring through August 2005. Rent expense under the operating leases was
$40,384, $221,851, $542,447, $210,420, and $466,716 during 1996, 1997, 1998, and
the six months ended June 30, 1998 and 1999, respectively. The interest rates
implicit in the capital leases range from 6.6% to 12.7%. Future minimum lease
payments as of December 31, 1998, are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ------------
<S> <C> <C>
1999................................................................ $ 55,357 $ 841,273
2000................................................................ 27,304 687,059
2001................................................................ 28,608 417,396
2002................................................................ 28,608 129,564
2003................................................................ 28,608 131,004
2004 and thereafter................................................. 7,151 218,340
---------- ------------
Total minimum lease payments........................................ 175,636 $ 2,424,636
------------
------------
Less--Imputed interest (4,029)
----------
----------
Present value of future minimum lease payments...................... 171,607
Less--Current portion............................................... (52,921)
----------
$ 118,686
----------
----------
</TABLE>

LITIGATION

From time-to-time, the Company is involved in certain legal actions arising
in the ordinary course of business. In the Company's opinion, based on the
advise of counsel, the outcome of such actions will not have a material adverse
effect on the Company's future financial position or results of operations.

F-19
<PAGE>
8. ACQUISITION

On July 30, 1999, the Company acquired 100% of the capital stock of Internet
Unlimited, Inc., a provider of Web hosting and collocation services, for
approximately $400,000 in cash and 546,984 shares of Common stock with estimated
transaction costs of $75,000. The acquisition will be accounted for using the
purchase method of accounting pursuant to APB No. 16 "Accounting for Business
Combinations." The Company expects the excess of purchase price over the fair
value of net liabilities acquired to be approximately $4,500,000. The Company
expects to allocate the excess purchase price to customer list and goodwill.

F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Internet Unlimited, Inc.:

We have audited the accompanying balance sheets of Internet Unlimited, Inc.
(a Pennsylvania Corporation) as of December 31, 1997 and 1998, and the related
statements of operations, shareholders' deficit and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Internet Unlimited, Inc. as
of December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

/s/ Arthur Andersen LLP

Philadelphia, Pa.,
July 30, 1999

F-21
<PAGE>
INTERNET UNLIMITED, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 3,639 $ 2,614 $ 45,454
Accounts receivable....................................................... 85,144 134,448 112,124
Other current assets...................................................... 15,028 23,207 15,813
---------- ---------- -----------
Total current assets.................................................... 103,811 160,269 173,391
---------- ---------- -----------
PROPERTY AND EQUIPMENT, net................................................. 94,380 128,770 210,961
OTHER ASSETS................................................................ 11,322 5,069 10,302
---------- ---------- -----------
$ 209,513 $ 294,108 $ 394,654
---------- ---------- -----------
---------- ---------- -----------

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of capital lease obligations.............................. $ -- $ -- $ 6,898
Accounts payable and accrued expenses..................................... 27,167 31,310 41,306
Deferred revenues......................................................... 123,308 185,004 271,422
Due to shareholder........................................................ 115,550 150,554 154,554
---------- ---------- -----------
Total current liabilities............................................... 266,025 366,868 474,180
---------- ---------- -----------
CAPITAL LEASE OBLIGATIONS................................................... -- -- 10,706
---------- ---------- -----------
COMMITMENTS (Note 6)
SHAREHOLDERS' DEFICIT:
Common stock, no par value, 1,000 shares authorized, 100, 67, and 67
shares issued and outstanding at December 31, 1997 and 1998, and June
30, 1999, respectively.................................................. 93,800 93,800 93,800
Accumulated deficit....................................................... (150,312) (136,560) (154,032)
Less--Treasury stock, at cost, 33 shares.................................. -- (30,000) (30,000)
---------- ---------- -----------
Total shareholders' deficit............................................. (56,512) (72,760) (90,232)
---------- ---------- -----------
$ 209,513 $ 294,108 $ 394,654
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-22
<PAGE>
INTERNET UNLIMITED, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:.......................................... $ 523,528 $ 721,005 $ 318,902 $ 666,011
OPERATING EXPENES:
Cost of revenues (see Note 2).................. 224,045 207,116 109,731 142,996
Selling general and administrative............. 381,947 449,000 151,380 485,297
Depreciation and amortization.................. 21,766 32,840 15,019 32,798
--------- --------- --------- ---------
627,758 688,956 276,130 661,091
--------- --------- --------- ---------
Operating income (loss).................... (104,230) 32,049 42,772 4,920
INTEREST EXPENSE................................... 10,407 18,297 6,841 22,392
--------- --------- --------- ---------
NET INCOME (LOSS).................................. $(114,637) $ 13,752 $ 35,931 $ (17,472)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these statements.

F-23
<PAGE>
INTERNET UNLIMITED, INC.

STATEMENTS OF SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>
COMMON STOCK
---------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TREASURY STOCK TOTAL
----------- --------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996.......................... 100 $ 37,100 $ (35,675) $ -- $ 1,425
Contribution of Common stock by
an officer...................................... (63) 56,700 -- (56,700) --
Issuance of Common stock to employees for
compensation.................................... 63 -- -- 56,700 56,700
Net loss.......................................... -- -- (114,637) -- (114,637)
--- --------- ------------ -------------- ----------
BALANCE, DECEMBER 31, 1997.......................... 100 93,800 (150,312) -- (56,512)
Purchase of treasury stock........................ (33) -- -- (30,000) (30,000)
Net income........................................ -- -- 13,752 -- 13,752
--- --------- ------------ -------------- ----------
BALANCE, DECEMBER 31, 1998.......................... 67 93,800 (136,560) (30,000) (72,760)
Net loss (unaudited).............................. -- -- (17,472) -- (17,472)
--- --------- ------------ -------------- ----------
BALANCE, JUNE 30, 1999 (unaudited).................. 67 $ 93,800 $ (154,032) $ (30,000) $ (90,232)
--- --------- ------------ -------------- ----------
--- --------- ------------ -------------- ----------
</TABLE>

The accompanying notes are an integral part of these statements.

F-24
<PAGE>
INTERNET UNLIMITED, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------- --------------------
1997 1998 1998 1999
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................... $(114,637) $ 13,752 $ 35,931 $ (17,472)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization..................... 21,766 32,840 15,019 32,798
Stock-based compensation expense.................. 56,700 -- -- --
Changes in operating assets and liabilities-
Decrease (increase) in assets--
Accounts receivable........................... (48,262) (49,304) 22,937 22,324
Other current assets.......................... (17,501) (7,523) 11,686 (637)
Increase (decrease) in liabilities--
Accounts payable and accrued expenses......... 20,259 4,143 (6,959) 9,996
Deferred revenues............................. 69,479 61,696 9,537 86,418
--------- --------- --------- ---------
Net cash (used in) provided by operating
activities................................ (12,196) 55,604 88,151 133,427
--------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment................. (78,232) (61,633) (42,471) (90,234)
--------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from shareholder loan...................... 94,996 40,000 20,000 34,000
Repayments on shareholder loan...................... -- (4,996) (34,996) (30,000)
Repayments of capital lease obligations............. (1,943) -- -- (4,353)
Purchase of treasury stock.......................... -- (30,000) (24,000) --
--------- --------- --------- ---------
Net cash provided by (used in) financing
activities................................ 93,053 5,004 (38,996) (353)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 2,625 (1,025) 6,684 42,840
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 1,014 3,639 3,639 2,614
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $ 3,639 $ 2,614 $ 10,323 $ 45,454
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these statements.

F-25
<PAGE>
INTERNET UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998 IS UNAUDITED)

1. THE COMPANY:

Internet Unlimited, Inc. (the "Company"), a Pennsylvania corporation,
commenced operations in 1995 as a partnership. The Company provides Web hosting
and collocation services.

As of June 30, 1999, the Company had a working capital deficit of $300,789
and accumulated losses of $154,032. The Company has incurred losses since
inception and continues to incur losses in 1999. The Company intends to invest
in expanding its network operations center, marketing, promotion, and
development of its infrastructure. The Company's future results of operations
involve a number of risks and uncertainties. Factors that could affect the
Company's future operating results and cause actual results to vary materially
from expectations include, but are not limited to, risks from competition, new
products and technological change, dependence on key personnel, availability of
capital, and potential year 2000 issues.

On July 30, 1999, FASTNET Corporation ("FASTNET") purchased all of the
outstanding capital stock of the Company pursuant to a definitive merger
agreement.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL STATEMENTS

USE OF ESTIMATES

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are
provided generally on the straight-line basis over the estimated useful lives of
the respective assets, which is currently 5 years for all assets. Maintenance,
repairs and minor replacements are charged to expense as incurred.

F-26
<PAGE>
INTERNET UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS

Carrying amounts of financial instruments held by the Company, which include
cash equivalents, accounts receivable, other current assets, accounts payable,
accrued expenses and deferred revenues, are reflected in the accompanying
financial statements at fair value due to the short-term nature of those
instruments.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company follows Statement of Financial Accounting Standard ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." The Company reviews its long-lived assets, primarily
property and equipment, for impairment, whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows, without
interest charges, will be less than the carrying amount of the assets.
Impairment is measured at fair value. There have been no such asset impairments.

REVENUE RECOGNITION

The Company recognizes ongoing Web hosting and collocation services revenue
over the period the services are provided. The Company offers contracts for Web
hosting and collocation services that are generally paid for in advance by
customers. The Company has deferred revenue recognition on these advance
payments and records the amounts to revenue on a straight-line basis over the
service period.

COST OF REVENUES

Cost of revenues includes initial set-up and recurring Web hosting charges,
telecommunications charges and other charges incurred in the delivery and
support of services. The Company uses FASTNET for all telecommunication
services. The telecommunications component of cost of revenues was $106,172,
$123,800, $58,750 and $87,080 for the years ended December 31, 1997 and 1998,
and for the six months ended June 30, 1998 and 1999, respectively.

ADVERTISING EXPENSES

All advertising costs are expensed as incurred. Advertising expenses for the
years ended December 31, 1997 and 1998 and the six months ended June 30, 1998
and 1999 amounted to $7,267, $65,193, $4,425 and $77,304, respectively.

INCOME TAXES

From inception to June 30, 1996, the Company was a partnership. Effective
July 1, 1996, the Company elected to be taxed under Subchapter S of the Internal
Revenue Code. As a result, the Company was not subject to federal or state
income taxes, and the taxable loss or income of the Company was included in the
shareholders' individual tax returns.

F-27
<PAGE>
INTERNET UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash balances. The Company invests its
excess cash with federally insured banks. The Company does not require
collateral from its customers.

SUPPLEMENTAL CASH FLOW INFORMATION

For the years ended December 31, 1997 and 1998, and the six months ended
June 30, 1998 and 1999, the Company paid cash for interest of $1,690, $2,433, $0
and $3,592, respectively.

3. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Equipment............................................... $ 113,919 $ 175,552 $ 264,931
Leasehold improvements.................................. -- -- 18,310
Furniture and fixtures.................................. -- -- 4,502
---------- ---------- -----------
113,919 175,552 287,743
Less--Accumulated depreciation.......................... (19,539) (46,782) (76,782)
---------- ---------- -----------
$ 94,380 $ 128,770 $ 210,961
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

Depreciation and amortization expense for the years ended December 31, 1997
and 1998, and the six months ended June 30, 1998 and 1999 was $21,766, $32,840,
$15,019 and $32,798, respectively. The net carrying value of property and
equipment under capital leases was zero, zero and $20,312 at December 31, 1997
and 1998, and June 30, 1999, respectively.

4. DUE TO SHAREHOLDERS:

During 1997 and 1998, a certain officer/shareholder made loans to the
Company through personal borrowing from a bank. The borrowings are due on
demand. The Company pays interest on such borrowings at an annual rate of 6%,
payable monthly. The Company had $115,550 and $150,554 outstanding under these
loans at December 31, 1997 and 1998, respectively.

5. SHAREHOLDERS' EQUITY:

COMMON STOCK

In 1997, an officer/shareholder of the Company contributed 63 shares of
Common stock to the Company with a fair value of $56,700. As a result of the
transaction, the Company recorded an increase to Common stock for the fair value
of these shares with an offset to treasury stock. Immediately following this
contribution, the Company distributed these 63 shares of Common stock equally
among the other shareholders/officers of the Company. The distribution was
recorded as compensation expense for the fair value of the Common stock
distributed.

F-28
<PAGE>
INTERNET UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS:

LEASES

The Company leases office space under a non-cancelable operating lease,
expiring in 2002. Rent expense under the operating lease was $21,382, $34,270,
$18,136, and $35,298 during 1997, 1998, and the six months ended June 30, 1998
and 1999, respectively. Future minimum lease payments as of December 31, 1998,
are as follows:

<TABLE>
<CAPTION>
OPERATING
LEASES
----------
<S> <C>
1999.............................................................................. $ 38,721
2000.............................................................................. 39,785
2001.............................................................................. 40,848
2002.............................................................................. 24,360
----------
Total minimum lease payments...................................................... $ 143,714
----------
----------
</TABLE>

F-29
<PAGE>
SHARES

[LOGO]

COMMON STOCK

---------------------

PROSPECTUS

---------------------

ING BARINGS
SOUNDVIEW TECHNOLOGY GROUP
FAC/EQUITIES

, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses (other than underwriting discounts and commissions) payable in
connection with this offering are as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 13,900
NASD filing fee.................................................... 5,500
Nasdaq filing fee.................................................. *
Printing and engraving expenses.................................... *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
Blue Sky fees and expenses (including legal fees).................. *
Transfer agent and rights agent and registrar fees and expenses.... *
Miscellaneous...................................................... *
---------
Total.......................................................... $ *
---------
---------
</TABLE>

- ------------------------

* To be filed by amendment

All expenses are estimated except for the Securities and Exchange Commission
fee and the NASD fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Registrant's Amended and Restated Articles of Incorporation provide that
pursuant to and to the extent permitted by Pennsylvania law, the Registrant's
directors shall not be personally liable for monetary damages for breach of any
duty owed to the Registrant and its shareholders. This provision does not
eliminate the duty of care, and, in appropriate circumstances, equitable
remedies such as an injunction or other forms of non-monetary relief would
remain available under Pennsylvania law. In addition, each director will
continue to be subject to liability for breach of the director's duty of loyalty
to the Registrant, for acts or omissions not in good faith or involving knowing
violations of law, or for actions resulting in improper personal benefit to the
director. The provision also does not affect a director's responsibilities under
any other law, such as federal securities laws or state or federal environmental
laws. The Registrant's Second Amended and Restated Bylaws provide that the
Registrant shall indemnify its officers and directors to the fullest extent
permitted by Pennsylvania law, including some instances in which indemnification
is otherwise discretionary under Pennsylvania law. Pennsylvania law permits the
Registrant to provide similar indemnification to employees and agents who are
not directors or officers. The determination of whether an individual meets the
applicable standard of conduct may be made by the disinterested directors,
independent legal counsel or the shareholders. Pennsylvania law also permits
indemnification in connection with a proceeding brought by or in the right of
the Registrant to procure a judgment in its favor. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers, or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in that
Act and is therefore unenforceable.

In general, any officer or director of the Registrant shall be indemnified
by the Registrant against expenses including attorneys' fees, judgments, fines
and settlements actually and reasonably incurred by that person in connection
with a legal proceeding as a result of such relationship, whether or not the

II-1
<PAGE>
indemnified liability arises from an action by or in the right of the
Registrant, if the officer or director acted in good faith, and in the manner
believed to be in or not opposed to the Registrant's best interest, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
the conduct was unlawful. Such indemnity is limited to the extent that (i) such
person is not otherwise indemnified and (ii) such indemnifications are not
prohibited by Pennsylvania law or any other applicable law.

Any indemnification under the previous paragraph (unless ordered by a court)
shall be made by the Registrant only as authorized in the specific case upon the
determination that indemnification of the director or officer is proper in the
circumstances because that person has met the applicable standard of conduct set
forth above. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum of disinterested directors who are not parties to such
action or (ii) if such quorum is not obtainable or, even if obtainable, a quorum
of disinterested directors so directs, by independent legal counsel in a written
opinion. To the extent that a director or officer of the Registrant shall be
successful in prosecuting an indemnity claim, the reasonable expenses of any
such person and the fees and expenses of any special legal counsel engaged to
determine the possibility of indemnification shall be borne by the Registrant.

Expenses incurred by a director or officer of the Registrant in defending a
civil or criminal action, suit or proceeding shall be paid by the Registrant in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that person is not entitled to be
indemnified by the Registrant as authorized by our Bylaws.

The indemnification and advancement of expenses provided by, or granted
pursuant to Article 10 of our Bylaws is not deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled, both as to action in that person's official capacity and as to action
in another capacity while holding such office.

The Board of Directors has the power to authorize the Registrant to purchase
and maintain insurance on behalf of the Registrant and others to the extent that
power to do so has not been prohibited by Pennsylvania law, create any fund to
secure any of its indemnification obligations and give other indemnification to
the extent permitted by law. The obligations of the Registrant to indemnify a
director or officer under Article 10 of our Bylaws is a contract between the
Registrant and such director or officer and no modification or repeal of our
Bylaws shall detrimentally affect such officer or director with regard to that
person's acts or omissions prior to such amendment or repeal.

