<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 2000
REGISTRATION STATEMENT NO. 333-85465
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5
TO
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. / /
------------------------
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 FEBRUARY 3, 2000
PROSPECTUS
4,000,000 SHARES
[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
$10.00 and $12.00 per share.
We have received approval to list our 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 8 FOR A DISCUSSION OF MATERIAL RISKS 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 600,000 shares of common
stock from us at the initial public offering price less underwriting discounts
solely to cover over-allotments.
ING BARINGS
WIT SOUNDVIEW
FAC/EQUITIES
DLJDIRECT INC.
The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 8
Use of Proceeds........................ 16
Dividend Policy........................ 16
Forward-Looking Statements............. 16
Capitalization......................... 17
Dilution............................... 18
Selected Consolidated Financial Data... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Our Business........................... 29
Management............................. 44
Related Party Transactions............. 52
Principal Shareholders................. 53
Description of Capital Stock........... 54
Shares Eligible for Future Sale........ 57
Underwriting........................... 58
Legal Matters.......................... 61
Experts................................ 61
Where You Can Find Additional
Information.......................... 61
Index to Financial Statements.......... F-1
</TABLE>
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.
In making your investment decision relating to the shares offered hereby,
you should rely only on the information contained in this prospectus and not on
any other information, including information available on our Web site. 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 , 2000 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.
<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 8 AND
THE FINANCIAL STATEMENTS, BEFORE MAKING AN INVESTMENT DECISION.
FASTNET
OVERVIEW
We are a growing Internet service provider offering Internet access and
enhanced services, such as Web hosting, managed security solutions and other
value added products, to small and medium sized enterprises through our regional
customer network facilities. We primarily offer our services to the mid-
Atlantic area of the United States and our strategy is to expand by replicating
our customer network facilities and our services offered to small and medium
sized enterprises in selected high growth secondary markets throughout the
United States. We currently have customer network facilities in Pennsylvania,
New Jersey and Maryland that enable us to service markets in Pennsylvania, New
Jersey, New York, Maryland and Delaware. We have been providing Internet access
services to our customers since 1994. 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 of Web servers,
including colocation services, where a customer locates its Web servers at
our facilities;
- INTERNET APPLICATIONS HOSTING SERVICES--hosting, monitoring and management
of Internet-based applications;
- VIRTUAL PRIVATE NETWORKS--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.
As of December 31, 1999, we provided Internet access and enhanced products
and services to approximately 300 enterprise customers, of which approximately
275 were small and medium sized enterprises, and approximately 15,800 dial-up
customers in the mid-Atlantic area. We charge a fee to our customers for our
products and services, including Internet access services. As of December 31,
1999, the number of our Web hosting customers was approximately 4,400. We also
provide Web server colocation services, which includes necessary floor space,
electrical and environmental control, physical and electronic security, Internet
bandwidth, monitoring and maintenance to customers who wish to outsource their
Web site or application site servers to a service provider.
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 are high capacity data centers that provide our customers with
not less than two direct connections to the Internet as well as access to our
enhanced products and services. Each customer network facility is connected to
our centralized network operations center.
3
<PAGE>
We currently have seven customer network facilities in operation servicing
the regions in and around Allentown, Pennsylvania, Harrisburg, Pennsylvania,
Basking Ridge, New Jersey, Holland Township, New Jersey, and Jersey City, New
Jersey, and the secondary markets surrounding Baltimore, Maryland and
Philadelphia, Pennsylvania. We are in the process of constructing three
additional customer network facilities to service Scranton/Wilkes Barre,
Pennsylvania, Pittsburgh, Pennsylvania, and the secondary market surrounding
Washington, D.C.
OUR CUSTOMERS
We target primarily small and medium sized enterprise customers located in
selected high growth secondary markets that generally have less than 100
employees and annual revenues of less than $100 million. Our target markets are
typically smaller than the 100 most populated U.S. metropolitan markets. We
select these markets based upon specific criteria, such as the density of target
customers, expected population and economic growth and existing competitive
factors. 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 because, based upon our
experience, 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 of the Internet industry is growing quickly. According
to International Data Corporation, Web-related expenditures by small
businesses in the United States are expected to grow from $9.6 billion in
1999 to over $32 billion by 2003.
- Many of these enterprises lack the resources and expertise to develop,
maintain and expand 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.
- These enterprises rely more heavily on their Internet service provider
than larger enterprises.
Although our primary business strategy is to target small and medium sized
enterprises, we currently derive a significant portion of our revenues from a
small number of our business customers that are not small and medium sized
enterprises.
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:
- replicating our model rapidly in selected secondary markets;
- leveraging customer relationships to market enhanced services;
- leveraging our centralized sales and marketing operations to take
advantage of economies of scale; and
- entering into strategic relationships and making selected acquisitions.
4
<PAGE>
Our headquarters are located at Two Courtney Place, Suite 130, 3864 Courtney
Street, Bethlehem, Pennsylvania 18017 and our telephone number is (610)
266-6700.
RISK FACTORS
Investing in our shares of common stock involves a high degree of risk. In
particular, you should be aware that 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 $3.1 million for the nine months ended
September 30, 1999, resulting in an accumulated deficit of approximately $5.1
million at September 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. We face strong competition in our industry which could
also cause our net operating losses to continue and increase. You should read
the section entitled Risk Factors beginning on page 8 as well as the other
cautionary statements throughout this prospectus to ensure you understand the
risks associated with an investment in our common stock.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by FASTNET.............. 4,000,000 shares
Common stock to be outstanding after this
offering................................... 14,388,947 shares
Over-allotment option........................ 600,000 shares
Use of proceeds.............................. $19.7 million for working capital, including
the expansion of our sales and marketing
capabilities, $7.4 million for capital
expenditures, including for the construction
of additional customer network facilities,
$500,000 for financial advisory fees payable
to Hambrecht & Quist LLC, $1.0 million for
repayment of a loan that we entered into with
one of our shareholders, and the remainder
for 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.
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.
5
<PAGE>
SUMMARY CONSOLIDATED 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 nine
months ended September 30, 1998 and 1999. The balance sheet data set forth below
is presented on an actual basis as of September 30, 1999. The statement of
operations data for the year ended December 31, 1998 and for the nine months
ended September 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;
- the conversion of 666,198 shares of series A convertible preferred stock
issued in August 1999, into 666,198 shares of common stock, which will
occur immediately prior to consummation of this offering, as if such
conversion had occurred on the dates these shares were 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 elimination of service revenues derived by FASTNET from Internet
Unlimited, Inc. prior to July 30, 1999 and the elimination of Internet
Unlimited, Inc.'s corresponding cost of services.
The balance sheet data as of September 30, 1999 is also presented on a pro
forma basis to reflect the following events as if they had occurred on
September 30, 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 consummation of this offering.
In addition, the balance sheet data as of September 30, 1999 is also
presented on a pro forma as adjusted basis to reflect the events described above
as well as the sale of 4,000,000 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 $11.00 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.
6
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------- --------------------------------------
1998 1999
------------------------- -------------------------
1996 1997 ACTUAL PRO FORMA 1998 ACTUAL PRO FORMA
---------- ---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Services......................... $1,545,072 $2,846,338 $ 4,875,471 $ 5,452,549 $3,453,758 $ 5,751,503 $ 6,448,025
Hardware and software............ 397,535 824,276 652,508 672,635 634,479 94,871 115,713
---------- ---------- ----------- ----------- ---------- ----------- -----------
1,942,607 3,670,614 5,527,979 6,125,184 4,088,237 5,846,374 6,563,738
---------- ---------- ----------- ----------- ---------- ----------- -----------
Operating expenses:
Cost of services................. 740,186 1,771,968 2,572,732 2,644,861 1,793,452 3,844,531 3,915,892
Cost of hardware and software.... 421,825 561,951 669,009 680,196 558,894 89,194 101,143
Selling, general and
administrative................. 793,336 1,445,224 3,067,740 3,516,740 2,052,782 3,911,189 4,492,302
Depreciation and amortization.... 78,804 177,375 346,568 1,866,908 230,475 904,233 1,812,308
---------- ---------- ----------- ----------- ---------- ----------- -----------
Total operating expenses....... 2,034,151 3,956,518 6,656,049 8,708,705 4,635,603 8,749,147 10,321,645
---------- ---------- ----------- ----------- ---------- ----------- -----------
Operating loss..................... (91,544) (285,904) (1,128,070) (2,583,521) (547,366) (2,902,773) (3,757,907)
Other expenses, net................ (23,680) (36,162) (146,220) (39,975) (91,766) (227,138) (65,445)
---------- ---------- ----------- ----------- ---------- ----------- -----------
Net loss........................... $ (115,224) $ (322,066) $(1,274,290) $(2,623,496) $ (639,132) $(3,129,911) $(3,823,352)
========== ========== =========== =========== ========== =========== ===========
Basic and diluted net loss per
common share..................... $ (0.01) $ (0.03) $ (0.14) $ (0.25) $ (0.07) $ (0.44) $ (0.39)
---------- ---------- ----------- ----------- ---------- ----------- -----------
Weighted average number of common
shares outstanding............... 11,575,000 11,575,000 8,880,833 10,613,929 9,480,339 7,122,004 9,754,654
========== ========== =========== =========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 3,812,558 $ 3,812,558 $43,132,558
Working capital (deficit)................................... (1,652) (1,652) 39,033,348
Total assets................................................ 16,089,521 16,089,521 55,409,521
Shareholders' equity........................................ 3,799,745 6,849,745 46,169,745
</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.
7
<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 ONLY RECENTLY BEGAN TO IMPLEMENT OUR CURRENT BUSINESS STRATEGY. AS A RESULT,
YOU MAY NOT BE ABLE TO EVALUATE OUR BUSINESS PROSPECTS BASED ON OUR HISTORICAL
RESULTS.
In late 1998, we began to implement our current business strategy of
targeting small and medium sized enterprises in high growth secondary markets
not only within the mid-Atlantic United States, but also outside of such region.
Prior to 1998, we conducted business solely in the mid-Atlantic area,
particularly in Eastern Pennsylvania. Consequently, the evaluation of our future
business prospects is difficult because our historical results for periods
during which we were implementing our current business strategy are limited.
WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.
We incurred net losses of approximately $115,000, or 6% of revenues, for the
year ended December 31, 1996, approximately $322,000, or 9% of revenues, for the
year ended December 31, 1997, approximately $1.3 million, or 23% of revenues,
for the year ended December 31, 1998 and approximately $3.1 million, or 54% of
revenues, for the nine months ended September 30, 1999 resulting in an
accumulated deficit of approximately $5.1 million at September 30, 1999. On a
pro forma basis, assuming that the acquisition of Internet Unlimited, Inc. was
consummated on January 1, 1998, we would have incurred net losses of
approximately $2.6 million, or 42% of revenues, for the year ended December 31,
1998 and approximately $3.8 million, or 58% of revenues, for the nine months
ended September 30, 1999. Under our current business strategy, we expect to
continue to operate at a loss for the foreseeable future. In particular, we will
need to utilize an estimated $19.7 million of the proceeds from this offering
for working capital for the next 12 months. In addition, we will need at least
an estimated $7.4 million to fund planned capital expenditures, including the
construction of our customer network facilities in our currently targeted
regions.
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 timing of costs relating to the construction of our customer network
facilities;
- the timing of the introduction of new products and services;
- changes in pricing policies and product offerings by us or our
competitors; and
- fluctuations in demand for Internet access and enhanced products and
services.
8
<PAGE>
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 customer network facilities 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 customer network facilities; 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.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999, TWO OF OUR CUSTOMERS TOGETHER
ACCOUNTED FOR 26% OF OUR TOTAL REVENUES. THE LOSS OF ANY OF THESE CUSTOMERS
COULD HARM OUR RESULTS OF OPERATIONS.
Although our primary business strategy is to target small and medium sized
enterprises, we currently derive, and expect in the future to derive, a
significant portion of our revenues from a small number of our business
customers that are not small and medium sized enterprises. For example, Lucent
Technologies, Inc. accounted for 7% of total revenues for the nine months ended
September 30, 1999 and 11% of total revenues for the fiscal year ended
December 31, 1998 and Microsoft's WebTV Networks, Inc. accounted for 19% of
total revenues for the nine months ended September 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, Inc. was consummated on
January 1, 1998, Lucent Technologies would have accounted for 6% of total
revenues for the nine months ended September 30, 1999 and 10% of total revenues
for the fiscal year ended December 31, 1998 and Microsoft's WebTV Networks, Inc.
would have accounted for 17% of total revenues for the nine months ended
September 30, 1999 and 8% of total revenues for the fiscal year ended
December 31, 1998. If we are unable to implement our strategy of targeting small
and medium sized enterprises, we will continue to be substantially dependent
upon revenues from our larger customers. We expect revenues from these customers
to 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. The loss of
any of our significant customers or a significant decrease in revenues from
these customers could harm our results of operations.
IN THE FUTURE, 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,
in the future, we are unable to expand our sales force and our technical
9
<PAGE>
support and customer support staff, our business would be harmed because this
would limit our ability to obtain new customers, sell products and services and
provide existing customers with a high level of technical support.
IF WE ARE UNABLE TO RAPIDLY EXPAND INTO OUR TARGET REGIONS, WE MAY NEED 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. As a result, we
anticipate that we will need significant additional funds to execute our growth
strategy. We currently anticipate that we will require an estimated $19.7
million for working capital for the next 12 months and at least an estimated
$7.4 million for capital expenditures, including the construction of our
customer network facilities in our currently targeted regions.
If we are unable to complete this offering or if the net proceeds from this
offering are not sufficient to meet our cash requirements, our need to fund our
ongoing operations could limit our ability to execute our business strategy.
Therefore, 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.
In the past, we have been able to provide limited services to customers 90
days after the date a lease is signed for the site of a new customer network
facility. There are many factors, however, which may affect our ability to
expand rapidly into target regions, including availability of equipment and
telecommunications services. Therefore, there can be no assurances that we will
be able to expand into our target regions in our anticipated time frame. If we
are unable to rapidly expand into our target regions, our business and results
of operations will be harmed.
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 Internet service providers and regional and local Internet
service providers, 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, colocation 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.
We believe that the number of competitors we face is significant and is
constantly changing. As a result, it is extremely difficult for us to accurately
identify and quantify our competitors. In addition, because of the constantly
evolving competitive environment, it is extremely difficult for us to determine
our relative competitive position at any given time.
10
<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.
If the use of the Internet by small and medium sized enterprises for
commerce and communication does not continue to grow, our business and results
of operations will be harmed. 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;
11
<PAGE>
- inconsistent quality of service; and
- difficulty in integrating hardware and software related to Internet based
business applications.
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.
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, we depend upon Sprint Communications Company, L.P., MCI
WorldCom, Inc. and UUNET Technologies, Inc. as our primary backbone providers.
These companies 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 backbone providers operate national
or international networks that provide data and Internet connectivity and enable
our customers to transmit and receive data over the Internet. 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 OUR EXECUTIVE OFFICERS TO EXECUTE OUR BUSINESS STRATEGY AND COULD
BE HARMED BY THE LOSS OF THEIR SERVICES.
Our success depends in part upon the continued service and performance of:
- David K. Van Allen, Chief Executive Officer;
- Sonny C. Hunt, President;
12
<PAGE>
- Stanley F. Bielicki, Chief Financial Officer;
- Phillip L. Weller, Chief Technology Officer;
- Rafe Scheinblum, Executive Vice President--Operations;
- Mark A. Horinko, Vice President--Engineering; and
- Thomas J. Roberts, Vice President--Sales.
We currently do not have employment agreements with any of our executive
officers. The loss of the services of one or more of our executive officers
could impair our ability to expand our operations and provide a high level of
service to our customers.
WE NEED TO RECRUIT AND RETAIN QUALIFIED PERSONNEL OR OUR BUSINESS COULD BE
HARMED.
Competition for highly-qualified employees in the Internet service industry
is intense because there is a limited number of people with an adequate
knowledge of and significant experience in our industry. Our success depends 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. Our failure to attract additional highly qualified personnel
could impair our ability to grow our operations and services to our customers.
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. In addition, we have finite capacity to
provide service to our customers under our current infrastructure. Because
utilization of our network is constantly changing depending upon customer use at
any given time, we maintain a level of capacity that we believe to be adequate
to support our current customer base. If we obtain additional customers in the
future, we will need to increase our capacity to maintain the quality of service
that we currently provide our customers. If customer usage exceeds our capacity
and we are unable to increase our capacity in a timely manner, our customers may
experience interruptions in or decreases in quality of the services we provide.
As a result, we may lose current customers or incur significant liability to our
customers for any damages they suffer due to any system downtime as well as the
possible loss of customers.
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.
13
<PAGE>
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 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.
We are subject to a variety of risks that could materially affect our
business due to the rapidly changing legal and regulatory landscape governing
Internet access providers. For example, the Federal Communications Commission
currently exempts Internet access providers from having to pay per-minute access
charges that long-distance telecommunications providers pay local telephone
companies for the use of the local telephone network. In addition, Internet
access providers are currently exempt from having to pay a percentage of their
gross revenues as a contribution to the federal universal service fund. Should
the Federal Communications Commission eliminate these exemptions and impose such
charges on Internet access providers, this would increase our costs of providing
dial-up Internet access service and could have a material adverse effect on our
business, financial condition and results of operations.
We face risks due to possible changes in the way our suppliers are regulated
which could have an adverse effect on our business. For example, most states
require local exchange carriers to pay reciprocal compensation to competing
local exchange carriers for the transport and termination of Internet traffic.
However, in February 1999, the Federal Communications Commission concluded that
at least a substantial portion of dial-up Internet traffic is jurisdictionally
interstate which could ultimately eliminate the reciprocal compensation payment
requirement for Internet traffic. Should this occur our telephone carriers may
no longer be entitled to receive payment from the originating carrier to
terminate traffic delivered to us. The Federal Communications Commission has
launched an inquiry to determine a 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 the new compensation mechanism that may be adopted by the Federal
Communications Commission increases the costs to out telephone carriers for
terminating traffic to us, or if states eliminate reciprocal compensation
payments, our telephone carriers may increase the price of service to us in
order to recover such costs. This could have a material adverse effect on our
business, financial condition and results of operations.
We face risks due to possible changes in the way our competitors are
regulated which could have an adverse effect on our business. For example, the
Federal Communications Commission is 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. Such favorable
regulatory measures could enhance the viability of our competitors in the
Internet access marketplace. In addition, changes in the regulatory environment
may provide competing Internet service providers the right of access to the
cable systems of local franchised cable operators. The adoption of open access
to cable systems by Internet service providers could harm our business.
14
<PAGE>
RISKS RELATED TO THIS OFFERING
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 5%
shareholders together will beneficially own approximately 70.6% of the
outstanding shares of our common stock, 69.6% 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 proceeds from this offering
without prior shareholder approval. As of the date of this prospectus, we have
only designated $28.6 million of the proceeds from this offering for specific
purposes. Accordingly, you will have to rely on our management to properly apply
a significant portion of these proceeds. Moreover, our intended use of proceeds
may change as a result of many factors, including a change in our business
strategy. In addition, we may use the proceeds from this offering for future
strategic acquisitions of, or investments in, other businesses. Our failure to
apply these proceeds effectively could cause our business to suffer.
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 10,388,947 shares
of common stock outstanding after this offering will be available for sale in
the public market after 180 days from the date of this prospectus subject to
compliance with Rule 144, or Rule 144(k) if they are not held by our affiliates.
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 $8.08 in net tangible
book value per share of our common stock on a pro forma basis assuming the
acquisition of Internet Unlimited, Inc., the sale of series A convertible
preferred stock, 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.
15
<PAGE>
USE OF PROCEEDS
We expect to receive approximately $39.3 million in net proceeds from the
sale of the 4,000,000 shares of common stock in this offering, assuming that the
initial public offering price is $11.00 per share, after deducting the estimated
underwriting discount and commissions and offering expenses. We expect to
receive approximately $45.5 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 currently intend to use $19.7 million of the net proceeds of this
offering for working capital, including the expansion of our sales and marketing
capabilities, $7.4 million for capital expenditures, including the construction
of our customer network facilities in our currently targeted regions, $500,000
for financial advisory fees payable to Hambrecht & Quist LLC and the remainder
for general corporate purposes. The $500,000 fee to be paid to Hambrecht & Quist
LLC is partial consideration for services previously rendered to us and is due
upon the earlier of the consummation of this offering and February 1, 2001. In
January 2000, we entered into a purchase agreement under which we issued a
$1.0 million note to H&Q You Tools Investment Holding, L.P. The note bears
interest at a rate equal to 7% per annum and will mature upon consummation of
this offering. We will use approximately $1.0 million of the net proceeds of
this offering to repay the outstanding principal and interest on the note to H&Q
You Tools Investment Holding, L.P. 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 the specified purposes may be
greater than or less than our estimates and will vary significantly depending on
a number of factors, including any change to our business strategy, future
revenue growth, if any, and the amount of cash we generate from operations. If
our business strategy changes, we may use proceeds from this offering to acquire
or develop new products or engage in businesses not currently contemplated by
our present business strategy. In addition, if our future revenue growth and
available cash are less than we currently anticipate, we may need to support our
ongoing business operations with funds from this offering that we currently
intend to use to support growth and expansion. As a result, we will retain broad
discretion in the allocation of the net proceeds of this offering and may spend
such proceeds for any purpose, including purposes not presently contemplated.
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.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999.
We present capitalization:
- on an actual basis;
- on a pro forma basis to reflect 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 4,000,000 shares of common
stock in this offering at an assumed initial public offering price of
$11.00 per share and our application of the estimated net proceeds of
approximately $39.3 million 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, Inc., and the unaudited pro forma
combined financial information contained elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ------------ -----------
<S> <C> <C> <C>
Long-term debt and capital lease obligations,
excluding current portion........................... $ 5,531,480 $ 2,481,480 $ 2,481,480
Shareholders' equity (deficit):
Preferred stock, no par value, 10,000,000 shares
authorized, 808,629 shares issued and outstanding
actual; 9,191,371 shares authorized and no shares
issued and outstanding pro forma and pro forma as
adjusted............................................ 5,480,537 -- --
Common stock, no par value per share, 50,000,000
shares authorized, 7,546,984 shares issued and
outstanding actual; 10,388,947 issued and
outstanding pro forma; and 14,388,947 issued and
outstanding pro forma as adjusted................... 4,798,924 13,329,461 52,649,461
Deferred compensation................................. (419,246) (419,246) (419,246)
Accumulated deficit................................... (5,060,470) (5,060,470) (5,060,470)
Treasury stock, at cost............................... (1,000,000) (1,000,000) (1,000,000)
----------- ------------ -----------
Total shareholders' equity........................ 3,799,745 6,849,745 46,169,745
----------- ------------ -----------
Total capitalization............................ $ 9,331,225 $ 9,331,225 $48,651,225
=========== ============ ===========
</TABLE>
This table is based on shares outstanding as of September 30, 1999 and does
not include:
- 585,000 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 $1.89 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;
- 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.
17
<PAGE>
DILUTION
As of September 30, 1999, we had a net tangible deficit of approximately
$410,000 or $(0.05) per share of common stock. Net tangible book value 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 September 30, 1999, our net tangible book value was $2.6 million or $0.25
per share; assuming on a pro forma basis, 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 September 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 4,000,000 shares in this offering,
assuming no exercise of the underwriters' over-allotment option, based on an
assumed initial public offering price of $11.00 per share and after deducting
the underwriting discounts and commissions and other estimated offering
expenses, would have been $2.92 per share. This represents an immediate increase
of $2.67 per share to existing shareholders and an immediate dilution of $8.08
per share to new investors. The following table 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. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
------
Pro forma net tangible book value per share at September
30, 1999................................................ $ 0.25
Pro forma increase per share attributable to new
investors............................................... 2.67
------
Pro forma as adjusted net tangible book value per share
after the offering........................................ 2.92
------
Dilution per share to new investors......................... $ 8.08
======
</TABLE>
The following summarizes as of September 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 $11.00 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 72% $13,081,999 23% $ 1.26
New investors.............................. 4,000,000 28 44,000,000 77 11.00
---------- --- ----------- ---
Total.................................. 14,388,947 100% $57,081,999 100%
========== === =========== ===
</TABLE>
The above information is based on shares outstanding as of September 30,
1999 and does not include:
- 585,000 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 $1.89 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;
- 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.
18
<PAGE>
SELECTED CONSOLIDATED 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 nine months ended September 30, 1998 and 1999 and the
balance sheet data as of December 31, 1994 and 1995 and September 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 nine months ended September 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;
- the conversion of 666,198 shares of series A convertible preferred stock
issued in August 1999, into 666,198 shares of common stock, which will
occur immediately prior to consummation of this offering, as if such
conversion had occurred on the dates these shares were 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 elimination of service revenues derived by FASTNET from Internet
Unlimited, Inc. prior to July 30, 1999 and the elimination of Internet
Unlimited, Inc.'s corresponding cost of services.
The balance sheet data as of September 30, 1999 is also presented on a pro
forma basis to reflect the following events as if they had occurred on
September 30, 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 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.
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.
19
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED DECEMBER 31,
(MAY 10, ---------------------------------------------------------------
1994) TO 1998
DECEMBER 31, -------------------------
1994 1995 1996 1997 ACTUAL PRO FORMA
------------- --------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Services.................... $ 26,258 $ 299,956 $1,545,072 $2,846,338 $ 4,875,471 $ 5,452,549
Hardware and software....... 50,918 148,848 397,535 824,276 652,508 672,635
--------- --------- ---------- ---------- ----------- -----------
77,176 448,804 1,942,607 3,670,614 5,527,979 6,125,184
--------- --------- ---------- ---------- ----------- -----------
Operating expenses:
Cost of services............ 37,427 122,622 740,186 1,771,968 2,572,732 2,644,861
Cost of hardware and
software.................. 38,341 190,482 421,825 561,951 669,009 680,196
Selling, general and
administrative............ 78,991 243,525 793,336 1,445,224 3,067,740 3,516,740
Depreciation and
amortization.............. 6,448 23,193 78,804 177,375 346,568 1,866,908
--------- --------- ---------- ---------- ----------- -----------
Total operating
expenses.............. 161,207 579,822 2,034,151 3,956,518 6,656,049 8,708,705
--------- --------- ---------- ---------- ----------- -----------
Operating loss................ (84,031) (131,018) (91,544) (285,904) (1,128,070) (2,583,521)
Other expenses, net........... 680 (4,610) (23,680) (36,162) (146,220) (39,975)
--------- --------- ---------- ---------- ----------- -----------
Net loss...................... $ (83,351) $(135,628) $ (115,224) $ (322,066) $(1,274,290) $(2,623,496)
========= ========= ========== ========== =========== ===========
Basic and diluted net loss per
common share................ $ (0.02) $ (0.01) $ (0.01) $ (0.03) $ (0.14) $ (0.25)
--------- --------- ---------- ---------- ----------- -----------
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
========= ========= ========== ========== =========== ===========
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------
1999
-------------------------
1998 ACTUAL PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Services.................... $3,453,758 $ 5,751,503 $ 6,448,025
Hardware and software....... 634,479 94,871 115,713
---------- ----------- -----------
4,088,237 5,846,374 6,563,738
---------- ----------- -----------
Operating expenses:
Cost of services............ 1,793,452 3,844,531 3,915,892
Cost of hardware and
software.................. 558,894 89,194 101,143
Selling, general and
administrative............ 2,052,782 3,911,189 4,492,302
Depreciation and
amortization.............. 230,475 904,233 1,812,308
---------- ----------- -----------
Total operating
expenses.............. 4,635,603 8,749,147 10,321,645
---------- ----------- -----------
Operating loss................ (547,366) (2,902,773) (3,757,907)
Other expenses, net........... (91,766) (227,138) (65,445)
---------- ----------- -----------
Net loss...................... $ (639,132) $(3,129,911) $(3,823,352)
========== =========== ===========
Basic and diluted net loss per
common share................ $ (0.07) $ (0.44) $ (0.39)
---------- ----------- -----------
Weighted average number of
common shares outstanding... 9,480,339 7,122,004 9,754,654
========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1999
------------------------------------------------------------ -------------------------
1994 1995 1996 1997 1998 ACTUAL PRO FORMA
-------- --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 2,401 $ 6,113 $ 28,591 $ 88,981 $ 256,782 $ 3,812,558 $ 3,812,558
Working capital deficit................ (95,682) (209,282) (552,418) (1,447,138) (4,356,637) (1,652) (1,652)
Total assets........................... 64,413 288,205 822,953 1,683,345 3,226,841 16,089,521 16,089,521
Shareholders' (deficit) equity......... (39,352) (94,980) (210,203) (532,269) (2,564,081) 3,799,745 6,849,745
</TABLE>
20
<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 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. 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 $4.5 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
colocation 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.
OUR HISTORY OF OPERATING LOSSES
We have incurred operating losses in each year since our inception. Our
operating losses were 5% of revenues for the year ended December 31, 1996, 8% of
revenues for the year ended December 31, 1997, 20% for the year ended
December 31, 1998 and 50% of revenues for the nine months ended September 30,
1999. On a pro forma basis, assuming the acquisition of Internet Unlimited was
consummated on January 1, 1998, our losses would have increased from 20% of
revenues on an actual basis to 42% on a pro forma basis for the year ended
December 31, 1998, and would have increased from 50% on an actual basis to 57%
on a pro forma basis for the nine months ended September 30, 1999. We anticipate
that we will continue to operate at a loss for the foreseeable future.
RESULTS OF OPERATIONS
We broadly classify our revenues by customer type, enterprise and
non-enterprise. Enterprise customers are business customers, governmental
entities, and non-profit organizations. Our non-enterprise customers are
residential customers and Microsoft's WebTV Networks' customers. We historically
have derived at least 60% 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.
21
<PAGE>
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
revenues 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, $1.8 million in 1997 and
$2.9 million in 1998. In addition, for the nine months ended September 30, 1999,
dedicated Internet access revenue represented $2.3 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 $1.3 million for the nine
months ended September 30, 1999. This increase in virtual private networking
revenues is primarily attributable to the increase in Microsoft's WebTV
Networks' customers utilizing this service and our expansion into new regions.
Dial-up access revenues increased from approximately $147,000 in 1996 to
approximately $719,000 in 1998 and approximately $991,000 in the nine months
ended September 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 60% of total revenues. During the years ended December 31,
1997 and 1998, revenues from the sale of our enhanced products and services
represented between 11% and 16% of our total revenues. On a pro forma basis
assuming our acquisition of Internet Unlimited, Inc. occurred on January 1,
1998, enhanced products and services revenues would have been 19% of revenues in
the year ended December 31, 1998 and 28% of revenues in the nine months ended
September 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 77 employees at
September 30, 1999. As of December 31, 1996 we operated our network operations
center and one customer network facility. As of September 30, 1999, we had
expanded the capabilities of the network operations center and had four customer
network facilities in operation with four additional customer network facilities
in construction. Our advertising expenditures increased from $104,000 in 1996
and $243,000 in 1997 to $625,000 in 1998. Advertising expenditures were $529,000
in the nine months ended September 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 services revenues consists primarily of Internet access and
telecommunications charges. These charges are the costs of directly connecting
to Internet backbone providers. Cost of services revenues also includes the
payroll and related expenses for engineering, and rental expense on leased
network and customer network facility equipment. Costs of hardware and software
includes the costs of third party hardware and software sold to our customers.
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.
22
<PAGE>
The following table sets forth statement of operations data as a percentage
of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Services..................................... 79.5% 77.5% 88.2% 84.5% 98.4%
Hardware and software........................ 20.5 22.5 11.8 15.5 1.6
------ ------ ------ ------ ------
100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------
Operating Expenses:
Cost of services............................. 38.1 48.3 46.5 43.9 65.8
Cost of hardware and software................ 21.7 15.3 12.1 13.7 1.5
Selling, general and administrative.......... 40.8 39.4 55.5 50.2 66.9
Depreciation and amortization................ 4.1 4.8 6.3 5.6 15.5
------ ------ ------ ------ ------
104.7 107.8 120.4 113.4 149.7
------ ------ ------ ------ ------
Operating loss............................... (4.7) (7.8) (20.4) (13.4) (49.7)
Other expense, net........................... (1.2) (1.0) (2.7) (2.2) (3.8)
------ ------ ------ ------ ------
Net loss..................................... (5.9)% (8.8)% (23.1)% (15.6)% (53.5)%
====== ====== ====== ====== ======
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
REVENUES. Total revenues increased by $1.7 million, or 43%, to
$5.8 million for the nine months ended September 30, 1999, compared to
$4.1 million for the nine months ended September 30, 1998. On a pro forma basis,
assuming our acquisition of Internet Unlimited, Inc. occurred prior to
January 1, 1999, total revenues would have been $6.6 million for the nine months
ended September 30, 1999.
Services revenues increased by $2.3 million, or 67%, to $5.8 million for the
nine months ended September 30, 1999, compared to $3.5 million for the nine
months ended September 30, 1998. This increase in services revenues is primarily
attributable to an increase in the number of customers using our dedicated
Internet access services and a 191% increase in virtual private network revenues
from $460,000 for the period ended September 30, 1998 to $1.3 million for the
period ended September 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 184% for the period ended September 30, 1999 over the same period
in 1998 in part due to our acquisition of Internet Unlimited, Inc. Our dial-up
customer base continued to grow over the comparable period, resulting in an
increase in dial-up revenues of 26% for the period ended September 30, 1999 over
the same nine month period in 1998.
Hardware and software revenues which represents our resale of third party
hardware and software to our customers decreased by $539,000 or 85% to $95,000
for the nine months ended September 30, 1999, compared to $634,000 for the nine
months ended September 30, 1998. In the nine months ended September 30, 1998, we
sold a significant amount of third party hardware and software as part of an
installation for one of our major customers. We expect hardware sales to decline
as a percentage of revenue because of our focus on small and medium sized
enterprises. These customers historically have required less hardware because of
the scale of their Internet needs and their inclination to use their existing
equipment when available.
During these periods, we derived a significant portion of our revenues from
Microsoft's WebTV Networks and the State of Delaware. Microsoft's WebTV Networks
represented 19% of total revenues
23
<PAGE>
for the nine months ended September 30, 1999. The State of Delaware represented
10% of total revenues for the nine months ended September 30, 1998.
COST OF REVENUES. Cost of revenues increased by $1.5 million, or 67%, to
$3.9 million for the nine months ended September 30, 1999, compared to
$2.4 million for the nine months ended September 30, 1998. As a percentage of
revenues, cost of revenues increased to 67% for the nine months ended
September 30, 1999 from 58% for the nine months ended September 30, 1998. On a
pro forma basis, assuming our acquisition of Internet Unlimited, Inc. occurred
prior to January 1, 1999, cost of revenues would have been $4.0 million for the
nine months ended September 30, 1999.
Cost of services increased by $2.0 million, or 114%, to $3.8 million for the
nine months ended September 30, 1999, compared to $1.8 million for the nine
months ended September 30, 1998. As a percentage of services revenues, cost of
services were 52% in the nine months ended September 30, 1998 compared to 67% in
the nine months ended September 30, 1999. These increases were 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, in
advance of generating revenues in new regions.
Cost of hardware and software decreased by $470,000 or 84% to $89,000 for
the nine months ended September 30, 1999, compared to $559,000 for the nine
months ended September 30, 1998 as a result of the decrease in hardware and
software revenues.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased by $1.8 million, or 91%, to $3.9 million for the nine months
ended September 30, 1999 compared to $2.1 million for the nine months ended
September 30, 1998. As a percentage of revenues, selling, general and
administrative expenses increased to 67% for the nine months ended
September 30, 1999 from 50% for the nine months ended September 30, 1998. This
increase is primarily attributable to the increase in selling, general and
administrative personnel from 31 at September 30, 1998 to 64 at September 30,
1999, and a 35% increase in advertising expense from $391,000 in the nine months
ended September 30, 1998 to $529,000 in the nine months ended September 30,
1999. As a result of the increase in personnel, all related general and
administrative expenses increased. $500,000 of the $1.9 million increase was for
financial advisory services provided by Hambrecht & Quist LLC. On a pro forma
basis, assuming our acquisition of Internet Unlimited, Inc. occurred prior to
January 1, 1999, selling, general and administrative expenses would have been
$4.0 million for the nine months ended September 30, 1999.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$674,000 or 292%, to $904,000 for the nine months ended September 30, 1999,
compared to $230,000 for the nine months ended September 30, 1998. This increase
was primarily attributable to the purchase of equipment necessary to support the
expansion of our network and to the amortization of the intangible assets
associated with our acquisition of Internet Unlimited, Inc. On a pro forma
basis, assuming our acquisition of Internet Unlimited, Inc. occurred prior to
January 1, 1999, depreciation and amortization, including the amortization of
intangible assets associated with the Internet Unlimited acquisition would have
been $1.8 million for the nine months ended September 30, 1999.
24
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
REVENUES. Total 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. On a pro forma basis, assuming our acquisition of
Internet Unlimited occurred prior to January 1, 1998, total revenues would have
been $6.1 million for the year ended December 31, 1998.
Services revenues increased by $2.1 million, or 71%, to $4.9 million for the
year ended December 31, 1998, from $2.8 million for the year ended December 31,
1997. This increase in services revenues resulted from an overall increase in
the number of customers using our dedicated Internet access services and from an
increase in virtual private networking revenues for the year ended December 31,
1998, compared, to the year ended December 31, 1997. Our dedicated Internet
access revenues increased by $1.2 million, or 67%, in 1998 compared to 1997. Our
dial-up customer base continued to increase in 1998 compared to 1997, resulting
in dial-up revenues increasing $207,000, or 40%, in 1998 compared to 1997.
Hardware and software revenues decreased by $171,000, or 21%, to $653,000
for the year ended December 31, 1998, from $824,000 for the year ended
December 31, 1997, 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.
During the year ended December 31, 1998, revenues from Lucent Technologies,
Inc. represented in excess of 11% of total revenues. During the year ended
December 31, 1997, revenues from Lucent Technologies, Inc. represented 24% and
revenues from Vanguard Cellular Systems, Inc. represented 13% of total revenues.
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. On a pro forma basis, assuming our acquisition of
Internet Unlimited occurred on January 1, 1998, cost of revenues would have been
$3.3 million for the year ended December 31, 1998.
Cost of services increased by $801,000, or 45%, to $2.6 million for the year
ended December 31, 1998, from $1.8 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 services revenues, cost of services were 53% in the year ended
December 31, 1998 compared to 62% in the year ended December 31, 1997. This
decrease is primarily attributable to a higher utilization rate of our network
and the addition of new customers without proportional incremental
infrastructure and telecommunications costs.
Cost of hardware and software increased by $107,000 or 19% to $669,000 for
the year ended December 31, 1998, from $562,000 for the year ended December 31,
1997. This increase is primarily attributable to a large sale of hardware to one
customer.
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 56% for the year ended December 31,
1998, compared to 39% for the year ended December 31, 1997. This increase in
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.
25
<PAGE>
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, Inc.
occurred on January 1, 1998, depreciation and amortization, including the
amortization of intangible assets associated with the Internet Unlimited
acquisition, would have been $1.9 million for the year ended December 31, 1998.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
REVENUES. Total 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.
Services revenues increased by $1.3 million, or 84%, to $2.8 million for the
year ended December 31, 1997, from $1.5 million for the year ended December 31,
1996. Our 1997 dedicated Internet access revenues grew by $360,000, or 26%,
compared to 1996. As a result of growth in our dial-up customer base in 1997,
our dial-up revenue increased $365,000, or 248%, over 1996.
Hardware and software revenues increased by $426,000, or 107%, to $824,000
for the year ended December 31, 1997, from $398,000 for the year ended
December 31, 1996.
During the year ended December 31, 1997, revenues from Lucent Technologies,
Inc. represented 24% of total revenues compared to 16% of total revenues for the
year ended December 31, 1996. During the year ended December 31, 1997, revenues
from Vanguard Cellular Systems 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.
Cost of services increased by $1.1 million, or 139%, to $1.8 million for the
year ended December 31, 1997, from $740,000 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 services revenues, cost
of services were 62.3% for the year ended December 31, 1997, compared to 47.9%
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.
Cost of hardware and software increased by $140,000 or 33% to $562,000 for
the year ended December 31, 1997, from $422,000 for the year ended December 31,
1996.
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 $138,000, or 131%, 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.
RECENT UNAUDITED FINANCIAL DATA
Our revenues for the year ended December 31, 1999 were approximately $8.3
million and our net loss for the year ended December 31, 1999 was approximately
$5.2 million. The financial data for such periods are unaudited. The preparation
of these financial data requires management to make estimates
26
<PAGE>
and assumptions that affect the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
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>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 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) $ (658,499) $ (99,402)
Cash flows used in investing
activities....................... (331,153) (690,352) (899,996) (423,867) (1,493,270)
Cash flows provided by financing
activities....................... 178,113 267,327 1,681,776 1,691,958 5,148,448
--------- --------- ---------- ---------- -----------
Net increase in cash and cash
equivalents...................... $ 22,478 $ 60,390 $ 167,801 $ 609,592 $ 3,555,776
========= ========= ========== ========== ===========
</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 colocation 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 $4.5 million. All of the outstanding preferred stock will
automatically convert into common stock immediately prior to the consummation of
this offering.
In June 1999, we entered into a master lease agreement with Ascend Credit
Corporation for a $20 million equipment lease facility, of which $10 million
will not be available until consummation of this offering. Under this
arrangement, we lease equipment necessary for the construction of our customer
network facilities. Currently, we have approximately $6.3 million available
under this facility. In order to complete the three customer network facilities
currently being constructed and the related expansion of our network operations
center, we anticipate that we will require an aggregate of approximately
$800,000 of additional borrowings under our Ascend equipment lease facility.
In January 2000, we entered into a purchase agreement under which we issued
a $1.0 million note to H&Q You Tools Investment Holding, L.P. The note bears
interest at a rate equal to 7% per annum
27
<PAGE>
and will mature upon consummation of this offering. We will use approximately
$1.0 million of the net proceeds of this offering to repay the outstanding
principal and interest on the note. We intend to use the $1.0 million proceeds
from the loan for working capital and capital expenditures.
As of September 30, 1999, our cash and cash equivalents were $3,812,558. We
do not invest our cash in securities that are subject to market risks. 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. If we are
unable to complete this offering or if the net proceeds from this offering are
not sufficient to meet our cash requirements, our need to fund ongoing
operations could limit our ability to execute our business strategy. Therefore,
we may be required to seek additional sources of financing, including financing
for our current long term capital commitments which we currently estimate to be
approximately $9.5 million through 2004. 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 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 customer network facilities and reduce our
marketing and development efforts. Any of these events could harm our business,
financial condition or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments primarily consist of debt. All of our debt
instruments bear interest at fixed rates. Therefore, a change in interest rates
would not affect the interest incurred or cash flows related to our debt. A
change in interest rates would, however, affect the fair value of the debt. The
following sensitivity analysis assumes an instantaneous 100 basis point move in
interest rates from levels at December 31, 1998 with all other factors held
constant. A 100 basis point increase or decrease in market interest rates would
result in a change in the value of our debt of less than $50,000 at
December 31, 1998. Because our debt is neither publicly traded nor redeemable at
our option, it is unlikely that such a change would impact our financial
statements or results of operations.
All of our transactions are conducted using the United States dollar.
Therefore, we are not exposed to any significant market risk relating to
currency rates.
28
<PAGE>
OUR BUSINESS
GENERAL
We are a growing Internet service provider offering Internet access and
enhanced services, such as Web hosting, managed security solutions and other
value added products to small and medium sized enterprises through our regional
customer network facilities. We primarily offer our services in the mid-
Atlantic area of the United States and our strategy is to expand by replicating
our customer network facilities and our services offered to small and medium
sized enterprises in selected high growth secondary markets throughout 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;
- Internet applications hosting services;
- virtual private networks;
- unified messaging; and
- total managed backup and recovery services.
Our customer network facility infrastructure and local sales support are
regionally located in order to provide cost savings to our customers and a high
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.
On July 30, 1999, we acquired Internet Unlimited, Inc., a Web hosting and
colocation company. As of December 31, 1999, we provided Internet access and
enhanced products and services to approximately 300 enterprise customers, of
which approximately 275 were small and medium sized enterprises, and
approximately 15,800 dial-up customers in the mid-Atlantic area. We also provide
Web hosting services to approximately 4,400 customers.
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 1998 there
were over 62 million Web users in the United States and over 134 million
worldwide, and projects that by the end of 2003 the number of Web users will
increase to 177 million in the United States and over 472 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. International Data Corporation estimates that the number of
consumers buying goods and services on the Internet will grow from 21.1 million
in 1998 to 72.1 million in 2003, and that the total value of
29
<PAGE>
goods and services purchased over the Internet will increase from approximately
$37 billion in 1998 to approximately $707 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 International Data Corporation, Internet access
revenues from businesses are expected to more than double in the next four
years from $5.1 billion in 1999 to $12 billion in 2003. 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, colocation 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:
- 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.
- 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. According to
International Data Corporation, Web-related expenditures by small
businesses in the United States are expected to grow from $9.6 billion in
1999 to over $32 billion by 2003.
- 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.
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, only in or
around densely populated major cities. Customers that are located within a few
miles from these points of presence often receive cost savings on their access
pricing. However, customers located in secondary markets that are 20 to 75 miles
away from these points of presence have typically been charged higher prices for
Internet access services.
30
<PAGE>
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
customer network facilities that we construct in each region in which we
operate. A customer network facility 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 customer
network facilities feature redundant power and climate control systems, and are
continuously monitored through a connection to our network operations center.
This connection allows us to monitor and control regional customer network
facility 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 network operations center also provides an
additional level of redundancy of Internet connectivity. In the event that both
independent Internet backbone networks to which a customer network facility is
connected fail, customer traffic can be routed to the Internet through the
network operations center to minimize service interruptions. Likewise, a
customer network facility will continue to function even if its connection to
the network operations center fails.
[LOGO]
31
<PAGE>
We currently have seven customer network facilities in operation servicing
the regions in and around Allentown, Pennsylvania, Harrisburg, Pennsylvania,
Jersey City, New Jersey, Basking Ridge, New Jersey and Holland Township, New
Jersey, and the secondary markets surrounding Philadelphia, Pennsylvania and
Baltimore, Maryland. We are in the process of constructing three additional
customer network facilities to service Scranton/Wilkes Barre, Pennsylvania,
Pittsburgh, Pennsylvania, and the secondary market surrounding Washington, D.C.
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 customer network facility.
COST SAVINGS TO OUR CUSTOMERS. We believe based upon comments from our
customers that our Internet solutions are more cost-effective for our customers
than developing their own in-house Internet solutions. In order to match the
level of performance and reliability that we provide to our customers, they
would need to make significant expenditures for equipment, personnel and
dedicated bandwidth. In addition, they would need to develop Internet expertise
and would be required to divert resources from their primary business
activities.
We believe that we can continue to provide high quality Internet services to
small and medium sized enterprises because we have developed a cost-effective
and highly efficient regional strategy that enables us to eliminate many of the
high cost network transport and interconnect elements typically associated with
a national network. A national network is commonly designed to include a point
of presence, or Internet access point, which enables a customer to connect to
one or more peering points. These peering points enable national networks to
connect with other networks to access the Internet for their customers. National
network customers connect to a point of presence then to a peering point through
large and typically expensive data circuits owned by the national network. Our
regional network design reduces the high costs associated with a national
network structure by eliminating the need for us to invest capital to purchase
large expensive data circuits. Instead, our network delivers the data from the
customer directly to the primary backbone provider which requires less expensive
circuits that connect our regionally located customer network facilities to our
main network operations center. In addition, because we position our customer
network facilities 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.
32
<PAGE>
Furthermore, because our customer network facilities support only our data
products, we do not incur expenses related to telephony equipment, long-distance
switches and other voice services.
OUR 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:
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. In the past, we have been able to provide limited services
to customers within 90 days after the date a lease is signed for the site of a
new customer network facility. 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 customer network facilities 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 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 CUSTOMER NETWORK FACILITIES. Our network
architecture is easily replicated in each target region. Each of our
customer network facilities 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 customer
network facilities 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.
EXPANDING 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. We market these products and
services to our existing customers to increase revenue per customer and maintain
high customer retention by strengthening our customers' relationships with us.
USING CENTRALIZED SALES AND MARKETING OPERATIONS TO EXPAND OUR REGIONAL
SALES AND MARKETING BY TAKING 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.
33
<PAGE>
ENTERING INTO STRATEGIC RELATIONSHIPS AND MAKING SELECTED ACQUISITIONS. We
seek to enter into strategic relationships with third party vendors to develop
and obtain new technologies to incorporate into our product and service
offerings. We believe that this enables us to meet our customers' needs
efficiently and in a cost-effective manner. For example, as part of our
relationship with WatchGuard Technologies, Inc., we worked with WatchGuard to
modify their security product to meet customers' needs. Additionally, we have
recently entered into an agreement with Covad Communications Company to sell
Covad's DSL services to our customers.
We recently entered into an equipment lease arrangement with Lucent
Technologies, Inc. and acquired Internet Unlimited, Inc., a provider of Web
hosting and colocation services. 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 December 31, 1999, we employed 29 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.
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 at 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. We offer our customers DSL service through an agreement
with Covad Communications Company which enables us to sell Covad's DSL service
as a bundled package with our Internet access and other value added services.
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.
34
<PAGE>
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 network operations
center personnel provide 24 hours-a-day, seven days-a-week monitoring and
threat response. We incorporate third-party products 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. On
December 30, 1998, we entered into a Managed Security Services Agreement
with WatchGuard Technologies, Inc. to provide these security services and
products, which expires on December 31, 2000. This agreement renews for an
additional one-year term if we meet or exceed minimum quarterly purchase
amounts and neither party has provided the other party notice of its
intention not to renew the agreement at least 30 days prior to the end of
the applicable term. Under the terms of this agreement, we have agreed to
purchase a minimum annual amount of services and products from WatchGuard,
resulting in minimum payments to WatchGuard of approximately $274,000 per
year.
- 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 colocation 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 colocation 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.
- INTERNET APPLICATIONS HOSTING SERVICES--The growth of the Internet has
made a strong Web presence increasingly important for small and medium
sized enterprises. We provide our customers with the Internet applications
hosting services they need to remain competitive. Our Internet
applications hosting services include e-commerce services and other
sophisticated applications related to the operation of an e-commerce
enabled Web site. Our Internet applications hosting services work in
conjunction with our Web hosting services to provide our customers with a
comprehensive Web presence.
- 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 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.
35
<PAGE>
- 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
customer network facility. 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
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
customer network facility. Each customer network facility 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. We provide our dedicated access customers with
constant Internet access through a data circuit that is connected continuously
to the Internet by way of a central network facility. Dedicated access customers
in each region connect to one of our customer network facilities using high
speed data circuits provided by an incumbent local exchange carrier or
competitive local exchange carrier. An incumbent local exchange carrier is
generally the original telephone company which services the customer's area. A
competitive local exchange carrier is generally a company that is trying to
compete with an incumbent local exchange carrier. Our dial-up customers connect
to our network using either 56K modem or digital ISDN circuits. We subscribe on
a monthly basis for services provided by a number of local exchange carriers,
including AT&T Corporation, through its subsidiary Teleport Communications
Group, and Bell Atlantic Corporation. We also have agreements with local
exchange carriers, including the following companies:
- HYPERION COMMUNICATIONS OF NEW JERSEY, LLC. We entered into an agreement
with Hyperion on May 12, 1999 for a term of one year. Hyperion provides us
with local exchange, switched access, long distance and dedicated access.
Under the terms of this agreement, we have agreed to purchase a minimum
annual amount of services from Hyperion, resulting in minimum payments to
Hyperion of approximately $242,000 per year.
36
<PAGE>
- NEXTLINK PENNSYLVANIA, INC. We entered into agreements with NEXTLINK in
June, October and December 1999, each for a term of three years. NEXTLINK
provides us with point-to-point DS3 service. Under the terms of these
agreements, we have agreed to purchase a minimum annual amount of services
from NEXTLINK, resulting in minimum payments to NEXTLINK of approximately
$327,000 per year.
Each customer network facility has access to at least two Internet backbone
providers. We have agreements with a number of national Internet backbone
providers, including the following companies:
- MCI WORLDCOM INC. We entered into an agreement with MCI on August 6, 1999
for a term of three years. MCI provides us with DS3 private line service.
Under the terms of this agreement, we have agreed to purchase a minimum
annual amount of services from MCI, resulting in minimum payments to MCI
of approximately $180,000 per year. This agreement is renewable on a
month-to-month basis.
- UUNET TECHNOLOGIES, INC. We entered into agreements with UUNET, one in
August for a one year term and another in December 1999 for a three year
term. UUNET provides us with T3 and T1 service. Under the terms of these
agreements, we have agreed to purchase a minimum annual amount of services
from UUNET, resulting in minimum payments to UUNET of approximately
$669,000 per year. These agreements may be terminated by either party upon
60 days advance notice to the other party, without obligation or penalties
for further payments.
- SPRINT COMMUNICATIONS COMPANY, L.P. We entered into an agreement with
Sprint on June 8, 1999 for a term of three years. Sprint provides us with
dedicated Internet access service. Under the terms of this agreement, we
have agreed to purchase a minimum annual amount of services from Sprint,
resulting in minimum payments to Sprint of approximately $1.4 million per
year.
These services provide redundancy and high reliability in the event that any
of our backbone providers should experience network difficulties. We are 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 OPERATIONS CENTER. Each customer network facility is connected to
our network operations center. The network operations center 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 network
operations center and the customer network facilities provides an additional
level of redundancy for customer traffic if needed. Since each customer network
facility is connected to the Internet independently from the network operations
center, connections from a customer network facility to the network operations
center typically do not require the same expensive high capacity or high
bandwidth transport facilities that link customer network facilities 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. We entered into an Equipment Lease Agreement with
Bay Networks on May 29, 1997 for a term of three years. Under the terms of this
agreement, we have agreed to make minimum payments to Bay Networks of
approximately $31,000 per year. This agreement is renewable on a month-to-month
basis. We entered into a Master Lease Agreement with Cisco Systems on
November 3, 1999 for a term of three years. Under the terms of this agreement,
we have agreed to lease equipment
37
<PAGE>
from Cisco Systems, resulting in minimum payments to Cisco Systems of
approximately $235,000 per year. 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. On September 18, 1998 and
June 29, 1999 we entered into Master Lease Agreements for equipment leasing with
Lucent Technologies (Ascend), each having three year terms. Under the terms of
one of these agreements, we have agreed to lease equipment from Lucent,
resulting in minimum payments to Lucent of approximately $34,000 per year. Under
the terms of the second agreement, we have a credit line to finance the leasing
of additional equipment. We have the option to purchase the equipment subject to
these leases at the end of the lease term and, in some cases, renew the term of
the lease for an additional rental period. 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 customer network facilities.
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
December 31, 1999, we provided Internet access and enhanced services to
approximately 300 enterprise customers, of which approximately 275 were small
and medium sized enterprises, and approximately 15,800 dial-up customers in the
mid-Atlantic area. We also provided Web hosting services to approximately 4,400
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 7% of total revenues for
the nine months ended September 30, 1999 and 11% of total revenues for the
fiscal year ended December 31, 1998 and Microsoft's WebTV Networks, Inc.
accounted for 19% of total revenues for the nine months ended September 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 6%
of total revenues for the nine months ended September 30, 1999 and 10% of total
revenues for the fiscal year ended December 31, 1998 and Microsoft's WebTV
Networks, Inc. would have accounted for 17% of total revenues for the nine
months ended September 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.
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
38
<PAGE>
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; and
- high performance.
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, colocation 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.;
- 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.
39
<PAGE>
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 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
40
<PAGE>
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.
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 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
41
<PAGE>
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
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 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 proprietary rights to trade secrets relating to technical and
business aspects of our operations. We have sought and will continue to seek
federal, state and local protection for these proprietary rights. We rely on a
combination of copyright, trademark and trade secret laws to protect our
proprietary rights, particularly related to our names and logos. 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. We believe that we were the first to adopt the service mark FASTNET and
the associated logo in connection with Internet service business, and have
received federal registrations for them. In addition, we have registrations
pending for the following other names and marks: YOU'RE HUMAN, SO ARE WE;
123HOSTME.COM; 123HOSTME! and HOST ME! We currently believe that these names and
marks are not material to our business.
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 subscribers are
shareware that we have obtained permission to distribute or that are otherwise
in the public domain and freely distributable, 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 December 31, 1999, we had a total of 91 employees, including 88
full-time employees and three part-time employees. Of these employees, 19 people
were in engineering, 43 people in general and administrative positions,
including executives, customer support, facilities-based transport and
accounting/billing and 29 people in sales and marketing.
42
<PAGE>
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 operations center is located at our headquarters in
Bethlehem, Pennsylvania. As of December 31, 1999 we leased approximately 46,411
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, 1999 for
our Bethlehem facility. We lease an additional 34,580 square feet of office
space under another lease, which ends January 6, 2006. We are obligated to pay
rent of approximately $345,500 for the fiscal year 2000 for this additional
office space.
We typically require approximately 800 square feet of space for each of our
customer network facilities. We currently lease space at the following two
customer network facility locations:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE LEASE EXPIRATION 1999 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, Inc., we
assumed a lease for an additional 15,000 square feet of office space in
Bethlehem, Pennsylvania. Internet Unlimited, Inc. paid approximately $34,000 in
rent for the year ended December 31, 1999 under this lease, which expires
March 31, 2004. Our annual rents are subject to adjustments. We also have
colocation agreements for space in each region in which we currently have a
customer network facility or are in the process of constructing a customer
network facility. We anticipate that we will require additional space for
customer network facilities 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.
43
<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........................ 41 Chief Executive Officer and Director
Sonny C. Hunt............................. 39 President and Director
Stanley F. Bielicki....................... 54 Chief Financial Officer
Phillip L. Weller......................... 39 Chief Technology Officer
Rafe Scheinblum........................... 47 Executive Vice President--Operations
Mark A. Horinko........................... 37 Vice President--Engineering
Thomas J. Roberts......................... 40 Vice President--Sales
Douglas L. Michels........................ 45 Director
David J. Farber........................... 66 Director
R. Barry Borden........................... 60 Director
Alan S. Kessman........................... 53 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.
PHILLIP L. WELLER has served as chief technology officer of FASTNET since
November 1999. Mr. Weller previously served as executive vice president of
engineering of FASTNET from November 1996 until November 1999. 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
44
<PAGE>
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.
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.
MARK A. HORINKO has served as vice president of engineering of FASTNET since
May 1999. From May 1984 until May 1999, Mr. Horinko held several senior
management positions with Vanguard Cellular Systems, Inc., including director of
technical services. Mr. Horinko's responsibilities at Vanguard included working
in areas of network engineering and operations, network deployment and real
estate, information technology and network management and security. Mr. Horinko
holds an A.A.S. from Lincoln Technical Institute in microelectronics and has
studied Computer Science and Business Management at Mansfield State University
and Moravian College.
THOMAS J. ROBERTS joined FASTNET as vice president of sales in January 2000.
From April 1989 until January 2000, Mr. Roberts served as director, field sales
for Binney & Smith where he was responsible for managing all of their food, drug
and regional mass merchandiser customers. Mr. Roberts holds a B.A. in
communications from Bloomsburg University and an M.B.A. from Columbia University
Business School.
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.
DAVID J. FARBER has served as a member of the board of directors of FASTNET
since January 2000. In January 2000, Mr. Farber was appointed to serve as Chief
Technologist for the Federal Communications Commission. Due to this appointment,
Mr. Farber has taken a leave of absence from his postion as a professor at the
University of Pennsylvania, where he has held appointments in both the
Department of Computer Science and the Department of Engineering since September
1988. Since September 1998, Mr. Farber has also served as director for both the
Center for Communications and Information Sciences and Policy, and the
Distributed Computer Laboratory, managing research in high-speed networking. Mr.
Farber holds a B.S.E.E., a Masters in Mathematics and an honorary doctorate of
Science from the Stevens Institute of Technology.
R. BARRY BORDEN has served as a member of the board of directors of FASTNET
since January 2000. Mr. Borden has served as president of Nettech Systems, Inc.,
a supplier of software for wireless data communications, since August 1997. In
addition, Mr. Borden has served as president of LMA Group, Inc., a general
management consulting firm, since August 1984. Mr. Borden is also a member of
the board of directors of Sedona Corporation, a supplier of software to
corporations for visualization of spatial data, and AM Communications, Inc., a
provider of status and network monitoring systems for broadband networks.
Mr. Borden holds a B.S.E.E. from the University of Pennsylvania.
ALAN S. KESSMAN has served as a member of the board of directors of FASTNET
since January 2000. Mr. Kessman has been a partner in PS Capital, an investment
management advisory partnership, since October 1998, and has served as chief
executive officer and a director of Vion Pharmaceuticals, Inc., a company
focused on cancer research, since January 1999. From 1983 to June 1998, Mr.
Kessman served as chief executive officer and president of Executone Information
Systems, Inc., a company that designs, manufactures and supports voice
processing and healthcare communications systems and offers voice, data and
video network services. Mr. Kessman holds a B.S. in Business Administration from
Lehigh University and is a certified public accountant.
45
<PAGE>
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 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.
We intend to establish an audit committee prior to the completion of the
offering. The audit committee will:
- review the results and scope of the audit and other services provided by
our independent auditors, and
- review and evaluate 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. Prior to
the consummation of this offering, we will grant 50,000 options to our new
directors David J. Farber, R. Barry Borden and Alan S. Kessman, which will vest
quarterly over a five year period. The new directors will also receive an
additional 5,000 options which will vest immediately. Each outside director will
receive an annual grant of 6,000 options during their term which will vest over
five years.
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 years ended December 31, 1998 and 1999 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.
46
<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 $50,000 or 10%
of the total of his salary and bonus during the fiscal years ended December 31,
1998 and 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- --------------------------- -------- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
David K. Van Allen..................... 1998 33,800 70,000 -- 2,705
CHIEF EXECUTIVE OFFICER 1999 182,250 -- -- 2,705
Sonny C. Hunt.......................... 1998 76,154 54,699 -- --
PRESIDENT 1999 150,000 -- -- --
Stanley F. Bielicki.................... 1999 111,424 33,576 -- --
CHIEF FINANCIAL OFFICER
Phillip L. Weller...................... 1998 95,000 35,000 2,308 --
EXECUTIVE VICE PRESIDENT -ENGINEERING 1999 125,000 -- -- --
Rafe Scheinblum........................ 1998 72,700 48,403 3,060 --
EXECUTIVE VICE PRESIDENT--OPERATIONS 1999 125,000 -- -- --
</TABLE>
The amount listed under All Other Compensation for Mr. Van Allen represents
a life insurance policy on Mr. Van Allen, for which Kathryn Van Allen, Mr. Van
Allen's wife, is a co-beneficiary with FASTNET.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted in the
1999 fiscal year to the executive officers named in the Summary Compensation
Table above. Mr. Van Allen was not granted any options during the 1999 fiscal
year. Amounts represent the hypothical gains that could be achieved from the
respective options if exercised at the end of the option term. These gains are
based on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date based
upon the grant price.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SHARES PRICE APPRECIATION FOR
UNDERLYING PERCENTAGE OF OPTION TERM
OPTIONS TOTAL OPTIONS EXERCISE EXPIRATION -----------------------
NAME GRANTED GRANTED PRICE ($/SHARE) DATE 5% ($) 10% ($)
- ---- ---------- ------------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sonny C. Hunt....................... 5,000 1.0 2.50 5/24/09 89,589 142,656
Stanley F. Bielicki................. 100,000 21.5 1.50 3/3/09 1,791,785 2,853,117
Phillip L. Weller................... 100,000 21.5 1.50 3/3/09 1,791,785 2,853,117
Rafe Scheinblum..................... 100,000 21.5 1.50 3/3/09 1,791,785 2,853,117
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning year end option values
for the 1999 fiscal year for the executive officers named in the Summary
Compensation Table above. The value of
47
<PAGE>
unexercised in-the-money options is calculated based on an assumed value equal
to an assumed initial public offering price of $11.00 per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END
--------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($)
- ---- ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Sonny C. Hunt............................. 5,000 -- 42,500 --
Stanley F. Bielicki....................... 50,000 50,000 475,000 475,000
Phillip L. Weller......................... 50,000 50,000 475,000 475,000
Rafe Scheinblum........................... 50,000 50,000 475,000 475,000
</TABLE>
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
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.
48
<PAGE>
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
December 31, 1999, options to purchase 585,000 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;
- 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 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
49
<PAGE>
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 several 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
- 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
50
<PAGE>
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 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,
- 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.
51
<PAGE>
RELATED PARTY TRANSACTIONS
EQUITY INVESTMENTS
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.
In November 1999, we entered into an amendment to our agreement with
Hambrecht & Quist LLC which provides for the payment to Hambrecht & Quist LLC of
$820,000 for services provided for the August 1999 private placement and general
strategic and financial advisory services. We are obligated to pay Hambrecht &
Quist LLC $500,000 of the $820,000 upon completion of our initial public
offering and the balance on February 1, 2001. Hambrecht & Quist LLC is
affiliated with H&Q You Tools Investment Holding, L.P. through a mutual
association with Hambrecht & Quist Group.
On December 31, 1999, we purchased software for approximately $245,000 in
cash pursuant to a corporate software license agreement with The Santa Cruz
Operation, Inc. Douglas Michels, a director of FASTNET, is the chief executive
officer of The Santa Cruz Operation, Inc.
In January 2000, we entered into a purchase agreement with H&Q You Tools
Investment Holding, L.P., under which we issued a $1.0 million note to H&Q You
Tools Investment Holding, L.P. In addition, H&Q You Tools Investment Holding,
L.P. received warrants to purchase 30,000 shares of our common stock. The
warrant is immediately exercisable at the initial public offering price per
share and expires seven years after the closing of this loan. The loan bears
interest at a rate equal to 7% per annum and matures upon the closing of this
offering.
INDEBTEDNESS OF MANAGEMENT
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, spouse of David K. Van Allen. All of
these notes mature upon consummation of this offering. The notes became due and
payable pursuant to an agreed upon payment schedule as of January 1, 2000.
52
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of FASTNET's common stock as of the date of this prospectus, 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 of FASTNET, including those listed on the
summary compensation table on page 47;
- 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 the date of this prospectus are deemed
outstanding, while such shares are not deemed outstanding for purposes of
computing percentage ownership of any other person. The options listed as
beneficially owned by Mr. Hunt reflect options to purchase 5,000 shares of
common stock that were issued to Mr. Hunt's wife, who is also an employee of
FASTNET. Applicable percentage ownership in the following table is based on
10,388,947 shares of common stock outstanding and 14,388,947 shares immediately
following the completion of this offering. The number of options represents
stock options that are exercisable within 60 days of the date of this
prospectus. 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 PERCENT
- ---- --------- ----------- --------- ------- --------- ----------- --------- -------
<S> <C> <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 27.1%
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 19.6%
Sonny C. Hunt........................... 2,725,000 5,000 2,730,000 26.3% 2,725,000 5,000 2,730,000 19.0%
Stanley F. Bielicki..................... 100,000 50,000 150,000 1.4% 100,000 50,000 150,000 1.0%
Rafe Scheinblum......................... 175,000 50,000 225,000 2.2% 175,000 50,000 225,000 1.6%
Phillip L. Weller....................... 175,000 50,000 225,000 2.2% 175,000 50,000 225,000 1.6%
David J. Farber......................... -- -- -- -- -- -- -- --
R. Barry Borden......................... -- -- -- -- -- -- -- --
Alan S. Kessman......................... -- -- -- -- -- -- -- --
Douglas L. Michels...................... -- 100,000 100,000 1.0% -- 100,000 100,000 0.70%
All directors and executive officers as
a group (11 persons).................. 6,000,000 255,000 6,255,000 60.3% 6,000,000 255,000 6,255,000 43.5%
</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.
Our articles of incorporation and bylaws contain 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 December 31, 1999, there were 7,546,984 shares of common stock
outstanding which were held of record by 9 shareholders. There will be
14,388,947 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.
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.
54
<PAGE>
In January 2000, we entered into a term sheet under which we will issue a
$1.0 million note to H&Q You Tools Investment Holding, L.P. If the loan is
consummated, we will also issue a warrant to purchase 30,000 shares of our
common stock to H&Q You Tools Investment Holding, L.P. for an aggregrate
purchase price of $300. The warrant shall vest upon consummation of this
offering and shall have an exercise price equal to the public offering price.
The warrant will expire on the seventh anniversary of the date of the loan.
The exercise price and the number of shares of common stock issuable upon
the exercise of the warrants 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 procedural requirements and establish
restrictions upon the acquisition of voting shares of a corporation which would
entitle the acquiring person to cast or direct the casting of a 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
55
<PAGE>
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 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 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 employees terminated within two years of such approval. Subchapter
25J, in general, prohibits the abrogation of 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.
NASDAQ NATIONAL MARKET LISTING
We have received approval 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 14,388,947 shares
of common stock based upon shares outstanding at December 31, 1999, assuming no
exercise of the underwriters' over-allotment option. Excluding the 4,000,000
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 10,388,947 shares of common stock
outstanding all of which 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 without the prior written consent of
ING Barings LLC. Beginning 180 days after the effective date of this
registration statement, all of such restricted shares will become available for
sale at various times pursuant to Rule 144, or Rule 144(k) if they are not held
by our affiliates. The general provisions of Rule 144 are described below. All
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 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 143,900 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 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.
H&Q You Tools Investment Holding, L.P. holds 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 585,000 shares
were then outstanding and 295,000 options to purchase shares of common stock
were then exercisable. Beginning 180 days after the date of this prospectus,
approximately 380,000 shares issuable upon the exercise of vested options will
become eligible for sale.
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 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.
57
<PAGE>
UNDERWRITING
Subject to the terms and conditions in an underwriting agreement, dated
, 2000, the underwriters named below, who are represented by ING
Barings LLC, SoundView Technology Group, Inc., FAC/Equities, a division of First
Albany Corporation, and DLJDIRECT Inc., 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........
DLJDIRECT Inc...............................................
---------
Total................................................. 4,000,000
=========
</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 legal matters and to
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 selected broker/dealers,
including the underwriters, and other broker/dealers not included in the table
above, at this price less a concession not in excess of $ per share. The
underwriters may allow, and these dealers may re-allow, to 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. We do not expect that
the underwriting discount will exceed 7% of the initial offering price per share
of common stock. The underwriting discounts and commissions are equal to the
public offering price per share of the common stock less the amount paid by the
underwriters to us for each share of common stock. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.
<TABLE>
<CAPTION>
TOTAL
---------------------------
PER SHARE NO EXERCISE FULL EXERCISE
--------- ----------- -------------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by us... $ $ $
</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 $1.6 million.
FASTNET has granted to the underwriters an option that may be exercised
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 600,000 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 conditions, to purchase its pro rata portion of these
additional shares based on such underwriter's percentage underwriting commitment
as indicated in the table above.
58
<PAGE>
An electronic prospectus will be made available on the Web site maintained
by DLJdirect. Other than the prospectus in electronic format, the information on
the Web site maintained by DLJdirect relating to this offering is not part of
this prospectus and has not been approved and/or endorsed by us or any
underwriter, other than DLJDIRECT.
FASTNET has agreed to indemnify the underwriters against 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. These liabilities generally consist of losses, claims, damages or
actions arising from or relating to the offer, purchase or sale of common stock
in this offering by the underwriters. Indemnification under the Securities Act
may be unenforceable as against public policy.
Each of FASTNET, its executive officers, directors and shareholders has
agreed, subject to exceptions, not to: (1) issue, offer, pledge, sell, contract
to sell, sell any option or contract to purchase, 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 our
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 our request, the underwriters have reserved for sale, at the initial
public offering price, 100,000 shares of common stock, representing
approximately 2.5% of the shares of common stock offered by this prospectus, for
sale to directors, officers and employees and their family members of FASTNET
and to business associates of FASTNET. 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. Participants in the sale of reserved shares
will not be subject to any lock-up arrangements with the underwriters.
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 our common
stock in any jurisdiction where action for that purpose is required. The shares
of common stock 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 shares of our 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 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 our common stock 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.
59
<PAGE>
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. 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
- currently prevailing conditions in the securities markets, including
current market valuations of publicly traded companies which are
comparable to FASTNET.
We have received approval to list our common stock on the Nasdaq National
Market under the symbol FSST.
Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
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 transactions that stabilize the price of the common stock. These 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
individual 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 these transactions or that
these transactions, once commenced, will not be discontinued without notice.
60
<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, Inc.'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.
61
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Basis of Presentation....................................... F-2
Unaudited Pro Forma Combined Statement of Operations--Year
Ended December 31, 1998................................... F-3
Unaudited Pro Forma Combined Statement of Operations--Nine
Months Ended September 30, 1999........................... F-4
Notes to Unaudited Pro Forma Combined Financial
Information............................................... F-5
FASTNET CORPORATION
Report of Independent Public Accountants.................... F-6
Consolidated Balance Sheets................................. F-7
Consolidated Statements of Operations....................... F-8
Consolidated Statements of Shareholders' Equity (Deficit)... F-9
Consolidated Statements of Cash Flows....................... F-10
Notes to Consolidated Financial Statements.................. F-11
INTERNET UNLIMITED, INC.
Report of Independent Public Accountants.................... F-19
Balance Sheets.............................................. F-20
Statements of Operations.................................... F-21
Statements of Shareholders' Deficit......................... F-22
Statements of Cash Flows.................................... F-23
Notes to Financial Statements............................... F-24
</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 colocation 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").
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 $4,462,498 in excess of purchase price over net tangible deficit
acquired as of July 30, 1999. Based on a preliminary analysis completed by
management, it has allocated $2,000,000 of this amount to customer list and the
remaining amount of $2,462,498 to goodwill. Customer list and goodwill are being
amortized on a straight-line basis over 3 years. The final allocation of the
purchase price and the assignment of useful lives are subject to change.
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 $4,464,992,
net of offering costs of $285,000. 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 Statements of Operations reflect the amortization of customer
list and goodwill of $1,487,500 for the year ended December 31, 1998 and
$1,115,625 (including $252,843 recorded by FASTNET in August and September 1999)
for the nine months ended September 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. Additionally, prior to the
Acquisition, FASTNET derived revenues from Internet Unlimited. These revenues
and the corresponding costs of revenues recorded by Internet Unlimited have been
eliminated from the pro forma statements of operations.
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 future results of
operations or financial condition of the Combined Company. The unaudited pro
forma statements of operations 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>
INTERNET PRO FORMA
FASTNET UNLIMITED ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (SEE NOTE 3) COMBINED
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
Services................................... $ 4,875,471 $700,878 $ (123,800) $ 5,452,549
Hardware and software...................... 652,508 20,127 672,635
----------- -------- ----------- -----------
5,527,979 721,005 (123,800) 6,125,184
----------- -------- ----------- -----------
OPERATING EXPENSES:
Cost of services........................... 2,572,732 195,929 (123,800) 2,644,861
Cost of hardware and software.............. 669,009 11,187 680,196
Selling, general and administrative........ 3,067,740 449,000 3,516,740
Depreciation and amortization.............. 346,568 32,840 1,487,500 1,866,908
----------- -------- ----------- -----------
6,656,049 688,956 1,363,700 8,708,705
----------- -------- ----------- -----------
Operating income (loss).................. (1,128,070) 32,049 (1,487,500) (2,583,521)
----------- -------- ----------- -----------
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) 124,542 (39,975)
----------- -------- ----------- -----------
NET INCOME (LOSS)............................ $(1,274,290) $ 13,752 $(1,362,958) $(2,623,496)
=========== ======== =========== ===========
BASIC NET LOSS PER COMMON SHARE.............. $ (0.14) $ (0.25)
=========== ===========
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
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
INTERNET PRO FORMA
FASTNET UNLIMITED ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (SEE NOTE 3) COMBINED
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
Services.................................... $ 5,751,503 $802,125 $(105,603) $ 6,448,025
Hardware and software....................... 94,871 20,842 115,713
----------- -------- --------- -----------
5,846,374 822,967 (105,603) 6,563,738
----------- -------- --------- -----------
OPERATING EXPENSES:
Cost of services............................ 3,844,531 176,964 (105,603) 3,915,892
Cost of hardware and software............... 89,194 11,949 101,143
Selling, general and administrative......... 3,911,189 581,113 4,492,302
Depreciation and amortization............... 904,233 45,293 862,782 1,812,308
----------- -------- --------- -----------
8,749,147 815,319 757,179 10,321,645
----------- -------- --------- -----------
Operating income (loss)................... (2,902,773) 7,648 (862,782) (3,757,907)
----------- -------- --------- -----------
OTHER INCOME (EXPENSES):
Interest income............................. 34,305 -- 34,305
Interest expense............................ (262,499) (22,392) 184,085 (100,806)
Other....................................... 1,056 -- -- 1,056
----------- -------- --------- -----------
(227,138) (22,392) 184,085 (65,445)
NET LOSS...................................... $(3,129,911) $(14,744) $(678,697) $(3,823,352)
=========== ======== ========= ===========
BASIC NET LOSS PER COMMON SHARE............... $ (0.44) $ (0.39)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
(Note 2).................................... 7,122,004 2,632,650 9,754,654
=========== ========= ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
F-4
<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 registration
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 nine months ended September 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 nine months ended September 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 issuances 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.
- Common shares to be issued for the conversion of 666,198 shares of
Series A Preferred upon the consummation of the offering as if such
conversion occurred on the dates of the issuances of the shares.
3. PRO FORMA ADJUSTMENTS:
The results of Internet Unlimited are included in the Internet Unlimited
columns through July 30, 1999, the date of the acquisition. The results of
Internet Unlimited for August and September 1999 are included in Fastnet's
historical results.
The Pro Forma Statements of Operations reflect the amortization of customer
list and goodwill of $1,487,500 for the year ended December 31, 1998 and
$1,115,625 (including $247,916 recorded by Fastnet in August and September 1999)
for the nine months ended September 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. Additionally, prior to the
Acquisition, FASTNET derived revenues from Internet Unlimited. These revenues
and the corresponding costs of revenues recorded by Internet Unlimited have been
eliminated from the pro forma statements of operations.