The Registrant intends to purchase insurance for its directors and officers
for certain losses arising from claims or charges made against them in their
capacities as directors and officers of the Registrant.

The Underwriting Agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify directors, officers, and controlling
persons of the Registrant against certain liabilities, including liabilities
under the Securities Act. Reference is made to Section of the form of
Underwriting Agreement which will be filed by amendment as Exhibit 1.1 hereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In the preceding three years, the Registrant has issued the following
securities that were not registered under the Securities Act:

Since its inception, the Registrant has issued to employees and certain
other persons an aggregate of 7,000,000 shares of common stock and options to
purchase 585,000 shares issued pursuant to the Registrant's Equity Compensation
Plan. All of such sales were made under the exemption from registration provided
under Section 4(2) of the Securities Act.

II-2
<PAGE>
On May 29, 1998, the Registrant issued 1,000,000 shares of common stock for
$.20 per share and a warrant to purchase 1,000,000 shares of our common stock at
a per share exercise price of $1.50 at any time on or before May 30, 2005 to H&Q
You Tools Investment Holding L.P. This sale was made under the exemption from
registration provided under Section 4(2) of the Securities Act.

Pursuant to the Registrant's Equity Compensation Plan, the Registrant has
granted since its inception options to purchase a total of 585,000 shares of
common stock, of which 450,000 are exercisable at a price of $1.50 per share,
115,000 are exercisable at a price of $2.50 per share and 20,000 are exercisable
at a price of $7.13. No options have been exercised. For a more detailed
description of our Equity Compensation Plan, see "Management--Equity
Compensation Plan" in this Registration Statement. In granting the options and
selling the underlying securities upon exercise of the options, the Registrant
relied upon exemptions from registration set forth in Rule 701 and Section 4(2)
of the Securities Act.

On June 30, 1999, the Registrant issued 546,984 shares of common stock to
the shareholders of Internet Unlimited, Inc. in connection with the Registrant's
acquisition of Internet Unlimited, Inc. These sales were made under the
exemption from registration provided under Section 4(2) of the Securities Act.

In August 1999, the Registrant's issued 666,198 shares of preferred stock to
certain investors, at a price of $7.13 per share. All of these sales were made
under the exemption from registration provided under Section 4(2) of the
Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ----------------- ------------------------------------------------------------------------------------------------
<C> <S>

1.1# Form of Underwriting Agreement.

3.1 Amended and Restated Articles of Incorporation of the Registrant.

3.2 Second Amended and Restated Bylaws of the Registrant.

5.1# Opinion of Morgan, Lewis & Bockius LLP.

10.1 1999 Equity Compensation Plan of the Registrant.

10.2# Investor Rights Agreement between the Registrant and the investors listed on Exhibit A thereto,
dated August 3, 1999.

10.3#* MCI WorldCom On-Net Voice Agreement between the Registrant and MCI WorldCom, Inc., dated August
6, 1999.

10.4#* Customer Service Agreement between Sprint Communications Company, L.P. and the Registrant, dated
June 28, 1999.

10.5#* Agreement between UUNET Technologies, Inc. and the Registrant, dated August 11, 1999.

10.6#* Managed Security Services Provider Agreement by and between WatchGuard Technologies, Inc. and
the Registrant, dated October 30, 1998.

10.7#* Co-location License by and between Switch and Data Facilities Site Two, L.P. and the Registrant,
dated January 1, 1999.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- ----------------- ------------------------------------------------------------------------------------------------
<C> <S>
10.8#* Commercial Lease Agreement by and between RB Associates and the Registrant, dated July 22, 1998.

10.9#* Lease Agreement between Holland Center, L.L.C. and the Registrant, dated June 15, 1999.

10.10#* Equipment Lease Agreement between Bay Networks USA, Inc. and the Registrant, dated May 29, 1997.

10.11#* Master Lease Agreement between Sunrise Leasing Corporation (Cisco Systems, Inc.) and the
Registrant, dated October 23, 1997.

10.12#* Letter of Agreement between the Registrant and Ascend Communications, Inc./ Ascend Credit
Corporation, dated February 21, 1997.

10.13#* Master Lease Agreement between Sun Microsystems, Inc. and the Registrant, dated February 21,
1997.

10.14#* Lease Agreement between Middle States Capital Corporation and the Registrant, dated August 13,
1997.

10.15#* Service Agreement between Service Electric Cable TV, Inc. and the Registrant, dated as of May
12, 1999.

10.16#* Agreement between NEXTLINK Pennsylvania, Inc. and the Registrant, dated May 25, 1999.

10.17#* Service Agreement between Hyperion Communications of New Jersey, LLC and the Registrant, dated
May 12, 1999.

10.18#* Master Lease Agreement between Ascend Credit Corporation and the Registrant, dated June 29,
1999.

10.19#* Agreement between WebTV Networks, Inc. and the Registrant, dated September 4, 1997.

10.20#* Form of Agreement between Focal Communications Corporation and the Registrant.

10.21 Convertible Promissory Note between H&Q You Tools Investment Holding, L.P. and the Registrant,
dated May 28, 1998.

10.22# Common Stock Warrant Purchase Agreement by and among the Registrant and H&Q You Tools Investment
Holding, L.P., dated May 28, 1998.

10.23 Statement with Respect to Shares of Series A Convertible Preferred Stock of the Registrant,
dated August 2, 1999.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Arthur Andersen LLP relating to the Registrant.

23.2 Consent of Arthur Andersen LLP relating to Internet Unlimited, Inc.

23.3# Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit 5.1).

24.1 Power of Attorney (included on signature page).

27.1 Financial Data Schedule.
</TABLE>

- ------------------------

# To be filed by amendment.

II-4
<PAGE>
* We intend to request confidential treatment of certain portions of this
exhibit pursuant to Rule 406 of the Securities Act of 1933. The entire
agreement will be filed separately with the Securities and Exchange
Commission.

(B) FINANCIAL STATEMENT SCHEDULES

All information for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission is either included in the
financial statements or is not required under the related instructions or are
inapplicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective registration statement; and

(iii) To include any material information with respect to the plan of
distribution no previously disclosed in the registration statement or
any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes (1) to provide to the
underwriter at the closing specified in the standby underwriting agreement,
certificates in such denominations and registered in

II-5
<PAGE>
such names as required by the underwriter to permit prompt delivery to each
purchaser; (2) that for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of a registration
statement in reliance upon Rule 430(a) and contained in the form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
act shall be deemed to be part of this registration statement as of the time it
was declared effective; and (3) that for the purpose of determining any
liability under the Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriter during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriter, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriter is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Bethlehem, Pennsylvania, on August
17, 1999.

FASTNET CORPORATION

By: /s/ DAVID K. VAN ALLEN
-----------------------------------------
David K. Van Allen
CHIEF EXECUTIVE OFFICER

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David K. Van Allen and Sonny Hunt or either of
them acting alone, his or her true and lawful attorney-in-fact and agent, with
full power of substitution and revocation, for him or her and in his or her
name, place and stead, in any and all capacities, to sign (i) any and all
amendments (including post-effective amendments) to this Registration Statement
and to file the same with all exhibits thereto, and other documents in
connection therewith and (ii) any registration statement and any and all
amendments thereto, relating to the offer covered hereby filed pursuant to Rule
462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or his or their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DAVID K. VAN ALLEN Chief Executive Officer and
- ------------------------------ Director (Principal August 17, 1999
David K. Van Allen Executive Officer)

/s/ STANLEY F. BIELICKI Chief Financial Officer
- ------------------------------ (Principal Financial and August 17, 1999
Stanley F. Bielicki Accounting Officer)

/s/ SONNY C. HUNT President and Director
- ------------------------------ August 17, 1999
Sonny C. Hunt

/s/ DOUGLAS L. MICHELS Director
- ------------------------------ August 17, 1999
Douglas L. Michels

II-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>

1.1# Form of Underwriting Agreement.

3.1 Amended and Restated Articles of Incorporation of the Registrant.

3.2 Second Amended and Restated Bylaws of the Registrant.

5.1# Opinion of Morgan, Lewis & Bockius LLP.

10.1 1999 Equity Compensation Plan of the Registrant.

10.2# Investor Rights Agreement between the Registrant and the investors listed on Exhibit A thereto, dated
August 3, 1999.

10.3#* MCI WorldCom On-Net Voice Agreement between the Registrant and MCI WorldCom, Inc., dated August 6,
1999.

10.4#* Customer Service Agreement between Sprint Communications Company, L.P. and the Registrant, dated June
28, 1999.

10.5#* Agreement between UUNET Technologies, Inc. and the Registrant, dated August 11, 1999.

10.6#* Managed Security Services Provider Agreement by and between WatchGuard Technologies, Inc. and the
Registrant, dated October 30, 1998.

10.7#* Co-location License by and between Switch and Data Facilities Site Two, L.P. and the Registrant, dated
January 1, 1999.

10.8#* Commercial Lease Agreement by and between RB Associates and the Registrant, dated July 22, 1998.

10.9#* Lease Agreement between Holland Center, L.L.C. and the Registrant, dated June 15, 1999.

10.10#* Equipment Lease Agreement between Bay Networks USA, Inc. and the Registrant, dated May 29, 1997.

10.11#* Master Lease Agreement between Sunrise Leasing Corporation (Cisco Systems, Inc.) and the Registrant,
dated October 23, 1997.

10.12#* Letter of Agreement between the Registrant and Ascend Communications, Inc./Ascend Credit Corporation,
dated February 21, 1997.

10.13#* Master Lease Agreement between Sun Microsystems, Inc. and the Registrant, dated February 21, 1997.

10.14#* Lease Agreement between Middle States Capital Corporation and the Registrant, dated August 13, 1997.

10.15#* Service Agreement between Service Electric Cable TV, Inc. and the Registrant, dated May 12, 1999.

10.16#* Agreement between NEXTLINK Pennsylvania, Inc. and the Registrant, dated May 25, 1999.

10.17#* Service Agreement between Hyperion Communications of New Jersey, LLC and the Registrant, dated May 12,
1999.
</TABLE>

II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.18#* Master Lease Agreement between Ascend Credit Corporation, Inc. and the Registrant, dated June 29, 1999.

10.19#* Agreement between WebTV Networks, Inc. and the Registrant, dated September 4, 1997.

10.20#* Form of Agreement between Focal Communications Corporation and the Registrant.

10.21 Convertible Promissory Note between H&Q You Tools Investment Holding, L.P. and the Registrant, dated
May 28, 1998.

10.22# Common Stock Warrant Purchase Agreement by and among the Registrant and H&Q You Tools Investment
Holding, L.P., dated May 28, 1998.

10.23 Statement with Respect to Shares of Series A Convertible Preferred Stock of the Registrant, dated
August 2, 1999.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Arthur Andersen LLP relating to the Registrant.

23.2 Consent of Arthur Andersen LLP relating to Internet Unlimited, Inc.

23.3# Consent of Morgan, Lewis & Bockius LLP (to be included in Exhibit 5.1).

24.1 Power of Attorney (included on signature page).

27.1 Financial Data Schedule.
</TABLE>

- ------------------------

# To be filed by amendment.

* We intend to request confidential treatment of certain portions of this
exhibit pursuant to Rule 406 of the Securities Act of 1933. The entire
agreement will be filed separately with the Securities and Exchange
Commission.

II-9

<PAGE>

EXHIBIT 3.1

AMENDED AND RESTATED ARTICLES OF INCORPORATION

YOU TOOLS CORPORATION
(A Pennsylvania corporation)

The Articles of Incorporation of You Tools Corporation are hereby amended
and restated in their entirety to read as follows:

FIRST: CORPORATE NAME. The name of the corporation is FASTNET CORPORATION
(hereinafter referred to as the "Corporation").

SECOND: REGISTERED OFFICE. The location and post office address of the
registered office of the Corporation in the Commonwealth of Pennsylvania is Two
Courtney Place, Suite 130, 3864 Courtney Street, Bethlehem, PA 18017.

THIRD: ORIGINAL INCORPORATION. The Corporation was incorporated under the
provisions of the Business Corporation Law of 1988, as amended. The date of its
incorporation is on May 10, 1994.

FOURTH: METHOD OF ADOPTION. These Amended and Restated Articles of
Incorporation were duly adopted by vote of the shareholders in accordance with
Sections 1914 and 1915 of the Pennsylvania Business Corporation Law of 1988, as
amended (the "Pennsylvania BCL").

FIFTH: CORPORATE PURPOSES. The purpose for which the Corporation is
organized is to engage in any and all lawful acts and activity for which
corporations may be organized under the Pennsylvania BCL.

SIXTH: CORPORATE EXISTENCE. The term of existence of the Corporation is
perpetual.

SEVENTH: CAPITAL STOCK. The aggregate number of shares which the
Corporation shall have authority to issue is 60,000,000 shares, no par value per
share, consisting of:

(a) 50,000,000 shares of Common Stock (the "COMMON STOCK"); and

(b) 10,000,000 shares of Preferred Stock (the "PREFERRED STOCK").

EIGHTH: PREFERRED STOCK. The Board of Directors may authorize the issuance
from time to time of Preferred Stock in one or more classes or series and with
designations, voting rights, preferences, and special rights, if any, as the
Board of Directors may fix by resolution.

<PAGE>

NINTH: RIGHTS OF COMMON STOCK. The designations, powers, preferences,
rights, qualifications, limitations and restrictions of the Common Stock are as
follows:

1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.

2. LIQUIDATION RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to liquidation,
upon the liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation shall be distributed to the holders of Common Stock.

3. REDEMPTION. The Common Stock is not redeemable.

4. VOTING RIGHTS. The holder of each share of Common Stock shall have
the right to one vote, and shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of this Corporation, and shall be entitled
to vote upon such other matters and in such manner as may be provided by law.

TENTH: INDEMNIFICATION. The Corporation shall, to the maximum extent
permitted from time to time under the laws of the Commonwealth of Pennsylvania,
indemnify and upon request shall advance expenses to any person who is or was a
party or is threatened to be made a party to any threatened, pending or
completed action, suit, proceeding or claim, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was or has
agreed to be a director or officer of the Corporation or while a director or
officer is or was serving at the request of or as the agent of the Corporation
as a director, officer or the agent of any other corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, against any and all expenses (including attorney's fees and
expenses), judgments, fines, penalties and amounts paid in settlement or
incurred in connection with the investigation, preparation to defend or defense
of such action, suit, proceeding or claim; provided, however, that the foregoing
shall not require the Corporation to indemnify or advance expenses to any person
in connection with any action, suit, proceeding, claim or counterclaim initiated
by or on behalf of such person. Such rights arising under any by-law, agreement,
vote of directors or shareholders or otherwise and shall inure to the benefit of
the heirs and legal representatives of such person. Any repeal or modification
of the foregoing provisions of this Article TENTH shall not adversely affect any
right or protection of a director or officer of this Corporation existing at the
time of such repeal or modification.

ELEVENTH: LIABILITY. A director of the Corporation shall not be liable to
the Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the Pennsylvania BCL as currently in
effect or as the same may hereafter be amended. No amendment, modification or
repeal of this Article ELEVENTH shall adversely affect any right or protection
of a director that exists at the time of such amendment, modification or repeal.

<PAGE>

TWELFTH: BYLAWS. The Board of Directors shall have the power, in addition
to the shareholders, to make, alter or repeal the bylaws of the Corporation.

THIRTEENTH: CUMULATIVE VOTING. Shareholders of the Corporation shall not
have the right to cumulate their votes for the election of directors of the
Corporation.

FOURTEENTH: RESERVATION OF RIGHT TO AMEND. The Corporation reserves the
right to amend, alter, change or repeal any provision contained in these
Articles, in the manner now or hereafter prescribed by statute, and all rights
conferred upon shareholders are granted subject to this reservation.

FIFTEENTH: POWERS OF THE BOARD OF DIRECTORS. All of the power of the
Corporation, insofar as it may be lawfully vested by these Amended and Restated
Articles of Incorporation in the Board of Directors, is hereby conferred upon
the Board of Directors of the Corporation.

<PAGE>

EXHIBIT 3.2

SECOND AMENDED AND RESTATED BYLAWS OF
FASTNET CORPORATION

ARTICLE I

Offices and Fiscal Year

Section 1.01 REGISTERED OFFICE. The registered office of the corporation
in Pennsylvania shall be at Two Courtney Place, Suite 130, 3864 Courtney Street,
Bethlehem, Pennsylvania, until otherwise established by an amendment of the
articles or by the Board of Directors and a record of the change is filed with
the Department of State in the manner provided by law.

Section 1.02 OTHER OFFICES. The corporation may also have offices at
such other places within or without Pennsylvania as the Board of Directors may
from time to time appoint or the business of the corporation may require.

Section 1.03 FISCAL YEAR. The fiscal year of the corporation shall begin
on the lst day of January in each year.

ARTICLE II

Notice - Waivers - Meetings Generally

Section 2.01 MANNER OF GIVING NOTICE.

(a) GENERAL RULE. Whenever written notice is required to be given to
any person under the provisions of the Business Corporation Law or by the
articles or these bylaws, it may be given to the person either personally or by
sending a copy thereof by first class mail or express mail, postage pre-paid, or
by telegram (with messenger service specified), telex, or facsimile
transmission, to the address (or to the fax number) of the person appearing on
the books of the corporation or, in the case of directors, supplied by the
director to the corporation for the purpose of notice. If the notice is sent by
mail, telegraph or courier service, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of fax, when received. A notice of the meeting shall specify the place, day and
hour of the meeting, and any other information required by any other provision
of the Business Corporation Law, the articles or these bylaws.

(b) ADJOURNED SHAREHOLDER MEETING. When a meeting of shareholders is
adjourned it shall not be necessary to give any notice of the adjourned meeting
or of the business to be transaction at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the Board
fixes a new record date for the adjourned meeting or the Business Corporation
Law requires notice of the business to be transacted and that notice has not
previously been given.

Section 2.02 NOTICE OF MEETINGS OF BOARD OF DIRECTORS. Notice of a
regular meeting of the Board of Directors need not be given. Notice of every
special meeting of the Board of Directors shall be given to each director by
telephone or in writing at least 24 hours (in the case of notice by telephone,
telex or fax) or 48 hours (in the case of notice by telegraph, courier service
or express mail) or five (5) days (in the case of notice of first class mail)
before the time at which the meeting is be held. Every such notice shall state
the time and place of the meeting. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board may be specified in
the notice of the meeting.

Section 2.03 NOTICE OF MEETINGS OF SHAREHOLDERS.

(a) GENERAL RULE. Written notice of every meeting of the shareholders
shall be given by, or at the direction of, the secretary to each shareholder of
record entitled to vote at the meeting at least:

(i) ten (10) days prior to the day named for a meeting called
to consider a fundamental change under 15 PA.CS, Chapter 19; or

(ii) five (5) days prior to the day named for the meeting in any
other case.

If the secretary neglects or refuses to give notice of a meeting, the person or
persons calling the meeting may do so. By decision of the Board, persons other
than the secretary may be authorized to give notice of shareholder meetings.

(b) CONTENTS. In the case of a special meeting of shareholders the
notice shall specify the general nature of the business to be transacted.

(c) NOTICE OF ACTION BY SHAREHOLDERS. In the case of a meeting of
shareholders that has as one of its purposes action on the bylaws, a written
notice shall be given to each shareholder that the purpose, or one of the
purposes of the meeting is to consider the adoption, amendment or repeal of the
bylaws. There shall be included in, or enclosed with, the notice, a copy of the
proposed amendment, or summary of the changes to be affected thereby.

2.04 WAIVER OF NOTICE.

(a) WRITTEN WAIVER. Whenever any written notice is required to be
given under the provisions of the Business Corporation Law the articles of these
bylaws, where waiver thereof in

<PAGE>

writing, signed by the person or persons entitled to the notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
the notice. Neither the business to be transacted at, nor the purpose of, a
meeting need be specified in the waiver of notice of the meeting.

(b) WAIVER BY ATTENDANCE. Attendance of a person at any meeting shall
constitute a waiver of notice of the meeting except where a person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.

2.05 MODIFICATION OF PROPOSAL CONTAINED IN NOTICE. Whenever the
language of a proposed resolution is included in the written notice of a meeting
required to be given under the provisions of the Business Corporation Law or the
articles or these bylaws, a waiver thereof in writing, signed by the person or
person entitled to the notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of the notice. Neither the business to
be transacted at, nor the purpose of, a meeting may be specified in the waiver
of notice of meeting.

2.06 EXCEPTION TO REQUIREMENT OF NOTICE.

(a) GENERAL RULE. Whenever any notice or communication is required to
be given to any person under the provisions of the Business Corporation Law or
by the articles or these bylaws or by the terms of any agreement or other
instrument or as a condition precedent to taking any corporate action and
communication with that person is then lawful, the giving of the notice or
communication to that person shall not be required.

(b) SHAREHOLDERS WITHOUT FORWARDING ADDRESSES. Notice or other
communication shall not be sent to any shareholder with whom the corporation has
been unable to communicate for more than 24 consecutive months because
communications to the shareholder are returned unclaimed or the shareholder has
otherwise failed to provide the corporation with a current address. Whenever the
shareholder provides the corporation with a current address, the corporation
shall commence sending notices and other communications to the shareholder in
the same manner as to the other shareholders.

2.07 USE OF CONFERENCE, TELEPHONE AND SIMILAR EQUIPMENT. One or more
persons may participate in the meeting of the Board of Directors or the
shareholders of the corporation by means of conference, telephone or similar
communications equipment by means of which all

<PAGE>

persons participating in the meeting can hear each other. Participation in the
meeting pursuant to this section shall constitute presence in person at the
meeting.

ARTICLE III

Shareholders

Section 3.01 PLACE OF MEETING. All meetings of the shareholders of the
corporation shall be held at the registered office of the corporation unless
another place is designated by the Board of Directors and the notice of the
meeting.

Section 3.02 ANNUAL MEETING. The Board of Directors may fix the date and
time of the annual meeting of the shareholders, but if no such date and time is
fixed by the Board, the meeting for any calendar year shall be held on the 10th
of January, in such year, if not a legal holiday under the laws of Pennsylvania,
and, if a legal holiday, then on the next succeeding business day not a Saturday
at 10:00 a.m. At the meeting the shareholders then entitled to vote shall elect
directors and shall transact such other business as may properly be brought
before the meeting. If the annual meeting shall not have been called and held
within six (6) months after the designated time, any shareholder may call the
meeting at any time thereafter.

Section 3.03 SPECIAL MEETINGS.

(a) CALL OF SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time:

(1) By the Board of Directors; or

(2) Unless otherwise provided in the articles by shareholders
entitled to cast at least 50% of the votes that all shareholders are
entitled to cast at the particular meeting.

(b) FIXING OF TIME FOR MEETING. At any time, upon written request of
any person who has called a special meeting, it shall be the duty of the
secretary to fix the time of the meeting which shall be held not more than 60
days after the receipt of the request. If the secretary neglects or refuses
to fix the time of the meeting, the person or persons calling the meeting may
do so.

Section 3.04 QUORUM AND ADJOURNMENT.

(a) General rule. A meeting of shareholders of the corporation duly
called shall not be organized for the transaction of business unless a quorum is
present. The presence of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on a particular matter to
be acted upon at the meeting shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
Board of Directors of this

<PAGE>

corporation, as such, shall not be counted in determining the total number of
outstanding shares for quorum purposes at any given time.

(b) WITHDRAWAL OF A QUORUM. The shareholders present at a duly
organized meeting can continue to do business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.

(c) ADJOURNMENT FOR LACK OF A QUORUM. If a meeting cannot be organized
because a quorum has not attended, those present may, except as provided in the
Business Corporation Law, adjourn the meeting to such time and place as they may
determine.

(d) ADJOURNMENTS GENERALLY. Any meeting at which directors are to be
elected shall be adjourned only from day to day, or for such longer periods not
exceeding 15 days each as the shareholders present and entitled to vote shall
direct, until the directors have been elected. Any other regular or special
meeting may be adjourned for such period as the shareholders present and
entitled to vote shall direct.

(e) ELECTING DIRECTORS AT ADJOURNED MEETING. Those shareholders
entitled to vote who attend a meeting called for the election of directors that
has been previously adjourned for lack of a quorum, although less than a quorum
as fixed in this section, shall nevertheless constitute a quorum for the purpose
of electing directors.

(f) OTHER ACTION IN ABSENCE OF A QUORUM. Those shareholders entitled
to vote who attend a meeting of shareholders that has been previously adjourned
for one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
notice of the meeting if the notice states that those shareholders who attend
the adjourned meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.

Section 3.05 ACTION BY SHAREHOLDERS. Except as otherwise provided in the
Business Corporation Law or the articles or these bylaws, whenever any corporate
action is to be taken by vote of the shareholders of the corporation, it shall
be authorized upon receiving the affirmative vote of a majority of the votes
cast by all shareholders entitled to vote thereon and, if any shareholders are
entitled to vote thereon as a class, upon receiving the affirmative vote of the
majority of the votes cast by the shareholders entitled to vote as a class.

Section 3.06 ORGANIZATION OF MEETING. At every meeting of the
shareholders, the chairman of the board, if there be one, or in the case of a
vacancy in office or absence of the chairman of the board, one of the following
officers present in the order stated: the vice-chairman of the board, if there
be one, the president, the vice-presidents in their order of ranks and
seniority, or a person chosen by a majority vote of the shareholders present,
shall act as chairman of the meeting. The secretary or, in the absence of the
secretary, an assistant secretary, or in the

<PAGE>

absence of the secretary and assistant secretary, a person appointed by the
chairman of the meeting shall act as secretary.

Section 3.07 VOTING RIGHTS OF SHAREHOLDERS. Unless otherwise provided in
the articles, every shareholder of the corporation shall be entitled to one vote
for every share standing in the name of the shareholder in the books of the
corporation. Shareholders whose shares are in a Voting Trust shall not vote but
their shares shall be voted as called for in the Voting Trust.

Section 3.08 VOTING AND OTHER ACTION BY PROXY.

(a) GENERAL RULE.

(1) Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person to act for the
shareholder by proxy.

(2) The presence of, or vote or other action at a meeting of
shareholders, or the expression of consent or dissent to corporate action
in writing, by proxy of a shareholder shall constitute the presence of,
or vote or action by, or written consent or dissent of the shareholder.

(3) Where two or more proxies of a shareholder are present, the
corporation shall, unless otherwise expressly provided by the proxy,
accept as the vote of all shares represented thereby the vote cast by a
majority of them and, if a majority of the proxies cannot agree whether
the shares represented shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally among those
persons.

(b) MINIMUM REQUIREMENTS. Every proxy shall be executed in writing by
the shareholder or by the duly authorized attorney-in-fact of the shareholder
and filed with the secretary of the corporation. A telegram, telex, cablegram,
datagram or similar transmission from a shareholder or attorney-in-fact or a
facsimile or similar reproduction of a writing executed by a shareholder or
attorney-in-fact:

(1) May be treated as properly executed for purposes of this
subsection; and

(2) Shall be so treated if it sets forth a confidential and
unique identification number or other mark furnished by the corporation
to the shareholders for the purposes of particular meeting or
transaction.

(c) REVOCATION. A proxy, unless coupled with an interest, shall be
revocable at will, notwithstanding any other agreement or any provision in the
proxy to the contrary, but the revocation of a proxy shall not be effective
until written notice thereof has been given to the secretary of the corporation.
An unrevoked proxy shall not be valid after three (3) years from the date of its
execution unless a longer time is expressly provided therein. A proxy shall not
be

<PAGE>

revoked by the death or incapacity of the maker, unless before the vote is
counted or the authority is exercised, written notice of the death or incapacity
is given to the secretary of the corporation.

(d) EXPENSES. Unless otherwise restricted in the articles, the
corporation shall pay the reasonable expenses of solicitation, of votes, proxies
or consents of shareholders by or on behalf of the Board of Directors or its
nominees for election to the Board, including solicitation by professional
proxies, solicitors and otherwise.

Section 3.09. VOTING BY FIDUCIARIES AND PLEDGEES. Shares of the
corporation standing in the name of a trustee or other fiduciary and shares held
by an assignee for the benefit of creditors or by receiver may be voted by the
trustee, fiduciary, assignee or receiver. A shareholder whose shares are pledged
shall be entitled to vote the shares until the shares have been transferred into
the name of the pledgee, or a nominee of the pledgee, but nothing in this
section shall effect the validity of a proxy given to a pledgee or nominee.

Section 3.10. VOTING BY JOINT HOLDERS OR SHARES.

(a) GENERAL RULE. Where shares of the corporation are held jointly or
as tenants in common by two or more persons as fiduciaries or otherwise:

(1) If only one or more of such persons is present in person or
by proxy, all the shares standing in the names of such persons shall be
deemed to be represented for the purpose of determining a quorum and the
corporation shall accept as the vote of all the shares the vote cast by
joint owner or a majority of them; and

(2) If the persons are equally divided upon whether the shares
held by them shall be voted or upon the manner of voting the shares, the
voting of the shares shall be divided equally among the persons without
prejudice to the rights of the joint owners or the beneficial owners
thereof among themselves.

(b) Exception. If there has been filed with the secretary of the
corporation a copy, certified by an attorney-at-law to be correct, of the
relevant portions of the agreement under which the shares are held or the
instrument by which the trust or estate was created or of an order of court
appointing them or of an order of court directing the voting of the shares, the
person specified as having such voting power in the document latest in date of
operative effect so filed, and only those persons, shall be entitled to vote the
shares but only in accordance therewith.

Section 3.11. VOTING BY CORPORATIONS.

(a) VOTING BY CORPORATE SHAREHOLDERS. Any corporation that is a
shareholder of this corporation may vote by any of its officers or agents, or by
proxy upon by any officer or agent, unless some other person by resolution of
the Board of Directors of the other corporation or a provision of its articles
or bylaws, a copy of which resolution or provision certified to be correct

<PAGE>

by one of its officers has been filed with the secretary of this corporation, is
appointed its general or special proxy in which case that person shall be
entitled to vote the shares.

(b) CONTROLLED SHARES. Shares of this corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the Board of
Directors of this corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.

Section 3.12. DETERMINATION OF SHAREHOLDERS OF RECORD.

(a) FIXING RECORD DATE. The Board of Directors may fix a time prior to
the date of any meeting of shareholders as a record date for the determination
of the shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall be not more than sixty
days prior to the date of the meeting of shareholders. only shareholders of
record on the date fixed shall be so entitled not withstanding any transfer of
shares on the books of the corporation after any record date fixed as provided
in this subsection. The Board of Directors may similarly fix a record date for
the determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board fixes a new record date for the adjourned
meeting.

(b) DETERMINATION WHEN A RECORD DATE IS NOT FIXED. If a record date is
not fixed:

(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close
of business on the next day proceeding the day in which notice is given
or, if notice is waived, at the close of business on the day immediately
preceding the day on which the meeting is held.

(2) The record date for determining shareholders entitled to:

(i) express consent or dissent to corporate action in
writing without a meeting, when prior action by the Board of
Directors is not necessary;

(ii) call a special meeting of the shareholders; or

(iii) propose an amendment of the articles;

shall be the close of business on the day in which the first written
consent or dissent, request for a special meeting or petition proposing
an amendment of the articles is filed with the secretary of the
corporation.

(3) The record date for determining shareholders for any other
purpose shall be at the close of business on the day in which the Board
of Directors adopts the resolution relating thereto.

<PAGE>

Section 3.13. VOTING LISTS.

(a) GENERAL RULE. The officer or agent having charge of the transfer
of books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof.

(b) EFFECT OF LIST. Failure to comply with the requirements of this
section shall not effect the validity of any action taken at a meeting prior to
a demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book or a duplicate thereof
kept in Pennsylvania, shall be prima facie evidence as to who are the
shareholders entitled to examine the list or share register or transfer book or
to vote on any meeting of shareholders.

Section 3.14. JUDGES OF ELECTION.

(a) APPOINTMENT. In advance of any meeting of shareholders of the
corporation, the Board of Directors may appoint judges of election, who need not
be shareholders, to act at the meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholder shall, appoint judges of election at the meeting.
The number of judges shall be one or three. A person who is a candidate for
office to be filled at the meeting shall not act as a judge.

(b) VACANCIES. In case any person appointed as a judge fails to appear
or fails or refuses to act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the convening of the meeting or at the meeting
by the presiding officer thereof.

(c) DUTIES. The judges of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effective
proxies, receive both votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith, to best of their
ability, and as expeditiously as is practical. If there are three judges of
election, the decision, act or certificate of a majority shall be effective in
all respects as the decision, act or certificate of all.

(d) REPORT. On request of the presiding officer of the meeting, or of
any shareholder, the judges shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. In the

<PAGE>

report of certificate made by them shall be prima facie evidence of the facts
stated therein.

Section 3.15. MINORS OF SECURITY HOLDERS. The corporation may treat a
minor who holds shares or obligations of the corporation as having the capacity
to receive and to empower others to receive dividends, interest, principal, or
other payments or distributions, to vote or express consent or dissent, and to
make elections and exercise rights relating to such shares or obligations or, in
the case of payments or distributions on shares the corporate officer
responsible for maintaining the list of shareholders or the transfer agent of
the corporation or, in the case of payments or distributions on obligations, the
treasurer or agent has received written notice that the holder is a minor.

ARTICLE IV

Board of Directors

Section 4.01. POWERS; PERSONAL LIABILITY.

(a) GENERAL RULE. Unless otherwise provided by statute, all powers
vested by law in the corporation shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the Board of Directors.

(b) PERSONAL LIABILITY OF DIRECTORS.

(1) A director shall not be personally liable, as such, for
monetary damages for any action taken unless:

(i) the director has breached or failed to perform the
duties of his or her office under 15 Pa.C.S. Subch. 17B; and

(ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness.

(2) Paragraph (1) shall not apply to:

(i) the responsibility or liability of a director pursuant
to any criminal statute; or

(ii) the liability of a director for the payment of taxes
pursuant to Federal, State or local law.