F-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To FASTNET Corporation:
We have audited the accompanying consolidated balance sheets of FASTNET
Corporation (a Pennsylvania Corporation) as of December 31, 1997 and 1998, and
the related consolidated 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 consolidated 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-6
<PAGE>
FASTNET CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1997 1998 1999
---------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 88,981 $ 256,782 $ 3,812,558
Accounts receivable, net of allowance of $14,442,
$17,187 and $37,187................................. 449,662 878,523 1,128,673
Other current assets.................................. 71,759 135,478 1,026,524
---------- ----------- -----------
Total current assets.............................. 610,402 1,270,783 5,967,755
---------- ----------- -----------
PROPERTY AND EQUIPMENT, net............................. 1,047,402 1,741,635 5,510,368
GOODWILL, net........................................... -- -- 2,320,766
CUSTOMER LIST, net...................................... -- -- 1,888,889
OTHER ASSETS............................................ 25,541 214,423 401,743
---------- ----------- -----------
$1,683,345 $ 3,226,841 $16,089,521
========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit........................................ $ 217,489 $ -- $ --
Current portion of long-term debt..................... 248,857 3,061,283 16,690
Current portion of capital lease obligations.......... 31,206 52,921 693,711
Accounts payable...................................... 879,174 1,289,156 2,081,388
Accrued expenses...................................... 58,761 338,896 1,400,385
Deferred revenues..................................... 622,053 885,164 1,777,233
---------- ----------- -----------
Total current liabilities......................... 2,057,540 5,627,420 5,969,407
---------- ----------- -----------
LONG-TERM DEBT.......................................... 127,272 44,816 3,088,007
---------- ----------- -----------
CAPITAL LEASE OBLIGATIONS............................... 30,802 118,686 2,443,473
---------- ----------- -----------
OTHER LIABILITIES....................................... -- -- 788,889
---------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock (Note 6).............................. -- -- 5,480,537
Common stock (Note 6)................................. 124,000 366,478 4,798,924
Deferred compensation................................. -- -- (419,246)
Accumulated deficit................................... (656,269) (1,930,559) (5,060,470)
Less- Treasury stock, at cost......................... -- (1,000,000) (1,000,000)
---------- ----------- -----------
Total shareholders' equity (deficit).............. (532,269) (2,564,081) 3,799,745
---------- ----------- -----------
$1,683,345 $ 3,226,841 $16,089,521
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
FASTNET CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
---------- ---------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Services....................... $1,545,072 $2,846,338 $ 4,875,471 $3,453,758 $ 5,751,503
Hardware and software.......... 397,535 824,276 652,508 634,479 94,871
---------- ---------- ----------- ---------- -----------
1,942,607 3,670,614 5,527,979 4,088,237 5,846,374
---------- ---------- ----------- ---------- -----------
OPERATING EXPENSES:
Cost of services............... 740,186 1,771,968 2,572,732 1,793,452 3,844,531
Cost of hardware and
software..................... 421,825 561,951 669,009 558,894 89,194
Selling, general and
administrative............... 793,336 1,445,224 3,067,740 2,052,782 3,911,189
Depreciation and
amortization................. 78,804 177,375 346,568 230,475 904,233
---------- ---------- ----------- ---------- -----------
2,034,151 3,956,518 6,656,049 4,635,603 8,749,147
---------- ---------- ----------- ---------- -----------
Operating loss............. (91,544) (285,904) (1,128,070) (547,366) (2,902,773)
---------- ---------- ----------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest income................ 1,151 1,305 15,256 13,584 34,305
Interest expense............... (18,587) (38,368) (166,831) (110,704) (262,499)
Other.......................... (6,244) 901 5,355 5,354 1,056
---------- ---------- ----------- ---------- -----------
(23,680) (36,162) (146,220) (91,766) (227,138)
---------- ---------- ----------- ---------- -----------
NET LOSS......................... $ (115,224) $ (322,066) $(1,274,290) $ (639,132) $(3,129,911)
========== ========== =========== ========== ===========
BASIC AND DILUTED NET LOSS PER
COMMON SHARE................... $ (0.01) $ (0.03) $ (0.14) $ (0.07) $ (0.44)
========== ========== =========== ========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING............. 11,575,000 11,575,000 8,880,833 9,480,339 7,122,004
========== ========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
FASTNET CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------- ----------------------- DEFERRED ACCUMULATED TREASURY
SHARES AMOUNT SHARES AMOUNT COMPENSATION DEFICIT STOCK TOTAL
-------- ---------- ---------- ---------- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1996................ -- $ -- 11,575,220 $ 124,000 $ -- $ (334,203) $ -- $ (210,203)
Net loss............ -- -- -- -- -- (322,066) -- (322,066)
------- ---------- ---------- ---------- --------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1997................ -- -- 11,575,220 124,000 -- (656,269) -- (532,269)
Purchase of treasury
stock............. -- -- (5,787,610) -- -- -- (1,000,000) (1,000,000)
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)....... -- -- -- 532,450 (532,450) -- -- --
Amortization of
deferred
compensation
(unaudited)....... -- -- -- -- 113,204 -- -- 113,204
Issuance of Common
stock for
acquisition
(unaudited)....... -- -- 546,984 3,899,996 -- -- -- 3,899,996
Sale of Preferred
stock
(unaudited)....... 666,198 4,464,992 -- -- -- -- -- 4,464,992
Conversion of note
payable
(unaudited)....... 142,431 1,015,545 -- -- -- -- -- 1,015,545
Net loss
(unaudited)....... -- -- -- -- -- (3,129,911) -- (3,129,911)
------- ---------- ---------- ---------- --------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30,
1999 (unaudited).... 808,629 $5,480,537 7,546,984 $4,798,924 $(419,246) $(5,060,470) $(1,000,000) $ 3,799,745
======= ========== ========== ========== ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-9
<PAGE>
FASTNET CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- -------------------------
1996 1997 1998 1998 1999
--------- --------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss............................ $(115,224) $(322,066) $(1,274,290) $ (639,132) $(3,129,911)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities-
Depreciation and amortization..... 78,804 177,375 346,568 230,475 904,233
Stock-based compensation
expense......................... -- -- 42,478 42,478 --
Amortization of deferred
compensation.................... -- -- -- -- 113,204
Changes in operating assets and
liabilities--
Decrease (increase) in assets--
Accounts receivable........... (176,554) (216,190) (428,861) (213,724) (155,075)
Other assets.................. 4,603 (88,079) (252,601) (80,430) (82,167)
Increase (decrease) in
liabilities--
Accounts payable and accrued
expenses.................... 277,067 533,819 689,616 (52,845) 776,489
Deferred revenues............. 106,822 398,556 263,111 54,679 684,936
Other liabilities............. -- -- -- -- 788,889
--------- --------- ----------- ----------- -----------
Net cash provided by (used
in) operating
activities................ 175,518 483,415 (613,979) (658,499) (99,402)
--------- --------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Purchases of property and
equipment......................... (331,153) (690,352) (899,996) (423,867) (1,093,071)
Cash paid for business
acquisition....................... -- -- -- -- (400,199)
--------- --------- ----------- ----------- -----------
Net cash used in investing
activities........................ (331,153) (690,352) (899,996) (423,867) (1,493,270)
--------- --------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from long-term debt........ 381,873 215,599 3,344,000 3,344,000 1,000,000
Repayments of long-term debt........ (296,960) (46,049) (615,920) (613,145) (140,407)
Repayments of capital lease
obligations....................... (3,800) (22,712) (28,815) (21,408) (176,137)
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 --
Proceeds from sale of Series A
Preferred stock, net of
transaction costs................. -- -- -- -- 4,464,992
--------- --------- ----------- ----------- -----------
Net cash provided by
financing activities...... 178,113 267,327 1,681,776 1,691,958 5,148,448
--------- --------- ----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS......................... 22,478 60,390 167,801 609,592 3,555,776
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 $ 698,573 $ 3,812,558
========= ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-10
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1999, AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999, IS UNAUDITED)
1. THE COMPANY:
FASTNET Corporation and its subsidiary (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 September 30, 1999, the Company had a working capital deficit of
$1,652 and accumulated losses of $5,060,470. 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. In order to accomplish these objectives and fund
its operations, the Company must raise additional capital. There can be no
assurance that such capital will be available when needed or on terms favorable
to the Company.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS
The financial statements for the nine months ended September 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 September 30, 1999 and the results
of its operations for the nine months ended September 30, 1998 and 1999. The
results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the entire year.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of FASTNET and
its wholly owned subsidiary. All material intercompany balances and transactions
have been eliminated in consolidation.
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-11
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (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 3 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,
including property and equipment, goodwill and customer list, 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
Service 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 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
F-12
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
provided on a time-and-material basis and revenues are recognized based upon
time (at established rates) and other direct costs as incurred.
ADVERTISING
All advertising costs are expensed as incurred. Advertising expenses for the
years ended December 31, 1996, 1997 and 1998 and the nine months ended
September 30, 1998 and 1999 amounted to $105,053, $243,104, $625,264, $391,452
and $528,833, 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, $1,318,021, $2,091,772, $1,606,950 and $2,880,762 for the
years ended December 31, 1996, 1997, and 1998, and the nine months ended
September 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.
MAJOR CUSTOMERS
The Company derived revenues of approximately 16% from its largest customer
for the year ended December 31, 1996, 24% and 13% from its two largest customers
for the year ended December 31,
F-13
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
1997, 11% from its largest customer for the year ended December 31, 1998, 10%
from its largest customer for the nine months ended September 30, 1998, and 19%
from its largest customer for the nine months ended September 30, 1999. The
Company had no other customer which exceeded 10% of revenues in 1996, 1997, 1998
or the nine months ended September 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 nine months
ended September 30, 1998 and 1999, the Company paid interest of $18,540,
$36,281, $171,101, $58,208 and $243,077, respectively. For the years ended
December 31, 1997, 1998 and for the nine months ended September 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 September 30, 1999, as the Company expects these amounts to be refunded. For
the year ended December 31, 1996 and for the nine months ended September 30,
1999, the Company paid no income taxes.
STOCK-SPLIT
On May 28, 1998, the Company effected a 24,115-for-1 split. All references
in the financial statements to the number of shares and to per share amounts
have been retroactively restated to reflect this change.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1997 1998 1999
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Equipment................................ $ 920,610 $1,591,667 $5,496,255
Computer equipment....................... 272,084 359,095 506,613
Computer software........................ 77,745 133,385 300,860
Furniture and fixtures................... 52,004 153,510 271,783
Leasehold improvements................... 14,209 125,109 217,694
---------- ---------- ----------
1,336,652 2,362,766 6,793,205
Less--Accumulated depreciation and
amortization........................... (289,250) (621,131) (1,282,837)
---------- ---------- ----------
$1,047,402 $1,741,635 $5,510,368
========== ========== ==========
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1996,
1997 and 1998, and the nine months ended September 30, 1998 and 1999 was
$78,804, $177,375, $346,568, $230,475
F-14
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT: (CONTINUED)
and $904,233, respectively. The net carrying value of property and equipment
under capital leases was $79,919, $188,883 and $3,368,949 at December 31, 1997
and 1998 and September 30, 1999, respectively.
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,
----------------------- SEPTEMBER 30,
1997 1998 1999
--------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Convertible Notes Payable................ $ -- $ 3,050,000 $ 3,050,000
Demand Note Payable...................... 200,000 -- --
Term Loans............................... 176,129 56,099 54,697
--------- ----------- -----------
376,129 3,106,099 3,104,697
Less--Current portion.................... (248,857) (3,061,283) (16,690)
--------- ----------- -----------
$ 127,272 $ 44,816 $ 3,088,007
========= =========== ===========
</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
bore interest at 7%, and both principal and accrued interest were 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. 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.
F-15
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DEBT: (CONTINUED)
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.
6. SHAREHOLDERS' EQUITY:
COMMON STOCK
The Company has 50,000,000 authorized shares of no par value Common stock.
The Company had 11,575,220 shares outstanding on December 31, 1997 and 7,000,000
shares outstanding on December 31, 1998.
In May 1998, the Company purchased 5,787,610 shares of Common stock from
certain employee shareholders (the "Sellers") of the Company. Subsequently in
May 1998, the Company 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.
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. In connection with the sale
of Series A Preferred stock, an advisory fee of $285,000 is due to a financial
advisor, who is an affiliate of a significant shareholder. The proceeds from the
sales of the Series A Preferred were $4,464,992, net of offering costs of
$285,000.
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.
F-16
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SHAREHOLDERS' EQUITY: (CONTINUED)
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. The Company issued options to purchase 110,000 shares of Common
stock for $2.50 per share in May 1999, at this time the fair value of the
Company's Common stock was $4.00 per share. The Company issued options to
purchase 3,000 shares of Common stock for $2.50 per share in June 1999, at this
time the fair value of the Company's Common stock was $7.13 per share. These
options vest over periods ranging from one to five years. As a result of these
option grants, deferred compensation of $532,450 was recorded as additional
paid-in capital for the six months ended September 30, 1999, and the resulting
amortization expense as a result of its amortization was $113,204 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.
Information with respect to outstanding options under the 1999 Plan is as
follows:
<TABLE>
<CAPTION>
OPTIONS AVERAGE
AVAILABLE FOR OUTSTANDING EXERCISE
GRANT OPTIONS PRICE RANGE PRICE
------------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Plan inception, March 3, 1999.... 1,000,000 -- $ -- $ --
Granted........................ (585,000) 585,000 $1.50-$7.13 $1.89
--------- ------- ----------- -----
Outstanding, September 30,
1999........................... 415,000 585,000 $1.50-$7.13 $1.89
========= ======= =========== =====
</TABLE>
As of September 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
In June 1999, the Company entered into a $20 million master equipment lease
agreement with an equipment vendor (the "Master Equipment Lease"). Leases under
the agreement are payable in three monthly installments of 0.83% of the value of
the equipment leased and 33 monthly installments of 0.0345% of the value of the
equipment leased. As of September 30, 1999 the Company had $17,420,471 available
for the purchase of additional equipment under the Master Equipment Lease.
F-17
<PAGE>
FASTNET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
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 nine months ended September 30, 1998 and 1999, respectively. The interest
rates implicit in the capital leases range from 6.6% to 14.9%. Future minimum
lease payments as of September 30, 1999, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<S> <C> <C>
Three months ending December 31, 1999................ $ 338,334 $ 280,224
2000................................................. 983,372 1,041,610
2001................................................. 1,096,634 753,113
2002................................................. 718,844 400,755
2003................................................. -- 383,781
2004 and thereafter.................................. -- 447,321
---------- ----------
Total minimum lease payments......................... 3,137,184 $3,306,804
==========
Less--Current portion................................ (693,711)
----------
$2,443,473
==========
</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.
RELATED PARTY TRANSACTION
In June, 1999 the Company entered into a financial arrangement as amended
with an advisor (the "Financial Advisor"), who is an affiliate of a significant
shareholder. This agreement provided for a payment of $320,000 to be made to the
Financial Advisor on February 1, 2001 related to the private placement of
securities (see Note 1), and a $500,000 payment to be made upon the earlier of
the consummation of an initial public offering or February 1, 2001. This
$500,000 payment is related to general strategic and advisory services rendered
during the three months ended September 30, 1999.
8. ACQUISITION:
On July 30, 1999, the Company acquired 100% of the capital stock of Internet
Unlimited, Inc., a provider of Web hosting and colocation services, for
approximately $400,000 in cash and 546,984 shares of Common stock with estimated
transaction costs of $75,000. The company recorded the acquisition 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 $4,462,498. The Company
expects to allocate the excess purchase price to customer list and goodwill.
F-18
<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.
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 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-19
<PAGE>
INTERNET UNLIMITED, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1997 1998 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
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-20
<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-21
<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-22
<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-23
<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 colocation 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
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.
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.
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,
F-24
<PAGE>
INTERNET UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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 colocation services revenue
over the period the services are provided. The Company offers contracts for Web
hosting and colocation 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.
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.
F-25
<PAGE>
INTERNET UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31,
------------------- JUNE 30,
1997 1998 1999
-------- -------- -----------
<S> <C> <C> <C>
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.
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-26
<PAGE>
4,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
ING BARINGS
WIT SOUNDVIEW
FAC/EQUITIES
DLJDIRECT INC.
, 2000
<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......... $ 15,346
NASD filing fee............................................. 5,500
Nasdaq filing fee........................................... 87,500
Printing and engraving expenses............................. 240,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 500,000
Blue Sky fees and expenses (including legal fees)........... 2,500
Transfer agent and rights agent and registrar fees and
expenses.................................................. 20,000
Miscellaneous............................................... 329,154
----------
Total................................................... $1,600,000
==========
</TABLE>
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
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
II-1
<PAGE>
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 H&Q You
Tools Investment Holding, L.P. an aggregate of 7,000,000 shares of common stock
and to employees and directors 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 July 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 issued 666,198 shares of preferred stock to
H&Q You Tools Investment Holding L.P., Naveen Jain, Everest Venture Partners I,
L.P., Entrepreneurial Investment Corporation, J.F. Shea Co. Inc., as nominee,
Lucent Technologies, Inc., InterNetworking Systems, 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.
In January 2000, the Registrant issued Warrants to H&Q You Tools Investment
Holdings, L.P. to purchase 30,000 shares of Registrant's common stock
exercisable at the Registrant's initial public offering price. The Registrant
issued a $1.0 million note to H&Q You Tools Investment Holding, L.P. The sale
was 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
- -------------- -----------
<S> <C>
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.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
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
September 18, 1998.
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 June 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.
10.24* Master Lease Agreement between Sunrise Leasing Corporation
(Cisco Systems, Inc.) and the Registrant, dated November 3,
1999.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
10.25+ Agreement between Hambrecht & Quist LLC and the Registrant,
dated June 29, 1999 and an amendment dated December 7, 1999.
10.26* Agreement between Covad Communications Company and the
Registrant, dated December 3, 1999.
10.27* Lease Agreement between 65 Public Square Associates and the
Registrant, dated November 15, 1999.
10.28* Agreement between UUNET Technologies, Inc. and the
Registrant, dated December 14, 1999.
10.29* Agreement between NEXTLINK Pennsylvania, Inc. and the
Registrant, dated December 7, 1999.
10.30* Agreement between NEXTLINK Pennsylvania, Inc. and the
Registrant, dated October 19, 1999.
10.31* Agreement between the ISK Magnetics, Inc. and the
Registrant, dated January 6, 2000.
10.32+ Agreement between The Santa Cruz Operation Inc. and the
Registrant, dated December 30, 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.
+ Previously filed.
* Certain portions of this exhibit have been omitted pursuant to Rule 406 of
the Securities Act of 1933. The omitted portions have been 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,
II-5
<PAGE>
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 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 Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Bethlehem,
Pennsylvania, on February 3, 2000.
<TABLE>
<S> <C> <C>
FASTNET CORPORATION
By: /s/ DAVID K. VAN ALLEN
-----------------------------------------
David K. Van Allen
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID K. VAN ALLEN Chief Executive Officer and
------------------------------------------- Director (Principal February 3, 2000
David K. Van Allen Executive Officer)
/s/ STANLEY F. BIELICKI Chief Financial Officer
------------------------------------------- (Principal Financial and February 3, 2000
Stanley F. Bielicki Accounting Officer)
/s/ SONNY C. HUNT President and Director
------------------------------------------- February 3, 2000
Sonny C. Hunt
* Director
------------------------------------------- February 3, 2000
Douglas L. Michels
*/s/ DAVID K. VAN ALLEN Director
------------------------------------------- February 3, 2000
David J. Farber
*/s/ DAVID K. VAN ALLEN Director
------------------------------------------- February 3, 2000
R. Barry Borden
*/s/ DAVID K. VAN ALLEN Director
------------------------------------------- February 3, 2000
Alan S. Kessman
*/s/ DAVID K. VAN ALLEN
-------------------------------------------
David K. Van Allen February 3, 2000
as attorney-in-fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
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
September 18, 1998.
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 June 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
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.
10.24* Master Lease Agreement between Sunrise Leasing Corporation
(Cisco Systems, Inc.) and the Registrant, dated November 3,
1999.
10.25+ Agreement between Hambrecht & Quist LLC and the Registrant,
dated June 29, 1999 and an amendment dated December 7, 1999.
10.26* Agreement between Covad Communications Company and the
Registrant, dated December 3, 1999.
10.27* Lease Agreement between 65 Public Square Associates and the
Registrant, dated November 15, 1999.
10.28* Agreement between UUNET Technologies, Inc. and the
Registrant, dated December 14, 1999.
10.29* Agreement between NEXTLINK Pennsylvania, Inc. and the
Registrant, dated December 7, 1999.
10.30* Agreement between NEXTLINK Pennsylvania, Inc. and the
Registrant, dated October 19, 1999.
10.31* Agreement between the ISK Magnetics, Inc. and the
Registrant, dated January 6, 2000.
10.32+ Agreement between The Santa Cruz Operation Inc. and the
Registrant, dated December 30, 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.
+ Previously filed.
* Certain portions of this exhibit have been omitted pursuant to Rule 406 of
the Securities Act of 1933. The omitted portions have been filed separately
with the Securities and Exchange Commission.
<PAGE>
DRAFT
2/1/00
FASTNET Corporation
4,000,000 Shares of Common Stock*
(no par value per share)
UNDERWRITING AGREEMENT
New York, New York
February __, 2000
ING Barings LLC
SoundView Technology Group, Inc.
FAC/Equities, a division of
First Albany Corporation
DLJDIRECT Inc.
As Representatives of the several Underwriters
c/o ING Barings LLC
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
FASTNET Corporation, a Pennsylvania corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters") for whom you are acting as representative (the "Representative")
an aggregate of 4,000,000 shares (the "Firm Shares") of its common stock, no par
value per share (the "Common Stock"), and for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, at the option of
the Underwriters, up to an additional 600,000 shares (the "Option Shares"),
which number of Firm Shares and Option Shares shall not exceed an aggregate of
4,600,000 shares of Common Stock. The Firm Shares and the Option Shares are
collectively referred to as the "Shares."
- ------------
* Plus an option to purchase from the Company up to an additional 600,000 shares
of Common Stock to cover over-allotments.
1
<PAGE>
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Underwriters that:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form
S-1 (No. 333-85465), for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"). Such registration
statement, including the prospectus, financial statements and
schedules, exhibits and all other documents filed as a part thereof, as
amended through the time of effectiveness of the registration
statement, including any information deemed to be a part thereof as of
the time of effectiveness pursuant to Rule 430A or Rule 434 of the
Rules and Regulations of the Commission under the Act (the
"Regulations"), is herein called the "Registration Statement". Any
registration statement filed by the Company pursuant to Rule 462(b)
under the Act is herein called the "Rule 462(b) Registration
Statement", and from and after the date and time of filing of the Rule
462(b) Registration Statement the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The prospectus, in the
form first filed with the Commission pursuant to Rule 424(b) of the
Regulations or filed as part of the Registration Statement at the time
of effectiveness if no Rule 424(b) or Rule 434 filing is required, is
herein called the "Prospectus". The term "preliminary prospectus" as
used herein means a preliminary prospectus as described in Rule 430A of
the Regulations; provided, however, if the Company has, with the
consent of ING Barings LLC, elected to rely upon Rule 434 under the
Act, the term "Prospectus" shall mean the Company's prospectus subject
to completion (each, a "preliminary prospectus") dated January __, 2000
(such preliminary prospectus is herein called the "Rule 434 preliminary
prospectus"). All references in this Agreement to the Registration
Statement, the Rule 462(b) Registration Statement, a preliminary
prospectus, the Prospectus or the Term Sheet, or any amendments or
supplements to any of the foregoing, shall include any copy thereof
filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").
(b) Each preliminary prospectus and the Prospectus, if filed
by electronic transmission pursuant to EDGAR (except as may be
permitted by Regulation S-T under the Securities Act), was identical to
the copy thereof delivered to the Underwriters for use in connection
with the offer and sale of the Shares. At the time of the effectiveness
of the Registration Statement or the effectiveness of any Rule 462(b)
Registration Statement and any post-effective amendment thereto, when
the Prospectus is first filed with the Commission pursuant to Rule
424(b) or Rule 434 of the Regulations, when any supplement to or
amendment of
2
<PAGE>
the Prospectus is filed with the Commission and at the Closing Date and
the Additional Closing Date, if any (as defined in Section 2), the
Registration Statement and the Prospectus and any amendments thereof
and supplements thereto complied and will comply in all material
respects with the applicable provisions of the Act and the Regulations,
did not and will not contain an untrue statement of a material fact and
did not and will not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. When any related preliminary prospectus was first filed
with the Commission (whether filed as part of the Registration
Statement for the registration of the Shares or any amendment thereto
or pursuant to Rule 424(a) of the Regulations) and when any amendment
thereof or supplement thereto was first filed with the Commission, such
preliminary prospectus and any amendments thereof and supplements
thereto complied in all material respects with the applicable
provisions of the Act and the Regulations and did not contain an untrue
statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading. No representation and warranty is
made in this subsection (b), however, with respect to any information
contained in or omitted from the Registration Statement or the
Prospectus or any related preliminary prospectus or any amendment
thereof or supplement thereto in reliance upon and in conformity with
information relating to the Underwriters furnished in writing to the
Company by or on behalf of any Underwriter through you expressly for
use in connection with the preparation thereof. If Rule 434 is used,
the Company will comply with the requirements of Rule 434.
(c) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania, with full power and authority to own,
lease and operate its properties and engage in the business in which it
is engaged or in which it proposes to engage as described in the
Registration Statement, the preliminary prospectus and the Prospectus.
The Company is duly registered and qualified to do business as a
foreign corporation in good standing in each jurisdiction where the
character, location, ownership or leasing of its properties (owned,
leased or licensed) or the nature or conduct of its business requires
such registration or qualification.
(d) The Company has no subsidiaries (as defined in the
Regulations), other than 123Hostme.com, Inc., formerly known as
Internet Unlimited, Inc. (the "Subsidiary"), which is a wholly-owned
subsidiary of the Company. The Company does not own or control,
directly or indirectly, any shares of stock or any other equity or
long-term debt
3
<PAGE>
securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association, or other entity other than the
Subsidiary. All the outstanding shares of capital stock of the
Subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, are owned solely by the Company and are
free and clear of any security interest, pledge, claim (legal or
equitable), lien, charge, equity, mortgage, encumbrance or other
restriction (each a "Lien"), shareholders' agreements, voting trusts or
defects of title. The Subsidiary has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of organization, with full power and authority to own,
lease and operate its properties and conduct the business in which it
is engaged or in which it proposes to engage. The Subsidiary is duly
registered and qualified as a foreign corporation in good standing in
each jurisdiction where the character, location, ownership or leasing
of its properties or the nature or conduct of its business requires
such registration or qualification. The Subsidiary is not currently
prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distribution on its capital stock, from
repaying to the Company any loans or advances to it from the Company or
from transferring any of its property or assets to the Company or any
other subsidiary of the Company.
(e) Arthur Andersen LLP, the accountants who have expressed
their opinion with respect to the consolidated financial statements
(including the related notes and supporting schedules) of the Company
and the Subsidiary filed with Commission as a part of the Registration
Statement, the preliminary prospectus and the Prospectus, are, with
respect to the Company and the Subsidiary, independent public
accountants as required by the Act and the Regulations.
(f) The Company has an authorized capitalization as of
December 31, 1999 as set forth in the Registration Statement, the
preliminary prospectus and the Prospectus and there has been no
material change in its capitalization since that date. All outstanding
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws and were not
issued in violation of any preemptive right, resale right, right of
first refusal or similar right. The authorized and outstanding capital
stock of the Company conforms to the description thereof contained in
the Registration Statement, the preliminary prospectus and
4
<PAGE>
the Prospectus (and such description correctly states the substance of
the provisions of the instruments defining the capital stock of the
Company). Except as described in the Registration Statement, the
preliminary prospectus and the Prospectus, there are no authorized or
outstanding rights (including, without limitation, preemptive rights,
co-sale rights, resale rights, rights of first refusal or similar
rights), warrants or options to acquire, or instruments convertible
into or exercisable or exchangeable for, any share of capital stock or
other equity interest or ownership interest in the Company or the
Subsidiary or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock
or other equity interest or ownership interest in the Company or the
Subsidiary or any such convertible or exercisable or exchangeable
securities or instruments or any such rights, warrants or options. The
Shares to be issued pursuant to this Agreement will not be issued in
violation of any preemptive right, co-sale right, resale right, right
of first refusal or similar right. The description of the Company' s
stock option, stock bonus and other stock plans or arrangements, and
the options or other rights granted thereunder, set forth in the
Registration Statement, the preliminary prospectus and the Prospectus
accurately and fairly presents the information required to be shown
with respect to such plans, arrangements, options and rights. The
Shares have been duly authorized for issuance and, when issued and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, good
title to the Shares will be transferred to the Underwriters free and
clear of any Liens and the certificates representing the Shares will be
in valid and sufficient form.
(g) There is (i) no action, suit, proceeding or investigation
before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, pending, threatened or contemplated, as
to which the Company or the Subsidiary will be a party or as to which
the business, assets or property of the Company or the Subsidiary is or
will be subject, (ii) no statute, rule, regulation or order that has
been enacted, adopted or issued by any governmental agency, body or
official, and (iii) no injunction, restraining order or order of any
nature that has been issued by a federal or state court or foreign
court of competent jurisdiction to which the Company or the Subsidiary
is or will be subject or affecting the business, assets or property of
the Company or the Subsidiary, that could (in the case of clauses (i),
(ii) and (iii)), individually or in the aggregate, whether or not
arising from transactions in the ordinary course of business, result in
a material adverse effect on or affecting the business, operations,
assets, properties, condition (financial or other), stockholders'
equity, prospects or results of operations (a "Material Adverse
Effect") of the Company and its subsidiaries taken as a whole, be
required to be disclosed in the Registration Statement, the preliminary
prospectus or the Prospectus or adversely affect the ability of the
Company to perform its obligations under this Agreement or be otherwise
important in the context
5
<PAGE>
of the sale of the Shares. There are no legal or administrative
proceedings, statutes, Contracts or documents concerning the Company or
the Subsidiary of a character that would be required to be described in
or filed as an exhibit to a registration statement on Form S-1 under
the Act that are not described or filed, as required, in the
Registration Statement, the preliminary prospectus and the Prospectus.
(h) The consolidated financial statements of the Company and
the Subsidiary, together with the related notes thereto, which are a
part of the Registration Statement, the preliminary prospectus and the
Prospectus, present fairly the consolidated financial position and the
consolidated results of operations, changes in stockholders' equity and
changes in cash flows of the Company and the Subsidiary as of the
respective dates and for the respective periods specified therein. All
of such financial statements and related notes have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved and comply as to form
with the applicable accounting requirements included in Regulation S-X
under the Act. The supporting schedules, the "Summary Financial
Information", the "Selected Consolidated Financial Data" and the tables
included in the Registration Statement, the preliminary prospectus and
the Prospectus fairly present the information purported to be shown
thereby at the respective dates thereof and for the respective periods
covered thereby and have been presented on a basis consistent with that
of the audited financial statements therein. No other financial
statements or supporting schedules are required by the Act or
Regulation S-X to be included therein. The pro forma consolidated
financial statements of the Company and its subsidiaries and the
related notes thereto included under the caption, "Summary Consolidated
Selected Financial Information", "Selected Consolidated Financial Data"
and elsewhere in the Registration Statement, the preliminary prospectus
and the Prospectus present fairly the information contained therein,
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly presented on the bases described therein; and the assumptions
used in the preparation thereof are reasonable. The adjustments used
therein give appropriate effect to those assumptions and reflect the
proper application of those assumptions to the historical financial
statement amounts and the transactions and circumstances referred to
therein. No other pro forma financial information is required to be
included in the Registration Statement, the preliminary prospectus and
the Prospectus pursuant to Regulation S-X.
6
<PAGE>
(i) Subsequent to the respective dates as of which information
is given in the Registration Statement, the preliminary prospectus and
the Prospectus, there has not been (i) any loss or adverse change, or
any development which may result in a loss or adverse change, in or
affecting the business, properties, management, assets, prospects,
stockholders' equity, operations, condition (financial or other), or
results of operations of the Company and its subsidiaries taken as a
whole, (ii) any transaction entered into by the Company or the
Subsidiary, except transactions in the ordinary course of business;
(iii) any obligation, direct or contingent, incurred by the Company or
the Subsidiary which is material to the Company and the Subsidiary
taken as a whole, except for liabilities or obligations which are
reflected in the Registration Statement, the preliminary prospectus and
the Prospectus, (iv) any change in the capital stock or outstanding
indebtedness of the Company, or (v) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company, which
in any case described in clauses (i), (ii), (iii), (iv) or (v) above,
could, individually or in the aggregate, have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole or adversely
affect the ability of the Company to perform its obligations under this
Agreement or be otherwise important in the context of the sale of the
Shares.
(j) The Company and the Subsidiary have good and marketable
title to all properties and assets described in the Registration
Statement, the preliminary prospectus and the Prospectus as being owned
by them, free and clear of Liens, except, individually and in the
aggregate, Liens for taxes not yet due and payable. The Company and the
Subsidiary have valid and enforceable leases for the properties leased
by them, the Company and the Subsidiary enjoy peaceful and undisturbed
possession under all such leases with such exceptions as do not
materially interfere with the use thereof made by the Company and the
Subsidiary, and such leases conform in all material respects to the
descriptions thereof, if any, set forth in the Registration Statement,
the preliminary prospectus and the Prospectus. The Company and the
Subsidiary, own, lease or otherwise have rights to use all properties
and assets as are important to their respective operations as now
conducted and as proposed to be conducted.
(k) The Company and the Subsidiary have all requisite power
and authority (corporate and other), and all licenses, certificates,
approvals, consents, concessions, qualifications, orders,
registrations, authorizations and permits from all federal, state,
foreign and other governmental and regulatory agencies, bodies and
authorities ("Permits") that are material to the conduct of the
business of the Company and the
7
<PAGE>
Subsidiary as such business is currently conducted. The Company
reasonably believes that it will be able to obtain Permits that are
material to the conduct of the business of the Company and the
Subsidiary as such business is proposed to be conducted as described in
the Registration Statement, the preliminary prospectus and the
Prospectus. All such Permits are valid and in full force and effect
(and there is no proceeding pending or, to the best knowledge of the
Company, threatened which may cause any such Permit to be withdrawn,
canceled, suspended or not renewed). The Company and the Subsidiary are
not in violation of, or in default under, and have fulfilled and
performed all their obligations with respect to such Permits. No event
has occurred which allows or would allow revocation or termination of
any such Permit or result in any material impairment of the rights of
the holder of any such Permit. The Contracts (as defined below) to
which the Company or the Subsidiary is a party are valid and binding
agreements, enforceable against the Company and the Subsidiary in
accordance with their terms and, to the best of the Company's
knowledge, the other contracting party or parties thereto are not in
material breach or default under any of such Contracts.
(l) The Company and the Subsidiary are not (i) in violation of
their respective certificates of incorporation, as amended, or bylaws,
as amended or (ii) in breach of or default in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement,
franchise, joint venture, deed of trust, bond, note, lease, Permit or
other agreement or instrument to which the Company or the Subsidiary is
a party or by which the Company or the Subsidiary may be bound or to
which any of the property or assets of the Company or the Subsidiary is
subject (each a "Contract"), or in violation of any law, order, rule,
regulation, writ, injunction or decree of any court or governmental
agency, body or authority, except in the case of this clause (ii) for
such breaches, defaults or violations that could not, individually or
in the aggregate, have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole or adversely affect the ability of the
Company to perform its obligations under this Agreement or be otherwise
important in the context of the sale of the Shares.
(m) The Company and the Subsidiary own, possess or license or
have other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications,
tradenames, inventions, copyrights, manufacturing processes, formulae,
trade secrets, know-how, franchises, and other unpatented and/or
unpatentable proprietary or confidential information, collaborative
research agreements, systems or procedures and material intangible
8
<PAGE>
property and assets (collectively, "Intellectual Property") necessary
to the conduct of their business as currently conducted and as proposed
to be conducted. The Company reasonably believes that the Company and
the Subsidiary will be able to own or possess adequate licenses or
other rights to use all Intellectual Property necessary to the conduct
of their business as proposed to be conducted as described in the
Registration Statement, the preliminary prospectus and the Prospectus.
The Company has no knowledge that it lacks or will be unable to obtain
any rights or licenses to use any of such Intellectual Property. The
Registration Statement, the preliminary prospectus and the Prospectus
fairly and accurately describe the Company's rights with respect to
Intellectual Property. Neither the Company nor the Subsidiary have
received any notice of, and otherwise has any knowledge of, any
infringement or of conflict with asserted rights or claims of others
with respect to any Intellectual Property and the Company is unaware of
any fact which could form a reasonable basis for any such claim.
(n) The Company has no knowledge of the existence of patents
or patent applications owned by third parties that may have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole or
adversely affect the ability of the Company to perform its obligations
under this Agreement or be otherwise important in the context of the
sale of the Shares.
(o) The Company is the sole and exclusive owner of all right,
title and interest in the United States registered trademarks and
service marks set forth on Part I of Annex A (collectively, "Registered
Marks"). The Company has applied for the United States trademarks and
service marks set forth on Part II of Annex A (collectively, "Applied
Marks"). The Company has not allowed any Applied Marks or Registered
Marks to be abandoned, canceled, or to lapse. The Company has no
knowledge of claims, actions, or proceedings, pending or threatened,
challenging the validity of any of the Registered Marks or the
registration of any Applied Marks.
(p) The Company has no knowledge of the existence of
trademarks or service marks, or trademark or service mark applications,
owned by third parties that may have, individually or in the aggregate,
a Material Adverse Effect on the Company and its subsidiaries taken as
a whole or adversely affect the ability of the Company to perform its
obligations under this Agreement or otherwise be important in the
context of the sale of the Shares.
9
<PAGE>
(q) The Company has registered with Network Solutions, Inc.
the Internet domain names [Fast.net] and [ ], and has administrative
control over [ ]. The Company has no knowledge of a registered
trademark held by a third party that may be used to prevent the Company
from using this domain name.
(r) The Company has taken all economically reasonable steps to
secure, protect, and maintain Registered Marks, Applied Marks, and the
[ ] Internet domain names.
(s) The Company and the Subsidiary have filed on a timely
basis with the appropriate taxing authorities (or have received an
extension for filing with respect to) all necessary federal, state and
foreign income and franchise tax returns, reports and other information
required to be filed by them. Each such tax return, report or other
information was, when filed, accurate and complete. The Company and the
Subsidiary have duly paid, or have made adequate charges, accruals and
reserves in the financial statements for, all such taxes required to be
paid by them and any other assessment, fine or penalty levied against
them, for all periods as to which the tax liability of the Company or
the Subsidiary has not been finally determined, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as could not have, individually or in the aggregate, a
Material Adverse Effect on the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business. No tax deficiency has been or, to the best of the
Company's knowledge, might be asserted or contemplated against the
Company or the Subsidiary.
(t) The Company and the Subsidiary are insured by recognized,
financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are
generally deemed adequate and customary for their business including,
but not limited to, policies covering real and personal property owned
or leased by the Company and the Subsidiary against theft, damage,
destruction, acts of vandalism and earthquakes, general liability and
directors and officers liability, all of which insurance is in full
force and effect. The Company has no reason to believe that it or the
Subsidiary will not be able to (i) renew its existing insurance
coverage as and when such policies expire or (ii) obtain comparable
coverage from similar institutions as may be necessary or appropriate
to conduct its business as now conducted and at a cost that would not
result in a Material Adverse Effect on the Company and its subsidiaries
taken as a whole or adversely affect the ability of the Company to
perform its obligations under this Agreement or be otherwise important
in the context of the sale of the Shares. Neither of the
10
<PAGE>
Company nor the Subsidiary has been denied any insurance coverage which
it has sought or for which it has applied.
(u) Neither the Company nor the Subsidiary is involved in any
labor dispute, disturbance, lockout, slowdown or stoppage of employees,
and, to the best knowledge of the Company, no such dispute or
disturbance is threatened or imminent. The Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
principal suppliers, subassemblers, value added resellers,
subcontractors, original equipment manufacturers, authorized dealers or
international distributors that could result in a Material Adverse
Effect on the Company and its subsidiaries taken as a whole or
adversely affect the ability of the Company to perform its obligations
under this Agreement or be otherwise important in the context of the
sale of the Shares.
(v) In the ordinary course of its business, the Company
periodically reviews the effect of Environmental Laws (as defined
below) on the business, operations and properties of the Company and
the Subsidiary, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws, or any Permit, any
related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company
has reasonably concluded that the Company and the Subsidiary (i) are in
compliance with all applicable foreign, United States federal, state
and local environmental laws, rules, regulations, treaties, statutes
and codes relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all Permits
required of them under applicable Environmental Laws to conduct their
business as currently conducted, (iii) are in compliance with all terms
and conditions of any such Permit and (iv) have not received notice of
any actual or potential liability for the investigation or remediation
of any disposal or release of hazardous or toxic substances or wastes,
pollutants or contaminants. No action, proceeding, revocation
proceeding, writ, injunction or claim is pending or threatened relating
to the Environmental Laws or to the Company's or the Subsidiary's
activities involving Hazardous Materials. "Hazardous Materials" means
any material or substance (i) that is prohibited or regulated by any
Environmental Law or (ii) that has been designated or regulated by any
governmental body or authority as radioactive, toxic, hazardous or
otherwise a danger to health, reproduction or the environment. Neither
the Company nor the Subsidiary has been named as a "potentially
responsible party" under the Comprehensive
11
<PAGE>
Environmental Response, Compensation and Liability Act of 1980, as
amended.
(w) Neither the Company nor the Subsidiary has engaged in the
generation, use, manufacture, transportation or storage of any
Hazardous Materials on any of the Company's or the Subsidiary's
properties or former properties. No Hazardous Materials have been
treated or disposed of on any of the Company's or the Subsidiary's
properties or on properties formerly owned or leased by the Company or
the Subsidiary during the time of such ownership or lease, except in
compliance with Environmental Laws.
(x) No payments or inducements have been made or given,
directly or indirectly, to any federal or local official or candidate
for, any federal or state office in the United States or foreign
offices by the Company or the Subsidiary, by any of their officers,
directors, employees or agents or, to the best knowledge of the
Company, by any other person in connection with any opportunity,
Contract, Permit, certificate, consent, order, approval, waiver or
other authorization relating to the business of the Company or the
Subsidiary, except for such payments or inducements as were lawful
under applicable written laws, rules and regulations. Neither the
Company nor the Subsidiary, nor any director, officer, agent, employee
or other person associated with or acting on behalf of the Company or
the Subsidiary, (i) has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment
to any government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or (iv) made any bribe, unlawful rebate, payoff,
influence payment, kickback or other unlawful payment in connection
with the business of the Company or the Subsidiary.
(y) Neither the Company nor the Subsidiary has any liability
for any prohibited transaction (within the meaning of Section 4975(c)
of the Internal Revenue Code of 1986, as amended (the "Code") or Part 4
of Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (or an accumulated funding deficiency within the
meaning of Section 412 of the Code or Section 302 of ERISA) or any
complete or partial withdrawal liability (within the meaning of Section
4201 of ERISA), with respect to any pension, profit sharing or other
plan which is subject to ERISA, to which the Company and the Subsidiary
make or ever have made a contribution and in which any employee of the
Company and Subsidiary is or has ever been a participant. With respect
12
<PAGE>
to such plans, the Company and the Subsidiary are in compliance in all
material respects with all applicable provisions of ERISA.
(z) The Company and the Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are
appropriately recorded to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted
only in accordance with management's general or specific authorization,
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences and (v) assets are properly accounted for
and safeguarded against loss from unauthorized use. The Company has not
received from its independent public accountants a letter describing or
been informed by them of, a substantial or material deficiency in the
Company's internal accounting controls in connection with their audit
of the Company's financial statements included in the Registration
Statement, the preliminary prospectus and the Prospectus.
(aa) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company or the Subsidiary to or for
the benefit of any of the officers or directors or shareholders of the
Company or the Subsidiary or any of the members of the families of any
of them, except as disclosed in the Registration Statement, the
preliminary prospectus and the Prospectus.
(bb) No consent, approval, registration, authorization,
filing, qualification, Permit or order of or with any court or
supervisory, regulatory, administrative or governmental agency, body or
authority, arbitrator or others (including securityholders) is required
in connection with the execution and delivery of this Agreement, the
issuance, sale or delivery of the Shares to be issued, sold and
delivered by the Company hereunder, or the consummation of any other of
the transactions contemplated herein or the fulfillment of the terms
hereof, except the registration under the Act of the Shares and such
consents, approvals, registrations, authorizations, filings,
qualifications, Permits or orders, as may be required under the state
securities or "blue sky" laws or the bylaws and rules of the National
Association of Securities Dealers, Inc. (the "NASD") or as have been
obtained and which are in full force and effect in connection with the
offer, purchase and distribution by the Underwriters of the Shares.
13
<PAGE>
(cc) The execution, delivery and performance by the Company of
this Agreement and the issuance and sale of the Shares and the
consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action. Neither the issuance,
offer, sale or delivery of the Shares, the execution, delivery and
performance by the Company of this Agreement nor the compliance by the
Company with all the provisions hereof nor the consummation of the
transactions contemplated hereby (i) conflicts with or will conflict
with, or constitutes or will constitute a breach or violation of or a
default under (or an event that, with notice or lapse of time or both,
would constitute such a breach, violation or default), or results in or
will result in the imposition of a Lien upon any property or assets of
the Company or the Subsidiary, under, any of the terms or provisions of
the certificate of incorporation or by-laws or other organizational or
constitutive documents of the Company or the Subsidiary, nor (ii)
conflicts with or will conflict with or constitutes or will constitute
a breach or violation of, or a default under (or an event that with
notice or the lapse of time or both would constitute a default) or the
loss of any material benefit under, or the termination of, or results
in or will result in the creation or imposition of any Lien upon any
property or assets of the Company or the Subsidiary pursuant to, any
Contract, nor (iii) violates or conflicts with or will violate or
conflict with any law, statute, rule or regulation applicable to the
Company or the Subsidiary or any judgment, decree or order applicable
to the Company or the Subsidiary of any court or supervisory,
regulatory, administrative or governmental agency, body or authority,
or arbitrator having jurisdiction over the Company or the Subsidiary or
any of their respective properties or assets.
(dd) The Company has full power and authority to enter into
this Agreement and to perform the transactions contemplated hereby.
This Agreement and the transactions contemplated herein have been duly
and validly authorized, executed and delivered by the Company and this
Agreement constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except as the enforceability thereof may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to or affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law) and
except to the extent that the provisions of Section 6 hereof may be
limited by applicable federal or state securities laws or unenforceable
as against public policy.
(ee) The Company has duly and validly authorized the issuance
and sale of the Shares. The description of the Shares in the
Registration
14
<PAGE>
Statement, the preliminary prospectus and the Prospectus is accurate in
all material respects.
(ff) The Company, is not now, and as a result of Underwriting
the offer and sale of the Shares in the manner contemplated in this
Agreement, the Registration Statement, the preliminary prospectus and
the Prospectus and the application of the net proceeds of such sale as
described in the Registration Statement, the preliminary prospectus and
the Prospectus, will not be, an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended (the "Investment Company Act"), without taking
account of any exemption arising out of the number or type of holders
of the Company's securities.
(gg) The Company has not incurred any liability for a fee,
commission, or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement other than the discount contemplated hereby.
(hh) Neither the Company nor the Subsidiary nor, to the
Company's best knowledge, any of its or their officers, directors or
affiliates (as defined in Rule 501(b) of Regulation D ("Regulation D")
under the Act) has taken or will take, directly or indirectly, any
action designed to cause or to result in or that has constituted, or
might reasonably be expected to cause or result in or constitute, under
the Securities Exchange Act of 1934, as amended (the Exchange Act"), or
otherwise, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(ii) The Company has not distributed and will not distribute
prior to the later of (A) the Additional Closing Date and (B) the
completion of the distribution of the Shares by the Underwriters and
dealers, any offering material (including, without limitation, content
on its Website, if any, that may be deemed to be offering material) in
connection with the offering and sale of the Shares other than the
preliminary prospectus and the Prospectus.
(jj) There are no holders of securities of the Company which
by reason of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby, have the
right to request or demand that the Company register under the Act any
of their securities in connection with the Registration Statement .
15
<PAGE>
(kk) There is no tax, duty, levy, impost, deduction, charge or
withholding imposed by any political subdivision or taxing authority by
virtue of the execution, delivery, performance or enforcement, or to
ensure the legality, validity or admissibility into evidence, of this
Agreement, and neither is it necessary that the Shares be submitted to,
or filed or recorded with, any court or other authority to ensure such
legality, validity, enforceability or admissibility into evidence.
There are no transfer taxes or other similar fees or charges under
federal law or the laws of any state, or any political subdivision
thereof, required to be paid in connection with the execution and
delivery of this Agreement or the issuance and sale by the Company of
the Shares.
(ll) All necessary actions, authorizations, conditions and
things required to be taken, given, fulfilled and done by the Company
and the Subsidiary on or prior to the date of this Agreement, have
been, or on the Closing Date or the Additional Closing Date, if any,
will have been taken, given, fulfilled and done in connection with (i)
the issue of the Prospectus, (ii) the execution and delivery of this
Agreement, (iii) the execution, delivery and issuance of the Shares,
(iv) the compliance with all provisions of this Agreement to be
performed or complied with by such date.
(mm) There are no issues related to the Company's or the
Subsidiary's preparedness for the Year 2000 that (i) are of a character
required to be described or referred to in the Registration Statement,
the preliminary prospectus or Prospectus which have not been accurately
described therein or (ii) could result in any Material Adverse Effect
on the Company and its subsidiaries taken as a whole or that might
materially affect their properties, assets or rights. All internal
computer systems and each Constituent Component of those systems and
all computer-related products and each Constituent Component (as
defined below) of those products of the Company and the Subsidiary
fully comply with Year 2000 Qualification Requirements. "Year 2000
Qualification Requirements" means that the internal computer systems
and each Constituent Component of those products of the Company and the
Subsidiary (i) have been reviewed to confirm that they store, process
(including sorting and performing mathematical operations, calculations
and computations), input and output data containing date and
information correctly regardless of whether the date contains dates and
times before, on or after January 1, 2000, (ii) have been designed to
ensure date and time entry recognition and calculations, and date data
interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century
formulas and multi-century formulas, and will not cause an abnormal
ending scenario within the application or generate incorrect values or
invalid results involving such dates, (iv)
16
<PAGE>
accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as
to the century. "Constituent Component" means all software (including
operating systems, programs, packages and utilities), firmware,
hardware, networking components, and peripherals provided as part of
the configuration. The Company and the Subsidiary have inquired of all
their material vendors as to their preparedness for the Year 2000 and
the Company has disclosed in the Registration Statement, the
preliminary prospectus or Prospectus any issues that could result in a
Material Adverse Effect on the Company and its subsidiaries taken as a
whole or adversely affect the ability of the Company to perform its
obligations under this Agreement or be otherwise important in the
context of the sale of the Shares.
(nn) No statement, representation, warranty or covenant made
by the Company in this Agreement or made in any certificate or document
required by this Agreement to be delivered to you was or will be, when
made, inaccurate, untrue or incorrect.
(oo) The Shares have been approved for inclusion on the Nasdaq
National Market System, subject only to official notice of issuance.
(pp) Except as described in the Registration Statement, the
preliminary prospectus and the Prospectus, the Company has not sold or
issued any shares of capital stock within the six month period
preceding the date of the Prospectus, all of which sales and issuances
were made in compliance with the Act and the Regulations.
(qq) Each officer, director and securityholder of the Company
has agreed to sign an agreement substantially in the form attached
hereto as EXHIBIT A (the "Lock-up Agreements"). The Company has
provided to counsel for the Underwriters a complete and accurate list
of all securityholders of the Company and the number and type of
securities held by each securityholder. The Company also has provided
to counsel for the Underwriters true, accurate and complete copies of
all of the Lock-up Agreements presently in effect or effected hereby.
The Company has given "no transfer" instructions to its transfer agent
and registrar with respect to such securities.
Any certificate signed by an officer of the Company and
delivered to the Representative or to counsel for the Underwriters
shall be deemed to be a representation and warranty by the Company to
each Underwriter as to the matters set forth therein.
17
<PAGE>
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) The Company agrees to issue and sell to the several
Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties, covenants and agreements
herein contained, but subject to the terms and conditions herein set
forth, the Underwriters, severally and not jointly, agree to purchase
from the Company, at a purchase price per share of $[ ], the number of
Firm Shares set forth opposite the respective names of the Underwriters
in Schedule I hereto plus an additional number of Firm Shares which
such Underwriter may become obligated to purchase pursuant to the
provisions of Section 9 hereof.
(b) Payment of the purchase price for, and delivery of, the
Firm Shares and the Option Shares (if the option provided for in
Section 2(c) below shall have been exercised on or before the third
full business day prior to the Closing Date) shall be made at the
offices of Morrison & Foerster LLP, 1290 Avenue of the Americas, New
York, New York, or at such other place as shall be agreed upon by ING
Barings LLC and the Company, at 10:00 A.M. on the third full business
day (as permitted under Rule 15c6-1 under the Exchange Act) (unless
postponed in accordance with the provisions of Section 9 hereof)
following the date of the effectiveness of the Registration Statement
(or, if the Company has elected to rely upon Rule 430A of the
Regulations, the third or fourth full business day (as permitted under
Rule 15c6-1 under the Exchange Act) after the determination of the
initial public offering price of the Firm Shares), or such other time
not later than five business days after such date as shall be agreed
upon by you and the Company (such time and date of payment and delivery
being herein called the "Closing Date"); provided, however, that if the
Company has not made available to the Underwriters copies of the
Prospectus in such quantities and at such places requested by the
Underwriters, no later than noon on the business day following the
execution of this Agreement, ING Barings LLC may, in its sole
discretion, postpone the Closing Date until no later than two full
business days following the delivery of such copies of the Prospectus.
Payment shall be made to the Company by wire transfer in immediately
available funds to the order of the Company, against delivery to you
for the respective accounts of the Underwriters of the Firm Shares to
be purchased by them. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or
accounts at The Depository Trust Company, as designated by ING Barings
LLC for the accounts of ING Barings LLC and the several Underwriters on
the Closing Date, against the irrevocable release of a wire transfer of
immediately available funds for the amount of the purchase price
therefor. Certificates
18
<PAGE>
for the Firm Shares shall be registered in such name or names and in
such authorized denominations as you may request on or before noon on
the business day prior to the Closing Date. The Company will permit you
to examine and package such certificates at or before noon on the
business day prior to the Closing Date. ("Business day" shall mean any
day other than a Saturday, Sunday or a legal holiday or a day on which
banking institutions or trust companies are authorized or obligated by
law to close in New York City.")
(c) In addition, the Company hereby grants to the Underwriters
the option to purchase, severally and not jointly, up to 600,000 Option
Shares at the same purchase price per share to be paid by the
Underwriters to the Company for the Firm Shares as set forth in this
Section 2, for the sole purpose of covering over-allotments in the sale
of Firm Shares by the Underwriters. This option may be exercised from
time to time and at any time, in whole or in part, on or before the
thirtieth day following the date of the Prospectus, by notice from ING
Barings LLC to the Company. Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised and
the date and time, as reasonably determined by ING Barings LLC, when
the Option Shares are to be delivered (such date and time being herein
sometimes referred to as the "Additional Closing Date"); provided,
however, that the Additional Closing Date shall not be earlier than the
Closing Date or earlier than the second full business day after the
date on which the option shall have been exercised nor later than the
fifth full business day after the date on which the option shall have
been exercised (unless such time and date are postponed in accordance
with the provisions of Section 9 hereof). The Company shall deliver, or
cause to be delivered, a credit representing the Option Shares to an
account or accounts at The Depository Trust Company, as designated by
ING Barings LLC for the accounts of ING Barings LLC and the several
Underwriters on the Additional Closing Date, against the irrevocable
release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. Certificates for the Option
Shares shall be registered in such name or names and in such authorized
denominations as ING Barings LLC may request at or before noon on the
business day prior to the Additional Closing Date. The Company will
permit you to examine and package such certificates for delivery at or
before noon on the business day prior to the Additional Closing Date.
The number of Option Shares to be sold to each Underwriter
shall be the number which bears the same ratio to the aggregate number
of Option Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such
19
<PAGE>
number increased as set forth in Section 9 hereof) bears to the total
number of Firm Shares being purchased from the Company, subject,
however, to such adjustments to eliminate any fractional shares as ING
Barings LLC in its sole discretion shall make.
Payment for the Option Shares shall be made by wire transfer
in immediately available funds to the order of the Company as noted
above, at the offices of Morrison & Foerster LLP or such other location
as may be mutually acceptable, upon delivery of the Option Shares to
you for the respective accounts of the Underwriters
The Company shall deliver, or cause to be delivered a credit
representing the Option Shares the Underwriters have agreed to purchase
on the Additional Closing Date to an account or accounts at The
Depository Trust Company as designated by ING Barings LLC for the
accounts of ING Barings LLC and the several Underwriters against the
irrevocable release of a wire transfer of immediately available funds
for the amount of the purchase price therefor.
(d) Time shall be of the essence and delivery at the time and
place specified in this Agreement is a further condition to the
obligations of the Underwriters.
3. OFFERING. It is understood that the several Underwriters
propose to offer the Shares for sale to the public upon the terms set forth in
the Prospectus.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees
with each Underwriter that:
(a) If the Registration Statement has not been declared
effective at the time of the execution of this Agreement, the Company
will use its best efforts to cause the Registration Statement and any
amendments thereto to become effective as promptly as possible. The
Company will use its best efforts to cause a registration statement on
Form 8-A (the "Form 8-A Registration Statement") as required by the
Exchange Act to become effective simultaneously with the Registration
Statement. If Rule 430A is used or the filing of the Prospectus is
otherwise required under Rule 424(b) or Rule 434, the Company will file
the Prospectus (properly completed if Rule 430A has been used) pursuant
to Rule 424(b) or Rule 434 within the prescribed time period and will
provide evidence satisfactory to you of such timely filing. If the
Company elects to rely on Rule 434, the Company will prepare and file a
term sheet that complies with the requirements of Rule 434. If the
Company elects to rely on Rule 462(b) under the Act, the Company shall
file a Rule 462(b) Registration
20
<PAGE>
Statement with the Commission in compliance with Rule 462(b) under the
Act prior to the time confirmations are sent or given, as specified by
Rule 462(b)(2) under the Act, and shall pay the applicable fees in
accordance with Rule 111 under the Act.
The Company will notify you immediately (and, if
requested by you, will confirm such notice in writing) (i) when the
Registration Statement and any amendments thereto become effective,
(ii) of any request by the Commission for any amendment of or
supplement to the Registration Statement, any preliminary prospectus or
the Prospectus or for additional information, (iii) of the mailing or
the delivery to the Commission for filing of any amendment of or
supplement to the Registration Statement or the Prospectus, (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment thereto or of the initiation, or the threatening, of any
proceedings therefor, (v) of the receipt of any comments from the
Commission, and (vi) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares for
sale in any jurisdiction or the initiation or threatening of any
proceeding for that purpose. If a stop order or suspension of
qualification is proposed at any time, the Company will use its best
efforts to prevent the issuance of any such stop order and, if issued,
to obtain the lifting thereof as soon as possible. The Company will not
file any amendment to the Registration Statement or any amendment of or
supplement to, any preliminary prospectus or the Prospectus (including
the prospectus required to be filed pursuant to Rule 424(b) or Rule
434) that differs from the prospectus on file at the time of the
effectiveness of the Registration Statement before or after the
effective date of the Registration Statement to which you shall
reasonably object in writing after being timely furnished in advance a
copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act by an Underwriter or dealer any
event shall have occurred as a result of which the Prospectus as then
amended or supplemented would, in the judgment of ING Barings LLC,
counsel to the Underwriters or the Company, include an untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, not
misleading or if it shall be necessary at any time to amend or
supplement the Registration Statement, the preliminary prospectus or
the Prospectus to comply with any law, the Company promptly will notify
ING Barings LLC and prepare and file with the Commission and furnish at
its own expense to the Underwriters and dealers, an appropriate
amendment or supplement (in form and substance satisfactory to ING
Barings LLC) which will correct
21
<PAGE>
such untrue statement or omission or so that the Registration
Statement, any preliminary prospectus and the Prospectus will comply
with the law and will use its best efforts to have any amendment to the
Registration Statement declared effective as soon as possible. If at
any time during the ninety (90) day period after the Registration
Statement becomes effective, any rumor, publication or event relating
to or affecting the Company shall occur as a result of which in the
opinion of ING Barings LLC the market price of the Shares has been or
is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after notice from ING Barings LLC
advising the Company to the effect set forth above, forthwith prepare,
consult with ING Barings LLC concerning the substance of and
disseminate a press release or other public statement, reasonably
satisfactory to ING Barings LLC, responding to or commenting on such
rumor, publication or event.
(c) As soon as practicable, but not later than 45 days after
the end of its fiscal quarter in which the first anniversary date of
the effective date of the Registration Statement occurs, the Company
will make generally available (within the meaning of Section 11(a) of
the Act) to its securityholders and to you an earnings statement or
statements of the Company which will satisfy the provisions of Section
11(a) of the Act and Rule 158 of the Regulations, covering a period of
at least twelve consecutive months beginning after the effective date
of the Registration Statement; and will, during the period of five
years from the date of the Prospectus, make generally available (within
the meaning of Section 11(a) of the Act) to its securityholders as soon
as practicable after the end of each fiscal year, an annual report
(including a balance sheet and statements of financial condition,
operations, cash flows and changes in stockholders' equity of the
Company, certified by the Company's independent public accountants)
and, as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the Registration Statement), consolidated
summary financial information of the Company for such quarter in
reasonable detail.
(d) The Company will furnish without charge to you and counsel
to the Underwriters five (5) complete signed copies of the Registration
Statement (including exhibits thereto), and to each other Underwriter a
copy of the Registration Statement (without exhibits thereto) and, so
long as, in the opinion of counsel to the Underwriters, delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as
many copies of each preliminary prospectus and the Prospectus and any
amendment or supplement thereto as you may request.
22
<PAGE>
(e) The Company will arrange for the qualification of the
Shares for sale under the laws of such jurisdictions (both national and
foreign) as ING Barings LLC may designate and will make such
applications, file such documents and furnish such information as may
be required for that purpose and will maintain such qualifications in
effect for so long as required for the distribution of the Shares;
provided, however, that in no event shall the Company be required to
qualify to do business in any such jurisdiction in which it is not
already qualified or to file a general consent to service of process in
any jurisdiction in which it is not now so required, other than in
respect of suits arising out of the offering or sale of the Shares. The
Company will, from time to time, prepare and file such statements,
reports and other documents, as are or may be required to continue such
qualifications in effect for so long a period as ING Barings LLC may
request for the distribution of the Shares. The Company will cooperate
with ING Barings LLC and counsel to the Underwriters in connection with
the filings required to be made by ING Barings LLC with the NASD and
will pay the fee of the NASD in connection with its review of the
offering of the Shares and will use its best efforts to cause the
Shares to be quoted on the Nasdaq National Market System.
(f) During the period of five years from the effective date of
the Registration Statement, the Company will furnish to you and, upon
request, to each of the several Underwriters, without charge, copies
of, in such quantities as you or the Underwriters may request from time
to time, (i) as soon as available, all reports or other communications
(financial or other) furnished generally by the Company to its
securityholders, (ii) as soon as practicable after the end of each
fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year
then ended and the opinion thereon of the Company's independent public
or certified public accountants; and (iii) as soon as practicable after
the filing thereof, copies of each proxy statement, Annual Report on
Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or
other report filed by the Company with the Commission, the NASD, any
other supervisory, regulatory, administrative or governmental agency,
body or authority whether pursuant to the Exchange Act or otherwise or
any national securities exchange or system on which any class of
securities of the Company is listed or quoted.
(g) For a period of 180 days from the date of the Prospectus
(the "Lock-Up Period"), without the prior written consent of ING
Barings LLC, each of the Company, its executive officers, directors and
securityholders shall not, directly or indirectly: (1) issue, offer for
sale, contract to sell, sell, pledge or otherwise dispose of (or enter
into any
23
<PAGE>
transaction or device which is designed to, or could be expected to,
result in the disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) by any person
at any time in the future of) any shares of Common Stock or securities
convertible into, exercisable or exchangeable for, or represent the
right to receive, Common Stock or sell or grant options, rights or
warrants with respect to any shares of Common Stock or any of the
foregoing or announce the offering of or register for sale any of the
foregoing or any outstanding shares of Common Stock; provided however,
that the Company may grant options and issue and sell Common Stock
pursuant to any directors' and employees' stock plan, stock ownership
plan or dividend reinvestment plan of the Company in effect at the
effective date of the Registration Statement and which are described in
the Prospectus so long as none of those shares may be transferred
during the Lock-Up Period and the Company shall enter stop transfer
instructions with its transfer agent and registrar against any such
transfer; or (2) enter into any swap, repurchase agreement, pledge,
transfer or other transaction that transfers to another, in whole or in
part, any of the economic benefits or risks of ownership of such shares
of Common Stock or other securities, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of
Common Stock or other securities, in cash or otherwise. In addition,
during such period, the Company and the Subsidiary also agree not to
file any registration statement (other than a Form S-8 registration
statement filed in connection with shares of Common Stock received
under a Company directors' and employees' stock plan, stock ownership
plan, employment agreement or dividend reinvestment plan) with respect
to, and each of the executive officers, directors and securityholders
of the Company has 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 LLC.
(h) During the period when, in the opinion of counsel to the
Underwriters, the delivery of a Prospectus by an Underwriter or dealer
may be required by the Act, the Company will comply, at its own
expense, with all requirements imposed upon it by the Commission, the
Act and the Exchange Act, and the rules and regulations of the
Commission promulgated thereunder, so far as necessary to permit the
continuance of sales of or dealing in the Shares during such period in
accordance with the provisions hereof and the Prospectus. In addition,
during such period the Company shall file, on a timely basis, with the
Commission and the Nasdaq National Market all reports and documents
required to be filed under the Exchange Act.
24
<PAGE>
(i) Each of the Company and the Subsidiary will conduct its
business in compliance with all applicable laws, rules, regulations,
decisions, directives and orders. The Company will do and perform all
things required or necessary to be done and performed under this
Agreement by the Company on or prior to the Closing Date and to comply
or cause to be satisfied, to the extent such are within its control,
the conditions precedent to the several obligations of the Underwriters
specified in Section 8 hereof.
(j) Neither the Company nor any of its affiliates (as defined
in Regulation D under the Act), will take, directly or indirectly, any
action designed to cause or result in, or which constitutes or which
might reasonably be expected to cause, result in, or constitute, under
the Exchange Act, or otherwise, stabilization or manipulation of the
price of the shares of Common Stock of the Company to facilitate the
offering and distribution of the Shares or any other action prohibited
by Regulation M under the Exchange Act.
(k) The Company will apply the net proceeds from the offering
and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds."
(l) The Company shall take all economically reasonable steps
to enforce all Intellectual Property rights against potential
infringers.
(m) The Company shall engage and maintain, at its expense, a
registrar and transfer agent for the Shares.
(n) The Company shall cause to be prepared and delivered, at
its expense, within one business day from the date hereof, to the
Underwriters an "electronic Prospectus" to be used by the Underwriters
in connection with the offering and sale of the Shares . As used
herein, the term "electronic Prospectus" means a form of Prospectus,
and any amendment or supplement thereto, that meets each of the
following conditions: (i) it shall be encoded in an electronic format,
satisfactory to you, that may be transmitted electronically by the
Underwriters to offerees and purchasers of the Shares for at least
during the period when, in the opinion of counsel to the Underwriters,
the Prospectus is required to be delivered under the Act or the
Exchange Act; (ii) it shall disclose the same information as the paper
Prospectus and Prospectus filed pursuant to EDGAR, except to the extent
that graphic and image material cannot be disseminated electronically,
in which case such graphic and image material shall be replaced in the
electronic Prospectus with a fair and accurate narrative description or
tabular representation of such material, as appropriate; and (iii) it
shall be in or convertible into a paper format or
25
<PAGE>
an electronic format, satisfactory to you, that will allow investors to
store and have continuously ready access to the Prospectus at any
future time, without charge to investors (other than any fee charged
for subscription to the system as a whole and for on-line time). The
Company hereby confirms that it has included or will include in the
Prospectus filed pursuant to EDGAR or otherwise with the Commission and
in the Registration Statement at the effective date of the Registration
Statement an undertaking that, upon receipt of a request by an investor
or his or her representative during the period when, in the opinion of
counsel to the Underwriters, delivery of a Prospectus by an Underwriter
or dealer may be required by the Act, the Company shall transmit or
cause to be transmitted promptly, without charge, a paper copy of the
Prospectus.
5. PAYMENT OF EXPENSES. (a) Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company will pay, or reimburse ING Barings LLC if paid by the Underwriters,
all costs, fees and expenses incident to the performance of the obligations of
the Company under this Agreement, including but not limited to costs, fees and
expenses of or relating to (i) the preparation by the Company, printing and
filing of the Registration Statement and exhibits to it, each preliminary
prospectus, the Prospectus and any amendment or supplement to the Registration
Statement or the Prospectus (including, without limitation, the fees and
expenses of the Company's counsel, accountants and other advisors), (ii) the
preparation and delivery of certificates representing the Shares, (iii) the
printing of this Agreement and Underwriter's Questionnaires, Underwriter's
Powers of Attorney, Blue Sky Memoranda, Master Agreements Among Underwriters and
Master Selling Agreements, and all other documents relating to the public
offering of the Shares (including those documents supplied to the Underwriters
in quantities as hereinabove stated) and furnishing (including costs of shipping
and mailing) such copies of the Registration Statement, the Prospectus and any
preliminary prospectus, and all exhibits, schedules, consents, certificates of
experts, amendments and supplements thereto, as may be requested for use in
connection with the offering and sale of the Shares by the Underwriters or by
dealers to whom Shares may be sold, (iv) the quotation of the Shares on the
Nasdaq National Market, (v) any filings required to be made with, and the review
by, the NASD and the fees, disbursements and other charges of the Underwriters'
counsel in connection therewith, (vi) the registration or qualification (or
obtaining exemptions from such registration or qualification) of the Shares for
offer and sale under the securities or Blue Sky laws of such jurisdictions
designated pursuant to Section 4(e), including the fees, disbursements and other
charges of the Underwriters' counsel in connection therewith, and the
preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (vii) the issuance, transfer and delivery of the Shares to the
Underwriters, including any issue, transfer, stamp or other taxes payable
26
<PAGE>
thereon, (viii) the transfer agent or registrar for the Shares, (ix) all costs
and expenses incident to the preparation and undertaking of "road show"
preparations to be made to prospective investors, and (x) all other fees, costs
and expenses referred to in Part II of the Registration Statement.
(b) If this Agreement shall be terminated by the Company or if
for any reason the Company shall fail to perform its obligations hereunder, if
any condition to the obligations of the Underwriters set forth in Section 8
hereof is not satisfied, or if this Agreement shall be terminated by ING Barings
LLC pursuant to Section 6, Section 8, Section 9 or Section 11, or if the sale to
the Underwriters of the Shares on the Closing Date is not consummated because of
any refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse ING Barings LLC and the other Underwriters (or such Underwriters as
have terminated this Agreement with respect to themselves), severally, upon
demand for all out-of-pocket expenses that shall have been incurred by ING
Barings LLC and the Underwriters in connection with the proposed purchase and
the offering and sale of the Shares, including but not limited to fees and
disbursements of counsel, printing expenses, travel expenses, postage, facsimile
and telephone charges.
6. INDEMNIFICATION. (a) The Company agrees to indemnify and
hold harmless each Underwriter, its directors, officers, employees, and agents
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all
losses, liabilities, claims, damages, actions and expenses whatsoever, as
incurred (including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing, compromising or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or other federal or state statutory law or regulation, or at common
law or otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement for the registration of the Shares, as originally filed
or any amendment thereof, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; or (ii) upon any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or alleged
omission to state therein a material fact necessary in order to make statements
therein, not misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained
27
<PAGE>
herein; or (iv) in whole or in part upon any failure of the Company to perform
its obligations hereunder or under law; or (v) any act or failure to act or any
alleged act or failure to act by an Underwriter in connection with, or relating
in any manner to, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon any matter covered by clause (i), (ii),
(iii) or (iv) above, provided that the Company will not be liable under this
clause (v) to the extent that a court of competent jurisdiction shall have
determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and provided, however, that the Company will not be liable in any
such case covered by clauses (i), (ii), (iii), (iv) or (v) above to the extent
but only to the extent that any such loss, liability, claim, damage, action or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information relating to an Underwriter furnished
to the Company by or on behalf of any Underwriter through you expressly for use
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have, including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the Company,
each of the officers of the Company who shall have signed the Registration
Statement, and each other person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever as incurred
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
relating to an Underwriter furnished to
28
<PAGE>
the Company by or on behalf of any Underwriter through you expressly for use
therein; provided, however, that in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter hereunder.
This indemnity will be in addition to any liability which any Underwriter may
otherwise have, including under this Agreement. The Company acknowledges that
the statements set forth in the first and third paragraphs under the caption
"Underwriting" in the Prospectus constitute the only information furnished in
writing relating to an Underwriter by or on behalf of any Underwriter expressly
for use in the Registration Statement relating to the Shares as originally filed
or in any amendment thereof, any related preliminary prospectus or the
Prospectus or in any amendment thereof or supplement thereto, as the case may
be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability or obligation which it may have under this Section 6 or otherwise (i)
unless the failure to notify shall result in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not in any event relieve
the indemnifying party from any obligations other than the indemnification
obligation provided in paragraph (a) or (b) above). In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified parties promptly after receiving the aforesaid notice from an
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified parties. Notwithstanding the foregoing, the indemnified party
or parties shall have the right to employ its or their own separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the defense of
such action, (ii) the indemnifying parties shall not have employed counsel to
have charge of the defense of such action within a reasonable time after notice
of commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that a conflict may arise between the positions of the
indemnifying party or parties in conducting the defense of any such action or
that there may be one or more legal defenses available to it or them which are
different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of
29
<PAGE>
the indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying parties, it being understood, however, that
the indemnifying party or parties shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(plus separate local counsel, if retained by the indemnified party or parties)
at any time for all such indemnified parties. An indemnifying party shall not be
liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
Notwithstanding the foregoing, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated in this Section 6, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which any
indemnified party is or could have been a party and indemnity was or could have
been sought hereunder by such indemnified party, unless such settlement,
compromise or consent is for money damages only and includes (i) an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such action, suit or proceeding and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
Any losses, claims, damages, liabilities, expenses or actions
for which an indemnified party is entitled to indemnification or contribution
under this Section 6 or under Section 7 below shall be paid by the indemnifying
party to the indemnified party as such losses, claims, damages, liabilities or
expenses are incurred, but in all cases, no later than thirty (30) days of
invoice to the indemnifying party.
The indemnity and contribution agreements contained in this
Section 6 and in Section 7 below and the representation and warranties of the
Company set forth in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf of any
Underwriter or any director, officer or employee of or person controlling any
Underwriter, the Company, its directors or officers or any persons controlling
the Company, (ii) acceptance of any Shares and payment therefor hereunder, and
(iii) any termination of this Agreement. A successor to any Underwriter, or to
the
30
<PAGE>
Company, shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 6 and Section 7 below.
The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 6 and Section 7 below and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 6 and Section 7 below fairly allocate the risks in light of the ability
of the parties to investigate the Company and its business in order to assure
that adequate disclosure is made in the Registration Statement, the preliminary
prospectus and Prospectus as required by the Act and the Exchange Act.
7. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 6 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Underwriters shall severally contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
losses, claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons, other than the Underwriters,
who may also be liable for contribution, including persons who control the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration Statement and
directors of the Company) as incurred to which the Company and one or more of
the Underwriters may be subject, in such proportions as is appropriate to
reflect the relative benefits received by the Company and the Underwriters from
the offering of the Shares or, if such allocation is not permitted by applicable
law or indemnification is not available as a result of the indemnifying party
not having received notice as provided in Section 6 hereof, in such proportion
as is appropriate to reflect not only the relative benefits referred to above
but also the relative fault of the Company on the one hand and the Underwriters,
severally, on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Underwriters, severally, on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company bears to the underwriting discounts and commissions
received by the Underwriters, respectively. The relative fault of the Company on
the one hand and of the Underwriters, severally, on the other shall be
31
<PAGE>
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this Section
7, (i) in no case shall any Underwriter be liable or responsible for any amount
in excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter hereunder, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. Further notwithstanding the provisions of this Section 7 and
the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 7, each director, officer,
employee and agent of an Underwriter and each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, each officer of the Company who
shall have signed the Registration Statement and each director of the Company
shall have the same rights to contribution as the Company, subject in each case
to clauses (i) and (ii) of this Section 7. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties, notify each party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 7 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its consent, provided that such consent was not unreasonably withheld.
The Underwriters' obligations in this Section 7 to contribute
are several in proportion to their respective underwriting obligations and not
joint. The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
32
<PAGE>
8. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
several obligations of the Underwriters to purchase and pay for the Firm Shares
and the Option Shares, as provided herein, shall be subject to the accuracy of
the representations and warranties on the part of the Company contained herein
as of the date hereof, the Closing Date and any Additional Closing Date, to the
absence from any certificates, opinions, written statements or letters furnished
to you or to Underwriters' counsel pursuant to this Section 8 of any
misstatement or omission, to the timely performance by the Company of its
covenants and other obligations hereunder and to each of the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than, if pricing pursuant to Rule 430A, 5:30 P.M., New York time
on the date of this Agreement, and if pricing pursuant to a pricing
amendment, 12:00 P.M., New York time on the date an amendment to the
Registration Statement containing the public offering price has been
filed with the Commission, or at such later time and date as shall have
been consented to in writing by ING Barings LLC; if the Company shall
have elected to rely upon Rule 430A or Rule 434 of the Regulations, the
Prospectus shall have been filed with the Commission in a timely
fashion in accordance with Section 4(a) hereof; and, at or prior to the
Closing Date no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof shall
have been issued and no proceedings for such purpose shall have been
initiated or threatened by the Commission; no order suspending the
qualification or registration of the Shares under the securities or
Blue Sky laws of any jurisdiction shall be in effect and no proceeding
for such purpose shall be pending before or threatened or contemplated
by the authorities of any such jurisdiction; any request for additional
information on the part of the staff of the Commission or any such
authorities shall have been complied with to the satisfaction of the
staff of the Commission or such authorities and to the satisfaction of
counsel to the Underwriters; after the date hereof no amendment or
supplement to the Registration Statement or the Prospectus shall have
been filed unless a copy thereof was first submitted to you and you did
not reasonably object thereto; and the NASD, upon review of the terms
of the public offering of the Shares, shall not have raised any
objection to the fairness or reasonableness of the underwriting terms
and arrangements.
(b) The Company shall have furnished to you the opinion of
Morgan, Lewis and Bockius LLP, counsel for the Company, dated the
Closing Date and the Additional Closing Date, if applicable, addressed
to the Underwriters and in form and substance satisfactory to Morrison
& Foerster LLP, counsel to the Underwriters.
33
<PAGE>
(c) The Company shall have furnished to the Underwriters the
opinion of Woodcock, Washburn, Kurtz, Mackiewicz & Norris, Intellectual
Property counsel for the Company, dated the Closing Date and the
Additional Closing Date, if applicable, in form and substance
satisfactory to Morrison & Foerster LLP, counsel to the Underwriters.
(d) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement,
preliminary prospectus or Prospectus, and the registration,
authorization, issue, sale and delivery of the Shares as herein
contemplated shall be satisfactory in form and substance to you and to
Underwriters' counsel. The Underwriters shall have received from
Morrison & Foerster, LLP, Underwriters' counsel, a favorable opinion,
dated the Closing Date (and the Additional Closing Date, if
applicable), with respect to the issuance and sale of the Shares, the
Registration Statement, the Prospectus and other related matters as you
may reasonably require, and the Company and the Subsidiary shall have
furnished to Underwriters' counsel such documents as they request for
the purpose of enabling them to pass upon the matters referred to in
this Section.