(c) NOTATION OF DISSENT. A director who is present at a meeting of the
Board of Directors, or of a committee of the board, at which action on any
corporate matter is taken on

<PAGE>

which the director is generally competent to act, shall be presumed to have
assented to the action taken unless his or her dissent is entered in the minutes
of the meeting or unless the director files a written dissent to the action with
the secretary of the meeting before the adjournment thereof or transmits the
dissent in writing to the secretary of the corporation immediately after the
adjournment of the meeting. The right to dissent shall not apply to a director
who voted in favor of the action. Nothing in this section shall bar a director
from asserting that minutes of the meeting incorrectly omitted his or her
dissent if, promptly upon receipt of a copy of such minutes, the director
notifies the secretary, in writing, of the asserted omission or inaccuracy.

Section 4.02. QUALIFICATIONS AND SELECTION OF DIRECTORS.

(a) QUALIFICATIONS. Each director of the corporation shall be a
natural person of full age who need not be a resident of Pennsylvania or a
shareholder of the corporation.

(b) ELECTION OF DIRECTORS. Except as otherwise provided in these
bylaws, directors of the corporation shall be elected by the shareholders. In
elections for directors, voting need not be by ballot unless required by vote of
the shareholders before the voting for election of directors begins. The
candidates receiving the highest number of votes from each class or group of
classes, if any, entitled to elect directors separately up to the number of
directors to be elected by the class or group of classes shall be elected. If at
any meeting of shareholders, directors of more than one class are to be elected,
each class of directors shall be elected in a separate election.

Section 4.03. NUMBER AND TERM OF OFFICE.

(a) NUMBER. The Board of Directors shall consist of such number of
directors as may be determined from time to time by resolution of the Board of
Directors.

(b) TERM OF OFFICE. Each director shall hold office until the
expiration of the term for which he or she was selected and until a successor
has been selected and qualified or until his or her earlier death, resignation
or removal. A decrease in the number of directors shall not have the effect of
shortening the term of any incumbent director.

(c) RESIGNATION. Any director may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as shall be specified in
the notice of resignation.

Section 4.04. VACANCIES.

(a) GENERAL RULE. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, may be filled
by a majority vote of the remaining members of the board though less than a
quorum, or by a sole remaining director, and each

<PAGE>

person so selected shall be a director to serve for the balance of the unexpired
term, and until a successor has been selected and qualified or until his or her
earlier death, resignation or removal.

(b) ACTION BY RESIGNED DIRECTORS. When one or more directors resign
from the board effective at a future date, the directors then in office,
including those who have so resigned, shall have power by the applicable vote to
fill the vacancies, the vote thereon to take effect when the resignations become
effective.

Section 4.05. REMOVAL OF DIRECTORS.

(a) REMOVAL BY THE SHAREHOLDERS. The entire Board of Directors, or any
class of the board, or any individual director may be removed from office
without assigning any cause by the vote of shareholders, or of the holders of a
class or series of shares, entitled to elect directors, or the class of
directors. In case the board or a class of the board or any one or more
directors are so removed, new directors may be elected at the same meeting. The
Board of Directors may be removed at any time with or without cause by the
unanimous vote or consent of shareholders entitled to vote thereon.

(b) REMOVAL OF THE BOARD. The Board of Directors may declare vacant
the office of a director who has been judicially declared of unsound mind or who
has been convicted of an offense punishable by imprisonment for a term of more
than one year or if, within 60 days after notice of his or her selection, the
director does not accept the office either in writing or by attending a meeting
of the Board of Directors.

Section 4.06. PLACE OF MEETINGS. Meetings of the Board of Directors may
be held at such place within or without Pennsylvania as the Board of Directors
may from time to time appoint or as may be designated in the notice of the
meeting.

Section 4.07 ORGANIZATION OF MEETINGS. At every meeting of the Board of
Directors, the chairman of the board, if there by one, or, in the case of a
vacancy in the office or absence of the chairman of the board, one of the
following officers present in the order stated: the vice chairman of the board,
if there by one, the president, the vice presidents in their order of rank and
seniority, or a person chosen by majority vote of the directors present, shall
act as chairman of the meeting. The secretary or, in the absence of the
secretary, an assistant secretary, or, in the absence of the secretary and
assistant secretaries, a person appointed by the chairman of the meeting, shall
act as secretary.

Section 4.08. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such time and place as shall be designated from time
to time by resolution of the Board of Directors.

Section 4.09. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the chairman or by two or more of the
directors.

<PAGE>

Section 4.10. QUORUM OF AND ACTION BY DIRECTORS.

(a) GENERAL RULE. A majority of the directors in office of the
corporation shall be necessary to constitute a quorum for the transaction of
business, and the acts of a majority of the directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors.

(b) ACTION BY WRITTEN CONSENT. Any action required or permitted to be
taken at a meeting of the directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the directors
in office is filed with the secretary of the corporation.

Section 4.11. EXECUTIVE AND OTHER COMMITTEES.

(a) ESTABLISHMENT AND POWERS. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to consist of one or more directors of the corporation. Any
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all of the powers and authority of the Board of
Directors except that a committee shall not have any power or authority as to
the following:

(1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law.

(2) The creation or filling of vacancies in the Board of
Directors.

(3) The adoption, amendment or repeal of these bylaws.

(4) The amendment or repeal of any resolution of the board that
by its terms is amendable or repealable only by the board.

(5) Action on matters committed by a resolution of the Board of
Directors to another committee of the board.

(b) ALTERNATE COMMITTEE MEMBERS. The board may designate one or more
directors as alternate members of any committee who may replace any absent or
disqualified member to any meeting of the committee or for the purposes of any
written action by the committee. In the absence or disqualification of a member
and alternate member or members of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another director to act at the
meeting in the place of the absent or disqualified member.

<PAGE>

(d) COMMITTEE PROCEDURES. The term "Board of Directors" or "board,"
when used in any provision of these bylaws relating to the organization or
procedures of or the manner of taking action by the Board of Directors, shall be
construed to include and refer to any executive or other committee of the board.

Section 4.12. COMPENSATION. The Board of Directors shall have the
authority to fix the compensation of directors for their services as directors
and a director may be a salaried officer of the corporation.

ARTICLE V

Officers

Section 5.01. OFFICERS GENERALLY.

(a) NUMBER, QUALIFICATIONS AND DESIGNATION. The officers of the
corporation shall be a president, a secretary, a treasurer, and such other
officers as may be elected in accordance with the provisions of Section 5.03.
Officers may but need not be directors or shareholders of the corporation. The
president and secretary shall be natural persons of full age. The treasurer may
be a corporation, but if a natural person shall be of full age. The Board of
Directors may elect from among the members of the board a chairman of the board
and a vice chairman of the board who shall be officers of the corporation. Any
number of offices may be held by the same person.

(b) RESIGNATIONS. Any officer may resign at any time upon written
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as may be specified in the
notice of resignation.

Section 5.02. ELECTION AND TERM OF OFFICE. The officers of the
corporation, except those elected by delegated authority pursuant to Section
5.03, shall be elected annually by the Board Directors, and each such officer
shall hold office for a term of one year and until a successor has been selected
and qualified or until his or her earlier death, resignation or removal.

Section 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The Board of
Directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more assistant secretaries, and one or more assistant
treasurers, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws or as the Board of
Directors may from time to time determine. The Board of Directors may delegate
to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.

<PAGE>

Section 5.04. REMOVAL OF OFFICERS AND AGENTS. Any officer or agent of the
corporation may be removed by the Board of Directors with or without cause. The
removal shall be without prejudice to the contract rights, if any, of any person
so removed. Election or appointment of an officer or agent shall not of itself
create contract rights.

Section 5.05. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, shall be filled by
the Board of Directors or by the officer or committee to which the power to fill
such office has been delegated pursuant to Section 5.03, as the case may be, and
if the office is one for which these bylaws prescribe a term, shall be filled
for the unexpired portion of the term.

Section 5.06. AUTHORITY.

(a) GENERAL RULE. All officers of the corporation, as between
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant to
resolutions or orders of the Board of Directors or, in the absence of
controlling provisions in the resolutions or orders of the Board of Directors,
as may be determined by or pursuant to these bylaws.

(b) CHIEF EXECUTIVE OFFICER. The chief executive officer shall have
and perform such duties as are delegated by the Board of Directors.

Section 5.07. THE CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The chairman
of the board or in the absence of the chairman, the vice chairman of the board,
shall preside at all meetings of the shareholders and of the Board of Directors
and shall have and perform such other duties as are delegated by the Board of
Directors.

Section 5.08. THE PRESIDENT. The president shall have and perform such
duties as are delegated by the Board of Directors.

Section 5.09. THE SECRETARY. The secretary or an assistant secretary
shall attend all meetings of the shareholders and of the Board of Directors and
shall record all the votes of the shareholders and of the directors and the
minutes of the meetings of the shareholders and of the Board of Directors and of
committees of the board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to documents executed on behalf of the
corporation under its seal; and, in general, shall perform all duties incident
to the office of secretary, and such other duties as may from time to time be
assigned by the Board of Directors.

Section 5.10. THE TREASURER. The treasurer or an assistant treasurer
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and receipt
of moneys earned by or in any manner due to or received by the corporation;
shall deposit all funds in his or her custody as treasurer in such banks or
other

<PAGE>

places of deposit as the Board of Directors may from time to time designate;
shall, whenever so required by the Board of Directors, render an account showing
all transactions as treasurer and the financial condition of the corporation;
and, in general, shall discharge such other duties as may from time to time be
assigned by the Board of Directors.

Section 5.11. SALARIES. The salaries of the officers elected by the Board
of Directors shall be fixed from time to time by the Board of Directors or by
such officer as may be designated by resolution of the board. The salaries or
other compensation of any other officers, employees and other agents shall be
fixed from time to time by the officer or committee to which the power to elect
such officers or to retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03. No officer shall be prevented from receiving
such salary or other compensation by reason of the fact that the officer is also
a director of the corporation.

ARTICLE VI

Share Certificates, Transfer, Etc.

Section 6.01. SHARE CERTIFICATES. Certificates for shares of the
corporation shall be in such form as approved by the Board of Directors, and
shall state that the corporation is incorporated under the laws of Pennsylvania,
the name of the person to whom issued, and the number and class of shares and
the designation of the series (if any) that the certificate represents. The
share register of transfer books and blank share certificates shall be kept by
the secretary or by any transfer agent or registrar designated by the Board of
Directors for that purpose.

Section 6.02. ISSUANCE. The share certificates of the corporation shall
be numbered and registered in the share register or transfer books of the
corporation as they are issued. They shall be signed by the president or a vice
president and by the secretary or an assistant secretary or the treasurer or an
assistant treasurer; but where a certificate is signed by a transfer agent or a
registrar, the signature of any corporate officer upon the certificate may be a
facsimile, engraved or printed. In case any officer who has signed, or whose
facsimile signature has been placed upon, any share certificate shall have
ceased to be such officer because of death, resignation or otherwise, before the
certificate is issued, it may be issued with the same effect as if the officer
had not ceased to be such at the date of its issue. The provisions of this
Section 6.02 shall be subject to any inconsistent or contrary agreement at the
time between the corporation and any transfer agent or registrar.

Section 6.03. TRANSFER. Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made inconsistent with any
shareholders agreement, the provisions of the securities laws and the provisions
of the Uniform Commercial Code, 13 Pa.C.S. Div. 8, or other provisions of law.

<PAGE>

Section 6.04. RECORD HOLDER OF SHARES. The corporation shall be entitled
to treat the person in whose name any share or shares of the corporation stand
on the books of the corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person.

Section 6.05. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of
any shares of the corporation shall immediately notify the corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may, in its discretion, cause a new certificate or certificates to be
issued to the holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate or, in case of loss or destruction of the
certificate, upon satisfactory proof of the loss or destruction and, if the
Board of Directors shall so determine, the deposit of a bond in such form and in
such sum, and with such surety or sureties, as it may direct.

ARTICLE VII

Indemnification of Directors, Officers and other Authorized
Representatives

Section 7.01. SCOPE OF INDEMNIFICATION.

(a) GENERAL RULE. The corporation shall indemnify an indemnified
representative against any liability incurred in connection with any proceeding
in which the indemnified representative may be involved as a party or otherwise
by reason of the fact that such person is or was serving in an indemnified
capacity, including, without limitation, liabilities resulting from any actual
or alleged breach or neglect of duty, error, misstatement or misleading
statement, negligence, gross negligence or act giving rise to strict or products
liability, except:

(1) where the indemnification is expressly prohibited by
applicable law;

(2) where the conduct of the indemnified representative has
been finally determined pursuant to Section 7.06 or otherwise:

(i) to constitute willful misconduct or recklessness within
the meaning of 15 Pa.C.S. Section 1746(b) or any superseding
provision of law sufficient in the circumstances to bar
indemnification against liabilities arising from the conduct; or

(ii) to be based upon or attributable to the receipt by the
indemnified representative from the corporation of a personal
benefit to which the indemnified representative is not legally
entitled; or

(3) to the extent the indemnification has been finally
determined in a final

<PAGE>

adjudication pursuant to Section 7.06 to be otherwise unlawful.

(b) PARTIAL PAYMENT. If an indemnified representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such person may be subject, the corporation shall indemnify the
indemnified representative to the maximum extent for such portion of the
liabilities.

(c) PRESUMPTION. The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contenders or its equivalent
shall not of itself create a presumption that the indemnified representative is
not entitled to indemnification.

(d) DEFINITIONS. For purposes of this Article:

(1) "indemnified capacity" means any and all past, present and
future service by an indemnified representative in one or more capacities
as a director, officer, employee or agent of the corporation, or, at the
request of the corporation, as a director, officer, employee, agent,
fiduciary or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other entity or enterprise;

(2) "indemnified representative" means any and all directors
and officers of the corporation and any other person designated as an
indemnified representative by the Board of Directors of the corporation
(which may, but need not, include any person serving at the request of
the corporation, as a director, officer, employee, agent, fiduciary or
trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other entity or enterprise);

(3) "liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with
respect to an employee benefit plan, or cost or expense, of any nature
(including, without limitation, attorneys' fees and disbursements); and

(4) "proceeding" means any threatened, pending or completed
action, suit, appeal or other proceeding of any nature, whether civil,
criminal, administrative or investigative, whether formal or informal,
and whether brought by or in the right of the corporation, a class of its
security holders or otherwise.

Section 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counterclaims or affirmative defenses) or participated in as an intervenor or
AMICUS CURIAE by the person seeking indemnification unless the initiation of or
participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
This section shall not apply to reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 7.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.

<PAGE>

Section 7.03. ADVANCING EXPENSES. The corporation shall pay the
expenses (including attorneys' fees and disbursements) incurred in good faith
by an indemnified representative in advance of the final disposition of a
proceeding described in Section 7.01 or the initiation of or participation in
which is authorized pursuant to Section 7.02 upon receipt of an undertaking
by or on behalf of the indemnified representative to repay the amount if it
is ultimately determined pursuant to Section 7.06 that such person is not
entitled to be indemnified by the corporation pursuant to this Article. The
financial ability of an indemnified representative to repay an advance shall
not be a perquisite to the making of the advance.

Section 7.04. SECURING OF INDEMNIFICATION OBLIGATIONS. To further
effect, satisfy or secure the indemnification obligations provided herein or
otherwise, the corporation may maintain insurance, obtain a letter of credit,
act as self-insurer, create a reserve, trust, escrow, cash collateral or
other fund or account, enter into indemnification agreements, pledge or grant
a security interest in any assets or properties of the corporation, or use
any other mechanism or arrangement whatsoever in such amounts, at such costs,
and upon such other terms and conditions as the Board of Directors shall deem
appropriate. Absent fraud, the determination of the Board of Directors with
respect to such amounts, costs, terms and conditions shall be conclusive
against all security holders, officers and directors and shall not be subject
to voidability.

Section 7.05. PAYMENT OF INDEMNIFICATION. An indemnified representative
shall be entitled to indemnification within 30 days after a written request for
indemnification has been delivered to the secretary of the corporation.

Section 7.06. ARBITRATION.

(a) GENERAL RULE. Any dispute related to the right to indemnification,
contribution or advancement of expenses as provided under this Article, except
with respect to indemnification for liabilities arising under the Securities Act
of 1933 that the corporation has undertaken to submit to a court for
adjudication, shall be decided only by arbitration in the metropolitan area in
which the principal executive offices of the corporation are located at the
time, in accordance with the commercial arbitration rules then in effect of The
American Arbitration Association, before a panel of three arbitrators, one of
whom shall be selected by the corporation, the second of whom shall be selected
by the indemnified representative and the third of whom shall be selected by the
other two arbitrators. In the absence of the American Arbitration Association,
of if for any reason arbitration under the arbitration rules of the American
Arbitration Association cannot be initiated, or if one of the parties fails or
refuses to select an arbitrator or if the arbitrators selected by the
corporation and the indemnified representative cannot agree on the selection of
the third arbitrator within 30 days after such time as the corporation and the
indemnified representative have each been notified of the selection of the
other's arbitrator, the necessary arbitrator or arbitrators shall be selected by
the presiding judge of the court of general jurisdiction in such metropolitan
area.

<PAGE>

(b) BURDEN OF PROOF. The party or parties challenging the right of an
indemnified representative to the benefits of this Article shall have the burden
of proof.

(c) EXPENSES. The corporation shall reimburse an indemnified
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending such arbitration.

(d) EFFECT. Any award entered by the arbitrators shall be final,
binding and nonappealable and judgment may be entered thereon by any party in
accordance with applicable law in any court of competent jurisdiction, except
that the corporation shall be entitled to interpose as a defense in any such
judicial enforcement proceeding any prior final judicial determination adverse
to the indemnified representative under Section 7.01(a)(2) in a proceeding not
directly involving indemnification under this Article. This arbitration
provision shall be specifically enforceable.

Section 7.07. CONTRIBUTION. If the indemnification provided for in this
Article or otherwise is unavailable for any reason in respect of any liability
or portion thereof, the corporation shall contribute to the liabilities to which
the indemnified representative may be subject in such proportion as is
appropriate to reflect the intent of this Article or otherwise.

Section 7.08. MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC. To
the extent that a representative of the corporation has been successful on the
merits or otherwise in defense of any action or proceeding referred to in 15
Pa.C.S. Section 1741 or 1742 or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees and disbursements) actually and reasonably incurred by such person in
connection therewith.

Section 7.09. CONTRACT RIGHTS; AMENDMENT OR REPEAL. All rights under this
Article shall be deemed a contract between the corporation and the indemnified
representative pursuant to which the corporation and each indemnified
representative intend to be legally bound. A repeal, modification or an
amendment hereof shall be prospective only and shall not affect any rights or
obligations then existing.

Section 7.10. SCOPE OF ARTICLE. The rights granted by this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of shareholder or disinterested directors or
otherwise both as to action in an indemnified capacity and as to action in any
other capacity. The indemnification, contribution and advancement of expenses
provided by, or granted pursuant to, this Article shall continue as to a person
who has ceased to be an indemnified representative in respect of matters arising
prior to such time, and shall inure to the benefit of the heirs and personal
representatives of such a person.

Section 7.11. RELIANCE ON PROVISIONS. Each person who shall act as an
indemnified representative of the corporation shall be deemed to be doing so in
reliance upon the rights provided by this Article.

<PAGE>

Section 7.12. INTERPRETATION. The provisions of this Article are intended
to constitute bylaws authorized by 15 Pa.C.S. Section 1746.

ARTICLE VIII

Miscellaneous

Section 8.01. CORPORATE SEAL. The corporation shall have a corporate seal
containing the name of the corporation, the year of incorporation and such other
details as may be approved by the Board of Directors.

Section 8.02. CHECKS. All checks, notes, bills of exchange or other
orders in writing shall be signed by such person or persons as the Board of
Directors or any person authorized by resolution of the Board of Directors may
from time to time designate.

Section 8.03. CONTRACTS.

(a) GENERAL RULE. Except as otherwise provided in the Business
Corporation Law in the case of transactions that require action by the
shareholders, the Board of Directors may authorize any officer or agent to enter
into any contract or to execute or deliver any instrument on behalf of the
corporation, and such authority may be general or confined to specific
instances.

(b) STATUTORY FORM OF EXECUTION OF INSTRUMENTS. Any note, mortgage,
evidence of indebtedness, contract or other document, or any assignment or
endorsement thereof, executed or entered into between the corporation and any
other person, when signed by one or more officers or agents having actual or
apparent authority to sign it, or by the president or vice president and
secretary or assistant secretary or treasurer or assistant treasurer of the
corporation, shall be held to have been properly executed for and in behalf of
the corporation, without prejudice to the rights of the corporation against any
person who shall have executed the instrument in excess of his or her actual
authority.

Section 8.04. INTERESTED DIRECTORS OR OFFICERS; QUORUM.

(a) GENERAL RULE. A contract or transaction between the corporation
and one or more of its directors or officers or between the corporation and
another corporation, partnership, joint venture, trust or other enterprise in
which one or more of its directors or officers are directors or officers or have
a financial or other interest, shall not be void or voidable solely for that
reason, or solely because the director or officer is present at or participates
in the meeting of the Board of Directors that authorizes the contract or
transaction, or solely because his, her or their votes are counted for that
purpose, if:

(1) the material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known to the Board
of Directors and the board authorizes

<PAGE>

the contract or transaction by the affirmative votes of a majority of the
disinterested directors even though the disinterested directors are less
than a quorum;

(2) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known
to the shareholders entitled to vote thereon and the contract or
transaction is specifically approved in good faith by vote of those
shareholders; or

(3) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the Board of
Directors or the shareholders.

(b) QUORUM. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board that
authorizes a contract or transaction specified in subsection (a).

Section 8.05. DEPOSIT. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Board of Directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by such
one or more officers or employees as the Board of Directors shall from time to
time determine.

Section 8.06. CORPORATE RECORDS.

(a) REQUIRED RECORDS. The corporation shall keep complete and accurate
books and records of account, minutes of the proceedings of the incorporators,
shareholders and directors and a share register giving the names and addresses
of all shareholders and the number and class of shares held by each. The share
register shall be kept at either the registered office of the corporation in
Pennsylvania or at its principal place of business wherever situated or at the
office of its registrar or transfer agent. Any books, minutes or other records
may be in written form or any other form capable of being converted into written
form within a reasonable time.

(b) RIGHT OF INSPECTION. Every shareholder shall, upon written
verified demand stating the purpose thereof, have a right to examine, in person
or by agent or attorney, during the usual hours for business for any proper
purpose, the share register, books and records of account, and records of the
proceedings of the incorporators, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose reasonably related
to the interest of the person as a shareholder. In every instance where an
attorney or other agent is the person who seeks the right of inspection, the
demand shall be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf of the
shareholder. The demand shall be directed to the corporation at its registered
office in Pennsylvania or at its principal place of business wherever situated.

Section 8.07. FINANCIAL REPORTS. Unless otherwise decided by the
Directors, the corporation shall furnish to its shareholders annual financial
statements, including at least a

<PAGE>

balance sheet as of the end of each fiscal year and a statement of income and
expenses for the fiscal year. The financial statements shall be prepared on the
basis of generally accepted accounting principles, if the corporation prepares
financial statements for the fiscal year on that basis for any purpose, and may
be consolidated statements of the corporation and one or more of its
subsidiaries. The financial statements shall be mailed by the corporation to
each of its shareholders entitled thereto within 120 days after the close of
each fiscal year and, after the mailing and upon written request, shall be
mailed by the corporation to any shareholder or beneficial owner entitled
thereto to whom a copy of the most recent annual financial statements has not
previously been mailed. Statements that are audited or reviewed by a public
accountant shall be accompanied by the report of the accountant; in other cases,
each copy shall be accompanied by a statement of the person in charge of the
financial records of the corporation:

(1) Stating his or her reasonable belief as to whether or not
the financial statements were prepared in accordance with generally
accepted accounting principles and, if not, describing the basis of
presentation.

(2) Describing any material respects in which the financial
statements were not prepared on a basis consistent with those prepared
for the previous year.

Section 8.08. AMENDMENT OF BYLAWS. These bylaws may be amended or
repealed, or new bylaws may be adopted, either (i) by vote of the shareholders
at any duly organized annual or special meeting of shareholders, or (ii) with
respect to those matters that are not by statute committed expressly to the
shareholders, and regardless of whether the shareholders have previously adopted
or approved the bylaw being amended or repealed, by vote of a majority of the
Board of Directors of the corporation in office at any regular or special
meeting of directors. Any change in these bylaws shall take effect when adopted
unless otherwise provided in the resolution effecting the change.

<PAGE>

EXHIBIT 10.1

YOU TOOLS CORPORATION, t/a FASTNET

1999 EQUITY COMPENSATION PLAN
-----------------------------

The purpose of the You Tools Corporation, t/a FastNet, 1999 Equity
Compensation Plan (the "Plan") is to provide (i) designated employees of You
Tools Corporation, t/a FastNet (the "Company") and its subsidiaries, (ii)
certain consultants and advisors who perform services for the Company or its
subsidiaries and (iii) non-employee members of the Board of Directors of the
Company (the "Board") with the opportunity to receive grants of incentive stock
options, nonqualified stock options and restricted stock. The Company believes
that the Plan will encourage the participants to contribute materially to the
growth of the Company, thereby benefitting the Company's shareholders, and will
align the economic interests of the participants with those of the shareholders.

1. ADMINISTRATION

(a) COMMITTEE. The Plan shall be administered and interpreted by the
Board or by a committee appointed by the Board. After an initial public offering
of the Company's stock as described in Section 18(b) (a "Public Offering"), the
Plan shall be administered by a committee, which may consist of "outside
directors" as defined under section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), and related Treasury regulations and "non-employee
directors" as defined under Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). However, the Board may ratify or approve
any grants as it deems appropriate. If a committee administers the Plan,
references in the Plan to the "Board," as they relate to Plan administration,
shall be deemed to refer to the committee.

(b) BOARD AUTHORITY. The Board shall have the sole authority to (i)
determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability and (iv) deal
with any other matters arising under the Plan.

(c) BOARD DETERMINATIONS. The Board shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Board's interpretations of the Plan
and all determinations made by the Board pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interest in
the Plan or in any

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awards granted hereunder. All powers of the Board shall be executed in its sole
discretion, in the best interest of the Company, not as a fiduciary, and in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.

2. GRANTS

Awards under the Plan may consist of grants of incentive stock options as
described in Section 5 ("Incentive Stock Options"), nonqualified stock options
as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock
Options and Nonqualified Stock Options are collectively referred to as
"Options") and restricted stock as described in Section 6 ("Restricted Stock")
(hereinafter collectively referred to as "Grants"). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Plan as the Board deems appropriate and as are
specified in writing by the Board to the individual in a grant instrument or an
amendment to the grant instrument (the "Grant Instrument"). The Board shall
approve the form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.

3. SHARES SUBJECT TO THE PLAN

(a) SHARES AUTHORIZED. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 1,000,000 shares. After a Public
Offering, the maximum aggregate number of shares of Company Stock that shall be
subject to Grants made under the Plan to any individual during any calendar year
shall be 500,000 shares, subject to adjustment as described below. The shares
may be authorized but unissued shares of Company Stock or reacquired shares of
Company Stock, including shares purchased by the Company on the open market for
purposes of the Plan. If and to the extent Options granted under the Plan
terminate, expire, or are canceled, forfeited, exchanged or surrendered without
having been exercised or if any shares of Restricted Stock are forfeited, the
shares subject to such Grants shall again be available for purposes of the Plan.

(b) ADJUSTMENTS. If there is any change in the number or kind of
shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued under the
Plan, and the price per share of such Grants shall be appropriately adjusted by
the Board to reflect any increase or decrease in the

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<PAGE>

number of, or change in the kind or value of, issued shares of Company Stock to
preclude, to the extent practicable, the enlargement or dilution of rights and
benefits under such Grants; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. Any adjustments determined
by the Board shall be final, binding and conclusive.

4. ELIGIBILITY FOR PARTICIPATION

(a) ELIGIBLE PERSONS. All employees of the Company and its
subsidiaries ("Employees"), including Employees who are officers or members of
the Board, and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Consultants and
advisors who perform services for the Company or any of its subsidiaries ("Key
Advisors") shall be eligible to participate in the Plan if the Key Advisors
render bona fide services and such services are not in connection with the offer
or sale of securities in a capital-raising transaction.

(b) SELECTION OF GRANTEES. The Board shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of shares of Company Stock subject to a particular Grant in such
manner as the Board determines. Employees, Key Advisors and Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees".

5. GRANTING OF OPTIONS

(a) NUMBER OF SHARES. The Board shall determine the number of shares
of Company Stock that will be subject to each Grant of Options to Employees,
Non-Employee Directors and Key Advisors.

(b) TYPE OF OPTION AND PRICE.

(i) The Board may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of section
422 of the Code or Nonqualified Stock Options that are not intended so to
qualify or any combination of Incentive Stock Options and Nonqualified Stock
Options, all in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees. Nonqualified Stock
Options may be granted to Employees, Non-Employee Directors and Key Advisors.

(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Board and may be equal to,
greater than, or less than the Fair Market Value (as defined below) of a share
of Company Stock on the date the Option is granted; provided, however, that (x)
the Exercise Price of an Incentive Stock Option shall be equal to, or greater
than, the Fair Market Value of a share of Company Stock on the date the
Incentive Stock Option is granted, (y) an Incentive Stock Option may not be
granted to an Employee who, at the

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time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
of the Company (a "10% Shareholder"), unless the Exercise Price per share is not
less than 110% of the Fair Market Value of Company Stock on the date of grant
and (z) if required by applicable state law, the Exercise Price per share for
Nonqualified Stock Options shall not be less than 85% of the Fair Market Value
of Company Stock on the date of grant and the Exercise Price per share of any
Nonqualified Stock Options granted to a 10% Shareholder shall not be less than
110% of the Fair Market Value of Company Stock on the date of grant.

(iii) If the Company Stock is publicly traded, then the Fair
Market Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or the
Nasdaq National Market, the last reported sale price thereof on the relevant
date or (if there were no trades on that date) the latest preceding date upon
which a sale was reported, or (y) if the Company Stock is not principally traded
on such exchange or market, the mean between the last reported "bid" and "asked"
prices of Company Stock on the relevant date, as reported on Nasdaq or, if not
so reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Board determines. If the Company Stock is not publicly traded or, if publicly
traded, is not subject to reported transactions or "bid" or "asked" quotations
as set forth above, the Fair Market Value per share shall be as determined by
the Board.

(c) OPTION TERM. The Board shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an Employee who, at the
time of grant, is a 10% Shareholder may not have a term that exceeds five years
from the date of grant.

(d) EXERCISABILITY OF OPTIONS. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Board and specified in the Grant Instrument. If required by
applicable state law, Options shall vest no less rapidly than 20% per year over
a period of five years after the date of grant. The Board may accelerate the
exercisability of any or all outstanding Options at any time for any reason.

(e) TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH.

(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a Grantee ceases
to be employed by, or provide service to, the Company for any reason other than
a "disability", death, or termination for "cause", any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days after
the date on which the Grantee ceases to be employed by, or provide service to,
the Company (or within such other period of time as may be specified by the
Board), but in any event no later than the date of expiration of the Option
term. Except as otherwise provided by the Board, any of the Grantee's Options
that are not otherwise exercisable as of the date on which

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<PAGE>

the Grantee ceases to be employed by, or provide service to, the Company shall
terminate as of such date.

(ii) In the event the Grantee ceases to be employed by, or
provide service to, the Company on account of a termination for "cause" by the
Company, any Option held by the Grantee shall terminate as of the date the
Grantee ceases to be employed by, or provide service to, the Company. In
addition, notwithstanding any other provisions of this Section 5, if the Board
determines that the Grantee has engaged in conduct that constitutes "cause" at
any time while the Grantee is employed by, or providing service to, the Company
or after the Grantee's termination of employment or service, any Option held by
the Grantee shall immediately terminate, and the Grantee shall automatically
forfeit all shares underlying any exercised portion of an Option for which the
Company has not yet delivered the share certificates, upon refund by the Company
of the Exercise Price paid by the Grantee for such shares.

(iii) In the event the Grantee ceases to be employed by, or
provide service to, the Company because the Grantee is "disabled", any Option
which is otherwise exercisable by the Grantee shall terminate unless exercised
within one year after the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period of time as may be
specified by the Board), but in any event no later than the date of expiration
of the Option term. Except as otherwise provided by the Board, any of the
Grantee's Options which are not otherwise exercisable as of the date on which
the Grantee ceases to be employed by, or provide service to, the Company shall
terminate as of such date.

(iv) If the Grantee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the Grantee ceases to
be employed or provide service on account of a termination specified in Section
5(e)(i) above (or within such other period of time as may be specified by the
Board), any Option that is otherwise exercisable by the Grantee shall terminate
unless exercised within one year after the date on which the Grantee ceases to
be employed by, or provide service to, the Company (or within such other period
of time as may be specified by the Board), but in any event no later than the
date of expiration of the Option term. Except as otherwise provided by the
Board, any of the Grantee's Options that are not otherwise exercisable as of the
date on which the Grantee ceases to be employed by, or provide service to, the
Company shall terminate as of such date.

(v) For purposes of this Section 5(e) and Section 6:

(A) The term "Company" shall mean the Company and its parent and
subsidiary corporations.

(B) "Employed by, or provide service to, the Company" shall mean
employment or service as an Employee, Key Advisor or member of the Board
(so that, for purposes of exercising Options and satisfying conditions
with respect to Restricted Stock, a Grantee shall not be considered to
have terminated employment or service until the Grantee

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<PAGE>

ceases to be an Employee, Key Advisor and member of the Board), unless
the Board determines otherwise.

(D) "Cause" shall mean, except to the extent specified otherwise
by the Board, a finding by the Board that the Grantee has breached his or
her employment or service contract with the Company, or has been engaged
in disloyalty to the Company, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the
course of his or her employment or service, or has disclosed trade
secrets or confidential information of the Company to persons not
entitled to receive such information.