(e) At the Closing Date (and the Additional Closing Date, if
applicable) you shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company, dated the
Closing Date (and the Additional Closing Date, if applicable), to the
effect that (i) the condition set forth in subsection (a) of this
Section 8 has been satisfied, (ii) as of the date hereof and as of the
Closing Date (and the Additional Closing Date, if applicable) all the
representations and warranties of the Company set forth in this
Agreement are accurate with the same force and effect as if made on
each of such dates, (iii) as of the Closing Date (and the Additional
Closing Date, if applicable) the agreements and obligations of the
Company to be performed hereunder on or prior thereto have been duly
performed, (iv) when the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate,
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained the information required to be included
therein by the Act and the applicable rules and regulations of the
Commission thereunder, and conformed to the requirements of the Act and
the applicable rules and regulations of the Commission thereunder; the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, did not and does not include any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an
34
<PAGE>
amended or supplemented Prospectus which has not been so set forth; and
(v) subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, the Company and the
Subsidiary have not sustained any material loss or interference with
their respective business or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental proceeding, and
there has not been any material adverse change, or any development
involving a prospective material adverse change, in the business,
management, properties, operations, prospects, condition (financial or
otherwise), or results of operations of the Company and the Subsidiary
taken as a whole, or any transaction that is material to the Company
and its subsidiaries taken as a whole, except transactions entered into
in the ordinary course of business, or any obligation, direct or
contingent, that is material to the Company and its subsidiaries, taken
as a whole, incurred by the Company or its subsidiaries, except
obligations incurred in the ordinary course of business, or any change
in the capital stock or outstanding indebtedness of the Company or any
of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company or any
of its subsidiaries.
(f) At the time this Agreement is executed and at the Closing
Date (and the Additional Closing Date, if applicable), Arthur Andersen
LLP shall have furnished to you a letter or letters, dated respectively
as of the time this Agreement is executed and as of the Closing Date
(and the Additional Closing Date, if applicable), addressed to you and
based upon the procedures described in such letter, but carried out to
a date not more than five (5) days prior to the Closing Date or the
Additional Closing Date, as the case may be, and otherwise in form and
substance satisfactory to you, confirming that they are independent
public accountants with respect to the Company within the meaning of
the Act and Regulation S-X, stating that the answer to item 10 of the
Registration Statement is correct as it relates to them and that:
(i) in their opinion the audited consolidated
financial statements, the audited consolidated financial
statement schedules and the audited financial statements of
the Company included in the Registration Statement and the
Prospectus and reported on by them comply in form in all
material respects with the applicable accounting requirements
of the Act and the related published rules and regulations;
35
<PAGE>
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and the
Subsidiary; carrying out certain specified procedures (but not
an examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the
stockholders and the board of directors of the Company and the
Subsidiary; and inquiries of certain officials of the Company
and the Subsidiary who have responsibility for financial and
accounting matters of the Company and the Subsidiary as to
transactions and events subsequent to December 31, 1998,
nothing came to their attention which caused them to believe
that:
(1) any unaudited financial statements
included in the Registration Statement and the
Prospectus do not comply as to form in all material
respects with the applicable accounting requirements
of the Act and with the published rules and
regulations of the Commission with respect to
registration statements on Form S-1; and said
unaudited financial statements are not in conformity
with generally accepted accounting principles applied
on a basis substantially consistent with that of the
audited financial statements included in the
Registration Statement and the Prospectus;
(2) with respect to the period subsequent to
September 30, 1999 there were any changes, at a
specified date not more than five days prior to the
date of the letter, in the long-term debt of the
Company and its subsidiaries or capital stock of the
Company or decreases in the stockholders' equity of
the Company, as compared with the amounts shown on
the September 30, 1999 consolidated balance sheet
included in the Registration Statement and the
Prospectus or the period from October 1, 1999 to such
specified date there were any decreases, as compared
with September 30, 1999 in net revenues or income
before income taxes or in total or per share amounts
of net income of the Company and its subsidiaries,
except in all instances for changes or decreases set
forth in such letter, in which case the letter shall
be accompanied by an explanation by the Company as to
the significance thereof unless said explanation is
not deemed necessary by ING Barings LLC;
36
<PAGE>
(3) the information included in the
Registration Statement and Prospectus in response to
Regulation S-K, Item 301 (Selected Financial Data),
Item 302 (Supplementary Financial Information), Item
402 (Executive Compensation) and Item 503(d) (Ratio
of Earnings to Fixed Charges) is not in conformity
with the applicable disclosure requirements of
Regulation S-K; and
(4) for the period from October 1, 1999, to
such specified date, there were, as compared to the
corresponding period in the preceding year, any
decrease in consolidated net revenues or increase in
excess of [ ]in the total amount of loss from
continuing operations and total net loss in excess of
[ ], except in all instances for changes, increases,
or decreases that the Registration Statement and the
Prospectus discloses have occurred or may occur.
(iii) they have performed the procedures specified by
the American Institute of Certified Public Accountants for a
review of Interim financial information as described in
Statement of Auditing Standards No. 71 ("SAS 71"), Interim
Financial Information, on the unaudited financial statements
included in the Registration Statement and the Prospectus and
are providing their report as described in SAS 71 on such
financial statements;
(iv) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and the Subsidiary) set forth in the Registration
Statement and the Prospectus, which have been specified by you
prior to the date of such letter, agrees with the accounting
records of the Company and its subsidiaries, excluding any
questions of legal interpretation.
(v) they have performed an SSAE 8 examination of the
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the Registration
Statement and the Prospectus and have determined that:
(1) the presentation includes, in all
material respects, the required elements of the
applicable rules and regulations under the Act;
37
<PAGE>
(2) the historical financial amounts have
been accurately derived in all material respects from
the Company's audited financial statements; and
(3) the underlying information,
determinations, estimates and assumptions of the
Company provide a reasonable basis for the
disclosures contained therein.
In addition, ING Barings LLC shall have received from Arthur
Andersen LLP a letter addressed to the Company and made available to
you for the use of the Underwriters stating that their review of the
Company's system of internal accounting controls, to the extent they
deemed necessary in establishing the scope of their examination of the
Company's consolidated financial statements as of September 30, 1999,
did not disclose any weaknesses in internal controls that they
considered to be substantial or material weaknesses.
In the event that the letters to be delivered referred to
above set forth note any changes, decreases or increases in the
financial information included in the Registration Statement and the
Prospectus, it shall be a further condition to the obligations of the
Underwriters hereunder that ING Barings LLC shall have determined in
its sole judgment, that such changes, decreases or increases as are set
forth in such letters do not reflect a material adverse change in the
stockholders' equity or long-term debt of the Company as compared with
the amounts shown in the latest balance sheet of the Company included
in the Prospectus, or a material adverse change in total net revenues
or net income of the Company, in each case as compared with the
corresponding period of the prior year.
(g) Subsequent to the date this Agreement is executed or, if
earlier, the dates as of which information is given in the Registration
Statement (exclusive of any amendment thereof) and the Prospectus
(exclusive of any supplement thereto), there shall not have been (i)
any change or decrease specified in the letter or letters referred to
in paragraph (f) of this Section 8 or (ii) any change, or any
development involving a prospective change, in or affecting the
condition (financial or other), earnings, business or properties of the
Company and the Subsidiary, whether or not arising in the ordinary
course of business, the effect of which, in any case referred to in
clause (i) or (ii) above, is, in ING Barings LLC's sole judgment,
material and adverse and that makes it impracticable or inadvisable to
proceed with the offering or delivery of the Shares as contemplated by
the Registration Statement (exclusive of any
38
<PAGE>
amendment thereof) and the Prospectus (exclusive of any supplement
thereto).
(h) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall
not have been a material adverse change, or any development involving a
prospective material adverse change, in the general affairs, business,
prospects, properties, management, key personnel, condition (financial
or other) or results of operations of the Company and the Subsidiary,
whether or not arising from transactions in the ordinary course of
business, in each case other than as set forth in the Registration
Statement and the Prospectus (or, in the case of a prospective change,
other than as contemplated by the Registration Statement and the
Prospectus), and (ii) the Company shall not have sustained any material
loss or interference with its business or properties from fire,
explosion, flood, hurricane or other casualty or calamity, whether or
not covered by insurance, or from any labor dispute or any court or
legislative or other governmental action, order or decree, which is not
set forth in the Registration Statement and the Prospectus, if in your
judgment any such development makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares at the public offering
price.
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall
have been no litigation or other proceeding instituted against the
Company or any of its officers or directors in their capacities as
such, before or by any federal, state, or local court, commission,
regulatory body, administrative agency or other governmental body,
domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding could have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole.
(j) At the time of execution of this Agreement, the Company
shall have furnished to you a letter addressed to you from each officer
and director of the Company and each shareholder or other person
heretofore designated by you, in which each such person agrees not to
(1) offer for sale, contract to sell, sell, pledge or otherwise dispose
of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition by any person at any
time in the future of) any shares of Common Stock or securities
convertible into, exercisable or exchangeable for, or represent the
right to receive, Common Stock or sell or grant options, rights or
warrants with respect to any shares of Common Stock or register for
sale any outstanding shares of Common Stock; or (2) enter into any swap
or other derivatives
39
<PAGE>
transaction that transfers to another, in whole or in part, any of the
economic benefits or risks of ownership of such shares of Common Stock
or securities, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise for a period of 180 days following the
time of execution of this Agreement without your prior written consent,
other than shares of Common Stock disposed of as gifts or transfers to
immediate family members or trusts or partnerships, the beneficiaries
and sole partners of which are immediate family members, provided that
the donee or transferee agrees in writing to be bound in the same
manner.
(k) The Shares shall be qualified for sale in such
jurisdictions as you shall have requested, each such qualification
shall be in effect and not subject to any stop order or other
proceeding on the Closing Date and the Additional Closing Date, if
applicable.
(l) The Shares shall have been authorized for quotation on the
Nasdaq National Market, subject to official notice of issuance.
(m) You shall not have advised the Company that the
Registration Statement, the preliminary prospectus or the Prospectus,
or any amendment or any supplement thereto, contains an untrue
statement of fact which, in your judgment, is material, or omits to
state a fact which, in your judgment, is material and is required to be
stated therein or necessary to make the statements therein not
misleading and the Company shall not have cured such untrue statement
of fact or omission of such statement of fact.
(n) The Company shall have furnished to you such certificates,
in addition to those specifically mentioned herein, as you may have
requested as to the accuracy and completeness at the Closing Date and
the Additional Closing Date, if applicable, of any statement in the
Registration Statement, the preliminary prospectus or the Prospectus,
as to the accuracy at the Closing Date and the Additional Closing Date,
if applicable, of the representations, warranties and covenants of the
Company herein, as to the performance by the Company of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and
precedent to your obligations hereunder.
(o) Prior to the Closing Date and the Additional Closing Date,
if applicable, the Company shall have furnished to the Underwriters
such further information and documents as you may reasonably request.
If any of the conditions specified in this Section shall not
have been fulfilled in all respects when and as required to be satisfied, or if
any of the
40
<PAGE>
opinions and certificates mentioned above or elsewhere in this Agreement shall
not be satisfactory in form and substance to you and counsel for the
Underwriters, this Agreement and all obligations of the Underwriters hereunder
may be terminated at, or at any time on or prior to, the Closing Date (and
Additional Closing Date, if applicable) by ING Barings LLC. Notice of such
termination shall be given to the Company promptly in writing or by telephone
confirmed in writing.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or
their obligations to purchase Firm Shares or Option Shares hereunder,
and if the Firm Shares or Option Shares with respect to which such
default relates do not (after giving effect to arrangements, if any,
made by you pursuant to subsection (b) below) exceed in the aggregate
10% of the number of Firm Shares or Option Shares, the Shares to which
the default relates shall be purchased by the non-defaulting
Underwriters in proportion to the respective proportions which the
numbers of Firm Shares set forth opposite their respective names in
Schedule I hereto bear to the aggregate number of Firm Shares set forth
opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of
the Firm Shares or Option Shares, as the case may be, you may in your
discretion arrange for yourself or for another party or parties
(including any non-defaulting Underwriter or Underwriters who so agree)
to purchase such Firm Shares or Option Shares, as the case may be, to
which such default relates on the terms contained herein. In the event
that within 5 calendar days after such a default you do not arrange for
the purchase of the Firm Shares or Option Shares, as the case may be,
to which such default relates as provided in this Section 9, this
Agreement or, in the case of a default with respect to the Option
Shares, the obligations of the Underwriters to purchase and of the
Company to sell the Option Shares shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in
each case as provided in Section 5, 6(a) and 7 hereof) or the
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter or Underwriters of its or their liability, if any, to the
other Underwriters and the Company for damages occasioned by its or
their default hereunder.
(c) In the event that the Firm Shares or Option Shares to
which the default relates are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or parties as
aforesaid, you or the Company shall have the right to postpone the
Closing Date or Additional
41
<PAGE>
Closing Date, as the case may be, for a period not exceeding five
business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any
other documents and arrangements, and the Company agrees to file
promptly any amendment or supplement to the Registration Statement or
the Prospectus which, in the opinion of Underwriters' counsel, may
thereby be made necessary or advisable. The term "Underwriter" as used
in this Agreement shall include any party substituted under this
Section 9 with like effect as if it had originally been a party to this
Agreement with respect to such Firm Shares and Option Shares.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All
representations and warranties, covenants and agreements of the Underwriters and
the Company contained in this Agreement, including the agreements contained in
Section 4 and Section 5, the indemnity agreements contained in Section 6 and the
contribution agreements contained in Section 7, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Underwriter or any controlling person thereof or by or on behalf of the
Company, any of its officers and directors or any controlling person thereof,
and shall survive delivery of and payment for the Shares to and by the
Underwriters. The representations contained in Section 1 and the agreements
contained in Sections 5, 6, 7 and 11(d) hereof also shall survive the
termination of this Agreement, including termination pursuant to Section 9 or 11
hereof.
11. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective, upon the later of
when (i) you and the Company shall have received notification of the
effectiveness of the Registration Statement or (ii) the execution of
this Agreement. If either the initial public offering price or the
purchase price per Share has not been agreed upon prior to 5:00 P.M.,
New York time, on the fifth full business day after the Registration
Statement shall have become effective, this Agreement shall thereupon
terminate without liability to the Company or the Underwriters except
as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you or by
you notifying the Company. Notwithstanding the foregoing, the
provisions of this Section 11 and of Sections 1, 5, 6 and 7 hereof
shall at all times be in full force and effect.
(b) ING Barings LLC shall have the right to terminate this
Agreement at any time on or prior to the Closing Date, or the
obligations of the Underwriters to purchase the Option Shares at any
time on or prior to the Additional Closing Date, as the case may be
(but in any event prior
42
<PAGE>
to delivery of and payment for the Shares), if (A) any domestic or
international event or act or occurrence has materially disrupted, or
in your opinion will in the immediate future materially disrupt, the
market for the Company's securities or securities in general; or (B) if
trading on the New York Stock Exchange, the American Stock Exchange or
NASDAQ National Market shall have been suspended, or limited, minimum
or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been required, on the New York
Stock Exchange, the American Stock Exchange or the NASDAQ National
Market, by the New York Stock Exchange, the American Stock Exchange, or
NASDAQ or by order of the Commission or any other governmental
authority having jurisdiction; or (C) if a banking moratorium has been
declared by a state or federal authority or if any new restriction
materially adversely affecting the distribution of the Firm Shares or
the Option Shares, as the case may be, shall have become effective; or
(D)(i) there shall have occurred any outbreak or escalation of
hostilities or there is an outbreak or escalation of national or
international hostilities or there is a declaration by the United
States of a national emergency or war or (ii) if there has been any
crisis or calamity or any change or development in United States' or
international political, financial or economic conditions, if the
effect of any such event in (D)(i) or (D)(ii), in the sole judgment of
ING Barings LLC makes it impracticable or inadvisable to proceed with
the offering, sale and delivery of the Firm Shares or the Option
Shares, as the case may be, on the terms contemplated by the Prospectus
(exclusive of any supplement thereto) or to enforce contracts for the
sale of securities; or (E) in the sole judgment of ING Barings LLC
there shall have occurred any Material Adverse Effect on the Company
and its subsidiaries taken as a whole or (F) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other
calamity of such character as in the sole judgment of ING Barings LLC
may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall
have been insured. Any termination pursuant to this Section shall be
without liability on the part of (a) the Company to any Underwriter,
except that the Company shall be obligated to reimburse the expenses of
ING Barings LLC and the underwriters pursuant to Sections 5, 6 and 7
hereof, (b) any Underwriter to the Company or (c) of any party hereto
to any other party except that the provisions of Sections 5, 6 and 7
shall at all times be effective and shall survive such termination.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone or facsimile and confirmed in writing by letter.
43
<PAGE>
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to (i) notification by
you as provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b)
hereof), or if the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the
Underwriters set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof, the Company will,
subject to demand by you, reimburse the Underwriters for all
out-of-pocket expenses (including the fees and expenses of their
counsel), incurred by the Underwriters in connection herewith.
12. NOTICES. Any notice or notification in any form to be
given hereunder shall be in writing and shall be delivered in person or sent by
telephone or facsimile transmission (but in the case of a notification by
telephone, with subsequent confirmation by letter or facsimile transmission).
Any notice or notification to you shall be addressed to:
ING Barings LLC
55 East 52nd Street
New York, New York 10055
Attention: Office of the General Counsel
Any notice or notification to the Company shall be addressed
to the Company at:
FASTNET Corporation
Two Courtney Place
Suite 130
Bethlehem, Pennsylvania 18017
Attention: Chief Executive Officer
Any notice or notification shall (subject to confirmation when
required) take effect at the time of receipt.
13. PARTIES. This Agreement shall insure solely to the benefit
of, and shall be binding upon, the Underwriters and the Company and the
controlling persons, directors, officers, employees and agents referred to in
Section 6 and 7, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The term "successors and assigns" shall not include a
purchaser, in
44
<PAGE>
its capacity as such, of Shares from any of the Underwriters. Notwithstanding
the foregoing, this Agreement and the terms and provisions hereof are, unless
otherwise specified herein, for the sole benefit of only those persons, except
that (a) the representations, warranties, indemnities and agreements of the
Company contained in this Agreement shall also be deemed to be for the benefit
of each Purchaser Indemnified Party and (b) the indemnity agreement of the
Underwriters contained in Section 6 hereof shall be deemed to be for the benefit
of each Company Indemnified Party.
14. CONSENT TO JURISDICTION. Any legal suit, action or
proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby ("Related Proceedings") may be instituted in the federal
courts of the United States of America located in the City and County of New
York or the courts of the State of New York in each case located in the City and
County of New York (collectively, the "Specified Courts"), and each party
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. Service of any process, summons,
notice or document by mail to such party's address set forth above shall be
effective service of process for any suit, action or other proceeding brought in
any such court. The parties irrevocably and unconditionally waive any objection
to the laying of venue of any suit, action or other proceeding in the Specified
Courts and irrevocably and unconditionally waive and agree not to plead or claim
in any such court that any such suit, action or other proceeding brought in any
such court has been brought in an inconvenient forum.
With respect to any Related Proceeding, each party irrevocably
waives, to the fullest extent permitted by applicable law, all immunity (whether
on the basis of sovereignty or otherwise) from jurisdiction, service of process,
attachment (both before and after judgment) and execution to which it might
otherwise be entitled in the Specified Courts or any other court of competent
jurisdiction, and will not raise or claim or cause to be pleaded any such
immunity at or in respect of any such Related Proceeding or Related Judgment,
including, without limitation, any immunity pursuant to the United States
Foreign Sovereign Immunities Act of 1976, as amended.
15. MISCELLANEOUS. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed within the State of New York.
This Agreement may be executed in one or more counterparts, and if executed in
more than one counterpart, the executed counterparts shall together constitute a
single instrument. The descriptive headings in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
45
<PAGE>
Time shall be of the essence of this Agreement.
This Agreement constitutes the entire agreement of the parties
to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
If any provision or portion of any provision of the Agreement,
or the application of any such provision or any portion thereof to any party or
circumstances, shall be held invalid or unenforceable, the remaining portion of
such provision and the remaining portion of such provision and the remaining
provisions of this agreement, and the application of such provision or portion
of such provision as is held invalid or unenforceable to any parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and such remaining portion of such provision and
the remaining provisions of this Agreement shall continue to be valid and in
full force and effect.
If the foregoing is in accordance with the Underwriters'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Company and the Underwriters in accordance with its terms.
46
<PAGE>
This Agreement may be signed in counterparts which together
shall constitute one and the same instrument.
Very truly yours,
FASTNET Corporation
By:
-------------------------------------
Name: David K. Van Allen
Title: Chief Executive Officer
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
ING Barings LLC
By: ,
-----------------------------------
Name:
Title:
For itself and the other several Underwriters
named in Schedule I to the foregoing Agreement.
47
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF FIRM
SHARES TO BE
UNDERWRITERS PURCHASED
- ------------ ---------------
<S> <C>
ING Barings LLC ...................................
SoundView Technology Group, Inc....................
FAC/Equities, a division of
First Albany Corporation........................
DLJDIRECT Inc......................................
---------------
Total .....................................
===============
</TABLE>
48
<PAGE>
ANNEX A
Part I
Part II
49
<PAGE>
EXHIBIT 5.1
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, PA 19103
February 3, 2000
FASTNET Corporation
Two Courtney Place - Suite 130
3864 Courtney Street
Bethlehem, PA 18017
Re: FASTNET Corporation Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel for FASTNET Corporation, a Pennsylvania corporation
(the "Company"), in connection with the preparation of the registration
statement on Form S-1 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Act of
1933, as amended (the "Act"), relating to the public offering (the "Offering")
of up to 4,600,000 shares (the "Shares") of the Company's common stock, no par
value (the "Common Stock"), including 600,000 Shares purchasable by the
underwriters upon exercise of their over-allotment option. All of the 4,600,000
Shares will be newly issued and sold by the Company (the "Company Shares"). This
opinion is being furnished pursuant to Item 601(b)(5) of Regulation S-K under
the Act.
In rendering the opinion set forth below, we have reviewed (a) the Registration
Statement and the exhibits thereto; (b) the Company's Amended and Restated
Articles of Incorporation, as amended on April 27, 2000; (c) the Company's
Amended and Restated Bylaws; (d) certain records of the Company's corporate
proceedings as reflected in its minute books; and (e) such statutes, records and
other documents as we have deemed relevant. In our examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, and conformity with the originals of all documents submitted
to us as copies thereof. In addition, we have made such other examinations of
law and fact as we have deemed relevant in order to form a basis for the opinion
hereinafter expressed.
Based upon the foregoing, we are of the opinion that the Company Shares,
<PAGE>
upon issuance and sale by the Company in the manner and for the consideration
contemplated in the Registration Statement, will be validly issued, fully paid
and nonassessable.
We hereby consent to the use of this opinion as an Exhibit to the Registration
Statement and to all references to this Firm under the caption "Legal Matters"
in the Registration Statement. In giving such consent, we do not thereby admit
that we are acting within the category of persons whose consent is required
under Section 7 of the Act and rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
<PAGE>
EXHIBIT 10.3
MCI WORLDCOM ON-NET VOICE AGREEMENT
This On-Net Voice Agreement ("Agreement") is made between MCI
Telecommunications, Inc. ("MCI"), for itself and on behalf of its U.S.-based
affiliates (collectively, "MCI WORLDCOM") and Fastnet ("Customer"). Customer
agrees to the terms of this Agreement with a three (3) year commitment ("Term")
and one hundred eighty thousand dollar ($180,000) Annual Volume Commitment
("AVC"). Customer will receive the On-Net Voice discounts associated with this
Term and AVC as set forth in MCI Tariff FCC No. 1. AVC is net of discounts.
INTERSTATE DS3: For interstate DS3 Private Line service, Customer will pay a
monthly charge (not eligible for discounts) equal to the greater of 29,366 per
circuit mile of $2,000.00 (regardless of mileage). This monthly charge is in
lieu of standard tariffed On-net fixed and per mile charges for DS3 Private Line
service.
SERVICE PROVISIONING AND RECEIPT: MCI WORLDCOM will provide to Customer
interstate and international Services pursuant to MCI Tariff FCC No. 1, and all
other applicable tariffs of MCI WORLDCOM and its U.S.-based affiliates,
(collectively, the "Tariff"). This Agreement incorporates by reference the terms
of the Tariff, which may be modified from time to time in accordance with law
and thereby affect the services furnished to Customer. In the event of
inconsistency between the terms of the Tariff and this Agreement, the Tariff
will be deemed controlling. The rates set forth in the Tariff do not pertain to
the following: charges for MCI WORLDCOM services other than those set forth in
this Agreement; charges for non-tariffed products, access or egress (or related)
charges imposed by third parties; taxes or tax-like surcharges; and other
tariffed charges applicable to Services. Customer agrees to pay all these other
charges, to the extent applicable, in addition to the charges set forth in this
Agreement. If MCI WORLDCOM voluntarily or involuntarily as a result of
government or judicial action cancels the Tarriff in whole or in part, then
effective on such cancellation this Agreement shall, as to canceled Tariff
provisions previously applicable to this Agreement, incorporate by reference the
substantively similar provisions of MCI WORLDCOM's standard Guide to Services
and Pricing ("Guide"), as amended by MCI WORLDCOM from time to time. For
purposes of such provisions, all references to the Tariff shall include
reference to the Guide.
SERVICE CONSIDERATIONS: This Agreement shall be binding upon acceptance and
execution by MCI WORLDCOM. Acceptance of this Agreement by MCI WORLDCOM is
subject to customer meeting the terms and conditions set forth in the Tariff
and, as applicable, in the Credit Approval Terms Attachment. The Term of this
Agreement shall begin not later than the first day of the 1st full monthly
billing period following acceptance of this Agreement by MCI WORLDCOM
("Agreement Start Date"). Customer shall not disclose the terms of this
Agreement to any third party.
APPLICABLE SERVICES: With the exception of Frame Relay and Internet Service,
this Agreement includes only those services billed under the On-Net Voice
Customer ID assigned hereto and inserted below by MCI WORLDCOM.
CELLULAR AND PAGING SERVICES: Should Customer choose to order cellular service
or MCI WORLDCOM voice paging service, under the applicable MCI WORLDCOM Customer
agreement, that provides charges for cellular or paging services will contribute
towards Customer's AVC, then MCI WORLDCOM shall allow such contribution
only subsequent to Customer's execution of the appropriate agreement(s). In
addition, Customer shall be eligible to receive a discount on the charges for
cellular and/or paging services as set forth in these agreements. Voice paging
service monthly recurring and usage charges, after the application of discounts,
shall contribute to the AVC, if permitted in Customer's paging agreement.
INTERNET SERVICES: Should Customer choose to order Internet Service under an MCI
WORLDCOM Internet Services Agreement ("Internet Agreement") that provides that
charges for internet services will contribute towards Customer's AVC then MCI
WORLDCOM shall allow such contribution only subseqent to Customer's execution of
the Internet Agreement. In addition, Customer shall then be eligible to receive
a discount on the charges of Internet Services as set forth in Internet
Agreement. Internet Service monthly recurring and usage charges, after the
application of disounts, shall contribute to the AVC permitted in the Internet
Agreement.
Any capitalized terms not expressly defined in an Attachment to this Agreement
shall have the meaning given to such term in this Agreement.
ACCEPTANCE DEADLINE: This Agreement shall be of no force and effect and the
offer contained herein shall be deemed withdrawn unless this Agreement is
executed by Customer and delivered to MCI WORLDCOM on or before September 03,
1999.
AUDIOCONFERENCING: Audioconferencing from MCI WORLDCOM Conferencing is a
one-way, multi-point service that allows long distance telecommunications
service between a single calling station and two or more called stations.
Audioconferencing requires a teleconferencing bridge port for each called
station. The necessary bridge ports are provided by a designated MCI WORLDCOM
Conference Center.
MCI WORLDCOM LOCAL SERVICE. Where MCI WORLDCOM has received applicable
regulatory approval and filed the necessary tariff(s). Customer will be eligible
to receive a discount based upon the AVC and Term indicated above on its
eligible monthly charges for MCI WORLDCOM facilities-based local exchange
service. Local exchange service are provided by MCI WORLDCOM operating
subsidiaries pursuant to applicable state tariffs and is subject to the terms
and conditions of the On-Net Voice Term Plan set forth in the applicable state
tariffs or transactional vehicles.
UNDERUTILIZATION: If at the end of any Annual Period as hereinafter defined,
Customer's Qualifying Volume (as defined in the Tariff) during such Annual
Period fails to meet or exceed the AVC, Customer shall pay, in addition to all
other charges under this Agreement, the difference between the AVC and
Customer's Qualifying Volume during such Annual Period. For purposes of this
Agreement, "Annual Period" means the consecutive twelve (12) month period
commencing on the Agreement Start Date hereof and each consecutive twelve (12)
month period thereafter during the Term or any renewal Term hereof.
EARLY TERMINATION: If Customer terminates this Agreement prior to the expiration
of the Term, Customer shall be required to pay, in addition to all accrued but
unpaid charges through the date of termination, the difference between
Customer's actual Qualifying Volume and the AVC for the Annual Period of
termination, plus fifty (50%) of the AVC for all Annual Periods of the remainder
of the Term.
CONVERSION FROM EXISTING MCI WORLDCOM AGREEMENTS: If Customer meets the
conditions stated under "Termination without Liability" in Tariff, execution of
this Agreement will cause an existing MCI or WORLDCOM term plan agreement to
terminate automatically without application of any Early Termination Charges in
those agreements. Early Termination and Underutilization Charges will apply if
Customer is ineligible for conversion from existing MCI or Worldcom term plans
without liability if all services are not converted to the On-Net Voice Plan.
PAYMENT ARRANGEMENTS: Customer must pay MCI WORLDCOM for services, including any
applicable underutilization charges or early termination charges within thirty
(30) days after Customer's receipt of MCI WORLDCOM's invoice.
TERM RENEWAL: Upon the expiration of the Term, this Agreement will automatically
renew on a month-to-month basis until either party provides the other party with
at least thirty (30) days' advance written notice of its intent to terminate
this Agreement.
ASSIGNMENT: Neither this Agreement, nor any rights or obligations of Customer in
this Agreement, shall be transferable or assignable by Customer without MCI
WORLDCOM's prior written consent, which will not be unreasonably withheld or
delayed, and any attempted transfer of assignment hereof by Customer not n
accordance herewith shall be null and void.
GOVERNING LAW: This Agreement, and all causes of action arising out of this
Agreement, will be subject to the Communications Act of 1934, as amended (the
"Act"), or, if any part of this Agreement is not governed by the Act, by the
domestic law of the State of New York without regard to its choice of law
principles.
ENTIRE AGREEMENT: This Agreement, including the Tariff and the Attachments
referenced below, is the complete agreement of the parties and supercedes any
prior agreements or representations, whether oral or written, with respect
thereto. Except for Tariff modifications initiated by MCI WORLDCOM , no
amendment to this Agreement will be valid unless each such change is accepted in
writing by an authorized representative of both parties.
Eligible usage will contribute to the overall revenue commitment level and is
eligible to receive discounts per the Tariff. Applicable rates and Discounts for
MCI WORLDCOM Audioconferencing are set forth in the Tariff.
ADDITIONAL ATTACHMENTS: This Agreement incorporates the following Attachment(s):
Attachment A - Customer Profile
Attachment B - PLFlatRatePromo
Attachment C - IOC Discount Private Line Access Promotion
Attachment D - Frame Relay Integration Addendum
Attachment E - FRFlatRatePromo
- --------------------------------------------------------------------------
Fastnet
Two Courtney Place
Suite 130
Bethlehem, PA 18017
MCI WorldCom - Office Use Only
Corp ID:
Contract:250811-01
Branch: 045
Billing Code: OPT213180
Sales Rep: Christopher Teefy
(609) 681-4064
FASTNET
/s/ Phillip Weller 8/6/99
- ------------------------------------------- ---------------
Philip Weller, Vice President - Engineering Acceptance Date
MCI TELECOMMUNICATIONS CORPORATION
- ------------------------------------------- ----------------
Frank Grillo, Vice President of Marketing Acceptance Date
- --------------------------------------------------------------------------
<PAGE>
MCI WORLDCOM ON-NET VOICE AGREEMENT
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<PAGE>
MCI WORLDCOM ON-NET VOICE AGREEMENT
ATTACHMENT A (CONTINUED)
MCI WORLDCOM COMMERCIAL CUSTOMER PROFILE
TERMS AND CONDITIONS
1. SERVICE AND PAYMENT TERMS. Customer and Guarantor agree to pay to MCI
WORLDCOM all applicable Service charges and any and all federal, state,
or local taxes that may apply to MCI WORLDCOM services provided.
Customer's account becomes delinquent if payment is not received by MCI
WORLDCOM on or before thirty (30) days from the billing date found on
the invoice. If MCI WORLDCOM does not receive notice, in writing, of a
dispute about the charges within thirty (30) days after an invoice is
rendered, such invoice shall be deemed correct and binding. Customer
agrees to make payment to MCI WORLDCOM at the address of the MCI
WORLDCOM operating center designated on the first page of this
Application; the place designated on the invoice; or at such place as
MCI WorldCom directs. Customer agrees to and will be assessed a
returned-check charge of up to $25.00 for any Customer check that a
financial institution refuses to honor.
2. TERMINATION RIGHTS. MCI WORLDCOM, by oral or written notice to
Customer, may immediately discontinue (unless the state in which
customer resides prohibits or requires some other notification period)
all Service(s) provided by MCI WORLDCOM to Customer or cancel a Service
Agreement for any of the following reasons: (i) A breach by Customer of
any of the provisions in the Service Agreement or this Credit
Application; (ii) The failure of Customer to provide a satisfactory
security deposit; (iii) Any violation by Customer of any law, rule, or
regulation (including applicable Tariffs); (iv) MCI WORLDCOM's
inability to furnish Service to Customer because of any law, rule,
court order, or other government regulation or interference; (v) Any
unauthorized or non-permitted use of MCI WORLDCOM Service; and (vi) Any
event, transaction, or occurrence outside the control of MCI WORLDCOM.
3. INTEREST CHARGE. Customer agrees to pay to MCI WORLDCOM the lesser of
an annual rate of interest of 18% (or a monthly rate of 1.5%) or the
maximum rate allowed by law on all accounts that are delinquent. If the
transactions contemplated by this Application would be usurious or
violate any law, MCI WORLDCOM and Customer (or Guarantor, as defined
below) agree (i) that the total amount contracted for, charged or
received by MCI WORLDCOM that constitutes interest shall not exceed the
maximum amount of interest allowed by law and (ii) that any excess
interest that is above that allowed by law shall be credited or paid to
Customer.
4. REPRESENTATIONS AND WARRANTIES. Customer, Guarantor, and the person(s)
signing this Application represent and warrant to MCI WORLDCOM that (i)
that the person executing on behalf of Customer has the authority and
power to execute this application; (ii) Customer conducts a bona fide
business and is in compliance with all laws; (iii) MCI WORLDCOM
services will be used solely for commercial purposes; and (iv) Customer
will abide by the permitted uses as set forth in the Service Agreement.
5. JURISDICTION AND VENUE. Customer and Guarantor agree that they, by
executing this Application or Guaranty, are doing business in a state
identified on the first page of this Application as a MCI WORLDCOM
operating center, and all claims or causes of action that in any way
arise out of or relate to the Application or Guaranty Agreement or the
provision of service may be brought in a court of competent
jurisdiction in such state. Customer and Guarantor hereby SPECIFICALLY
AND VOLUNTARILY WAIVE the right to seek to transfer venue from the
court in which MCI WORLDCOM against Customer or Guarantor has filed any
action.
6. Guaranty AGREEMENT (If applicable). For value received, and in
consideration of the credit heretofore and hereafter extend by MCI
WORLDCOM, the undersigned, to Customer and all of its successors and
assigns, whether one or more ("Guarantor"), jointly and severally
guarantee the full and punctual payment when due of all indebtedness
(as hereinafter defined) owing by Debtor to MCI WORLDCOM . "Debtor"
includes Customer and all other entities owned or controlled by
Customer and/or Guarantor, whether such entities are now or hereafter
existing. Guarantor agrees that such guarantee is a continuing
guarantee of payment of all indebtedness owing by Debtor to MCI
WORLDCOM now outstanding or owing or which thereafter may exist or be
incurred. It shall be conclusively presumed that all extensions of
credit and financial accommodations made by MCI WORLDCOM to Debtor made
concurrently herewith or hereafter are made in reliance upon this
Guaranty Agreement.
This guarantee shall continue until such time as Guarantor gives
written notice of termination by actual delivery thereof to the Credit
Manager of MCI WORLDCOM at the operating center identified on the first
page hereof, and such notice of termination is acknowledged in writing
by an officer of MCI WORLDCOM. Such termination of this guarantee shall
not be effective as to the Indebtedness then owing to MCI WORLDCOM by
Debtor, and this guarantee shall continue as to any such Indebtedness
until the same is fully paid, discharged, and satisfied.
Guarantor absolutely and unconditionally guarantees payment of the
Indebtedness to MCI WORLDCOM. Guarantor's liability hereunder shall not
be impaired, reduced, or affected by MCI WORLDCOM's failure, refusal,
or neglect to collect the Indebtedness from Debtor, or to enforce or
preserve any other security or guarantee, or the failure to perform any
other act prior to seeking payment from Guarantor.
<PAGE>
Guarantor hereby expressly waives and consents in advance to any change
or alteration of any agreement between Debtor and MCI WORLDCOM,
including, without limitation, the rearrangement, renewal, and/or
extension of Debtor's Indebtedness. Guarantor's liability hereunder
shall not be impaired, reduced, or affected by the taking of any other
guarantee or security for the Indebtedness, or by the release,
subordination, or loss of any such other guarantee or security, whether
done voluntarily by MCI WORLDCOM or by the death, insolvency,
bankruptcy, disability of Debtor, or any Guarantor.
As used herein "Indebtedness" means and includes every claim, demand,
right, and/or cause of action of every kind or character and all
extensions and renewals thereof, whether arising by reason of sales of
goods; merchandise or service on open account: promissory notes;
interest; express or implied contracts; tort; any other matter; or
whether constituting a joint or several; direct or indirect; or primary
or secondary liability of Debtor to MCI WORLDCOM.
7. AUTHORITY TO APPROVE. This Application for Commercial Credit is a
solicitation by Customer to MCI WORLDCOM for an offer to sell to
Customer telephone, Internet, and/or related services. Until such offer
is made by MCI WORLDCOM and accepted by Customer, there is no contract
obligating MCI WORLDCOM to provide any goods or services to Customer.
MCI WORLDCOM will make no offer until Customer's credit worthiness has
been investigated and approved by MCI WORLDCOM. NO SALESPERSON HAS
AUTHORITY TO ENTER INTO THIS AGREEMENT OR ANY SIDE AGREEMENT.
<PAGE>
MCI WorldCom On-Net Voice Agreement
Attachment A
MCI WorldCom Commercial Customer Profile
<TABLE>
<CAPTION>
- ------------------------------- ------------------ ----------------------- ----------------------- -----------------------
SALES INFORMATION
- -------------------- ---------- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales Rep/ARM Name Sales Rep East National/Data Address-East & National/Data: 6929 N. Lakewood Ave., Tulsa, OK 74117
ID (918-590-6000)
West Agents
Christopher Teefy Address - West & Agents: 100 N.E. Loop 410, San Antonio, TX 78216
(210-285-2454)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
APPLICANT INFORMATION
- -------------------------------------------------------------------------- ----------------------- -----------------------
Complete Company Name (If incorporated, name shown on corporate charter) Taxpayer ID (Required) Date Business Started
<S> <C> <C>
Fastnet
<CAPTION>
- ------------------------------- ------------------------------------------ ----------------------- -----------------------
Main Business Phone Number Type of Business (Required) State of Incorporation Date of Incorporation
<S> <C> <C>
610-289-1100 Internet Service Provider
- --------------------------------------------------------------------------------------------------------------------------
Street Address - Line 1
Two Courtney Place
<CAPTION>
- -------------------------------------------------- ----------------------- ----------------------- -----------------------
Street Address - Line 2 City State Zip + 4
<S> <C> <C> <C>
Suite 130 Bethlehem PA 18017
- -------------------------------------------------- ----------------------- ----------------------- -----------------------
Billing Address - Line 1
- --------------------------------------------------------------------------------------------------------------------------
Billing Address - Line 2 City State Zip + 4
<CAPTION>
- -------------------------------------------------- ----------------------- ----------------------- -----------------------
PARENT OR SUBSIDIARY INFORMATION
- --------------------------------------------------------------------------------------------------------------------------
Check One Name of Business State of Incorporation Percentage Owned
<S> <C> <C> <C> <C>
Parent Subsidiary
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PRINCIPAL, PARTNER, AND MAJOR-SHAREHOLDER INFORMATION LIST THE COMPLETE NAMES OF ALL PRINCIPALS, PARTNERS, AND MAJOR
SHAREHOLDERS
- ------------------------------- ------------------------------------------ -----------------------------------------------
<S> <C> <C> <C>
Name of Owner Social Security Number
CHECK ONE
------------------------------------------ -----------------------------------------------
Name of Partner 1 Social Security Number
Sole Partnership
Proprietorship ------------------------------------------ -----------------------------------------------
Name of Partner 2 Social Security Number
LLC LLP ------------------------------------------ -----------------------------------------------
Name of Officer 1 Title
Private Public ------------------------------------------ -----------------------------------------------
Corporation Corporation Name of Officer 2 Title
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
REFERENCE
<S> <C> <C>
- -------------------------------------------------------------------------- ----------------------- -----------------------
Name of Bank Phone Fax
- -------------------------------------------------------------------------- ----------------------- -----------------------
Lending Officer Account Number
- -------------------------------------------------------------------------- -----------------------------------------------
PREVIOUS OR EXISTING LOCAL-SERVICE PROVIDER Previous or Existing Long-Distance Provider
- -------------------------------------------------------------------------- -----------------------------------------------
<CAPTION>
General Trade References LIST BUSINESSES WITH WHICH THE APPLICANT HAS TRADED WITHIN THE LAST 12 MONTHS
- --------------------------------------------------------------------------------------------------------------------------
Company Name of Contract Phone Fax
<S> <C> <C> <C> <C>
- ------ ------------------------------------------- ----------------------- ----------------------- -----------------------
1
- ------ ------------------------------------------- ----------------------- ----------------------- -----------------------
2
- ------ ------------------------------------------- ----------------------- ----------------------- -----------------------
3
- ------ ------------------------------------------- ----------------------- ----------------------- -----------------------
USAGE, CREDIT AND SIGNATURES
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Estimated Monthly Usage Authorization of Credit Investigation:
<S> <C>
30000 Applicant authorizes MCI WorldCom to investigate his credit and understands that
MCI WorldCom may also utilize the other sources of credit deemed necessary. Such
- ------------------------------- information will be held in strict confidence. Applicant agrees to indemnify and
Requested Credit Limit hold MCI WorldCom and any other persons harmless from all liability, damage, or
expenses arising from or relating to any and all credit investigations by MCI WorldCom.
Applicant has read and agrees to the Terms and Conditions attached to this Application.
<CAPTION>
- ------------------------------- ------------------------------------------------------------------------------------------
Name of Authorized Officer, Owner, or Partner Title or Authorized Officer, Owner, or Partner Application Tracking ID
<S> <C> <C>
Phillip Weller Vice President - Engineering 50642
- -------------------------------------------------- ----------------------------------------------- -----------------------
Signature of Authorized Officer, Owner, or Partner Date
/s/ Phillip Weller 8/6/99
- -------------------------------------------------------------------------------------------------- -----------------------
CONTINUING GUARANTEE OF SERVICE COMPLETE ONLY WHEN GUARANTY IS REQUIRED BY MCI WORLDCOM
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
I personally guarantee payment of account to MCI WorldCom, Inc. executed effective in the date below.
- --------------------------------------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------
Name Social Security Number
<S> <C> <C>
- -------------------------------------------------------------------------- -----------------------------------------------
Home Address State Zip + 4
- -------------------------------------------------------------------------- ----------------------- -----------------------
Signature Date
- -------------------------------------------------------------------------- -----------------------------------------------
</TABLE>
<PAGE>
MCI WORLDCOM ON-NET VOICE AGREEMENT
ATTACHMENT B
MCI WORLDCOM FLAT-RATE PRIVATE LINE ACCESS PROMOTION
- --------------------------------------------------------------------------------
CUSTOMER INFORMATION
- --------------------------------------------------------------------------------
COMPANY NAME CONTACT TITLE
Fastnet
- ------------------------------------------------- ------------------------------
BILLING ADDRESS - LINE 1 PHONE
Two Courtney Place 610-289-1100
- --------------------------------- ------------------------------ -------- ------
BILLING ADDRESS - LINE 2 CITY STATE ZIP
Suite 130 Bethlehem PA 18017
- --------------------------------------------------------------------------------
PROMOTION SUMMARY
- --------------------------------------------------------------------------------
Customer receives flat-rate local loops for all new DSO's and T1's.
Interstate service must be provided by MCI WorldCom. Promotion applies
to "meet-point" circuits. Promotional rates are applicable for the
length of the term agreement. Additional terms and conditions may
apply.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Monthly
Recurring
Per-Circuit Access Type
Charges
------------- ------------------------ ----------------------- ------------------------
1 2 3
------------- ------------------------ ----------------------- ------------------------
Monthly Access is partially
Recurring Access is at least owned by MCI WorldCom
Pre-Circuit partially served or and spans more than 20
Charges Access is completely owned by MCI WorldCom, miles overall, or no
owned by MCI WorldCom and spans less than part of the circuit is
20 miles overall. provided by MCI
WorldCom.
------------- ------------------------ ----------------------- ------------------------
TERM YEARS DSO DS1 DS0 DS1 DS0 DS1
------------- ------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 [*] [*] [*] [*] [*] [*]
------------- ------------ ----------- ----------- ----------- ----------- ------------
2 [*] [*] [*] [*] [*] [*]
------------- ------------ ----------- ----------- ----------- ----------- ------------
3 [*] [*] [*] [*] [*] [*]
------------- ------------ ----------- ----------- ----------- ----------- ------------
4 [*] [*] [*] [*] [*] [*]
------------- ------------ ----------- ----------- ----------- ----------- ------------
5 [*] [*] [*] [*] [*] [*]
---------------------------------------------------------------------------------------
</TABLE>
The Account Term must provide below all related hardware information for
each T1 or Circuit, in order to ensure proper enrollment and invoicing. The
Promotion Code will be assigned at the T-Carrier level; however, if not ID
is available, the Promotion Code will be assigned at the Circuit level.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
T-CARRIER ID CIRCUIT DSO OR DS1 NPA-NXX SERVICE ORDER ACCESS TYPE
(OPTION 2&3) ID NO. (1,2,3)
<S> <C> <C> <C> <C> <C> <C>
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
1
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
2
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
3
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
4
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
5
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
6
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
7
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
8
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
9
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
10
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
11
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
12
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
13
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
14
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
15
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
16
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
17
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
18
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
19
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
20
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
21
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
22
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
23
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
24
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
MCI WORLDCOM ON-NET VOICE AGREEMENT
ATTACHMENT C
IOC DISCOUNT PRIVATE LINE ACCESS PROMOTION
FOR FASTNET
A Customer that enrolls in an MCI WORLDCOM On-net Private Line Agreement shall
receive the monthly recurring Inter-Office Service discounts provided below, in
addition to an On-net Private Line discounts associated with the selected term
and volume commitment. The IOC discount is contingent on the length of the
customer's new on-net contract signed. The discounts for all other products and
service are set forth in MCI F.C.C. Tariff No. 1.
The customer must place an order for installation of all circuits which receive
the benefits of this promotion by September 30, 1999. All circuits which receive
the benefits of this promotion must be installed by October 31, 1999.
[*]
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
MCI WORLDCOM ON-NET VOICE AGREEMENT
ATTACHMENT D
FRAME RELAY INTEGRATION ADDENDUM
FOR FASTNET
By enrolling in MCI WORLDCOM Domestic Frame Relay under this MCI WORLDCOM On-Net
Voice Agreement, Customer's local access channel charges for T-1, DPLS, or DSO
access, domestic monthly recurring port charges, and domestic monthly recurring
permanent virtual circuit ("PVC") charges, after the application of discounts,
will contribute toward the volume commitment under this Agreement. In addition,
local access channel and monthly recurring charges for domestic port and PVC
will receive the tariffed discount associated with the term and volume
commitment of this Agreement. Customer will be subject to the term length and
early termiantion and underutilization penalties in this Agreement.
For Frame Relay, Customer will pay the standard rates as set forth in the
Tariff, including but not limited to access charges, standard Tariffed
non-recurring charges, including but not limited to, installation charges and
reconfiguration charges, monthly recurring port and permanent virtual circuit
("PVC") charges.
The rate set forth in the Tariff do not include, and the discounts set forth in
the Tariff do not apply to, the following: charges for Frame Relay Service
Services other than those set forth herein; non-tarriffed products; access or
egress (or related) charges imposed by third parties; taxes or tax-like
surcharges; and other tariffed charges, included without limitation, Universal
Service Fund charges, and Primary Interexchange Carrier Charges, which are
additional.
CUSTOMER SHOULD NOT ENROLL FOR FRAME RELAY SERVICE UNDER THIS AGREEMENT IF
CUSTOMER HAS ENROLLED UNDER A MCI WORLDCOM STANDALONE FRAME RELAY AGREEMENT.
Any capitalized terms not expressly defined in this Attachment shall have the
meaning given to such term in the Agreement.
BILLING IDENTIFIERS
COMS ID (Required) ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
Mega ID (if available): ________________________
<PAGE>
MCI WORLDCOM ON-NET VOICE AGREEMENT
ATTACHMENT E
MCI WORLDCOM FLAT-RATE FRAME RELAY AND ATM ACCESS PROMOTION
- --------------------------------------------------------------------------------
Customer Information
- ------------------------- --------- ------------------- ------------------------
Company Name Contact Title
- --------------------------------------------------------------------------------
Billing Address Phone
- --------------------------------------------------------------------------------
Promotion Summary
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
- ---------- ---------- ---------- ---------- ---------- ---------- --------------
<PAGE>
MCI WORLDCOM ON-NET VOICE AGREEMENT
ATTACHMENT E
MCI WORLDCOM FLAT-RATE FRAME RELAY AND ATM ACCESS PROMOTION
- --------------------------------------------------------------------------------
CUSTOMER INFORMATION
- --------------------------------------------------------------------------------
COMPANY NAME CONTACT TITLE
Fastnet
- ---------------------------------------------------------------- ---------------
BILLING ADDRESS - LINE 1 PHONE
Two Courtney Place 610-289-1100
- ------------------------------ -------------------------- ----------- ----------
BILLING ADDRESS - LINE 2 CITY STATE ZIP
Suite 130 Bethlehem PA 18017
- ------------------------------ -------------------------- ----------- ----------
PROMOTION SUMMARY
- --------------------------------------------------------------------------------
Customer receives flat-rate local loops for all new DSO's and T1's.
Promotion requires T1 access loops to have a minimum of two channels
dedicated to Frame Relay or ATM, and the T1's first two channels must
be assigned to Frame Relay or ATM. Interstate service must be provided
by MCI WorldCom. Promotion applies to "meet-point" circuits.
Promotional rates are applicable for the length of the term agreement.
Additional terms and conditions may apply.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
MONTHLY RECURRING PER-CIRCUIT CHARGES
---------------------------------------------------------------------------------------
------------- ------------ ----------- ------------------------------------------------
Access Type DSO T1 Description of Access Type
------------- ------------ ----------- ------------------------------------------------
<S> <C> <C> <C>
1 [*] [*] Access is completely owned by MCI WorldCom.
------------- ------------ ----------- ------------------------------------------------
2 [*] [*] Access is at least partially served or owned
by MCI WorldCom, and spans less than 20 miles
overall.
------------- ------------ ----------- ------------------------------------------------
3 [*] [*] Access is partially owned by MCI WorldCom and
spans more than 20 miles overall, or no part
of the circuit is provided by MCI WorldCom.
--------------------------------------------------------------------------------------------
</TABLE>
The Account Term must provide below all related hardware information for
each T1 or Circuit, in order to ensure proper enrollment and invoicing. The
Promotion Code will be assigned at the T-Carrier level; however, if not ID
is available, the Promotion Code will be assigned at the Circuit level.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
T-CARRIER ID CIRCUIT DSO OR DS1 NPA-NXX SERVICE ORDER ACCESS TYPE
(OPTION 2&3) ID NO. (1,2,3)
<S> <C> <C> <C> <C> <C> <C>
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
1
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
2
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
3
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
4
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
5
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
6
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
7
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
8
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
9
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
10
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
11
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
12
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
13
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
14
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
15
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
16
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
17
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
18
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
19
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
20
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
21
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
22
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
23
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
24
- ---- -------------------- --------- ------------ --------- ---------------- -----------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT 10.4
No. BSG9902-014R1
Date: JUNE 8, 1999
SPRINT
Page 1 of 5
CUSTOM SERVICE AGREEMENT ("AGREEMENT")
Customer Name: Fastnet Corp
Address: 3864 Courtney Street
Bethlehem, PA 18017
- --------------------------------------------------------------------------------
Sprint Communications Company L.P. ("Sprint"), a limited partnership, offers to
provide the Services in Section 2 under the terms and conditions in this
Agreement. This Agreement and any information concerning its terms and
conditions are Sprint's proprietary information and are governed by the parties'
nondisclosure agreement. The parties' nondisclosure agreement term is extended
to be coterminous with the Agreement Term. Customer agrees not to disclose this
Agreement or any information in this Agreement to any third party.
1. TERM - The Term is 36 months, and will start on the first day of the
first billing month after the parties sign this Agreement
("Commencement Date").
2. SERVICES - "Services" means the applicable Sprint offerings that are
specially priced under this Agreement. The Services are Sprint IP
Dedicated Services.
3. MINIMUM SERVICE COMMITMENT ("MSC") - MSC is the amount of Services that
Customer commits to purchase during a specified time period. During
each billing month of the Term, Customer's Minimum Monthly Commitment
("MMC") is $95,000.
MSC CONTRIBUTORY SERVICES - The Services that contribute to Customer's
MSC are Sprint IP Dedicated Services.
MSC SHORTFALL LIABILITY - If Customer fails to meet its MMC, unless
caused by Sprint's material failure to perform under this Agreement,
Customer will pay Sprint, in addition to other applicable charges, the
difference between the MMC and Customer's actual MSC Contributory
Services Usage Charges for each period in which Customer does not
achieve the MMC.
4. QUALIFICATIONS - To receive special pricing under this Agreement,
Customer will meet the following qualifications on the Commencement
Date. If Customer does not meet these qualifications, Sprint may
terminate this Agreement.
a. Customer will have at least 1 Sprint-provided DS3 local access
line for Sprint Services in NPA-NXX 610-289 or successor
NPA-NXX.
5. CONDITIONS - During each billing month Customer will meet the following
conditions to receive all benefits under this Agreement. If Customer
does not meet any one of these conditions, Sprint may adjust Customer's
Services charges or terminate this Agreement.
a. Customer will have at least 1 Sprint-provided OC3 local access
line for Sprint Services in NPA-NXX 610-289 or successor
NPA-NXX.
b. Customer must be headquartered in the State of Pennsylvania.
6. ADDITIONAL PROVISIONS -
At any time after the 12th billing month of the Term, Customer may
request once that Sprint review Customer's pricing under the Agreement
and determine if Customer is eligible to receive decreased rates or
Discounts for Domestic Sprint IP Dedicated Services. Any rate decrease
may depend on Customer's agreement to adjust this Agreement's Term or
MSC.
<PAGE>
EXHIBIT 10.4
No. BSG9902-014R1
Date: JUNE 8, 1999
SPRINT
Page 2 of 5
7. SERVICES CHARGES -
a. PRICING COMPONENTS FOR DOMESTIC SPRINT IP SERVICES
Domestic Sprint IP Services consist of Internet (public) and
Intranet (corporate LAN) network access to allow remote users
to dial-in (via local or toll-free access) for access to hosts
or other resources available on these networks. The following
are the primary price components of the standard Domestic
Sprint IP Services offerings.
1) DIAL ACCESS CHARGES - Sprint will charge customer a
Usage Charge per remote user per hour for either
local or toll free dial access. The hourly rates
cover access at any time from any available city.
Dial access Usage Charges do not include local
telephone message and toll charges.
2) SPRINT IP DEDICATED PORT CHARGES - Sprint will charge
customer a one-time installation charge and monthly
recurring charges per Sprint IP Dedicated port for:
(a) local access facilities (per Sprint FCC Tariff
No. 8), (b) the Sprint IP Dedicated port and (c)
Customer Premise Equipment ("CPE") required for each
Sprint IP Dedicated port.
3) USER ID CHARGES - Sprint will charge customer a
monthly charge per user ID for assignment and
administration of the customer-managed user IDs with
fixed addressing or Sprint-managed user IDs. Sprint
may charge customer a monthly charge per user ID for
customer-managed user IDs with dynamic addressing
subject to customer's specific pricing structure.
4) CPE - Certain CPE may be used with Sprint IP
Services. Customer may purchase (at a one-time
purchase price) or rent (at a monthly recurring
rental charge) CPE from Sprint with a Sprint CPE
order form. Sprint must certify customer-provided
CPE. Sprint will charge customer a one-time
installation charge for CPE installed by Sprint.
5) FRAME RELAY GATEWAY CHARGES - For Frame Relay
gateways to the Internet or Intranet, Sprint will
charge customer a one-time charge and a monthly
recurring charge for each Sprint Frame Relay Burst
Express PVC.
6) USAGE CHARGE(S) - Usage Charges are the variable
recurring charges for use of Sprint's interexchange
communications network, determined by customer's
amount of telecommunications services used. Unless
expressly stated in this Agreement, Usage Charges do
not include taxes, interest, surcharges, access line
charges, access facilities charges, other charges
associated with access, fixed recurring charges,
feature charges, operator services charges, directory
assistance charges, installation charges, account
charges, set up fees, report charges, and other
non-recurring charges.
b. Domestic Sprint IP Dedicated Services Pricing: customer will
comply with Sprint's Standard terms and conditions for
Domestic Sprint IP Services (incorporated into this
agreement).Customer will receive the following charges for
these services:
<PAGE>
EXHIBIT 10.4
No. BSG9902-014R1
Date: JUNE 8, 1999
SPRINT
Page 3 of 5
CUSTOM SERVICE AGREEMENT ("AGREEMENT")
Customer Name: Fastnet Corp
Address: 3864 Courtney Street
Bethlehem, PA 18017
- --------------------------------------------------------------------------------
1) Sprint will charge Customer a $95,000 fixed monthly
recurring charge for each Domestic OC3 Sprint IP
Dedicated port, with an individual order term of 3
years or longer,
2) installed or in service during the Term. Orders for
all IMUX, FDS3, 45Mbps and OC3 Sprint IP Dedicated
ports will be accepted in Sprint's discretion.
3) The monthly recurring charge above does not include
charges for Local Access Facilities, CPE, and other
charges described in the Standard Provisions of this
Agreement. Charges for Local Access Facilities are in
Sprint FCC Tariff No. 8.
4) Customer is not eligible for standard order term
discounts.
d. Sprint will waive the non-recurring charge of $6,000 for each
Dedicated IP Port upgrade during the Term.
e. Sprint will waive Domestic OC3 Sprint IP Dedicated port
installation charge (non-recurring) on ports installed with an
individual order term of 3 years during the Term. This
installation charge does not include installation charges for
Local Access Facilities and CPE.
Local access lines, and Ports, installed under subsection 7e. above are
subject to a 36 month continuous use requirement. If Customer
disconnects any local access line, or Port receiving an installation
waiver prior to the conclusion of the minimum required continuous use
period, Customer must pay a prorated portion of the waived installation
charges based upon the number of months remaining in the period.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
EXHIBIT 10.4
No. BSG9902-014R1
Date: JUNE 8, 1999
SPRINT
Page 4 of 5
STANDARD PROVISIONS
1. TARIFF APPLICABILITY. Capitalized terms are defined in this Agreement
or in applicable Sprint FCC Tariffs. Rates, charges and discounts for
call types, Service elements, features, and Services not in this
Agreement are in the applicable Sprint Base Service Tariff or public
price list.
2. FIXED RATES. Fixed rates will remain fixed for the Term. Percentage
discounts will remain fixed for the Term, but Sprint may modify the
list price for non-tariffed Services against which Sprint applies
discounts.
3. TARIFF WITHDRAWAL. If Sprint withdraws any tariff that applies to
Services in this Agreement, the tariff terms and conditions then in
effect will continue to apply to this Agreement. After Sprint withdraws
any applicable tariff, this Agreement will control over any
inconsistent provision in the withdrawn tariff. But Sprint may modify
any list price that is not fixed by this Agreement.
4. CREDIT APPROVAL. Customer is subject to credit approval and may be
required to submit a deposit.
5. REGULATORY PROGRAMS. Sprint may impose additional charges on Customer
to recover amounts Sprint is required by regulatory or other
governmental authorities to collect on behalf of or pay to others in
support of statutory or regulatory programs. Examples of these programs
include, but are not limited to, the Universal Service Fund, the
Presubscribed Interexchange Carrier Charge, and compensation to
payphone service providers for use of their payphones to access
Sprint's service.
6. NOTICE. Any notice required under this Agreement or related to a
dispute must be submitted in writing to the appropriate party's address
shown below. If a notice relates to a dispute, Customer must provide a
copy to Sprint at 8140 Ward Parkway, Kansas City, Missouri 64114,
Attention: Law Department/Marketing and Sales.
7. RELIANCE. In accepting this Agreement Customer is not relying on any
representations or promises not included in this Agreement.
When signed by the parties this Agreement will: (a) constitute the
parties' entire understanding regarding Services; and (b) supersede all
agreements or discussions, oral or written, regarding Services.
8. ORDERS. Customer will order Services pursuant to Sprint's standard
ordering procedures, subject to Sprint's acceptance, that may include
signing Sprint's standard Order for Data Communication Service form or
other Sprint-designated form ("Order"). The Sprint Tariffs, if
applicable, and the Sprint standard terms and conditions for Services
(incorporated into this Agreement) also apply to Sprint's provision of
Services.
9. DEFINITIONS. (a) The term "Domestic" means the 48 contiguous states of
the United States and the District of Columbia. (b) "Usage Charges" are
the variable recurring charges or fixed monthly recurring charge for
use of Sprint's interexchange communications network. Sprint calculates
Usage Charges by the amount of telecommunications network service used
by Customer (units of time or a similar measure). Except as expressly
provided in this Agreement, Usage Charges excludes taxes, interest,
surcharges, access line charges, access facilities charges, other
charges associated with access fixed recurring charges (other than
specified interexchange circuit charges), feature charges, operator
service surcharges, directory assistance charges, installation charges,
account charges, set up fees, report charges, and other non-recurring
charges.
10. HEADINGS. Headings are for reference only and have no effect on any
provision's meaning.
11. COMMENCEMENT. To become effective this Agreement must be: (a) signed by
a Customer representative; (b) delivered to Sprint on or before June
30, 1999; and (c) signed by a Sprint officer or authorized designee.
12. ALTERATIONS. Alterations to this Agreement will not be valid unless
accepted in writing by a Sprint officer or authorized designee.
FASTNET CORPORATION SPRINT COMMUNICATIONS COMPANY L.P.
- -------------------------------- ----------------------------------
By: /s/ Phillip L. Weller By /s/ Steve Prout
----------------------------- ----------------------------
Name: Phillip Weller Name: Steve Prout
-------------------------- -------------------------
Title: VP-Engineering Title: Regional Director
-------------------------- ------------------------
Date: 6/10/99 Date: June 20, 1999
-------------------------- -------------------------
Address: 3864 Courtney St., Ste 130 Address: 555 Croton Road
----------------------------- -----------------------
Bethlehem, PA 18017 King of Prussia, PA 19406
- ----------------------------- ---------------------------------
<PAGE>
BROADBAND (T3 & OC-N)
CUSTOMER AUTHORIZATION
AIM # __ __ __ __ __ __ __ __ __ __ CUST ID # 13068673
CUSTOMER NAME: You Tools Corp.
-----------------------------------------------------------------
CITY: __________________________________________ STATE _______ ZIP ___________
SCA # OR DS3 REQUEST # _______________________ QUANTITY _______________________
CKT TYPE (T3 OR OC-N) _________________________ CWD __________________________
ACCESS ARRANGEMENT: / / SPA /X/ CPA TO POP / / CPA TO SWC
/ / SCVBA TO POP / / SCVBA TO SWC
/ / Customer Paid Expedite (X if Applicable) (Director/Sales Signature Required)
Reason For Expedite __________________________________________________________
- -------------------------------------------------------------------------------
Term Plan: 3 year
--------------
Term Plan must be one of the approved options within the SCA or DS3 Request
Approval Document. Subject to availability.
DEDICATED ACCESS CHARGES MRC NR
Access Transport
---------------- -------------
ACF
---------------- -------------
COCF *
---------------- -------------
EFC
---------------- -------------
M13 MUX (Sprint Or Vendor)
---------------- -------------
ISP (Internet Dedicated Access) * *
---------------- -------------
Expedite
---------------- -------------
Other
---------------- -------------
All Sprint charges and other charges set forth above are subject to change.
Terms and conditions are governed by the applicable Sprint tariffs, as they may
be amended from time to time. Additional terms and conditions set forth in
Special Customer Arrangement approvals shall apply to this circuit.
SPECIAL ACCESS SURCHARGE APPLICATION FOR EXEMPTION
The undersigned hereby certifies that he/she is an authorized representative of
the company named below and that the circuit herein is not inter-connected with
the local exchange through a Private Branch Exchange (PBX) or other device
actually capable of switching traffic to or from the local exchange. Therefore,
this circuit is exempted from the access surcharge.
The undersigned warrants the accuracy of this special access surcharge
application for exemption and the undersigned shall defend, indemnify and hold
Sprint Communications Company L.P., a Delaware Limited Partnership, (Sprint)
harmless from and against any damages, costs or expenses which Sprint may incur
by submitting this application for exemption.
It is acknowledged that acceptance or rejection of this application will be the
sole responsibility of the local telephone company, and not Sprint.
Customer Initial: X DKV
--------------
ACCESS OPERATIONS
[*] WE ARE SEEKING CONFIDENTIAL TREATMENT OF THESE TERMS, WHICH HAVE BEEN
OMITTED. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
By Signing below customer agrees to pay all of the above charges.
SPRINT APPROVAL CUSTOMER APPROVAL
Sprint Signature: /s/ Tom Duggan Company Name: You Tools Corp.
------------------ ------------------------------
(Director Signature if Expedite): Customer Signature: /s/ David K. Van Allen
---- ------------------------
Print or Type Name: Tom Duggan Print or Type Name: David Van Allen
----------------- ------------------------
Date: 10/21/97 Date: 10/22/97
------------------------------- --------------------------------------
ACCESS OPERATIONS
<PAGE>
BROADBAND (T3 & OC-N)
CUSTOMER AUTHORIZATION
AIM # __ __ __ __ __ __ __ __ __ __ CUST ID # __ __ __ __ __ __ __ __ __ __
CUSTOMER NAME: You Tools Corp.
--------------------------------------------------------------
CITY: Philadelphia STATE PA ZIP 19144
----------------------------------- ----------- -----------------
SCA # OR DS3 REQUEST # 00497029 QUANTITY 1
---------------- -------------------------------
CKT TYPE (T3 OR OC-N) T3 CWD 5/5/97
---------------- -------------------------------
ACCESS ARRANGEMENT: / / SPA /X/ CPA TO POP / / CPA TO SWC
/ / SCVBA TO POP / / SCVBA TO SWC
/X/ Customer Paid Expedite (X if Applicable) (Director/Sales Signature Required)
Reason For Expedite ___________________________________________________________
- --------------------------------------------------------------------------------
Term Plan: 3 Year
-------------------
Term Plan must be one of the approved options within the SCA or DS3 Request
Approval Document. Subject to availability.
DEDICATED ACCESS CHARGES MRC NR
Access Transport
------------- -------------
ACF
------------- -------------
COCF * *
------------- -------------
EFC
------------- -------------
M13 MUX (Sprint Or Vendor)
------------- -------------
ISP (Internet Dedicated Access) * *
------------ -------------
Expedite *
------------ -------------
Other
------------ -------------
All Sprint charges and other charges set forth above are subject to change.
Terms and conditions are governed by the applicable Sprint tariffs, as they may
be amended from time to time. Additional terms and conditions set forth in
Special Customer Arrangement approvals shall apply to this circuit.
SPECIAL ACCESS SURCHARGE APPLICATION FOR EXEMPTION
The undersigned hereby certifies that he/she is an authorized representative of
the company named below and that the circuit herein is not inter-connected with
the local exchange through a Private Branch Exchange (PBX) or other device
actually capable of switching traffic to or from the local exchange. Therefore,
this circuit is exempted from the access surcharge.
The undersigned warrants the accuracy of this special access surcharge
application for exemption and the undersigned shall defend, indemnify and hold
Sprint Communications Company L.P., a Delaware Limited Partnership, (Sprint)
harmless from and against any damages, costs or expenses which Sprint may incur
by submitting this application for exemption.
It is acknowledged that acceptance or rejection of this application will be the
sole responsibility of the local telephone company, and not Sprint.
Customer Initial: DVK
-----------
By Signing below customer agrees to pay all of the above charges.
SPRINT APPROVAL CUSTOMER APPROVAL
Sprint Signature: /s/ Tom Duggan Company Name: FASTNET
------------------ --------------
(Director Signature Customer Signature: /s/ David Van Allen
if Expedite):_____________________ -------------------
[*] WE ARE SEEKING CONFIDENTIAL TREATMENT OF THESE TERMS, WHICH HAVE BEEN
OMITTED. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Print or Type Name: Tom Duggan Print or Type Name: David Van Allen
------------------- -------------------
Date: 4/15/97 Date: April 18, 1997
--------------------------------- ------------------------------
ACCESS OPERATIONS
<PAGE>
EXHIBIT 10.5
UUDIRECT T3 TIERED AGREEMENT
<TABLE>
<CAPTION>
Service1 Monthly Fee Start-up Charge2
- -------- ----------- ----------------
<S> <C> <C> <C>
/ / 3 Mbps port [$ * ]
/ / 6 Mbps port [$ * ]
/ / 9 Mbps port [$ * ]
/ / 12 Mbps port [$ * ]
/ / 15 Mbps port [$ * ]
/ / 18 Mbps port [$ * ]
/ / 21 Mbps port [$ * ]
/ / 24 Mbps port [$ * ]
/ / 27 Mbps port [$ * ]
/ / 30 Mbps port [$ * ]
/ / 33 Mbps port [$ * ]
/ / 36 Mbps port [$ * ]
/ / 39 Mbps port [$ * ]
/X/ 45 Mbps port [$ * ]
</TABLE>
PRICES ABOVE DO NOT INCLUDE ANY TELCO LINE CHARGES, EQUIPMENT COSTS,3 OR NETWORK
APPLICATIONS FEES.4
TERM COMMITMENT5
/X/ 1-year Term
PAYMENT
If a Purchase Order is required, return the PO with this form and
provide PO#: _______________
BILLING PREFERENCE / / Bill my existing UUNET account number: ______________
/ / Bill to a new account number
PLEASE SIGN THIS AGREEMENT ON THE REVERSE.
- ---------------------------
1 Customer must provide 60 days' prior written notice to UUNET before
downgrading service to a lower tier. While Customer can resell Internet
connectivity, Customer cannot resell the service in its entirety to another
person or entity without the express prior written consent of UUNET. If
Customer resells Internet connectivity to end users, Customer is responsible
for: (i) providing the first point of contact for end user support inquiries;
(ii) providing software fulfillment to end users; (iii) running its own
primary and secondary domain name service ("DNS") for end users; (iv)
registering end users' domain names; (v) using BGP routing to the UUNET
Network, if requested by UUNET; (vi) collecting route additions and changes,
and providing them to UUNET; and (vii) registering with the appropriate
agency all IP addresses provided by UUNET to Customer that are allocated to
end users.
2 To ensure proper installation, UUNET will order all telco lines. A $500
surcharge applies to Customer-ordered lines. Installation may be scheduled
between the hours of 8AM and & 7PM ET Monday through Friday (excluding
holidays). If Customer requires installation outside of these hours UUNET
will charge an additional $500 fee.
3 UUNET is acting only as a reseller with respect to the hardware and
software offered under this Agreement ("Equipment"), which was manufactured
by a third party ("Manufacturer"). UUNET will provide first-level support for
Equipment, but will not repair or replace Equipment. Customer's use of the
Equipment is subject to the terms and conditions of the Manufacturer's end
user agreement. Should Customer purchase Equipment from UUNET, UUNET will
ship the current UUNET-tested version of the Equipment to the Customer.
4 Descriptions of the domain name, mail, new services, and other network
applications available in connection with this service, and the pricing and
additional terms applicable to these services, are set forth in the Network
Applications Fee Schedule available at www.uu.net/terms. UUNET reserves the
right to change the Network Applications Fee Schedule from time to time,
effective upon posting of the changes to the URL or other notice to Customer.
5 Discount applicable only to Monthly Fee. At the conclusion of the Term
Commitment, this Agreement shall continue in effect on a month-to-month basis
at UUNET's then-current list price for the service.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
GENERAL TERMS AND CONDITIONS
1. UUNET Technologies, Inc. ("UUNET") exercises no control over, and accepts
no responsibility for, the content of the information passing through
UUNET's host computers, network hubs and points of presence (the "UUNET
Network"). EXCEPT AS EXPRESSLY SET FORTH IN SECTION 7 BELOW, UUNET (a)
MAKES NO WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, FOR THE
SERVICES AND EQUIPMENT IT IS PROVIDING, AND (b) DISCLAIMS ANY WARRANTY OF
TITLE, MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE. Use of any information obtained via the UUNET Network is at
Customer's own risk. UUNET specifically denies any responsibility for the
accuracy or quality of information obtained through its services. UUNET
shall not be liable for any delay or failure in performance due to Force
Majeure, which shall include without limitation acts of God, earthquake,
labor disputes, changes in law, regulation or government policy, riots,
war, fire, epidemics, acts or omissions of vendors or suppliers, equipment
failures, transportation difficulties, or other occurrences which are
beyond UUNET's reasonable control.
2. All use of the UUNET Network and the service must comply with the
then-current version of the UUNET Acceptable Use Policy ("Policy") which is
made a part of this Agreement and is available at the following URL:
www.uu.net/terms. UUNET reserves the right to amend the Policy from time to
time, effective upon posting of the revised Policy at the URL or other
notice to Customer. UUNET reserves the right to suspend the service or
terminate this Agreement effective upon notice for a violation of the
Policy. Customer agrees to indemnify and hold harmless UUNET from any
losses, damages, costs or expenses resulting from any third party claim or
allegation ("Claim") arising out of or relating to use of the service,
including any Claim which, if true, would constitute a violation of the
Policy.
3. NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL,
PUNITIVE OR CONSEQUENTIAL DAMAGES THAT RESULT FROM CUSTOMER'S OR CUSTOMER'S
USERS' USE OF THE UUNET NETWORK AND THE SERVICE INCLUDING, WITHOUT
LIMITATION, ANY SUCH DAMAGES FOR LOSS OF DATA RESULTING FROM DELAYS,
NON-DELIVERIES, MISDELIVERIES OR SERVICE INTERRUPTIONS. Notwithstanding
anything to the contrary stated in this Agreement, Customer's sole remedies
for any claims relating to this service or the UUNET Network are set forth
in Section 7 below.
4. Networks assigned from a UUNET net-block are non-portable. Network space
allocated by UUNET must be returned to UUNET in the event Customer
discontinues service.
5. Payment is due 30 days after date of invoice. Accounts are in default if
payment is not received within 30 days after date of invoice. If payment is
returned to UUNET unpaid Customer is immediately in default and subject to
a returned check charge of $25 from UUNET. Accounts unpaid 60 days after
date of invoice may have service interrupted or terminated. Such
interruption does not relieve Customer of the obligation to pay the Monthly
Fee. Only a written request to terminate Customer's service relieves
Customer of the obligation to pay the Monthly Fee. Accounts in default are
subject to an interest charge on the outstanding balance of the lesser of
1.5% per month or the maximum rate permitted by law. Customer agrees to pay
UUNET its reasonable expenses, including attorney and collection agency
fees, incurred in enforcing its rights under this Agreement. Prices are
exclusive of any taxes which may be levied or assessed upon the Equipment
or services provided hereunder. Any such taxes shall be paid by Customer.
If Customer is exempt from otherwise applicable taxes, Customer must submit
its tax identification number and exemption certificate at the same time it
submits this Agreement.
6. Billing for UUNET service will commence when a UUNET hub and a functioning
telephone circuit are prepared to route IP packets to Customer's site. The
Start-up Charge is invoiced upon acceptance of this Agreement by UUNET.
Charges for Equipment shall be invoiced upon shipment. Service is invoiced
monthly in advance, and may be canceled only by 60 days' advance written
notice. In the
<PAGE>
event of early cancellation of a Term Commitment, Customer will be required
to pay 75% of UUNET's standard Monthly Fee for each month remaining in the
Term Commitment. UUNET reserves the right to change the rates by notifying
Customer 60 days in advance of the effective date of the change.
7. The Service Level Agreement ("SLA") for this service, which is made a part
of this Agreement, is set forth at www.uu.net/terms and applies only to
customers agreeing to a Term Commitment of at least one year. UUNET
reserves the right to amend the SLA from time to time effective upon
posting of the revised SLA to the URL or other notice to Customer;
provided, that in the event of any amendment resulting in a material
reduction of the SLA's service levels or credits, Customer may terminate
this Agreement without penalty by providing UUNET written notice of
termination during the 30 days following notice of such amendment. The SLA
sets forth Customer's sole remedies for any claim relating to this service
or the UUNET Network, including any failure to meet any guarantee set forth
in the SLA. UUNET's records and data shall be the basis for all SLA
calculations and determinations. Notwithstanding anything to the contrary,
the maximum amount of credit in any calendar month under the SLA shall not
exceed the Monthly Fee and/or Start-up Charge which, absent the credit,
would have been charged for UUNET service that month (collectively the
"UUNET Fees"); provided, that the maximum amount of credit for failure to
meet the Availability Guarantee shall not exceed the sum of (a) the UUNET
Fees, plus (b) the telephone company line charge which, absent the credit,
would have been charged for such month.
8. Neither party may use the other party's name, trademarks, tradenames or
other proprietary identifying symbols without the prior written approval of
the other party. Neither party may assign or transfer any of its rights or
obligations under this Agreement without the express, prior written consent
of the other party; provided, that either party may assign or transfer this
Agreement to any affiliate of such party upon advance written notice to the
other party. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof nor shall any single or partial exercise of any right or
remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by law.
9. MCI WORLDCOM, Inc. or its affiliates or subcontractors may perform some or
all of UUNET's duties and/or obligations hereunder.
10. This Agreement supersedes all previous representations, understandings or
agreements and shall prevail notwithstanding any variance with terms and
conditions of any order submitted. Acceptance of this Agreement by UUNET
may be subject, in UUNET's absolute discretion, to satisfactory completion
of a credit check. Activation of service shall indicate UUNET's acceptance
of this Agreement. Use of the UUNET Network constitutes acceptance of this
Agreement.
AGREED AND ACCEPTED BY CUSTOMER:
Signature: /s/ Rafe Scheinblum Company Name: FASTNET
---------------------- ----------------------------
Printed Name: Rafe Scheinblum Address: 3864 Courtney St. Suite 130
------------------- --------------------------------
Title: EVP, Operations Bethlehem, PA 18017
-------------------------- -----------------------------------------
Date: 8/11/99 Telephone 610-266-6700 Fax 610-807-0902
--------------------------- ------------ ------------
<PAGE>
EXHIBIT 10.6
WATCHGUARD TECHNOLOGIES, INC.
MANAGED SECURITY SERVICES PROVIDER AGREEMENT
This WatchGuard Technologies, Inc. Managed Security Services Provider Agreement
(the "Agreement") is made and entered into by and between WatchGuard
Technologies, Inc., a Delaware corporation, with its principal place of business
at 316 Occidental Ave. S., Suite 200, Seattle, WA 98104 ("WGT"), and You Tools
Corporation/Fastnet, a Pennsylvanian corporation, with its principal place of
business at 3864 Courtney Street, Suite 130, Bethlehem, PA 18017 ("MSS
Provider"). WGT and MSS Provider are sometimes referred to herein collectively
as the "Parties" and individually as a "Party".
The Parties, therefore, agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement with initial letters capitalized, these
terms shall have the following definitions:
1.1 "COMPENSATION AGREEMENT" MEANS THE DOCUMENT ATTACHED HERETO AS EXHIBIT A.
1.2 "DISTRIBUTED PRODUCTS" means all Products, other than the MSS Product,
identified in the most current version of the WGT Manufacturer's Suggested
Retail Price ("MSRP") list in effect from time to time.
1.3 "DOCUMENTATION" shall mean any manuals, user guides, product descriptions
and specifications, brochures, technical manuals, license agreements, limited
hardware warranty, supporting materials and other printed information generally
made available and delivered by WGT with a Product, whether provided in print,
electronic, or video format.
1.4 "EFFECTIVE DATE" means the date on which this Agreement is signed and dated
by a duly authorized representative of WGT.
1.5 "END-USER" means a Product End-User and/or a Service End-User, as the
context requires.
1.6 "GROSS PURCHASES" means the gross purchase price paid by MSS Provider to WGT
for the Product, excluding any taxes or pass through charges and net of any
credits or returns.
1.7 "GUARANTEED MINIMUM PURCHASES" means the guaranteed minimum purchase amounts
set forth in the Compensation Agreement.
1.8 "HARDWARE PRODUCT" means any "Firebox" hardware product identified in the
Compensation Agreement, and in the most current WGT MSRP list in effect from
time to time.
1.9 "LIMITED HARDWARE WARRANTY" means the standard warranty of WGT in effect
form time to time that is applicable to each Hardware Product purchased by MSS
Provider. The Limited Hardware Warranty in effect on the date of this Agreement
is attached hereto as Exhibit B.
<PAGE>
1.10 "MANAGED SECURITY SERVICES" means the Internet security and support
services offered and furnished to Service End-Users by MSS Provider using the
MSS Product.
1.11 "MSS PRODUCT" means WGT's "NOC Security Suite" software product, and any
Updates thereto, identified in the Compensation Agreement. The NOC Security
Suite consists of both the "Global Policy Manager" and "WatchGuard Event
Processor" components.
1.12 "IVOC SECURITY SUITE RENEWAL FEE" means the telephone support and security
update services fees to be paid by MSS Provider in accordance with Section 5.3
of this Agreement.
1.13 "PRODUCT" means any product identified in the Compensation Agreement, and
in the most current version of WGT's MSRP list in effect from time to time,
including any Hardware Product, Software, or Documentation, and any Updates
thereto.
1.14 "PRODUCT END-USER" means any end-user purchaser of a Distributed Product
from MSS Provider under the terms of this Agreement.
1.15 "SECURITY SUBSCRIPTION FEE" means the telephone support and software update
fees to be paid by MSS Provider in accordance with Section 5.4.
1.16 "SERVICE END-USER" means any end-user purchaser of Managed Security
Services from MSS Provider pursuant to a written service agreement that conforms
to the requirements of this Agreement.
1.17 "SOFTWARE" means any software product identified in the Compensation
Agreement, and in the most current version of WGT's MSRP list in effect from
time to time, including any Updates thereto.
1.18 "TERM" means the period described in Section 6.1.
1.19 "TERRITORY" means the geographic area of North America as identified in the
Compensation Agreement.
1.20 "TRADEMARKS" means the following WGT trademarks and trade names:
WatchGuard-Registered Trademark-; WatchGuard-Registered Trademark- Technologies;
WatchGuard-Registered Trademark- SchoolMate; Firebox-TM-; Firebox-TM- II;
LiveSecurity-TM- and any other trademarks and trade names designated in writing
by WGT for use by MSS Provider under this Agreement.
1.21 "UPDATE" means any minor modification, upgrade or enhancement of a Product
(excluding any new version of a Product) that WGT elects to make generally
commercially available to its MSS Providers via FTP site or other reasonable
means.
SECTION 2. LICENSE GRANT AND LIMITATIONS
2.1 LICENSE GRANT. Subject to the terms and conditions of this Agreement,
including any Exhibits attached hereto, WGT hereby grants to MSS Provider, for
the Term of this Agreement, a non-exclusive, non-transferable license to do the
following in the Territory: (i) install and use the Global Policy Manager
software component of the MSS Product at one (1) single primary
<PAGE>
location for the sole purpose of furnishing Managed Security Services to
Service End-Users through use of the Hardware Product purchased from WGT; (ii)
install and use the Global Policy Manager software component of the MSS Product
at one (1) single secondary location for the sole purpose of furnishing Managed
Security Services to Service End-Users through use of the Hardware Product
purchased from WGT, solely for the duration of any operation failure at the
primary location, (iii) install and use the WatchGuard Event Processor software
component of the MSS Product at multiple locations solely for the purpose of
furnishing Managed Security Services to Service End-Users through use of the
Hardware Product purchased from WGT; (iv) market and demonstrate the Distributed
Products to potential Product End-Users; (v) resell the Distributed Products to
Product End-Users in the same condition as received from WGT; (vi) support the
Distributed Products sold to Product End-Users; and (vii) use and display the
Trademarks solely for purposes of identifying the Products in connection with
the rights granted under (i), (ii), (iii), (iv), (v) and (vi) above. MSS
Provider's use of any Product will also be subject to the terms and conditions
of the applicable WGT end-user license agreement furnished with the Product;
provided, however, that in the event of any conflict or inconsistency between
the terms of this Agreement and the terms of any such end-user license
agreement, the terms of this Agreement shall control.
2.2 LIMITATIONS OF USE. The MSS Product is licensed, not sold, to MSS Provider.
Section 2.1 above sets forth the entirety of MSS Provider's rights to, as
applicable, use, market, demonstrate, distribute, lease, manage and support the
Products. All rights in and to the Products not expressly granted to MSS
Provider under this Agreement are hereby expressly reserved to WGT without
restriction. Without limiting the foregoing MSS Provider will not, directly or
through others (i) install and/or use the WatchGuard Event Processor software
component of the MSS Product other than in connection with the licensed use of
the Global Policy Manager component of the MSS Product granted in Section 2.1(i)
and (ii) above; (ii) market, manage, lease, demonstrate, distribute, or support,
as applicable, any Product outside the Territory, or supply any Distributed
Product to any Product End-User that MSS Provider knows or has reason to know
intends to use or install the Distributed Product outside the Territory, unless
otherwise agreed to in writing by WGT; (iii) distribute any Distributed Product
in any form other than its original packaging and condition as received from WGT
under the terms of the end-user license agreement and Limited Hardware Warranty;
(iv) modify any Product or translate or port the Software into any other
computer or human language; (v) disassemble, reverse engineer, decompile or
repackage all or any component of any Product or otherwise attempt to discover
any portion of the source code or trade secrets related to any Product; (vi)
sell, lend, rent, give, assign or otherwise transfer or dispose of any Product
other than in accordance with Section 2.1; (vii) remove, alter, distort, cover
or modify any notice of proprietary rights present in or on any Product or its
packaging as delivered to MSS Provider; or (viii) register, attempt to register
or assist anyone else to register, directly or indirectly, the Trademarks or any
copyright or other proprietary rights associated with the Products in the
Territory or elsewhere other than in the name of WGT, without WGT's prior
written consent.
<PAGE>
2.3 PROTECTION AGAINST UNAUTHORIZED USE. MSS Provider will promptly notify WGT
of any known or suspected unauthorized use of the Products or the Trademarks. In
the event of any such unauthorized use by MSS Provider's employees, agents or
representatives, MSS Provider will use its best efforts to terminate such
unauthorized use and to retrieve any copy of the Products in the possession or
control of the person or entity engaging in such unauthorized use. MSS Provider
will immediately notify WGT of any legal proceeding initiated by MSS Provider in
connection with such unauthorized use. WGT may, at its option and expense,
participate in any proceeding and, in such event, MSS Provider will provide such
authority, information and assistance related to such proceeding as WGT may
reasonably request to protect WGT's interests.
SECTION 3. PRODUCT PROCUREMENT, PRICING, AND PAYMENT
3.1 PRODUCT PROCUREMENT. During the Term, WGT will deliver to MSS Provider, and
MSS Provider will pay for, all Products ordered by MSS Provider in accordance
with the terms and conditions of this Agreement.
3.2 ORDERS. MSS Provider will place orders for the Products that it desires to
obtain from WGT by completing, signing, and submitting to WGT a written order
for the same, in a form acceptable to WGT, via facsimile, mail or other means.
MSS Provider will submit such orders at lease thirty (30) days in advance of the
requested delivery date set forth in the orders. All orders will be subject to
acceptance by WGT through written acceptance or shipment of the Products subject
to the order. WGT will use commercially reasonable efforts to deliver the
Products to MSS Provider in accordance with Section 3.4 within ten (10) days of
WGT's acceptance of any order placed by MSS Provider.
3.3 STOCK ROTATION/EXCESS INVENTORY. Credit for stock rotation/excess inventory
returns by MSS Provider to WGT shall not exceed fifteen percent (15%) of MSS
Provider's previous quarter's net purchases of the Products, which percentage
amount shall include returns by MSS Provider of any discontinued Product. Such
returns may be executed by MSS Provider monthly, cumulative to fifteen percent
(15%) during the current quarter. MSS Provider shall be responsible for return
freight shipping costs, F.O.B. the location designated by WGT. WGT will not
require an order by MSS Provider to offset the above returns.
3.4 DELIVERY. All Products will be delivered F.O.B. carrier at WGT's shipping
location as determined by WGT from time to time. MSS Provider will pay or
reimburse WGT for all reasonable shipping charges, premiums for freight
insurance, inspection fees, duties, import and export fees, assessments,
transportation and other costs incurred by WGT to transport the Product to the
shipping destination.
3.5 PRICE. MSS Provider will pay WGT according to the pricing terms specified in
the Compensation Agreement for each MSS Product ordered by MSS Provider, and
according to WGT's then current MSRP list for the Distributed Products ordered
by MSS Provider for resale to Product End-Users.
3.6 INVOICES. MSS Provider will pay WGT the full amount invoiced within thirty
(30) days
<PAGE>
after the date of WGT's invoice, unless provided otherwise on the applicable
invoice. All orders from outside the United States must be prepaid in advance
unless otherwise agreed to in writing by the WGT credit department. All payments
to WGT shall be in the lawful money of the United States of America to WGT.
International payments shall be made via wire transfer to WGT's bank account
number 3300108287, at the Silicon Valley Bank, 3003 Tasman Drive, Santa Clara,
CA 95054, USA; ABA routing number 121140399.
3.7 RESALE OF DISTRIBUTED PRODUCTS. Except for any Hardware Products used by MSS
Provider in connection with its Managed Security Services, and except for the
copies of the Software licensed to MSS Provider for its internal use under the
terms of the applicable Software end-user license agreement, MSS Provider
represents and warrants that all Distributed Products acquired under this
Agreement are acquired solely for demonstration, licensing or sale (as
applicable) to Product End-Users in the Territory without intervening use by MSS
Provider. Upon WGT's request, MSS Provider will furnish WGT evidence of such
resale (including but not limited to satisfactory evidence of exemption from
retail sales, use or similar taxes that may otherwise apply to transactions
under this Agreement).
SECTION 4. OBLIGATIONS OF THE PARTIES
4.1 OBLIGATIONS OF MSS PROVIDER. MSS Provider will use good faith efforts to
aggressively market and promote the Distributed Products and its Managed
Security Services in the Territory. In furtherance thereof, MSS Provider will:
(a) keep on hand a reasonable inventory of the MSS Product for Managed
Security Services, and of the Distributed Products sufficient to allow for
prompt delivery to Product End-User customers;
(b) establish a program to market the Distributed Products and its Managed
Security Services and conduct regular local promotional and other marketing
efforts for the Distributed Products and its Managed Security Services. In
furtherance hereof, MSS Provider may create, develop and use any and all of
its own advertising, demonstration and promotional literature, data,
information and items as may be appropriate or desirable in the discretion
of MSS Provider in order to promote, market and sell the Products. The
promotional items and materials developed by MSS Provider will be used in
conjunction with the items provided by WGT, and in accordance with the
Trademark guidelines established by WGT from time to time;
(c) promptly respond to sales leads or referrals furnished by WGT or other
Product vendors;
(d) maintain and furnish to WGT, on a monthly basis, complete and accurate
records of each Product distributed, leased or managed, as applicable
(e.g., showing the date of the transaction, Zip Code of the customer, the
Product serial number and the applicable Product license key(s) under this
Agreement);
<PAGE>
(e) provide quality Product support and promptly advise WGT of each
complaint that MSS Provider may receive or otherwise become aware of
concerning the Product or any portion thereof (including, but not limited
to, warranty claims). MSS Provider will promptly investigate all such
complaints, and will give immediate attention to and use its best efforts
to promptly, courteously and equitably respond to, adjust and settle
(without incurring any obligation or liability on behalf of WGT) all
complaints received by MSS Provider from any customer, potential customer
or anyone else arising out of or in connection with MSS Provider's
distribution of any Distributed Product or the performance of any services.
In handling any complaints, MSS Provider will use its best efforts to
maintain and promote good public relations for WGT;
(f) secure and maintain, in the name of WGT, any and all registrations,
permits, licenses, approvals and other governmental actions required to
import, handle, market, sell, manage, demonstrate, and use, as applicable,
the Products in the Territory, provide to WGT quarterly progress reports on
such action, and provide WGT copies of all registrations, permits,
licenses, approvals, certificates, correspondence and other documentation
related to such action;
(g) avoid deceptive, misleading or unethical conduct which is or might be
detrimental to WGT or its Products, and refrain from making any
representation, warranty or guarantee to any End-User, customer, or other
third party with respect to specifications, features or capabilities of the
Products that is inconsistent with the literature distributed by WGT or
this Agreement;
(h) conduct its business in a manner under its own control, provided that
MSS Provider will at all times comply with all applicable laws and
regulations and will not engage in, or permit its employees or agents to
engage in, any activities or practices which could reflect negatively upon
the reputation or prospects of WGT or its Products or expose WGT to any
liability of any nature whatsoever; and
(i) comply with the Trademark usage guidelines established by WGT from time
to time, including, but not limited to, the prominent display by MSS
Provider of WGT's LiveSecurity trademark and logo design on all product
packaging, brochures, Web sites, and any other marketing materials and
advertisements used by MSS Provider in connection with the Managed Security
Services hereunder.
(j) participate with WGT in a joint press release, within thirty (30) days
of the effective date of this Agreement, announcing MSS Provider's intent
to offer Managed Security Services.
(k) participate with WGT in a joint press release announcing MSS Provider's
offering of Managed Security Services, within thirty (30) days of such
offering
4.2 OBLIGATIONS OF WGT. WGT will:
(a) provide MSS Provider with sixty (60) days' advance notice in the event
of the discontinuation of any Product;
<PAGE>
(b) furnish MSS Provider with such demonstration Products, promotional
literature, data, information and other items as WGT deems appropriate for
MSS Provider's promotion, marketing, managing, leasing, distribution, and
support, as applicable, of the Products. MSS Provider will use such items
only for the purpose of performing its obligations under this Agreement;
(c) provide MSS Provider with quality sales training in the operation and
management of all Products purchased by MSS Provider;
(d) provide MSS Provider with telephone and/or electronic mail access to
WGT's Technical Support Representatives and with on-line technical support
documentation during the Term of this Agreement. Telephone access to WGT
Technical Support is offered between the hours of 6:00 AM and 5:00 PM
(Pacific Standard Time), Monday through Friday. On-line technical support
documentation and electronic mail access is available to MSS Provider at
any time; and
(e) provide MSS Provider with Updates during the Term of this Agreement.
SECTION 5. COMPENSATION
5.1 GENERAL. MSS Provider will pay WGT all applicable Product prices, license
fees, renewal fees, and any other fees in the amounts and at the times specified
in the Compensation Agreement for Managed Security Services, and in the most
current version of WGT's MSRP list in effect from time to time for purchase and
resale of the Distributed Products.
5.2 GUARANTEED MINIMUM PURCHASES. During the Term, MSS Provider will make Gross
Purchases in an amount at least equal to the Guaranteed Minimum Purchase amounts
specified in the Compensation Agreement, through committed orders placed
pursuant to Section 3.2 and calling for shipment on or before the dates set
forth in the Compensation Agreement.
5.3 NOC SECURITY SUITE RENEWAL FEE. During the second year of the Term, and
during each subsequent year Term thereafter, MSS Provider will pay to WGT the
NOC Security Suite Renewal Fee identified in the Compensation Agreement for each
and every Hardware Product under management by MSS Provider. At the end of each
quarter of any such year, WGT will invoice MSS Provider for the NOC Security
Suite Renewal Fee associated with each and every Hardware Product delivered to
and managed by MSS Provider during the same quarter in the immediately preceding
year of the Term. Any failure by MSS Provider to pay to WGT any and all invoiced
NOC Security Suite Renewal Fee amounts during and such year of the Term shall
result in termination of this Agreement in accordance with Section 6 below.
5.4 SECURITY SUBSCRIPTION FEE. MSS Provider will pay to WGT the Security
Subscription Fee, at the discount identified in the Compensation Agreement, for
each and every Distributed Product distributed by MSS Provider to Product
End-Users. At the end of each quarter during the second year of the Term, and
during each subsequent year Term thereafter, WGT will invoice MSS Provider for
the Security Subscription Fee associated with each and every Distributed Product
delivered to and distributed by MSS Provider to Product End-Users during
<PAGE>
the same quarter in the immediately preceding year of the Term. Any failure by
MSS Provider to pay to WGT any and all Invoiced Security Subscription Fee
amounts during any such year of the Term shall result in termination of this
Agreement in accordance with Section 6 below.
SECTION 6. TERM AND TERMINATION
6.1 TERM. The Term will commence on the Effective Date of this Agreement and,
unless sooner terminated under Sections 6.2 or 6.3, will end on the second
anniversary of the date of this Agreement; provided that the Term will
automatically renew for successive additional periods of one (1) year each if
(a) MSS Provider has met or exceeded all Guaranteed Minimum Purchase amounts and
has complied with the marketing requirements under Section 4.1; (b) the Parties
have agreed in writing upon the Guaranteed Minimum Purchase amounts, Product
price discounts, and the NOC Security Suite Renewal Fee amounts for the next
subsequent one (1) year renewal period; and (c) neither Party has given the
other Party notice of such Party's intention not to renew the Term at least
thirty (30) days prior to the end of the then-current Term. WGT agrees that in
order for MSS Provider to continue to provide Managed Security Services to its
Service End-Users upon any termination or expiration of the Term, MSS Provider
will require a service migration period ("Service Migration Period") to migrate
to another platform. The Service Migration Period will commence on the date of
termination or expiration of the Term and will end on the date which is the
earlier of either one (1) year from its date of commencement or when MSS
Provider provides written notice to WGT of its completion.
6.2 TERMINATION BY WGT. WGT may terminate the Term by giving MSS Provider
written notice of such termination upon the occurrence of any of the following:
(a) any solicitation by MSS Provider for the sale of the Distributed
Products to Product End-Users or potential Product End-Users located
outside the Territory unless otherwise agreed to in writing by WGT;
(b) any offer by MSS Provider to furnish customers outside the Territory
with Managed Security services using the MSS Product unless otherwise
agreed to in writing by WGT;
(c) the insolvency of MSS Provider, the filing of a petition in bankruptcy
by or against MSS Provider, the appointment of a receiver for MSS Provider
or MSS Provider's property, the execution of an assignment by MSS Provider
of all or substantially all of its assets for the benefit of its creditors,
or the conviction of MSS Provider or any principal or manager of MSS
Provider for any crime tending to adversely affect the ownership or
operation of MSS Provider's business;
(d) any failure by MSS Provider to perform any of its other obligations
under this Agreement where such failure continues for thirty (30) days
after written notice thereof by WGT to MSS Provider;
<PAGE>
(e) WGT giving MSS Provider ninety (90) days' advance written notice of
termination at any time and for any reason after the expiration of the
initial two (2) year Term;
(f) any failure by MSS Provider to pay to WGT the applicable NOC Security
Suite Renewal Fee in accordance with Section 5.3 of this Agreement, subject
to a thirty (30) day cure period after receipt by MSS Provider of written
notice from WGT of such non-payment; or
(g) any failure by MSS Provider to pay to WGT the applicable Security
Subscription Fee in accordance with Section 5.4 of this Agreement, subject
to a thirty (30) day cure period after receipt by MSS Provider of written
notice from WGT of such non-payment; or
(h) any failure by MSS Provider to make Gross Purchases in sufficient
amounts to meet or exceed the applicable cumulative Guaranteed Minimum
Purchases.
6.3 TERMINATION BY MSS PROVIDER. Upon the occurrence of any of the following,
MSS Provider may terminate the Term by giving WGT written notice of such
termination;
(a) the insolvency of WGT, the filing of a petition by or against WGT, the
appointment of a receiver for WGT or WGT's property, or the execution of an
assignment by WGT of all or substantially all of its assets for the benefit
of its creditors; or
(b) any failure by WGT to perform any of its obligations under this
Agreement where such failure continues for thirty (30) days after written
notice thereof by MSS Provider to WGT.
6.4 EFFECT OF TERMINATION. Any termination pursuant to Sections 6.2 or 6.3 will
be without prejudice to any other right or remedy afforded to either party under
this Agreement or any applicable law (e.g., in the case of any breach or default
by the other party), and will not affect any rights or obligations which have
arisen prior to the date of such termination. In the event of any expiration or
termination of the Term, MSS Provider will:
(a) cease to use, demonstrate, market, sublicense, distribute, lease,
manage and support, as applicable, the Products immediately upon the
expiration or completion of the Service Migration Period;
(b) cease use of all Trademarks immediately upon the expiration or
completion of the Service Migration Period;
<PAGE>
(c) return to WGT, within twenty (20) days of termination of this
Agreement, any and all demonstration Products, promotional literature,
data, information, and all other items provided to MSS Provider under this
Agreement that WGT may specifically request for return from MSS Provider,
other than those items required by MSS Provider during the Service
Migration Period;
(d) pay to WGT in full any and all outstanding invoice amounts;
(e) immediately inform any and all then current End-Users of the
termination of this Agreement and provide the same with the information
necessary for obtaining security updates and technical support directly
from WGT; and
(f) furnish WGT with such information relating to the marketing, managing,
distribution, and support of the Products in the Territory as WGT may
reasonably request (including, but not limited to, information as to calls
or the status of any negotiations for the distribution of any Distributed
Product, or any sales or service records).
6.5 TERMINATION OF LICENSE GRANT. Upon the expiration or termination of the
Term, the license granted to MSS Provider under Section 2 of this Agreement will
terminate immediately upon the expiration or completion of the Service Migration
Period. Upon any termination or expiration of the Term, the NOC Security Suite
Renewal Fees will only be payable by MSS Provider on a pro rata, quarterly basis
until the expiration or completion of the Service Migration Period. Any end-user
licenses of the Software accompanying the Distributed Products and granted under
the terms of this Agreement will survive the end of the Term in accordance with
the terms of the end-user license agreement included with the Distributed
Products.
SECTION 7. GENERAL TERMS AND CONDITIONS
7.1 CONFIDENTIAL INFORMATION. In the performance of or otherwise in connection
with this Agreement, either Party ("Disclosing Party") may disclose to the other
Party ("Receiving Party") certain Confidential Information (as defined below) of
the Disclosing Party. The Receiving Party will treat such Confidential
Information as confidential and proprietary of the Disclosing Party and will use
such Confidential Information solely for the purposes for which it is provided
by the Disclosing Party. Without limiting the generality of the foregoing, the
Receiving Party will take reasonable precautions to prevent any unauthorized use
or disclosure of such Confidential Information. The obligations under this
paragraph will not apply to any:
(a) use or disclosure of any information pursuant to the exercise of the
Disclosing Party's rights under this Agreement;
(b) information that is now or later becomes part of the public domain
through no fault of the Receiving Party;
<PAGE>
(c) information that is obtained by the Receiving Party from a Third Party
(other than in connection with this Agreement) who was not under any
obligation of secrecy or confidentiality with respect to such information;
(d) information that is independently developed by the Receiving Party
(e.g., without reference to any Confidential Information);
(e) any disclosure required by applicable law (e.g., pursuant to applicable
securities laws or legal process), provided that the Receiving Party will
use reasonable efforts to give advance notice to and cooperate with the
Disclosing Party in connection with any such disclosure; and
(f) any disclosure with the consent of the Disclosing Party.
For purposes of the foregoing, the term "Confidential Information" means any
confidential or proprietary information of a Party, whether of a technical,
business or other nature (including, but not necessarily limited to: trade
secrets, know how and information relating to the technology, customers,
business plans, promotional and marketing activities, finances and other
business affairs of such Party); provided that the same is marked or otherwise
identified in writing as confidential or proprietary information prior to, upon
or promptly after receipt by the other Party.
7.2 USE OF TRADEMARKS. WGT reserves all rights in and to the Trademarks and all
other trademarks and trade names used by WGT in connection with the Products,
but WGT grants to MSS Provider the non-exclusive, non-transferable right to use
and display the Trademarks during the Term to promote and identify the Products
in the Territory in connection with this Agreement MSS Provider will comply with
the trademark guidelines and procedures established by WGT from time to time in
MSS Provider's use of the Trademarks, including, without limitation, use of the
trademark and copyright symbols as specified by WGT from time to time. When
using the Trademarks, MSS Provider will include a statement acknowledging that
the Trademarks are owned by WGT. MSS Provider hereby acknowledges that the
goodwill associated with its use of the Trademarks inures solely and exclusively
to WGT and that MSS Provider does not acquire any rights in the Trademarks as a
result of such use. MSS Provider will not use the Trademarks or any confusingly
similar name, marks, logos, designs or artwork as part of MSS Provider's name,
trade name, trademark, top-level domain name, or artwork without WGT's prior
written consent.
7.3 DOMAIN NAME REGISTRATION. Use of any WGT Trademarks in a top-level domain
name established by MSS Provider is strictly prohibited without the prior
written approval of any such top-level domain name by WGT.
7.4 INDEPENDENT CONTRACTOR. MSS Provider is an independent contractor, not an
employee, agent or franchisee of WGT MSS Provider will not represent or hold
itself out as an employee, agent or franchisee of WGT. MSS Provider does not
have any authority to, and will not, create or assume any license, warranty or
other obligation, express or implied, on behalf of WGT. This
<PAGE>
Agreement will not be interpreted or construed as creating or evidencing any
association, joint venture or partnership between the Parties or as imposing any
partnership or franchiser obligation or liability on either Party.
7.5 RECORDS; AUDIT. During the Term, and for twelve (12) months after any
expiration or termination of the Term, MSS Provider will keep and maintain
accurate accounts and records regarding each MSS Product managed and all
Distributed Products distributed by MSS Provider, as well as the Product license
keys delivered to End-Users under this Agreement. Upon WGT's request, MSS
Provider will provide access to such records for examination, reproduction, and
audit by WGT, or its representatives. Any such audit will be conducted at such
times and in such a manner so as not to unreasonably interfere with MSS
Provider's normal operations. If any such audit discloses that MSS Provider is
deficient in its compliance with the terms and conditions of this Agreement, MSS
Provider will immediately pay to WGT any deficiency, plus interest at the rate
of one and one-half percent (1.5%) per annum, compounded on an annual basis.
Acceptance of any payment by WGT will be without prejudice to WGT's rights to an
audit under this Section 7.5 or any other rights or remedies afforded to WGT
under any other provision of this Agreement or applicable law.
7.6 TAXES. The Guaranteed Minimum Purchases and all other amounts payable to WGT
under this Agreement do not include sales, use or value added taxes, customs
fees, duties or other governmental taxes or charges. MSS Provider will pay all
such taxes and charges. In the event MSS Provider is required under any
applicable law to withhold any taxes or duties from the amounts specified under
this Agreement, payment of the amounts specified under this Agreement will be
net of such withholding taxes or duties. MSS Provider will pay the amount of all
such withholding taxes and duties and supply WGT with information concerning the
amount and type of tax withheld and any certificates concerning payments of such
withholding tax.
7.7 INTEREST. Any amount not paid when due will be subject to finance charges at
the rate of one and one-half percent (1.5%) per annum, compounded on an annual
basis. Payment of such finance charges will not excuse or cure MSS Provider's
breach or default for late payment. If WGT retains a collection agency, attorney
or other person or entity to collect overdue payments, all collection costs,
including but not limited to reasonable attorney's fees, will be payable by MSS
Provider.
7.8 OWNERSHIP. The Products involve valuable patent, copyright, trade secret,
trade name, trademark and other proprietary rights of WGT. No title to or
ownership of such proprietary rights is transferred to MSS Provider under this
Agreement or by MSS Provider's use of any Trademarks, copyright or other
proprietary right. WGT reserves all of its copyright, trade secret and other
proprietary rights in the Products. MSS Provider will not infringe, violate or
contest and will take appropriate steps and precautions for the protection of,
such proprietary rights.
7.9 IMPLEMENTATION. MSS Provider will take all action during or after the Term
that is reasonably requested by WGT, and at WGT's expense, for the
implementation of the ownership provisions of this Agreement, or to evidence,
perfect, or protect WGT's ownership of the Products and the proprietary rights
associated with ownership of the Products (including, without limitation, the
execution, acknowledgement, and delivery of instruments of conveyance, patent,
copyright, trademark or other proprietary rights, registration applications, or
other documents).
<PAGE>
7.10 WARRANTY; RETURNS. WGT will permit MSS Provider and any Product End-Users
purchasing the Distributed Products to return any defective Product in
accordance with the limited warranty contained in the applicable WGT end-user
license agreement or Limited Hardware Warranty, provided that MSS Provider or
the Product End-User has complied with all of the warranty terms and conditions.
In order to receive the remedy provided for hereunder, MSS Provider or the
Product End-User must deliver to WGT a sample of the Product which MSS Provider
or the Product End-User finds to be defective in workmanship or materials, or
damaged in shipment prior to MSS Provider or the Product End-User assuming the
risk of loss or damage, along with a written explanation of the alleged defect
within thirty (30) days from the delivery of such Product to MSS Provider or the
Product End-User. In the event WGT verifies a defect reported by MSS Provider or
the Product End-User and such defect affects more than one (1) Product, then, at
WGT's option, MSS Provider or the Product End-User shall either certify
destruction of or return all allegedly defective Products to WGT. WGT will be
responsible for transportation charges for such Product units sent to WGT's
facilities for service during the one (1) year Limited Hardware Warranty period.
Provided that WGT is able to verify the presence of the reported defect in such
units, transportation charges, via a mode of transportation chosen by WGT, shall
be borne by WGT to return the Product units from WGT's location to MSS Provider
or the Product End-User's location. Upon verification of a defect in one (1) or
more Product returned in accordance with the foregoing, or upon MSS Provider's
or the Product End-User's certification that it has destroyed any defective
Product in compliance with WGT's instructions, WGT will, at its option, either
issue a credit to MSS Provider or the Product End-User in the amount of the
purchase price paid or payable for such Product, ore replace the defective
Product with an identical (non-defective) Product. Such remedy will be exclusive
and in full satisfaction of MSS Provider's and the Product End-User's claims
hereunder. WGT does not warrant the Product free from all bugs, errors, defects,
design flaws or omissions. The warranties in this Agreement apply only to the
latest version of each Product made available by WGT. Such warranties will not
apply to any Product which WGT determines has been subject to misuse, neglect,
improper installation, repair, alteration or damage by MSS Provider or the
Product End-User. WGT's obligations under this paragraph will not apply to the
extent arising out of any use or combination of the Product with any other
products, goods, services or other items furnished by anyone other than WGT, or
to any modification or change of the Product not made by WGT. The foregoing
warranties and rights may be asserted by MSS Provider only. Notwithstanding the
above, WGT shall defend and indemnify MSS Provider with regard to any claims,
liabilities, costs, expenses or losses asserted by any End-User relating to any
defect, deficiency or nonconformity in any Product furnished by or on behalf of
WGT, subject to the terms of the Limited Hardware Warranty and applicable
end-user license agreements accompanying the Products.
7.11 INFRINGEMENT. WGT represents that it is free to enter into this Agreement
as the legal owner of full title and rights to, as applicable, all patents,
trademarks and copyrights with regard to the Products, and has not received any
notice or notification of any other individual or entity claiming any
infringement of the same. As such, WGT will defend and indemnify MSS Provider
against any judicial proceeding based upon infringement of any U.S. patent or
U.S. copyright by the Products to the extent that such proceeding arises from or
in connection with a component of the Product manufactured or developed by WGT
and not any third party, provided that MSS Provider notifies WGT of such
proceeding promptly after MSS Provider receives notice thereof, WGT has control
over the defense and settlement of the proceeding, MSS Provider provides
<PAGE>
such assistance in the defense and settlement of the proceeding as WGT may
reasonably request, and MSS Provider complies with any settlement or court order
made in connection with such proceeding (e.g., as to the future use of any
infringing Product). WGT's obligations under this paragraph will not apply to
any infringement to the extent arising out of any use or combination of the
Product with any other products, goods, services or other items furnished by MSS
Provider or anyone other than WGT or to any modification or change of the
Product not made by WGT.
7.12 DISCLAIMER AND RELEASE. THE WARRANTIES OF WGT AND THE REMEDIES OF MSS
PROVIDER SET FORTH IN SECTIONS 7.10 AND 7.11 ARE EXCLUSIVE AND IN SUBSTITUTION
FOR, AND MSS PROVIDER HEREBY WAIVES, RELEASES AND DISCLAIMS, ALL OTHER
WARRANTIES, OBLIGATIONS AND LIABILITIES OF WGT AND ALL OTHER RIGHTS, REMEDIES
AND CLAIMS OF MSS PROVIDER, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE,
WITH RESPECT TO ANY DEFECT, DEFICIENCY OR NONCONFORMITY IN ANY PRODUCT OR OTHER
ITEM FURNISHED BY OR ON BEHALF OF WGT UNDER THIS AGREEMENT, INCLUDING, BUT NOT
LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE; IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING
OR USAGE OF TRADE; ANY OBLIGATION, LIABILITY, RIGHT, REMEDY OR CLAIM IN TORT
(INCLUDING NEGLIGENCE, WHETHER ACTIVE, PASSIVE OR IMPUTED), PRODUCT LIABILITY,
STRICT LIABILITY OR OTHER THEORY; AND CLAIM OF INFRINGEMENT.
7.13 REPRESENTATIONS. MSS Provider will be solely responsible for any
representations or warranties MSS Provider may make to any End-User or other
third party with respect to the Product or any products, goods, services or
other items provided by MSS Provider. Except to the extent inconsistent with
Section 7.11, MSS Provider releases and will defend, indemnify and hold harmless
WGT and its officers, directors, employees, agents and representatives from any
and all claims, losses, damages, liens, liabilities, costs and expenses
(including, but not limited to, reasonable attorneys' fees) incurred or asserted
by any End-User or other third party otherwise arising out of or in connection
with (a) any misrepresentation, negligent or tortious act or omission, or breach
of or default under this Agreement by MSS Provider or by anyone else acting for
or on behalf of MSS Provider in connection with the promotion, managing,
distribution, or other dealings, as applicable, with respect to the Products;
(b) any End-User or other third party use of the Product or any products or
services of MSS Provider; or (c) any representations and warranties regarding
the Products made by MSS Provider that are inconsistent with or in addition to
the warranties made in WGT's end-user license agreement or Limited Hardware
Warranty, as applicable, accompanying each Product.
7.14 LIMITATIONS OF LIABILITY. EXCEPT AS PROVIDED IN SECTION 7.11, WGT'S
LIABILITY (WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE WHETHER
ACTIVE, PASSIVE, IMPUTED), PRODUCT LIABILITY STRICT LIABILITY OR OTHER THEORY)
UNDER THIS AGREEMENT OR WITH REGARD TO ANY PRODUCT OR OTHER ITEMS FURNISHED
UNDER THIS AGREEMENT WILL IN NO EVENT EXCEED THE COMPENSATION PAID TO WGT
CONCERNING SUCH PRODUCT UNDER THIS AGREEMENT.
<PAGE>
7.15 CONSEQUENTIAL DAMAGES. IN NO EVENT WILL WGT BE LIABLE, WHETHER IN CONTRACT,
WARRANTY, TORT (INCLUDING NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED),
PRODUCT LIABILITY, STRICT LIABILITY OR OTHER THEORY), TO MSS PROVIDER, ANY
END-USER OR ANY OTHER PERSON OR ENTITY FOR COST OF COVER OR FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING WITHOUT LIMITATION
DAMAGES FOR LOSS OF PROFIT, BUSINESS OR DATA) ARISING OUT OF ITS PERFORMANCE OR
NONPERFORMANCE OF THIS AGREEMENT OR THE USE OF, INABILITY TO USE OR RESULTS OF
USE OF THE PRODUCT.
7.16 COMPLIANCE WITH LAWS. In performing this Agreement, both Parties will
comply with all applicable laws, regulations and other requirements, now or
hereafter in effect, of government authorities having jurisdiction.
7.17 EXPORT. Without limiting anything else herein, MSS Provider will not export
or re-export, directly or indirectly, any Product to any country to which export
or re-export of such items is prohibited by the U.S. Export Administration Act,
regulations of the U.S. Department of Commerce and other export controls of the
U.S., as they may be amended, without first obtaining an appropriate written
authorization from the U.S. Office of Export Licensing or its successor. At the
time of execution of this Agreement, MSS Provider is prohibited from exporting
or re-exporting, directly or indirectly, the Products to the following
countries: Cuba, Libya, North Korea, Iran, Iraq, Rwanda, Sudan, Syria and the
Federal Republic of Yugoslavia (Serbia and Montenegro). Notwithstanding the
foregoing list, MSS Provider is not relieved from its obligations to comply with
the foregoing export control laws, as such laws may be amended from time to
time. MSS Provider shall also comply with all other foreign or local
governmental export and import control laws, regulations and rules.
7.18 GOVERNMENT APPROVALS. MSS Provider will obtain at its expense all licenses,
permits and other governmental approvals; will provide all notices; and will pay
all duties, taxes and other charges required for the license, export, re-export
and import of the Products managed and/or distributed, as applicable, by MSS
Provider; the license of the Software managed and/or distributed, as applicable,
by MSS Provider; and the implementation of this Agreement.
7.19 NO IMPLIED WAIVER. If either Party fails to require performance of any duty
hereunder by the other Party, such failure shall not affect its right to require
performance of that duty or any other duty thereafter. The waiver by either
Party of a breach of any provision of this Agreement shall not be a waiver of
the provision itself or a waiver of any breach thereafter, or waiver of any
other provision herein.
7.20 ASSIGNMENT. Neither party will assign or transfer all or any part of this
Agreement of any or its rights under this Agreement without the prior written
consent of the other Party, such consent not to be unreasonably withheld.
Subject to the foregoing, this Agreement will be fully binding upon, inure to
the benefit of and be enforceable by the Parties and their respective successors
and assigns.
7.21 SURVIVAL. Sections 6.5, 7.1, 7.4 through 7.9 and 7.11 through 7.27 and all
accrued obligations to pay, together with all other provisions of this Agreement
which may reasonably be
<PAGE>
interpreted or construed as surviving the expiration or termination of the
Term, will survive the expiration or termination of the Term.
7.22 NOTICES. Any notice or other communications under this Agreement given by
either Party to the other will be in writing and delivered to an officer of the
Party either (a) in person or by first-class, registered or certified mail or a
recognized overnight delivery service, return receipt requested, postage prepaid
or (b) by facsimile and then acknowledged as received by return facsimile by the
intended recipient. Notices will be deemed received only upon actual receipt.
Notices will be directed to the intended recipient at the address specified
below the signature on the signature page of this Agreement. Either Party may
change its address by giving the other Party notice of such change in accordance
with this paragraph.
7.23 NO CONFLICT. Both Parties represent and warrant that they are free to enter
into and perform this Agreement without thereby being in breach of or default
under the terms of any other contract, commitment or understanding.
7.24 INTERPRETATION. The English language of this Agreement will govern any
interpretation of or dispute regarding the terms of this Agreement. Paragraph
captions are for convenience of reference and do not alter or limit the terms of
this Agreement. The Parties hereto have expressly required that the present
Agreement and its Exhibits be drawn up in the English language. Les parties aux
presentes ont expressement exige que la presente conventions et se Annexes
solent redigees en la langue anglaise.
7.25 GOVERNING LAW; VENUE. This Agreement will be governed by and interpreted in
accordance with the local laws of the State of Washington, U.S.A., without
regard to its conflicts of law provisions and not including the provisions of
the 1980 U.N. Convention in Contracts for the International Sale of Goods. Both
Parties consent and submit to the jurisdiction of the Federal and State courts
located in a neutral State to be mutually agreed upon in good faith between the
Parties. Except as provided elsewhere herein, any remedy of the Parties set
forth in this Agreement is in addition to any other remedy afforded to each
Party under this Agreement, any other contract, by law or otherwise.
7.26 EXCUSED PERFORMANCE. Neither Party will be liable for, or be considered to
be in breach of or default under this Agreement on account of any delay or
failure to perform as required by this Agreement (other than any delay or
failure in the payment of money) as a result of any cause or condition beyond
such Party's reasonable control.
7.27 ENTIRE AGREEMENT. This Agreement is the exclusive Agreement between the
Parties with respect to its subject matter and, as of the Effective Date,
supersedes all prior and contemporaneous agreements, negotiations,
representations and proposals, written or oral, related to its subject matter.
Its terms cannot be modified, supplemented or rescinded, except by an agreement
in writing signed by an authorized representative of each Party. Neither Party
shall be bound by or be liable to the other Party for any representations,
promise or inducement made by an agent or person in the other's employ, which is
not embodied in this Agreement. No additional conflicting terms submitted on any
order acceptance, or similar form shall become a part of this Agreement. In the
event of any discrepancy or inconsistency between this Agreement and any other
form used by either Party in connection herewith, the terms of this
<PAGE>
Agreement shall govern. The Parties acknowledge that they have read this
Agreement and agree to be bound by its terms and conditions.
IN WITNESS WHEREOF the Parties have executed this Agreement as of the Effective
Date.
MSS PROVIDER: WGT:
By: /s/ David K. Van Allen By: /s/
------------------------------- ---------------------------------
Title: CEO Title: EVP, Sales
---------------------------- ------------------------------
Address: 3864 COURTNEY STREET Address: 316 OCCIDENTAL AVE., S.,
-------------------------- ----------------------------
Bethlehem, PA 18017 Suite 200 Seattle, WA 98106
- --------------------------------- ------------------------------------
Date: 12/30/98 Date: 12/30/98
---------------------------- -------------------------------
<PAGE>
EXHIBIT A
COMPENSATION AGREEMENT
The fees and other amounts payable by MSS Provider to WGT under this
Compensation Agreement shall be in U.S. Dollars as follows:
A. ANNUAL COMMITMENT LEVEL*: 100, 250 or 750 Firebox Units
*Excludes Distributed Products purchases
Firebox II units: 60*
B. MSS PRICING SCHEDULE:
Firebox II/unit (1) [*]
NOC Security Suite $N/A (Included in Firebox (2) [*]
Of $20,000.00, or the difference between
$50,000.00 and the number of boxes purchased
x $500.00] in the event that 100 Firebox II units
Are not purchased by 11/30/99.]
NOC Security Suite Renewal Fee(3) [*]
(3)payable per section 5.3 of the agreement
Firebox Monitors [*]
MSS Technical Certification Class [*]
C. MSS GUARANTEED MINIMUM PURCHASES(4)
(4)Quarters indicated are based on the Effective Date of the Agreement
Q1 - Initial Order [ * ] Delivery Date: 12/31/98
Q2 - Minimum Purchase [ * ] Delivery Date: 03/31/99
Q3 - Minimum Purchase [ * ] Delivery Date: 06/30/99
Q4 - Minimum Purchase [ * ](5) Delivery Date: 9/30/99
5 [ * ]
Total Year One (1) Minimum Purchases *
D. DISTRIBUTED PRODUCTS PRICING SCHEDULE:
DISTRIBUTED PRODUCTS DISCOUNT:(6) [*]
(6) [*]
E. TERRITORY: North America
F. POINT OF SALE REPORTS: Provide to WGT monthly per Section 4.1(d) of
the Agreement.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
<PAGE>
Note: Some MSS Products are available for purchase only in multiples of five
(5). Year two (2) Guaranteed Minimum Purchases shall be mutually agreed upon
between the parties in Q4 of year one (1).
<PAGE>
EXHIBIT 10.7
SWITCH AND DATA FACILITIES CO. CO-LOCATION LICENSE
FOR
SniP Link, LLC and You Tools Corporation
This Co-location License (the "License") made this as of the 1st day of
January, 1999, by and between Switch and Data Facilities Site Two, LP, a
Delaware limited partnership, having an address at 483 Winthrop Road, Teaneck,
NJ ("S&DFS2") and SNiP Link, LLC and You Tools Corporation DBA Fastnet, as Joint
Licensees, having an address c/o SniP Link at 900 Route 168, Suite E4,
Blackwood, NJ 08012 ("Licensees").
W I T N E S S E T H:
WHEREAS, S&DFS2 and Broad and Noble Associates, Inc. have entered into a
lease covering Suite 990 comprising of a portion of the 9th floor of an office
building located at 401 North Broad Street, Philadelphia, PA ("Prime Lease").
WHEREAS, Licensees wishes to operate its computer and/or communications
systems located at the S&DFS2 premises in 401 North Broad Street, and S&DFS2 is
willing to grant to Licensees a nonexclusive license to use a portion of the
S&DFS2 premises for such purposes under the terms and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained and for other good and valuable consideration, S&DFS2 and
Licensees hereby agree as follows:
1. Use of Space. Licensees shall use a part of S&DFS2 premises comprising 997
sq. ft (the "Space") to accommodate:
Equipment located in the space designated in Exhibit I. S&DFS2 will supply
power of the type and in the amount designated in Exhibit II. Space shall
be equipped as designated in Exhibit II.
<PAGE>
The Space shall be used solely for the installation and operation of
equipment as listed in Exhibit A "Equipment List" and such additional
equipment as will be consistent with Licensee's initial installation, in
connection with Licensee's business and for any directly related reasonable
business purposes, to the extent allowed in the Overlease, a copy of which
has been delivered to Licensee. Licensees covenants and agrees that
Licensees shall not use the Space for any other purposes whatsoever unless
otherwise specifically authorized in writing by S&DFS2. Licensees' use of
the Space is to be conducted in accordance with all security procedures
adopted by S&DFS2. It is expressly agreed that the License granted
hereunder is a nonexclusive license to use the Space along with other
licensees similarly licensed by S&DFS2. S&DFS2 may, at its option, elect by
notice to Licensees to substitute for the Space other space at the site
designated by S&DFS2, provided that the substitute space contain
approximately equal area and have substantially similar configuration.
Expenses for such move will be borne by S&DFS2. This License is and at all
times shall be subject and subordinate to the Prime Lease.
2. Prohibited Uses. Licensees shall not at any time use or allow any person
to use the Space or do or permit anything to be done or kept in or about
the Space that: (a) violates any certificate of occupancy in force for the
Building; (b) causes or is likely to cause damage to the Building or the
Space, any equipment, facilities or other systems therein; (c) constitutes
a violation of any Legal Requirement of which Licensees has been put on
written notice, unless it is a violation of any state, federal, or local
law or regulation; (d) violates a requirement or condition of the standard
fire insurance policy issued for office or data processing buildings in the
City of Philadelphia or, in the reasonable judgement of S&DFS2 constitutes
an extra-hazardous condition; (e) constitutes a nuisance, annoyance or
inconvenience to other lessees, licensees or occupants of the Building or
any portion of the Space or interferes with or disrupts the use or
occupancy of any area of the Building or any portion of the Space by other
lessees, licensees or occupants of the Building or the Space; (f)
interferes with the computer or telecommunications operations of the
Building or the Space; (g) constitutes an unlawful, immoral or
objectionable occurrence or condition; or (h) violates any provision of the
Prime Lease.
Licensees shall be allowed to use the Space for all reasonable business
purposes, including without limitation the location of computer equipment,
telecommunications equipment, storage space, office space and other uses
related to the providing of internet, telecommunications, computer and
related services. Licensees shall be allowed to located, within the
licensed Space, any and all telecommunication, computer and/or Internet
related equipment it wishes, provider however it is consistent with the
power supplied to the space outlined in Exhibit II.
3. Services Provided. S&DFS2 shall provide certain support (collectively, the
"Services") for the Licensee's equipment installed in the Space: (1)
installation support ("Installation Services") including necessary power
connections, floor tile cutouts or ceiling conduit, equipment and terminal
connections as detailed in the Installation Support Work Description
attached hereto as Exhibit B and incorporated by reference herein; (2)
conditioned environment with controlled access for operation on shared
basis which environment shall be maintained in a manner
<PAGE>
consistent with the requirements of telephony and data storage and
transmission equipment as outlined in Exhibit II, including, generator
backed electricity which standby power source shall be sufficient to meet
100% of licensees power needs and shall be maintained in a first class
manner and designed to turn on automatically in the event of interruption
of building power, (3) operational support ("Operational Services") for the
operation and maintenance of Licensee's equipment as detailed in the
Operational Support Work Description attached hereto as Exhibit C and
incorporated by reference herein, (4) engineering support ("Engineering
Services") for the ordering, installation coordination and acceptance
testing of telecommunications facilities and services as detailed in the
Engineering Support Work Description attached hereto as Exhibit D and
incorporated by reference herein, and (5) the operation of the entire
premises in a manner consistent with the requirements of the Prime Lease so
as not to disturb or adversely effect the use and quiet enjoyment of the
Space by Licensees hereunder. Any additional services other than the
Services thus defined and the fees to be paid for such additional services
are subject to written amendment of this License upon mutual agreement
between S&DFS2 and Licensee. Licensees acknowledges that S&DFS2 may
temporarily interrupt the Services for the reasons of mandate by law,
utility stoppage beyond its control, or inspection and repair required to
operate and maintain the plumbing, mechanical and electrical systems of the
Building. S&DFS2 shall endeavor to provide the maximum possible prior
written notice to Licensees of such scheduled inspections and repairs.
However, any such interruptions of Power will be for the shortest
reasonable time required and so as to cause the minimum of service
disruption to the Licensee.
4. Floor Load. Licensees shall not place a load upon any floor of the Space,
which exceeds either the load per square foot, which such floor was
designed to carry (200 lbs. per square foot), or that which is allowed by
law. S&DFS2 reserves the right to prescribe the weight and position of all
safes, business machines and mechanical equipment. Licensees shall be
responsible for the costs of engineering evaluation and installation of
floor supports, if necessary for batteries and other equipment exceeding
floor load specifications.
5. Equipment Installation and Removal. Licensees shall provide the equipment
installation work. Prior to and/or by the expiration of this License,
Licensee, at its expense, shall remove from the Space, all of Licensee's
property, and Licensees shall repair any damage to the Space or the
Building resulting from the installation or removal of Licensee's property,
reasonable wear and tear excepted.
6. Term. The term of this License (the "Term") shall be three (3) years,
commencing January 1, 1999 (the "Commencement Date"). Licensees shall have
an option to renew the License for the Space for an additional two (2) year
upon notice no less than 90 days prior to the end of the initial term.
Except as set forth herein, Licensee shall have no right to terminate this
Agreement prior to the end of the term.
7. License Fees. Licensees shall pay to S&DFS2 the following fees (License
Fees) for the License granted and the Services provided hereunder by
S&DFS2: (i) commencing on the
<PAGE>
Commencement Date, $[*] per month for the Space and Operational
Services as provided above during the first three years of the five year
term, and if the option is exercised, during the option period $[*]
per month during the remaining two years and (ii) a one time payment of
$[*] for Installation Services as provided above which has been
paid. All recurring Licensees fees are payable monthly in advance on the
first day of each month during the Term. One-time fees are due and payable
30 days after receipt of invoice. In addition to any fees specified herein,
Licensees shall also be responsible for the payment of sales and/or use
taxes, if any, imposed by any governmental authority or agency in
connection with the license granted here or services performed hereunder.
Any additional services, including additional equipment operation to be
performed by S&DFS2 for Licensees which are not covered by this License and
the consideration to be paid by Licensees for such additional services
shall be subject to the mutual agreement of S&DFS2 and Licensees and shall
be set forth in writing. In the event that Licensees fails to pay the
License Fees set forth in this Section within ten days (10) after such
payment is due, then Licensees shall pay S&DFS2 a late charge equal to 5%
of such past due payment as an agreed liquidated amount as compensation for
S&DFS2's additional administrative expense relating to such late payment.
8. Security Deposit. Simultaneously with the execution of the License
Agreement, Licensees will deposit with S&DFS2 the sum of $9,000.00 dollars
in cash as a Security Deposit. Such Security Deposit (which shall not bear
interest to Licensees unless required to do so by any provision of law)
shall be considered as security for the payment and performance by
Licensees of all of Licensee's obligations, covenants, conditions and
agreements under this License Agreement. Upon expiration of the term
hereof (or any renewals and extensions thereof) S&DFS2 shall, (provided the
Licensees is not in default under the terms hereof) return and pay back
such security deposit to Licensee, less any amounts appropriated by S&DFS2
to make good on Licensee's obligations hereunder. The Security Deposit may
be waived upon the presentation and acceptance by S&DFS2 of Licensee's
financial statements.
9. Insurance. During the Term of this License, S&DFS2 shall maintain
All Risk casualty insurance, covering the S&DFS2 premises in the Building
and insuring such premises in the amount of its full replacement value.
During the Term, Licensees shall maintain, at their expense, All Risk
casualty insurance covering Licensee' property in the amount of their
replacement value. During the Term of this License, S&DFS2 shall maintain
public liability insurance covering the S&DFS2 premises in the Building and
insuring against all hazards and risks customarily insured against by
persons operating data communications buildings. Licensees, at their
expense, shall maintain, at all times during the Term of the License,
comprehensive general liability insurance, written on an occurrence basis
with blanket contractual liability coverage, with respect to use of the
Space and operation of business therein, with combined single-limit
coverage of not less than Five Hundred Thousand Dollars ($500,000). S&DFS2
may increase the policy amount to be maintained by Licensees under this
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
<PAGE>
Section 8 as S&DFS2 deems necessary in order to maintain adequate
liability coverage. Licensees shall provide copies of such insurance
certificates to Licensor.
10. Indemnity. Licensees shall indemnify and hold harmless S&DFS2 against all
claims, suits, expenses losses, liabilities or damages resulting from any
breach by Licensees of any material provision of this License or from any
negligence, gross negligence or willful misconduct of
Licensee. S&DFS2 shall, subject of Section 10 below, indemnify and hold
harmless Licensees against all claims, suits, expenses, losses, liabilities
or damages directly resulting from a material breach by S&DFS2 of any
material provision of this License due to gross negligence or willful
misconduct of S&DFS2.
11. Limitation of Liability. Notwithstanding Section 9 above, in no event
shall S&DFS2 be liable for (i) lost profits, lost information or any
damages to Licensees or any of Licensee's customers' business or property
caused by any error in judgement of, or any action taken or omitted by,
S&DFS2, or any interruption of the Services, unless such error, action,
omission or interruption constitutes or results from gross negligence or
willful misconduct of S&DFS2 and/or willful breach by S&DFS2 of the
material provisions of this Agreement; or special, consequential or
punitive damages as a result of its performance or nonperformance of this
License. S&DFS2 shall not be liable for any claims, suits, expenses,
losses, liabilities or damages caused by Licensee's failure to perform its
responsibilities under this License or by failure of S&DFS2 to fulfill its
obligations under this License due to causes beyond its control, including,
but not limited to; defects in computer and/or communications systems
provided by Licensee, acts of God, interruption of power or other
utilities, interruption of transportation or communication services, acts
of civil or military authority, national emergencies, or strike. Licensees
shall not be liable for its failure to perform its non-monetary obligations
hereunder due to causes beyond its control, including but not limited to,
defective telecommunication systems or equipment provided by Licensee, acts
of God, interruption of power or other utilities, interruption of
transportation or communication services, acts of civil or military
authority, national emergencies or strike. In the event S&DFS2 is found to
be liable for claims, suits, expenses, losses, liabilities or damages
pursuant to this Section 10, S&DFS2's liability per wrongful action or
inaction of S&DFS2 shall be the least of (a) the provable amount of actual
damages directly incurred from such action or inaction, or (b) in the case
of services interruption, the amount of the monthly fees paid by Licensees
to S&DFS2 prorated by the number of days in which the Services are
interrupted, or (c) the amount of the monthly fees paid by Licensees to
S&DFS2. In no event shall S&DFS2's liability be greater than the monthly
fees it receives.
12. Confidentiality. Each party, for itself, its agents, employees and
representatives agrees that it will not divulge any confidential or
proprietary information which it receives from the other party, except as
may be required in the performance of the Services or the implementation of
the project with respect to which the Services are rendered; provided,
however, that no liability shall arise hereunder as a result of the
dissemination of any information which (i) was in the possession or control
of one party prior to the date of disclosure to that party by the other
party
<PAGE>
hereunder, or (ii) was in the public domain or enters the public
domain through no improper act by the party to which such information was
disclosed or any of that party's agents or employees, or (iii) was
rightfully given to a party by a source independent of the other party, and
provided further, that each party shall be permitted to disclose any
information to the extent required by applicable law or governmental
authorities. However, Licensor shall be allowed to publicize that Licensees
is a customer of S&DFS2 or Switch & Data Facilities Company, LLC. Any
report or other document prepared by S&DFS2 in the performance of the
Services for use by Licensees shall be deemed to be confidential
information hereunder.
13. Binding Agreement; Assignment. This License shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns, except that Licensees shall not be permitted to assign this
License or any interest herein without the prior written consent of S&DFS2,
which consent shall not be unreasonably withheld. For purposes of the
above sentence a transfer in connection with the sale of essentially all of
either Licensee's business shall not be deemed assignment and shall be
allowed as of right. Licensees shall not pledge, mortgage or encumber this
License or any interest herein and shall not (without the prior written
consent of S&DFS2) assign this License or any interest herein or permit any
other person or entity to occupy the S&DFS2 Space. Each Licensee shall
have the right, after the first 6 months, to assign this agreement to the
other Licensee and be relieved of further liability. However, if the event
the Security Deposit has not been posted, a Security Deposit will be
required at such time. Licensees shall reimburse S&DFS2 on demand for any
reasonable costs that may be incurred by S&DFS2 in connection with any
proposed assignment. Notwithstanding any assignment to a third party,
Licensees will remain fully liable for the payment of fees and for the
performance of all the other obligations of Licensees contained in this
License. The consent by S&DFS2 to any assignment shall not relieve
Licensees of the obligation to obtain the consent of S&DFS2 to any future
assignment.
14. Cooperation of Licensee. Licensees shall fully cooperate with S&DFS2 in
connection with S&DFS2's performance of the Services. Licensees shall, with
reasonable promptness, provide all information reasonably required by
S&DFS2 for its performance of the services, and shall make designated
representatives available for regular consultation at such times and places
as S&DFS2 shall reasonably request.
15. No Agency Relationship Implied. It is acknowledged and agreed by Licensees
that S&DFS2 performs the Services hereunder solely as an independent
contractor and that no joint venture, partnership, employment, agency or
other relationship is intended, accomplished or embodied in this License.
S&DFS2 shall have the sole and exclusive right to supervise, manage,
control and direct its performance of this License.
16. Default. In the event Licensees fails to pay monthly or other fees within
fifteen (15) days of S&DFS2's written notice to Licensees of its failure to
pay when due and demand for the immediate payment thereof, S&DFS2 may at
its sole discretion take any or all of the following actions: i) prohibit
Licensee's access to the Space; ii) turn off electricity; iii) terminate
Operational Services to Licensees as defined in Exhibit C; iv) restrict
vendor access to work
<PAGE>
on Licensee's equipment and/or circuits and v) terminate this License.
In the event Licensees fails to perform or comply with any other provision
of this License within twenty (20) days of S&DFS2's written notice to
Licensees of its failure to so perform or comply, or thirty (30) days in
the event the a cure is underway S&DFS2 may terminate this License.
Additionally, in the event of Licensee's default under this License and
failure to cure such default within the time periods specified, Prime
Landlord may also terminate this License. Licensees shall in any event
remain fully liable for damages as provided by law and or all costs and
expenses incurred by S&DFS2 on account of such default, including
reasonable attorneys' fees. Licensee's obligation to pay all fees and
charges which have been accrued shall survive any termination of this
License.
17. Termination of License. If (a) S&DFS2 exercises its right to terminate the
License pursuant to Section 16 above, or (b) Prime Landlord terminates this
License pursuant to Section 16 above, or (c) the Term of the License shall
expire and terminate, then in each such case, Licensees shall immediately
quit and peacefully surrender the portion of the Space it occupies to
S&DFS2, and S&DFS2 may recover the Space, by summary proceedings or any
action or proceeding, and remove all occupants and property from the Space.
If the space is not surrendered upon the expiration or earlier termination
of the License, Licensees hereby indemnifies S&DFS2 against loss, cost,
expense, damage, claim or liability, including reasonable attorneys fees,
resulting from delay by Licensees in so surrendering the space. Licensee's
obligations under this Section 17 shall survive the expiration or early
termination of the License.
Notwithstanding anything contained herein if Prime Landlord terminates the
Prime Lease as a result of any breach or other conduct of Licensor then
Licensor will be responsible to Licensees for any loss, cost or expense of
Licensees related to the surrender of the leased spaces and/or relocation.
Licensor represents that Licensor, to the best of its knowledge Prime
Landlord does not intend to terminate this lease, nor is there any
condition or event known to Licensees which would cause Prime Landlord to
terminate the Prime Lease.
18. Notices. All notices, reports, requests or other communications given
pursuant to this License shall be made in writing, shall be delivered by
hand delivery, overnight courier service or fax, shall be deemed to have
been duly given when delivered, and shall be addressed as follows:
To Licensees:
SniP Link, LLC and You Tools Corporation
C/o SniP Link
900 Route 168, Suite E4
Blackwood, NJ 08012
Fax: 1-609-232-9503
To S&DFS2:
<PAGE>
Switch and Data Facilities Site Two, LP.
C/O SD Philadelphia, LLC, GP
483 Winthrop Road
Teaneck, NJ 07666
Attention: James F. Lavin
Fax: 201-833-0439
Or to such other location as S&DFS2 shall designate via certified return receipt
notification to Licensee.
19. Governing Law. The rights and obligations of the parties under this License
shall be governed by and construed and enforced in accordance with the laws
of the State of New York without giving effect to conflicts of laws
provisions.
20. Entire Agreement. The License constitutes the entire agreement between
S&DFS2 and Licensees with respect to the use of the Space and the Services,
and may be modified only by a written instrument signed by a duly
authorized officer on behalf of each party. No representation or statement
not contained in this License shall be binding upon S&DFS2 as a warranty or
otherwise.
IN WITNESS WHEREOF, the parties hereto have duly executed this License as
of the day and year first above written.
SniP Link, LLC
By: /s/ Anthony Abate
Name: Anthony Abate
Title: President
You Tools Corporation
By: /s/ David K. Van Allen
Name: David K. Van Allen
Title: CEO
Switch and Data Facilities Site Two, LP.
By: /s/ James. F. Lavin
<PAGE>
Name: James F. Lavin
Title: Managing Member SO Philadelphia, LLC, G.P.
Attachments:
Exhibit A Licensee's Equipment List
Exhibit B Installation Support Work
Exhibit C Operational Support Work
Exhibit D Engineering Support Work
Exhibit I -- Space Diagram
Exhibit II-- Environmental Specifications
Exhibit III-- Security
License Rider
<PAGE>
SNIP
S&DFS2 Doc. #1
401 North Broad Co-location December 28, 1998
By:
Name:
Title:
EXHIBIT A
EQUIPMENT LIST
(To Be Provided by Licensees)
<PAGE>
EXHIBIT B
INSTALLATION SUPPORT WORK
S&DFS2 shall provide the following Installation Services:
1. The provision of a drywall demised space enclosing approximately 997 square
feet.
2. The installation of a lockable door on said space.
3. The installation of a main AC panel with generator backed power feed of 250
Amp capacity, 208 V, 3 Phase.
4. Provision of a 40 circuit 100/220V Subpanel with 200A main breaker.
5. Eight (8) 110V 20A circuits from Subpanel terminating 1 each into 4 gang
outlet boxes evenly distributed on the raised flooring.
<PAGE>
EXHIBIT C
OPERATIONAL SUPPORT WORK DESCRIPTION
S&DFS2 shall provide the following support:
1. Access for visiting public telecommunications carriers staff for the
installation and testing of circuits.
2. Access for visiting maintenance staff from any authorized maintenance
organization.
3. Accompanying and supervising visiting Licensee's staff when necessary.
Above support is available 24 hours per day, 365 days per year.
<PAGE>
EXHIBIT D--Engineering Support Work
Shall be handled by Licensees.
<PAGE>
Exhibit I--Space Diagram
<PAGE>
Exhibit II--Environmental Specifications Environmental Controls
COOLING: All cooling provided by computer-room grade equipment. All units have
multiple compressors and multiple circuits for internal redundancy. Cooling not
less than 150 BTU/h with an N+l redundancy.
TEMPERATURE: Temperature is maintained at 72 degrees F dry bulb at ASHRAE 1%.
HUMIDITY: 30% to 60% humidity non-condensing. Humidity control delivered
through Leibert units via infra-red humidifier.
STATIC CONTROL/GROUNDING: Master station ground bus and grounding to the floor.
<PAGE>
EXHIBIT III--Security
FIRST LEVEL: 24 hours per day, seven days per week key card entrance security
for entire premises. The key card system chosen by S&DFCo for this purpose is a
computer/database controlled state-of-the-art system that requires BOTH a
currently valid computer readable pass card AND the correct PIN number to gain
access through the main entrance doors to the facility. Hence possessing the
card does not automatically grant the finder access to the facility. Each tenant
shall designate the names and PIN numbers for those to be admitted to the space
and/or to their demised space along with a completed S&DFCo Security Form
containing pertinent personal information. S&DFCo who will then issue one card
per applicant to the Tenant. It is the responsibility of each tenant to notify
S&DFCo of revocation of privileges or loss of cards for any cards issued.
Replacement of lost cards will be issued at $10 per card. S&DFCo reserves the
right to require periodic change of PIN numbers to keep cards current.
Procedures will be issued to tenants in writing concerning these and any other
relevant security matters.
SECOND LEVEL: Each tenant shall have either lockable cages, and/or cabinets. The
tenant shall be solely responsible for access control to its cabinets and/or
cages. Those tenants that have separately demised rooms will also have key card
readers at their entrance doors that allow access to their space only to those
authorized by that tenant. S&DFCo will have no security responsibility within
such demised spaces.
THIRD LEVEL: S&DFCo will provide and maintain 24 hour per day, seven days per
week video recording with multiple, strategically placed cameras to capture all
activity in the entire premises. The cameras will be positioned to obtain "face
shots" of all those entering and leaving all key areas of the entire premises.
These tapes will be saved for three months then recycled. Certain tenants may be
granted access via the Internet to camera(s) in or near their suites. Such
hook-ups and related equipment shall be at the sole expense of the tenant
requesting/requiring such off-site access.
FOURTH LEVEL: The computer system selected will record all entrance activity at
all key card readers for traffic and security reporting. Certain areas will
require a keycard and pass code to exit. Those shall be recorded for analysis as
well and be available upon request from S&DFCo.
FIFTH LEVEL: It is S&DFCo intention to provide one on-site security/maintenance
person, 24 hours per day, seven days per week before year end 1999. However, the
staffing levels will be dictated by the number, types, service requirements and
timing of tenants added to the space. The actual timing of local staffing will
remain at the sole discretion of S&DFCo.
SIXTH LEVEL: 401 North Broad is a major telecom facility. The landlord provides
a modest level of overall security for the entire building. While S&DFCo is NOT
relying on the landlord for significant security, the nature of the building,
the guard position in the lobby, and the familiarity of the staff with those
authorized to be in the building, does provides some deterrence to
<PAGE>
unauthorized personnel.
<PAGE>
License Rider:
1) Cross Connection: There are no fees for cross connection to other carriers
or Licensees in the S&DFS2 space. All cable cross connects installed by
Licensees must meet standards set by S&DFS2.
2) Power
a) Independent of S&DFS2 UPS: Licensees will be charged, on a monthly
basis, 120% of S&DFS2's metered cost for power drawn upstream of the
UPS equipment. S&DFS2 will provide Licensees with either a 208V or a
480V feed for Licensee's rectification equipment.
b) Through S&DFS2 UPS: Licensees will be charged, on a monthly basis,
150% of S&DFS2's metered cost for power drawn downstream of the UPS
equipment.
3) Licensees will receive the first 7% of their monthly license rate as credit
towards power charges. Licensor shall provide a separate submeter for
Licensee's space
4) Fire Suppression
5) Preaction Water: A preaction water fire suppression system is included in
the monthly license fee stated in paragraph 7.
6) Right of First Refusal. Licensees shall have a right of first refusal on
the adjacent 800 Square Foot space outlined in Exhibit I during the first
18 months of its License. Upon a bona fide offer to utilize such space,
Licensor shall so inform Licensees of said offer and Licensees shall have
the right within 10 days to accept or reject said offer. Such offers may be
for all or a portion of the space outlined in Exhibit I. A refusal for a
portion of the space shall not extinguish Licensee's rights hereunder.
<PAGE>
JOINT TENANCY AGREEMENT
This Agreement entered into this __day of January, 1999 by and between SNIP
Link, L.L.C., a New Jersey limited liability company ("SNIP") and You Tools
Corporation, a Pennsylvania corporation dba "FastNet" ("FASTNET") (SNIP and
FastNet are sometimes collectively referred to as the "PARTIES" or each as a
"PARTY").
The Parties desire to jointly enter into a License Agreement (defined below
as the "LICENSE AGREEMENT") with Switch and Data Facilities Site Two, LP, a
Delaware limited partnership ("LICENSOR"), pursuant to which the Parties shall
jointly obtain a license to occupy certain space identified in the License
Agreement at premises located at Suite 990, 401 North Broad Street, Philadelphia
PA (the "PREMISES"). The Parties intend that except as otherwise agreed to in
writing between them, each Party shall be entitled to occupy and utilize
one-half (2) of the Premises and each Party shall be responsible to pay one-half
(2) of all costs and expenses of every nature whatsoever associated with the
Parties' occupancy of the Premises, all as more fully set forth herein.
NOW, THEREFORE, intending to be legally bound hereby, the Parties hereby agree
as follows:
1. APPROVAL OF LICENSE AGREEMENT. The Parties hereby approve of the License
Agreement with Licensor in the form attached hereto ("LICENSE AGREEMENT")
and each Party shall execute such License Agreement as a joint tenant
thereunder.
2. ACCESS TO PREMISES AND SHARING OF COSTS OF OCCUPANCY.
1. Except as otherwise set forth in writing between the Parties, each
Party shall be entitled to use up to one-half (2) of the space located
at the Premises for the purposes authorized in the License Agreement
and each Party shall be entitled to retain all revenue, if any, of
every nature whatsoever generated by such Party in connection with
such Party's occupancy of the Premises. Except as otherwise agreed to
by the Parties, each Party shall solely own all equipment placed or
installed by such Party on the Premises. The Parties agree to
cooperate in good faith regarding the allocation between them of the
use of the physical space located at the Premises.
2. Except as otherwise set forth in writing between the Parties, each
Party shall be responsible for one-half (2) of all costs, obligations
and expenses of every nature whatsoever incurred in connection with
the Parties' occupancy of the Premises, including without limitation,
the following costs, obligations and expenses (collectively the
"OBLIGATIONS"):
<PAGE>
1. All obligations to the Licensor under the License Agreement of
every nature whatsoever, including without limitation, all
obligations for required security deposits, monthly license fees
and all other obligations to the Licensor of every nature
whatsoever; provided however in the event the Licensor imposes a
cost or fee upon the Parties which is attributable to any service
provided at the request of a Party solely for that Party and not
the other, the Party requesting such service shall be solely
responsible for the payment of any such cost or fee so imposed by
the Licensor.
2. All premium obligations for the procurement and maintenance of
the comprehensive general liability insurance policies required
to be maintained by the Parties pursuant to the License Agreement
and any all other obligations imposed upon or required to be paid
by the Parties under or related to the License Agreement or
otherwise directly related to the Parties' occupancy of the
Premises.
3. The Parties shall cooperate in good faith with each other
regarding administrating the payment of all of the Obligations
referred to in Subsection b. above by each Party either paying
directly to the Licensor (or other applicable payee) one-half (2)
of all such Obligations or by one Party paying to the other such
Party's share of such Obligations. In all events each Party
shall pay such Party's share of the Obligations in a timely
manner and in all events within the time-frame required therefor
set forth in the License Agreement or other applicable agreement.
1. In the event a Party (the "Defaulting Party") does not
pay when due any Obligations due from such Party, which
default continues uncured for a period of five (5) business
days following written notice thereof to the Defaulting
Party, the non-breaching Party ("Non-Breaching Party") shall
have the right (but not the obligation), in addition all
other rights and remedies under this Agreement or otherwise,
to elect to terminate the occupancy of the Premises by the
Defaulting Party and to assume occupancy of and
responsibility for 100% of the Premises from and after such
date.
4. The Parties shall cooperate regarding obtaining and maintaining the
comprehensive general liability insurance coverage required to be
maintained by the Parties under the License Agreement. In all events
such comprehensive general liability insurance policies shall name
each Party as either a named insured or as an additional insured under
such insurance policy. Each Party shall be solely responsible, at its
own cost and expense, to obtain and maintain such casualty insurance
as such Party may deem necessary or appropriate in connection with its
equipment located at the Premises.
<PAGE>
3. RENEWAL OF LICENSE AGREEMENT. Upon the termination of the initial three (3)
year term of License Agreement if both Parties do not want to renew and
extend the License Agreement, the Party, if any, desiring to so extend may
do so alone without the other party. Each Party shall give the other
written notice of its intention to renew the License term at least 120 days
prior to the expiration of the initial License term (or the expiration of
any renewal term thereof). In the event both Parties desire to renew or
obtain a new License for the Premises individually (without the other
Party), neither Party shall have priority with respect to such License
rights and each Party shall "bid" with the other (not with the Licensor)
for such renewal rights.
4. INDEMNIFICATION. Each Party (herein the "INDEMNIFYING PARTY") shall
indemnify, defend and hold the other Party ("OTHER PARTY") harmless
(including reasonable attorneys' fees) from any loss or liability of any
nature whatsoever incurred by the Other Party arising out of or related to
(i) the Indemnifying Party's breach of this Agreement or (ii) any acts of
the Indemnifying Party under the License Agreement.
5. MISCELLANEOUS PROVISIONS.
1. NOTICES. All notices and other communications hereunder shall be in
writing and shall be made by delivery by means by which the sender
obtains a receipt of delivery (including without limitation, certified
mail return receipt requested, overnight courier services or
confirmation of facsimile transmission), addressed to the party to
whom a request or demand is to be made at the addresses of the parties
set forth below. Notices given as provided herein shall be deemed to
have been given or served on the earlier of (i) the date of personal
delivery or the date indicated on the receipt of delivery, (ii) the
business day next following any such notice sent by overnight courier,
or (iii) the third business day following the date on which any such
notice shall have been sent by certified mail.
The addresses of the parties are as follows:
(i) To SNIP, as follows:
100-A Twinbridge Drive
Pennsauken, NJ 08110
(ii) to FastNet, as follows:
2. GOVERNING LAW. This Agreement shall be governed by, interpreted and
enforced in accordance with the laws of the State of New Jersey
without giving effect to the conflict of law principles thereof.
3. SUCCESSOR AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the
<PAGE>
benefit of the parties hereto and their respective successors,
assigns, heirs and representatives, and upon any person, firm,
corporation, or organization succeeding to the affairs of either of
the parties hereto by way of sale of assets, capital stock, merger,
reorganization or any other transaction of any nature whatsoever.
4. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties with respect to the subject matter hereof,
superseding all prior agreements or contemporaneous oral agreements
with respect to such matters. This Agreement can not be modified
except by a writing signed by the parties hereto.
5. NO JOINT VENTURE OR PARTNERSHIP. The Parties acknowledge that no joint
venture or other partnership relationship is created by the Parties'
relationship created by this Agreement and in no event is either Party
authorized to incur or bind the other Party on account of any cost or
liability, except with the prior written consent of the other Party.
IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands on the
date first above written.
SNIP LINK, L.L.C. YOU TOOLS CORPORATION,
DBA
FASTNET
BY: /s/ Anthony Abate BY: /s/ David K. Van Allen
-------------------------------- -----------------------------------
Anthony Abate, duly authorized David K. Van Allen, President
Member
<PAGE>
EXHIBIT 10.8
COMMERCIAL LEASE AGREEMENT
Intending to be legally bound, this Agreement made the 22 day of July,
1998, by and between RB ASSOCIATES, a Pennsylvania Partnership, of Two Courtney
Place, Suite 140, 3864 Courtney Street, Bethlehem, Pennsylvania 18017
(hereinafter called "LANDLORD") with YOU TOOLS CORPORATION, D/B/A FASTNET a
Corporation with offices at Two Courtney Place, Suite 130, 3864 Courtney Street,
Bethlehem, Pennsylvania 18017 (hereinafter called "TENANT").
1. TERM, MINIMUM RENTAL. It is expected that the Improvements provided
in paragraph 32 of this Lease will take no more than six (6) weeks to complete.
Landlord will make every reasonable effort to complete the Improvements within
this six (6) week time period. If there are necessary delays beyond the control
of Landlord so that additional time is required to complete the Improvements
(such as a contractor not finishing its work within this six (6) week time
period), then Landlord shall exercise all possible reasonable diligence so as to
complete the Improvements as soon as possible. Rent nor the term of this
Agreement shall commence until all Improvements are completed to the reasonable
satisfaction of Landlord and Tenant or Tenant occupies the space and commences
business operations pursuant to this paragraph 1 of this Lease.
Landlord hereby demises and lets unto Tenant all that certain office
space comprised of approximately 11,055 square feet on the first floor of the
building known as Courtney II, Suite 130, 3864 Courtney Street, Bethlehem,
Pennsylvania 18017 to be used and occupied only as lawful and proper office,
computer center and warehousing space for Tenant's business for the term of
seven (7) years to commence at the conclusion of the construction of the
Improvements and terminating on the thirty-first (31st) day of August, 2005 as
follows:
(A) Tenant shall pay rent on the basis of [*] Dollars per square
foot for a base rent for the first year of occupancy payable in equal monthly
payments of [*] Dollars with the first rent payable on execution of this
lease, for the month beginning at the conclusion of the construction of the
Improvements with the first month's rent prorated based on Tenant's occupancy
date and monthly thereafter on the first (1st) day of each month until August
31, 1999; and
(B) Tenant's second year of occupancy shall commence at the rate of
[*] Dollars per square foot for a base rent for the second year of occupancy
in the amount of [*] Dollars payable in twelve (12) equal monthly payments of
[*] Dollars with the first rent of the second year of the term commencing and
payable on September 1, 1999; and
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
(C) Tenant's third year of occupancy shall commence at the rate of
[*] Dollars per square foot for a base rent for the third year of occupancy
in the amount of [*] Dollars payable in twelve (12) equal monthly payments of
[*] Dollars with the first rent of the third year of the term commencing and
payable on September 1, 2000; and
(D) Tenant's fourth year of occupancy shall commence at the rate of
[*] Dollars per square foot for a base rent for the fourth year of occupancy
in the amount of [*] Dollars payable in twelve (12) equal monthly payments of
[*] Dollars with the first rent of the fourth year of the term commencing and
payable on September 1, 2001; and
(E) Tenant's fifth year of occupancy shall commence at the rate of
[*] Dollars per square foot for a base rent for the fifth year of occupancy
in the amount of [*] Dollars payable in twelve (12) equal monthly payments of
[*] Dollars with the first rent of the fifth year of the term commencing and
payable on September 1, 2002; and
(F) The base rent for the Tenant's sixth and seventh years of
occupancy shall be the same as the base rent for the Tenant's fifth year of
occupancy.