(f) EXERCISE OF OPTIONS. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise to
the Company with payment of the Exercise Price. The Grantee shall pay the
Exercise Price for an Option as specified by the Board (x) in cash, (y) with the
approval of the Board, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Board deems appropriate) and having
a Fair Market Value on the date of exercise equal to the Exercise Price or (z)
by such other method as the Board may approve, including after a Public Offering
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board. Shares of Company Stock used to exercise an Option
shall have been held by the Grantee for the requisite period of time to avoid
adverse accounting consequences to the Company with respect to the Option. The
Grantee shall pay the Exercise Price and the amount of any withholding tax due
(pursuant to Section 7) at the time of exercise.

(g) LIMITS ON INCENTIVE STOCK OPTIONS. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the option, as to the excess, shall be treated as a Nonqualified
Stock Option. An Incentive Stock Option shall not be granted to any person who
is not an Employee of the Company or a parent or subsidiary (within the meaning
of section 424(f) of the Code).

6. RESTRICTED STOCK GRANTS

The Board may issue or transfer shares of Company Stock to an Employee,
Non-Employee Director or Key Advisor under a Grant of Restricted Stock, upon
such terms as the Board deems appropriate. The following provisions are
applicable to Restricted Stock:

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<PAGE>

(a) GENERAL REQUIREMENTS. Shares of Company Stock issued or
transferred pursuant to Restricted Stock Grants may be issued or transferred for
consideration or for no consideration, as determined by the Board. The Board may
establish conditions under which restrictions on shares of Restricted Stock
shall lapse over a period of time or according to such other criteria as the
Board deems appropriate. The period of time during which the Restricted Stock
will remain subject to restrictions will be designated in the Grant Instrument
as the "Restriction Period."

(b) NUMBER OF SHARES. The Board shall determine the number of shares
of Company Stock to be issued or transferred pursuant to a Restricted Stock
Grant and the restrictions applicable to such shares.

(c) REQUIREMENT OF EMPLOYMENT OR SERVICE. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Section 5(e))
during a period designated in the Grant Instrument as the Restriction Period, or
if other specified conditions are not met, the Restricted Stock Grant shall
terminate as to all shares covered by the Grant as to which the restrictions
have not lapsed, and those shares of Company Stock must be immediately returned
to the Company. The Board may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.

(d) RESTRICTIONS ON TRANSFER AND LEGEND ON STOCK CERTIFICATE. During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Restricted Stock except to a Successor
Grantee under Section 8(a). Each certificate for a share of Restricted Stock
shall contain a legend giving appropriate notice of the restrictions in the
Grant. The Grantee shall be entitled to have the legend removed from the stock
certificate covering the shares subject to restrictions when all restrictions on
such shares have lapsed. The Board may determine that the Company will not issue
certificates for shares of Restricted Stock until all restrictions on such
shares have lapsed, or that the Company will retain possession of certificates
for shares of Restricted Stock until all restrictions on such shares have
lapsed.

(e) RIGHT TO VOTE AND TO RECEIVE DIVIDENDS. Unless the Board
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Restricted Stock and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Board.

(f) LAPSE OF RESTRICTIONS. All restrictions imposed on Restricted
Stock shall lapse upon the expiration of the applicable Restriction Period and
the satisfaction of all conditions imposed by the Board. The Board may
determine, as to any or all Restricted Stock Grants, that the restrictions shall
lapse without regard to any Restriction Period.

7. WITHHOLDING OF TAXES

(a) REQUIRED WITHHOLDING. All Grants under the Plan shall be subject
to applicable federal (including FICA), state and local tax withholding
requirements. The Company may

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require that the Grantee or other person receiving or exercising Grants pay to
the Company the amount of any federal, state or local taxes that the Company is
required to withhold with respect to such Grants, or the Company may deduct from
other wages paid by the Company the amount of any withholding taxes due with
respect to such Grants.

(b) ELECTION TO WITHHOLD SHARES. If the Board so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to a Grant by having shares withheld up to an amount that does not
exceed the Grantee's minimum applicable withholding tax rate for federal
(including FICA), state and local tax liabilities. The election must be in a
form and manner prescribed by the Board and shall be subject to the prior
approval of the Board.

8. TRANSFERABILITY OF GRANTS

(a) NONTRANSFERABILITY OF GRANTS. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock Options,
if permitted in any specific case by the Board, pursuant to a domestic relations
order (as defined under the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the regulations thereunder). When a Grantee
dies, the personal representative or other person entitled to succeed to the
rights of the Grantee ("Successor Grantee") may exercise such rights. A
Successor Grantee must furnish proof satisfactory to the Company of his or her
right to receive the Grant under the Grantee's will or under the applicable laws
of descent and distribution.

(b) TRANSFER OF NONQUALIFIED STOCK OPTIONS. Notwithstanding the
foregoing, subject to applicable state law, the Board may provide, in a Grant
Instrument, that a Grantee may transfer Nonqualified Stock Options to family
members, one or more trusts for the benefit of family members, or one or more
partnerships of which family members are the only partners, according to such
terms as the Board may determine; provided that the Grantee receives no
consideration for the transfer of an Option and the transferred Option shall
continue to be subject to the same terms and conditions as were applicable to
the Option immediately before the transfer.

9. RIGHT OF FIRST REFUSAL; REPURCHASE RIGHT

(a) OFFER. Prior to a Public Offering, if at any time an individual
desires to sell, encumber, or otherwise dispose of shares of Company Stock that
were distributed to him or her under this Plan and that are transferable, the
individual may do so only pursuant to a BONA FIDE written offer, and the
individual shall first offer the shares to the Company by giving the Company
written notice disclosing: (a) the name of the proposed transferee of the
Company Stock; (b) the certificate number and number of shares of Company Stock
proposed to be transferred or encumbered; (c) the proposed price; (d) all other
terms of the proposed transfer; and (e) a written copy of the proposed offer.
Within 60 days after receipt of such notice, the

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Company shall have the option to purchase all or part of such Company Stock at
the price and on the terms set forth in the notice.

(b) SALE. In the event the Company (or a shareholder, as described
below) does not exercise the option to purchase Company Stock, as provided
above, the individual shall have the right to sell, encumber, or otherwise
dispose of his shares of Company Stock at the price and on the terms of the
transfer set forth in the written notice to the Company, provided such transfer
is effected within 15 days after the expiration of the option period. If the
transfer is not effected within such period, the Company must again be given an
option to purchase, as provided above.

(c) ASSIGNMENT OF RIGHTS. The Board, in its sole discretion, may waive
the Company's right of first refusal and repurchase right under this Section 9.
If the Company's right of first refusal or repurchase right is so waived, the
Board may, in its sole discretion, assign such right to the remaining
shareholders of the Company in the same proportion that each shareholder's stock
ownership bears to the stock ownership of all the shareholders of the Company,
as determined by the Board. To the extent that a shareholder has been given such
right and does not purchase his or her allotment, the other shareholders shall
have the right to purchase such allotment on the same basis.

(d) PURCHASE BY THE COMPANY AFTER TERMINATION OF EMPLOYMENT OR
SERVICE. Prior to a Public Offering, if a Grantee ceases to be employed by, or
provide service to, the Company, the Company shall have the right to purchase
all or part of any Company Stock distributed to him or her under this Plan at
its then current Fair Market Value (as defined in Section 5(b)) (or at such
other price as may be established in the Grant Instrument); provided, however,
that such repurchase shall be made in accordance with applicable accounting
rules to avoid adverse accounting treatment and such repurchase shall be made in
accordance with applicable state law.

(e) PUBLIC OFFERING. On and after a Public Offering, the Company shall
have no further right to purchase shares of Company Stock under this Section 9.

(f) SHAREHOLDER'S AGREEMENT. Notwithstanding the provisions of this
Section 9, if the Board requires that a Grantee execute a shareholder's
agreement with respect to any Company Stock distributed pursuant to this Plan,
the provisions of this Section 9 shall not apply to such Company Stock.

10. CHANGE OF CONTROL OF THE COMPANY

As used herein, a "Change of Control" shall be deemed to have occurred
if:

(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) (other than persons who are shareholders on the effective date
of the Plan) becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
more than 50% of the voting power of the then

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outstanding securities of the Company, provided that a Change of Control shall
not be deemed to occur as a result of a change of ownership resulting from the
death of a shareholder; or

(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or consolidation,
will not beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to more than 50% of all votes to which all
shareholders of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock to elect
directors by a separate class vote), (ii) the sale or other disposition of all
or substantially all of the assets of the Company, or (iii) a liquidation or
dissolution of the Company.

11. CONSEQUENCES OF A CHANGE OF CONTROL

(a) NOTICE AND ACCELERATION. Upon a Change of Control, unless the
Board determines otherwise, (i) the Company shall provide each Grantee with
outstanding Grants written notice of such Change of Control, (ii) all
outstanding Options shall automatically accelerate and become fully exercisable
and (iii) the restrictions and conditions on all outstanding Restricted Stock
shall immediately lapse.

(b) ASSUMPTION OF GRANTS. Upon a Change of Control where the Company
is not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Board determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
by, the surviving corporation.

(c) OTHER ALTERNATIVES. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Board may take
one or both of the following actions: the Board may (i) require that Grantees
surrender their outstanding Options in exchange for a payment by the Company, in
cash or Company Stock as determined by the Board, in an amount equal to the
amount by which the then Fair Market Value of the shares of Company Stock
subject to the Grantee's unexercised Options exceeds the Exercise Price of the
Options, or (ii) after giving Grantees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Board deems appropriate. Such surrender or termination shall take place as
of the date of the Change of Control or such other date as the Board may
specify.

(d) LIMITATIONS. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Board shall not have the right to take
any actions described in the Plan (including without limitation actions
described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change

-10-

<PAGE>

of Control would qualify for such treatment and the Company intends to use such
treatment with respect to the Change of Control.

12. REQUIREMENTS FOR ISSUANCE OR TRANSFER OF SHARES

(a) SHAREHOLDER'S AGREEMENT. The Board may require that a Grantee
execute a shareholder's agreement, with such terms as the Board deems
appropriate, with respect to any Company Stock issued or distributed pursuant to
this Plan.

(b) LIMITATIONS ON ISSUANCE OR TRANSFER OF SHARES. No Company Stock
shall be issued or transferred in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance or transfer of such
Company Stock have been complied with to the satisfaction of the Board. The
Board shall have the right to condition any Grant made to any Grantee hereunder
on such Grantee's undertaking in writing to comply with such restrictions on his
or her subsequent disposition of such shares of Company Stock as the Board shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof, and certificates representing such shares may
be legended to reflect any such restrictions. Certificates representing shares
of Company Stock issued or transferred under the Plan will be subject to such
stop-transfer orders and other restrictions as may be required by applicable
laws, regulations and interpretations, including any requirement that a legend
be placed thereon.

13. AMENDMENT AND TERMINATION OF THE PLAN

(a) AMENDMENT. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required in order for Incentive Stock Options
granted or to be granted under the Plan to meet the requirements of section 422
of the Code or, after a Public Offering, such approval is required in order to
exempt compensation under the Plan from the deduction limit under section 162(m)
of the Code.

(b) TERMINATION OF PLAN. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless the
Plan is terminated earlier by the Board or is extended by the Board with the
approval of the shareholders.

(c) TERMINATION AND AMENDMENT OF OUTSTANDING GRANTS. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the Board
acts under Section 19(b). The termination of the Plan shall not impair the power
and authority of the Board with respect to an outstanding Grant. Whether or not
the Plan has terminated, an outstanding Grant may be terminated or amended under
Section 19(b) or may be amended by agreement of the Company and the Grantee
consistent with the Plan.

-11-

<PAGE>

(d) GOVERNING DOCUMENT. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.

14. FUNDING OF THE PLAN

This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.

15. RIGHTS OF PARTICIPANTS

Nothing in this Plan shall entitle any Employee, Key Advisor,
Non-Employee Director or other person to any claim or right to be granted a
Grant under this Plan. Neither this Plan nor any action taken hereunder shall be
construed as giving any individual any rights to be retained by or in the employ
of the Company or any other employment rights.

16. NO FRACTIONAL SHARES

No fractional shares of Company Stock shall be issued or delivered
pursuant to the Plan or any Grant. The Board shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.

17. HEADINGS

Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.

18. EFFECTIVE DATE OF THE PLAN

(a) EFFECTIVE DATE. Subject to approval by the Company's shareholders
within 12 months before or after the Plan is adopted, the Plan shall be
effective on March 3, 1999.

(b) PUBLIC OFFERING. The provisions of the Plan that refer to a Public
Offering, or that refer to, or are applicable to persons subject to, section 16
of the Exchange Act or section 162(m) of the Code, shall be effective, if at
all, upon the initial registration of the Company Stock under section 12(g) of
the Exchange Act, and shall remain effective thereafter for so long as such
stock is so registered.

19. MISCELLANEOUS

-12-

<PAGE>

(a) GRANTS IN CONNECTION WITH CORPORATE TRANSACTIONS AND OTHERWISE.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Board to make Grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Board may make a Grant
to an employee of another corporation who becomes an Employee by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or restricted stock grant made by such
corporation. The terms and conditions of the substitute grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives. The Board shall prescribe the provisions of the substitute
grants.

(b) COMPLIANCE WITH LAW. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, after a Public Offering it is the
intent of the Company that the Plan and all transactions under the Plan comply
with all applicable provisions of Rule 16b-3 or its successors under the
Exchange Act. In addition, it is the intent of the Company that the Plan and
applicable Grants under the Plan comply with the applicable provisions of
section 162(m) of the Code, after a Public Offering, and section 422 of the
Code. To the extent that any legal requirement of section 16 of the Exchange Act
or section 162(m) or 422 of the Code as set forth in the Plan ceases to be
required under section 16 of the Exchange Act or section 162(m) or 422 of the
Code, that Plan provision shall cease to apply. The Board may revoke any Grant
if it is contrary to law or modify a Grant to bring it into compliance with any
valid and mandatory government regulation. The Board may also adopt rules
regarding the withholding of taxes on payments to Grantees. The Board may, in
its sole discretion, agree to limit its authority under this Section.

(c) COMPLIANCE WITH SECURITIES LAWS. If required to comply with
applicable securities laws, the Company shall provide Grantees with such
financial information about the Company as the Board deems necessary or
appropriate to comply with such laws.

(d) GOVERNING LAW. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall be governed
and construed by and determined in accordance with the laws of the Commonwealth
of Pennsylvania, without giving effect to the conflict of laws provisions
thereof.

-13-

<PAGE>
EXHIBIT 10.21

H&Q You Tools Investors, L.P.
One Bush Street
San Francisco, CA 94104

August 9, 1999

David K. Van Allen
FASTNET Corporation
Two Courtney Place -- Suite 130
3864 Courtney Street
Bethlehem, PA 18017

Dear David:

In connection with and in consideration for the proposed public offering (the
"Offering") of common stock of FASTNET Corporation (the "Company"), this
letter confirms the agreement of H&Q You Tools Investors, L.P. ("H&Q") to
(i) amend the Convertible Promissory Note between H&Q and the Company, dated
May 27, 1998 (the "Note"), to extend the maturity date of the Note from
November 30, 1999 to January 31, 2001, effective immediately, and (ii) convert
the Note into shares of the Company's common stock pursuant to the terms
relating to the conversion option that are set forth in the Note, effective
immediately prior to the consummation of the Offering.

H&Q YOU TOOLS INVESTORS, L.P.

/s/ Andrew Kahn
- --------------------------------
By: Andrew Kahn
Title: Principal

Acknowledged and Agreed to:

FASTNET CORPORATION

/s/ David K. Van Allen
- --------------------------------
By: David K. Van Allen
Title: Chief Executive Officer

<PAGE>

CHANGE OF TERMS
TO
PROMISSORY NOTE

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Borrower: Lender:
FASTNET CORPORATION H&Q YOU TOOLS INVESTMENT HOLDING, L.P.
(FORMERLY YOU TOOLS CORPORATION) One Bush Street
3864 Courtney Street San Francisco, CA 94104
Two Courtney Place, Suite 130
Bethlehem, PA 18017
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Principal Amount: $3,050,000.00 Original Date of Note: May 28, 1998
Date of Change of Terms: May 14, 1999

The Promissory Note referenced above is amended as follows:

1. "Initial Conversion Price" shall be One and 50/100 Dollars ($1.50),
notwithstanding the occurrence of a Qualified Equity Financing.

All other terms to the Promissory Note referenced above remain unchanged.

BORROWER:

FASTNET CORPORATION

By: /s/ Sonny Hunt
-------------------------------
Name: Sonny Hunt
------------------------
Title: President
-----------------------

<PAGE>

AGREEMENT

Whereas, You Tools Corporation ("You Tools") wants to borrow
$3,050,000 from H&Q You Tools Investment Holding, L.P., ("H&Q"), pursuant
to the terms of the Convertible Promissory Note attached hereto (the "Note");
and

Whereas, the Note is convertible into common stock of You Tools
pursuant to the terms of the Note; and

Whereas, the conversion of the Note may require You Tools to
authorize an additional amount of shares necessary to allow H&Q to exercise
the Convertible Option pursuant to the Note; and

Whereas, H&Q requires assurance that in the event H&Q determines to
convert the Note that the authorization of the additional amount of shares
required to effect such conversion will be approved by the voting majority of
investors in You Tools;

Whereas, Sonny Hunt, David Van Allen, R. Scheinblum and P. Weller
are investors in You Tools (each, an "Investor"), and in aggregate have a
voting majority of the shares of You Tools;

Whereas, each Investor recognizes the benefit of a loan made to You
Tools pursuant to the Note,

Therefore, each Investor agrees as follows:

1. Each Investor agrees that should H&Q elect to convert its Note, each
Investor will vote to approve the authorization of any additional
shares required to effect such conversion; and

2. Each Investor agrees that should he or she sell any of their shares
of You Tools to any other party, they will first obtain in writing
from such acquiring party written acknowledgment acceptable to H&Q
that such acquiring party will also agree that should H&Q elect to
convert its Note, such acquiring party will vote to approve the
authorization of any additional shares required to effect such
conversion.

Agreed: Dated: 5/28/98

/s/ Sonny Hunt /s/ David Van Allen
- --------------------- ----------------------
Sonny Hunt David Van Allen

/s/ Rafe Scheinblum /s/ Phillip Weller
- --------------------- ----------------------
R. Scheinblum P. Weller

<PAGE>
ADDENDUM TO CONVERTIBLE PROMISSORY NOTE

With regard to paragraph IV titled "Reserving Shares" that sentence
should be replaced as follows:

Upon notice by Lender of the intent to exercise the Conversion Option
Borrower agrees to immediately amend its Articles of Incorporation to
authorize an additional amount of shares required so as to allow Lender
to exercise the Conversion Option pursuant to the provisions of this
Note.

All other terms and conditions of the Convertible Promissory Note dated
May 28, 1998 shall remain the same.

BORROWER:

YOU TOOLS CORPORATION:

By: /s/ Sonny Hunt
----------------
Name: Sonny Hunt
----------------
Title: President
----------------

<PAGE>

CONVERTIBLE PROMISSORY NOTE

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BORROWER: LENDER
- --------- ------
<S> <C>
YOU TOOLS CORPORATION H&Q YOU TOOLS INVESTMENT HOLDING, L.P.
3864 Courtney Street One Bush Street
Two Courtney Place, Suite 130 San Francisco, CA 94104
Bethlehem, PA 18017

</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Principal Amount: $3,050,000.00 Interest Rate: 7.00% Date of Note: MAY 28, 1998
------------ ----- ------------

</TABLE>

PROMISE TO PAY: YOU TOOLS CORPORATION, A.K.A. FASTNET ("Borrower") promises
to pay to H&Q YOU TOOLS INVESTMENT HOLDING, L.P. ("Lender"), or order, in
lawful money of the United States of America, the principal amount of THREE
MILLION FIFTY THOUSAND DOLLARS ($3,050,000.00), or so much as may be
outstanding, together with interest on the unpaid outstanding principal
balances from the date of this Note until such balance is paid in full.

PAYMENT: Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to collection costs
and late charges, then fees, and then to accrued unpaid interest, and any
remaining amount to principal.

FIXED INTEREST RATE: The interest rate on this Loan is seven percent (7.00%) per
annum, or, if lower, the maximum rate of interest allowed by applicable law.
Interest shall be computed on a 365 days per year simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 365 days,
times the outstanding principal balance, times the actual number of days that
the principal balance was outstanding.

INTEREST ONLY PAYMENTS: Borrower will pay interest in arrears on the principal
amount outstanding on this Note with quarterly payments beginning on June 30,
1998 and continuing on the last day of each September, December, March and June
thereafter through Maturity and on the Maturity Date.

MATURITY: The Borrower shall repay all principal and any other amounts
outstanding on this Note including interest on November 30, 1999, (the "Maturity
Date"). Borrower may not prepay the principal on this Note before the Maturity
Date. The Maturity Date may be modified by the Early Acceleration provision
below.

EARLY ACCELERATION: All principal, interest, and any other amounts outstanding
on this Note shall become immediately due and payable upon the sole discretion
of Lender if (a) there is a Change of Control, as defined in the Loan and
Security Agreement, or (b) there is a Qualified Equity Financing, as defined
below.

LOAN FEE: This Note is subject to a Thirty Two Thousand Five Hundred Dollar
($32,500) loan fee.

REPAYMENT: Borrower agrees that all loan fees are earned fully as of the date
received by Lender and will not be subject to refund, except as otherwise
required by law.

________________________________________________________________________________
Promissory Note, Page 2

<PAGE>

CONVERSION OPTION: The Lender may, at any time on or before the Maturity Date,
require the Borrower to convert all or part of the principal into a number of
shares of common stock equal to the quotient of (a) the principal amount subject
to conversion divided by (b) the Conversion Price, as defined herein, which
option shall be referred to as the "Conversion Option". Borrower agrees to
deliver to Lender shares of the Borrower's common stock pursuant to the
provisions herein within seven (7) days of the receipt of any Conversion Notice.

I. CERTAIN DEFINITIONS. As used in this Promissory Note the
following terms shall have the following respective meanings:

(a) "Common Stock" shall mean shares of the presently authorized
common stock of the Borrower and any stock into which such common stock
may hereafter be exchanged.

(b) "Conversion Notice" shall mean a written notice given to the
Borrower from the Lender in which the Lender notifies the Borrower that
the Lender elects to exercise the Conversion Option for all or part of
the principal on this Note.

(d) "Convertible Amount" shall mean the aggregate dollar amount
which is subject to conversion pursuant the Conversion Option.

(e) "Convertible Securities" shall mean any evidence of
indebtedness, shares of stock or other securities directly or indirectly
convertible into or exchangeable for Common Stock.

(f) "Initial Conversion Price" shall mean the price per share at
which the Borrower issues additional shares of Common Stock, Options or
Convertible Securities in a Qualified Equity Financing, or if no
Qualified Equity Financing has occurred before Lender elects to exercise
its Conversion Option, then the Initial Conversion Price shall mean One
and 50/100 Dollars ($1.50).

(g) "Options" shall mean the rights, options or warrants to
subscribe for, purchase or otherwise acquire shares of Common Stock or
Convertible Securities.

(h) "Qualified Equity Financing" shall mean the sale of Common
Stock or Convertible Securities by the Borrower to "accredited investors"
within the meaning of Rule 501 of Regulation D under the Securities Act
of 1933 for gross proceeds of Three Million Dollars ($3,000,000) or more
after the date of this Note and prior to the exercise of the Conversion
Option.

II. ADJUSTMENTS. The Conversion Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as
follows:

(a) RECLASSIFICATION, REORGANIZATION, CONSOLIDATION OR MERGER. In
the case of any reclassification of the Common Stock, or any
reorganization, consolidation or merger of the Borrower with or into
another corporation (other than a merger or reorganization with respect
to which the Borrower is the continuing corporation and which does not
result in any reclassification of the Common Stock), each share of

________________________________________________________________________________
Promissory Note, Page 3

<PAGE>

Common Stock theretofore issuable upon exercise of any Conversion Option,
shall be properly adjusted as to the number and kind of securities
receivable upon the exercise of any Conversion Option, such that Lender
shall receive the number and kind of securities which a holder of Common
Stock would have been entitled to receive after the happening of any of
the events described in this subsection (a) had the conversion pursuant
to any Conversion Option been made immediately prior to the happening of
such event or the record date for such event, whichever is earlier. The
provisions of this subsection (a) shall similarly apply to successive
reclassifications, reorganizations, consolidations or mergers.

(b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If Borrower at
any time prior to Lender's exercise of any Conversion Option shall split,
subdivide or combine the Common Stock of the Borrower, the Conversion
Price shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of a combination.
Any adjustment under this subsection (b) shall become effective when the
split, subdivision or combination becomes effective.

(c) STOCK DIVIDENDS. If the Borrower at any time prior to Lender's
exercise of any Conversion Option shall pay a dividend with respect to
Common Stock of the Borrower payable in shares of Common Stock, Options,
or Convertible Securities, the Conversion Price shall be adjusted, from
and after the date of determination of the shareholders entitled to
receive such dividend or distributions, to that price determined by
multiplying the Conversion Price in effect immediately prior to such date
of determination by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to
such dividend or distribution, and (ii) the denominator of which shall be
the total number of shares of Common Stock outstanding immediately after
such dividend or distribution (including Common Stock issuable upon
exercise, conversion or exchange of any Option or Convertible Securities
issued as such dividend or distribution). If the Options or Convertible
Securities issued as such dividend or distribution by their terms
provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the, or any increase by the number of shares
issuable upon exercise, conversion or exchange thereof (by change of rate
or otherwise), the Conversion Price shall, upon any such decrease or
increase becoming effective, be reduced to reflect such decrease or
increased to reflect such increase as if such decrease or increase became
effective immediately prior to the issuance of the Options or Convertible
Securities as the dividend or distribution. Any adjustment under this
subsection (c) shall become effective on the record date.

(d) OTHER SECURITIES. In the event the Borrower at any time prior
to Lender's exercise of any Conversion Option makes, or fixes a record
date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Borrower other than shares of Common Stock, then, and in each such event,
provision shall be made so that the Lender shall receive, upon exercise
of any Conversion Option, in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Borrower
which the Lender would have received had the Convertible Amounts been
exercised for such Common Stock on the date of such event and had the
Lender thereafter, during the period from the date of such event to and
including the date of exercise, retained such securities receivable by
Lender as aforesaid during such period, subject to all other adjustment
called for during such period under the provisions of this Note with
respect to the rights of the Lender.

________________________________________________________________________________
Promissory Note, Page 4

<PAGE>

(e) NEW SECURITIES. If the Borrower, at any time after a Qualified
Equity Financing and prior to the Maturity Date, shall issue additional
shares of Common Stock, Options or Convertible Securities at a price per
share below the Conversion Price, the Conversion Price shall be reduced
to such price. Notwithstanding the foregoing, the Borrower shall not be
required to make any adjustment to the Conversion Price in the case of
the issuance of up to Two Million shares of Common Stock or Convertible
Securities upon the exercise of any options or warrants to employees,
consultants or directors of Borrower.

III. FRACTIONAL SHARES. Pursuant to the Conversion Option no
fractions of shares of Common Stock shall be issued, but in lieu thereof
Borrower shall pay a cash adjustment to Lender in respect of such
fractional interest in an amount equal to such fractional interest
multiplied by the then applicable Conversion Price.

IV. RESERVING SHARES. Borrower shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the Conversion Options of Lender, as such number of
shares of Common Stock as shall from time to time be adjusted pursuant to
the provisions of this Note.

LOAN AND SECURITY AGREEMENT. This Note is subject to and shall be governed by
all the terms and conditions of the Loan and Security Agreement dated as of the
Date of this Note first written above between the Borrower and Lender as amended
from time to time (the "Loan and Security Agreement").

COLLATERAL: This Note is secured by certain collateral of the Borrower as more
thoroughly described in the Loan and Security Agreement and the Intellectual
Property Security Agreement dated as of the Date of this Note first written
above, between Borrower and Lender.

SERVICE CHARGE: Since it would be impractical or extremely difficult to fix
Lender's actual damages for collecting and accounting for a late payment, if any
payment to Lender required herein is not paid on or before three business days
after its due date, Borrower shall pay to Lender and amount equal to five
percent of any such late payment (but not less than $10 nor more than $250).
Borrower shall also pay interest on any such late payment from the due date
thereof until the date paid at the lesser of 18% per annum or the maximum rate
allowed by law.

WAIVER OF JURY TRIAL: BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER TO
THIS NOTE BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION.

BORROWER:

YOU TOOLS CORPORATION

BY: /s/ Sonny Hunt
----------------
NAME: Sonny Hunt
----------------
TITLE: President
----------------

________________________________________________________________________________
Promissory Note, Page 5

<PAGE>

Exhibit 10.23

STATEMENT WITH RESPECT TO
SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK

FASTNET CORPORATION

FASTNET Corporation, a Pennsylvania corporation (hereinafter called the
"Corporation"), does hereby make this Statement with Respect to Shares under the
corporate seal of the Corporation and does hereby state and certify that,
pursuant to the authority expressly vested in the Board of Directors of the
Corporation by the Articles of Incorporation, the Board of Directors has duly
adopted the following resolutions:

SERIES A CONVERTIBLE PREFERRED STOCK

RESOLVED, that, pursuant to Article Seventh of the Articles of
Incorporation, which authorizes 10,000,000 shares of preferred stock, no par
value per share, and Article Eighth of the Articles of Incorporation, which
authorizes the Board of Directors to fix by resolution the designations, voting
rights, preferences and special rights, if any, the Board of Directors hereby
creates a new series of preferred stock called Series A Convertible Preferred
Stock and determines the number of shares, designations, voting rights,
preferences and special rights of this Series A Convertible Preferred Stock as
follows:

8.1 DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK. There is hereby
established a series of Preferred Stock designated "Series A
Convertible Preferred Stock" (herein referred to as "Series A Preferred
Stock"), consisting of 10,000,000 shares, having a stated value of
$7.13 per share (the "Series A Stated Value"), and having the relative
rights, designations, preferences, qualification, privileges,
limitations and restrictions applicable thereto as follows:

1. DIVIDENDS. The holders of shares of Series A Preferred Stock shall
be entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock) on the Common Stock (as adjusted for stock splits, stock
dividends, reclassification and the like) on each outstanding share of Series A
Preferred Stock, payable when, as and if declared by the Board of Directors.
Such dividends shall not be cumulative. In addition, holders of shares of Series
A Preferred Stock shall be entitled to receive any dividends paid to holders of
Common Stock on a pro rata basis, with the amount distributable to the holders
of shares of Series A Preferred Stock to be computed on the basis of the number
of shares of Common Stock that such holders of shares of Series A Preferred
Stock would hold if, immediately prior to such dividend or distribution, all of
the outstanding shares of such Series A Preferred Stock had been converted into
shares of Common Stock

2. LIQUIDATION.

(a) PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the holders
of the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the

<PAGE>

Corporation to the holders of Common Stock by reason of their ownership thereof,
an amount per share equal to $7.13 per share (as adjusted for stock splits,
stock dividends, reclassification and the like) for each share of Series A
Preferred Stock then held by them, plus declared but unpaid dividends. If, upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock in
proportion to the preferential amount each such holder is otherwise entitled to
receive. Notwithstanding the foregoing, holders of Series A Preferred Stock may,
in their sole discretion, elect to convert such shares into Common Stock
effective immediately prior to and effective upon such liquidation, dissolution
or winding up and participate in such liquidation, dissolution or winding up as
a holder of Common Stock.

(b) REMAINING ASSETS. Upon payment of the preferential amounts
required by Section 2(a) above, if assets remain in the Corporation, the holders
of the Common Stock shall receive all of the remaining assets of the Corporation
pro rata based on the number of shares of Common Stock held by each such holder.

(i) DEEMED LIQUIDATION. For purposes of this Section
2, a liquidation, dissolution or winding up of the Corporation shall be
deemed to occur if the Corporation shall sell, convey or otherwise
dispose of all or substantially all of its property or business or
merge into or consolidate with any other corporation (other than a
wholly-owned subsidiary corporation) or effect any other transaction or
series of related transactions in which more than fifty percent (50%)
of the voting power of the Corporation is disposed of, (other than as
contemplated by Section 4(b)(i)), PROVIDED that this Section 2(c)(i)
shall not apply to a merger effected exclusively for the purpose of
changing the domicile of the Corporation.

(ii) VALUATION OF CONSIDERATION. In the event of a
deemed liquidation as described in Section 2(c)(i) above, if the
consideration received by the Corporation is other than cash or
securities, its value will be deemed its fair market value as mutually
determined by the Corporation and the holders of at least a majority of
the voting power then outstanding shares of Series A Preferred Stock
or, if such parties are unable to agree on a value, as determined by an
independent valuation firm mutually acceptable to such parties. Any
securities shall be valued as follows:

(A) Securities not subject to investment
letter or other similar restrictions on free marketability:

(1) If traded on a securities
exchange or The Nasdaq Stock Market, the value shall
be deemed to be the average of the closing prices of
the securities on such exchange over the thirty-day
period ending three (3) days prior to the closing;

(2) If actively traded
over-the-counter, the value shall be deemed to be the
average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending
three (3) days prior to the closing; and

2
<PAGE>

(3) If there is no active public
market, the value shall be the fair market value
thereof, as mutually determined by the Corporation
and the holders of at least a majority of the voting
power of all then outstanding shares of Series A
Preferred Stock or, if such parties are unable to
agree on a value, as determined by an independent
valuation firm mutually acceptable to such parties.

(B) The method of valuation of securities
subject to investment letter or other restrictions on free
marketability (other than restrictions arising solely by
virtue of a stockholder's status as an affiliate or former
affiliate) shall be to make an appropriate discount from the
market value determined as above in Section 2(c)(ii)(A) to
reflect the approximate fair market value thereof, as mutually
determined by the Corporation and the holders of at least a
majority of the voting power of all then outstanding shares of
Series A Preferred Stock or, if such parties are unable to
agree on a value, as determined by an independent valuation
firm mutually acceptable to such parties.