All rental payments shall be payable at the offices of Landlord as specified in
this Lease, or as may be designated in writing by the Landlord. The rent for the
first month of this Lease shall be tendered upon the signing of this Lease.
Tenant is also responsible for any other obligation that is expressly provided
for under this Lease.
2. LICENSES, PERMITS, ETC. Tenant shall be solely responsible for
obtaining all licenses or permits, which may be required by any governmental
agency or authority in order for Tenant to lawfully conduct its business, which
Tenant shall obtain at its sole cost and expense; however, Landlord shall obtain
any and all Certificates of Occupancy required by the Municipality for Tenant to
occupy the demised Premises. Landlord will cooperate with Tenant in obtaining
these approvals. Landlord has no knowledge of any conditions relating to the
leased space which would prevent Tenant from obtaining any and all required
approvals for its business.
3. INABILITY TO GIVE POSSESSION. If Landlord is unable to give Tenant
possession of the demised premises as herein provided, by reason of the holding
over of a previous occupant or by any other necessary cause beyond the
reasonable control of Landlord, Landlord shall not be liable in damages to
Tenant therefor, and during the period that Landlord is unable to give
possession, all rights and remedies of both parties hereunder shall be
suspended, and Tenant shall not be liable to Landlord under this Lease for the
period of time that Landlord is unable to give such possession. Tenant may
terminate this Lease at its sole option if possession
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
2
<PAGE>
is delayed beyond September 30, 1998 to causes beyond the reasonable control of
the Landlord which are not the responsibility of the Tenant. With regard to
possession by Tenant and all obligations of Landlord and Tenant hereunder, time
shall be of the essence. Landlord has no knowledge of any facts or conditions
other than construction of the Improvements as provided in this Lease which
would prevent Landlord from giving possession as set forth in this Lease.
4. AFFIRMATIVE COVENANTS OF TENANT. Tenant covenants and agrees that
it will without demand:
(A) Pay the rent and all other charges herein reserved as rent on the
days and times that the same are made payable without fail, and without setoff,
deduction or counter-claim. Tenant shall pay a late charge at the rate of five
(5%) percent on each dollar of rent, or any other sum collectible as rent under
this lease, not paid within fifteen (15) days after the same is due. If Landlord
shall at any time or times accept said rent or rent charges after the same shall
have become due and payable, such acceptance shall not excuse delay upon
subsequent occasions, or constitute, or be construed as a waiver of any of the
Landlord's rights. Tenant agrees that any charge or payment herein reserved,
included or agreed to be treated or collected as rent may be proceeded for and
recovered by landlord in the same manner as rent due and in arrears.
(B) Comply with all requirements of any of the constituted public
authorities, and with the terms of any State or Federal statute or local
ordinance or regulation applicable to Tenant on its use of the demised premises,
and save Landlord harmless from all penalties, fines, costs or damages resulting
from Tenant's failure to do so.
(C) Comply with the reasonable rules and regulations from time to time
made and uniformly enforced by Landlord for the safety, care, upkeep and
cleanliness of the demised premises and the building and appurtenances of which
it is a part. Tenant agrees that such rules and regulations shall, when written
notice thereof is given to Tenant, form a part of this lease.
(D) Keep the demised premises in good order and condition, ordinary
wear and tear excepted and damage by accidental fire or other casualty, alone
excepted, and upon termination of this lease to deliver up to Landlord the
demised premises in the same condition as Tenant has herein agreed to keep them.
(E) Give to Landlord prompt written notice of any accident, fire or
damage occurring on or to the demised premises within twenty-four (24) hours of
occurrence thereof or when Tenant reasonably learns of same.
(F) Peaceably deliver up and surrender possession of the demised
premises to Landlord at the expiration or sooner termination of this lease and
promptly deliver to Landlord at its office all keys for the demised premises.
3
<PAGE>
(G) Park its cars and cause its employees to park their cars only in
those portions of the parking area as may be designated for that purpose by
Landlord.
5. OCCUPANCY AND ASSIGNMENT. Tenant shall not occupy or permit to be
occupied the demised premises or any part thereof, other than as hereinbefore
specified, nor shall Tenant assign, mortgage or pledge this lease, or underlet
or sublet the demised premises, or any part thereof, without the written consent
of the Landlord, provided, however, that Landlord's consent shall not be
unreasonably withheld for Tenant to sublet to a similar use tenant, providing
such subtenant and/or assignee shall be financially responsible as determined
according to the reasonable satisfaction of the Landlord, regardless of to whom
it may be that Tenant desires to assign this Lease and even if that assignee may
be the Tenant's subsidiary, parent company or related entity. It is specifically
agreed, however, that Tenant may freely assign this Lease to any subsidiary,
parent company or related entity providing the remaining provisions of this
paragraph are adhered to. In any event, Tenant shall remain obligated for
performance of all of the terms and conditions of this Lease regardless of to
whom this Lease is assigned or whomever becomes a subtenant or sublessee.
6. NEGATIVE COVENANTS OF TENANT. Tenant covenants and agrees that it
will do none of the following without the consent of the Landlord:
(A) Place or allow to be placed upon the demised premises or on the
inside or outside of the building of which the demised premises are a part any
sign, projection or devise. In case of the breach of this covenant (in addition
to all other remedies given to Landlord hereunder) Landlord shall have the right
of removing such sign, projection or device and restoring the premises to their
former condition and Tenant shall be liable to Landlord for any and all expenses
including costs and reasonable attorney's fees so incurred by Landlord which at
the option of Landlord may be recovered in the same manner as rent.
(B) Make any alterations, improvements, or additions to the demised
premises without the Landlord's consent, which will not be unreasonably
withheld. Specifically, Landlord understands that there will be additions to the
demised premises upon Tenant's occupancy, but wants to know what these will be
as they are being made. Any and all alterations, improvements, additions or
fixtures installed before or during the term of this Lease, shall become and
remain the property of the Landlord if they become fixtures.
(C) Use, operate or maintain any machinery, equipment or fixture that,
in Landlord's reasonable opinion, is harmful to the building and appurtenances
of which the demised premises is a part or is unreasonably disturbing to the
other tenants occupying any other part thereof excepting that equipment
necessary for Tenant's normal business; however, in no event shall Tenant's
activities cause noxious fumes or unreasonable interference with adjoining
tenants. Similarly, Landlord covenants that to the extent Landlord is able to do
so, Landlord shall not allow any other tenants to interfere with Tenant's
business activities within the space leased pursuant to this Commercial Lease
Agreement.
4
<PAGE>
(D) Place any weights in any portion of the demised premises beyond
the safe carrying capacity of the building of which the demised premises is a
part.
(E) Tenant agrees not to do anything that causes the Landlord's fire
or other insurance on the demised premises or on the building of which the
demised premises is a part, to become void or suspended or to be rated as a more
hazardous risk than at the date of the execution of this Lease so that the cost
of this insurance to the Landlord increases. In case of a breach of this
covenant (in addition to all other remedies herein given to Landlord) Tenant
agrees to pay Landlord as additional rent any and all increase or increases of
premiums on insurance reasonably carried by Landlord on the demised premises, or
on the building and appurtenant land of which the demised premises may be a
part, caused in any way by the occupancy of Tenant.
(F) Remove or attempt to remove Tenant's or Sublessee's goods or
property from or out of the demised premises otherwise than in the ordinary and
usual course of business, or to sublease without having first paid and satisfied
Landlord for all rent, costs and attorney's fees which may become due during the
entire term of this lease.
(G) The Tenant shall not permit the demised premises to be used or
occupied in a congested manner. The number of people that shall use or occupy
the demised premises shall be reasonable for the size of the demised premises
taking into consideration the safety of the occupants, the burden that an
unreasonable number of occupants will place upon the electricity, heating and
air conditioning equipment, the congestion that would result in the common
facilities of said building and its appurtenances such as hallways, washrooms,
parking lot, etc. "Reasonable" herein shall be defined by reference to
applicable Zoning, Building Code and Safety Rules and Regulations. If the
demised premises are being used or occupied by more people than approved at
Lease start, based on approved floor plan, Tenant agrees to reduce the number
thereof upon written demand of Landlord to the number that is determined to be
reasonable for the demised premises.
7. LANDLORD'S RIGHT TO ENTER. Provided Landlord has given Tenant
twelve (12) hours advance written notice, Tenant shall permit Landlord,
Landlord's agents, cleaners, or employees or any other person or persons
authorized by Landlord, to inspect the demised premises during normal business
hours with prior notice and to enter the demised premises for the purposes of
cleaning and if Landlord shall so elect, for making reasonable alterations,
improvements or repairs to the building of which the demised premises are a
part, or for any reasonable purpose in connection with the operation and
maintenance of the building, except in case of emergency, the Landlord may enter
at any time. In any inspection hereunder, Landlord will take all reasonable
steps and measures possible so as not to interfere with Tenant's business
operation.
8. RELEASE OF LANDLORD. If there is any injury, loss, or damage to any
person or property in the demised premises which results from the Tenant's
negligence or any act of any guest or business invitee of the Tenant, except for
gross negligence occasioned by the Landlord, Tenant shall be responsible for,
shall indemnify and hold harmless and hereby
5
<PAGE>
relieves Landlord from, any and all liability by reason of any injury, loss,
damage to any person or property in the demised premises, whether the same be
due to fire, breakage, leakage, water flow, gas, use, misuse, or defects
therein, or condition anywhere in the demised premises, failure of water supply
or light or power or electricity, wind, lightning, storm, or any other cause
whatsoever, whether the loss, injury or damage be to the person or property of
Tenant or any other persons.
9. FIRE OR OTHER CASUALTY.
(A) If during the term of this lease or any renewal or extension
thereof, the demised premises of the building of which the demised premises is a
part is totally destroyed or is so damaged by fire or other casualty not
occurring through the fault or negligence of Tenant or those employed by or
acting for Tenant (whether or not the demised premises are damaged) that the
same cannot be repaired or restored within one hundred twenty (120) regular
working days from the date of the happening of such damage, or if such damage or
casualty is not included in the risks covered by Landlord's fire insurance with
the usual extended coverage, then this lease shall absolutely cease and
terminate and the rent shall abate for the balance of the term. In such case,
Tenant shall pay the rent apportioned to the date of damage and Landlord may
enter upon and repossess the demised premises without further notice and with
the right to break in and take possession.
(B) If the damage caused as above can be repaired or restored within
one hundred and twenty (120) regular working days and said damage and the cost
of repairs and restoration are fully covered by the Landlord's insurance,
Landlord may exercise the following option:
(1) Landlord shall have the option to restore the premises for
that purpose and the rent shall be apportioned during the time Landlord is in
possession, taking into account the proportion of the demised premises rendered
untenantable and the duration of Landlord's possession; if a dispute arises as
to the amount of rent due under this clause, Tenant agrees to pay the full
amount claimed by Landlord and Tenant shall have the right to proceed by law to
determine the proper payment.
(C) If the damage caused as above is only slight, Landlord shall
repair whatever portion, if any, of the demised premises that may have been
damaged by fire or other casualty insured as aforesaid, and the rent accrued or
accruing shall not be apportioned or suspended, unless the Tenant's business is
interrupted, in which event the rent shall be apportioned or suspended as
appropriate.
(D) If said damage by fire or other casualty was caused by the action
or negligence of Tenant or his agent, employees or invitees, Tenant shall not be
entitled to any abatement or apportionment of the rent.
(E) Tenant, at its own cost and expense covering Tenant's space only
and their equipment, shall obtain during the term of this lease, and any
renewals thereof, fire, vandalism,
6
<PAGE>
and comprehensive liability insurance in an amount not less than One Million
Dollars ($1,000,000.00). Tenant shall also obtain appropriate business
interruption insurance to cover a situation whereby Tenant is unable to conduct
its business in the premises, or any part thereof, by reason of loss or damage
due to fire or other casualty, whether insured or uninsured. Landlord shall have
the night to request in writing that Tenant provide Landlord with proof of
insurance within five (5) days of said request. Failure to provide proof upon
request may be deemed a default under the terms of this lease.
10. SERVICES. The following services and facilities shall be supplied
by Landlord to Tenant in connection with Tenant's use of the demised premise, in
common with other tenants of the building of which the demised premises are a
part:
(A) Standard heat and air conditioning equipment and facilities (per
Floor Plan Addendum).
(B) Landlord shall supply the demised premises with electric service
for heat, air conditioning, lighting and power to operate business machines and
equipment. Landlord shall furnish and install a meter for measuring Tenant's
electric usage and Tenant shall pay utility company direct for such usage.
Landlord shall, at its expense, repair and maintain standard building equipment
used to furnish power to the demised premises which shall be reimbursed
according to the Operating Expense Addendum attached hereto.
(C) Providing Landlord is not grossly negligent, Landlord shall have
no responsibility or liability to Tenant, nor shall there be any abatement in
the said rent for any failure to supply any of said services and facilities that
Landlord has agreed to supply hereunder during such period as the services and
facilities are out of order, undergoing repair or if prevented by labor
disorders, strikes, accidents or other causes beyond Landlord's control. If
Landlord deems it advisable or convenient to interrupt any of said services in
order to make repairs, alterations or improvements with the agreement of Tenant
except in case of emergency which is not in Landlord's control or because of
labor disturbances, strikes, accidents or causes beyond Landlord's control,
Landlord may do so for the period necessary and required and if so there shall
not be any abatement in rent or other liability to Tenant.
11. REPAIRS. Except for damage or fire occurring independent of Tenant
and not due to Tenant's negligence or cause, Tenant will pay for all repairs
within the space necessary to return the premises to its original condition as
leased, ordinary wear and tear accepted. Tenant shall also remove all dirt,
rubbish, waste and refuse from the demised premises and all its property
therefrom, to the end that Landlord may again have and repossess the demised
premises not later than midnight on the day upon which this lease or any renewal
thereof or extension ends. Tenant shall not knowingly do or commit or suffer or
cause to be done or committed upon the demised premises any act or thing
contrary to the laws, rules, regulations or ordinances prescribed from time to
time by Landlord for the safety, care, upkeep, maintenance and cleanliness of
the demised premises.
7
<PAGE>
12. ADDITIONAL RENT. Tenant shall pay as rent in addition to the base
rental herein reserved any and all sums which may become due by reason of the
failure of Tenant to comply with any and all covenants of this lease and to pay
any and all damages, costs and expenses, including, but not limited to,
reasonable attorney's fees which Landlord may suffer or incur by reason of any
default or failure on Tenant's part to comply with any and all the covenants of
this lease.
13. LANDLORD'S REMEDIES. If Tenant, after written notice and further
time period for opportunity to cure as provided in paragraph 20 below:
(A) Does not pay in full when due any and all installments of rent
and/or any other charges or payment herein reserved, included, or agreed to be
treated or collected as rent and/or any other charges, expenses, or costs herein
agreed to be paid by the Tenant; or
(B) Violates or fails to perform or otherwise breaks any covenant or
agreement herein contained; or
(C) Vacates the demised premises or removes or attempts to remove or
manifests any intention to remove any goods or property therefrom otherwise than
in the ordinary and usual course of business without having first paid and
satisfied Landlord in full for all rent and other charges, expenses and
reasonable costs and reasonable attorney's fees then due or that may thereafter
become due until the expiration of the term, above mentioned; or
(D) Makes an assignment for the benefit of creditors; or whenever
Tenant seeks or consents to or acquiesces in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any substantial part of its
properties; or whenever a permanent or temporary receiver of Tenant for
substantially all of the assets of Tenant shall be appointed; or an order,
judgment or decree shall be entered by any court of competent jurisdiction on
the application of a creditor.
(1) In addition to any rent and other charges already due and
payable, the rent for the entire unexpired balance of the term of this lease, as
well as all other charges, costs, expenses and attorney's fees herein to be paid
by Tenant or at the option of Landlord or anyone acting on Landlord's behalf at
Landlord's option, or any part thereof, shall be taken to be due and payable and
in arrears, as if by the terms of this lease said rent, charges, costs and
expenses were on that day due and payable; and/or
(2) Landlord, or anyone acting on Landlord's behalf may, without
written notice or demand, enter the demised premises and:
8
<PAGE>
(a) may remove from the demised premises all goods and
chattels found therein to any other place or location as Landlord may desire and
any costs incurred for said removal and any charges made for storage of said
goods and chattels at the location to which they are removed Tenant agrees to
pay; or
(b) take immediate possession and may lease the demised
premises or any part to such person, company, firm or corporation as may in
Landlord's sole discretion seem best and Tenant shall be liable for any loss of
rent for the then current term.
The Tenant hereby releases and discharges Landlord, and its
agent, from all claims, actions, suits, damages and penalties, for or by reason
or on account of any entry, distraint, levy, appraisement, removal of said goods
and chattels of sale after Tenant has been given notice to cure any default
pursuant to Section Twenty (20) of this Lease.
14. RIGHT OF ASSIGNEE OF LANDLORD. Should the Landlord assign its
interest in this Lease to another person or entity, then the right to enforce
all of the lawful provisions of this lease may be exercised by any assignee of
the Landlord's right, title and interest in this lease in its, his, her or their
own name, and Tenant hereby expressly waives the requirements of any and all
laws regulating the manner and/or form in which such lawful assignments shall be
executed and witnessed.
15. REMEDIES CUMULATIVE. All of the remedies hereinbefore given to
Landlord and all rights and remedies given to Landlord by law and equity shall
be cumulative and concurrent. No determination of this lease or the taking or
recovering of the premises shall deprive Landlord of any of its remedies or
actions against Tenant for any and all sums due at the time or which, under the
terms hereof, would in the future become due, nor shall the bringing of any
action for rent or breach of covenant, or the resort to any other remedy herein
provided for the recovery of rent be construed as a waiver of the right to
obtain possession of the premises.
16. ATTORNMENT AND NON-DISTURBANCE. In the event of the sale or
assignment of Landlord's interest in the building of which the demised premises
is a part or in the event of exercise of the power of sale under any mortgage
made by Landlord covering the building of which the demised premises is a part,
Tenant shall attorn to the purchaser and recognize such purchaser as Landlord
under this lease, providing the purchaser agrees to a customary and usual
non-disturbance provision.
17. SUBORDINATION, ETC. At the option of Landlord or Landlord's
permanent lender, or both of them, this lease and the Tenant's interest
hereunder shall be subject and subordinate at all times to any mortgage or
mortgages, deed or deeds of trust, or such other security instrument on
instruments, including all renewals, extension, consolidations, assignments and
refinances of the same, as well as all advances made upon the security thereof,
which now or hereafter become liens upon the Landlord's fee and/or leasehold
interest in the demised premises, and/or any and all of the buildings now or
hereafter erected or to be erected and/or any and all of the land comprising the
office building, provided, however, that in each
9
<PAGE>
such case, the holder of such other security, the trustee of such deed of trust
or holder of such other security instrument shall agree that this lease shall
not be divested or in any way affected by foreclosure or other default
proceedings under said mortgage, deed of trust, or other instrument or other
obligations secured thereby, so long as the Tenant shall not be in default under
the terms of this lease; and Tenant agrees that this lease shall remain in full
force and effect notwithstanding any such default proceedings. Landlord agrees
that a customary and reasonable non-disturbance clause reasonably acceptable to
Tenant and in recordable form shall be included in any and all written
subordination agreements that the Tenant may be requested to sign for the
purpose of any mortgage holder.
18. EXECUTION OF DOCUMENTS. The above subordination shall be self
executing, but Tenant agrees upon demand to execute such other document or
documents as may be required by a mortgagee, trustee under any deed of trust, or
holder of a similar security interest, or any party to the types of documents
enumerated herein for the purpose of subordinating this lease in accordance with
the foregoing, provided such subordination contains a non-disturbance clause
reasonably acceptable to Tenant. Upon the expiration of ten (10) days after a
formal written notice, Tenant shall be deemed to have appointed Landlord and
Landlord may execute and deliver the required document for and on behalf of
Tenant.
19. ESTOPPEL AGREEMENTS. Provided Landlord is not in breach of the
provisions of this Lease, Tenant shall execute an estoppel agreement in favor of
any mortgagee or purchaser of Landlord's interest herein, if requested to do so
by any mortgagee. Such estoppel agreement shall be in the form requested by such
mortgagee or purchaser and reasonably acceptable to Tenant.
20. NOTICE OF OPPORTUNITY TO CURE. Notwithstanding any other provision
of the lease to the contrary, the Landlord and the Tenant agree to send via U.S.
Certified Mail, return receipt requested, to each other written notice of any
violation of this Lease by either party. Should the violation of the Lease be
one that can be cured by the payment of money, such as a failure to pay rent on
a timely basis, then the party which is in default shall pay the amount due
within ten days of the sending of the written notice to the party required to
make the payment, and if such payment is not made within this time period, then
the non-defaulting party shall have all of the rights and remedies as explained
in this Lease and as provided by law. With regard to non-monetary defaults under
the Lease, the same form of written notice shall be given to the defaulting
party with an opportunity to cure the default as quickly as possible but no less
than thirty (30) days. If the default cannot be cured despite all due diligence
having been taken by the defaulting party, then the time to cure the default
will be extended for a reasonable period of time providing the defaulting party
is acting with all due diligence to cure the default; but, in any event, if the
default is not cured within ninety (90) days, the non-defaulting party shall
have all of the rights and remedies as explained in this Lease and as provided
by law.
21. ARBITRATION. Claims, disputes or other matters in question between
the parties to this Agreement arising out of or relating to this Agreement or
breach thereof shall be subject to and decided by arbitration in accordance with
the Arbitration Rules of
10
<PAGE>
the American Arbitration Association currently in effect through its
Philadelphia, Pennsylvania office unless the parties mutually agree otherwise.
Any arbitration shall take place in Easton, Pennsylvania.
(A) Demand for arbitration shall be filed in writing with the other
party to this Agreement and with the American Arbitration Association. A demand
for arbitration shall be made within a reasonable time after the claim, dispute
or other matter in question has arisen. In no event shall the demand for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.
(B) No arbitration arising out of or relating to this Agreement shall
include, by consolidation, joinder or in any other manner, an additional person
or entity not a party to this Agreement, except by written consent containing a
specific reference to this Agreement signed by the Owner. Architect, and any
other person or entity sought to be joined. Consent to arbitration involving an
additional person or entity shall not constitute consent to arbitration of any
claim, dispute or other matter in question not described in the written consent
or with a person or entity not named or described therein. The foregoing
agreement to arbitrate and other agreements to arbitrate with an additional
person or entity duly consented to by the parties to this Agreement shall be
specifically enforceable in accordance with applicable law in any court having
jurisdiction thereof.
(C) The award rendered by the arbitrator or arbitrators shall be
final, and judgment may be entered upon it in accordance with applicable law in
any court having jurisdiction thereof.
22. NO IMPLIED EVICTION. Notwithstanding any inference to the contrary
herein contained, it is understood that the exercise by Landlord of any of its
rights hereunder shall never be deemed an eviction (constructive or otherwise)
of Tenant, or a disturbance of its use of the demised premises, and shall in no
event render Landlord liable to Tenant or any other person, so long as such
exercise of rights is in accordance with the foregoing terms and conditions.
23. LITIGATION INVOLVING LANDLORD AND AGENT. In the event that
Landlord or its Agent shall without fault on its part be made a party to any
litigation commenced by or against Tenant, then, and to such extent Tenant shall
indemnify and hold Landlord and Agent harmless from and against any liability
arising therefrom.
24. CONDEMNATION. If the whole of the premises shall be acquired or
condemned by eminent domain, then the term of this Lease shall cease and
terminate as of the date on which possession of the premises is required to be
surrendered to the condemning authority. All rent shall be paid up to the date
of termination. Tenant reserves unto itself, however, all rights to any awards
that may be payable to Tenant under the terms of the Eminent Domain Code of
Pennsylvania except for claims arising from natural causes such as sinkholes,
11
<PAGE>
acts of nature and/or acts of God for which Tenant waives any right to any such
award or damages.
25. NOTICES. All notices required to be given by either party to the
other shall be in writing. All such notices shall be deemed to have been
properly given if served personally or if sent by United States certified mail,
postage prepaid, addressed to Landlord at Two Courtney Place, Suite 140, 3864
Courtney Street, Bethlehem, Pennsylvania 18017 and addressed to Tenant at the
demised premises or to such other address which either party may hereafter
designate in writing by notice given in a like manner.
26. REAL ESTATE BROKERS. The Tenant and the Landlord represent to each
other that there are no brokers involved in this transaction, except that the
Markward Group, 1628 North 18th Street, Allentown, Pennsylvania, 18014,
represents the Landlord. It is agreed that Tenant has no responsibility
whatsoever for any payment to any broker related to this Lease, with the
understanding that the Markward Group is the only broker involved in this Lease.
27. BINDING EFFECT. All rights and liabilities herein given to, or
imposed upon the respective parties hereto, shall extend to and bind the
respective heirs, executors, administrators, successors and assigns of said
parties.
28. SEVERABLE TERMS. Each term, remedy, provision, condition,
obligation and/or waiver contained in this lease, or any amendment or supplement
hereto, is a separate and distinct covenant and, if any such term, remedy,
provision, condition, obligation and/or waiver is declared unenforceable or
unconstitutional, or invalid by any court of competent jurisdiction or by an act
of congress or by any other governmental authority, such decision, statute,
ordinance or regulation will not affect in any manner the enforceability or
validity of any other term, remedy, provision, condition, obligation and/or
waiver contained herein, and they will remain in full force and effect.
29. ENVIRONMENTAL PROTECTION. Tenant represents that there will not be
caused nor permitted the disposal or release of any hazardous substances in or
on the premises being leased except as allowed by law or governmental authority.
Further Tenant represents that neither it shall nor will they allow anyone else
to do, anything affecting the premises that is in violation of any Environmental
Law. "Hazardous Substances" are those substances defined as toxic or hazardous
substances by Environmental law and the following substances: gasoline,
kerosene, other flammable or toxic petroleum products, toxic pesticides and
herbicides, volatile solvents, materials containing asbestos or formaldehyde and
radioactive materials. As used in this paragraph, Environmental Law means
Federal laws and laws of the jurisdiction where the premises is located that
relates to health, safety or environmental protection. To the extent that Tenant
or anyone on its behalf, including but not limited to its officers, directors,
employees, representatives, agents or business invitees, allows anyone of the
things to be done which are not permitted as recited in this paragraph, Tenant,
its directors, officers and shareholders, agree to fully indemnify Landlord, its
successors and assigns, heirs and personal representatives, from any and all
responsibility and liability to any person, property or
12
<PAGE>
in any other fashion pursuant to Environmental Law, rule or regulation. The
provisions, representations and agreements in this paragraph shall survive the
termination of this Lease. This paragraph shall survive the termination of this
Lease especially as may be indicated as a result of an independent Phase I or
Phase II study performed at Tenant's expense at the time of Tenant's vacation of
premises. As of the date of execution of this Lease, Landlord represents that it
has no knowledge of any violations or conditions which could be a violation of
any state, federal or local environmental laws, rules or regulations.
30. ENTIRE AGREEMENT. This lease and any riders or addendums that may
be attached hereto set forth all the promises, agreements, conditions and
understandings between Landlord or its agents and Tenant relative to the demised
premises, and there are no promises agreements, conditions or understandings,
either oral or written, between them other than are herein set forth. Except as
herein otherwise provided, no subsequent alteration, amendment, change or
addition to this lease shall be binding upon Landlord or Tenant unless reduced
to writing and signed by them.
31. QUIET ENJOYMENT. Landlord covenants and agrees that, upon Tenant's
payment of rent, and its observance and performance of all of its obligations
under this Lease, Tenant shall peaceably and quietly enjoy the property being
leased to the Tenant pursuant to this Commercial Lease Agreement.
32. IMPROVEMENTS. The space being leased shall be provided by
Landlord as turn key fit out. Improvements to the space being leased shall be
provided on building standard per floor plan attached as Floor Plan Addendum
to this lease, as also outlined in the specs explained in 32 (A) below; all
of these improvements shall be herein referred to as the "Improvements."
Tenant shall be responsible for all telephone, data and electric as well as
any other improvements above building standard. The total cost of the
Improvements is agreed to be [*] Dollars. Landlord shall pay One Hundred
Thousand and 00/100 ($100,000.00) Dollars of the cost of the Improvements and
Tenant shall pay the remaining balance of [*] Dollars of the cost of the
Improvements upon the signing of this lease. The following specs are included
in the basic fit-out of the Improvements:
(1) Rough and finish plumbing per attached spec sheet
(2) Reuse standard cabinets, appliances supplied by Tenant
(3) Industrial Carpeting (Cpt Tacoma) with vinyl base (VCT
Great 8)
(4) Relocate existing HVAC Units Install new 5 ton unit (12-ton
a/c unit extra)
(5) Drop existing sprinkler heads where required
(6) Pressure wash warehouse area
(7) Construction of all interior partitions, installation of
doors, Insulation, and drop ceiling,
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
13
<PAGE>
(8) 24" drywall ceiling border in areas indicated
(9) Painting and standard wall paper installation (wall paper
not included)
(10) Tenant shall accept full responsibility and pay for all
electrical work
(11) Detailed Spec Sheets are attached
(12) All extras and change orders to the Improvements will be
billed at cost plus 15% management fee
(B) For any changes or extras not included in the Improvements, Tenant
shall agree to pay fifty (50%) percent down at the time the Landlord approves
any proposed change(s) or extra(s) by the Tenant, and the remaining balance
shall be paid at the time the aforementioned proposed change(s) or extra(s) have
been completed.
33. OPTION TO RENEW. Tenant shall have one-five year option to renew
under the same conditions as contained herein but with annual CPI Philadelphia
Urban Wage Index increases over the last year of the original lease term for
each year of this option period.
34. SECURITY DEPOSIT. Tenant shall pay to Landlord a security deposit
one (1) month's rent upon signing this lease which shall be returned within
thirty (30) days after the end of the lease. This security deposit shall not be
used as the last month's rent by Tenant and shall be held without interest by
Landlord as security of damage to the leased premises and as security for any
violation of the lease by Tenant.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound to the
terms of this Lease, have caused this lease to be executed the day and year
first above written.
WITNESS: RB ASSOCIATES, A PENNSYLVANIA PARTNERSHIP, LANDLORD
BY: /s/ Richard Bartolacci
- ------------------------- ----------------------------------
RICHARD BARTOLACCI, PARTNER
ATTEST: YOU TOOLS CORPORATION, D/B/A FASTNET,TENANT
BY: /s/ Rafe Scheinblum BY: /s/ David Van Allen
--------------------- ----------------------------------
SECRETARY DAVID VAN ALLEN, PRESIDENT
15
<PAGE>
Addendum to Lease between You Tools Corporation d/b/a FastNet and RB Associates
for space known as Suite 130, 3894 Courtney Street, Bethlehem, PA.
FIRST RIGHT OF REFUSAL
During the term of this Lease, should Landlord receive a bona fide offer to
lease any available space contiguous to Tenant's space which Landlord is willing
to accept, Tenant shall have a first right of refusal to lease said space under
the same terms and conditions. Upon receiving said offer to lease said space,
Landlord shall forward to Tenant of copy of the offer and Tenant shall have five
(5) business days from receipt of said offer to exercise its first right of
refusal to lease said space under the terms and conditions set forth in the
offer. Should Tenant fail to communicate to Landlord its intention with respect
to Tenant's first right of refusal within the aforesaid five (5) business day
period, it shall be conclusively presumed that Tenant is not exercising its
first right of refusal to lease said space and Landlord shall be at liberty to
lease the space under the terms set forth in the offer. If for any reason the
space is not leased under the terms and conditions of the offer, then Tenant
shall have the continuing right of first refusal with respect to any such other
offer.
LANDLORD /s/ Richard Bartolacci TENANT /s/ David Van Allen
-------------------------------- -----------------------------
<PAGE>
OPERATING EXPENSE ADDENDUM
ATTACHED TO and made a part of the Commercial Lease Agreement made the
22 day of July, 1998, by and between RB ASSOCIATES, Landlord, and YOU TOOLS
CORPORATION, D/B/A FASTNET, Tenant.
35. PAYMENT. Tenant shall pay to Landlord an Operating Expense
Allowance of [*] Dollars, per year in equal monthly installments of [*]
Dollars, the first of which shall be payable upon execution of this Lease. If
the term of this Lease commences other than on the first day of a month, then
the Operating Expense Allowance for the first month of the term of this Lease
shall be adjusted proportionately, and the aforesaid first installment paid
by Tenant upon the execution of this Lease shall be initially applied to the
first partial month and the balance to the succeeding month.
If Landlord's Operating Expense for any Operating Year shall be
greater than the total Operating Expense Allowance for such year, Tenant shall
pay to Landlord as additional rent an amount equal to Tenant's Proportionate
Share of the difference (the amount of Tenant's Proportionate Share of such
difference is hereinafter referred to as the "Operating Expense Adjustment'). If
Tenant occupies the demised premises or a portion thereof for less than a full
Operating Year, the Operating Expense Adjustment will be calculated in
proportion to the amount of time in such Operating Year that Tenant occupied the
demised premises.
Such Operating Expense Adjustment shall be paid in the following
manner: Within one hundred twenty days (120) following the end of the first and
each succeeding Operating Year, Landlord shall furnish to Tenant an Operating
Expense Statement setting forth (a) the Operating Expense for the preceding
Operating Year; (B) the Operating Expense Allowance; and (c) Tenant's Operating
Expense Adjustment for such Operating Year. Within fifteen (15) days following
receipt of such Operating Expense Statement (the "Expense Adjustment Date")
Tenant shall pay to Landlord as additional rent the Operating Expense Adjustment
for such Operating Year.
Commencing with the first month of the second Operating Year, Tenant
shall pay to Landlord, in addition to the Operating Expense Allowance, on
account of the Operating Expense Adjustment for such Operating Year, monthly
installments in advance equal to one-twelfth (1/12) of the estimated Operating
Expense Adjustment for such Operating year. On the next succeeding Expense
Adjustment Date, Tenant shall pay to Landlord (or Landlord shall credit to
Tenant) any deficiency (or excess) between the installments paid on account of
the preceding year's Operating Expense Adjustment and the actual Operating
Expense Adjustment for such Operating Year.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
As used in this Addendum, the following words and terms shall be defined as
hereinafter set forth:
A. "Operating Year" shall mean each calendar year, or other period of
twelve (12) months as hereinafter may be adopted by Landlord as its fiscal year,
occurring during the term of the Lease.
B. "Operating Expense Allowance" shall mean and equal the monthly
amount hereinabove set forth.
C. "Operating Expense Statement" shall mean a statement in writing
signed by Landlord, setting forth in reasonable detail (i) the Operating Expense
for the preceding Operating Year; (ii) the Operating Expense Allowance; and
(iii) the Tenant's Operating Expense Adjustment for such Operating Year or
portion thereof. The Operating Expense Statement for each Operating Year and all
supporting and related invoices, costs and documentation shall be available for
inspection by Tenant at Landlord's office during normal business hours.
D. "Operating Expense" shall mean the following expenses incurred by
the landlord in connection with the operation, repair and maintenance of the
demised premises, the building of which it is a part and the land on which it is
located: (i) Real estate taxes and other taxes or charges levied in lieu of such
taxes, general and special public assessments, charges imposed by any
governmental authority pursuant to anti-pollution or environmental legislation,
taxes on the rentals of the building in which the demised premises are located
or the use, occupancy or renting of space therein; (ii) premiums and fees for
fire and extended coverage insurance, insurance against loss of rentals for
space in the building of which the demised premises are a part and public
liability insurance, all in amounts and coverages (with additional policies
against additional risks) as may be required by Landlord or the holder of any
mortgage; (iii) water and sewer service charges, electricity, heat and other
utility charges not separately metered to tenants in the building of which the
demised premises are a part; (iv) all maintenance and repair costs to all areas
of the building in which the demised premises are located, including repairs and
replacements of supplies and equipment, snow and trash removal and paving, lawn
and general grounds upkeep, maintenance and repair of all mechanical equipment
such as standard HVAC, elevators, electrical and plumbing equipment, and the
costs of all labor, materials and supplies incidental thereto; except that
Tenant shall not be required to reimburse Landlord for non-reimbursable capital
repairs unless the repairs were caused by the Tenant's negligence, excessive use
above and beyond design capacity or if the design criteria provided by Tenant
prove not to be adequate; (v) management fees payable to the managing agent for
the demised premises, if any, and if there shall be no managing agent or if the
managing agent is a company affiliated with the Landlord, the management fees
that would customarily be charged for the management of the building in which
the demised premises are located by an independent first class managing agent in
the Philadelphia suburban area; (vi) any and all other expenditures of Landlord
incurred in connection with the operation, repair or maintenance of the demised
premises and the building or land within which they are located which are
properly expensed in accordance with generally accepted accounting principles
consistently applied in the operation,
2
<PAGE>
maintenance and repair of a first class office/industrial building facility.
Tenant to pay for trash removal. Landlord reserves the right to separately meter
water and sewer used by Tenant within the demised premises and charge Tenant
directly for those services, in which event those items shall no longer be
included in the definition of "Operating Expenses" and shall be paid separately
by Tenant.
The term "Operating Expense" shall not include depreciation on the
building or equipment therein, interest, net income, franchise or capital stock
taxes payable by Landlord, executive salaries, real estate broker's commissions
or the cost of services provided especially for any particular tenant at such
Tenant's expense and not uniformly available to all tenants within the building
of which the demised premises are a part.
E. "Tenant's Proportionate Share" shall be [*] which is equivalent
to a fraction [*].
36. FINAL YEAR OF LEASE TERM. During the calendar year in which the
term of this Lease ends, Landlord shall have the right to submit to Tenant a
statement of Landlord's reasonable estimate of the Operating Expense Adjustment
during the period (the "Final Period") beginning on the first day of the final
Operating Year of the term or, if later, the date of the immediately preceding
Operating Expense Adjustment, and ending on the final day of the term of this
Lease. Upon the earlier to occur of the thirtieth (30th) day following Tenant's
receipt of such statement or the final day of the term of this Lease, Tenant
shall pay to Landlord said estimated Operating Expense Adjustment minus the
total amount of payments previously made by Tenant pursuant to Section 1 above
during the final period. If requested by Tenant, Landlord shall submit to Tenant
a statement setting forth the actual amount of said Operating Expense Adjustment
after Landlord's final calculation of same, and within fifteen (15) days after
Tenant's receipt of such statement, Tenant shall pay to Landlord any deficiency,
or, as the case may be, Landlord shall refund to Tenant any overpayment
occasioned by Tenant's payment of the aforesaid estimate.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed the day and year first above written.
WITNESS: RB ASSOCIATES, A PENNSYLVANIA PARTNERSHIP, LANDLORD
BY: /s/ Richard Bartolacci
- ------------- -------------------------------------------
RICHARD BARTOLACCI, PARTNER
ATTEST: YOU TOOLS CORPORATION, D/B/A FASTNET,TENANT
BY: /s/ Rafe Scheinblum BY: /s/ David Van Allen
---------------------- -------------------------------------------
SECRETARY DAVID VAN ALLEN, PRESIDENT
4
<PAGE>
SECOND
ADDENDUM TO COMMERCIAL LEASE AGREEMENT
WHEREAS, RB ASSOCIATES, a Pennsylvania Partnership, of Two Courtney Place,
Suite 140, 3864 Courtney Street, Bethlehem, Pennsylvania 18017 (hereinafter
called "Landlord") and FASTNET CORPORATION a Corporation with offices at Two
Courtney Place, Suite 130, 3864 Courtney Street, Bethlehem, Pennsylvania 18017
(hereinafter called "Tenant") entered into a Commercial Lease Agreement dated
July 22, 1998 (hereinafter referred to as the "Commercial Lease Agreement") and
Addendum to Commercial Lease Agreement dated August 8, 1999 (hereinafter
referred to as the "First Addendum"); and
WHEREAS, the Landlord desires to rent and Tenant desires to lease an
additional amount of warehouse and office space which consists of approximately
19,941 square feet located at Courtney I, Suite 150, 3894 Courtney Street,
Bethlehem, Pennsylvania 18017 (hereinafter referred to as the "Second Additional
Space") in addition to the approximately 26,470 square feet currently being
leased by Tenant from Landlord pursuant to the Commercial Lease Agreement and
the First Addendum; and
WHEREAS, Tenant and Landlord agree that the terms and conditions for the
lease of the Second Additional Space shall be the same as the Commercial Lease
Agreement except as specifically provided to the contrary in this Second
Addendum to the Commercial Lease Agreement; and
WHEREAS, the Landlord and the Tenant hereby agree to amend Section 2.
LICENSES, PERMITS, ETC., Section 6. NEGATIVE COVENANTS OF TENANT., Section 10.
SERVICES. and Section 32. IMPROVEMENTS. of the Commercial Lease Agreement as
specifically stated herein; and
WHEREAS, the Landlord and the Tenant hereby agree to the payment of a
Security Deposit by Tenant to Landlord as specifically stated herein; and
WHEREAS, the Landlord and the Tenant hereby agree to amend the "Operating
Expense Allowance" and the "Tenant's Proportionate Share" in the Operating
Expense Addendum attached to and made a part of the Commercial Lease Agreement
as specifically stated herein;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereby agree that the Commercial Lease Agreement
is amended as follows:
1. The following rental terms for the Second Additional Space shall be added to
and paid in addition to the rental payments provided in Section 1. TERM, MINIMUM
RENTAL of the Commercial Lease Agreement and First Addendum:
Landlord hereby demises and lets unto Tenant all that certain warehouse and
office space comprised of approximately 19,941 square feet known as
Internet Unlimited located at Courtney I, Suite 150, 3894 Courtney Street,
Bethlehem, Pennsylvania 18017 to be used and occupied for the same purposes
and uses and all other related purposes and uses as provided in the
Commercial Lease Agreement as lawful warehousing and office space for
Tenant's business for the term of six (6) years to commence on or before
September 1,
5
<PAGE>
1999 and terminating on the thirty-first (31st) day of August, 2005 as
follows:
(a) Tenant shall pay rent on the basis [*] Dollars per square foot
for a base rent for the first seven (7) months of occupancy payable in equal
monthly payments [*] Dollars with the first month's rent payable on September
1, 1999 and monthly thereafter on the first (1st) day of each month until
March 31, 2000; and
(b) Tenant shall pay rent on the basis of [*] Dollars per square
foot for a base rent for the next five (5) months of occupancy payable in
equal monthly payments of [*] Dollars with the first month's rent payable on
April 1, 2000 and monthly thereafter on the first (1st) day of each month
until August 31, 2000; and
(c) Tenant shall pay rent on the basis [*] Dollars per square foot
for a base rent for the next seven (7) months of occupancy payable in equal
monthly payments [*] Dollars with the first month's rent payable on September
1, 2000 and monthly thereafter on the first (1st) day of each month until
March 31, 2001; and
(d) Tenant shall pay rent on the basis [*] Dollars per square foot
for a base rent for the next five (5) months of occupancy payable in equal
monthly payments of [*] Dollars with the first month's rent payable on April
1, 2001 and monthly thereafter on the first (1st) day of each month until
August 31, 2001; and
(e) Tenant shall pay rent on the basis [*] Dollars per square foot
for a base rent for the next seven (7) months of occupancy payable in equal
monthly payments of [*] Dollars
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
6
<PAGE>
with the first month's rent payable on September 1, 2001 and monthly
thereafter on the first (1st) day of each month until March 31, 2002; and
(f) Tenant shall pay rent on the basis [*] Dollars per square foot
for a base rent for the next five (5) months of occupancy payable in equal
monthly payments of [*] Dollars with the first month's rent payable on April
1, 2002 and monthly thereafter on the first (1st) day of each month until
August 31, 2002; and
(g) Tenant shall pay rent on the basis of [*] Dollars per square
foot for a base rent for the next seven (7) months of occupancy payable in
equal monthly payments of [*] Dollars with the first month's rent payable on
September 1, 2002 and monthly thereafter on the first (1st) day of each month
until March 3 1, 2003; and
(h) Tenant shall pay rent on the basis [*] Dollars per square foot
for a base rent for the next five (5) months of occupancy payable in equal
monthly payments of [*] Dollars with the first month's rent payable on April
1, 2003 and monthly thereafter on the first (1st) day of each month until
August 31, 2003; and
(i) Tenant shall pay rent on the basis of [*] Dollars per square
foot for a base rent for the next seven (7) months of occupancy payable in
equal monthly payments of [*] Dollars with the first month's rent payable on
September 1, 2003 and monthly thereafter on the first (lst) day of each month
until March 31, 2004; and
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
7
<PAGE>
(j) Tenant shall pay rent on the basis of [*] Dollars per square
foot for a base rent for the next five (5) months of occupancy payable in
equal monthly payments of [*] Dollars with the first month's rent payable on
April 1, 2004 and monthly thereafter on the first (1st) day of each month
until August 31, 2004; and
(k) Tenant shall pay rent on the basis of [*] Dollars per square
foot for a base rent for the next seven (7) months of occupancy payable in
equal monthly payments [*] Dollars with the first month's rent payable on
September 1, 2004 and monthly thereafter on the first (1st) day of each month
until March 31, 2005; and
(l) Tenant shall pay rent on the basis of [*] Dollars per square
foot for a base rent for the next five (5) months of occupancy payable in
equal monthly payments of [*] Dollars with the first month's rent payable on
April 1, 2005 and monthly thereafter on the first (1st) day of each month
until August 31, 2005.
Section 2. LICENSES, PERMITS, ETC. of the Commercial Lease Agreement shall be
deleted in its entirety but only as far as pertaining to the Second Additional
Space is concerned and the following Section 2. LICENSES, BUILDING PERMITS,
CERTIFICATES OF OCCUPANC.Y ETC. shall be inserted in place thereof-.
2. LICENSES, BUILDING PERMITS, CERTIFICATES OF OCCUPANCY, ETC. Tenant shall be
solely responsible for obtaining all necessary licenses, building permits and
certificates of occupancy and comply with all zoning and any other ordinances
with Hanover
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
8
<PAGE>
Township as well as any other local, state, and/or federal laws, rules and
regulations which may apply to the construction of the improvements to be
made to the Second Additional Space. Landlord will cooperate with Tenant in
obtaining these permits and approvals. Landlord has no knowledge of any
conditions relating to the leased space which would prevent Tenant from
obtaining any and all required approvals for its business. Landlord will
timely submit upon receipt from Tenant any drawings to Hanover Township and
obtain the initial building permits required and applicable to the Second
Additional Space at Tenant's expense.
3. Paragraph (B) of Section 6. NEGATIVE COVENANTS OF TENANT. of the Commercial
Lease Agreement shall be deleted in its entirety but only as far as pertaining
to the econd Additional Space is concerned and the following paragraph (B) of
Section 6. NEGATIVE COVENANTS OF TENANT. shall be inserted in place thereof:
(B) Make any alterations, improvements, or additions to the Second
Additional Space without the Landlord's consent, which will not be
unreasonably withheld. Specifically, Landlord understands that there will
be improvements made to the Second Additional Space prior to Tenant's
occupancy, however Tenant shall not commence construction of any
improvements without first obtaining written approval of the Landlord as
described in Section 32.(A) of the Second Addendum of this Lease found at
paragraph 5. below. Any and all alterations, improvements, additions or
fixtures installed before or during the term of this Lease, shall become
and remain the property of the Landlord if they become fixtures; however,
all computer communications, and/or internet related equipment and/or
related fixtures may be removed by Tenant if it is removed by the time the
Tenant vacates the Second Additional Space and provided, in the
9
<PAGE>
case of computer, Internet and/or communication fixtures, the Leased
Space is not damaged and/or is reasonably restored.
4. Section 10. SERVICES. of the Commercial Lease Agreement shall be deleted in
its entirety but only as far as pertaining to the Second Additional Space is
concerned and the following Section 10. SERVICES. shall be inserted in place
thereof:
10. SERVICES. The following services and facilities shall be supplied by
Landlord to Tenant in connection with Tenant's use of the Second Additional
Space, in common with other tenants of the building of which the Second
Additional Space is a part:
(A) Landlord shall supply the Second Additional Space with electric
service for heat, air conditioning, lighting and power to operate business
machines and equipment. Landlord shall furnish and install a meter for
measuring Tenant's electric usage in the Second Additional Space and Tenant
shall pay utility company direct for such usage in the Second Additional
Space. Landlord shall, at its expense, repair and maintain standard
building equipment used to furnish power to the Second Additional Space
which shall be reimbursed according to the Operating Expense Addendum
attached to the Commercial Lease Agreement except as modified by this
Second Addendum.
(B) Providing Landlord is not grossly negligent, Landlord shall have
no responsibility or liability to Tenant, nor shall there be any abatement
in the said rent for any failure to supply any of said services and
facilities that Landlord has agreed to supply hereunder during such period
as the services and facilities are out of order, undergoing repair as a
direct and necessary result of labor disorders, strikes, accidents or other
causes beyond Landlord's control, In case of emergency which is not in
Landlord's control or
10
<PAGE>
because of labor disturbances, strikes, accidents or causes beyond
Landlord's control, Landlord may do so for the period necessary and
required and if so there shall not be any abatement in rent or other
liability to Tenant. However, Landlord acknowledges and understands the
importance of uninterrupted utility services to Tenant and agrees to
exercise due diligence to maintain such uninterrupted service if within the
Landlord's control and, furthermore, to attempt to notify Tenant in
advance, if practicable, of any such anticipated interruption.
5. Section 32. IMPROVEMENTS. of the Commercial Lease Agreement shall be
deleted in its entirety but only as far as pertaining to the Second Additional
Space is concerned and the following Section 32. IMPROVEMENTS. shall be inserted
in place thereof:
32. IMPROVEMENTS. Tenant represents that all improvements to the Second
Additional Space shall be completed by Tenant within a reasonable time and
Tenant will occupy the Second Additional Space on or before December 31,
1999. Tenant further agrees that:
(A) Any and all improvements as to the Second Additional Space shall
be constructed at the sole cost and expense of Tenant. Before starting any
structural construction whatsoever, Tenant must obtain Landlord's written
approval of all building plans, blueprints, contractors to be used and
building, roof and floor penetrations and any changes made thereto after
approval by Landlord or during construction which approval shall not be
unreasonably withheld if the proposed improvements are reasonably related
and appropriate to Tenant's business. In particular, Tenant agrees that
Tenant shall use the following contractors for all initial construction
work competitively priced and
11
<PAGE>
performed in the area of their specialty: Centimark for all roof work,
Baron Welding Fabricators for curb cuts and Seip for HVAC work excluding
specialty air-conditioning work. Further, Landlord shall have thirty (30)
days from receipt by Landlord in writing from Tenant of all complete
building plans, blueprints, contractors to be used and a detailed plan of
all building, roof and floor penetrations prior to Landlord's giving its
approval or rejection and prior to Tenant beginning any construction.
Landlord shall have ten (10) days from receipt by Landlord in writing from
Tenant of any changes made during construction to approve or reject any
such changes; and
(B) Prior to any contractor providing any work on the Second
Additional Space, the contractor shall have executed a Stipulation versus
Liens in form satisfactory to Landlord and cause it to be filed with the
Office of the Northampton County Prothonotary at Easton, Pennsylvania; and
(C) Tenant shall provide to Landlord evidence that each contractor has
at all times adequate workmen's compensation insurance and general
liability insurance with companies, coverages and dollar limits
satisfactory to Landlord with Landlord named as an additional insured,
together with a certificate from the insurer to the effect that such
insurance may not be canceled or substantially modified without at least
thirty (30) days prior written notice to Landlord.
6. Tenant shall pay to Landlord a security deposit consisting of one (1)
month's rent for the Second Additional Space of [*] Dollars upon signing this
Second Addendum which shall be
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
12
<PAGE>
returned within thirty (30) days after the end of the term described herein in
Section I of this Second Addendum. This security deposit shall not be used as
the last month's rent by Tenant and shall be held without interest by Landlord
as security for damages to the Second Additional Space and as security for any
violation of the lease by Tenant.
7. Section 1. PAYMENT. of the Operating Expense Addendum of the Commercial
Lease Agreement shall be amended and the following payment for the Second
Additional Space shall be added to and paid in addition to the payment described
in the First Addendum:
Tenant shall also pay to Landlord an additional Operating Expense Allowance
of [*] Dollars, per year in equal monthly installments of [*] Dollars for
the Second Additional Space leased in the Second Addendum to Commercial
Lease Agreement.
8. Section 1.E. of the Operating Expense Addendum of the Commercial Lease
Agreement shall be amended and the following shall be added to the 'Tenant's
Proportionate Share' as described in the First Addendum:
"`Tenant's Proportionate Share' shall be 36.89% which is equivalent to
a fraction for the Second Additional Space leased in Courtney I in the
Second Addendum to Commercial Lease Agreement."
In all other respects, the Commercial Lease Agreement and the First
Addendum are hereby ratified and affirmed.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Addendum to
be executed as of this 1st day of September, 1999.
WITNESS: RB ASSOCIATES, A PENNSYLVANIA PARTNERSHIP
BY /S/ RICHARD BARTOLACCI (SEAL)
- -------------------------------- ----------------------------------
RICHARD BARTOLACCI, PARTNER LANDLORD
ATTEST: FASTNET CORPORATION
/s/ Stanley F. Bielicki BY: BY /S/ DAVID VANALLEN (SEAL)
- ------------------------------- ------------------------------------
DAVID VAN ALLEN, PRESIDENT TENANT
14
<PAGE>
ADDENDUM TO COMMERCIAL LEASE AGREEMENT
WHEREAS, RB ASSOCIATES, a Pennsylvania Partnership, of Two Courtney Place,
Suite 140, 3864 Courtney Street, Bethlehem, Pennsylvania 18017 (hereinafter
called "LANDLORD") and FASTNET CORPORATION, a corporation with offices at Two
Courtney Place, Suite 130, 3864 Courtney Street, Bethlehem, Pennsylvania 18017
(hereinafter called "TENANT") entered into a Commercial Lease Agreement dated
July 22, 1998 (hereinafter referred to as the "Commercial Lease Agreement"); and
WHEREAS, the Landlord desires to rend and Tenant desires to lease an
additional amount of warehouse and office space which consists of approximately
15,415 square feet located at Courtney II, Suite 130, 3864 Courtney Street,
Bethlehem, Pennsylvania 18017 (hereinafter referred to as the "Additional
Space") in addition to the approximately 11,055 square feet currently being
leased by Tenant from Landlord pursuant to the Commercial Lease Agreement; and
WHEREAS, Tenant and Landlord agree that the terms and conditions for the
lease of the Additional Space shall be the same as the Commercial Lease
Agreement except as specifically provided to the contrary in this Addendum to
the Commercial Lease Agreement;
WHEREAS, the Landlord and the Tenant hereby agree to amend Section 2.
LICENSES, PERMITS, ETC., Section 6 NEGATIVE COVENANTS OF TENANT, Section 10.
SERVICES. and Section 31. IMPROVEMENTS. of the Commercial Lease Agreement as
specifically stated herein; and
WHEREAS, the Landlord and the Tenant hereby agree to the payment of a
Security Deposit by Tenant to Landlord as specifically stated herein; and
WHEREAS, the Landlord and the Tenant hereby agree to amend the "Operating
Expanse Allowance" and the "Tenant's Proportionate Share" in the Operating
Expense Addendum attached to and made a part of the Commercial Lease Agreement
as specifically stated herein;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties hereby agree that the Commercial Lease Agreement
is amended as follows:
1. The following rental terms for the Additional Space shall be added to and
paid in addition to the rent provided in Section 1. TERM, MINIMUM RENTAL, of the
Commercial Lease Agreement:
Landlord hereby demises and lets unto Tenant all that certain warehouse
space comprised of approximately 15,415 square feet adjoining and adjacent
to the first floor of the building known as the Additional Space of
Courtney II, Suite 130, 3864 Courtney Street, Bethlehem, Pennsylvania 19017
to be used as provided in the Lease dated July 22, 1998 as lawful
warehousing space for Tenant's business for the term of six (6) years to
commence on or before June 1, 1999 and terminating on the thirty-first
(31st) day of August 2005 as follows:
15
<PAGE>
(a) Tenant shall pay rent on the basis of [*] Dollars per square foot
for a base rent for the first year of occupancy payable in equal monthly
payments of [*] Dollars with the first month's rent prorated based on
Tenant's occupancy date and monthly thereafter on the first (1st) day of
each month until May 31, 2000; and
(b) Tenant's second year of occupancy shall commence at the rate of
[*] Dollars per square foot for a base rent for the second year of
occupancy in the amount of [*] Dollars payable in twelve (12) equal
monthly payments of [*] Dollars with the first rent of the second year of
the term commencing and payable on June 1, 2000; and
(c) Tenant's third year of occupancy shall commence at the rate of [*]
Dollars per square foot for a base rent for the third year of occupancy
in the amount of [*] Dollars payable in twelve (12) equal monthly
payments of [*] Dollars with the first rent of the third year of the
term commencing and payable on June 1, 2001;and
(d) Tenant's fourth year of occupancy shall commence at the rate of
[*] Dollars per square foot for a base rent for the fourth year of
occupancy in the amount of [*] Dollars payable in twelve (12) equal
monthly payments of [*] Dollars with the first rent of the fourth year of
the term commencing and payable on June 1, 2002; and
(e) Tenant's fifth year of occupancy shall commence at the rate of [*]
Dollars per square foot for a base rent for the fifth year of occupancy
in the amount of [*] Dollars payable in twelve (12) equal monthly
payments of [*] Dollars with the first rent of the fifth year of the
term commencing and payable on June 1, 2003; and
(f) the base rent for the Tenant's sixth year of occupancy June 1,
2004 to August 31, 2005 shall be the same as the base rent for the
Tenant's fifth year of occupancy.
2. Section 2. LICENSES, PERMITS, ETC. of the Commercial Lease Agreement shall be
deleted in its entirety but only as far as pertaining to the Additional Space is
concerned and the following Section 2. LICENSES, BUILDING PERMITS, CERTIFICATES
OF OCCUPANCY, ETC. shall be inserted in place thereof:
2. LICENSES, BUILDING PERMITS, CERTIFICATES OF OCCUPANCY, ETC. Tenant shall be
solely responsible for obtaining all necessary licenses, building permits and
certificates of occupancy and comply with all zoning and any other ordinances
with Hanover Township as well as any other local, state and/or federal laws,
rules and regulations which may apply to the construction of the improvements to
be made to the Additional Space. Landlord will cooperate with Tenant in
obtaining these permits and approvals. Landlord has no knowledge of any
conditions relating to the lease space which would prevent Tenant from obtaining
any and all
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
16
<PAGE>
required approvals for its business. Landlord will timely submit upon receipt
from Tenant any drawings to Hanover Township and obtain the initial building
permits required and applicable to the Additional Space at Tenant's expense.
3. Paragraph (B) of Section 6. NEGATIVE COVENANTS OF TENANT. of the Commercial
Lease Agreement shall be deleted in its entirety but only as far as pertaining
to the Additional Space is concerned and the following paragraph (B) of Section
6. NEGATIVE COVENANTS OF TENANT. shall be inserted in place thereof:
(B) Make any alterations, improvements, or additions to the Additional
Space without Landlord's consent, which will not be unreasonably
withheld. Specifically, Landlord understands that there will be
improvements made to the Additional Space prior to Tenant's occupancy,
however, Tenant shall not commence construction of any improvements
without first obtaining written approval of the Landlord as described
in Section 32.(A) of the Addendum of this Lease found at paragraph 5,
below. Any and all alterations, improvements, additions or fixtures
installed before or during the term of this Lease, shall become and
remain the property of the Landlord if they become fixtures; however,
all computer communications, and/or internet related equipment and/or
related fixtures may be removed by Tenant if it is removed by the time
Tenant vacates the Additional Space and provided, in the case of
computer, internet and/or communication fixtures, the Leased Space is
not damaged and/or is reasonably restored.
4. Section 10. SERVICES. of the Commercial Lease Agreement shall be deleted in
its entirety but only as far as pertaining to the Additional Space is concerned
and the following Section 10. SERVICES. shall be inserted in place thereof:
10. SERVICES. The following services and facilities shall be supplied by
Landlord to tenant in connection with Tenant's use of the Additional Space,
in common with other tenants of the building of which the Additional Space
is a part:
(A) Landlord shall supply the Additional Space with electric service for
heat, air conditioning, lighting and power to operate business machines and
equipment. Landlord shall furnish and install a meter for measuring
Tenant's electric usage in the Additional Space and Tenant shall pay
utility company direct for such usage in the Additional Space. Landlord
shall, at its expense, repair and maintain standard building equipment used
to furnish power to the Additional Space which shall be reimbursed
according to the Operating Expense Addendum attached to the Commercial
Lease Agreement except as modified by this Addendum.
(B) Providing Landlord is not grossly negligent, Landlord shall have no
responsibility or liability to Tenant, nor shall there be any abatement in
the said rent for any failure to supply any of said services and facilities
that Landlord has agreed to supply hereunder during such period as the
services and facilities are out of order, undergoing repair as a direct and
unnecessary result of labor disorders, strikes, accidents or other
17
<PAGE>
causes beyond Landlord's control. In case of emergency which is not in
Landlord's control or because of labor disturbances, strikes, accidents
or causes beyond Landlord's control, Landlord may do so for the period
necessary and required and if so there shall not be any abatement in
rent or other liability to Tenant. However, Landlord acknowledges and
understands the importance of uninterrupted utility services to Tenant
and agrees to exercise due diligence to maintain such uninterrupted
service if within the Landlord's control and, furthermore, to attempt to
notify Tenant in advance, if practicable, of any such anticipated
interruption.
5. Section 32. IMPROVEMENTS. of the Commercial Lease Agreement shall be
deleted in its entirety but only as far as pertaining to the Additional Space is
concerned and the following Section 32. IMPROVEMENTS. shall be inserted in place
thereof:
32. IMPROVEMENTS. Tenant represents that all improvements to the Additional
Space shall be completed by Tenant within a reasonable time and Tenant will
occupy the Additional Space on or before June 1, 1999. Tenant further
agrees that:
(A) Any and all improvements as the Additional Space shall be
constructed at the sole cost and expense of Tenant. Before starting any
structural construction whatsoever, Tenant must obtain Landlord's written
approval of all building plans, blueprints, contractors to be used and
building, roof and floor penetrations and any changes made thereto after
approval by Landlord or during construction which approval shall not be
unreasonably withheld if the proposed improvements are reasonably related
and appropriate to Tenant's business. In particular, Tenant agrees that
Tenant shall use the following contractors for all initial construction
work competitively priced and performed in the area of their specialty:
Centimark for all roof work, Baron Welding Fabricators for curb cuts and
Seip for HVAC work excluding specialty air-conditioning work. Further,
Landlord shall have thirty (30) day from receipt by Landlord in writing
from Tenant of all complete building plans, blueprints, contractors to be
used and a detailed plan of all building, roof and floor penetrations prior
to Landlord's giving its approval or rejection and prior to Tenant
beginning any construction. Landlord shall have ten (10) days form receipt
by Landlord in writing from Tenant of any changes made during construction
to approve or reject any such changes; and
(B) Prior to any contractor providing any work on the Additional Space,
the contractor shall have executed a Stipulation versus Liens in form
satisfactory to Landlord and cause it to be filed with the Office of the
Northampton County Prothonotary at Easton, Pennsylvania; and
(C) Tenant shall provide to Landlord evidence that each contractor has
at all time adequate workmen's compensation insurance and general liability
insurance with companies, coverages and dollar limits satisfactory to
Landlord with Landlord named as addition insured, together with a
certificate form the insurer to the effect that such insurance may not be
canceled or substantially modified without at least thirty (30) days prior
written notice to Landlord.
18
<PAGE>
6. Tenant shall pay to Landlord a security deposit consisting of one (1)
month's rent for the Additional Space of [*] Dollars upon signing this
Addendum which shall be returned within thirty (30) days after the end of the
term described herein in Section 1 of this Addendum. This security deposit
shall not be used as the last month's rent by Tenant and shall be held
without interest by Landlord as security for damages to the Additional Space
and as security for any violation of the lease by Tenant.
7. Section 1. PAYMENT. of the Operating Expense Addendum to the Commercial
Lease Agreement which provides "Tenant shall pay to Landlord an Operating
Expense Allowance of [*] Dollars, per year in equal monthly installments of
[*] Dollars," shall be deleted and instead it shall be provided that "Tenant
shall pay to Landlord an Operating Expense Allowance for both the demised
premises in the Commercial Lease Agreement and the Additional Space leased in
this Addendum of [*] Dollars, per year in equal monthly installments of [*]
Dollars,"
8. Section 1.E.of the Operating Expense Addendum to the Commercial Lease
Agreement which provides `Tenant's Proportionate Share' shall be [*] which is
equivalent to a fraction," shall be deleted and stead it shall be provided
that " `Tenant's Proportionate Share' for both the demised premises in the
Commercial Lease Agreement and the Additional Space leased in this Addendum
shall be [*] which is equivalent to a fraction..."
In all other respects, the Commercial Lease Agreement dated July 22, 1998 is
hereby ratified and affirmed.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed this 8 day of August, 1999.
WITNESS: RB ASSOCIATES, a Pennsylvania Partnership
/s/ Donald J. Ayers BY: /S/ RICHARD BARTOLACCI (SEAL)
- ----------------------------- ---------------------------
RICHARD BARTOLACCI, PARTNER LANDLORD
ATTEST: FASTNET CORPORATION
BY: /s/ Stanley F. Bielicki BY: /S/ DAVID VAN ALLEN (SEAL)
-------------------------------- -------------------------
DAVID VAN ALLEN, PRESIDENT
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
19
<PAGE>
EXHIBIT 10.9
LEASE BETWEEN
HOLLAND CENTER, L.L.C., LANDLORD
AND
YOU TOOLS CORPORATION, TENANT
FOR COMMERCIAL SPACE IN
HOLLAND CENTER
<PAGE>
TABLE OF CONTENTS
1. PREMISES..................................................................1
2. TERM......................................................................1
3. RENT......................................................................2
4. SECURITY DEPOSIT..........................................................2
5. ADDITIONAL RENT...........................................................2
6. UTILITIES AND SERVICES....................................................3
7. RENEWALS AND OPTIONS......................................................3
8. PREPARATION OF THE PREMISES...............................................3
9. ACCEPTANCE OF THE PREMISES................................................4
10. USE OF THE PREMISES.......................................................4
11. MAINTENANCE AND REPAIRS...................................................4
12. ALTERATIONS AND IMPROVEMENTS..............................................5
13. TENANT'S EQUIPMENT, FURNITURE AND TRADE FIXTURES..........................6
14. ASSIGNMENT AND SUBLETTING.................................................6
15. COMPLIANCE WITH LAWS......................................................8
16. RULES AND REGULATIONS.....................................................8
17. DAMAGE CAUSE..............................................................8
18. CONDEMNATION AND EMINENT DOMAIN...........................................9
19. DEFAULT..................................................................10
20. LANDLORD'S RIGHT AND REMEDIES............................................11
21. LANDLORD'S REMEDIES CUMULATIVE; EXPENSES.................................13
22. USE OF SECURITY DEPOSIT..................................................13
23. ESTOPPEL CERTIFICATES....................................................13
24. MECHANIC'S LIENS.........................................................14
25. NOTICES..................................................................14
26. RESERVATION OF RIGHTS BY LANDLORD........................................14
27. LANDLORD'S RIGHT OF ENTRY................................................15
28. ATTORNMENT...............................................................16
29. MORTGAGE PRIORITY........................................................16
30. QUIET ENJOYMENT..........................................................16
31. ABANDONMENT..............................................................16
32. SURRENDER................................................................16
33. HOLDING OVER.............................................................17
34. WAIVER OF CLAIMS AND LANDLORD'S LIABILITY................................17
35. LANDLORD'S OBLIGATIONS...................................................18
36. INDEMNIFICATION OF LANDLORD..............................................18
37. TENANT'S INSURANCE.......................................................19
38. NO WAIVER................................................................21
39. ENVIRONMENTAL LAWS.......................................................21
40. JURY TRIAL WAIVER........................................................22
<PAGE>
41. FORCE MAJEURE............................................................22
42. INTERPRETATION...........................................................22
43. RECORDING OF LEASE.......................................................23
44. SALE OR LEASE OF PREMISES................................................23
45. BROKERAGE COMMISSIONS....................................................23
46. AMENDMENT TO LEASE.......................................................24
47. APPROVAL OF LEASE BY LANDLORD............................................24
48. EXISTING LEASE...........................................................24
49. ENTIRE AGREEMENT.........................................................24
ACKNOWLEDGMENTS...............................................................24
EXHIBIT A - DIAGRAMMATIC FLOOR PLAN...........................................25
EXHIBIT B - LEASE SUMMARY.....................................................26
EXHIBIT C - FLOOR PLAN SKETCH..................................................
EXHIBIT D - WORK TO BE DONE BY LANDLORD REGARDING TENANT IMPROVEMENTS........ 28
EXHIBIT E - RULES & REGULATIONS...............................................29
EXHIBIT F - TENANT'S OPTION TO RENEW LEASE....................................34
<PAGE>
THIS LEASE AGREEMENT made this 15 day of June 1999 between Holland Center
L.L.C., a limited liability company existing by virtue of the laws of the State
of New Jersey, and having an address c/o Philip Collins, 287 Hopewell-Amwell
Road, Hopewell, NJ 08525, hereinafter called the Landlord, and You Tools
Corporation having an address of Two Courtney Place, Suite 130, 3864 Courtney
Street, Bethlehem, PA 18017, hereinafter called the Tenant:
WITNESSETH
For and in consideration of the covenants herein contained, and upon the terms
and conditions herein set forth, Landlord and Tenant hereby agree as follows:
1. PREMISES. Landlord hereby leases to Tenant and Tenant hereby hires
from Landlord, subject to all terms and conditions of this Lease, those certain
premises set forth on the floor plan attached hereto as Exhibit "A" and by this
reference made a part hereof as fully as if set forth herein (hereinafter called
the "Leased Premises"). Said Leased Premises are located in that certain
building (hereinafter called the "Building") which is situated on that certain
parcel of land (said parcel of land together with the Building and all other
improvements located thereon are hereinafter referred to as the "Parcel")
located at and known as
2. TERM.
2.1. The Term of this Lease shall be as set forth in the Lease
Summary and shall commence on the earlier to occur of (I) the date Landlord
delivers possession of the Leased Premises to Tenant or (ii) the Target
Commencement Date set forth in the Lease Summary (hereinafter referred to as the
"commencement date") which Lease Summary is attached hereto as Exhibit B and by
this reference made a part hereof as fully as if set forth herein. Landlord
shall give notice to Tenant of the commencement date, said notice to be made at
least seven (7) days prior to the commencement date set forth in such notice.
The parties hereto acknowledge and agree that the Term of this Lease shall not
commence until possession of the Leased Premises is delivered to Tenant. The
term of this Lease shall terminate on the earlier of (i) five (5) years from the
commencement date, or (ii) the earlier termination of this Lease pursuant to the
terms and conditions of this Agreement.
2.2. The parties hereto agree to execute a memorialization, to
be prepared by Landlord, setting forth (I) the name and address of the parties
hereto; (ii) the exact date on which the term of this Lease commenced; and (iii)
the termination date of this Lease.
2.3. If the Landlord, for any reason whatsoever, cannot deliver
possession of the Leased Premises within six (6) months from the Target
Commencement Date as set forth in the Lease Summary, then either party shall
have the right to terminate this Agreement and neither party shall be liable to
other for any harm or damage suffered or alleged to be suffered as a result
thereof.
<PAGE>
3. RENT.
3.1. Tenant shall pay rent (hereinafter called "Basic Rent")
for the Leased Premises to the Landlord in accordance with the provisions of the
Lease Summary. Said Basic Rent to be due and payable on the first day of each
month during the Term of this Lease, except that if the commencement date occurs
on a day other than the first day of a month, then the Basic Rent for the
fraction of the month starting with the commencement date shall be paid on said
commencement date prorated on the basis of the actual number of days in said
month. The Basic Rent shall be payable to Landlord, without deduction or offset
in lawful money of the United States of America at the address for Landlord set
forth in the Lease Summary or to such other person or such other place as
Landlord may from time to time designate in writing.
3.2. If Tenant shall fail to make any payments required to be
paid by Tenant hereunder within five (5) days after such payments are due and
payable, including but not limited to payments of Rent, Additional Rent (as set
forth in Article 5 herein) and replenishment of Security, the Tenant shall be
charged and shall be obligated to pay interest on such monies at the rate of ten
(10%) percent per annum.
4. SECURITY DEPOSIT. Tenant shall deposit with Landlord such amount as
set forth in the Lease Summary as a security deposit for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
this Lease satisfactory to the Landlord. Said security deposit shall be returned
to the Tenant, without interest, after the expiration of the Lease term,
provided the Tenant has fully and faithfully performed all such conditions and
covenants. Landlord shall have the right to use such security deposit to cure
any default of the Tenant. If Landlord so applies any part of said deposit,
Tenant shall, on demand, promptly restore said security to its original amount.
5. ADDITIONAL RENT.
5.1. Tenant hereby acknowledges that in addition to the payment
of Basic Rent, Tenant shall pay as additional rent ("Additional Rent") an amount
equal to Tenant's proportionate share of common area expenses and all charges
for, inter alia, services and utilities charged, assessed to, or used by Tenant,
and any other charges as shall become due and payable hereunder.
5.2. Tenant's "proportionate share" of common area expenses
shall mean and refer to that percentage arrived at by dividing the number of
rentable square feet leased by the Tenant by the total rentable square feet
within the Parcel. The parties hereto acknowledge that Tenant's proportionate
share at the execution of this Lease is as set forth in the Lease Summary.
<PAGE>
5.3. "Common area expenses" shall mean and refer to the total
of all costs and expenses paid or incurred by Landlord with respect to, inter
alia, the management, operation, insurance (including but not limited to rent
abatement insurance and hazard and liability insurance), supplies, wages,
professional fees, maintenance and repair, taxes, assessments and improvements
in regard to the Parcel (excepting those charges directly attributable to a
particular Tenant). For those costs and expenses incurred by Landlord which the
Landlord must expense over a period of years, the common area expense chargeable
to the Tenant shall be an amount equal to the amount expensed during the term of
this Lease as such costs and expenses are expensed by the Landlord.
5.4. Tenant shall pay Additional Rent on the first day of each
month in accordance with the provisions of the Lease Summary.
5.5. Within ninety (90) days following the end of each year of
the Lease Term, and at the end of the Lease term, a fair and equitable
adjustment shall be made with respect to any payments due from Tenant for the
preceding period, on the basis of the actual cost to the Landlord of such items
of Additional Rent.
6. UTILITIES AND SERVICES.
6.1. The Tenant shall arrange with the provider or supplier
thereof for all utilities required or needed to service the Leased Premises.
6.2. The Landlord shall have no liability for any disruption or
delay in any of the utilities or services provided to Tenant or the Leased
Premises for any reason whatsoever. Landlord shall have no liability for any
damage or personal injury caused by the disruption or delay of such utilities or
services, for any reason whatsoever.
7. RENEWALS AND OPTIONS. Provided no default of Tenant under the Lease
has previously occurred, Tenant is hereby granted and shall have an option to
extend the term of this Lease as set forth in Exhibit "F" - Tenant's Option to
Renew Lease, and to lease additional space as set forth in Exhibit "G" Tenant's
Option to Lease Additional Space, which Exhibits F and G are by this reference
made a part hereof as fully as if set forth herein.
8. PREPARATION OF THE PREMISES. Before the commencement date, Landlord
will prepare the Leased Premises for the Tenant's occupancy to substantially
conform with the floor plan and suite layout sketch attached hereto as Exhibit
"C" and by this reference made a part hereof as fully as if set forth herein.
The Landlord will furnish and install at its cost and expense those improvements
shown on the Schedule of Tenant Improvements annexed hereto as Exhibit "D" and
by this reference made a part hereof as fully as if set forth herein. Any
additional improvement work desired by the Tenant shall be performed in
accordance with Exhibit "D". The Tenant shall submit to the Landlord for
approval any proposed improvement
<PAGE>
work to be done by the Tenant, and no such alterations or improvements shall be
made in the Leased Premises without the Landlord's prior written consent.
9. ACCEPTANCE OF THE PREMISES. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with
respect to the Leased Premises, Building or the Parcel or with respect to the
suitability or fitness of them for the conduct of Tenant's business or for any
other purposes. The taking of possession or use of the Leased Premises by Tenant
shall conclusively establish that the Leased Premises and the Landlord's
Building were at such time in satisfactory condition and in conformity with the
provisions of this Lease in all respects.
It is further understood that usual and necessary construction
activity by Landlord in completion or alteration of the Parcel and improvements
thereto do not and will not invalidate or affect this Lease or any rights
hereunder, nor be grounds for Tenant asserting constructive eviction.
10. USE OF THE PREMISES. Tenant shall use the Leased Premises only for
those purposes set forth in Exhibit "E" - Rules and Regulations, attached hereto
and by this reference made a part hereof as fully as if set forth herein.
11. MAINTENANCE AND REPAIRS.
11.1. BY TENANT. The Tenant covenants and agrees throughout the
term of the Lease, at Tenant's own cost and expense, to keep and maintain the
Leased Premises in good substantial order, state, and condition as at the
commencement date, reasonable wear and tear excepted, and shall, at its own cost
and expense, make all repairs and perform all maintenance necessary to keep the
Leased Premises in good condition and repair. The term "repairs" shall include
all necessary replacements, alterations, and additions. All repairs shall be
equal in quality and class to the original work. The necessity for, and adequacy
of, repairs pursuant to this Section shall be measured by the standard which is
appropriate for buildings of similar construction and class. Said repairs and
maintenance shall include, but necessarily be limited to, the following:
11.1.1. PAINTING AND DECORATING. The Tenant shall
do all painting and decorating necessary to keep the Leased Premises in good
condition and repair.
11.1.2. GLASS. The Tenant shall replace at the
Tenant's own expense any and all glass in the Leased Premises which may become
damaged or destroyed.
11.1.3. LIGHTING FIXTURES. The Tenant shall
replace the lamps and fluorescent tubes, and shall maintain and/or replace all
defective blasts, in all interior lighting
<PAGE>
fixtures, whether provided by the Landlord or the Tenant, and in all exterior
fixtures provided by the Tenant.
11.2. BY LANDLORD. Landlord shall be responsible for the
performance of all maintenance and repairs to the common areas of the Parcel and
all building structures and exteriors, roofs, parking areas, paving and
landscaping.
12. ALTERATIONS AND IMPROVEMENTS.
12.1. Tenant shall make no alterations, changes, or
improvements in or to the Leased Premises without the prior written consent of
the Landlord. Tenant shall be responsible for the total cost and expense of all
alterations, changes and improvements made by or on behalf of the Tenant. Any
such alterations, changes or improvements shall not interfere with the
mechanical, electrical, air conditioning and plumbing systems and fixtures,
serving any portions of the Leased Premises or Building. At least thirty (30)
days prior to making any alteration, change or improvements, Tenant shall supply
to Landlord a detailed drawing and specifications of the alteration, change or
improvement to be made. Tenant shall, at its sole cost and expense, obtain all
required permits, approvals, and certificates required by all Governmental
authorities in regard to such alterations, changes or improvements. Tenant shall
deliver to Landlord promptly upon its receipt duplicates of all such approvals.
Tenant shall carry and will cause Tenant's contractors and subcontractors to
carry such workman's compensation, general liability, personal and property
damage insurance as required by law and in amounts no less than may be
reasonably required by Landlord. Tenant agrees to do such work in such manner as
not to interfere with or impair the use of other portions of the Parcel by
Landlord and other Tenants of the Parcel, and if necessary to prevent such
interference or impairment, to do work after business hours even though more
expense may be incurred thereby. Contractors and subcontractors doing Tenant's
work may be of Tenant's choice but subject to Landlord's prior written approval,
which approval Landlord agrees not to unreasonably withhold or delay. Tenant
will inform Landlord, in writing, of the names of such contractors and
subcontractors at least one week prior to the commencement of such work.
12.2. All alterations, changes and improvements shall, upon
installation, become the property of Landlord and shall remain upon and be
surrendered with the Leased Premises. All property permitted or required to be
removed by Tenant at the end of the Term remaining on the Leased Premises after
the termination date shall be deemed abandoned and may, at the election of
Landlord, either be retained as Landlord's property or may be removed from the
Leased Premises by Landlord at Tenant's expense.
13. TENANT'S EQUIPMENT, FURNITURE AND TRADE FIXTURES.
13.1. Tenant shall have the right to install, at its own
expense, such equipment, furniture, and trade fixtures, as it considers
necessary or advisable in the conduct of
<PAGE>
its business. Provided the Tenant is not in default hereunder, Tenant shall have
the right to remove all such equipment, furniture, and trade fixtures.
13.2. In the event that Tenant removes any or all of said
equipment, furniture, and trade fixtures, Tenant shall pay all cost and expenses
of any such removal and shall leave the Leased Premises in as good a state and
condition as they were at the commencement of the initial Term of this Lease,
reasonable wear and tear excepted. If Tenant fails to make such repairs,
Landlord shall have the right to do so for and on behalf of and at the expense
of Tenant, and Tenant covenants and agrees to forthwith fully pay on demand to
the Landlord the cost of all such expenditures so made by Landlord.
13.3. In the event that Tenant abandons any such equipment,
furniture, and trade fixtures, such equipment, furniture, and trade fixtures so
abandoned shall, at the election of Landlord, become the property of the
Landlord, or in the event that Landlord elects not to retain said equipment,
furniture or trade fixtures, Landlord shall have the right to remove the same or
any part thereof and charge Tenant the reasonable costs of such removal and or
storage.
14. ASSIGNMENT AND SUBLETTING.
14.1. Tenant expressly covenants that it shall not by operation
of law or otherwise assign, sublet, mortgage, or encumber this Lease, or any
part thereof, or permit the Leased Premises to be used by others without the
prior written consent of Landlord in each instance. Any attempt to do so by
Tenant shall be void. The consent by Landlord to any assignment, mortgage,
encumbrance, subletting or use of the Leased Premises by others shall not
constitute a waiver of Landlord's right to withhold its consent to any
subsequent assignment, mortgage, encumbrance or use of the Leased Premises by
others. Without the prior written consent of Landlord, this Lease and the
interest of Tenant herein or any assignee of Tenant herein, shall not pass by
operation of law, and shall not be subject to garnishment or sale under
execution in any suit or proceeding which may be brought against or by Tenant or
any assignee of Tenant.
14.2. In no event shall any assignment or subletting to which
Landlord may consent, release or relieve Tenant from its obligations to fully
perform all of the terms, covenants, and conditions of its Lease on its part to
be performed.
14.3. If Tenant requests Landlord's consent to an assignment of
this Lease or a subletting of all or any part of the Leased Premises, Tenant
shall submit to Landlord:
(a) the name of the proposed assignee or subtenant;
(b) a copy of the proposed assignment or subletting
agreement;
(c) the nature of the proposed Tenant's business; and
<PAGE>
(d) such information as to its financial
responsibility and general reputation as Landlord may reasonably require.
14.4. Upon the receipt of such request and information from
Tenant, Landlord may approve same or;
(a) cancel and terminate this Lease, if the
request is to assign this Lease or to sublet all of the Lease Premises or, if
the request is to assign or sublet a portion of the Leased Premises only, to
cancel and terminate this Lease with request to such portion;
(b) to grant said request with the
understanding and agreement that any monies received by Tenant in excess of
the Basic Rent and Additional Rent (prorated to that portion of the Leased
Premises so sublet or assigned) set forth herein shall be paid to Landlord.
14.5. In the event Landlord shall cancel this Lease, Tenant
shall surrender possession of the Leased Premises, or the portion of the Leased
Premises which is the subject of the request in accordance with the provisions
of this Lease relating to surrender of the Leased Premises.
14.6. In the event that Landlord shall consent to a sublease or
assignment pursuant to the request from Tenant, Tenant shall cause to be
executed by its assignee or subtenant an agreement to perform faithfully and to
assume and be bound by all of the terms, covenants, conditions, provisions and
agreements of this Lease for the period covered by the assignment or sublease
and to the extent of the space sublet or assigned. An executed copy of each
sublease or assignment and assumption of performance by the sublessee or
assignee, on Landlord's standard form, shall be delivered to Landlord within
twenty (20) days prior to the commencement of occupancy set forth in such
assignment or sublease. No such assignment or sublease shall be binding on
Landlord, and the same shall be void, until Landlord has received and approved
such copies as required herein.
14.7. If this Lease is assigned or sublet with the consent of
Landlord, or occupied by anyone other than Tenant, Landlord may collect the
rents and the other sums to be paid as mentioned in this Lease from said
assignee, subtenant or occupant or anyone else, and apply the net amount
collected to the rents and other sums and payments to be paid by Tenant, and
Tenant shall be and remain liable for the payment of any deficiency arising
under the terms, covenants, conditions, agreements, and provisions as provided
in this Lease. The collection by Landlord from any assignee, subtenant, occupant
or anyone else, shall not be deemed a waiver of this covenant, or release or
discharge Tenant from its obligation to any said rents and other sums specified
in this Lease.
<PAGE>
15. COMPLIANCE WITH LAWS. Tenant covenants that throughout the Term of
this Lease, at Tenant's sole cost and expense, Tenant shall promptly comply with
all present and future statutes and ordinances and orders, rules and
requirements of all Federal, State, County and Municipal governments, and all
legally constituted authorities and all appropriate departments, bureaus,
commissions, boards and offices thereof, and with any directions or orders of
any public officer or offices, which shall impose any duty or obligation upon
the Tenant with respect to the Leased Premises or the use or occupancy thereof.
Tenant further covenants that throughout the Term of this Lease, at Tenant's
sole cost and expenses, Tenant shall promptly comply with the orders, rules and
regulations of the Board of Fire Underwriters where the Leased Premises are
situate, or any other governmental body now or hereafter constituted, exercising
similar functions. Tenant will likewise observe and comply with the requirements
of all policies of public liability, fire and all other policies of insurance at
any time in force with respect to the Parcel.
16. RULES AND REGULATIONS. The rules and regulations regarding the
Leased Premises, affixed to this lease "Exhibit E" attached hereto and by this
reference made a part hereof as fully as if set forth herein, as well as any
other and further reasonable rules and regulations which shall be made by the
Landlord, shall be observed by the Tenant and by the Tenant's employees, agents,
invitees and licensees. The Landlord reserves the right to rescind any presently
existing rules applicable to the Parcel, and to make such other and further
reasonable rules and regulations as in its judgment may from time to time be
desirable for the safety, care and cleanliness of the Parcel and its Tenants and
for the preservation of good order therein, which rules, when so made and notice
thereof given to the Tenant, shall have the same force and effect as if
originally made a part of this Lease.
17. DAMAGE CAUSE.
17.1. If during the term hereof the Leased Premises shall be
partially damaged (as distinguished from "substantially damaged", as that term
is hereinafter defined) by fire or other casualty, Tenant shall immediately
notify Landlord, and provided such damage is not caused by Tenant and subject to
receipt by Landlord of insurance proceeds, Landlord shall forthwith proceed to
repair such damage and restore the Leased Premises to substantially their
condition at the time of such damage, but Landlord shall not be responsible for
any delay which may result from any cause beyond Landlord's reasonable control.
Landlord shall not have any obligation to repair or restore improvements,
fixtures including trade fixtures), floor coverings, furnishing or decorative
feature furnished by Tenant.
17.2. If during term hereof the Leased Premises shall be
substantially damaged or destroyed by fire or other casualty, the Landlord shall
have the option to cancel and terminate this Lease or to elect to have the Lease
remain in full force and effect, and if Landlord so elects and provided such
damage is not caused by Tenant and subject to receipt by Landlord of insurance
proceeds, Landlord shall proceed with all reasonable dispatch to repair or
rebuild the
<PAGE>
Leased Premises to substantially their condition at the time of such damage or
destruction (subject, however, to zoning laws and building codes then in
existence), but Landlord shall not be responsible for any delay which may result
from any cause beyond the Landlord's reasonable control. Landlord shall not have
any obligation to repair or restore improvements, fixtures (including trade
fixtures), floor coverings, furnishings or decorative features furnished by
Tenant.
17.3. If Landlord's right of termination is exercised, this
Lease and the term hereof shall cease and come to an end as of the date of said
notification of election.
17.4. The terms "substantially damaged" and "substantial
damage", as used in this Article, shall have reference to damage of such a
character as cannot reasonably be expected to be substantially repaired within
ninety (90) days from the time that such repair or restoration work would be
commenced.
17.5. Notwithstanding anything herein to the contrary, the
Tenant shall not be entitled to any credit, rebate, or adjustment in the Basic
Rent or Additional Rent, unless and to the extent of rent abatement insurance
proceeds received by Landlord.
17.6. Notwithstanding any provision herein to the contrary,
Landlord shall not be obligated to repair the Leased Premises, Building or
Parcel if the proceeds from any insurance award are insufficient to restore the
Leased Premises, Building or Parcel to its condition as it existed immediately
prior to such casualty.
18. CONDEMNATION AND EMINENT DOMAIN.
18.1. If the whole of the premises shall be condemned or taken
either permanently or temporarily for any public or quasi-public use or purpose,
under any statute or by right of eminent domain, or by private purchase in lieu
thereof, then in that event the term of this Lease shall cease and terminate
from the date when possession is taken thereunder pursuant to such proceeding or
purchase and Tenant shall have no claim against Landlord for the value of any
unexpired term of said Lease, and shall release unto Landlord any such claim it
may have against the condemnor. In the event a portion only of the Leased
Premises shall be so taken Landlord may elect to terminate this Lease from the
date when possession is taken thereunder pursuant to such proceeding or purchase
or Landlord may elect to repair and restore, at its own expense, the portion not
taken and this Lease shall remain in effect but the rent shall be adjusted
accordingly.
18.2. In the event of any total or partial taking of the Leased
Premises or the Building or any portion of the Parcel, Landlord shall be
entitled to receive the entire award in any such proceeding and Tenant hereby
assigns any and all right, title and interest in or to any such award or any
part thereof and hereby waives all right against Landlord and the condemning
authority, except that Tenant shall have the right to claim and prove in any
such proceeding and
<PAGE>
to receive any award which may be made for Tenant's fixtures, equipment and
relocation expenses.
18.3. If the Leased Premises or the building are declared
unsafe by any duly constituted authority having the power to make such
determination or are the subject of a violation notice or notice requiring
repair or reconstruction, Landlord, at its option, may terminate this Lease and
in such event, Tenant shall immediately surrender said premises to Landlord and
thereupon this Lease shall terminate.
19. DEFAULT. Each of the following, whether occurring before or after
the commencement date, shall be deemed a Default by Tenant and a breach of this
Lease:
(a) the filing of a petition by or against Tenant for
adjudication as a bankrupt, or for reorganization, or for arrangement under any
bankruptcy act;
(b) The commencement of any action or proceeding for the
dissolution or liquidation of Tenant, whether instituted by or against Tenant,
or for the appointment of a receiver or trustee of the property of Tenant under
any state or federal statute for relief of debtors;
(c) The making by Tenant of an assignment for the benefit of
creditors;
(d) The suspension of business by Tenant or any act by Tenant
amounting to a business failure;
(e) The filing of a tax lien or a mechanic's lien against any
property of Tenant;
(f) Tenant's causing or permitting the Leased Premises to be
vacant, or abandonment of the Leased Premises by Tenant for a period in excess
of ten (10) days;
(g) failure by Tenant to pay Landlord when due the Basic Rent or
Additional Rent or any other sum by the time required by the terms of this
Lease;
(h) The assignment, subletting, mortgaging, or encumbering by
Tenant of the Leased Premises without the prior written consent of Landlord;
(I) failure by Tenant to perform or comply with any of the terms,
covenants, agreements, or conditions of this Lease on the part of Tenant to be
performed, or if any representations of Tenant are untrue.
<PAGE>
20. LANDLORD'S RIGHT AND REMEDIES. Upon the occurrence of any such
event of default set forth above and without any additional notice except as may
be set forth in this Article:
20.1. Landlord may, on behalf of Tenant, cure any such default of
Tenant and immediately recover as additional rent any expenditures made and the
amount of any obligations incurred in connection therewith, plus eighteen (18%)
percent per annum interest from the date of any such expenditure.
20.2. Landlord may accelerate all Basic rent and Additional rent
due for the balance of the term of this Lease and declare the same to be
immediately due and payable.
20.3. Landlord, at its option, may serve notice upon Tenant that
this Lease and the then unexpired term hereof shall cease and expire and become
absolutely void on the date specified in such notice, to be not less than five
(5) days after the date of such notice without any right on the part of the
Tenant to save the forfeiture by payment of any sum due or by the performance of
any term, provision, covenant, agreement or condition broken; and, thereupon and
at the expiration of the time limit in such notice, this Lease and the term
hereof granted, as well as the right, title and interest of the Tenant
hereunder, shall wholly cease and expire and become void in the same manner and
with the same force and effect (except as to Tenant's liability) as if the date
fixed in such notice were the date herein granted for expiration and the term of
this Lease. Thereupon, Tenant shall immediately quit and surrender to Landlord
the Leased Premises, and Landlord may enter into and repossess the Leased
Premises and remove all occupants thereof, and, at Landlord's option, any
property thereon without being liable to indictment, prosecution or damages
therefor. No such expiration or termination of this Lease shall relieve Tenant
of its liability and obligations under this Lease, including but not limited to
Tenant's obligation to pay Basic Rent and Additional Rent, whether or not the
Leased Premises shall be relet.
20.4. Landlord may, at any time after occurrence of any event of
default, re-enter the Leased Premises with or without due process of law, take
possession of all building, improvements, additions, alterations, equipment and
fixtures thereon, and eject all parties in possession thereof therefrom, using
such force for that purpose as may be necessary including the changing of the
locks, without being liable to any prosecution for said re-entry or the use of
such force, and, without terminating this Lease, at any time and from time to
time to relet the Leased Premises or any part or parts thereof for the account
of Tenant or otherwise, receive and collect the rents therefor, applying the
same first to the payment of such expenses as Landlord may have paid, assumed or
incurred in recovering possession of the Leased Premises, including costs,
expenses and attorneys' fees, and for placing the same in good order and
condition or preparing, altering or repairing the same for reletting, and all
other expenses, commissions and charges, including attorneys' fees and
brokerage, paid, assumed or incurred by Landlord in connection with reletting
the Leased Premises, and then to the fulfillment of the covenants of Tenant.
<PAGE>
20.5. Landlord shall have the right, as agent for Tenant, to take
possession of any furniture or fixtures of Tenant found upon the Leased Premises
after taking possession of same pursuant to this Section and sell the same at
any private or public sale and apply the proceeds to any amount due Landlord.
Tenant waives any notice, execution or levy in connection therewith.
20.6. Landlord shall have the right of injunction, in the event
of a breach or threatened breach by Tenant of any of the agreements, conditions,
covenants or terms hereof, to restrain the same and the right to invoke any
remedy allowed by law or in equity, whether or not other remedies, indemnity or
reimbursements are herein provided, and if the Landlord shall become compelled
to commence any action or proceeding prior to such default being remedied by the
Tenant, all sums paid by the Landlord for expenses of any such action or
proceeding, including reasonable counsel fees, shall be paid by the Tenant to
the landlord on demand and may be collectable by Landlord as rent hereunder.
20.7. Landlord may retain, as partial damages, any Basic Rent,
Additional Rent, Security Deposit, or monies received by it from Tenant or
others on behalf of Tenant.
20.8. No act or thing done by Landlord shall be deemed to be an
acceptance of Tenant's surrender of the Leased Premises, unless Landlord shall
execute a written agreement of surrender with Tenant. Tenant's liability
hereunder shall not be terminated by the execution of a new lease of the Leased
Premises by Landlord. Tenant agrees to pay to Landlord, upon demand, the amount
of damages herein provided after the amount of such damages for any month shall
have been ascertained. Separate actions may be maintained each month by Landlord
against Tenant to recover the damages then due, without waiting until the end of
the term to determine the aggregate amount of such damages. Tenant hereby
expressly waives any and all rights of redemption granted by or under present or
future laws in the event of the eviction of Tenant or Tenant being dispossessed
for any cause, or in the event of Landlord obtaining possession of the Leased
Premises by reason of the violation by Tenant of any of the covenants or
conditions of this Lease.
<PAGE>
21. LANDLORD'S REMEDIES CUMULATIVE; EXPENSES.
21.1. All rights and remedies of Landlord herein shall be
cumulative, and none shall exclude any other right or remedy allowed by law. The
failure of Landlord to insist in any one or more instance upon a strict
performance of any covenant of this Lease or to exercise any option or right
herein contained, shall not be construed as a waiver or relinquishment for the
future of any such covenant, right or option, but the same shall remain in full
force and effect. For the purpose of any suit brought or based hereon, this
Lease shall be construed to be a divisible contract, to the end that successive
actions may be maintained on this Lease as successive periodic sums which mature
hereunder.
21.2. Tenant shall pay, upon demand, all of the Landlord's costs,
charges, and expenses, including the fees of counsel, agents, and others
retained by Landlord, incurred in enforcing Tenants' obligations and/or
Landlord's rights hereunder.
22. USE OF SECURITY DEPOSIT.
22.1. In the event of a Default by Tenant in respect any of the
terms, covenants or conditions of this Lease, Landlord may use, apply or retain
the whole or any part of the Security Deposit to the extent required for the
payment of any Basic Rent, Additional Rent or any other sum as to which Tenant
is in Default or for any sum which Landlord may expend or may be required to
expend by reason of Tenant's Default in respect of any of the terms, covenants
or conditions of this Lease, including but not limited to, any damages or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord.
22.2. In the event of a sale or lease of the Parcel, Landlord
shall have the right to transfer the Security Deposit to the vendee or lessee,
as the case may be, and Landlord shall thereupon be released by Tenant from all
liability for the return of such Security Deposit. Tenant agrees to look to the
new landlord solely for the return of the Security Deposit. It is agreed that
the provisions hereof shall apply to every transfer or assignment made of the
Security Deposit to a new landlord. Tenant further covenants that it will not
assign or encumber or attempt to assign and encumber the Security Deposit and
that neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
23. ESTOPPEL CERTIFICATES. Tenant shall, from time to time, upon not
less than ten (10) days prior written request by Landlord execute, acknowledge
and deliver to Landlord a written statement certifying that this Lease Agreement
is unmodified and in full force and effect (or that same is in full force and
effect as modified, listing the instruments of modification), the dates to which
the rent and other charges have been paid, and whether or not to the best of
Tenant's knowledge Landlord is in default hereunder (and if so, specifying the
nature
<PAGE>
of the default), it being intended that any such statement delivered pursuant to
this Article may be relied upon by a prospective purchaser of Landlord's
interest or mortgagee of Landlord's interest or assignee of any mortgage of
Landlord's interest in any underlying lease or in the Building or the Leased
Premises or Parcel. Failure of the Tenant to so execute such a certificate shall
be a default of Tenant, and Landlord may then execute same on Tenant's behalf as
Tenant's attorney-in-fact.
24. MECHANIC'S LIENS. Tenant covenants and agrees, at its own cost and
expense, to have any mechanic's notice of intention or mechanic's lien filed
against the Parcel for work claimed to have been done for, or materials claimed
to have been furnished to, Tenant, discharged of record or bonded within thirty
(30) days after the filing or recording of same. In addition, Landlord may
discharge the same either by paying the amount claimed to be due, by procuring
the discharge of such notices or liens by deposit in court, by giving security,
or in such other manner as is or may be prescribed by law. Any amounts paid by
Landlord for any of the aforesaid purposes, and all reasonable counsel fees
expended in procuring the discharge of such notices or liens, shall be repaid by
Tenant to Landlord on demand, and if unpaid, shall be treated as Additional
Rent. Nothing herein contained shall imply any consent or agreement on the part
of Landlord to subject the Landlord's estate to liability under any mechanic's
or construction lien law.
25. NOTICES. Notices by either party to the other shall be in writing
and shall be delivered personally or sent by registered or certified mail or
overnight courier addressed to Landlord or Tenant at their respective addresses
hereinabove set forth, or to such other address as either party shall hereafter
designate by notice as aforesaid. All notices sent by registered or certified
mail properly addressed shall be deemed served three (3) days after the date of
mailing, except that notice of change of address shall not deemed served until
received by the addressee. Notices sent by overnight courier or personal
delivery shall be effective when delivered.
26. RESERVATION OF RIGHTS BY LANDLORD.
26.1. Landlord hereby reserves to itself any and all rights
available to it by statute, law, rule, ordinance or under this Lease including,
but not limited to, the following rights which are reserved to Landlord for its
purpose in operating the Parcel:
(a) the exclusive right to the use of the name of the Building for all purposes,
except that Tenant may use the name as its business address and for no other
purpose;
(b) the right to change the name or street address of the
Building without notice or liability to Tenant by Landlord;
(c) the right to install and maintain a sign or signs on the
exterior of the Building for any purpose whatsoever, including offering the
premises for sale or for rent;
<PAGE>
(d) the exclusive right to use the roof of the Building;
(e) after the Tenant vacates the Leased Premises, the right to
alter or otherwise prepare the Leased Premises for re-occupancy;
(f) the right to lease space in the Building to anyone, or the
right to grant to anyone the right to conduct any business or undertaking in the
Building.
26.2. The exercise by Landlord of said rights hereinabove
reserved shall not render Landlord guilty of an eviction or disturbance of
Tenant's use and possession, and Landlord shall not be liable therefore in any
matter to Tenant.
27. LANDLORD'S RIGHT OF ENTRY.
27.1. Tenant agrees to permit Landlord and Landlord's agents,
employees and representatives to enter the Leased Premises at all reasonable
times during normal business hours for the purposes of:
(a) inspecting the Leased Premises;
(b) making any repairs to the Leased Premises that Landlord is
obligated or permitted to make under this Lease, and to perform any work therein
that may be necessary to comply with any laws, ordinances, rules, regulations or
requirements of any public authority or of the Board of Fire Underwriters or any
similar body, or that the Landlord may reasonably deem necessary to prevent
waste or deterioration in connection with the Leased Premises;
(c) showing the Leased Premises to prospective buyers of the
property;
(d) showing the Leased Premises to prospective Tenants;
(e) placing notices on or within the Leased Premises and to
maintain the same, without hindrance or molestation.
27.2. Landlord shall give Tenant reasonable prior notice before
commencing any non-emergency repair or alteration to the Leased Premises.
27.3. Nothing herein shall imply any duty upon the part of
Landlord to do any such work.
<PAGE>
27.4. Landlord may, during the progress of any work in the Leased
Premises, keep and store all necessary materials, tools and equipment in such
manner upon the Leased Premises as not to unreasonably interfere with Tenant's
business operations. Landlord shall not in any event be liable for
inconvenience, annoyance, disturbance, loss of business or any damages that
Tenant may suffer or sustain by reason of making any repairs or the performance
of any work in the Leased Premises in accordance with the provisions of
Paragraph 27 hereof, or on account of bringing or storing any materials,
supplies, and equipment into or upon the Leased Premises during usual business
hours.
27.5. Landlord or Landlord's authorized agents may enter upon the
Leased Premises at any time in case of emergency without prior notice to Tenant.
27.6. Landlord, in exercising any of its rights under this
Section, shall not be deemed guilty of an eviction, partial eviction or
disturbance of Tenant's use or possession of the Leased Premises and shall not
be liable to Tenant for same.
28. ATTORNMENT. Tenant covenants and agrees that if the leasehold
interest of Landlord in the Parcel or any part thereof is terminated, Tenant
will attorn to the then holder of the reversionary interest in the Parcel or
such part thereof and will recognize such holder as Tenant's landlord under this
Lease.
29. MORTGAGE PRIORITY. This Lease shall not be a lien against the
premises in respect of any mortgages that may now or hereafter be placed upon
the property. The recording of such mortgage or mortgages shall have preference
and precedence and be superior and prior in lien to this Lease by virtue hereof,
and the Tenant agrees to execute any instruments, without cost, which further
effect the subordination of this Lease to any such mortgage or mortgages. A
refusal by the Tenant to execute such instruments shall entitle the Landlord to
the option of canceling this Lease, and the term hereof is hereby expressly
limited accordingly.
30. QUIET ENJOYMENT. Landlord covenants and agrees that, upon the
performance by Tenant of all of the covenants, agreements, and provisions hereof
on Tenant's part to be kept and performed, Tenant shall have, hold, and enjoy
the Leased Premises, subject to the terms and conditions of this Lease.
31. ABANDONMENT. The Tenant shall not vacate or abandon the Leased
Premises at any time during the Lease term.
32. SURRENDER. Upon the termination of the Term or prior expiration of
this Lease, Tenant shall peaceably and quietly quit and surrender to Landlord
the Leased Premises, broom clean, in as good condition as they were on the
commencement date, ordinary wear and tear excepted.
<PAGE>
33. HOLDING OVER. If Tenant holds possession of the Leased Premises
beyond the termination date of the lease term, tenant shall become a Tenant from
month-to-month at DOUBLE the monthly Basic Rent and Additional Rent Payable
hereunder in the final month of the Lease Term, and upon all other terms and
conditions of this lease, and shall continue to be such month-to-month Tenant
until such tenancy shall be terminated by landlord or tenant and such possession
shall cease. Nothing contained in this Lease shall be construed as a consent by
Landlord to the occupancy or possession by Tenant of the Leased Premises beyond
the expiration of the term, and Landlord, upon said expiration of the term shall
be entitled to the benefit of all legal remedies that now may be in force or may
be hereafter enacted relating to the speedy repossession of the Leased Premises.
34. WAIVER OF CLAIMS AND LANDLORD'S LIABILITY.
34.1. Landlord shall not be liable for, and Tenant hereby
releases and relieves Landlord from all liability in connection with any and all
loss of life, personal injury, damage to or loss of property, or loss or
interruption of business occurring to Tenant, in or about or arising out of the
Parcel including but not limited to the following:
(a) any fire, other casualty, accident, occurrence or condition
in or upon the Parcel;
(b) any defect in or failure of plumbing, sprinkling, electrical
heating or air conditioning systems or equipment, or any other systems and
equipment of the Leased Premises,
(c) any steam, gas, oil, water, rain or snow that may leak into,
issue or flow from any part of the Leased Premises or the Building from the
drains, pipes or plumbing, sewer or other installation of same, or other
installation of same, or from any other place or quarter;
(d) the breaking or disrepair of any installations and
equipment;
(e) the falling of any fixture or any wall or ceiling materials;
(f) broken glass;
(g) latent or patent defects;
(h) the exercise of any rights by Landlord under the terms and
conditions of this Lease;
<PAGE>
(I) any acts or omissions of the other Tenants or occupants of
the Building or of nearby buildings;
(j) any acts or omissions of the other persons;
(k) any acts or omissions of Landlord, its agents, servants and
employees; and
(l) theft, Act of God, public enemy, injunction, riot, strike,
national emergency, insurrection, war, court order, or any order of any
governmental authorities having jurisdiction over the Leased Premises.
34.2. For the purposes of this Article, the terms "Landlord" and
"Tenant" shall mean and refer to their respective agents, employees, invitees,
guests and representatives.
34.3. Landlord shall have no personal liability under any of the
terms, conditions or covenants of this Lease and Tenant shall look solely to the
equity of the Landlord in the Building of which the Leased Premises form a part
for the satisfaction of any claim, remedy or cause of action accruing to Tenant
as a result of the breach of any condition of this Lease by Landlord.
35. LANDLORD'S OBLIGATIONS. Landlord's obligations under this Lease
Agreement shall be binding upon Landlord only for the period of time that
Landlord is in ownership of the building; and, upon termination of that
ownership, Tenant, except as to any obligations which have then matured, shall
look solely to Landlord's successor in interest in the Building for the
satisfaction of each and every obligation of Landlord hereunder.
36. INDEMNIFICATION OF LANDLORD.
36.1. Tenant shall indemnify, hold harmless and defend Landlord
from and against any and all costs, expenses (including reasonable counsel
fees), liabilities, losses, damages, suits, actions, fines, penalties, claims,
or demands of any kind and asserted by or on behalf of any person or
governmental authority, arising out of or in anyway connected with, and Landlord
shall not be liable to Tenant on account of;
(a) any failure by Tenant, its agents, servants, employees,
invitees or licensees, to perform any of the agreements, terms, covenants, or
conditions of this Lease required to be performed by Tenant;
<PAGE>
(b) any failure by Tenant, its agents, servants, employees,
invitees or licensees, to comply with any statutes, ordinances, regulations or
orders of any governmental authority;
(c) any damage to persons or property caused by moving property
in or out of the Building, or by the installation or removal of furniture or
other property in or out of the Building, or by the installation of removal or
furniture or other property caused by Tenant, its agents, servants, employees,
invitees or licensees;
(d) any accident, death or personal injury, damage or loss or
theft of property, which shall occur in or about the Parcel as the result of the
occupancy, use, or presence in such Parcel by Tenant, or its agents, servants,
employees, invitees and licensees, except as same may be caused solely by the
willful act or gross negligence of the Landlord, its employees and agents.
36.2. Any such expense shall be deemed Additional Rent, due on
the first day of the next calendar month after it is incurred.
37. TENANT'S INSURANCE. Tenant covenants, at its sole cost and
expense, but for the mutual benefit of Landlord and Tenant, to maintain
throughout the Lease Term:
37.1. LIABILITY. Personal injury and property damage liability
insurance against claims for bodily injury, death, or property damage occurring
on, in, or about the Leased Premises, Building, and Parcel. Such insurance shall
afford minimum protection, during the term of this Lease, of not less than
$500,000 in respect of bodily injury or death to any one person, of not less
than $1,000,000 in respect of any one accident, and of not less than $500,000
for property damages.
37.2. CASUALTY. Tenant shall obtain fire and casualty insurance
on the Leased Premises in an amount of not less than Two Hundred Thousand
Dollars ($200,000.00) and in form and from an insurer acceptable to Landlord.
37.3. Tenant shall furnish to the Landlord or its mortgagee such
evidence of insurance, as called for herein, as the Landlord or its mortgagee
may, from time to time, request. Upon failure at any time on the part of Tenant
to procure and deliver to Landlord evidence of such insurance indicating the
premium has been paid and the insurance is in effect, Landlord shall be at
liberty, from time to time, as often as such failure shall occur, to procure
such insurance and to pay the premium therefor. Any sums paid for insurance by
Landlord shall be and become, and are hereby declared to be Additional Rent
hereunder for the collection of which Landlord shall have all the remedies
provided for in this Lease or by law for the collection of rent. Payment by
Landlord of such premium or the carrying by Landlord of any such policy
<PAGE>
shall not be deemed to waive or release the default of Tenant with respect
thereto. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a default hereunder entitling Landlord to
exercise any or all of the remedies as provided in this Lease in the event of
default.
37.4. All policies of insurance provided for in this Section
hereof shall name Landlord as an additional named insured. If required by
mortgagee, such policies shall also be payable to the mortgagee as the interest
of such mortgagee may appear. The loss, if any, under any such insurance
policies shall be adjusted with the insurance companies by Landlord, and its
mortgagee, if any. Each such policy shall contain a provision, if available and
obtainable, that no act or omission of Tenant shall affect or limit the
obligations of the insurance company to pay to Landlord the amount of any loss
sustained. Such policy shall further contain a provision that the policy may not
be canceled without ten (10) days prior written notice to the Landlord and ten
(10) days written notice to any mortgagee, to whom a loss thereunder may be
payable.
37.5. At least fifteen (15) days prior to commencement of the
Term, a certificate evidencing coverage of such policies therefor shall be
delivered by Tenant to Landlord and at least thirty (30) days before each of
such policies shall expire, Tenant shall deliver a certificate evidencing
renewal of such coverage.
37.6. NEGATIVE COVENANTS OF TENANT. Tenant agrees that it will
not do or suffer to be done, any act, matter or thing objectionable to fire,
hazard or liability insurance companies whereby the fire insurance or any other
insurance now in force or hereafter to be placed on the Parcel or any part
thereof, shall become void or suspended, or whereby the same shall be rated as a
more hazardous risk than at the date when Tenant receives possession hereunder.
In case of a breach of this covenant, in addition to all other remedies of
Landlord hereunder, Tenant agrees to pay to Landlord as additional rent, any and
all increase or increases or premiums on insurance carried by Landlord on the
Leased Premises, or any part thereof, or on the Building of which the Leased
Premises may be a part, caused in any way by the occupancy of Tenant.
37.7. MUTUAL WAIVER OF SUBROGATION. Landlord hereby waives any
and all rights of recovery against Tenant for or arising out of damage to or
destruction of the Parcel and any other property of Landlord from causes then
insured under standard fire and extended coverage insurance policies or
endorsements to the extent that its insurance policies then in effect permit
such waiver. If at any time during the Term any insurance carrier which shall
have issued a policy to either of the parties covering the Leased Premises or
any of the property of Tenant, shall refuse to consent to the waiver of the
right of recovery with respect to any loss payable under such policy, or if such
carrier shall consent to such waiver only upon the payment of an additional
premium (unless such additional premium is voluntarily paid by one of the
parties hereto), or shall cancel a consent previously given, or shall cancel or
threaten to cancel any policy previously issued and then in full force and
effect, then in any such event, the waiver in
<PAGE>
this Section shall thereupon be of no further force and effect as to the loss,
damage or destruction covered by such policy except as hereinafter provided. If,
however, at any time thereafter such consent shall be obtained therefor from any
existing or any substitute insurance carrier, the waiver hereinabove provided
for shall again become effective.
38. NO WAIVER.
38.1. Failure of either party to complain of any act or omission
on the part of the other party, no matter how long same may continue, shall not
be deemed a waiver by said party of any of its rights hereunder. No waiver by
either party at any time expressed or implied, of a breach of any provision of
this Lease shall be deemed waiver of a breach of any other provision or a
consent to any subsequent breach of the same or any other provision. The consent
to or approval of any action on any one occasion by either party hereto shall
not be deemed a consent to or approval of said action on any subsequent occasion
or a consent to or approval of any other action on the same or any subsequent
occasion. Any and all rights and remedies which either party may have under this
Lease or by operation of law by reason of a breach by the other party shall be
distinct, separate, and cumulative, and shall not be deemed inconsistent with
any other right or remedy and any two or more or all of such rights and remedies
may be exercised at the same time. Acceptance by either party of any of the
benefits of this Lease with knowledge of any breach thereof by the other party
shall not be deemed a waiver by the party receiving the benefit of any rights or
remedies to which it is entitled hereunder by law.
38.2. The receipt by Landlord of the Basic Rent and Additional
Rent with knowledge of the breach of any covenant of this Lease shall not be
deemed a waiver of such breach. No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly Basic Rent or a lesser amount of the Additional
Rent then due shall be deemed to be other than on account of the earliest
stipulated amount then due, nor shall any endorsement or statement on any check
or any letter or other instrument accompanying any check or payment as Basic
Rent or Additional Rent be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such Basic Rent or Additional Rent or pursue any other remedy
provided in this Lease.
38.3. The failure of Landlord to enforce any of the Rules and
Regulations as may be set by Landlord from time to time against Tenant or
against any other Tenant in the Building shall not be deemed waiver of any such
Rule or Regulation.
39. ENVIRONMENTAL LAWS.
39.1. Tenant shall, at Tenant's own expense, comply with any
and all applicable environmental laws, including but not limited to the New
Jersey Spill Compensation and Control Act and Industrial Site Recovery Act.
Tenant shall comply with the Industrial Site
<PAGE>
Recovery Act, N.J.S.A. 13:1K-6 et seq. and the regulations promulgated
thereunder ("ISRA") in line with the closing, termination or transfer of
Tenant's operation at the Premises. Tenant shall also provide all information
within Tenant's control requested by Landlord or the Bureau of Industrial
Site Evaluation (the "Bureau") of the New Jersey Department of Environmental
Protection ("NJDEP") and Tenant shall promptly execute any affidavits
requested by Landlord should the information contained therein be found by
Tenant to be complete and accurate. Tenant shall only bear that part of the
costs of ISRA compliance which are applicable to Tenant's or Tenant's
employees, agents, invitees, licensees, or contractors or any of their
discharges of hazardous substances or wastes at the Premises during the Lease
Term and any extensions or renewals hereof. Tenant shall defend, indemnify
and hold harmless Landlord from and against any and all costs, expenses and
liability arising out of the provisions of this Article, which obligation
shall survive the termination of this Lease.
40. JURY TRIAL WAIVER. Landlord and Tenant do hereby waive trial by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matter whatsoever arising out of or in any
connection with this Lease, the relationship of Landlord and Tenant, Tenant's
use or occupancy of the Leased Premises, and/or any claim, injury or damage, or
any emergency or statutory remedy.
41. FORCE MAJEURE. If the Landlord is prevented from performing any of
its obligations hereunder by reason of any Act of God or any other reason beyond
the reasonable control of the Landlord including, but not limited to,
governmental preemption in connection with a national emergency or any rule,
order or regulation, weather, strikes, unavailability of materials, building
moratorium or governmental approvals or the absence thereof, this Lease and
Tenant's obligation to pay Basic Rent and Additional Rent hereunder shall in no
way be affected, impaired or excused, and the Landlord's time to perform shall
be extended by a time equal to the amount of such delay.
42. INTERPRETATION.
42.1. Whenever in this Lease any words of obligation or duty are
used, such words or expressions shall have the same force and effect as though
made in the form of covenants.
42.2. No remedy or election given by any provision in this Lease
shall be deemed exclusive unless so indicated, but each shall, wherever
possible, be cumulative with all other remedies in law or equity as otherwise
specifically provided.
42.3. The parties mutually agree that the headings and captions
contained in this Lease are inserted for convenience of reference only, and are
not be deemed part of or to be used in construing this Lease.
<PAGE>
42.4. The covenants, agreements, obligations and representations,
herein contained shall, subject to the provisions of this Lease, bind and inure
to the benefit of Landlord, its successors and assigns, and, where appropriate,
its agents, servants, invitees, employees and guests and Tenant, its successors
and assigns and, where appropriate, its agents, servants, invitees, employees
and guests except as otherwise provided herein; provided, however, that no
rights shall inure to the benefit of any successors of Tenant unless Landlord's
written consent for the transfer to such successor has first been obtained.
42.5. This Lease has been executed and delivered in the State of
New Jersey and shall be construed in accordance with the laws of the State of
New Jersey.
42.6. Landlord has made no representations or promises with
respect to the Leased Premises or the Parcel except as expressly contained
herein. Tenant has inspected the Leased Premises and agrees to take the same in
an "as is" condition, except as otherwise expressly set forth. Landlord shall
have no obligation, except as herein set forth, to do any work in and to the
Leased Premises to render them ready for occupancy and use by Tenant.
42.7. If any part or provision of this Lease is found to be void
or unenforceable, the remaining provisions shall, nevertheless, be binding with
the same effect as though the void or unenforceable provision was deleted.
43. RECORDING OF LEASE. Tenant shall not record this Lease or a
memorandum thereof.
44. SALE OR LEASE OF PREMISES. It is agreed that, if any time the
Landlord shall sell or lease the Parcel, Landlord shall be entirely free,
relieved, released, and discharged of all future obligations and liabilities for
the performance of the terms, covenants, conditions, and provisions of this
Lease, for the balance of the Term of this Lease and any renewals or extensions
thereof, and of and under the covenant of quiet enjoyment, effective from the
date of said sale or lease and the assumption in writing by the purchaser or
lessee of Landlord's obligations under this Lease, a copy of which assumption
document shall be provided to Tenant, and the said purchaser or lessee does
hereby covenant and agree to perform all the terms, covenants and conditions of
this Lease that the Landlord hereunder has agreed to perform under the terms of
this Lease.
45. BROKERAGE COMMISSIONS. Tenant and Landlord warrant to each other
that the only real estate broker involved in the within Lease is the real estate
broker set forth in Paragraph 10 of the Lease Summary. If any claim for
brokerage commission or other compensation on account of this Lease herein shall
be made by any other broker, the party dealing with such other broker shall
either pay such claim promptly or shall give written notice of its intention to
defend such claim. Such defense shall be made by such party at its own expense
and such party shall thereafter promptly pay any final judgment rendered in
favor of a
<PAGE>
claimant on account of brokerage commissions or other compensation in connection
with this Lease.
46. AMENDMENT TO LEASE. No change, modification, extension or
termination of any of the terms, provisions, covenants, promises or conditions
of this Lease Agreement shall be effective unless made in writing and signed by
all parties thereto.
47. APPROVAL OF LEASE BY LANDLORD. This Lease is unenforceable unless
approved in writing by Landlord within ten (10) days of the date hereof.
48. EXISTING LEASE. Upon execution of this Lease by both parties, the
existing Lease between Xanadu Associates, L.L.C., Landlord, and You Tools
Corporation, Tenant, for space Holland Center, dated 28 March 1997, shall become
null and void.
49. ENTIRE AGREEMENT. This Lease contains the entire agreement between
the parties. No representative, agent or employee of the Landlord has been
authorized to make any representations or promises with reference to the within
letting or to vary, alter or modify the terms thereof. No additions, changes or
modifications, renewals or extensions hereof shall be binding unless reduced to
writing and signed by the Landlord and the Tenant.
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date
first written.
WITNESS: LANDLORD:
HOLLAND CENTER, L.L.C.
/s/ Whitney Collins By: /s/ Phillip Collins
- ------------------------------- ------------------------------
Philip Collins, Manager
TENANT:
YOU TOOLS CORPORATION
/s/ Rafe Scheinblum By: /s/ Sonny Hunt
- ------------------------------- ------------------------------
Sonny Hunt, President
/s/ Rafe Scheinblum By: /s/ Stanley F. Bielicki
- ------------------------------- ------------------------------
Stanley F. Bielicki, Secretary
<PAGE>
EXHIBIT A - DIAGRAMMATIC FLOOR PLAN
<PAGE>
EXHIBIT B - LEASE SUMMARY
1. Tenant: You Tools Corporation
2. Leased Premises: Unit 2 + Telephone Room in Holland Center
County Route 519 and Spring Garden Road, Holland Twp., New Jersey
(See Exhibit A to Lease)
3. Total Rentable Area of Leased Premises: 1689 sq. ft.
4. Proportion of Tenant's Rentable Area to Total Building Rentable Area:
1689 sq. ft./ 10,812 sq. ft. = 15.62%.
5. Lease Term: Five (5) years.
6. Annual Basic Rent: $[*] monthly) increasing annually at the rate of
inflation as measured by the Consumer Price Index (CPI). As used
herein, the CPI shall be the Index published by the U.S. Dept. of
Labor, Bureau of Labor Statistics, for All Urban Consumers, New
York-Northeastern New Jersey, All Items. On each annual anniversary
date, the Basic Rent shall be increased by [*], which increase shall
be adjusted upon publication of the CPI for the appropriate month. In
no case shall the Annual Basic rent be less than $[*].
Additional Rent: Payments against Additional rent shall be paid
monthly and in accordance with Section 5 of the Lease. Payments
against Additional Rent for the first year of the Lease Term shall be
$[*] monthly). At the end of each calendar year the Landlord shall
determine its expenses for the prior year in accordance with Section 5
of the Lease and the Additional rent for the past calendar year shall
be adjusted accordingly. Payments against Additional rent for each
subsequent year of the Lease Term shall be at the adjusted rate of the
previous year.
7. Occupancy Date: At execution of the Lease Agreement by both parties.
Rent Commencement Date, Additional Rent: The first day of the month
following the Occupancy Date.
Rent Commencement Date, Basic Rent: The first day of the month following
the commencement of Additional Rent.
8. Security Deposit; $[*] + $[*] = $[*] x [*] = $[*] - $[*] = $[*].
9. Tenant's Option to Renew Lease: One (1) @ Five (5) years. See Exhibit F
to Lease.
10. Real Estate Broker: None.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
11. Addresses for Payments and Notices:
Landlord: Holland Center, L.L.C., c/o Philip Collins
287 Hopewell-Amwell Road, Hopewell, NJ 08525
Tenant: You Tools Corporation, c/o Sonny Hunt, President
Two Courtney Place, Suite 130, 3864 Courtney Street
Bethlehem PA 18017
Landlord: Tenant:
Holland Center, L.L.C. You Tools Corporation
By: /s/ Philip Collins By: /s/ Sonny Hunt
------------------------- ---------------------------
Philip Collins, Manager Sonny Hunt, President
MEMORANDUM OF ACTUAL OCCUPANCY, RENT COMMENCEMENT AND
EXPIRATION DATES:
Date of Occupancy: 15 June 1999
--------------------
Date of Commencement of Additional Rent: 1 July 1999
--------------------
Date of Commencement of Basic Rent: 1 August 1999
--------------------
Date of Expiration of Lease: _______________________ 14 June 2004
<PAGE>
EXHIBIT D - WORK TO BE DONE BY LANDLORD REGARDING TENANT
IMPROVEMENTS.
None.
<PAGE>
EXHIBIT E - RULES & REGULATIONS
The following Rules and Regulations are in addition to and supplementary to any
rules and regulations set forth elsewhere in the text of the Lease Agreement:
1. USE OF PREMISES.
1.1 The Tenant shall only use the leased premises for the installation and
maintenance of communications equipment, office space, and related retail use
and shall not permit the premises to be used for any other purpose without
Landlord's prior written consent, which may be withheld for any reason or for no
reason.
1.2 All uses and purposes are to be subject to and in compliance with all
Federal, State, County, Township and Municipal statutes, laws, ordinances,
codes, and orders.
1.3 The Tenant shall not use, or permit the use of, any part of the leased
premises for any purpose which will increase existing insurance rates, or cause
a cancellation of any insurance policy, on the building or any part of the
building in which the leased premises are located, nor shall the Tenant permit
any article about the leased premises which may be prohibited by the standard
extended coverage form of fire insurance policy. Tenant, at its sole expense,
shall comply with all insurance company requirements necessary to maintain
reasonable fire insurance. Tenant shall not bring in, store, test or use any
materials which could cause or produce fire, explosion, fumes or vapor.
1.4 Tenant shall not cause any part of the leased premises to be used in any
manner so as to impair the structural strength of the building or suffer to be
installed in the building any machinery or apparatus the weight or vibration of
which could tend to injure or impair the structure or foundation thereof.
1.5 No portion of the leased premises shall be used as a dwelling, habitation or
sleeping quarters by Tenant or any other person or persons, nor shall Tenant or
any other person or persons permit the presence or maintenance about the leased
premises of any bird or animal. Cooking within or about the leased premises is
prohibited.
1.6 Tenant shall not conduct, or permit any other person or persons to conduct,
any auction upon the leased premises; manufacture or store goods, wares or
merchandise upon the leased premises without the prior written approval of the
Landlord, excepting the usual supplies and inventory to be used by Tenant in the
conduct of its business; permit the leased premises to be used for gambling;
make any unusual noises or permit to be played any musical instrument, radio,
television, recorded or wired music in such manner as to disturb or annoy other
tenants; or permit any unusual or annoying odors to be produced upon the leased
premises.
<PAGE>
1.7 Waterclosets and urinals shall not be used for any purpose other than those
for which they were constructed, and no sweepings, rubbish, ashes, paper or any
other substances of any kind shall be placed in them.
2. ELECTRIC WIRING. All electric wiring done by the Tenant shall be connected as
directed by Landlord, and no stringing or cutting of wires shall be allowed,
except with prior written consent of Landlord. All wiring shall be performed
only by licensed contractors approved by Landlord. If Tenant requires telephone,
cable, wireless, burglar alarm or signal service, Landlord shall direct where
and how all such connections and wiring for such service shall be introduced and
run. Without such direction, no boring, cutting or installation of wires or
cables is permitted. All wiring, whether exposed, concealed, in partitions,
below floor, or above ceiling shall conform to any and all applicable codes.
3. ACCESS TO MECHANICAL AND ELECTRICAL EQUIPMENT. Whenever and wherever required
by Landlord, Tenant shall provide to Landlord, its employees, agents and
contractors, access to all mechanical and/or electrical equipment located in, or
accessible from, the leased premises. Landlord shall make a reasonable effort to
assure that such access does not interfere unduly with Tenant's use of the
premises, but Landlord makes no guarantees and accepts no responsibility for
loss or damage as the result of such interference unless due to Landlord's gross
negligence.
4. SIGNS AND ADVERTISING.
4.1 Tenant shall not place or permit to be placed on the windows, doors or
exterior of the premises any sign, decoration, lettering, advertising matter or
other thing of any kind without first obtaining Landlord's written approval
therefor. Landlord's approval shall be based on drawings and documents submitted
by the Tenant which fully describe the size, design, color, materials and
methods of attachment. Landlord's approval may be withheld for any reasonable
reason, including the impact of such sign, etc., on the other tenants in the
building. Tenant further agrees to maintain such sign, decoration, lettering,
advertising matter or other thing as may be approved in good condition and
repair at all times.
4.2 All signs, etc., and lighting thereof shall be in compliance with applicable
statutes, ordinances, codes and regulations. The Tenant shall be responsible for
obtaining all required permits and approvals for the installation of such signs,
etc., and lighting.
5. PROJECTIONS. No awnings or other projections shall be attached to the
outside walls or roof of the Building without the prior written consent of the
Landlord.
6. SIDEWALKS. The Tenant shall maintain the sidewalks in front of and adjacent
to the demised premises, and the entryways to the demised premises, at all times
free of all trash, debris, obstructions, ice and snow.
<PAGE>
7. TRASH DISPOSAL. Tenant shall not dispose of trash other than by use of the
dumpsters provided by the Landlord without Landlord's prior written consent.
Trash shall be kept within the demised premises prior to being placed in the
dumpsters. All trash shall be completely segregated in accordance with
instructions and/or regulations issued by the Landlord and/or public authorities
having jurisdiction, and shall be placed only in the dumpsters designated for
each type of trash. All crates, boxes and cartons not used for the purpose of
containing other trash shall be compacted prior to being placed in the
dumpsters. No trash shall be placed on the ground surrounding the dumpsters,
which area shall be kept neat and clean at all times. Any and all fines or other
penalties imposed by the Township, Mercer County, or the trash hauler retained
by the Landlord because of failure by the Tenant to satisfactorily maintain the
dumpsters and the surrounding areas shall be the responsibility of the Tenant.
Any and all such fines and/or penalties, if paid by the Landlord, shall be
reimbursed to the Landlord by the Tenant as Additional Rent.
8. RESPONSIBILITY FOR LOSS.
8.1 Landlord shall not be responsible to Tenant for any loss of property from
the Leased Premises however occuring, or for any damage done to the effects of
Tenant by any of Landlord's employees, or by any other person or any other
cause.
8.2 Tenant assumes full responsibility for: (i) protecting the Leased Premises
from theft, robbery and pilferage, (ii) keeping the Leased Premises secure, and
(iii) locking the doors in and to the Leased Premises. Any damage resulting from
neglect of this clause shall be paid for by Tenant. All property belonging to
Tenant, or any person in the Leased Premises, which is in the Building or the
Leased Premises, shall be there at the risk of Tenant or other person only, and
Landlord, Landlord's agents and employees shall not be liable for damage thereto
or theft or misappropriation thereof.
9. PARKING.
9.1 Tenant shall have the non-exclusive right to use in common with Landlord and
other tenants of the Building and their employees and invitees the parking area
provided by Landlord for the parking of passenger automobiles. Tenant agrees
that it and its employees and invitees shall comply with such rules and
regulations for use of the parking area as Landlord may from time to time
prescribe. Landlord shall not be responsible for any damage to or theft of any
vehicle in the parking area and shall not be require to keep parking spaces
clear of unauthorized vehicles or to otherwise supervise the use of the parking
area. Landlord reserves the right to change any existing or future parking area,
roads or driveways, and may make any repairs or alterations it deems necessary
to the parking area, roads and driveways, and to temporarily revoke or modify
the parking rights granted to Tenant hereunder.
<PAGE>
9.2 Tenant shall have no exclusive right to any parking spaces at the present
time. However, if in the future the Landlord assigns a parking space or spaces
to any other Tenant, the Landlord shall assign to Tenant a parking space or
spaces on the same ratio of parking spaces to rental area that have been
assigned to such other tenants.
10. TENANT'S ACCESS TO PREMISES. Tenant shall have access to the leased premises
at all times. Landlord, however, shall have no obligation to provide services to
the extent that such services by Landlord are not otherwise required to be
provided outside of normal business hours or which conflict with applicable
regulations. (Example: hours of operation of parking lot lighting.) However, in
no case shall Landlord's failure to provide such services prevent Tenant's
access to the leased premises.
11. ROOF RIGHTS. Tenant shall have the right to use the roof of the building of
which the leased premises form a part for the installation and maintenance of an
antenna and/or other related communications equipment. Such use shall be
confined to the back (west) slope of the roof and to the roof area directly over
the leased premises. Such roof-mounted equipment shall be of a size and location
such that it will not be visible from routes 519 and 614. All roofing work shall
be performed at the Tenant's expense by a roofing contractor specified by the
Landlord. All work shall be performed in accordance with drawings and
specifications approved in advance in writing by the landlord, such approval not
to unreasonably withheld.
12. EMERGENCY GENERATOR.
12.1 Tenant shall have the right to install a gas-fired emergency generator
within the leased premises, at Tenant's sole cost and expense. Fuel shall be
provided by the existing gas utility through the Tenant's existing meter. Such
generator shall be located adjacent to the rear (west) exterior wall of the
leased premises and shall be properly vented for combustion air and exhaust.
Such generator shall be located in an enclosure with 2-hour fire-rated walls and
ceiling (2 layers of 5/8" Firecode gypsum wall board on each side of wood or
metal studs) with 2-hour rated hollow metal door and frame. Spaces between wall
studs and ceiling joists shall be filled with sound-attenuation batts. No
demising wall shall form a part of generator enclosure. Generator installation
shall be in accordance with all applicable codes and regulations, and in
accordance with drawings and specifications approved in advance in writing by
the Landlord, such approval not to unreasonably withheld. Any and all increase
in the cost of Landlord's casualty insurance as the result of such generator
installation shall be reimbursed by Tenant to Landlord annually as such increase
become due and payable.
12.2 Operation of emergency generator shall be limited solely to the duration of
power outages of the public electric utility serving the building of which the
leased premises form a part. Operation of the emergency generator for
maintenance purposes shall be for the shortest possible duration and shall be
conducted only outside normal business hours. Tenant shall supply Landlord with
its schedule of maintenance operation.
<PAGE>
13. AIR CONDITIONING EQUIPMENT. Tenant shall have the right to install
additional air-conditioning equipment at Tenant's sole cost and expense. Such
equipment shall be floor-mounted within the leased premises. Additional electric
capacity to serve such equipment, if required, shall be at the sole cost of the
Tenant. Installation of such equipment shall be in accordance with all
applicable codes and regulations, and in accordance with drawings and
specifications approved in advance in writing by the landlord, such approval not
to be unreasonably withheld.
14. WATER CONSERVATION.
14.1 Tenant acknowledges that water consumption is limited by prior Municipal
approvals. Tenant agrees to make every reasonable effort to conform to every
reasonable request by Landlord to conserve water. All fixtures installed by
Tenant requiring the use of water shall be of the most water-conserving type,
regardless of expense. Tenant shall install no refrigeration, ice-making, or
other equipment of any sort requiring water for cooling.
14.2 If requested by Landlord, Tenant shall install at its sole cost and expense
a water meter to meter Tenant's total water consumption. Tenant shall limit its
use of water to 3000 gallons per month (100 gallons per day). Water consumption
in excess of this amount shall constitute a default under the terms of the
Lease.
<PAGE>
EXHIBIT F - TENANT'S OPTION TO RENEW LEASE.
Tenant is hereby granted and shall, provided no default under the Lease has
previously occurred, have an option to extend the term of this Lease for an
additional five (5) year term. No such option shall exist if any default under
the Lease has previously occurred. Such option shall only be exercised by
written notification of the Landlord at least one (1) year prior to the
expiration of the original lease term.
Basic Rent for the first year of the Renewal Term shall be equal to the Basic
Rent for the last year of the original lease term, increased by the percentage
increase in the Consumer Price Index (CPI) between the first month of the last
year of the original lease term and the first month of the first year of the
Renewal Term. For the Renewal Term the Basic Rent shall increase annually in
accordance with the CPI as noted in Exhibit B, Item 6. In no case shall the
Annual Basic Rent be less than $[*].
Additional Rent for the Renewal Term shall be adjusted annually in accordance
with Exhibit B, Item 6.
All other terms and conditions of this Lease shall apply equally to the Renewal
Term.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
RIDER NO. 1 TO LEASE BETWEEN HOLLAND CENTER, LLC, LANDLORD, AND
YOU TOOLS CORPORATION, TENANT:
This Rider to the Lease made this 15 day of June, 1999, by and between Holland
Associates, LLC, whose mailing address is c/o Philip Collins, 287
Hopewell-Amwell Road, Hopewell, NJ 08525, hereinafter referred to as "Landlord",
and You Tools Corporation, whose mailing address is Two Courtney Place, Suite
130, 3864 Courtney Street, Bethlehem, PA 18017, hereinafter referred to as
"Tenant", Witnesseth: Landlord and Tenant hereby agree as follows:
1. In Section 2.2, line 2, after "Landlord" add: "and in conformity with this
Lease Agreement".
2. In Section 2.3, line 2, delete "six (6) months" and substitute: "one
(1) month". In line 4, delete "either party" and substitute: "Tenant". In
line 4, delete "right" and substitute "option".
3. In Section 3.2, line 2, delete "five (5)" and substitute "ten (10".
4. In Section 4, lines 4 & 5, delete "satisfactory to the Landlord". In line 9,
after "Tenant" add: "after 30 days prior written notice of same, unless default,
in the opinion of Landlord, has created a real or potential threat to persons or
property or is the result of a monetary breach of the Lease by the Tenant". In
line 9, after "Landlord" add: "properly".
5. In Section 5.1, line 4, delete "inter alia". In line 5, after "utilities"
add: "properly".
6. In Section 8, at the end of this Section add: "which shall not be
unreasonably withheld".
7. In Section 9, at the end of the first paragraph, add: "Notwithstanding the
above, however, Landlord represents and covenants that it is not aware of any
condition relating to the leased premises such as would make premises unfit for
Tenant's business and/or interfere with Tenant's business operations, as such
business has been described in writing by Tenant to Landlord prior to the
execution of this Lease Agreement."
8. In Section 9, at the end of the second paragraph, add: "Landlord agrees to
take reasonable steps and actions to minimize any interference with Tenant's
business."
9. In Section 10, at the end of this Section, add: "...herein, and any and all
purposes reasonably related thereto, which do not conflict with applicable codes
and regulations or with the business activities of existing tenants. Landlord
represents that there is not such conflict between the businesses of other
tenants and the business of the Tenant as described herein, to the best of
landlord's knowledge and belief."
10. In Section 11.1, in line 3, delete "substantial".
<PAGE>
11. In Section 11.2, at the end of this Section, add: "Any and all repairs,
including without limitation, structural repairs hereunder, shall be completed
by landlord as soon as reasonably possible so as to minimize interference with
Tenant's business."
12. In Section 12.1, in line 3, at the end of the first sentence, add
"...Landlord, but if such alterations conform to applicable codes and
regulations and do not unreasonably interfere with the operations of other
tenants or of the shopping center of which the leased premises form a part, and
if such alterations are reasonably related to Tenant's business, the written
consent of Landlord shall not be unreasonably withheld."
13. In Section 12.1, in line 15, at the end of the fifth sentence, add:
"...improvements, and Landlord will cooperate with Tenant to obtain same."
14. In Section 12.2, in line 2, after "installation", add: "and if they become
non-removable fixtures".
15. In Section 12.2, in line 5, after "Leased Premises", add: "ten (10) days".
16. In Section 13.2, in line 9, before "cost", add: "reasonable". In line 9,
after "such", add: "necessary".
17. In Section 13.3, in line 2, after "fixtures", add: "and after written notice
fails to remove within 10 (ten) days".
18. In Section 14.1, in line 5 at the end of the first sentence, add: "which
shall not be unreasonably withheld. Landlord and Tenant agree that reasonable
causes for withholding of consent by Landlord include, but are not necessarily
limited to, a) conflict with the business uses of other Tenants, whether or not
such uses are exclusive by lease, b) interference with the activities and quiet
enjoyment of other tenants and/or neighbors, c) the creation of possible danger
to persons or property, d) the creation of problems of obtaining insurance or of
insurance premium increase, e) conflict with applicable codes, regulations and
authorities, including but not limited to municipal Zoning and Planning Boards."
19. In Section 14.1, in line 15 at the end of this Section, add" "However, for
purpose of this Section, Tenant shall be free to assign the Lease or any part
thereof, without restriction except as noted above, to a subsidiary, successor
corporation, merged corporation and/or affiliate."
20. In Section 14.4, in line 2 after "or", add: "deny same if the Landlord's
consent may be reasonably withheld or if there are substantial financial and
economic reasons for Landlord's refusal."
<PAGE>
21. In Sections 14.4 (a) and (b), omit these sections in their entirety.
22. In Section 14.5, line 1, delete "In the event Landlord shall cancel" and
substitute "Upon Landlord's cancellation of".
23. In Section 15, at the end of this Section, add, "Landlord covenants that,
with regard to the Leased premises, as of the date of signing of this Agreement
and to the best of Landlord's knowledge and belief, it is in full compliance
with any local, state and federal laws, rules, requirements and regulations."
24. In Section 16, at the end of this Section, add: "Notwithstanding the above,
however, any such reasonable rules and regulations may not interfere with
Tenant's quiet enjoyment of the leased premises."
25. In Section 17.1, in line 10 after "control", add: "provided Landlord has
acted diligently."
26. In Section 17.2, in lines 3 and 5, after "Landlord" add "or Tenant".
27. In Section 17.3, in line 1, after "Landlord's" add "or Tenant's".
28. In Section 17.5, at the end of this Section, add: "...and Landlord
represents that Landlord shall maintain such insurance throughout the term of
the Lease."
29. In Section 17.6, add: "In the case of substantial destruction, Landlord
shall give Tenant written notice within 60 days of Landlord's intent to rebuild
or not. Landlord shall carry a minimum of $715,000 casualty insurance on the
property throughout the term of the Lease."
30. In Section 19, in lines 1 & 2, delete: "...whether occurring before or...".
In line 3, and the end of this Section, add: "...provided that, if such default
poses no threat to persons or property or if such default is for non-payment of
rent or other charges due under this Lease, Landlord gives written notice to
Tenant of such default and provided that Tenant fails to cure such default
within ten (10) days."
31. In Section 19.(d), add: "...for a period of thirty (30) days and for no
valid business reason."
32. In Section 19.(e), add: "...that is not removed within sixty (60) days."
33. In Section 19.(f), add: "... for no valid business reason."
34. In Section 19.(h), add: "...which shall not be unreasonably withheld.
Landlord and Tenant agree as noted in Item 18 above."
<PAGE>
35. In Section 19.(I), add: "... and same result in a breach in the material
terms of the lease."
36. In Section 20, line 2, after "forth", add: "in Section 19".
37 In Section 20.1, in line 4, delete "eighteen (18%)" and substitute "ten
(10%)".
38.In Section 20.2, add: "However, any such accelerated amount shall be
reduced by Landlord's mitigation of damages, if any."
39. In Section 20.3, in lines 1 through 9, delete: "Landlord, at.....such
notice" and substitute "Upon default".
40. In Section 20.3, in lines 22 and 23, delete: "whether or not the Leased
premises are relet" and substitute: "subject, however, to Landlord's mitigation
of damages, if any."
41. In Section 20.4, at the end of this Section, add: "and to the reduction of
any and all payments, including accelerated payments, due by Tenant under the
Lease after default."
42. In Section 20.5, add: "However, landlord shall give Tenant reasonable notice
of any such disposition of Tenant's property."
43. In Section 21, in the title between "LANDLORD'S" and "REMEDIES" add: "AND
TENANT'S".
44. In section 21.1, in line 1, after "Landlord" add: "and Tenant". In line 3
after "Landlord" add "or Tenant".
45. In Section 21.2, in line 1, before "Tenant", add: "If Tenant defaults". In
line 2, after "Landlord's" add: "reasonable and necessary".
46. In Section 26.1.(a), in line 3 after "address", add: "and for any and all
reasonable purposes related to its business".
47. In Section 26.1.(b), in line 2, delete "notice or". At the end of this
Section, add: "provided Landlord gives Tenant sixty (60) days advance written
notice of such change;".
48. In Section 26.1.(f), at the end of this Section, add: "provided same does
not interfere with Tenant's quiet enjoyment and occupancy."
49. In Section 27.1, delete lines 1 through 4 and substitute: "Tenant agrees to
permit Landlord and Landlord's agents, employees and representatives to enter
the Leased premises as
<PAGE>
necessary during normal business hours with Tenant's escort, provided that 24
hours notice shall have first been given so do so, and provided that such notice
or escort shall not be required if such entry in necessary, in the opinion of
the Landlord, to prevent injury to persons or damage to property, for the
purposes of:".
50. In Section 27.1.(d), at the beginning of this Section, add: "after default
or during the last year of the Lease term,".
51. In Section 27.1.(e), at the end of this Section, add: "provided same does
not interfere with Tenant's business".
52. In Section 27.2, delete this Section in its entirety.
53. In Section 27.3, at the beginning of this Section, add: "Unless otherwise
stated herein,".
54. In Section 27.4, in line 5 before "Landlord", add: "Provided Landlord is not
grossly negligent and exercises due diligence,"
55. In Section 27.5, in line 1 before "Landlord", add: "If necessary,". At the
end of this Section, add: "provided, however, that a reasonable effort shall be
made to give such prior notice."
56. In Section 29, at the end of this Section, add: "However, there shall be no
interference with Tenant's quiet enjoyment or breach of this Lease by virtue or
result of such subordination.
57. In Section 31, at the end of this Section, add: "accept as otherwise
stated".
58. In Section 32, in line 4, delete "as good" and substitute "reasonably
similar".
59. In Section 34.1, in line 1, before "Landlord", add: "Unless due to the gross
negligence of Landlord and/or its agents,".
60. In Section 37.2, in line 3, after "($200,00.00)", add: "or up to the
allowable insurable amount".
61. In Section 38.2, in line 3, after "breach", add: "unless otherwise agreed to
in writing by Landlord and Tenant."
62. In Section 38.3, at the end of this Section, add: "unless otherwise agreed
to in writing by Landlord and Tenant."
<PAGE>
63. In Section 41, at the end if this Section, add: "provided Landlord acts with
due diligence to correct and remedy such problems."
64. In Section 42.4, at the end of this Section, add: "which consent shall not
be unreasonable withheld."
65. In Exhibit E - Rules and Regulations, in Section 1.4, add: "It is understood
that Tenant has the right to make interior repairs and changes, and to install
fixtures or improvements as may be necessary for Tenant's business, subject to
obtaining the required building and occupancy permits and subject to the prior
written approval of the Landlord, based upon documents completely describing the
proposed repairs, changes, fixtures and/or improvements, which approval shall
not be unreasonably withheld."
In Witness Whereof, the parties hereto have executed this Rider on the date
first written:
Witness: Landlord: Holland Center, L.L.C.
/s/ Whitney Collins By: /s/ Philip Collins
Phillip Collins, Manager
Tenant: You Tools Corporation
/s/ Rafe Scheinblum By: /s/ Sonny Hunt
Sonny Hunt, President
<PAGE>
EXHIBIT 10.10
<TABLE>
<CAPTION>
BAY NETWORKS USA, INC. EQUIPMENT LEASE AGREEMENT
- ---------------------------------------- ------------------------------ ---------------------------------------------------------
<S> <C> <C> <C> <C>
Lessor Name BAY NETWORKS USA, INC. Contact Name Address 1100 Technology
Park Drive - BL1106
- ---------------------------------------- ------------------------------ -------------------------- ------------- ----------------
City BILLERICA County MIDDLESEX State MA Zip 01821 Phone
508-916-7887
- ---------------------------------------- ------------------------------ -------------------------- ------------- ----------------
Lessee Name YOU TOOLS CORPORATION Contact Name Dave Van Allen Address 3864 Courtney
Street, Two
Courtney Place
- ---------------------------------------- ------------------------------ -------------------------- ------------- ----------------
City Bethlehem County Berks State PA Zip 18017 Phone
- ---------------------------------------- ------------------------------ -------------------------- ------------- ----------------
Supplier Name Corporate Networking, Inc. Street 2206 Allenbach Lane
- ---------------------------------------- ------------------------------ -------------------------- ------------- ----------------
City Lansdale County State PA Zip 19446 Phone
610-584-0196
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. EQUIPMENT LEASE AGREEMENT. Lessor agrees to lease to Lessee and Lessee
agrees to lease from Lessor the equipment ("Equipment") listed below.
LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT
INCLUDING THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN
NO EVENT SHALL LESSOR BE LIABLE FOR SPECIAL OR CONSEQUENTIAL DAMAGES. Title
to each item of Equipment leased hereunder shall remain with the Lessor at
all times and the Lessee shall have no right, title, or interest in
Lessor's title to the Equipment. Lessee agrees to continue to make payments
under this Lease regardless of any claims it may have against the supplier
or manufacturer. Lessee promises to pay Lessor the lease payments shown
below according to the payment schedule shown below.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Quantity Description of Equipment/Services Leased Make & Type Model Number Cost
- -------------------------------------------- ------------------------------------------- ------------- -------------- --------------
SEE ATTACHED SCHEDULE `A' $78,374.00
- -------------------------------------------- ------------------------------------------- ------------- -------------- --------------
- -------------------------------------------- ------------------------------------------- ------------- -------------- --------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Equipment to be new unless otherwise noted as: [ ] used [ ] reconditioned
- ------------------------------------------------------------------------------------------------------------------------------------
Equipment location, if other than Lessee's address above:
- ---------------------- -------------------------------------- ------------- ------------------ -------------------------------------
<S> <C> <C> <C> <C>
Address City County State Zip
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2. TERM AND PAYMENT SCHEDULE:
A. Reference Purchase Order Number: _______________________ B. Reference Bay Networks Invoice Number:______________________
- --------------------- ------------------------------------------------------------- ------------------------------------------------
Number of Months: Amount of payments: <C>
<S> <C> Payments are due monthly in advance, beginning
thirty (30) days following delivery of
36 Equipment, and continuing on the same day of
Monthly Lease Payment: $2,453.10 each following month until fully paid. Unless
otherwise indicated in writing by Lessee to
Maintenance/Other: $ N/A Lessor within five (5) days from delivery of
End of Lease equipment ("notification period"), then Lessee
Tax: $ 147.19 is deemed to have accepted the Equipment and
Purchase Option: *The payment amounts defined herein are valid for execution acknowledged the commencement of lease
within thirty (30) days from date of Lessee's signature payments. Lessor, at Lessor's option, may
Fair Market Value below. Lessee is responsible for associated taxes which require Lessee to execute an acknowledgment of
require Lessee to execute an acknowledgment of will be the same after such notification period.
calculated based upon applicable state laws.* the same Payments will be applied first to past due
after such notification period. balances, taxes, and late charges, then to the
current amount due. All payments are to be made
by check or wire transfer payable to BAY
NETWORKS USA, INC. and to be sent to such
destination as may be specified by BAY NETWORKS
USA, INC.
- --------------------------------------------------------------------------------
</TABLE>
Lessee agrees to all the terms and conditions shown above and on the
reverse side of or page attached to this Lease, that those terms and conditions
are a complete and exclusive statement of the agreement between Lessor and
Lessee and that they may be modified only by written agreement and not by course
of performance. Lessee agrees that this Lease cannot be terminated except as
provided for in this Lease. Lessee agrees that its obligations under this Lease
are absolute and shall continue in full force and effect regardless of any
inability of Lessee to use Equipment for any reason whatsoever.
This Lease is not binding on Lessor until Lessor accepts it by signing below.
Lessee authorizes Lessor to record a UCC-1 financing statement or similar
instrument in order to show Lessor's interest in the Equipment. Lessee agrees to
execute such UCC-1 financial statement and in addition appoints Lessor with full
authority and power as its attorney-in-fact to execute and deliver such UCC-1
financial statement or other similar instrument and ratifies each and every act
that Lessor may lawfully perform in exercising those powers. This Lease may not
be terminated early.
- --------------------------------------------------------------------------------
Dated 5-29 , 1997 Dated , 19
----------------------- ---- ----------------------- ----
LESSEE: YOU TOOLS CORPORATION LESSOR: BAY NETWORKS USA, INC.
Signature: /s/ David Van Allen Signature:
------------------------------ ---------------------------
Name/Title: David V.an Allen Name/Title:
----------------------------- --------------------------
- ---------------------------------------- ---------------------------------------
<PAGE>
3. LATE PAYMENT: In the event that Lessee fails to make any payment as and when
due under Section 2, then at the option of Lessor, effective 15 days following
written notice to Lessee:
(a) The entire payment amount shall be immediately due and
payable; and/or
(b) Lessor shall have the right to terminate this Lease and
immediately recover all Equipment from Lessee's premises;
and/or
(c) Lessee shall pay a late fee equal to the lower of 1.5% or the
highest rate allowed by applicable law per month times the
amount of the payment which is late, calculated from the
payment due date.
Each of the foregoing rights and remedies of Lessor are cumulative, and in
addition to, all other rights of Lessor under this Lease and under applicable
law.
4. USE OF EQUIPMENT: Lessee may possess and use the Equipment in accordance with
this Lease, provided that any such use is in conformity with the operation
instructions, all applicable laws and any insurance policies with respect to the
Equipment. Lessor shall have the right to inspect the Equipment. Lessee shall
promptly notify Lessor of any change in Lessee's name, place of business, or any
accident allegedly resulting from the use or operation of the Equipment. Lessee
shall keep and use the Equipment only at the address of Lessee indicated on this
Lease. Lessee agrees that the Equipment will not be removed from that address
unless it gets written permission in advance from Lessor.
4a. USE OF SOFTWARE: Licensee's right to use software, its revisions and updates
for the operation of the Equipment is governed by the "shrink-wrap" license
agreement which accompanies the software media (and reproduced in the
accompanying user's manual.)
5. INSTALLATION, REPAIRS AND MAINTENANCE: Lessee is responsible for installing
and keeping the Equipment in good mechanical condition and working order,
ordinary wear and tear excepted. Lessee is responsible for protecting the
Equipment from damage and from any other kind of loss while it has the
Equipment. If the Equipment is damaged or lost, Lessee agrees to continue to
make payments under this Lease.
6. RISK OF LOSS: All risk of loss, damage, theft, or destruction of the
Equipment shall be borne by the Lessee. Any such loss will not impair the
obligations of Lessee under this Lease, all of which shall continue in full
force and effect, and Lessee shall either place the affected Equipment in
working order or pay the Lessor an amount equal to all unpaid lease payments due
and to become due under this Lease with respect to the affected Equipment plus
the replacement value of the affected Equipment.
7. INSURANCE: Lessee shall, at its expense, and for the entire term of this
Lease, maintain in full force damage or loss insurance in an amount equal to or
greater than the replacement value of the Equipment and comprehensive general
liability insurance in a minimum amount of
<PAGE>
$1,000,000 for each occurrence. Lessor shall be named as an additional insured
on all such policies and shall be notified of the cancellation or modification
of any policy. Certificates of insurance evidencing the coverages listed above
are to be issued to Lessor prior to the commencement of this Lease.
8. END OF LEASE OPTIONS: Upon the expiration or earlier termination of this
Lease by passage of time or otherwise, the Lessee will have the following
options:
(a) PURCHASE OPTION: Unless agreed to in writing otherwise, Lessee
may purchase all, but not less than all, of the Equipment
covered under this Lease Agreement and any supplemental
schedules at the then Fair Market Value as determined by
Lessor.
(b) RENEWAL OPTION: Lessee may continue to lease the Equipment for
successive one month terms. This Lease will automatically
renew for successive one month terms unless Lessee sends
Lessor written notice that Lessee does not want it to renew at
least thirty (30) days before the end of any term.
(c) RETURN OPTION: Lessee may surrender and return all leased
Equipment. At the end of the term of this Lease, Lessee will
immediately return the Equipment to Lessor in a condition as
good as received less normal wear and tear to any place in the
United States Lessor designates. Lessee will prepay expenses
of recovery, crating, insuring against loss, and shipping by
means Lessor designates. Lessee also agrees to pay Lessor an
administration fee for processing the return of the Equipment
equal to one percent (1%) of the original Equipment cost
reflected in Part 2 of this Agreement. If Lessee fails to
promptly return Equipment, Lessee shall be obligated to extend
the Lease for successive thirty (30) day terms until all
Equipment has been returned to, inspected by, and accepted by
Lessor.
9. DEFAULT; REMEDIES: In the event Lessee defaults under any of its obligations
to Lessor under this Lease, Lessor may without prejudice and in addition to any
other rights or remedies available to Lessor under applicable law, terminate
this Lease, repossess the Equipment, and recover from Lessee as liquidated
damages all amounts then due and to become due under this Lease, plus all costs
of termination, collection and repossession.
10. REPRESENTATIONS, WARRANTIES, AND COVENANTS: Lessee represents, warrants and
covenants that, as of the date hereof and until all amounts owed hereunder have
been paid in full under this Lease:
(a) Lessee hereby waives all defenses, setoffs and counterclaims
to the payment obligations under Section 2 which may be
asserted against Lessor;
(b) Lessee has all the legal capacity, power and right required
for it to enter into this Lease and has the rights to perform
its obligations thereunder, all such actions have received all
corporate or governmental authorization required by any
<PAGE>
applicable charter, by-lay, constitution, law, rule or
regulation, and this Lease is genuine, valid and enforceable
against Lessee in accordance with its terms; and
(c) There does not exist and will be no setoffs, counterclaims or
defenses on the part of Lessee to any claims against or
obligations of Lessee under this Lease; and Lessee hereby
waives all such future setoffs, counterclaims and defenses;
and Lessee has not done anything that might impair the value
of this Lease or of the rights of Lessor or Lessor's assignee
under this Lease or with respect to any payment due hereunder.
11. INDEMNIFICATION: Lessee shall defend, indemnify and hold Lessor harmless
from and against any and all claims, damages, costs, expenses (including
attorney's fees), losses and liabilities of every kind and nature in any way
arising out of or in connection with (I) the failure of any of Lessee's
representatives or warranties contained herein to be true, complete and correct
as of the date hereof and at all times during the Lease, or (II) the breach by
Lessee of any provision of this Lease, or (III) the failure of Lessee to make
any payment owed under this Lease as and when required hereunder, or (IV) any
loss, liability or damage arising from Lessee's use, misuse, operation or
possession of the Equipment.