(iii) NOTICE OF TRANSACTION. The Corporation shall
give each holder of record of Series A Preferred Stock written notice
of such impending transaction not later than ten (10) days prior to the
stockholders' meeting called to approve such transaction, or ten (10)
days prior to the closing of such transaction, whichever is earlier.
The notice shall describe the material terms and conditions of the
impending transaction, and the Corporation shall thereafter give such
holders prompt notice of any material changes. The transaction shall in
no event take place sooner than ten (10) days after the Corporation has
given the notice provided for herein or sooner than ten (10) days after
the Corporation has given notice of any material changes provided for
herein; provided, however, that such periods may be shortened upon the
written consent of the holders of Series A Preferred Stock that are
entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then
outstanding shares of such Series A Preferred Stock. The Company shall
also give each holder of record of Series A Preferred Stock written
notice of the completion of such transaction.

(iv) EFFECT OF NONCOMPLIANCE. If the requirements of
this Section 2(c) are not complied with, the Corporation shall, in its
sole discretion, either cause the closing of the transaction to be
postponed until such requirements have been complied with, or cancel
such transaction, in which event the rights, preferences and privileges
of the holders of the Series A Preferred Stock shall revert to and be
the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in
Section 2(c)(iii) hereof.

3. REDEMPTION. The Series A Preferred Stock is not redeemable, except
as set forth in Section 6(a).

4. CONVERSION. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):

(a) RIGHT TO CONVERT. Subject to Section 4(c), each holder of
shares of Series A Preferred Stock shall have the right, at such holder's
option, at any time or from time to time after the date upon which any shares of
Series A Preferred Stock were first issued (the "Purchase Date"), to convert any
such shares of Series A Preferred Stock into such number of fully paid and
nonassessable shares of Common Stock as shall be determined by multiplying (x)

<PAGE>

the Series A Stated Value, plus all accrued and unpaid dividends per share, by
(y) the number of shares of Series A Preferred Stock being converted, then
dividing that product by (z) the Conversion Price (as hereinafter defined and as
last adjusted and then in effect) for the shares of Series A Preferred Stock
being converted. The "Conversion Price" means $7.13, as may be hereafter
adjusted as set forth in Section 4(d).

(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock immediately
upon the earlier of (i) the Corporation's sale of its Common Stock in a firm
commitment underwritten public offering pursuant to a registration statement
under the Securities Act of 1933, as amended (the "SECURITIES ACT") or (ii) the
close of business of the date specified by written consent or agreement of the
holders of at least two-thirds (2/3) of the then outstanding shares of Series A
Preferred Stock (each, an "Event of Conversion"). Upon the occurrence of an
Event of Conversion, all shares of Series A Preferred Stock then outstanding
shall, by virtue of, and simultaneously with, the occurrence of the Event of
Conversion and without any action on the part of the holder thereof, be
automatically converted into such number of fully paid and nonassessable shares
of Common Stock as shall be determined by multiplying (x) the Series A Stated
Value, plus all accrued and unpaid dividends per share, by (y) the number of
shares of Series A Preferred Stock being converted, then dividing that product
by (z) the Conversion Price (as last adjusted and then in effect) for the shares
of Series A Preferred Stock being converted. The Corporation shall give each
holder of record of Series A Preferred Stock written notice of any Event of
Conversion described in clause (i) of Section 4(b).

(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock under Section 4(a) above, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for such stock, and shall give written notice to the Corporation
at its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares Series A Preferred Stock to be converted, and the person
or persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. Upon conversion of only a portion
of the number of shares covered by a certificate representing shares of Series A
Preferred Stock surrendered for conversion, the Corporation shall issue and
deliver to the holder of the certificate so surrendered for conversion, at the
expense of the Corporation, a new certificate covering the number of shares of
Series A Preferred Stock representing the unconverted portion of the certificate
so surrendered, which new certificate shall entitle the holder thereof to
dividends, if any, on the shares of Series A Preferred Stock represented thereby
to the same extent as if the certificate theretofore covering such unconverted
shares had not been surrendered for conversion.

(D) CONVERSION PRICE ADJUSTMENTS OF SERIES A PREFERRED STOCK
FOR CERTAIN DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of
the Series A Preferred Stock shall be subject to adjustment from time to time as
follows:

(i) Issuance of Additional Stock below Purchase Price
. If the Corporation shall issue, after the Purchase Date, any
Additional Stock (as defined below)

<PAGE>

without consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such
Additional Stock, the Conversion Price in effect immediately prior to
each such issuance shall automatically be adjusted as set forth in this
Section 4(d)(i), unless otherwise provided in this Section 4(d)(i).

(A) ADJUSTMENT FORMULA. Whenever the
Conversion Price is adjusted pursuant to this Section
(4)(d)(i), the new Conversion Price shall be determined by
multiplying the Conversion Price then in effect by a fraction,
(x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance
(the "OUTSTANDING COMMON") plus the number of shares of Common
Stock that the aggregate consideration received by the
Corporation for such issuance would purchase at such
Conversion Price then in effect; and (y) the denominator of
which shall be the number of shares of Outstanding Common plus
the number of shares of such Additional Stock. For purposes of
the foregoing calculation, the term "Outstanding Common" shall
include shares of Common Stock deemed issued pursuant to
Section 4(d)(i)(E) below.
(B) DEFINITION OF "ADDITIONAL STOCK". For
purposes of this Section 4(d)(i), "ADDITIONAL STOCK" shall
mean any shares of Common Stock issued (or deemed to have been
issued pursuant to Section 4(d)(i)(E)) by the Corporation
after the Purchase Date) other than

(1) Shares of Common Stock issued
pursuant to a transaction described in Section 4(d)
(ii) hereof,

(2) Shares of Common Stock issuable or
issued to employees, consultants or directors of the
Corporation directly or pursuant to a stock option
plan or restricted stock plan approved by the Board
of Directors of the Corporation,

(3) Shares of Common Stock
issued or issuable upon conversion of the Series A
Preferred Stock, and

(4) Pursuant to subscriptions,
warrants, options convertible securities or other
rights which were outstanding on the Purchase Date.

(C) NO FRACTIONAL ADJUSTMENTS. No adjustment
of the Conversion Price for the Series A Preferred Stock shall
be made in an amount less than one cent per share, provided
that any adjustments which are not required to be made by
reason of this sentence shall be carried forward and shall be
either taken into account in any subsequent adjustment made
prior to three years from the date of the event giving rise to
the adjustment being carried forward, or shall be made at the
end of three years from the date of the event giving rise to
the adjustment being carried forward.

(D) DETERMINATION OF CONSIDERATION. In the
case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.

<PAGE>

In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value thereof as determined by the Board of Directors
irrespective of any accounting treatment.

(E) DEEMED ISSUANCES OF COMMON STOCK. In the
case of the issuance (whether before, on or after the
applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options
to purchase or rights to subscribe for such convertible or
exchangeable securities, the following provisions shall apply
for all purposes of this Section 4(d)(i):

(1) The aggregate maximum number of
shares of Common Stock deliverable upon exercise
(assuming the satisfaction of any conditions to
exercisability, including without limitation, the
passage of time, but without taking into account
potential antidilution adjustments) of such options
to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such
options or rights were issued and for a consideration
equal to the consideration (determined in the manner
provided in Section 4(d)(i)(D)), if any, received by
the Corporation upon the issuance of such options or
rights plus the minimum exercise price provided in
such options or rights (without taking into account
potential antidilution adjustments) for the Common
Stock covered thereby.

(2) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of
or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability,
including, without limitation, the passage of time,
but without taking into account potential
antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to
have been issued at the time such securities were
issued or such options or rights were issued and for
a consideration equal to the consideration, if any,
received by the Corporation for any such securities
and related options or rights (excluding any cash
received on account of accrued interest or accrued
dividends), plus the minimum additional
consideration, if any, to be received by the
Corporation (without taking into account potential
antidilution adjustments) upon the conversion or
exchange of such securities or the exercise of any
related options or rights (the consideration in each
case to be determined in the manner provided in
Section 4(d)(i)(D)).

(3) In the event of any change in
the number of shares of Common Stock deliverable or
in the consideration payable to the Corporation upon
exercise of such options or rights or upon conversion
of or in exchange for such convertible or
exchangeable securities, including, but not limited
to, a change resulting from the antidilution
provisions thereof, the Conversion Price of the
Series A Preferred Stock, to the extent in any way
affected by or computed using

<PAGE>

such options, rights or securities, shall be
recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration
upon the exercise of any such options or rights or
the conversion or exchange of such securities.

(4) Upon the expiration of any such
options or rights, the termination of any such rights
to convert or exchange or the expiration of any
options or rights related to such convertible or
exchangeable securities, the Conversion Price of the
Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or
securities or options or rights related to such
securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock
(and convertible or exchangeable securities which
remain in effect) actually issued upon the exercise
of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of
the options or rights related to such securities.

(5) The number of shares of Common
Stock deemed issued and the consideration deemed paid
therefor pursuant to Sections 4(d)(i)(E)(1) and
4(d)(i)(E)(2) shall be appropriately adjusted to
reflect any change, termination or expiration of the
type described in either Section 4(d)(i)(E)(3) or
4(d)(i)(E)(4).

(F)NO INCREASED CONVERSION PRICE.
Notwithstanding any other provisions of this Section
(4)(d)(i), except to the limited extent provided for in
Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of the
Conversion Price pursuant to this Section 4(d)(i) shall have
the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such
adjustment.

(ii) STOCK SPLITS AND DIVIDENDS. In the event the
Corporation should at any time or from time to time after the Purchase
Date fix a record date for the effectuation of a split or subdivision
of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "COMMON STOCK EQUIVALENTS") without payment
of any consideration by such holder for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares
of Common Stock issuable upon conversion or exercise thereof), then, as
of such record date (or the date of such dividend distribution, split
or subdivision if no record date is fixed), the Conversion Price of the
Series A Preferred Stock shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase of the
aggregate number of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number
of shares issuable with respect to Common Stock Equivalents, determined
from time to time in the manner provided for deemed issuances in
Section 4 (d)(i)(E).

(iii) REVERSE STOCK SPLITS. If the number of shares
of Common Stock outstanding at any time after the Purchase Date is
decreased by a combination of

<PAGE>

the outstanding shares of Common Stock, then, following the record date
of such combination, the Conversion Price for the Series A Preferred
Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in outstanding shares.

(e) OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d)(ii), then, in
each such case for the purpose of this Section 4(e), the holders of Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock into which their shares of Series A Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock
entitled to receive such distribution.

(f) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made so that the holders of the
Series A Preferred Stock shall thereafter be entitled to receive upon conversion
of Series A Preferred Stock the number of shares of stock or other securities or
property of the Corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
A Preferred Stock after the recapitalization to the end that the provisions of
this Section 4 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of Series A Preferred Stock)
shall be applicable after that event and be as nearly equivalent as practicable.

(g) NO IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of Series A Preferred Stock against impairment.

(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.

(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock.
Instead of any fractional share, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal to
the fair market value of one share of Common Stock multiplied by such
fractional interest. For purposes of the preceding sentence, fair
market value shall be determined using the method of valuing securities
found in Section 2(c)(ii) above. The number of shares issuable upon
such conversion shall be determined on the basis of the total number of
shares of Series A Preferred Stock the holder is at the time converting
into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.

<PAGE>

(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock
pursuant to this Section 4, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of such Preferred
Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, upon the written request at any time
of any holder of Series A Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price for the Series A
Preferred Stock at the time in effect, and (C) the number of shares of
Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of the Series A
Preferred Stock.

(i) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least ten (10) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.

(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of such
series of Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to the Articles of Incorporation.

(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.

5. VOTING RIGHTS. The holder of each share of Series A Preferred Stock
shall have the right to one vote for each share of Common Stock into which
Series A Preferred Stock could then be converted, and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of Series A

<PAGE>

Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).

6. PROTECTIVE PROVISIONS. So long as shares of Series A Preferred Stock
are outstanding (as adjusted for stock splits, stock dividends, or
recapitalizations and the like), the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least two-thirds (2/3) of the then outstanding shares of Series A
Preferred Stock, voting together as a class:

(a) effect a transaction described in Section 2(c)(i) above;
PROVIDED, HOWEVER, that in the case of a merger or sale of all or substantially
all of its assets, if the holders of at least two-thirds (2/3) of the then
outstanding Series A Preferred Stock do not approve such transaction, the
Corporation shall have the option, in its sole discretion, to either accept the
vote of the holders of Series A Preferred Stock, and remain subject to the
restrictions set forth in this Section 6, or purchase from all of the holders of
Series A Preferred Stock the total number of shares of Series A Preferred Stock
held by each such holder at a price per share equal to $7.13, plus any accrued
but unpaid dividends, plus eight percent (8%) annual interest accruing from the
date such shares were purchased until such buy back date. If the Corporation
chooses to elect to purchase the shares of Series A Preferred Stock as provided
for in this Section 6(a), it shall provide notice of such decision to each
holder of Series A Preferred Stock within ten days of the vote by the holders of
the Series A Preferred Stock. The closing of the purchase of such shares shall
take place within 20 days of the receipt of such notice by the holders of Series
A Preferred Stock.

(b) alter, amend or otherwise change the rights, preferences
or privileges of the shares of Series A Preferred Stock so as to affect
adversely the shares of such series;

(c) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock;

(d) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity with,
the Series A Preferred Stock with respect to dividends, redemption or upon
liquidation;

(e) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; PROVIDED, HOWEVER, that this restriction shall
not apply to the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the Corporation
or any subsidiary pursuant to agreements under which the Corporation has the
option to repurchase such shares at cost upon the occurrence of certain events,
such as the termination of employment, or through the exercise of any right of
first refusal;

(f) change the principal business of the Corporation; or

(g) increase the number of authorized directors of the
Corporation.

7. STATUS OF CONVERTED STOCK. In the event any shares of Series A
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be cancelled and shall not be issuable by the Corporation and
such converted shares, without further action on the

10
<PAGE>

part of the Corporation or its shareholders, shall be eliminated from the
Corporation's authorized capital stock.

<PAGE>

IN WITNESS WHEREOF, the Corporation has caused this Statement with
Respect to Shares to be signed by the officer of the Corporation whose
signature is set forth below on this 2nd day of August, 1999.

FASTNET CORPORATION

/s/ David K. VanAllen
---------------------------------
David K. VanAllen
Chairman of the Board &
Chief Executive Officer

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

STATE OF
PERCENTAGE INCORPORATION
OF OR
PARENT SUBSIDAIRY OWNERSHIP ORGANIZATION
- ------ ---------- --------- ------------
<S> <C> <C> <C>

FASTNET INTERNET 100% PENNSYLVANIA
CORPORATION UNLIMITED, INC.

</TABLE>

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

To FASTNET Corporation:

As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made a part of this
S-1 Registration Statement.

/s/ Arthur Andersen LLP

Philadelphia, Pa.,
August 17, 1999

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Internet Unlimited, Inc.:

As independent public accountants, we hereby consent to the use of our
report and to all references to our Firm included in or made a part of this
S-1 Registration Statement.

/s/ Arthur Andersen LLP

Philadelphia, Pa.,
August 17, 1999

<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR YEAR YEAR 6-MOS
6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 DEC-31-1998
DEC-31-1999
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1998 JAN-01-1998
JAN-01-1999
<PERIOD-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 JUN-30-1998
JUN-30-1999
<CASH> 0 88,981 256,782 0
524,671
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 0 464,104 895,710 0
1,218,307
<ALLOWANCES> 0 14,442 17,187 0
17,187
<INVENTORY> 0 0 0 0
0
<CURRENT-ASSETS> 0 610,402 1,270,783 0
1,861,163
<PP&E> 0 1,336,652 2,362,766 0
3,111,749
<DEPRECIATION> 0 289,250 621,131 0
879,589
<TOTAL-ASSETS> 0 1,683,345 3,226,841 0
4,322,194
<CURRENT-LIABILITIES> 0 2,057,540 5,627,420 0
7,740,109
<BONDS> 0 0 0 0
0
0 0 0 0
0
0 0 0 0
0
<COMMON> 0 124,000 366,478 0
366,478
<OTHER-SE> 0 (656,269) (2,930,559) 0
(3,941,875)
<TOTAL-LIABILITY-AND-EQUITY> 0 1,683,345 3,226,841 0
4,322,194
<SALES> 1,942,607 3,670,614 5,527,979 2,655,182
3,549,015
<TOTAL-REVENUES> 1,942,607 3,670,614 5,527,979 2,655,182
3,549,015
<CGS> 1,162,011 2,333,919 3,241,741 1,542,353
2,116,138
<TOTAL-COSTS> 872,140 1,622,599 3,414,308 1,317,488
2,402,476
<OTHER-EXPENSES> 6,244 (901) (5,355) (254)
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 18,587 38,368 166,831 54,521
121,588
<INCOME-PRETAX> (115,224) (322,066) (1,274,290) (252,095)
(1,080,441)
<INCOME-TAX> 0 0 0 0
0
<INCOME-CONTINUING> (115,224) (322,066) (1,274,290) (252,095)
(1,080,441)
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> (115,224) (322,066) (1,274,290) (252,095)
(1,080,441)
<EPS-BASIC> (0.01) (0.03) (0.14) (0.02)
(0.15)
<EPS-DILUTED> (0.01) (0.03) (0.14) (0.02)
(0.15)

</TABLE>