The provisions of this section with regard to matters arising during this Lease
shall survive the termination of the Lease.
12. ASSIGNMENT BY LESSOR:
(a) Lessor shall have the right immediately and at any time to
assign this Lease and/or Lessor's rights hereunder to any
subsidiary, affiliate, or third party. Lessee hereby consents
to such assignment and agrees that Lessor's assignee shall
have the full right and power, on Lessor's behalf and/or in
its own name, to enforce this Lease directly against Lessee.
(b) Lessee shall not assign, sublet, pledge or encumber this Lease
or the Equipment without Lessor's prior written consent.
(c) Lessee will take all reasonable steps from time to time
requested by Lessor or by Lessor's assignee to perfect the
interest of Lessor and/or its assignee in this Lease and the
payments required herein.
(d) Lessee hereby waives all defenses, setoffs and counterclaims
to the payment obligations under Section 1 which may be
asserted against Lessor's assignee.
13. Miscellaneous: The Lease supersedes any previous written or oral agreements.
This Lease shall be binding upon and inure to the benefit of both parties, their
permitted successors and assignees. This Lease shall be governed by, and
construed in accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
BAY NETWORKS USA, INC.
DELIVERY AND INSPECTION CERTIFICATE
Pursuant to the Equipment Lease Agreement dated as of 5/29/97 (the "Agreement")
by and between Bay Networks USA, Inc. ("Lessor") and YOU TOOLS CORPORATION
("Lessee").
The undersigned being duly authorized, certifies that of the equipment
described in the Agreement, including the BCN, BLN, HSSI card, Software, Octal
Port Sync Module, and associated equipment, between the Lessor and Lessee, are
in accordance with the terms of the Agreement, have been delivered, inspected,
and accepted by the undersigned as satisfactory, and conforming in all respects
with the requirement and provisions of the Agreement.
IN WITNESS WHEREOF, the Lessee hereto have executed this Delivery and Inspection
Certificate as of 5/29/97 (date).
Lessee: You Tools Corporation
-------------------------------
By: /s/ Stanley F. Bielicki
-------------------------------
for DVA
Title: CFO
-------------------------------
<PAGE>
SCHEDULE `A'
The following 2 pages(s) comprise this Schedule `A'
Equipment schedule for the certain Lease Agreement dated ____________ between
Bay Networks USA, Inc. ("Lessor") and YOU TOOLS CORPORATION ("Lessee").
<PAGE>
Corporate Networking, Inc.
2206 Allebach Lane
Lansdale, PA 19446
610-584-0196/610-584-6195(fax)
INVOICE
-------------- ------------------
DATE INVOICE NO.
-------------- ------------------
2/12/97 12191773
-------------- ------------------
BILL TO SHIP TO
Bay Networks You Tools Corporation
1100 Technology Park Drive 3864 Courtney Street
BL11-06 Two Courtney Place
Billerica, MA 01821 Bethlehem, PA 18017
Attn: Mr. Sam Pietropaolo Attn: Mr. Dave Van Allen
<TABLE>
<CAPTION>
- ---------------- ----------- ---------------- -------- --------------- -------------- ------------------- -----------------
P.O. NO. TERMS DUE DATE REP SHIP DA... SHIP VIA FOB S.O. #
- ---------------- ----------- ---------------- -------- --------------- -------------- ------------------- -----------------
Verbal Net 30 3/14/97 TRK 2/12/97 UPS ship point 10410
- ---------------------------------------------------------------------- -------------- ------------------- -----------------
ITEM DESCRIPTION QTY PRICE EACH AMOUNT
<S> <C> <C> <C> <C>
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
73001RF Bay Networks BCN DC Base Unit, Remanufactured 1 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
75021RF Bay Networks BCN DC Additional Power Supply, 1 * *
Remanufactured
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
75010RF Bay Networks System Resource Module, 1 * *
Remanufactured
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
AG0008017 Bay Networks System Software, Version 11.0 1 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
AG2104039 Bay Networks Single Port HSSI card, 64Mb 1 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
AG1004005 Bay Networks Dual 100 BASE-T card, 64Mb 1 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
AG2104010 Bay Networks Octal Port Synchronous Module for 1 * *
BCN
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
74035-16 Bay Networks Single Port HSSI, 16Mb 1 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
AA0011002 8M Flash Card - Formatted 1 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
AF0011005 Bay Networks 32MB DRAM Kit 2 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
Shipping Shipping and Handling 1 * *
- -------------------- ------------------------------------------------- -------------- ------------------- -----------------
Please remit to above address. Thank you for your business. TOTAL * *
- ------------------------------------------------------------------------------------- ------------------- -----------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
Corporate Networking, Inc.
2206 Allebach Lane
Lansdale, PA 19446
610-584-0196/610-584-6195(fax)
INVOICE
--------------- ---------------------
DATE INVOICE NO.
--------------- ---------------------
4/2/97 12191944
--------------- ---------------------
BILL TO SHIP TO
Bay Networks You Tools Corporation
1100 Technology Park Drive 3864 Courtney Street
Billerica, MA 01821 Suite 130
BL11-06 Bethlehem, PA 18017
Attn: Mr. Sam Pietropaolo Attn: Mr. Dave Van Allen
<TABLE>
<CAPTION>
- --------------- ------------- -------------- --------- --------------- -------------- ---------------- ---------------------
P.O. NO. TERMS DUE DATE REP SHIP DA... SHIP VIA FOB S.O. #
- --------------- ------------- -------------- --------- --------------- -------------- ---------------- ---------------------
Verbal Net 30 5/2/97 TRK 3/5/97 UPS ship point 10410
- --------------------------- ------------------------------------------ -------------- ---------------- ---------------------
ITEM DESCRIPTION QTY PRICE EACH AMOUNT
<S> <C> <C> <C> <C>
- --------------------------- ------------------------------------------ -------------- ---------------- ---------------------
77010 Bay Networks BLN 2 Base Unit with Dual 1 * *
Power Supplies
- --------------------------- ------------------------------------------ -------------- ---------------- ---------------------
75010 Bay Networks BCN System Resource Module 1 * *
(SRM-F)
- --------------------------- ------------------------------------------ -------------- ---------------- ---------------------
Please remit to above address. Thank you for your business. TOTAL *
- ------------------------------------------------------------------------------------- ---------------- ---------------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
EXHIBIT 10.11
<TABLE>
<CAPTION>
MASTER LEASE AGREEMENT
- ---------------------------------------------------------------- ---------------
<S> <C> <C>
LEGAL NAME OF LESSEE D.B.A. NAME FEDERAL TAX ID #
YOU TOOLS CORPORATION FASTNET 23-2767197
- --------------------------------------------------------------------------------
ADDRESS COUNTY
961 MARCON BOULEVARD LEHIGH
- ----------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CITY STATE/PROVINCE ZIP / /CORPORATION / /PARTNERSHIP / / PROPRIETORSHIP
ALLENTOWN PA 18103
- ---------- ---------------------------------------------------------------------
<S> <C> <C>
CONTACT NAME PHONE NUMBER FAX NUMBER
STAN BIELICKI 610-289-1100 610-289-1108
- --------------------------------------------------------------------------------
SUPPLIER/VENDOR SALES REPRESENTATIVE
CISCO SYSTEMS, INC.
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ADDRESS CITY STATE ZIP
170 WEST TASMAN DRIVE SAN JOSE CA 95134-1706
- --------------------------------------------------------------------------------
</TABLE>
LEASE TERMS AND CONDITIONS
The terms and conditions of this Master Lease Agreement ("Master Agreement")
shall apply to each and every Equipment Schedule ("LEASE") which shall become
part of and attached to this Master Agreement. The Master Agreement and all
Leases subsequently executed shall be referred to jointly as "Agreements".
1. Sunrise Leasing Corporation ("LESSOR") agrees to lease to LESSEE and
Lessee agrees to lease from LESSOR the equipment listed on each LEASE
("Equipment").
2. TERM RENEWALS AND EXTENSIONS: This LEASE is for the term as stated herein
and the rights and obligations of the parties shall commence upon LESSEE'S
acceptance of the EQUIPMENT ("Commencement Date"). THIS LEASE IS
NON-CANCELABLE FOR THE FULL TERM HEREOF. Each LEASE shall renew
automatically in one year non-cancelable increments unless LESSOR receives
written notice of LESSEE'S intent to: (a) purchase the EQUIPMENT or (b)
terminate the LEASE. All notices must be received by LESSOR in writing via
certified mail, return receipt, ninety (90) days prior to the end of the
LEASE expiration date of the initial term or any of the non-cancelable
increments.
3. PAYMENT: LESSEE agrees to pay LESSOR LEASE payments as stated herein.
LESSOR shall bill LESSEE by invoice for LEASE payments at LESSEE'S address
set forth above. Charges for a partial month will be prorated based on a
thirty (30) day month. LESSEE shall remit payment in full to LESSOR by the
Commencement Date in advance each month thereafter to the address set forth
on the invoice. The obligation of LESSEE to make LEASE payments is
unconditional. NOTWITHSTANDING ANY LAWFUL TERMINATION OF THE LEASE, LESSEE
SHALL CONTINUE TO PAY LESSOR LEASE PAYMENTS UNTIL ALL EQUIPMENT HAS BEEN
RETURNED TO LESSOR AS PROVIDED UNDER PARAGRAPH 14.
4. WARRANTIES: LESSOR HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATION,
WARRANTY, PROMISE, OR COVENANT, EXPRESS OR IMPLIED, AS TO THE CONDITION,
QUALITY, DURABILITY, CAPABILITY, FUNCTION, PERFORMANCE, OR SUITABILITY OF
THE EQUIPMENT, ITS MERCHANTABILITY, OR ITS FITNESS FOR ANY PARTICULAR
PURPOSE OR AGAINST INTERFERENCE OR AGAINST INFRINGEMENT. THE PARTIES AGREE
THAT AS THE LESSEE SELECTED BOTH THE EQUIPMENT AND THE SUPPLIER OF THE
EQUIPMENT, NO DEFECT, EITHER PATENT OR LATENT, SHALL RELIEVE LESSEE OF ITS
OBLIGATION HEREUNDER. LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE FOR
SPECIFIC PERFORMANCE OR ANY LIABILITY, LOSS, DAMAGE, INCLUDING
CONSEQUENTIAL AND INCIDENTAL DAMAGES, ARISING OUT OF LESSEE'S USE OF THE
EQUIPMENT, OR SUPPLIER'S FAILURE TO TIMELY DELIVER THE EQUIPMENT.
5. ASSIGNMENT: (A) LESSEE SHALL NOT ASSIGN, SUBLET, LEND, TRANSFER, OR PLEDGE
THIS LEASE OR THE EQUIPMENT WITHOUT LESSOR'S PRIOR WRITTEN APPROVAL. THIS
LEASE AND THE COVENANTS AND OBLIGATIONS HEREUNDER SHALL BE
BINDING UPON
<PAGE>
ANY SUCH ASSIGN, SUCCESSOR, REPRESENTATIVE OR TRANSFEREE OR LESSEE. (B) LESSOR
may assign, transfer, pledge or sell LESSOR'S interest in this LEASE or the
EQUIPMENT. Upon notification of such assignment, LESSEE shall remit lease
payments directly to the address set forth on the notification. In no event
shall any assignee of LESSOR be obligated to perform any duty, covenant,
condition, or promise under this LEASE. (C) All terms and conditions hereof
shall be binding upon all successors and assigns of the parties hereto but only
to the extent such successors and assigns are permitted hereunder.
6. UCC FILINGS: LESSEE hereby agrees to execute such financing statements,
amendments thereto and other instruments as may be requested by LESSOR and
hereby constitutes and appoints LESSOR its true and lawful attorney-in-fact
to execute such financing statements on behalf of LESSEE without the
LESSEE'S signature. LESSEE agrees that the filing of this LEASE or a
photocopy thereof shall constitute and be the equivalent of the filing of
an original financing statement with respect to the EQUIPMENT under the
Uniform Commercial Code and LESSEE hereby adopts any photocopy or other
reproduction of its signature on this LEASE as its own.
7. PURCHASE OPTION: Upon lawful termination of this LEASE and provided that no
Event of Default has occurred during the term of the LEASE, LESSEE shall
have an option to purchase all (not part) of the EQUIPMENT without recourse
or warranty ("Purchase Option"). The LESSEE, however, is required to give
ninety (90) days written notice to LESSOR prior to the end of the LEASE of
its intention to purchase the EQUIPMENT. The payment for the EQUIPMENT
purchase must be made prior to the next usual LEASE rental payment date for
that LEASE; otherwise LESSEE shall be billed for the next LEASE payment
under the terms of the LEASE and the LEASE payment must be made promptly.
If an Event of Default has occurred during the term of the LEASE or payment
for the EQUIPMENT is not made pursuant to the terms of this Option,
LESSEE'S Purchase Option shall be canceled forthwith. LESSEE does not have
the right to assign its Purchase Option rights to any other entity. THE
FAIR MARKET VALUE OF EQUIPMENT SHALL BE THE RETAIL MARKET PRICE FOR USED,
WELL MAINTAINED EQUIPMENT AT THE TERMINATION OF A LEASE.
8. USE OF EQUIPMENT: LESSEE shall use the EQUIPMENT solely at the business
location as set forth in the Equipment Schedule. LESSEE shall use the
EQUIPMENT in compliance with the Manufacturer's or Supplier's suggested
guidelines. Provided LESSEE is not in default hereunder, LESSEE shall have
the right to quiet and peaceful use of the EQUIPMENT. LESSOR shall be
permitted to inspect the EQUIPMENT during LESSEE'S regular business hours.
9. REPAIRS: LESSEE, at its own expense, shall keep the EQUIPMENT in good
repair, and maintain a service agreement in full force throughout the term
of the LEASE which fulfills all of the manufacturer's or vendor's
maintenance requirements as set forth in its full service maintenance
contract. Notwithstanding LESSEE agrees to pay LESSOR for any expense
incurred to cause the EQUIPMENT to meet vendor's specifications. LESSEE
shall pay such charges immediately upon request.
10. INSURANCE: LESSEE shall provide, and pay for (a) insurance against the loss
or theft of or damage to the EQUIPMENT for the full replacement value and
(b) public liability and property damage insurance naming LESSOR as Loss
Payee or Additional Insured. Upon request from LESSOR, LESSEE shall provide
LESSOR with a Certificate of Insurance.
11. NET LEASE: LESSEE intends the LEASE payments hereunder to be net to LESSOR.
LESSEE shall pay, or reimburse LESSOR, property taxes, fees, assessments,
charges and taxes (municipal, state and federal) which are imposed upon
this LEASE or the EQUIPMENT or its ownership, leasing, renting, possession
or use while it is subject to this LEASE, excluding, however, taxes based
on LESSOR'S net income. Unless otherwise specified in the LEASE, LESSOR
shall be responsible for filing all personal property tax returns with
respect to the EQUIPMENT and shall pay all taxes in connection with such
filing. LESSEE shall reimburse LESSOR for such personal property tax
payments within ten (10) days of receipt of LESSOR'S invoice therefore.
12. TITLE: Title to the EQUIPMENT shall remain in LESSOR except upon the
exercise of the Purchase Option by LESSEE. All replacement parts,
accessories, additions to, or modifications of the EQUIPMENT shall become
property of LESSOR, LESSEE shall affix to the EQUIPMENT, in a prominent
place, any tags, stickers, labels or markings supplied by LESSOR stating
ownership of the EQUIPMENT. LESSEE shall give LESSOR immediate notice of
any attachment or judicial process affecting the EQUIPMENT or LESSOR'S
ownership thereof.
13. RISK OF LOSS: Upon acceptance of the EQUIPMENT, LESSEE shall bear risk of
loss from any cause whatsoever and any such loss shall not relieve LESSEE
from any obligation hereunder including the duty to make LEASE payments. In
the event the EQUIPMENT is lost or damaged beyond repair, LESSEE shall
replace the EQUIPMENT with identical EQUIPMENT, which shall become the
EQUIPMENT for purposes of this LEASE.
<PAGE>
14. RETURN OF EQUIPMENT: Upon lawful termination of this LEASE or upon LESSEE'S
default, LESSEE, at its own expense, shall crate, insure, and transport the
EQUIPMENT to LESSOR or to a location within the Continental U.S. designated
by LESSOR to receive the EQUIPMENT in the same condition it was at the
commencement of the LEASE reasonable wear and tear excepted.
15. EVENTS OF DEFAULT: The following shall be "Events of Default": (a) LESSEE
fails to make any LEASE payment within five (5) days after the date the
payment is due; (b) LESSEE fails to allow LESSOR to inspect the EQUIPMENT
during business hours; (c) LESSEE fails to provide insurance on EQUIPMENT;
(d) LESSEE fails to maintain the EQUIPMENT and maintain a service contract;
(e) LESSEE assigns or otherwise transfers this lease or the EQUIPMENT
without LESSOR'S prior written approval; (f) LESSEE creates, incurs, or
assumes any mortgage, lien, pledge, or other encumbrance or attachment of
any kind whatsoever, with respect to the EQUIPMENT or this LEASE or any of
LESSOR'S interest hereunder; (g) LESSEE moves the EQUIPMENT to a location
other than as stated on the front page hereof without LESSOR'S prior
written approval; (h) LESSEE fails to return the EQUIPMENT to LESSOR upon
termination of this LEASE; (i) LESSEE files or has filed against it a
petition in bankruptcy or seeking similar relief; (j) LESSEE becomes
insolvent; or (k) LESSEE defaults under any other lease or agreement
between the parties.
16. REMEDIES: Unless LESSEE cures an event of default within 10 business days
from when it has received written notice from LESSOR, the parties agree
that upon the occurrence of an Event of Default, LESSOR may take one or
more of the following actions: (i) declare the entire amount of the
remaining LEASE payments, including arrearages, due and immediately
payable, (ii) take peaceful possession of the EQUIPMENT with or without
court order, and (iii) recover all commercially reasonable costs and
expenses incurred by LESSOR in any repossession, recovery, storage or
repair, sale, release or other disposition of the EQUIPMENT. No right or
remedy herein conferred upon or reserved to LESSOR is exclusive of any
other right or remedy hereunder or allowed by law. Each right and remedy
shall be cumulative and may be exercised singly or in combination. To the
extent permitted by applicable law, LESSEE also hereby waives any rights
now or hereafter conferred by statute or otherwise which may require LESSOR
to sell, lease or otherwise use the EQUIPMENT in mitigation of LESSOR'S
damages, or which may otherwise limit or modify any of LESSOR'S rights or
remedies under this paragraph.
17. LESSOR'S EXPENSES: LESSEE shall pay LESSOR all costs and expenses,
including reasonable attorney's fees, incurred by LESSOR in exercising any
of its rights or remedies hereunder. To the extent allowed by law, LESSEE
shall be obligated to pay a late payment penalty equal to 5% of the monthly
rental for each month the payment is delinquent, or the maximum rate
permitted by law.
18. INDEMNITY: LESSEE shall indemnify LESSOR against, and hold LESSOR harmless
from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney's fees, arising out
of, connected with, or resulting from this LEASE or the EQUIPMENT without
limitation. The indemnities contained herein shall survive termination of
this LEASE.
19. NON-WAIVER: LESSOR'S failure to require strict performance by LESSEE of any
of the provisions of this LEASE shall not be a waiver thereof.
20. SEVERABILTY: If any provision of this LEASE be declared invalid, such
provision shall be inapplicable and deemed omitted, but the remaining
provisions, including the default and remedy provisions, shall remain in
full force and effect.
21. WAIVER: Except as hereinafter specifically provided and to the extent
allowed by law, LESSEE and LESSOR agree that the provisions of Uniform
Commercial Code Article 2A, as enacted by the State of Minnesota, shall not
be applicable to this Agreement. Notwithstanding the foregoing, UCC
Sections 2A-109, 2A-523, 2A-525, 2A-526 and 2A-531 shall remain applicable
in their current form.
22. CHOICE OF LAW, JURISDICTION AND VENUE: The parties herein expressly agree
that this Agreement shall be governed by the laws of the State of Minnesota
and shall be interpreted, construed and enforced in accordance with the
laws of the State of Minnesota. In any legal action hereunder, LESSEE
hereby consents to personal jurisdiction and venue in the Courts of the
State of Minnesota, and LESSEE will not object to personal jurisdiction or
venue in the Courts of the State of Minnesota.
23. Monthly Lease Payments and other Lease Terms shall be shown on Equipment
Schedules to this Master Agreement and are incorporated herein by
reference.
<PAGE>
LESSEE HAS READ AND IS SUBJECT TO THE CONDITIONS SET FORTH HEREIN. This Master
Agreement Constitutes the entire Agreement between the parties and no provision
of this Master Agreement shall be deemed waived, amended or modified by either
party unless such waiver, amendment or modification is in writing signed by the
party to be charged thereby.
IN WITNESS WHEREOF LESSEE HAS HEREBY EXECUTED THIS NON-CANCELABLE LEASE THIS
23RD DAY OF OCTOBER, 1997.
<TABLE>
<S> <C>
NAME OF LESSEE: YOU TOOLS CORPORATION DBA FASTNET LESSOR:SUNRISE LEASING CORPORATION
SIGNED_/s/_David K. Van Allen DATE_6/13/97 SIGNED /s/ Carrie A. Halvorson DATE 10/23/97
signature signifies acceptance by Lessor
NAME AND TITLE David K. Van Allen, Chief Executive Officer NAME AND TITLE Carrie A. Halvorson
------------------------------------------- -------------------
and Vice President
------------------------
</TABLE>
<PAGE>
EQUIPMENT SCHEDULE FOR MASTER LEASE AGREEMENT
The Equipment listed on this Equipment Schedule is subject to the applicable
Master Lease Agreement and all the conditions and terms stated therein.
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
EQUIPMENT LOCATION
961 Marcon Boulevard Allentown PA 18103 Lehigh
- -----------------------------------------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP COUNTY
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
EQUIPMENT DESCRIPTION
QUANTITY MAKE/MODEL SERIAL NUMBER
- ---------------- ------------------------------------------------------------------------------
<S> <C>
2 CISCO7513/4 7513 13-Slot, 2 CyBus, 1 RSP4, Single Power Supply
2 MEM-RSP-64M RSP 64MB DRAM Option
6 PA-H Single Port HSSI Port Adapter
4 PA-FE-TX 1-Port Fast Ethernet (100 Base TX) Port Adapter
1 MEM-RSP-FLC16M Cisco 7500 RSP Flash Credit Card: 16 MB Option
1 SF75C-X.X.X RSP1, RSP2, RSP7000 IOS IP Only Feature Set
1 FR-IR75 InterDomain Routing License
1 FR-WPP75 RSP1, RSP2, RSP7000 WAN Packet Protocols License
1 SF75C-X.X.X RSP1, RSP2, RSP7000 IOS IP Only Feature Set
1 FR-IR75 InterDomain Routing License
1 FR-WPP75 RSP1, RSP2, RSP7000 WAN Packet Protocols License
1 MEM-RSP-FLC16M Cisco 7500 RSP Flash Credit Card: 16 MB Option
5 VIP2-20 Versatile Interface Processor-2, Model 20
1 CISCO7513 Cisco 7513 13-Slot, 2 CyBus: IRSP2:1 AC Supply
1 SF75CV-X.X.X RSP1, RSP2, RSP7000 IOS IP & Basic VIP Feature Set
1 VIP2-20 Versatile Interface Processor-2, Model 20
2 PA-H Single Port HSSI Port Adapter
1 CON-SNT-7513 Cisco 7513 SMARTnet Maintenance
------------------------------------------------------------------------------
PURCHASE OPTIONS /X/ Fair Market Value
/ / Other___________________________________________
The Purchase Option terms and conditions are listed in section
7 of the Master Lease Agreement.
------------------------------------------------------------------------------
SALE TAX OPTIONS: /X/ Each lease payment is subject to sales tax
/ / Total Sales Tax required in advance
/ / Exempt Certificate Attached (subject to local
tax regulations)
- ---------------- ------------------------ -----------------------------------------------------
</TABLE>
- -------------------------------
LEASE TERM
36 MONTHS
- -------------------------------
PAYMENT SCHEDULE
MONTHLY]LEASE PAYMENT
[*] /month*
*Automatic Bank Payments
Excludes Applicable Taxes
- -------------------------------
ADVANCE PAYMENT
(Including Applicable Taxes)
[*] for last payment
- -------------------------------
REMAINING MONTHLY
PAYMENTS
(Excluding Applicable Taxes)
35 MOS at * [*]/mo
- -------------------------------
SECURITY DEPOSIT
(If Any)
$ N/A
- -------------------------------
Upon receipt and acceptance of the Equipment subject to this Equipment
Schedule, please complete the attached Equipment Receipt and Acceptance
Report and return it to Sunrise Leasing Corporation.
- --------------------------------------------------------------------------------
LESSEE HAS READ AND IS SUBJECT TO THE CONDITIONS SET FORTH ON THE REVERSE SIDE
OF THE MASTER LEASE
IN WITNESS WHEREOF LESSEE HAS HEREBY EXECUTED THIS NON-CANCELABLE LEASE THIS
23RD DAY OF OCTOBER, 1997.
<TABLE>
<S> <C>
NAME OF LESSEE: YOU TOOLS CORPORATION dba FASTNET LESSOR: SUNRISE LEASING CORPORATION
SIGNED/s/ David K. Van Allen, CEO & VP DATE 6/13/97 SIGNED /s/ Carrie Halvorson
-------------------------------- ------- ---------------------------------
authorized signature signature signifies acceptance by Lessor
NAME AND TITLE David K. Van Allen, CEO & VP DATE 10/23/97
---------------------------- ------------
Please Print Please Print
</TABLE>
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
EXTENSION SHEET FOR UNIFORM COMMERCIAL CODE FINANCING STATEMENTS
STATE OF: PA NUMBER OF SHEETS: 1
The Equipment listed below:
<TABLE>
<CAPTION>
Quantity Description
- -------------------------------------------------------------------------------
<S> <C>
5 TNT DUAL AC BASE CHASSIS
5 SPARE 19" RACK MOUNT KIT
5 SHIELD TO ROUTE EXHAUST TO REAR
5 STANDARD S/W RELEASE FOR TNT
5 DOMESTIC POWER CORD
33 SERIES 56 48 PORT DIGITAL MODEM CARDS
11 OCTAL CT1 TI/PRI MODULE
5 100 BASE-T ETHERNET CARD
5 HYBRID ACCESS 192 S/W ENABLE
5 ISDN SIGNALLING S/W ENABLE
1 ASCEND ACCESS CONTROL
6 TNT DUAL AC BASE CHASSIS
6 SPARE 19" RACK MOUNT KIT
6 SHIELD TO ROUTE EXHAUST TO REAR
6 STANDARD S/W RELEASE FOR TNT
6 DOMESTIC POWER CORD
6 ISDN SIGNALLING S/W ENABLE
6 100 BASE-T ETHERNET CARD
6 HYBRID ACCESS 192 S/W ENABLE
28 SERIES 56 48 PORT DIGITAL MODEM CARDS
3 REDUNDANT AC POWER SUPPLY
11 OCTAL CT1 T1/PRI MODULE
</TABLE>
has been sold by Ascend Communications, Inc. and all additions, substitutions,
and upgrades thereto whether now or hereafter in the Lessee's possession. This
equipment is more fully described in SCHEDULE NO. 02-01 AND 02-02 TO MASTER
LEASE AGREEMENT 9161 between Debtor and Secured Party. This filing is made for
information purposes only. The equipment covered hereby is the subject of a
lease transaction with Debtor as Lessee and Secured Party as Lessor.
Debtor: You Tools Corporation/FASTNET
Secured Party: ASCEND Credit Corporation
<TABLE>
<CAPTION>
LOCATION: SCHEDULE # 9161-02-02
You Tools Corporation/FASTNET
2130 Arch Street
Philadelphia, PA 18001
QTY PART # DESCRIPTION EXTENDED
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6 TNT-2AC TNT DUAL AC BASE CHASSIS $[*]
6 TNT-SP-RM19 SPARE 19" RACK MOUNT KIT $[*]
6 TNT-SP-SHIELD SHIELD TO ROUTE EXHAUST TO REAR $[*]
6 TNT-SR-STD STANDARD S/W RELEASE FOR TNT $[*]
6 POW-CORD-DOM DOMESTIC POWER CORD $[*]
6 TNT-SO-ISDN ISDN SIGNALLING S/W ENABLE $[*]
6 TNT-SL-E100 100 BASE-T ETHERNET CARD $[*]
<PAGE>
6 TNT-SL-HA192 HYBRID ACCESS 192 S/W ENABLE $[*]
28 TNT-SL-DM48-S56 SERIES 56 48 PORT DIGITAL MODEM CARDS $[*]
3 TNT-SP-AC REDUNDANT AC POWER SUPPLY $[*]
11 TNT-SL-CT1 OCTAL CT1 T1/PRI MODULE $[*]
TOTAL: $489,719
</TABLE>
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
LOCATION: SCHEDULE# 9161-02-01
You Tools Corporation/FASTNET
3864 Courtney Street, #130
Bethlehem, PA 18017
QTY PART # DESCRIPTION EXTENDED
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5 TNT-2AC TNT DUAL AC BASE CHASSIS $[*]
5 TNT-SP-RM19 SPARE 19" RACK MOUNT KIT $[*]
5 TNT-SP-SHIELD SHIELD TO ROUTE EXHAUST TO REAR $[*]
5 TNT-SR-STD STANDARD S/W RELEASE FOR TNT $[*]
5 POW-CORD-DOM DOMESTIC POWER CORD $[*]
33 TNT-SL-DM48-S56 SERIES 56 48 PORT DIGITAL MODEM CARDS $[*]
11 TNT-SL-CT1 OCTAL CT1 T1/PRI MODULE $[*]
5 TNT-SL-E100 100 BASE-T ETHERNET CARD $[*]
5 TNT-SL-HA192 HYBRID ACCESS 192 S/W ENABLE $[*]
5 TNT-SO-ISDN ISDN SIGNALLING S/W ENABLE $[*]
1 AAC-CD ASCEND ACCESS CONTROL $[*]
TOTAL: $616,248
</TABLE>
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
August 31, 1998 EXHIBIT 10.12
Mr. Dave Van Allen
You Tools Corporation/FASTNET
3864 Courtney Street, #130
Bethlehem, PA 18017
Re: Master Lease Agreement No. 9161, Schedule No. 02
Dear Mr. Van Allen:
This is a letter of agreement and acknowledgment between You Tools Corporation/
FASTNET (Lessee) and Ascend Credit Corporation (Lessor) that the Rent
Commencement Date is SEPTEMBER 30, 1998 which supersedes section 2 of the Master
Lease Agreement No. 9161 and supersedes Paragraph 6 on Lease Schedule No. 02.
Except as modified by this Acknowledgment Letter, the terms and conditions of
the Master Lease Agreement and Lease Schedule shall remain in full force and
effect.
Please sign where I have marked an "X" and overnight to the address on this
letter.
If you have any questions, please don't hesitate to call me at (408) 436-8647
ext. 7538.
Regards,
ASCEND CREDIT CORPORATION
Tamara V. Nicolao
Admin./Operations
Agreed and Acknowledged by:
Lessee: You Tools Corporation/FASTNET
By: /s/ David K. Van Allen
-------------------------
Name: David K. Van Allen
-------------------------
Title: CEO
-------------------------
Date: 9/18/98
-------------------------
<PAGE>
LEASE SCHEDULE NO. 01
This Schedule and its supplements incorporate by this reference the terms and
conditions of the Master Lease Agreement, Number 9161, between Ascend Credit
Corporation (Lessor) and You Tools Corporation/FASTNET (Lessee).
1. SUPPLIER: Ascend Communications Inc.
2. LOCATION OF EQUIPMENT: See Attachment A.
3. EQUIPMENT VALUE: $346,464.00 (exclusive of sales and/or use taxes).
4. LEASE TERM: The Lease Term of the Equipment described in this Schedule
shall begin on the Rent Commencement Date referenced below in Paragraph 6
and its expiration date shall be 36 months after such Rent Commencement
Date.
5. RENT: $10,705.74 per month (exclusive of sales and/or use taxes) due and
payable at the Rent Commencement Date and on the same date of each
succeeding month of the Lease Term. The advance Rent payment shall be
$10,705.74. This amount is $ N/A for the first month and $10,705.74 for the
last 1 month(s), of the Lease Term.
6. RENT COMMENCEMENT DATE: 3/27/97
7. PURCHASE OPTION: Lessee shall have the option to purchase the Equipment for
its fair market value for continued use ("FMV"), on the expiration of this
Lease or any renewal term, provided Lessee is not in default of any of its
obligations under this Lease on such expiration date. This purchase option
may only be exercised by Lessee's written notice to Lessor not earlier than
180 days, nor later than 90 days, prior to the end of the Lease Term or any
renewal term. The purchase price for such Equipment shall be payable upon
the expiration date of such term. FMV shall be equal to the value of the
Equipment installed and in use, with consideration given to the age,
condition, utility and replacement costs for the Equipment. In the event
that Lessor and Lessee are unable to agree upon the purchase price for the
Equipment, such purchase price will be determined by an independent
appraiser to be selected by Lessor. Lessee shall be responsible for all
applicable sales and/or use taxes on the Equipment. Upon exercise of this
purchase option and payment of the purchase price, Lessor shall execute and
deliver to Lessee such documents as Lessee may reasonably request in order
to vest in Lessee all right, title and interest in the Equipment.
8. RENEWAL OPTION: Lessee shall have the option to renew this Lease, on the
expiration date of this Lease or any renewal term, for the fair market
rental for the continued use of the Equipment ("FMR") and on such other
terms as may be agreed upon by Lessor and Lessee prior to such expiration
date, provided Lessee is not in default of any of its obligations under
this lease on such expiration date. This renewal option may only be
exercised by Lessee's written notice to Lessor not earlier than 180 days,
nor later than 90 days, prior to the end of the Lease Term or any renewal
term. FMR shall be equal to the value of the monthly rental of the
Equipment installed and in use, with consideration given to the age,
condition, utility and replacement costs for the Equipment, for the renewal
term.
9. TAX BENEFITS: Lessee understands that Lessor intends to claim the "Tax
Benefits", consisting of the maximum Modified Accelerated Cost Recovery
System deductions for the minimum useful life applicable to each item of
Equipment, as provided by Sections 168(b)
<PAGE>
and (c) of the Internal Revenue Code of 1986, and analogous benefits under state
law, with respect to the Equipment. Lessee represents and warrants that: (i)
Lessee has not been, is not now, and during the term of this Lease will not
become, and will not allow the Equipment to be used by or leased to, a
tax-exempt entity or government agency; and (ii) Lessee is not now, and during
the term of this Lease will not become, a public utility. Without limitation by
the preceding sentence, Lessee agrees not to take any action, fail to take any
action, or misstate any fact which may result in any loss to Lessor of the Tax
Benefits.
Lessee agrees to pay promptly to Lessor an amount which will fully
compensate Lessor, on an after-tax basis, for any loss of the Tax Benefits,
plus interest, penalties and additions to tax, any loss in time value of
the Tax Benefits, and any taxes imposed on any such compensation payment,
resulting from Lessee's acts, omissions or misstatements, including,
without limitation, with respect to the representations and warranties in
the preceding paragraph. A loss of Tax Benefits occurs at the earliest of:
(i) the happening of any event causing the loss; (ii) payment by Lessor of
any additional tax resulting from the loss; or (iii) any adjustment to the
tax return of Lessor. Lessor's right to recovery of a loss of Tax Benefits
shall survive the expiration or termination of this Lease.
10. DESCRIPTION OF EQUIPMENT: See Schedule A which is attached hereto and made
a part hereof by this reference.
The person executing this Schedule on behalf of Lessee hereby certifies that he
or she has read, and is duly authorized to execute, this Schedule
Accepted by:
Ascend Credit Corporation LESSEE: You Tools Corporation/FASTNET
BY: BY: /s/ David K. Van Allen
---------------------------------- -----------------------------------
NAME: NAME: David K. Van Allen
-------------------------------- ---------------------------------
TITLE: TITLE: CEO
------------------------------- --------------------------------
DATE: DATE: 3/26/97
-------------------------------- ---------------------------------
<PAGE>
LEASE SCHEDULE NO. 02
This Schedule and its supplements incorporate by this reference the terms and
conditions of the Master Lease Agreement, Number 9161, between Ascend Credit
Corporation (Lessor) and You Tools Corporation/FASTNET (Lessee).
1. SUPPLIER: Ascend Communications, Inc.
2. LOCATION OF EQUIPMENT: See Attachment A.
3. EQUIPMENT VALUE: $1,105,967.00 (exclusive of sales and/or use taxes).
4. LEASE TERM: The Lease Term of the Equipment described in this Schedule
shall begin on the Rent Commencement Date referenced below in Paragraph 6
and its expiration date shall be 36 months after such Rent Commencement
Date.
5. RENT: $34,174.38 per month (exclusive of sales and/or use taxes) due and
payable at the Rent Commencement Date and on the same date of each
succeeding month of the Lease Term. The advance Rent payment shall be
$68,348.76. This amount is $34,174.38 for the first month and $34,174.38
for the last 1 month(s), of the Lease Term.
6. RENT COMMENCEMENT DATE: September 30, 1998
7. PURCHASE OPTION: Lessee shall have the option to purchase the Equipment for
its fair market value for continued use ("FMV"), on the expiration of this
Lease or any renewal term, provided Lessee is not in default of any of its
obligations under this Lease on such expiration date. The purchase option
may only be exercised by Lessee's written notice to Lessor not earlier than
180 days, nor later than 90 days, prior to the end of the Lease Term or any
renewal term. The purchase price for such Equipment shall be payable upon
the expiration date of such term. FMV shall be equal to the value of the
Equipment installed and in use, with consideration given to the age,
condition, utility and replacement costs for the Equipment. In the event
that Lessor and Lessee are unable to agree upon the purchase price for the
Equipment, such purchase price will be determined by an independent
appraiser to be selected by Lessor. Lessee shall be responsible for all
applicable sales and/or use taxes on the Equipment. Upon exercise of this
purchase option and payment of the purchase price, Lessor shall execute and
deliver to Lessee such documents as Lessee may reasonably request in order
to vest in Lessee all right, title and interest in the Equipment.
8. RENEWAL OPTION: Lessee shall have the option to renew this Lease, on the
expiration date of this Lease or any renewal term, for the fair market
rental for the continued use of the Equipment ("FMR") and on such other
terms as may be agreed upon by Lessor and Lessee prior to such expiration
date, provided Lessee is not in default of any of its obligations under
this lease on such expiration date. This renewal option may only be
exercised by Lessee's written notice to Lessor not earlier than 180 days,
nor later than 90 days, prior to the end of the Lease Term or any renewal
term. FMR shall be equal to the value of the monthly rental of the
Equipment installed and in use, with consideration given to the age,
condition, utility and replacement costs for the Equipment, for the renewal
term.
9. TAX BENEFITS: Lessee understands that Lessor intends to claim the "Tax
Benefits", consisting of the maximum Modified Accelerated Cost Recovery
System deductions for the
<PAGE>
minimum useful life applicable to each item of Equipment, as provided by
Sections 168(b) and (c) of the Internal Revenue Code of 1986, and analogous
benefits under state law, with respect to the Equipment. Lessee represents and
warrants that: (i) Lessee has not been, is not now, and during the term of this
Lease will not become, and will not allow the Equipment to be used by or leased
to, a tax-exempt entity or government agency; and (ii) Lessee is not now, and
during the term of this Lease will not become, a public utility. Without
limitation by the preceding sentence, Lessee agrees not to take any action, fail
to take any action, or misstate any fact which may result in any loss to Lessor
of the Tax Benefits.
Lessee agrees to pay promptly to Lessor an amount which will fully
compensate Lessor, on an after-tax basis, for any loss of the Tax Benefits,
plus interest, penalties and additions to tax, any loss in time value of
the Tax Benefits, and any taxes imposed on any such compensation payment,
resulting from Lessee's acts, omissions or misstatements, including,
without limitation, with respect to the representations and warranties in
the preceding paragraph. A loss of Tax Benefits occurs at the earliest of:
(i) the happening of any event causing the loss; (ii) payment by Lessor of
any additional tax resulting from the loss; or (iii) any adjustment to the
tax return of Lessor. Lessor's right to recovery of a loss of Tax Benefits
shall survive the expiration or termination of this Lease.
10. DESCRIPTION OF EQUIPMENT: See Schedule A which is attached hereto and made
a part hereof by this reference.
The person executing this Schedule on behalf of Lessee hereby certifies that he
or she has read, and is duly authorized to execute, this Schedule
Accepted by:
Ascend Credit Corporation LESSEE: You Tools Corporation/FASTNET
-------------------------------
BY: BY: /s/ David K. Van Allen
---------------------------------- -----------------------------------
NAME: NAME: David K. Van Allen
---------------------------------- ---------------------------------
TITLE: TITLE: CEO
------------------------------- --------------------------------
DATE: DATE: 9/18/98
-------------------------------- ---------------------------------
<PAGE>
EXTENSION SHEET FOR UNIFORM COMMERCIAL CODE FINANCING STATEMENTS
STATE OF: PA NUMBER OF SHEETS: 1
The Equipment listed below:
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
<S> <C>
5 TNT DUAL AC BASE CHASSIS
5 SPARE 19" RACK MOUNT KIT
5 SHIELD TO ROUTE EXHAUST TO REAR
5 STANDARD S/W RELEASE FOR TNT
5 DOMESTIC POWER CORD
33 SERIES 56 48 PORT DIGITAL MODEM CARDS
11 OCTAL CT1 TI/PRI MODULE
5 100 BASE-T ETHERNET CARD
5 HYBRID ACCESS 192 S/W ENABLE
5 ISDN SIGNALLING S/W ENABLE
1 ASCEND ACCESS CONTROL
6 TNT DUAL AC BASE CHASSIS
6 SPARE 19" RACK MOUNT KIT
6 SHIELD TO ROUTE EXHAUST TO REAR
6 STANDARD S/W RELEASE FOR TNT
6 DOMESTIC POWER CORD
6 ISDN SIGNALLING S/W ENABLE
6 100 BASE-T ETHERNET CARD
6 HYBRID ACCESS 192 S/W ENABLE
28 SERIES 56 48 PORT DIGITAL MODEM CARDS
3 REDUNDANT AC POWER SUPPLY
11 OCTAL CT1 T1/PRI MODULE
</TABLE>
has been sold by Ascend Communications, Inc. and all additions, substitutions,
and upgrades thereto whether now or hereafter in the Lessee's possession. This
equipment is more fully described in SCHEDULE NO. 02-01 AND 02-02 TO MASTER
LEASE AGREEMENT 9161 between Debtor and Secured Party. This filing is made for
information purposes only. The equipment covered hereby is the subject of a
lease transaction with Debtor as Lessee and Secured Party as Lessor.
Debtor: You Tools Corporation/FASTNET
Secured Party: ASCEND Credit Corporation
<PAGE>
LOCATION: SCHEDULE # 9161-02-02
You Tools Corporation/FASTNET
2130 Arch Street
Philadelphia, PA 18001
<TABLE>
<CAPTION>
QTY PART # DESCRIPTION EXTENDED
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
6 TNT-2AC TNT DUAL AC BASE CHASSIS $[ * ]
6 TNT-SP-RM19 SPARE 19" RACK MOUNT KIT $[ * ]
6 TNT-SP-SHIELD SHIELD TO ROUTE EXHAUST TO REAR $[ * ]
6 TNT-SR-STD STANDARD S/W RELEASE FOR TNT $[ * ]
6 POW-CORD-DOM DOMESTIC POWER CORD $[ * ]
6 TNT-SO-ISDN ISDN SIGNALLING S/W ENABLE $[ * ]
6 TNT-SL-E100 100 BASE-T ETHERNET CARD $[ * ]
6 TNT-SL-HA192 HYBRID ACCESS 192 S/W ENABLE $[ * ]
28 TNT-SL-DM48-S56 SERIES 56 48 PORT DIGITAL MODEM CARDS $[ * ]
3 TNT-SP-AC REDUNDANT AC POWER SUPPLY $[ * ]
11 TNT-SL-CT1 OCTAL CT1 T1/PRI MODULE $[ * ]
TOTAL: $489,719
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
<PAGE>
LOCATION: SCHEDULE # 9161-02-01
You Tools Corporation/FASTNET
3864 Courtney Street, #130
Bethlehem, PA 18017
<TABLE>
<CAPTION>
QTY PART # DESCRIPTION EXTENDED
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
5 TNT-2AC TNT DUAL AC BASE CHASSIS $[ * ]
5 TNT-SP-RM19 SPARE 19" RACK MOUNT KIT $[ * ]
5 TNT-SP-SHIELD SHIELD TO ROUTE EXHAUST TO REAR $[ * ]
5 TNT-SR-STD STANDARD S/W RELEASE FOR TNT $[ * ]
5 POW-CORD-DOM DOMESTIC POWER CORD $[ * ]
33 TNT-SL-DM48-S56 SERIES 56 48 PORT DIGITAL MODEM CARDS $[ * ]
11 TNT-SL-CT1 OCTAL CT1 T1/PRI MODULE $[ * ]
5 TNT-SL-E100 100 BASE-T ETHERNET CARD $[ * ]
5 TNT-SL-HA192 HYBRID ACCESS 192 S/W ENABLE $[ * ]
5 TNT-SO-ISDN ISDN SIGNALLING S/W ENABLE $[ * ]
1 AAC-CD ASCEND ACCESS CONTROL $[ * ]
TOTAL: $616,248
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
<PAGE>
EXHIBIT 10.13
SUN MICROSYSTEMS
FINANCE
A SUN MICROSYSTEMS, INC. BUSINESS
MASTER LEASE AGREEMENT
MASTER LEASE # SL2321
Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor, subject
to the following terms of this Master Lease Agreement ("Master Lease") and any
Lease Schedule ("Schedule"), collectively referred to as the Lease ("Lease"),
the personal property described in any Schedule together with all attachments,
replacements, parts, substitutions, additions, upgrades, accessories, software
licenses and operating manuals (the "Product"). Each Schedule shall constitute a
separate, distinct, and independent Lease and contractual obligation of Lessee.
1. COMMENCEMENT DATE AND TERM
The initial lease term ("Initial Term") and Lessee's rental obligations shall
begin on the Commencement Date and continue for the number of Rental Periods
specified in the Lease as set forth in Section 2 below and shall renew
automatically thereafter until terminated by either party upon not less than
ninety (90) days prior written notice. The Commencement Date with respect to
each item of Product shall be the 16th day after date of shipment to Lessee.
2. RENT AND RENTAL PERIOD
All rental payments and any other amounts payable under a Lease are collectively
referred to as "Rent". The Rental Period shall mean the rental payment period of
either calendar months, quarters, or as otherwise specified in each Schedule.
Rent for the specified Rental Period is due and payable in advance, to the
address specified in Lessor's invoice, on the first day of each Rental Period
during the Initial Term and any extension (collectively, the "Lease Term"),
provided, however, that Rent for the period of time (if any) from the
Commencement Date to the first day of the first Rental Period shall begin to
accrue on the Commencement Date. If any Rent is not paid when due, Lessee will
pay a service fee equal to five percent (5%) of the overdue amount plus interest
at the rate of one and one half percent (1.5%) per month or the maximum legal
interest rate, whichever is less.
3. NET LEASE, TAXES AND FEES
Each Schedule shall constitute a net lease and payment of Rent shall be absolute
and unconditional, and shall not be subject to any abatement, reduction, set
off, defense, counterclaim, interruption, deferment or recoupment for any reason
whatsoever. Lessee agrees to pay Lessor when due shipping charges, fees,
assessments and all taxes (municipal, state and federal) imposed upon a Lease or
the Product or its ownership, leasing, renting, possession or use except for
taxes based on Lessor's income.
4. TITLE
Product shall always remain personal property. Lessee shall have no right or
1
<PAGE>
interest in the Product except as provided in this Master Lease and the
applicable Schedule and shall hold the Product subject and subordinate to the
rights of Lessor. Lessee agrees to execute UCC financing statements as and when
requested by Lessor and hereby appoints Lessor as its attorney-in-fact to
execute such financing statements. Lessor may file a photocopy of any Lease as a
financing statement.
Lessee will, at its expense, keep the Product free and clear from any liens or
encumbrances of any kind (except any caused by Lessor) and will indemnify and
hold Lessor harmless from and against any loss or expense caused by Lessee's
failure to do so. Lessee shall give Lessor immediate written notice of any
attachment or judicial process affecting the Product or Lessor's ownership. If
requested, Lessee will label the Product as the property of Lessor and shall
allow, subject to Lessee's reasonable security requirements, the inspection of
the Product during regular business hours.
5. USE, MAINTENANCE AND REPAIR
Lessee, at its own expense, shall keep the Product in good repair, appearance
and condition, other than normal wear and tear and shall obtain and keep in
effect throughout the term of the Schedule a hardware and software maintenance
agreement with the manufacturer or other party acceptable to Lessor. All parts
furnished in connection with such repair and maintenance shall be manufacturer
authorized parts and shall immediately become components of the Product and the
property of Lessor. Lessee shall use the Product in compliance with the
manufacturer's or supplier's suggested guidelines.
6. DELIVERY AND RETURN OF PRODUCT
Lessee assumes the full expense of transportation, insurance, and installation
to Lessee's site. Upon termination of each Schedule, Lessee will provide Lessor
a letter from the manufacturer certifying that the Product is in good operating
condition and is eligible for continued maintenance and that the operating
system is at the then current level, unless under a Sun service contract during
the Lease Term. Lessee, at its expense, shall deinstall, pack and ship the
Product to a U.S. location identified by Lessor. Lessee shall remain obligated
to pay Rent on the Product until the Product and certification are received by
Lessor.
7. ASSIGNMENT AND RELOCATION
Lessee may sublease or assign its rights under this agreement with Lessor's
prior written consent, which consent shall not be unreasonably withheld,
subject, however, to any terms and conditions which Lessor may require. No
permitted assignment or sublease shall relieve Lessee of any of its obligations
hereunder.
Lessee acknowledges Lessor may sell and/or assign its interest or grant a
security interest in each Lease and/or the Product to an assignee ("Lessor's
Assignee"), so long as Lessee is not in default hereunder. Lessor or Lessor's
Assignee shall not interfere with Lessee's right of quiet enjoyment and
2
<PAGE>
use of the Product. Upon the assignment of each Lease, Lessor's Assignee
shall have any and all discretions, rights and remedies of Lessor and all
references to Lessor shall mean Lessor's Assignee. In no event shall any
assignee of Lessor be obligated to perform any duty, covenant or condition under
this Lease and Lessee agrees it shall pay such assignee without any defense,
rights of set-off or counterclaims and shall not hold or attempt to hold such
assignee liable for any of Lessor's obligations hereunder.
Lessee, at its expense, may relocate Product (after packing it for shipment in
accordance with the manufacturer's instructions) to a different address with
thirty (30) days prior written notice to Lessor. The Product shall at all times
be used solely within the United States.
8. UPGRADES AND ADDITIONS
Lessee may affix or install any accessory, addition, upgrade, equipment or
device on the Product ("Additions") provided that such Additions (i) can be
removed without causing material damage to the Product, (ii) do not reduce the
value of the Product and (iii) are obtained from or approved by Sun Microsystems
Computer Corporation and are not subject to the interest of any third party
other than Lessor. Any other Additions may not be installed without Lessor's
prior written consent. At the end of the Schedule Term, Lessee shall remove any
Additions which (i) were not leased by Lessor and (ii) are readily removable
without causing material damage or impairment of the intended function, use, or
value of the Product and restore the Product to its original configuration. Any
Additions which are not so removable will become the Lessor's property (lien
free).
9. LEASE END OPTIONS
Upon written notice given at least ninety (90) days prior to expiration of the
Lease Term, and provided Lessee is not in default under any Schedule, Lessee may
(i) exercise any purchase option set forth on the Schedule, or (ii) renew the
Schedule for a minimum extension period of twelve (12) months, or (iii) return
the Product to Lessor at the expiration date of the Schedule pursuant to Section
6 above.
10. INSURANCE, LOSS OR DAMAGE
Effective upon shipment of Product to Lessee and until Product is received by
Lessor, Lessee shall provide at its expense (i) insurance against the loss or
theft or damage to the Product for the full replacement value, and (ii)
insurance against public liability and property damage. Lessee shall provide a
certificate of insurance that such coverage is in effect, upon request by
Lessor, naming Lessor as loss payee and/or additional insured as may be
required.
Lessee shall bear the entire risk of loss, theft, destruction of or damage to
any item of Product. No loss or damage shall relieve Lessee of the obligation to
pay Rent or any other obligation under the Schedule. In the event of loss or
damage, Lessee shall promptly notify Lessor and shall, at Lessor's option, (i)
place the Product in good condition and repair, or (ii) replace the Product with
lien free Product of the same model, type
3
<PAGE>
and configuration in which case the relevant Schedule shall continue in full
force and effect and clear title in such Product shall automatically vest in
Lessor, or (iii) pay Lessor the present value of remaining Rent plus the buyout
purchase option price provided for in the applicable Schedule.
11. SELECTION, WARRANTIES AND
LIMITATION OF LIABILITY
Lessee acknowledges that it has selected the Product and disclaims any reliance
upon statements made by Lessor. Lessee acknowledges and agrees that use and
possession of the Product by Lessee shall be subject to and controlled by the
terms of any manufacturer's or, if appropriate, supplier's warranty, and Lessee
agrees to look solely to the manufacturer or, if appropriate, supplier with
respect to all mechanical, service and other claims, and the right to enforce
all warranties made by said manufacturer are hereby assigned to Lessee for the
term of the Schedule.
EXCEPT AS SPECIFICALLY PROVIDED HEREIN, LESSOR HAS NOT MADE AND DOES NOT MAKE
ANY REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, NON-INFRINGEMENT, THE DESIGN,
QUALITY, CAPACITY OR CONDITION OF THE PRODUCT, ITS MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE. IT BEING AGREED THAT AS THE LESSEE SELECTED BOTH THE
PRODUCT AND THE SUPPLIER, NO DEFECT, EITHER PATENT OR LATENT SHALL RELIEVE
LESSEE OF ITS OBLIGATION HEREUNDER. LESSEE AGREES THAT LESSOR SHALL NOT BE
LIABLE FOR SPECIFIC PERFORMANCE OR ANY LIABILITY, LOSS, DAMAGE OR EXPENSE OF ANY
KIND INCLUDING, WIHTOUT LIMITATION, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR
SPECIAL DAMAGES OF ANY NATURE, DAMAGES ARISING FROM THE LOSS OF USE OF PRODUCT,
LOST DATA, LOST PROFITS, OR FOR ANY CLAIM OR DEMAND.
12. INDEMNITY
Lessee shall indemnify and hold harmless Lessor and Lessor's Assignee from and
against any and all claims, actions, suits, proceedings, liabilities, damages,
penalties, costs and expenses (including reasonable attorneys' fees), arising
out of the use, operation, possession, ownership (for strict liability in tort
only), selection, leasing, maintenance, delivery or return of any item of
Product.
13. DEFAULT AND REMEDIES
Lessee shall be in default of any Lease if (i) Lessee fails to pay Rent within
ten (10) days of due date; (ii) Lessee fails to perform or observe or breaches
any covenant or condition or any representation or warranty in such Lease, and
such failure or breach continues unremitted for a period of ten (10) days after
written notice from Lessor; (iii) Lessee, except as expressly permitted in the
Lease, attempts to move, sell,
4
<PAGE>
transfer, encumber, or sublet without consent any item of Product leased under
such Lease; (iv) Lessee files or has filed against it a petition in bankruptcy
or becomes insolvent or makes an assignment for the benefit of creditors or
consents to the appointment of a trustee or receiver or either shall be
appointed for Lessee or for a substantial part of its property without its
consent, or (v) Lessee or any guarantor of Lessee is declared legally deceased
or if Lessee shall terminate its existence by merger, consolidation, sale of
substantially all of its assets or otherwise.
Upon default, Lessor may, at its option, take one or more of the following
actions; (i) declare all sums due and to become due under the Schedule
immediately due and payable, (ii) require Lessee to return immediately all
Product leased under such Schedule to Lessor in accordance with Paragraph 6
hereof, (iii) without breach of the peace take immediate possession of and
remove the Product; (iv) sell any or all of the Product at public or private
sale or otherwise dispose of, hold, use or lease to others, or; (vi) exercise
any right or remedy which may be available to Lessor under applicable law,
including the right to recover damages for the breach of the Schedule. In
addition, Lessee shall be liable for reasonable attorney's fees, other costs and
expenses resulting from any default, or the exercise of Lessor's remedies,
including placing such Product in the condition required by Paragraph 6 hereof.
Each remedy shall be cumulative and in addition to any other remedy otherwise
available to Lessor at law or in equity. No express or implied waiver of any
default shall constitute a waiver of any of Lessor's other rights.
14. LESSEE'S REPRESENTATIONS
Lessee represents and warrants for this Master Lease and each Schedule that the
execution, delivery and performance by Lessee have been duly authorized by all
necessary corporate action; the individual executing was duly authorized to do
so; the Master Lease and each Schedule constitute valid binding agreements of
the Lessee enforceable in accordance with their terms that all information
supplied by Lessee, including but not limited to the credit application and
other financial information concerning Lessee, is accurate in all material
respects as of the date provided; and if there is any material change in such
information prior to manufacturer's or, if appropriate, supplier's shipment of
Product under the Schedule, Lessee will advise Lessor of such change in writing.
15. APPLICABLE LAW
This Master Lease and each Schedule shall in all respects be governed by and
construed in accordance with the laws of the state of California without giving
effect to the principles of conflict of laws.
16. MISCELLANEOUS
Lessee agrees to execute and deliver to Lessor such further documents,
including, but not limited to, financing statements, assignments, and financial
reports and take such further action as Lessor may reasonably request to protect
Lessor's interest in the Product.
5
<PAGE>
The performance of any act or payment by Lessor shall not be deemed a waiver of
any obligation or default on the part of Lessee. Lessor's failure to require
strict performance by Lessee of any of the provisions of this Master Lease shall
not be a waiver thereof. No rights or remedies referred to in Article 2A of the
Uniform Commercial Code will be conferred on Lessee unless expressly granted in
this Master Lease.
This Master Lease together with any Schedule constitutes the entire
understanding between the parties and supersedes any previous representations or
agreements whether verbal or written with respect to the use, possession and
lease of the Product described in that Schedule. In the event of a conflict, the
terms of the Schedule shall prevail over the Master Lease.
No amendment or change of any of the terms or conditions herein shall be binding
upon either party unless they are made in writing and are signed by an
authorized representative of each party. Each Schedule is non-cancellable for
the full term specified and each Schedule shall be binding upon, and shall inure
to the benefit of Lessor, Lessee, and their respective successors, legal
representatives and permitted assigns.
All agreements, representations and warranties contained herein shall be for the
benefit of Lessor and shall survive the execution, delivery and termination of
this Master Lease, any Schedule or related document.
Any provision of this Master Agreement and/or each Schedule which is
unenforceable shall not cause any other remaining provision to be ineffective or
invalid. The captions set forth herein are for convenience only and shall not
define or limit any of the terms hereof. Any notices or demands in connection
with any Schedule shall be given in writing by regular or certified mail at the
address indicated in the Schedule, or to any other address specified.
6
<PAGE>
THIS MASTER LEASE SHALL BECOME FFECTIVE
ON THE DATE ACCEPTED BY LESSOR.
You Tools Corporation, for its
LESSOR: SUN MICROSYSTEMS FINANCE LESSEE: Fastnet Division
A Sun Microsystems, Inc. Business -------------------------------
(Full legal name of Lessee)
(Business Entity)
BY: /s/ Gregg E. Gerst BY: /s/ David K. Van Allen
------------------------- ----------------------------
(Authorized Signature) (Authorized Signature)
NAME: Gregg E. Gerst NAME: David K. Van Allen
------------------------ ---------------------------
TITLE: Manager, U.S. Leasing Programs TITLE: VP & CEO
----------------------------- --------------------------
DATE: February 10, 1997
-----------------
7
<PAGE>
<TABLE>
<S> <C>
Lease Schedule ("Schedule") No. ___02_____
To Master Lease Agreement ("Master Lease") No. SL2321
- ------------------------------------------------------- --------------------------------------------------------------
LESSEE LESSOR
- ------------------------------------------------------- --------------------------------------------------------------
NAME: You Tools Corporation, for its SUN MICROSYSTEMS FINANCE
Fastnet Division A SUN MICROSYSTEMS, INC. BUSINESS
- ------------------------------------------------------- --------------------------------------------------------------
ADDRESS: 961 Marcon Boulevard 2550 GARCIA AVENUE
Allentown, PA 18103 MOUNTANVIEW, CA 94043
- ------------------------------------------------------- --------------------------------------------------------------
ADMIN. CONTACT: Phil Weller
- ------------------------------------------------------- --------------------------------------------------------------
PHONE NO.: 610-954-5200 PHONE NO.: 800-735-5786 FAX NO.: 800-786-8688
- ------------------------------------------------------- --------------------------------------------------------------
BILLING ADDRESS PAYMENT SCHEDULE
- ------------------------------------------------------- --------------------------------------------------------------
Two Courtney Place, Suite 130 LEASE TERM: 24 Months
3854 Courtney Street RENTAL: $[ * ] PER Month
Bethlehem, PA 18017
- ------------------------------------------------------- --------------------------------------------------------------
LESSEE PURCHASE ORDER; 42PW-2391 SALES/USE TAX: Payment amount may be increased to include
applicable sales/use tax.
- ------------------------------------------------------- --------------------------------------------------------------
CONTACT:
- ------------------------------------------------------- --------------------------------------------------------------
PHONE NO.:
- ------------------------------------------------------- -------------------------------------------------------------
LOCATION OF PRODUCT END OF LEASE OPTIONS
- ------------------------------------------------------- --- ---- ----------------------------------------------------
Same as billing address X FMV PURCHASE OR RENWAL
- ------------------------------------------------------- ---- ----------------------------------------------------
$1 PURCHASE OPTION
- ------------------------------------------------------- ---- ----------------------------------------------------
10% PURCHASE OPTION
- -------------------------------------------------------
OTHER:
- ------------------------------------------------------- ----
CONTACT: Phil Weller
- -------------------------------------------------------
PHONE NO: 610-954-5200
- ------------------------------------------------------- -------------------------------------------------------------
PRODUCT DESCRIPTION AS DESCRIBED IN RARITAN VALLEY COMPUTER CORP. SALES QUOTATION DATED OCTOBER 10, 1997 TOTALING
$[ * ] ATTACHED HERETO.
- ----------------------------------------------------------------------------------------------------------------------
MASTER AGREEMENT: This Schedule is issued and effective this date set forth below pursuant to the Master Lease
identified above. All of the terms, conditions, representations and warranties of the Master Lease are hereby
incorporated herein and made a part hereof as if they were expressly set forth in this Schedule and this Schedule
constitutes a separately enforceable, complete and independent lease with respect to the Product described herein. By
their execution and delivery of this Schedule, the parties hereby affirm all of the terms, conditions, representations
and warranties of the Master Lease.
The additional terms set forth on the reverse side hereof are made a part of this Schedule.
- ----------------------------------------------------------------------------------------------------------------------
AGREED AND ACCEPTED BY: AGREED AND ACCEPTED BY:
SUN MICROSYSTEMS FINANCE LESSEE: YOU TOOLS CORPORATION, FOR ITS
A SUN MICROSYSTEMS, INC. BUSINESS FASTNET DIVISION
BY: /s/ Robert J. Reinke BY: /s/ Stanley F. Bielicki
----------------------------- ----------------------------------
NAME: Robert J. Reinke NAME: Stanley F. Bielicki
-------------------------- --------------------------------
TITLE: Operations Manager TITLE: CFO
-------------------------- --------------------------------
DATE: October 28, 1997 DATE: 10/24/97
-------------------------- --------------------------------
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
</TABLE>
8
<PAGE>
Lease Agreement EXHIBIT 10.14
Lease Number: 7221271
Vendor/Supplier of Equipment
Corporate Networking, Inc.
2206 Allebach Lane
Lansdale, PA 19446 (610) 584-0196
Note: VENDOR IS NOT AN AGENT OR REPRESENTATIVE OF THE LESSOR, AND IS NOT
AUTHORIZED TO MODIFY ANY OF THE TERMS OF THIS LEASE
- --------------------------------------------------------------------------------
Schedule of Payments
Term: Number of Payments: [ * ] @ [ * ] per month*
*Except as otherwise indicated: / / Quarterly / / Other
(Note: Applicable taxes and insurance may be added; see Paragraphs 10 and 12)
- --------------------------------------------------------------------------------
EQUIPMENT DESCRIPTION, (includes serial numbers)
SEE EQUIPMENT SCHEDULE "A"
/ / Check here if separate equipment is listed
- --------------------------------------------------------------------------------
PAYABLE AT SIGNING OF LEASE (check one)
/ / Security Deposit (see paragraphs 6 and 15) $______
/ / First and Last ONE Total Payment [ * ]
/ / Other: $_______________
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION (IF OTHER THAN BELOW)
(Attach additional schedule if locations differ for each item of equipment)
3864 Courtney Street, Two Courtney Place, Suite 130, Bethlehem, PA 18017
- --------------------------------------------------------------------------------
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
ACCEPTANCE OF LEASED EQUIPMENT
As Lessee, you acknowledge that the equipment covered by this Lease has been
completely and satisfactorily delivered, and after full inspection is accepted
for all purposes of the Lease. Your acceptance shall be deemed effective and
irrevocable forty-eight (48) hours after delivery of the Equipment if you do not
notify us of nonacceptance, or on the date you sign the Certificate of
Acknowledgment and Acceptance of Leased Equipment, whichever is earlier.
- -------------------------------------------------------------------------------
Dear Lessee: We have written this Lease Agreement in plain language because we
want you to fully understand its items. Please read your copy of this Lease
carefully and feel free to ask us any questions you may have about it. We use
the words YOU and YOUR to mean the Lessee indicated below. The words WE, US, and
OUR refer to the Lessor indicated below.
1. LEASE AGREEMENT: You agree to lease from us and we agree to lease to
you, the equipment listed above or on any schedule to this Lease. You
unconditionally promise to pay us the sum of all of the rental payments
indicated above or on any schedule. The amount of each rental payment
shown above or on any schedule is based on our estimated total cost of
the equipment including, if applicable, installation costs. The rental
payment shall be raised or lowered, in a proportionate manner, if the
actual cost of the equipment is greater than or less than the estimate,
and you authorize us to adjust the rental payment by up to ten percent
(10%) if it is necessary. You authorize us to insert in this Lease any
serial numbers and other identification data about the equipment, as
well as any other omitted factual matters.
2. UCC-ARTICLE 2A: You agree that this Lease is a "Financial Lease" under
Article 2A of the Uniform Commercial Code ("UCC"). You acknowledge
that: (a) we did not select, manufacture or supply the equipment, but
at your request we have purchased the equipment for lease to you; and
(b) based on your own judgment, you have selected the vendor or
supplier of the equipment (indicated above), and you have selected the
particular equipment that you are leasing from us. You agree that you
have approved any purchase or supply contract between us and the vendor
before signing this Lease; or, if you have entered into a purchase
contract for the equipment, you agree to assign it to us effective when
we pay for the equipment. You may have rights under the supply or
purchase contracts, and you may contact the supplier for a description
of those rights or any warranties. To the extent permitted by
applicable law, you waive any and all rights and remedies conferred
upon you under UCC Sections 2A-303 and 2A-508 through 522.
3. NO WARRANTIES: We are leasing the equipment to you "AS IS". WE MAKE NO
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE
OR ORDINARY USE IN CONNECTION WITH THIS LEASE. YOU UNDERSTAND AND AGREE
THAT WE ARE INDEPENDENT FROM THE VENDOR OR SUPPLIER OF THE EQUIPMENT,
AND THAT NEITHER THE VENDOR NOR ANY OTHER PERSON IS OUR AGENT, NOR ARE
THEY AUTHORIZED TO WAIVE OR CHANGE ANY TERM OR CONDITION OF THIS LEASE.
YOU AGREE THAT NO REPRESENTATION, GUARANTEE OR
<PAGE>
WARRANTY BY THE VENDOR OR OTHER PERSON IS BINDING ON US. So long as you
are not in default under any of the terms of this Lease, we transfer to
you any warranties made to us, as the owner of the equipment, by the
Vendor, manufacturer or supplier. YOU AGRE THAT ANY BREACH BY THE
VENDOR OR OTHER PERSON WILL NOT RELIEVE OR EXCUSE YOUR OBLIGATIONS TO
US. Regardless of cause, you will not assert any claim whatsoever
against us for loss of proceeds you expected to make or any other
direct, consequential, special or indirect damages. If you have entered
into a maintenance agreement for the equipment, and the cost of the
maintenance is included in your monthly payments, you acknowledge that
we are not responsible for any service, repairs, or maintenance of the
equipment, and that we are not a party to the maintenance agreement; if
you have a dispute regarding maintenance or service, you will
nevertheless continue to pay us all payments due under this Lease and
any schedules to this Lease.
4. NON-CANCELLABLE LEASE: THIS LEASE CANNOT BE CANCELED BY YOU FOR ANY
REASON.
ADDITIONAL TERMS AND CONDITIONS WHICH ARE PART OF THIS LEASE ARE
PRINTED ON THE REVERSE SIDE
ACCEPTED BY LESSOR : Middle States Corporation
By /s/ Duane E. Rouba PRESIDENT
--------------------------------------------
Authorized Signature Title
DUANE E. ROUBA
8/13/97
----------------
Date
Mailing Address: P.O. Box 286
Route 202
Bedminster, NJ 07921
ACCEPTED BY LESSEE:
YOU TOOLS CORPORATION
- --------------------- ----------------------------------------
Full Legal Name Federal Tax ID # or Social Security #
961 MARCON BLVD. 610-289-1100
- ---------------- ----------------------------------------
BILLING ADDRESS PHONE # FAX #
ALLENTOWN, PA 18103
- ----------------------------------------------------------------------------
CITY COUNTY STATE ZIP
THE UNDERSIGNED HEREBY AGREES TO ALL OF THE TERMS AND CONDITIONS AS SET FORTH ON
BOTH SIDES OF THIS LEASE AGREEMENT (AND ANY SCHEDULE TO THIS LEASE AND CERTIFIES
THAT THE EQUIPMENT SHALL BE USED FOR BUSINESS PURPOSES ONLY.
<PAGE>
By /s/ David Van Allen 7/28/97
----------------------------------------------------------------
AUTHORIZED SIGNATURE DATE
DAVID VAN ALLEN CEO
- ------------------------------------------------------------------
PRINT NAME OF SIGNER TITLE
- --------------------------------------------------------------------------------
PERSONAL GUARANTY
I hereby acknowledge that I am receiving a benefit from this lease, and
I unconditionally guarantee the prompt payment in full of all obligations of the
Lessee under this Lease. I further acknowledge that this lease may be amended
from time by execution of lease schedules and that by signing below I represent
and acknowledge that a "continuing guaranty" is being given, which shall be in
full force and effect and apply to all such future schedules. This guaranty
shall remain and continue in full force and effect as to any renewal,
modification or extension of the lease, and shall further apply to any
additional leases entered into between the lessor and the lessee from the date
of this guaranty forward, whether or not I have received notice of or consented
to such renewal, modification extension or additional leases. I understand that
the lessor in entering into such renewals, modifications, extensions or
additional lease transactions, shall be relying upon my guarantee herein. I also
agree that you, the lessor may make other arrangements with the lessee, such as
releasing or compromising the lessee's obligations and I will still be
responsible for those payments and other obligations. You do not have to notify
me if the Lessee fails to meet all of its obligations under the lease. If the
lessee fails to meet all of its obligations, I will immediately pay in
accordance with the default provisions of the Lease all sums due under the
original terms of the Lease, and I will perform all other obligations of the
Lessee under the Lease, and I agree that you do not have to proceed first
against the Lessee or exhaust other collateral before I am required to satisfy
my obligations under this guaranty. I will reimburse you for all the expenses
you incur in enforcing any of your rights against the Lessee or me, including
attorney's fees.
If this is a corporate or partnership guaranty, it is authorized by the
Board of Directors of the guaranteeing corporation, or by the partnership
agreement. THIS GUARANTY SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MINNESOTA. I AGREE AND CONSENT TO THE JURISDSICTION OF THE FEDERAL AND STATE
COURTS LOCATED IN HENNEPIN COUNTY, MINNESOTA, FOR THE DETERMINATION OF DISPUTES
BETWEEN US. I agree and consent that you may serve me by registered or certified
mail, which will be sufficient to obtain jurisdiction. No payment by me under
this guaranty shall entitle me, by subrogation or otherwise, to any payment from
the Lessee or out of the property or other assets of the Lease. I WAIVE TRIAL BY
JURY IN ANY ACTION BETWEEN US.
<TABLE>
<S> <C> <C> <C>
- --------------------------------- --------------------------------------------------------------------
WITNESS SIGNATURE DATED PERSONAL GUARANTOR SIGNATURE, AN INDIVIDUAL (No titles) DATED
- --------------------------------- --------------------------------------------------------------------
WITNESS SIGNATURE DATED PERSONAL GUARANTOR SIGNATURE, AN INDIVIDUAL (No titles) DATED
</TABLE>
<PAGE>
5. DELIVERY OF EQUIPMENT: You request that we arrange delivery to you at
your expense. If the equipment has not been delivered, installed, and
accepted by you within forty-five (45) days from the date that we
ordered the equipment, we may on ten (10) days written notice to you
terminate
6. TERM OF LEASE, ADMINISTRATIVE FEE: The Lease term will start on the
date that any equipment is delivered to you or your agent ("the
Commencement Date") and will continue until you have met all of your
obligations under the Lease. Advance rentals are not refundable if the
Lease does not begin for any reason. The payments of rent are payable
periodically in advance as stated above or on any schedule to this
Lease. The first payment is due on the Commencement Date. You will be
notified in writing if we change your first payment date, and we may
charge you interim rent for any adjustment period. Thereafter, your
payments will be due on the same day of each month (or other period
indicated on the reverse side). All payments will be made to us at our
address on this Lease, or at the address which we designate in writing.
YOUR OBLIGATION TO PAY RENTALS TO US IS UNCONDITI9NAL AND IS NOT
SUBJECT TO ANY REDUCDTION, SET-OFF, DEFENSE, OR COUNTERCLAIM FOR ANY
REASON WHATSOEVER. If you paid a security deposit to us, it will be
held by us to secure your performance under this Lease, and will be
applied or returned pursuant to paragraph 15. On the Commencement Date
of this Lease, you shall pay to us a one-time administrative fee, not
to exceed $250.
7. ASSIGNMENT. You may not sell, transfer, assign or sublease the
equipment without our prior written approval. We may sell, assign or
transfer this Lease and ownership of the equipment without notifying
you; and you agree that if we do, the new lessor will have the same
rights and benefits that we now have, and will not have to perform any
of our obligations. You agree that the rights of the new lessor will
not subject to any claims, defenses or setoffs that may have against
us. However, any such assignment, sale, or transfer of this Lease or
the equipment will not relieve us of our obligations to you under this
Lease.
8. OWNERSHIP, RIGHTS, AND QUIET ENJOYMENT: Except with regard to any
computer software which may be covered by this Lease, you agree that we
are the owner of and have title to the equipment. If the Equipment
includes computer software, with respect to that software, you
acknowledge and agree that (a) we do not have, have not had, nor will
in the future have any title to or ownership in the software; and (b)
you have executed or will execute a separate Software License Agreement
with the Licensor of the software, and we are not a party to and shall
have no responsibilities whatsoever in regards to that Software License
Agreement. You agreed, at your expense, to protect and defend our title
or other rights to the equipment. Further, you agree that you will at
all times keep the equipment free from any legal process or lien
whatsoever, and you shall give us immediate notice if any legal process
or lien is asserted or made against the equipment. You shall have the
right to quiet use and enjoyment of the equipment for the term of this
Lease, provided you are not in default.
9. CARE, USE AND LOCATION; LOSS OF EQUIPMENT: You are responsible for
<PAGE>
installing and keeping the equipment in good working order and repair.
You will keep and use the equipment only at your address shown on the
reverse side, or on any attached schedule, and you will only use it for
business or commercial purpose and in compliance with all applicable
laws. You will not make any alterations to the equipment without our
prior written consent, nor will you permanently attach the equipment to
your real estate. At the end of the Lease term, you will return the
equipment to us at your expense. You are responsible for protecting the
equipment from damage, except for ordinary wear and tear, and from any
other kind of loss while you have the equipment or while it is being
delivered to you. In the event the equipment is lost or damaged, so
long as you are not in default under this Lease, then you shall have
the option to: (a) repair or replace the equipment, or (b) pay to us
both the unpaid balance of the remaining rent under the Lease and our
residual interest in the equipment, present valued using a discount rte
of six (6%) percent per year (or other rate required by law).
10. TAXES AND FEES: You agree to pay when due all taxes, fines and
penalties relating to this Lease. You also agree that we may estimate
the yearly personal property taxes that will be due for the equipment,
and you agree to pay us the estimated taxes when we request payment. At
our election, we may bill you and you must pay us a monthly personal
property tax fee of up to three hundred and thirteen thousands of one
percent (0.313%) of the original equipment cost to reimburse us for the
taxes we are paying and for our costs for preparing, reviewing and
filing the returns. If we pay any taxes, fines or penalties for us, you
agree to reimburse us on demand, and your payment will be based on the
full amount of such taxes, without regard to any discounts we may be
obtain due to early payment or otherwise. You also agree that we have
the right to sign your name to any document for the purpose of such
filing, so long as the filing does not interfere with your right to use
the equipment.
11. INDEMNITY. We are not responsible for any injuries or losses to you or
any other person caused by the installation or use of the equipment.
You agree to reimburse us for and to defend us against any claims for
such losses or injuries, including those arising out of negligence,
tort or strict liability claims. This indemnity shall continue even
after the term of this Lease has expired.
12. INSURANCE: You agree that we have the right (but not the obligation) to
place, at your expense, property insurance against loss, theft, damage
or destruction of the equipment for up to the full replacement value,
unless you provide us with written evidence of your own insurance
coverage which is satisfactory to us and which identifies us as the
loss payee. You also agree to provide and maintain public liability
insurance naming us as an additional insured. If we place insurance for
you, you agree to pay the expense for that insurance in equal
installments allocated to each rental payment (plus interest on such
amount at 1.5% per month, or the highest rate permitted by law); the
expenses shall include the full premium for the insurance and service
fees which we or our designee customarily charge for placing insurance.
If any insurance proceeds are paid, you shall apply the insurance
proceeds toward your total obligations under this lease; or, if you are
not in default under this Lease or any other obligation to us, and we
otherwise consent in writing, you shall have the option to use the
insurance proceeds to repair or replace the equipment. If we place
insurance for you, you shall cooperate with our insurance agent
<PAGE>
in connection with the placement and the processing of any claims.
Nothing in this Lease shall create any insurance relationship of any
type whatsoever between us and any other person or party. You agree
that we are not required to secure or maintain in force any insurance,
in any amounts or upon any specific terms and conditions. We reserve
the right to terminate any insurance coverage which we may arrange, and
we may allow any such insurance coverage to lapse without having any
liability to you. You hereby appoint us as your attorney-in-fact to
make claims for, receive payment off, and execute and endorse all
documents, checks, or drafts for loss or damage under any insurance
policies.
13. DEFAULT AND REMEDIES: If you do not pay rent when due, or it you break
any your promises under this Lease or under any other agreement with
us, or you become insolvent, assign your assets for the benefit of your
creditors, or enter (voluntarily or involuntarily) into bankruptcy
proceeding, you will be in default. If your default is caused by your
failure to make any payment when due, we can require that you return
the equipment to us and pay to us the remaining balance of all the
rental payments due under this ease, present valued using a six percent
(6%) per year discount rate. If you fail to return the equipment to us,
in addition we can also require you pay to us our residual interest in
the equipment present valued as noted above. You also agree to pay us
interest on all sums due us from the date of default until paid at the
rate of one and half (1-1/2%) percent per month, but only to the extent
permitted by law. If your default is caused by your breaking any of
your other promises under this Lease, we shall be entitled to recover
from you all damages caused by that default. We can also use any of the
remedies available to us under the Uniform Commercial Code or any other
law. If we refer this Lease to an attorney for enforcement or
collection, you agree to pay our reasonable attorney's fees of at least
20% of the remaining balance of all the rental payments, plus our
actual costs. If we have to take possession of the equipment, you agree
to pay the cost of repossession, storing, shipping, repairing and
selling the equipment for a price that exceed the sum of (a) our cost
of repossession and sale of the equipment and (b) the residual value of
the equipment, present valued as calculated above, then we shall give
you a credit for the amount of such excess. You agree that we do not
have to notify you that we are selling the equipment.
14. OTHER RIGHTS: You agree that any delay or failure to enforce our rights
under the Lease (or under any schedule(s) to this Lease or any other
agreements) shall not prevent us from enforcing any rights at a later
time. Both parties intend this Lease to be a valid and legal document,
and agree that if any part is determined to be unenforceable, all other
parts will remain in full force and effect. If this document is found
not to be a Lease, then you grant us a security interest in the
equipment. You also give us the right to immediately file, at your
expense, any Uniform Commercial Code ("UCC") financing statements or
related filings, as well as the right to sign your name to any such
filings that we make.
15. REDELIVERY OF EQUIPMENT; RENEWAL: You shall provide us with written
notice, by certified mail, sent not less than 90 days nor more than 150
days prior to the expiration of the Lease term, of your intention
either to exercise any option to purchase the equipment (if we grant
you such an option) or to return the equipment to us at the end of the
Lease term. For this notice to be effective, you must not be in default
of any of
<PAGE>
your obligations to us. If you elect to return the equipment to us at
the expiration of the original or any renewal term of the Lease, you
shall disconnect, properly package for shipping, and return the
equipment to us, insured and freight prepaid by you, in good repair,
condition and working order to a location designated by us. Upon your
purchase or return of the equipment, we may charge you a title transfer
or lease termination fee of up to $150.00. If we have not received
written notice from you of your intention to purchase or return the
equipment, this Lease will automatically renew for succeeding one-year
periods, commencing at the expiration of the original Lease term. If
this Lease is renewed, the advance payment of the last month's lease
payment (as set forth on the reverse side) shall apply to the last
month of the renewal period, and shall not apply to the last month of
the initial term. Any security deposit held by us shall continue to
secure your performance for the renewal period. If you specifically
request in writing, and provided you have fulfilled all of your
obligations to us (including, if you elect, the return of the equipment
in good repair, condition and working order), we will refund your
security deposit to you without interest within 90 days after the end
of the original or renewed lease term (or as otherwise required by
applicable law), or at your direction we may apply the security deposit
toward your purchase of the equipment (if we grant you a purchase
option).
16. LATE CHARGE: If any part of a payment is not made by you when due, you
agree to pay us a late charge of ten (10%) percent of each such late
payment to cover our additional internal collection overhead (to the
extent permitted by law). You agree to pay us the late charge not later
than one month following the date that the original payment was due.
17. ENTIRE AGREEMENT; CHANGES: This Lease contains the entire agreement
between you and us, and it may not be altered, amended, modified,
terminated or otherwise changed except in writing and signed both by
you and us. A limiting endorsement on a check or other form of payment
will not be effective to modify your obligations or any of the other
terms and conditions of this Lease, and we may apply any payments
received without being bound by such limiting endorsements.
18. COMPLIANCE; NOTICES: In the event you fail to comply with any part of
this Lease, we can, but we do not have to, take any action necessary to
effect your compliance upon ten (10) days prior written notice to you.
If we are required to pay any amount to obtain your compliance, the
amount we pay plus all of our expenses in causing your compliance,
shall become additional rend and shall be paid by you at the time of
the next due rental payment. If any notices are required under this
Lease, they shall be sufficient if given personally or mailed to the
address set forth in this Lease by certified or registered mail,
postage prepaid. This Lease is for the benefit of and is binding upon
you and your personal representatives, successors and assigns.
19. CHOICE OF LAW; JURISDICTION: YOU AND WE AGREE THAT THIS LEASE SHALL BE
BINDING WHEN ACCEPTED IN WRITING BY US AT OUR OFFICES, AND SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA. YOU AND WE EACH CONSENT
TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN HENNEPIN
COUNTY,
<PAGE>
MINNESOTA, FOR THE DETERMINATION OF ALL DISPUTES ARISING UNDER THIS
LEASE. However, you agree that we will have the right to commence any
action in any Court having the proper jurisdiction for that action. You
agree and consent that we may serve you by registered or certified
mail, which shall be sufficient to obtain jurisdiction. YOU AGREE TO
WAIVE TRIAL BY JURY IN ANY ACTION BETWEEN US.
20. REPRESENTATIONS AND COVENANTS OF LESSEE: You represent that all
financial and other information furnished to us was, at the time of
delivery, true and correct. During the term of the Lease, you shall
provide us with such interim or annual financial statements as we
request.
<PAGE>
ADDENDUM TO LEASE AGREEMENT NO. _________
BETWEEN MIDDLE STATES CAPITAL CORPORATION AS LESSOR, AND
YOU TOOLS CORPORATION, LESSEE, DATED 7/28/97
Lessee shall have the option to purchase all (but not less than all) of the
equipment described in the Lease upon the expiration of the initial lease term
for its fair market -value plus applicable sales tax (and any other tax
applicable to such sale) provided that Lessee has performed all terms and
conditions of said Lease at the time. The option contained herein replaces and
supersedes all prior purchase options respecting the equipment subject to the
Lease.
To exercise this option, Lessee must give Lessor notice of such exercise at
lease sixty (60) days prior to the end of the lease term. Such notice shall be
irrevocable. If the Lessee and Lessor do not agree on such fair market value
within thirty (30) days of the end of the lease term, Lessor may engage an
independent appraiser to determine such fair market value. The appraiser shall
assume that the equipment was maintained as required by the Lease and the
appraisers determination shall be conclusive. Lessee will reimburse Lessor for
the appraisers fees.
Upon receipt by the Lessor of the full purchase price, Lessor will furnish to
Lessee a bill of sale warranting title to the equipment excepting any impairment
thereof by reason of any acts by the Lessee or those making claim against the
Lessee. The bill of sale will provide that the purchase shall be "AS IS, WHERE
IS, WITHOUT FURTHER WARRANTEES, EXPRESS OR IMPLIED."
Lessor: Lessee:
MIDDLE STATES CAPITAL CORP. YOU TOOLS CORPORATION
By: By /s/ David Van Allen
---------------------------- ------------------------------
DUANE E.ROUBA DAVID VAN ALLEN
Title: PRESIDENT Title: CEO
---------------------------- ------------------------------
Date: Date: 7/28/97
---------------------------- ------------------------------
<PAGE>
EQUIPMENT SCHEDULE "A"
LEASE # 7221271
This Equipment Schedule "A" is to be attached to and become a part of that
Schedule of Leased Equipment dated 7/28/97 , 19___________- by and between the
undersigned and MIDDLE STATES CAPITAL CORPORATION, RT 202 & HILLSIDE AVENUE,
BEDMINSTER, NJ 107921 (Lessor)
QTY DESCRIPTION MODEL NO. SERIAL NO.
VENDOR: CORPORATE NETWORKING INC. 610-584-0196
2206 ALLEBACH LANE
LANSDALE, PA 19446
1 NETWORK GENERAL FAST ETHERNET PORTABLE SNIFFER NETWORK ANALYZER
1 NETWORK GENERAL SNIFFER INTERNETWORKING ANALYZER (WAN)
1 NETWORK GENERAL ISDN ANALYSIS SOFTWARE WITH BASIC RATE INTERFACE
1 TELE-PATH INSTRUMENTS ISDN U-INTERFACE
1 DOLCH PENTIUM COMPUTER
This Equipment Schedule "A" is hereby verified as correct by the undersigned
Lessee, who acknowledges receipt of a copy.
Lessee: YOU TOOLS CORPORATION
------------------------------
SIGNATURE /s/ David Van Allen
------------------------------
DAVID VAN ALLEN
TITLE: CEO
<PAGE>
May 7, 1999 EXHIBIT 10.15
Mr. Phil Weller
FAST NET
Courtney Drive
Bethlehem, PA 18015
SENT VIA FACSIMILE 610-954-5925
Dear Phil:
SECTV is pleased to quote to you pricing for DS-3 Circuit from your Bethlehem
facility to your Holland Township, New Jersey facility. The pricing is as
follows
<TABLE>
<CAPTION>
MONTHLY RATES
1 YEAR 3 YEAR 5 YEAR
------ ------ ------
<S> <C> <C> <C>
Channel Termination [ * ] [ * ] [ * ]
First Mile [ * ] [ * ] [ * ]
Each Add'l Mile [ * ] [ * ] [ * ]
Installation [ * ] [ * ] [ * ]
</TABLE>
Example: Air miles between your facility and Holland township is approximately
16 air miles. This would be for a 5 YEAR CONTRACT: 1 mile @ [ * ] =
[*] + 15 miles @ [ * ]/miles = [ * ] + [ * ] Channel
Termination Charge.
If the terms of this contract are satisfactory, please sign below and return to
me at my office. Should you have any questions, please do not hesitate to
contact me at 610-868-0902.
Sincerely,
/s/ Jeffrey J. Kelly
Jeffery J. Kelly
Chief Technician
JJK: tmc
ACCEPTED: /s/ Phil Weller 5/12/99
---------------------- ------------------------
Phil Weller Date
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
NEXTLINK EXHIBIT 10.16
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SERVICE ORDER AND AGREEMENT
- -----------------------------------------------------------------------------------------------------------------------------------
Salesperson: Margle/Grantham CC Representative: Date: 6/25/99
----------------------------- ------------------------- ------------
- -----------------------------------------------------------------------------------------------------------------------------------
Type of Service
- -----------------------------------------------------------------------------------------------------------------------------------
Local: Long Distance: 800: Calling Card Other: X Promo: Centrex (see attached)
------ ------ ------ ------ ----- ------ --------
- -----------------------------------------------------------------------------------------------------------------------------------
Address Information
- -----------------------------------------------------------------------------------------------------------------------------------
Customer Name: Fastnet Physical Address: Same as billing
----------------------------------------------- -----------------------------------------------
Billing Address: Two Courtney Place
----------------------------------------------- -----------------------------------------------
Suite 130
----------------------------------------------------- -----------------------------------------------
3864 Courtney Street City: ST: Zip:
----------------------------------------------------- ----------------- --------- ---------------------
City: Bethlehem ST: PA Zip: 18017 Install Contact: Phil Weller
--------------------- --------- ------------- ------------------------------------------------
Customer Contact: Phil Weller Date to be Contacted:
--------------------------------------------- -------------------------------------------
Title: Phone: 610-266-6700 Title: Phone:
---------------------------- ----------------- ----------------------------- --------------------
Fax: 610-231-9525 E-Mail: Fax: E-Mail:
---------------------------- ----------------- ------------------------------- -----------
Web site address: ISP:
- ------------------------------------------------------------------ ----------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
MONTHLY CHARGES
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------- ---------------------------------------------------------------
2 - Point to Point $[ * ] x [ * ] $9,920
- ------------------------------------ -------- -------- ------
DS3 x
------ -------
- -----------------------------------------------------------------------------------------------------------------------------------
CUSTOMER SIGNED AND APPROVED
- -----------------------------------------------------------------------------------------------------------------------------------
By signing this order form, I authorize NEXTLINK Pennsylvania, (herein referred to as NEXTLINK) to make whatever inquiries are
necessary, including checking my credit history, to verify any statements made on this application and to determine my eligibility
for local and/or long distance service whenever NEXTLINK deems it necessary. I authorize any person or corporation to compile and
furnish NEXTLINK such information as is necessary to allow NEXTLINK to process this application. I agree to pay all charges
incurred on my NEXTLINK account, including any applicable state, federal or local use, excise, sales privilege taxes, duties or
similar liabilities by the stated due date and to adhere to all of the terms and conditions stated in NEXTLINK's tariffs and the
Terms and Conditions on the back of this Service Order and Agreement. Further, I represent that I am authorized to approve and
accept the responsibility of the terms and conditions herein.
- -----------------------------------------------------------------------------------------------------------------------------------
Authorized Signature: /s/ Phillip Weller Authorized Signature:
--------------------------- --------------------------
Company Name: FASTNET Company Name: NEXTLINK Pennsylvania, Inc.
----------------------------------- ---------------------------------------------------
Title/Date: VP-Engineering 6/28/99 Title/Date: Vice President Branch Operations
--------------------------------------------------- ------------------------------------
925 Berkshire Blvd. - Wyomissing, PA 19610 Phone 610-288-1234 - Fax:
-------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
TERMS AND CONDITIONS
1. SERVICE: During the term hereof, NEXTLINK Pennsylvania ("NEXTLINK")
shall provide Customer with the telecommunications services designated on this
Service Order and Agreement ("Agreement"). The services offered by NEXTLINK
under this Agreement are offered pursuant to applicable tariffs, which are filed
with applicable federal and state regulatory agencies, and these terms and
conditions. In the event of a conflict between this Agreement and such tariffs,
the tariffs shall control. Tariffs are available for review at NEXTLINK's
offices. This Agreement and any attachments, together with the applicable
tariffs constitute the entire agreement of the parties and supercedes all prior
discussions or agreements, whether written or oral, including but not limited to
any advertising, brochures, or solicitations. Should Customer request additional
service(s) subsequent to execution of this Agreement, Customer and NEXTLINK
agree to execute an additional agreement for such service(s). Customer agrees to
cooperate with NEXTLINK to accomplish service activation by providing NEXTLINK
access to Customer's premises and facilitating testing and any other service
delivery requirements. Service activation shall commence when NEXTLINK equipment
has been installed and telephone service is made available to Customer.
2. PAYMENT OBLIGATION: Customer shall pay NEXTLINK for service pursuant to
the terms and conditions of the applicable tariff(s) and this Agreement. Prices
for service are exclusive of applicable taxes. No later than thirty (30)
calendar days after service activation, NEXTLINK will bill Customer monthly for
service provided hereunder and usage itemization shall accompany each invoice.
Invoices shall be due and payable upon receipt. Undisputed charges for service
that are not paid within thirty (30) days after the invoice date shall be past
due. The lower of interest of 1.5% per month, or the maximum amount permitted by
law, will be charged on past due amounts beginning the 31st day following the
invoice date. If charges are not paid within ninety (90) days of the due date,
and NEXTLINK submits the account for collections, Customer shall pay all
collection costs including, but not limited to, reasonable Attorney's fees.
Failure to pay said bill within ninety (90) days may result in discontinuance of
service.
3. TERM & RENEWAL: This Agreement shall be effective upon complete
execution by the parties. The term is set forth on the Service Order and shall
commence on the service activation date. If no term is specified or following
the expiration of the term, this Agreement shall continue on a month-to-month
basis, upon the terms and conditions in the applicable tariff(s) and specified
herein. In the event of early termination of this Agreement by Customer, or
termination by NEXTLINK for material breach, Customer shall pay NEXTLINK all
non-recurring charges reasonably expended to establish service to the Customer;
any disconnect, early cancellation, or termination charges incurred and paid to
third parties on behalf of customer; plus all recurring charges for the balance
of the then current term.
4. LIABILITY/INDEMNIFICATION/WARRANTY: NEXTLINK agrees to respond to
emergency interruptions of service in a timely manner. NEXTLINK agrees to
maintain and service all NEXTLINK equipment necessary to fulfill the terms of
this Agreement at no expense to the Customer.
With respect to claims or suits by Customer, its customers, or any others for
damages relating to or arising out of acts or omissions involving initiation,
installation, provisioning or restoration of any services or facilities offered
under this Agreement, NEXTLINK's liability, if any, shall be limited to the
lesser of $500 or, in the event of any failure of service, an amount equal to no
more than the proportionate charge (based on the rates then in effect) for the
service for the period of time during which the service was affected. NEXTLINK
shall in no event be liable for loss of profits, or incidental, indirect,
exemplary, punitive, special or consequential damages suffered by Customer,
Customer's customers, or any other persons or entities and relating to or
arising out of the services, the system equipment, or any other obligation of
NEXTLINK under this Agreement or otherwise, including but not limited to,
temporary service interruptions or the failure by NEXTLINK or any third party to
repair the system equipment or services, or for any act or omission of any other
entity, company or companies furnishing a portion of the service.
IN ACCORDANCE WITH THE REQUIREMENTS OF UNIFORM COMMERCIAL CODE, NEXTLINK MAKES
NO REPRESENTATION OR WARRANTY EITHER EXPRESS OR IMPLIED REGARDING THE SERVICES
OR SYSTEM EQUIPMENT, AND SPECIFICALLY DISCLAIMS ANY WARRANTY, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A
PARTICULAR PURPOSE, AND ASSUMES NO OBLIGATION WITH RESPECT TO THE ENFORCEMENT OF
ANY MANUFACTURER'S WARRANTIES AND GUARANTEES. NO DEFECT, UNFITNESS, OR OTHER
CONDITION OF SYSTEM EQUIPMENT OR SERVICES SHALL RELIEVE CUSTOMER OF THE
OBLIGATION TO PAY ANY CHARGES HEREUNDER OR PERFORM ANY OTHER OBLIGATIONS UNDER
THIS AGREEMENT.
<PAGE>
EXHIBIT 10.17
SERVICE AGREEMENT
This Agreement dated as of ___ 5/12/1999 by and between Hyperion Communications
of New Jersey, LLC and ____________ FastNet ____________________ ("Customer").
Hyperion is a certified local exchange, switched access, long distance and
dedicated access service carrier.
Customer is desirous of Hyperion providing to Customer telecommunications
service(s) and hereby agrees to purchase the services(s) at the cost(s) and
term(s) as set forth herein.
In consideration of the mutual promises and covenants contained herein the
parties agree to the following:
<TABLE>
<CAPTION>
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
Total
Total Monthly Monthly
Installation Installation Recurring Recurring
Quantity Service Term Cost Cost Cost Cost
<S> <C> <C> <C> <C> <C> <C>
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
56 PRI 1 $0 $0 [*] $20,160**
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
3 Blocks 20#'s 1 $0 $0 [*] $48
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
Total* $0 $20,208
- --------------- ----------------------------- -------- -------------- ------------- ------------ --------------
</TABLE>
[**2 Months Free Service from date of Installation]
(Additional Terms and Conditions follow on the reverse side.)
CUSTOMER INFORMATION & APPROVAL
<TABLE>
<S> <C>
Company Name: FastNet Name: Phil Weller
------------------------------- ------------------------------------------
Address: 3864 Courtney St., Ste. 130 Title: Vice-President
------------------------------------- ------------------------------------------
City, state, ZIP: Bethlehem, PA 18017 Signature: /s/ Phil Weller
---------------------------- --------------------------------------
Account Executive Sales Manger Phil Weller
- ----------------- ------------ ---------------------
Name: Mark A. Sirianni Name: John Hellgren
---------------------------------------- -------------------------------------------
Signature: Signature:
----------------------------------- --------------------------------------
General Manager
- ---------------
Name: Barak Byers
Signature:
-----------------------------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
ADDITIONAL TERMS AND CONDITIONS
1. PAYMENT. Payment for service(s), including applicable federal, state, and
local taxes, is due upon receipt of invoice. Beginning thirty (30) days
after the date of invoice, interest on late payments will accrue at the
rate of 1.5% per month, or the highest rate allowed by law on the unpaid
balance, whichever is lower.
2. ADDITIONAL CHARGES. Customer is subject to the applicable charges for
moves, adds, changes, and upgrades for those items covered by this Service
Agreement. All service(s) other than those stated herein will be provided
at the prevailing charges.
3. TARIFFS. Additional terms and conditions of this Service Agreement are set
forth in Hyperion tariffs which are subject to change and are on file with
the applicable state and/or federal regulatory authorities. Except for the
cost(s) of service(s) on a term of more than month to month, these tariffs
fully determine the rights and obligations of Customer and, in the event of
any conflicts between this Service Agreement and the tariff, the tariff
shall control.
4. TOTAL SERVICE RESALE. In the event that service(s) are sold to customer via
Total Service Resale, Hyperion reserves the right to transfer Customer, at
no additional charge, to Hyperion's partial or total on-net services.
5. ASSUMPTION/PURCHASE OF CONTRACT. In the event that Hyperion assumes or
purchases an existing contract between Customer and another
telecommunications carrier, Customer shall be indemnified and held harmless
against any and all termination liability associated with said contract so
long as Customer enters into a Service Agreement with Hyperion for a term
equal to or greater than the remaining term of Customer's existing
contract.
6. NOTICE OF TERMINATION. In the event Customer intends to terminate this
Service Agreement prior to expiration of the term set forth herein, if more
than a month to month term, Customer shall provide Hyperion three (3)
months written notice. In the event that Customer does not so notify
Hyperion, Customer shall owe Hyperion an additional three (3) months of
charges in additional to the termination liability outlined below.
7. TERMINATION LIABILITY. If Customer terminates service prior to the
fulfillment of the term, then a termination liability will be due to
Hyperion from Customer. The termination liability shall be the greater of
the following:
a) the difference between the term period and the actual number of months
the service has been in effect at the time of termination multiplied
by the monthly rate for such service; or
b) the termination liability charges associated with such assumed or
purchased contract.
<PAGE>
MASTER LEASE AGREEMENT Exhibit 10.18
No. A
---------
This Master Lease Agreement (the "MLA") is entered into by and between
Ascend Credit Corporation ("Lessor"), having its principal place of business at
1701 Harbor Bay Parkway, Alameda, CA 94502 and FASTNET Corporation (f/k/a YOU
TOOLS CORPORATION) ("Lessee"), having its principal place of business at Two
Courtney Place, #130, 3864 Courtney Street, Bethlehem, PA 18017.
1. LEASE AGREEMENT. Lessor agrees to lease to Lessee, and Lessee agrees
to lease from Lessor, the equipment (the "Equipment") referenced in each of
the Schedules (the "Schedule" or "Schedules") which incorporate this MLA
therein (the "Lease"). So long as no Event of Default has occurred or is
continuing, Lessor agrees to lease to Lessee the groups of Equipment
described on each Schedule, subject to the following conditions, which Lessor
in its sole discretion may elect to waive with respect to a Schedule: (i)
that in no event shall Lessor be obligated to lease Equipment to Lessee
hereunder where the aggregate purchase of all Equipment leased to Lessee
hereunder would exceed [*]; (ii) the Equipment leased hereunder shall only be
Equipment manufactured by either Ascend Communications, Inc. or Lucent
Technologies or its affiliates; (iii) that [*] hereunder will be available to
the Lessee for Equipment leases upon execution; (iv) that the remaining [*]
hereunder will be available to the Lessee for Equipment leases upon Lessee
providing Lessor with verification that a minimum of [*] in new equity has
been received; (v) that the lease amount shall not include more than 10% for
freight, installation, maintenance, professional services and taxes and that
such amounts above the limit will be paid for by the Lessee; and (vi) no new
leases shall be issued after June 30, 2000.
2. TERM. Each Lease shall be effective upon the execution of the MLA and
the related Schedule by the Lessor and the Lessee. The lease term (the "Lease
Term") of the Equipment referenced in each of the Schedules shall commence on
the rent commencement date specified in each Schedule (the "Rent Commencement
Date"). The Rent Commencement Date shall be the date 30 days from the date that
the Equipment is shipped by the supplier (the "Ship Date") as evidenced by a
shipping document provided by the supplier related to the Equipment (the
"Shipping Document"). Lessor will provide Lessee with a copy of the Shipping
Document evidencing the Ship Date.
3. RENT. The rent (the "Rent") for the Equipment referenced in any Schedule
shall be as stated in such Schedule and shall be payable according to the
provisions of such Schedule. If any amount payable under a Schedule is not
received by Lessor within 10 days of the due date, Lessee agrees to pay an
Overdue Charge, as defined herein, with respect to such amount.
4. SELECTION AND ASSIGNMENT. Lessee will select the type, quantity and
Supplier
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
(subject to above) of each item of Equipment designated in a Schedule, and
Lessee hereby assigns to Lessor all of its right, title and interest in and to
the related equipment purchase agreement, a copy of which has been provided to
Lessor by Lessee (the "Agreement"). The Agreement may be amended with the
consent of Lessor. Any such assignment with respect to Equipment shall become
binding upon Lessor when Lessor and Lessee have entered into a Lease with
respect to such Equipment and as of the Rent Commencement Date referenced in
such Lease. Upon such an assignment becoming effective, Lessor shall be
obligated to purchase the Equipment from the Supplier in accordance with the
provisions of the Agreement. It is expressly agreed that Lessee shall at all
times remain liable to Supplier under the Agreement to perform all duties and
obligations of Lessee thereunder, except for the obligation to purchase the
Equipment to the extent expressly assumed by the Lessor hereunder, and that the
Lessee shall be entitled to the same rights of the purchaser of the Equipment
under the Agreement, except such right, title and interest in the Equipment
retained exclusively by the Lessor as owner of the Equipment. Lessor shall have
no liability for a Supplier's failure to meet the terms and conditions of the
Agreement.
5. DELIVERY AND INSTALLATION. Lessee shall be responsible for payment of
all transportation, packing, installation, testing and other charges associated
with the delivery, installation or use of any Equipment which are not included
in the Agreement with respect to such Equipment.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE EQUIPMENT, ITS MERCHANTABILITY,
OR ITS FITNESS FOR A PARTICULAR PURPOSE. LESSOR SHALL NOT BE LIABLE TO LESSEE
OR ANY OTHER PERSON FOR DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES ARISING FROM LESSEE'S USE OF THE EQUIPMENT, OR FOR DAMAGES BASED ON
STRICT OR ABSOLUTE TORT LIABILITY OR LESSOR'S PASSIVE NEGLIGENCE. LESSEE HEREBY
ACKNOWLEDGES THAT ANY MANUFACTURER'S OR SUPPLIER'S WARRANTIES WITH RESPECT TO
THE EQUIPMENT ARE FOR THE BENEFIT OF BOTH LESSOR AND LESSEE. NOTWITHSTANDING
THE FOREGOING, LESSEE'S OBLIGATIONS TO PAY EACH RENT PAYMENT DUE, OR OTHERWISE
PERFORM ITS OBLIGATIONS, UNDER THIS LEASE ARE ABSOLUTE AND UNCONDITIONAL.
7. TITLE TO AND LOCATION OF EQUIPMENT. Lessor shall retain title to each
item of Equipment. Lessee, at its expense, shall protect Lessor's title and keep
the Equipment free from all claims, liens, encumbrances and legal processes.
The Equipment is personal property and is not to be regarded as part of the real
estate on which it may be situated. If requested by Lessor, Lessee will, at
Lessee's expense, furnish a landlord or mortgagee waiver with respect to the
Equipment. The Equipment shall not be removed from the location specified in
the Schedule without the written consent of Lessor. Lessee shall, upon Lessor's
request, affix and maintain plates, tags or other identifying labels, showing
Lessor's ownership of the Equipment in a prominent position on the Equipment .
8. USE OF EQUIPMENT, INSPECTION AND REPORTS. The use of the Equipment by
Lessee shall conform with all applicable laws, insurance policies, and
warranties of the manufacturer or Supplier of the Equipment. Lessor shall have
the right to inspect the Equipment
2
<PAGE>
at the premises where the Equipment is located. Lessee shall notify Lessor
promptly of any claims, liens, encumbrances or legal processes with respect to
the Equipment.
9. FURTHER ASSURANCES. Lessee shall execute and deliver to lessor such
instruments as Lessor deems necessary for the confirmation of this Lease and
Lessor's rights hereunder. Lessor is authorized to file financing statements
signed only by the Lessor in accordance with the Uniform Commercial Code, or
financing statements signed by Lessor as Lessee's attorney-in-fact. Any such
filing with respect to the Equipment leased pursuant to a true lease shall not
be deemed evidence of any intent to create a security interest under the Uniform
Commercial Code.
10. MAINTENANCE AND REPAIRS. Lessee shall, at its expense, maintain each
item of Equipment in good condition, normal wear and tear excepted. Lessee
shall not make any addition, alteration, or attachment to the Equipment without
Lessor's prior written consent. Lessee shall make no repair, addition,
alteration or attachment to the Equipment which interferes with the normal
operation or maintenance thereof, creates a safety hazard, or might result in
the creation of a mechanic's or materialman's lien.
11. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS. If Lessee fails to perform
any of its obligations under a Lease, Lessor may perform any act or make any
payment which Lessor deems necessary for the maintenance and preservation of the
Equipment subject thereto and Lessor's title thereto. All sums so paid by
Lessor (together with all related Overdue Charges), and reasonable attorneys'
fees incurred by Lessor in connection therewith, shall be additional rent
payable to Lessor on demand. The performance of any such act or the making of
any such payment by Lessor shall not be deemed a waiver or release of any
obligation or default on the part of Lessee.
12. INDEMNIFICATION. Lessee assumes liability for, and hereby agrees to
indemnify, protect and hold harmless, Lessor, and its agents, employees,
officers, directors, partners and successors and assigns, from and against, all
liabilities, obligations, losses, damages, injuries, claims, demands, penalties,
actions, costs and expenses, including, without limitation, reasonable
attorneys' fees, of whatever kind and nature, in contract or in tort, arising
out of the use, condition, operation, ownership, selection, delivery, leasing or
return of any item of Equipment, regardless of when, how and by whom operated,
or any failure on the part of Lessee to perform or comply with any of its
obligations under a Lease, excluding, however, any of the foregoing which result
from the gross negligence or willful misconduct of Lessor. Such indemnities and
assumptions of liabilities and obligations shall continue in full force and
effect, notwithstanding the expiration or other termination of such Lease.
Nothing contained in any Lease shall authorize Lessee to operate the Equipment
subject thereto so as to incur or impose any liability on, or obligation for or
on behalf of, Lessor.
13. NO OFF-SET. All Rents shall be paid by Lessee irrespective of any
off-set, counterclaim, recoupment, defense or other right which Lessee may have
against Lessor, the manufacturer or Supplier of the Equipment or any other
party.
14. ASSIGNMENT BY LESSEE. Lessee shall not, without Lessor's prior written
consent, (a) sell, assign, transfer, pledge, hypothecate, or otherwise dispose
of, encumber or suffer to exist a lien upon or against, any of the Equipment or
any Lease or any interest therein, by operation of
3
<PAGE>
law or otherwise, or (b) sublease or lend any of the Equipment or permit any of
the Equipment to be used by anyone other than Lessee.
15. ASSIGNMENT BY LESSOR. Lessor may assign, sell or encumber its interest
in any of the Equipment and any Lease. Upon Lessor's written consent, Lessee
shall pay directly to the assignee of any such interest all Rent and other sums
due under an assigned Lease. THE RIGHTS OF ANY SUCH ASSIGNEE SHALL NOT BE
SUBJECT TO ANY ABATEMENT, DEDUCTION, OFF-SET, COUNTERCLAIM, RECOUPMENT, DEFENSE
OR OTHER RIGHT WHICH LESSEE MAY HAVE AGAINST LESSOR OR ANY OTHER PERSON OR
ENTITY. Notwithstanding the foregoing, any such assignment (a) shall be subject
to Lessee's right to possess and use the Equipment subject to a Lease so long as
Lessee is not in default thereunder, and (b) shall not release any of Lessor's
obligations hereunder.
16. RETURN OF EQUIPMENT. Unless Lessee has exercised its option, if any, to
renew a lease or purchase the Equipment subject thereto, upon expiration of the
then current Lease Term of such Lease, Lessee shall, at its expense, cause such
Equipment to be removed, disassembled, and placed in the same condition as when
delivered to Lessee (reasonable wear and tear excepted) and properly crate such
Equipment for shipment and deliver it to a common carrier designated by Lessor.
Lessee will ship such Equipment, F.O.B. destination, to any address specified in
writing by Lessor within the continental United States. All additions,
attachments, alterations and repairs made or placed upon any of the Equipment
shall become part of such Equipment and shall be the property of Lessor.
17. EVENTS OF DEFAULT. The occurrence of any of the following shall be
deemed to constitute an Event of Default hereunder: (a) Lessee fails to pay
Rent, any other amount it is obligated to pay under a Lease or any other amount
it is obligated to pay to Lessor and does not cure such failure within 10 days
of such amount becoming due; (b) Lessee fails to perform or observe any
obligation or covenant to be performed or observed by Lessee hereunder or under
any Schedule, including, without limitation, supplying all requested
documentation, and does not cure such failure within 10 days of receiving
written notice thereof from Lessor; (c) the occurrence and continuance of any
default under any other lease or agreement for borrowed money made between
Ascend Communications, Inc. or its affiliates or successors, and the Lessee; (d)
any warranty, representation or statement made or furnished to Lessor by or on
behalf of Lessee is proven to have been false in any material respect when made
or furnished; (e) the attempted sale or encumbrance by Lessee of the Equipment,
or the making of any levy, seizure or attachment thereof or thereon; or (f) the
dissolution, termination of existence, discontinuance of business, insolvency,
or appointment of a receiver of any part of the property of Lessee, assignment
by Lessee for the benefit or creditors, the commencement of proceedings under
any bankruptcy, reorganization or arrangement laws by or against Lessee, or any
other act of bankruptcy on the part of Lessee.
18. REMEDIES OF LESSOR. At any time after the occurrence of any Event of
Default, Lessor may exercise one or more of the following remedies: (a) Lessor
may terminate any or all of the Leases with respect to any or all items of
Equipment subject thereto; (b) Lessor may recover from Lessee all Rent and other
amounts then due and to become due under any or all of the Leases; (c) Lessor
may take possession of any or all items of Equipment, wherever the same may be
located, without demand or notice, without any court order or other process of
law and
4
<PAGE>
without liability to Lessee for any damages occasioned by such taking of
possession, and any such taking of possession shall not constitute a termination
of any Lease; (d) Lessor may demand that Lessee return any or all items or
Equipment to Lessor in accordance with Paragraph 16; and (e) Lessor may pursue
any other remedy available at law or in equity, including, without limitation,
seeking damages, specific performance or an injunction.
Upon repossession or return of any item of the Equipment, Lessor shall
sell, lease or otherwise dispose of such item in a commercially reasonable
manner, with or without notice and on public or private bid, and apply the net
proceeds thereof (after deducting the estimated fair market value of such item
at the expiration of the term of the applicable Lease, in the case of a sale, or
the rents due for any period beyond the scheduled expiration of such Lease, in
the case of any subsequent lease of such item, and all expenses, including,
without limitation, reasonable attorneys' fees, incurred in connection
therewith) towards the Rent and other amounts due under such Lease, with any
excess net proceeds to be retained by Lessor.
Each of the remedies under this Lease shall be cumulative, and not
exclusive, and in addition to any other remedy referred to herein or otherwise
available to Lessor in law or in equity. Any repossession or subsequent sale or
lease by Lessor of any item of Equipment shall not bar an action for a
deficiency as herein provided, and the bringing of an action or the entry of
judgment against Lessee shall not bar Lessor's right to repossess any or all
items of Equipment.
19. CREDIT AND FINANCIAL INFORMATION. Within 90 days of the close of each of
Lessee's fiscal years, Lessee shall deliver to Lessor a copy of Lessee's annual
report, if any, and an audited balance sheet and profit and loss statement with
respect to such year. Within 30 days after the end of each of Lessee's fiscal
months, Lessee shall deliver to Lessor a balance sheet and profit and loss
statement for such month and, if requested, any other additional information
regarding historical or projected operating performance reasonably requested by
Lessor, all of which shall be certified by an officer of Lessee. Upon Lessee
becoming a publicly traded company, fiscal year and reporting requirements will
change to 120 days and the monthly reporting requirements will change to fiscal
quarters and be due 60 days after each quarter.
20. INSURANCE. As of the date that risk of loss for the Equipment passes
from the Supplier to the Lessee under the terms of the Agreement, Lessee shall
obtain and maintain through the end of the Lease Term of each Lease (and any
renewal or extension thereof), at its own expense, property damage and personal
liability insurance and insurance against loss or damage to the Equipment,
including, without limitation, loss by fire (with extended coverage), theft and
such other risks of loss as are customarily insured against with respect to the
types of Equipment leased hereunder and by the types of businesses in which such
Equipment will be used by Lessee. Such insurance shall be in such amounts, with
such deductibles, in such form and with such insurers as shall be satisfactory
to Lessor; provided, however, that the amount of the Insurance against loss or
damage to the Equipment shall not be less than the greater of the replacement
value of the Equipment, from time to time, or the original purchase price of the
Equipment. Each insurance policy shall name Lessee as an insured and Lessor as
an additional insured or loss payee, and shall contain a clause requiring the
insurer to give Lessor at least 30 days prior written notice of any alteration
in the terms of such policy or of the cancellation thereof. Lessee shall
furnish to Lessor a certificate of insurance or other evidence satisfactory to
Lessor that such insurance coverage is in effect; provided, however, that Lessor
shall be under no
5
<PAGE>
duty either to ascertain the existence of or to examine such insurance policy or
to advise Lessee in the event such insurance coverage shall not comply with the
requirements hereof. Lessee shall give Lessor prompt notice of any damage to, or
loss of, any of the Equipment, or any part thereof, or any personal injury or
property damage occasioned by the use of any of the Equipment.
21. TAXES. Lessee hereby assumes liability for, and shall pay when due, and,
on a net after-tax basis, shall indemnify, protect and hold harmless Lessor
against all fees, taxes and governmental charges (including, without limitation,
interest and penalties) of any nature imposed on or in any way relating to
Lessor, Lessee, any item of Equipment or any Lease, except state and local
taxes on or measured by Lessor's net income (other than any such tax which is in
substitution for or relieves Lessee from the payment of taxes it would otherwise
be obligated to pay or reimburse to Lessor as herein provided) and federal taxes
on Lessor's net income. Lessee shall, at its expense, file when due with the
appropriate authorities any and all tax and similar returns, and reports
required to be filed with respect thereto, for which it has indemnified Lessor
hereunder or, if requested by Lessor, notify Lessor of all such requirements and
furnish Lessor with all information required for Lessor to effect such filings.
Any fees, taxes or other charges paid by Lessor upon failure of Lessee to make
such payments shall, at Lessor's option, become immediately due from Lessee to
Lessor and shall be subject to the Overdue Charge from the date paid by Lessor
until the date reimbursed by Lessee.
22. SEVERABILITY. If any provision of any Lease is held to be invalid by a
court of competent jurisdiction, such invalidity shall not affect the other
provisions of such Lease or any provision of any other Lease.
23. NOTICES. All notices hereunder shall be in writing and shall be deemed
given when sent by certified mail, postage prepaid, return receipt requested,
addressed to the party to which it is being sent at its address set forth herein
or to such other address as such party may designate in writing to the other
party.
24. AMENDMENTS, WAIVERS AND EXTENSIONS. This MLA and each Schedule
constitute the entire agreement between Lessor and Lessee with respect to the
Lease of the Equipment subject to such Schedule, and supersede all previous
communications, understandings, and agreements, whether oral or written, between
the parties with respect to such subject matter. No provision of any Lease may
be changed, waived, amended or terminated except by a written agreement,
specifying such charge, waiver, amendment or termination, signed by both Lessee
and Lessor, except that Lessor may insert, on the appropriate schedule, the
serial number of Equipment, after delivery of such Equipment, and the Rent
Commencement Date for the Equipment. No waiver by Lessor of any Event of Default
shall be construed as a waiver of any future Event of Default or any other Event
of Default. At the expiration of the Lease Term with respect to a Lease, upon
notice given by Lessee at least ninety (90) days prior thereto, (a) such Lease
shall be renewed or the Equipment subject thereto shall be purchased under the
terms and conditions set forth herein for a term and rent amount or purchase
price, as the case may be, to be agreed upon, or (b) if no such agreement is
reached prior to the expiration of such Lease Term or such notice specifies that
Lessee intends to return the Equipment, then Lessee shall return the Equipment
to Lessor in the manner prescribed in Paragraph 16 of this MLA. In the absence
of Lessor's timely receipt of the notice contemplated by the preceding
6
<PAGE>
sentence, the Lease shall be automatically extended, on a month-to-month basis,
until terminated (upon notice by either party given at least ninety (90) days
prior to the end of the month on which the termination is to be effective) or
until renewed or the Equipment subject thereto is purchased by agreement of the
parties. Unless otherwise agreed, Lessee shall continue to pay rent for each
month following such Lease Term until the Equipment subject to such Lease is
returned pursuant to Paragraph 16 of this MLA.
25. CONSTRUCTION. This MLA shall be governed by and construed in accordance
with the internal laws, but not the choice of laws provisions, of the State of
California. The titles of the sections of this MLA are for convenience only and
shall not define or limit any of the terms or provisions hereof. Time is of the
essence in each of the provisions hereof.
26. PARTIES. This MLA shall be binding upon, and inure to the benefit of,
the permitted assigns, representatives and successors of the Lessor and Lessee.
If there is more than one Lessee named in this MLA, the liability of each shall
be joint and several.
27. COUNTERPARTS. Each Lease may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute but one and the same instrument.
28. OVERDUE CHARGE. Overdue Charge shall mean an amount equal to 2% per
month of any payment under a Lease which is past due, including, without
limitation, any amounts not included in any payment of Rent hereunder, or the
highest charge permitted by law, whichever is lower.
The person executing this MLA on behalf of Lessee hereby certifies that he or
she has read, and is duly authorized to execute, this MLA.
Accepted by:
Ascend Credit Corporation LESSEE: FASTNET Corporation
(f/k/a YOU TOOLS CORPORATION)
BY /s/ Annette Severiens BY:/s/ David K. Van Allen
--------------------------- -----------------------------
NAME: Annette Severiens NAME: David K. Van Allen
------------------------ --------------------------
TITLE: Assistant Treasurer TITLE: Chief Executive Officer
------------------------ --------------------------
DATE: June 29, 1999 DATE: June 29, 1999
------------------------- ---------------------------
7
<PAGE>
TO: FASTNET CORPORATION
FROM: ASCEND COMMUNICATIONS, INC.
DATE: 5/3/99
RE: FINANCING PROPOSAL
1. CREDIT LINE-EQUIPMENT FINANCING: Ascend will provide Ascend equipment
purchase (of which up to [*]% may be used for freight, installation,
maintenance, professional services, and taxes) financing of approximately
$[20,000,000] in the form of an operating lease, 36 months in duration.
The first three months shall be interest only at [*]%, followed by 33
months at a monthly lease factor rate of [*] against the purchase
price. FastNet shall have the option of purchasing the equipment for the
then fair market value at the end of the lease.
Up to $[*] of the facility shall be made available upon the
execution of all required documentation. An additional $[*]
shall be made available upon FastNet's receipt of not less than
$[*] in new equity.
2. SECURITY INTEREST. The Lease will be secured via the Ascend equipment.
Upon the receipt of each shipment, FastNet shall be required to provide
Ascend with a list detailing the installation locations of each piece of
equipment, along with serial numbers, if applicable.
3. REVIEW OF FINANCIAL PERFORMANCE. Ascend will require FastNet to provide
audited financials within 90 days of the close of each fiscal year end
and monthly financials within 45 days of the close of each month after
the acceptance of the sales agreement and execution of related financing
agreements. Upon FastNet becoming a public company, audited financials
shall be required within 120 days of fiscal year end and quarterly
financials shall be required within 60 days of quarter end.
4. ADDITIONAL INFORMATION: Ascend shall require FastNet from time to time
to provide addition information regarding operating or projected
performance.
5. OBSERVER RIGHTS: Ascend requests maintaining observer's rights only to
assign one representative of Ascend to hold a non-voting, observer's
position to attend board of director's meetings at will.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
1
<PAGE>
Both sides recognize that this term sheet is not the definitive agreement. The
terms of this proposal will be set forth in the lease agreement, both parties
will mutually agree upon the terms and provisions of which. If Ascend does not
receive an executed copy of this term sheet by 6/1/99, it shall become null and
void.
Signed and accepted:
/s/David K. Van Allen
- ---------------------------- ---------------------------------
FASTNET Corporation Ascend Communications, Inc.
Date: 5/30/99 Date: 5/30/99
----------------------- ----------------------------
2
<PAGE>
Exhibit 10.19
FASTNET-WebTV Network Services Agreement
This Agreement is made and entered into on this September 4, 1997
("Effective Date") between You Tools Corporation / FASTNET, a Pennsylvania
corporation, with offices at 3864 Courtney Street, Suite #130, Bethlehem, PA,
18017 ("FASTNET"), and WebTV Networks Inc., a California corporation, with
offices at 305 Lytton Avenue, Palo Alto, California 94301 ("WNI").
The parties hereto agree and bind themselves as follows:
1. SERVICE
1.1 NETWORK SERVICES: FASTNET shall sell, and WNI shall purchase,
telecommunications services for the interconnection of WNI's
subscriber(s) to WNI's facilities. These services consist of two
main components:
1.1.1 Dialup Network Services: FASTNET shall provide dialup modem
access from WNI Subscribers via common carrier switched
telephone circuits to FASTNET's packet-switched IP network
using telecommunications standards and compatible Internet
protocols using facilities, equipment and software more
fully described in Schedule A.
1.1.2 Connectivity between FASTNET and WNI: FASTNET shall provide
connectivity between FASTNET's dialup network facilities and
WNI's facilities through the Internet or by direct (e.g.
dedicated physical or virtual circuit) connection, at WNI's
election as further described in Schedule C. Except as
otherwise provided in Schedule C, the cost for establishing
and maintaining such connectivity shall be included with the
prices stated in schedule B.
1.2 NETWORK PERFORMANCE: FASTNET shall use all commercially
reasonable efforts to operate its network services seven (7) days
per week, twenty-four (24) hours per day, each day of the year.
FASTNET's telecommunications services provided to WNI should be,
at a minimum, of a quality usual and customary in the industry
for regional Internet access providers.
1.3 NETWORK INTEROPERABILITY: Both parties agree to comply with the
technical requirements listed in Schedule A.
1.4 NETWORK COVERAGE: FASTNET currently maintains a local calling
area footprint of local access numbers (each, a "dialup POP") in
Delaware, New Jersey, and Pennsylvania, as described in Schedule
D. FASTNET will not reduce this local calling area coverage below
90% of the existing local calling areas listed in Schedule D, for
a period greater than thirty (30) days. FASTNET shall provide WNI
with thirty (30) days written
<PAGE>
notice prior to discontinuing an existing local access number
and/or a particular geographic location. If FASTNET breaches any
obligation of this Section 1.4, WNI shall have the right to
renegotiate all terms and conditions of this Agreement without
affecting the validity and enforceability of this Agreement until
this Agreement is replaced by a new agreement between the parties
or until this Agreement is otherwise terminated as provided
herein. If such renegotiation does not result in an agreement
between the parties within thirty (30) days, WNI shall have the
right to immediately terminate this Agreement.
1.5 CUSTOMER SERVICE: WNI is responsible for all Subscriber customer
support, billing, and collections. FASTNET shall not be
responsible for any hardware or software requirements of WNI's
Subscribers to connect with FASTNET's facilities. FASTNET's
relationship under this agreement is solely with WNI and not with
any WNI Subscriber.
1.6 TECHNICAL SUPPORT: FASTNET shall provide to WNI a network
operations Internet email address for reporting by WNI to FASTNET
of problems in FASTNET's connectivity or performance affecting
WNI subscribers and transmittal of trouble tickets initiated from
WNI's Service Operations Center. FASTNET shall monitor said
mailbox to insure acknowledgment of email problem reports and/or
trouble tickets within one (1) hour of receipt and shall insure
that problem resolution for trouble tickets received is reported
back to the designated WNI Service Operations Center email
address within one hour of resolution. FASTNET will provide email
notification to a designated WNI Internet email address of any
service problems which may affect WNI subscribers within one (1)
hour of discovery, including but not limited to POP failures,
Internet access interruptions or routing instabilities, telco
connectivity problems, dial-in port outages or serious congestion
(latency) problems.
In addition, FASTNET shall provide WNI with a toll-free number
and a pager number to report problems relating to FASTNET's
network availability or performance which affect WNI subscribers
and to escalate problems which are significantly affecting WNI
subscribers, whether or not previously reported by email. The
toll-free and pager numbers shall be used only by WNI and shall
not be released to WNI's Subscribers. Such telephone assistance
shall be available to WNI on a continuous basis, twenty-four (24)
hours per day, seven (7) days per week, for each day of the year,
and shall be provided by a qualified technician. FASTNET shall
use commercially reasonable efforts to begin analysis of any
request for assistance or report of problems as soon as possible
after discovery thereof, and in no event more than one half hour
after any call made by WNI for such purpose. FASTNET shall make
all repairs required for the proper functioning of its systems as
soon as commercially reasonable after the discovery thereof or
WNI's notice to FASTNET thereof. FASTNET
<PAGE>
shall actively monitor the performance of its systems, and shall
notify WNI promptly of any condition which materially adversely
affects such performance. FASTNET will provide WNI with notice as
far in advance as is reasonably possible as to the changes in its
service infrastructure, hours of operation, modification to
communications protocols and any other planned changes in the
service that could reasonably be expected to have a material
affect on WNI's ability to service its end users.
1.7 RESALE: The services provided by FASTNET are for the use of WNI
Subscribers, and WNI will not resell the services provided by
FASTNET hereunder to any other party for resale by such party
except with the prior written approval of FASTNET, which approval
shall be in the sole discretion of FASTNET, and only if such
party agrees in writing to all of the terms and conditions of
this Agreement. WNI shall not at any time or in any manner
represent itself as the operator of FASTNET.
1.8 PROJECT MANAGEMENT: Prior to the termination of the testing
period provided in Section 7, each party will assign a project
manager for the term of the contract to serve as the other
party's primary single point of contact.
1.9 REPORTING: Within five (5) business days of the end of each
calendar month, and in no event later than the date that any
invoice pursuant to Section 2.2 is delivered, FASTNET shall
provide WNI with monthly usage data detailing network access by
WNI's Subscribers, on which FASTNET shall base its billing to
WNI.
2. PRICING AND BILLING
2.1 PRICING: The prices in Schedule B apply for all services provided
by FASTNET under this Agreement. For all other services which WNI
may request, FASTNET's list prices apply unless other prices have
been specifically negotiated.
2.2 INVOICES: FASTNET shall provide to WNI a monthly invoice for all
sums due pursuant to this Agreement, and WNI agrees to pay all
such invoices to FASTNET no later than thirty (30) days after the
receipt of such invoices. Any disputed amounts shall be resolved
by arbitration pursuant to the provisions of Section 13. Any
payment made more than thirty (30) days after due is subject to a
charge of the lesser of 1% per month or the maximum legal
interest rate.
2.3 NETWORK AVAILABILITY: In the event that certain percentages of
Customers cannot establish a connection at FASTNET's POPs, the
following shall apply:
<PAGE>
If at least 10% of WNI Subscriber calls to FASTNET's POPs do
not connect due to factors within the reasonable control of
FASTNET during the course of a given month, and WNI finds it
necessary to redirect those Access calls to a different ISP,
then the Base Charges for that month shall be reduced by the
percentage of calls experiencing such difficulties as
compared to the total number of WNI Customer Access calls to
FASTNET's POPs minus 10%.
FOR EXAMPLE, IF 12% OF WNI'S CUSTOMERS CANNOT CONNECT TO
FASTNET OVER THE PERIOD OF ANY MONTH, THE TOTAL CHARGE TO
WNI FOR THAT MONTH WILL BE REDUCED BY 2%.
3. END USER AGREEMENT
WNI agrees to have all of its Subscribers enter into an end user agreement (the
"End User Agreement") in substantially the form provided to FASTNET, the receipt
and adequacy of which FASTNET acknowledges. In addition to it rights under
Section 6.1, FASTNET may deny or refuse connection or access to any FASTNET
dialup POP to any WNI Subscriber who violates the End User Agreement or notifies
FASTNET that it has a claim against FASTNET or that FASTNET is or might be
responsible to such customer for damages related to any services provided to
such customer through WNI. WNI may amend the end user agreement once per
calendar quarter by giving FASTNET written notice of amendment.
4. INDEMNIFICATION
WNI shall defend, indemnify, and hold harmless FASTNET against any claims, costs
or expenses (including reasonable attorneys' fees) arising out of, relating to
or resulting from any breach of this Agreement by WNI, or any use by WNI of
FASTNET's services in violation of this Agreement. FASTNET shall defend,
indemnify, and hold harmless WNI against any claims, costs or expenses
(including reasonable attorneys' fees) arising out of, relating to or resulting
from any breach of this Agreement by FASTNET.
5. TERM
The term of this Agreement shall commence on the Effective Date hereof and shall
continue until the date which is two (2) years from the date hereof, which term
shall be automatically renewed for additional one-year terms, provided that
neither party has delivered to the other party a written notice of intent not to
renew for the forthcoming term. Such notice of intent shall be delivered not
less than 120 days in advance of the end of the current term.
<PAGE>
6. TERMINATION
6.1 This Agreement may be terminated as follows:
6.1.1 Either party may terminate this Agreement for cause,
without penalty, in the event that the other party breaches
any material terms of this Agreement. Prior to any
termination under this Section 6.1.1, the non-breaching
party shall first give the other party written notice of its
intent to terminate which shall specify the problem(s)
constituting cause. The other party will have thirty (30)
days from the date of receipt of such notice to correct the
problem. If the problem is not corrected within such period,
the non-breaching party may terminate this Agreement upon
notice to the breaching party.
6.1.2 FASTNET may terminate this Agreement without penalty upon
ten (10) days written notice to WNI, if WNI permits a
violation of the acceptable use policy set forth in its End
User Agreement and does not act to remedy such violation
within seven (7) days after receiving written notification
of such violation from FASTNET.
6.1.3 FASTNET may terminate this Agreement without penalty if any
amounts due and owing by WNI remain unpaid sixty (60) days
after the date of invoice and FASTNET has notified WNI that
said amounts are past due, 10 business days prior to
termination.
6.1.4 Either party may terminate this Agreement for convenience
after giving the other party six (6)-month written notice.
In the event of any termination under this Section 6.1.4,
FASTNET will maintain service availability at least the
usage level of the immediately preceding full month for six
(6) months from the date notice is received by FASTNET.
6.1.5 As provided by Section 7.
6.2 The exercise of any right of termination under Section 6.1 shall
be in addition to, and not in lieu of, any other rights and
remedies of the nonbreaching party hereunder. Notwithstanding
anything to the contrary in this Agreement, the provisions of
Sections 4, 9, 10, 11, 12, 13, 14 and 15 shall survive the
expiration or termination of this Agreement for any reason.
7. TESTING
During the period of sixty (60) days following execution of this Agreement, both
parties shall use all commercially reasonable efforts to integrate their
respective networks to provide the connectivity described in Schedule C and
shall conduct testing to assure such
<PAGE>
connectivity. If either party shall reasonably declare the testing results to be
unsatisfactory at the conclusion of the sixty (60) day period, then the parties
shall have another twenty (20) days to correct the problem; and if such
correction is not completed to the mutual and reasonable satisfaction of the
parties within such time, then either party shall be entitled, upon written
notice to the other party, to terminate this Agreement without further liability
to either party. If no such notice is given within eighty (80) days of the
execution hereof, satisfactory completion of technical testing shall be
presumed, and the contract shall remain in full force and effect. Billing will
begin thirty (30) days after the termination of testing, at the rates described
in Schedule B. If testing is completed during the course of a month, the first
month's billing will be prorated to reflect the shortened month. Testing may be
declared complete before the 60 day testing period is complete if both parties
agree.
8. FORECASTS
WNI shall not be required to provide expected usage forecasts to FASTNET. WNI
shall use commercially reasonable efforts to provide FASTNET with advance
information as to marketing programs which WNI expects will materially impact
future loads, particularly concerning loads in FASTNET's geographical
locations/POPs.
9. NO PUBLICITY
Neither party shall disclose the prices and terms of this Agreement, except for
disclosure in confidence to its employees and consultants, accountants,
attorneys, bankers, investors, potential investors, or as required by law.
Neither party shall publicize the existence of this Agreement without the
written consent of the other, and in the event of such agreement, all press
release materials shall be reviewed and approved by the other party prior to the
publication of such press release materials.
10. WAIVER OF WARRANTIES
FASTNET MAKES NO WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, FOR THE
SERVICE AND PRODUCTS IT IS PROVIDING UNDER THIS AGREEMENT. FASTNET HEREBY
DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
FASTNET WILL NOT BE RESPONSIBLE FOR ANY DAMAGE SUFFERED BY WNI OR ITS CUSTOMERS
AS A RESULT OF ANY FAILURE NOT CAUSED BY AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF FASTNET NETWORK FUNCTIONALITY, INCLUDING LOSS OF DATA RESULTING
FROM DELAYS, NONDELIVERIES, MISDELIVERIES, OR SERVICE INTERRUPTIONS CAUSED BY
FASTNET'S OWN NEGLIGENCE OR ANY ERRORS OR OMISSIONS OF WNI OR ITS CUSTOMERS.
USE BY WNI OR ITS CUSTOMERS OF ANY INFORMATION OBTAINED VIA FASTNET'S NETWORK IS
AT WNI'S AND ITS CUSTOMERS' OWN RISK, AND FASTNET CANNOT GUARANTEE THE ACCURACY
OR SECURITY OF ANY NETWORK CONTENT. FASTNET SPECIFICALLY DENIES ANY
RESPONSIBILITY FOR THE ACCURACY OR QUALITY OF INFORMATION OBTAINED THROUGH ITS
SERVICES.
<PAGE>
11. LIMITATION OF LIABILITY
NEITHER PARTY SHALL HAVE ANY LIABILITY WHATSOEVER FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES OF ANY KIND (INCLUDING LOST REVENUES
OR PROFITS, LOSS OF BUSINESS OR LOSS OF DATA) ARISING OUT OF OR IN CONNECTION
WITH OR RELATED TO THIS AGREEMENT OR THE SERVICES PROVIDED HEREUNDER SUFFERED BY
THE OTHER OR BY ANY ASSIGNEE OR OTHER TRANSFEREE OF, OR PARTY CLAIMING RIGHTS
DERIVED FROM, THE OTHER, EVEN IF INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH
DAMAGES. EXCEPT FOR FASTNET'S BREACH OF SECTION 14 OR FASTNET'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, AND EXCEPT FOR WNI'S BREACH OF SECTION 2.2, IN
NO EVENT OR CIRCUMSTANCE SHALL EITHER PARTY'S AGGREGATE LIABILITY HEREUNDER
EXCEED THE LARGEST AMOUNT PAID BY WNI TO FASTNET FOR SERVICES FOR ANY ONE MONTH
PERIOD AND WITH RESPECT TO CLAIMS OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
FASTNET'S AGGREGATE LIABILITY SHALL NOT EXCEED THE LARGEST AGGREGATE AMOUNT PAID
BY WNI TO FASTNET FOR ANY THREE (3) CONSECUTIVE MONTHS.
12. GOVERNING LAW
This Agreement shall be governed by and construed enforced in accordance with
the laws of the State of California. The federal and state courts within the
State of California, Northern District, shall have exclusive jurisdiction to
adjudicate any dispute arising with the Agreement or any disclosure by the
Discloser of its Confidential Information to Promisor, and Promisor hereby
consents to such jurisdiction.
13. DISPUTE RESOLUTION
13.1 Any and all disputes arising under or related to this Agreement
shall be submitted to binding arbitration in Santa Clara County,
California under the commercial arbitration rules then prevailing
of the American Arbitration Association, except as otherwise
provided herein and judgment upon any award rendered may be
entered and enforced in any court of competent jurisdiction.
13.2 The arbitrator shall be a person who is knowledgeable in
telecommunications and familiar with the telecommunications
industry.
13.3 In the event of any such arbitration or any court action, the
losing party shall pay all reasonable costs of collection, court
costs or costs of arbitration and attorneys' fees of both parties.
<PAGE>
14. CONFIDENTIALITY
The parties have previously signed a Mutual Non-Disclosure Agreement which is
incorporated by reference herein and which shall be in effect during the term of
this agreement or attachment E, whichever is longer.
15. GENERAL PROVISIONS
15.1 ENTIRE AGREEMENT: The parties hereto acknowledge that they have
read this entire Agreement and that this Agreement and the
exhibits attached hereto constitute the entire understanding and
contract between the parties and supersede any and all prior or
contemporaneous oral or written communications with respect to the
subject matter hereof. This Agreement shall not be modified,
amended or in any way altered except by an instrument in writing
signed by the parties.
15.2 RELATIONSHIP OF PARTIES: The parties to this Agreement are
independent contractors. No agency, partnership, joint venture or
employment is created as a result of the Agreement. Neither party
is authorized to bind the other in any respect whatsoever.
15.3 BINDING EFFECT: Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of
the parties and their legal representatives, heirs,
administrators, executors, successors and assigns.
15.4 PLURAL/GENDER: Whenever from the context it appears appropriate,
each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in the
masculine, the feminine or the neuter gender shall include the
masculine, feminine and neuter. The term "person" means any
individual, corporation, partnership, trust or other entity.
15.5 SEVERABILITY: If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall
be held invalid, the remainder of this Agreement, or the
application of such provision to persons or circumstances other
than those to which it is held invalid, shall not be affected
thereby.
15.6 COUNTERPARTS: This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all
of which, when taken together, shall constitute one and the same
instrument. It shall not be necessary for all parties to execute
the same counterpart hereof.
15.7 WAIVER: No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall
operate as a waiver
<PAGE>
thereof; nor shall any single or partial exercise of any right or
remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right or remedy granted hereby or by
law.
15.8 NOTICE: Unless otherwise provided, any notice to be given
hereunder shall be effective on the first day after dispatch.
Such notice shall be sent by first class mail, postage prepaid and
marked for delivery by certified or registered mail, return
receipt requested, addressed to the parties listed below at their
respective places of business, or at such other addresses of which
notice has been given to the addressing party:
If to WebTV Networks, Inc.:
Attention: Bill Yundt
WebTV Networks, Inc.
305 Lytton Avenue
Palo Alto, CA 94301
With a copy to:
Attention: WebTV Legal
WebTV Networks, Inc.
305 Lytton Avenue
Palo Alto, CA 94301
If to FASTNET:
Attention: David Van Allen
You Tools Corporation / FASTNET
3864 Courtney Street, Suite #130
Bethlehem, PA 18017
With a copy to:
Attention: Lawrence Cooper - FASTNET Legal
Miele, Cooper, Spinrad and Kronberg
90 Milburn Ave.
Milburn, NJ 07041
15.9 ASSIGNMENT: WNI shall be entitled to assign all or any portion of
its rights or delegate its obligations under this Agreement
without the prior written consent of FASTNET.
15.10 FORCE MAJEURE: No party shall be liable by reason of any failure
or delay in the performance of its obligations due to riots,
fires, explosions, acts of God, war, governmental action or any
other cause which is beyond
<PAGE>
the reasonable control of such party; provided that in the event
that a force majeure described in this Section 15.10 extends for
a period in excess of sixty (60) days, the other party shall be
entitled to immediately terminate this Agreement.
15.11 COMPLIANCE WITH LAWS: Each party shall comply with all laws,
regulations and other legal requirements that apply to this
Agreement. FASTNET hereby warrants that, to its knowledge, it has
complied with all laws, regulations, and orders relating or
pertaining to the provision of the services to be provided under
this Agreement, including without limitation, all applicable state
or federal legislation or rule applicable to the services in any
material respect. To the knowledge of FASTNET, material permits,
licenses, and authorizations required by any regulatory bodies
have been obtained and are in effect for the services.
15.12 FACSIMILE TRANSMISSION: Parties to this Agreement are authorized
to execute the Agreement, and transmit a signed copy of same via
facsimile to the other parties, who hereby agree to accept and
rely upon such documents as if they bore original signatures. The
parties sending such facsimiles hereby acknowledge and agree to
provide to the other parties, within seventy-two (72) hours of
transmission, the Agreement bearing an original signature.
15.13 NO THIRD PARTY BENEFICIARY: The rights and remedies provided
herein are for the exclusive benefit of the parties hereto and
their permitted assignees. No right or benefit of any of the
terms and conditions herein is intended to, or shall be afforded
to any third party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
of the date first above recited.
WEBTV NETWORKS, INC. YOU TOOLS CORPORATION / FASTNET
By:/s/ William Yundt By: /s/ David Van Allen
------------------ ---------------------
Name: William Yundt Name: Dave Van Allen
---------------- ----------------
Title: Vice President Title: CEO
--------------- -------
<PAGE>
SCHEDULE A
NETWORK INTEROPERABILITY
1. FASTNET shall make its dial-up (Internet) network access facilities
available to WNI's Subscribers via the public switched telephone network
using circuit termination equipment which complies with current interface
and modem standards (i.e. V.34 for 28,800 bps service, with extensions for
33,600 speeds as available) and supports dial-in connection speeds of (at
least) 28,800 bps. In addition, FASTNET will use equipment which supports
PPP connections and PAP authentication in a manner which is compatible with
WNI client and server software, which compatibility shall be ascertained
during testing (Agreement section 7). FASTNET will notify WNI of changes in
its modem and terminal server hardware and software in advance of making
such changes and if WNI should determine that planned changes are not
compatible with WNI systems and services, WNI may exercise its rights under
section 6.1.1 of this Agreement.
2. FASTNET shall provide to WNI telnet access with a login account on a Unix
host computer attached to its network with telnet access and the ability to
issue ping and traceroute commands from within FASTNET's network. If
FASTNET does not have an available Unix host for telnet access, they shall
identify one or more computers within it's network which will properly
respond to ICMP requests and traceroute commands issued from other Internet
locations outside of FASTNET's network.
3. FASTNET shall operate a proxy server that can identify access by WNI
Subscribers and forward login attempts from such Subscribers to WNI's
Radius server for authentication, provided that WNI's Radius server can be
reached through the Internet from FASTNET's network, or with dedicated
lines between the parties.
4. FASTNET shall operate a TCP/IP network that can link WNI's Subscribers who
connect to FASTNET's dialup network access facilities to WNI's servers,
provided WNI's servers can be reached through the Internet from FASTNET's
network, or with dedicated lines between the parties.
5. FASTNET shall provide WNI with applicable Radius software, as it is
required for interoperability with FASTNET's Radius implementation. WNI
will be responsible for any fees to third parties for licensing this
software for the copies used by WNI. In connection with obtaining the
source code for the Radius Software, WNI must agree to reasonable
confidentiality and source code protection requirements of the owner of the
Radius Software and FASTNET.
6. FASTNET's network services shall maintain Radius server interoperability
during the course of the contract.
7. WNI agrees that it shall operate its own Radius server, which will perform
user validation functions, and will maintain this server in a secure
environment. WNI also
<PAGE>
will maintain this server with reasonably current versions of the Radius
protocols as provided by FASTNET.
8. WNI agrees to assign each Subscriber a unique identification number for
billing purposes, and to reasonably cooperate with FASTNET in establishing
the structure of this identification number.
9. WNI and FASTNET each agree to cooperate with the other in identifying and
resolving any security infringements which involve WNI's Subscriber and
FASTNET's network.
10. WNI will impose inactivity time-outs on the WebTV boxes of a maximum of 15
minutes. Inactivity time-outs disconnect the WNI Subscriber's box from
FASTNET when the user has not sent any commands to the box for the
specified period of time. In addition, WNI provides two other backup
timeouts should the first timeout fail. FASTNET will not implement server
side timeouts for WNI customers.
<PAGE>
SCHEDULE B
DIALUP NETWORK SERVICES PRICING
1. FASTNET SHALL OFFER 2 DIFFERENT PRICING PLANS:
1.1 "PER SUBSCRIBER" PRICING PLAN: At the end of each month, FASTNET
shall count the number of unique Per Subscriber IDs that were used
to connect to the service during that month. A Per Subscriber ID
that was used in a prior month and that was not used in the month
to be billed shall not be included. WNI will then be billed an
amount equal to this number of unique Per Subscriber IDs
multiplied by a price per Subscriber defined as follows:
Pricing shall be at $[*] per month. A mutually agreed upon
written pricing plan can replace this pricing at any time.
1.2 "PER HOUR" PRICING PLAN: At the end of each month, FASTNET shall
calculate the cumulative numbers of hours spent on-line by WNI
Subscribers that were identified by a Per Hour ID. Each
Subscriber's usage will be calculated in seconds and converted to
hours with one decimal place, or in six minute increments. WNI
would then be invoiced an amount equal to this number of hours
multiplied by a price per hour defined as $[*] per hour. A
mutually agreed upon written pricing plan can replace this pricing
at any time.
Whenever a WebTV box connects to FASTNET, WNI shall ensure that the
WebTV box uses an ID whose prefix identifies which pricing plan to use to bill
that connection (a "Per Subscriber ID" or "Per Hour ID," as applicable).
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
***IMPORTANT NOTE!!! THE FOLLOWING RATE CENTERS
ARE NOT ENABLE FOR USE BY WEB TV***
The rate centers shown below should be included in Web TV's NOVEMBER (or later)
schedule. FASTNET will advise when facilities are ready. These locations are
installed and currently are being used by FASTNET engineering. DO NOT USE THESE
NPA-NXX until advised!
<TABLE>
<CAPTION>
RATE CENTER LOCATION NPA NXX
- ------------------------------------------------------------------
<S> <C> <C> <C>
Holland Township Phillipsburg 908 213
Riverside Riverside 609 255
Penberton Penberton 609 283
Mount Holly Mount Holly 609 288
Burlington Burlington 609 326
Marlton Marlton 609 355
Moorestown Moorestown 609 359
Fort Dix Fort Dix 609 353
Camden Camden 609 246
Laurel Springs Laurel Springs 609 248
Haddonfield Haddonfield 609 325
Gloucester Gloucester 609 349
Merchantville Merchantville 609 356
Bridgeton Bridgeton 609 369
Williamstown Williamstown 609 327
Glassboro Glassboro 609 244
Pitman Pitman 609 270
Pennington Pennington 609 281
Hightstown Hightstown 609 336
Ewing Ewing 609 362
Penns Grove Penns Grove 609 276
Wilmington Wilmington 302 252
Dover Dover 302 747
Georgetown Georgetown 302 752
Allentown Allentown 610 295
Bethlehem Bethlehem 610 297
Easton Easton 610 333
Kennett Square Kennett Square 610 335
Collegeville Collegeville 610 342
Downingtown Downingtown 610 343
Philadelphia Sub Zone 30 Norristown 610 382
Philadelphia Sub Zone 36 Wayne 610 386
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RATE CENTER LOCATION NPA NXX
- ------------------------------------------------------------------
<S> <C> <C> <C>
Phoenixville Phoenixville 610 422
Kutztown Kutztown 610 426
Pottstown Pottstown 610 427
Center Point Center Point 610 528
Philadelphia Sub Zone 21 Havertown-Manoa 610 536
Philadelphia Sub Zone 14 Darby-Ridley Park 610 537
Philadelphia Sub Zone 23 Cynwyd-Narberth 610 538
Philadelphia Sub Zone 25 Bryn Mawr 610 542
Philadelphia Sub Zone 10 Chester Heights 610 387
Philadelphia Sub Zone 11 Chester 610 546
Philadelphia Sub Zone 12 Media 610 548
Philadelphia Sub Zone 13 Swarthmore 610 549
Philadelphia Sub Zone 17 Upper Darby 610 553
Philadelphia Sub Zone 22 Broomall-Newtown Square 610 557
Reading Reading 610 568
Royersford Royersford 610 569
Chester Springs Chester Springs 610 634
Philadelphia Sub Zone 24 Ardmore 610 726
Philadelphia Sub Zone 28 Paoli-Malvern-Berywyn 610 727
Philadelphia Sub Zone 29 Valley Forge 610 728
Philadelphia Sub Zone 31 Conshohocken 610 729
West Chester West Chester 610 883
Exton Exton 610 884
Eagle Eagle 610 885
</TABLE>
<PAGE>
SCHEDULE C
CONNECTIVITY BETWEEN FASTNET AND WNI
FASTNET will provide transport via the Internet of WNI Subscriber traffic (IP
packets) between (1) FASTNET's network and WNI's network and server computers
and (2) between WNI Subscribers and all other generally reachable (non-WNI
network) IP networks comprising the Internet. FASTNET will be responsible for
management of routing and performance of the provided transport from WNI's
customers through FASTNET's network connection to its carrier/ISP to insure
routing integrity and transport reliability. FASTNET will exercise all
reasonable efforts within its control to insure that the average round trip
latency (measured by ICMP echo tests between FASTNET and WNI) is less than 100
milliseconds. Further, FASTNET shall disclose to WNI the names and contact
information for the carrier(s) or ISP(s) through which it obtains Internet
backbone connectivity and/or packet exchange with other FASTNET/ISPs and the
interconnect location, routing arrangement and speed of such connection(s) in
order that WNI can adjust its connectivity and routing if needed to better
support FASTNET's transport obligation under the conditions of this paragraph.
Upon WNI's request, FASTNET shall also provide dedicated access into its network
for transport of WNI Subscriber traffic between FASTNET's network and WNI's
network and server computers. The communication path between FASTNET and WNI
may be by way of common carrier, competitive access provider, CLEC, ISP or some
combination. Terms for the implementation of such a solution shall be
negotiated at the time of WNI's request. FASTNET agrees to provide suitable
floor/rack space and inside termination of the communication circuit(s) with
appropriate environmental facilities (HVAC and power with UPS), a router and
communication interface (router interface and DSU/CSU, etc.) compatible with
WNI's facilities at the far end of the path. The connection and required
interfaces, at WNI's discretion, may be T-1 or fractional T-1 (with suitable
encoding and framing), DS-3 or fractional DS-3 (with Cisco HSSI router
interface) or Frame Relay, ATM (Asynchronous Transfer Mode) or SMDS at any
available speed. FASTNET and WNI will manage and be responsible for the
operation and maintenance of the equipment at their respective ends of the
communication path. FASTNET will cooperate with and accept guidance from WNI
for routing setup between the dedicated access path to WNI and the FASTNET's
other IP routes and shall permit WNI access to the SNMP MIB in the router at the
FASTNET end of the path for traffic and status monitoring and configuration
verification.
<PAGE>
SCHEDULE D
LIST OF LOCAL ACCESS NUMBERS AND LOCATIONS
TO BE PROVIDED BY FASTNET
FASTNET EXCHANGES FOR WEB TV
(CONFIDENTIAL)
ALL NXX end with 9191
NPA-NXX
<TABLE>
<CAPTION>
Rate Center Location NPA NXX
- ----------- -------- --- ---
<S> <C> <C> <C>
Philadelphia Zone 3 Philadelphia 215 254
Philadelphia Zone 4 Philadelphia 215 268
Philadelphia Sub Zone 32 Flourtown 215 273
Philadelphia Sub Zone 33 Ambler 215 274
Philadelphia Sub Zone 34 Cheltenham-Elkins Park-Jen 215 277
Philadelphia Sub Zone 37 Bethayres-Huntingdon Valley 215 344
Philadelphia Sub Zone 38 Willow Grove 215 346
Philadelphia Sub Zone 39 Hatboro 215 347
Philadelphia Sub Zone 40 Feasterville-Churchville 215 436
Philadelphia Zone 1 Philadelphia 215 446
Philadelphia Sub Zone 41 Eddington-Cornwell Heights 215 447
Philadelphia Sub Zone 42 Bristol 215 458
Philadelphia Sub Zone 43 Langhorne 215 478
Philadelphia Sub Zone 44 Levittown 215 486
Philadelphia Sub Zone 45 Warrington 215 488
North Wales North Wales 215 583
Morrisville Morrisville 215 584
Doylestown Doylestown 215 589
Philadelphia Zone 2 Philadelphia 215 594
Yardley Yardley 215 595
Lansdale Lansdale 215 692
New Hope New Hope 215 693
Quakertown Quakertown 215 892
Newtown Newtown 215 944
</TABLE>
<PAGE>
ATTACHMENT E
WEBTV NETWORKS, INC.
MUTUAL NON-DISCLOSURE AGREEMENT
This Non-Disclosure Agreement ("Agreement") is made and entered into as of 8/28,
1997 by WebTV Networks, Inc., having its principal place of business at 305
Lytton Avenue, Palo Alto, California 94301 (the "First Party") and You Tools
Corp. / FASTNET ("Second Party") with a principal place of business at 3864
Courtney Street, S-130, Bethlehem, PA 18017.
1. PURPOSE. The First Party and Second Party wish to explore a business
opportunity of mutual interest concerning each Party's business, operations,
proprietary technology, and products. In connection with this opportunity
certain trade secrets and business information proprietary to each Party and
which each Party considers Confidential Information (as defined below) may be
provided to one Party (the "Promisor") by the other Party (the "Discloser").
This Agreement is intended to allow both Parties to have open discussions
regarding Confidential Information, while still affording complete protection of
the Discloser's Confidential Information against disclosure or unauthorized use.
Written agreements regarding authorized disclosures or use of the Discloser's
Confidential Information may, but need not, be entered into between the Parties
in the future.
2. DEFINITION. "Confidential Information" means any Discloser proprietary
information relating to (i) the Discloser's proprietary technology and products,
including without limitation, technical data, trade secrets, know-how, research,
product plans, ideas or concepts, products, services, software, inventions,
patent applications, techniques, processes, developments, algorithms, formulas,
technology, designs, schematics, drawings, engineering, and hardware
configuration information (collectively, "Technical Information"), and (ii)
proprietary information relating to the Discloser's operations and business or
financial plans or strategies, including but not limited to customers, customer
lists, markets, financial statements and projections, product pricing and
marketing, financial or other strategic business plans or information
(collectively, "Business Information"), disclosed to Promisor by the Discloser,
either directly or indirectly, in writing, orally or by drawings or inspection
of samples, equipment or facilities. Confidential Information does not include
any of the foregoing items which (i) is known to Promisor at the time of the
disclosure to Promisor by the Discloser as evidenced by written records of
Promisor, (ii) has become publicly known and made generally available through no
wrongful act of Promisor, or (iii) has been rightfully received by Promisor from
a third party who is authorized to make such disclosures.
3. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Promisor agrees not to use any
Confidential Information disclosed to it by the Discloser for its own use or for
any purpose except to carry out discussion concerning, and the undertaking of,
any business
<PAGE>
relationship between Promisor and the Discloser. Promisor will not disclose any
Confidential Information of the Discloser to third parties or to employees of
Promisor except to its employees who are required to have the information in
order to carry out the discussions of the contemplated business. Promisor will
have or has had its employees who have access to Confidential Information of the
Discloser sign a nondisclosure agreement in content substantially similar to
this Agreement and will promptly notify the Discloser in writing of the names of
each such employee upon the request of the Discloser at any time. Promisor
agrees that it will take all reasonable measures to protect the secrecy of and
avoid disclosure or use of Confidential Information of the Discloser in order to
prevent it from falling into the public domain or the possession of persons
other than those persons authorized hereunder to have any such Confidential
Information, which measures shall include the highest degree of care that
Promisor utilizes to protect its own Confidential Information of a similar
nature, but in any event not less than a reasonable degree of care. Promisor
agrees to notify the Discloser promptly in writing of any misuse or
misappropriation of Confidential Information of the Discloser which may come to
the Promissor's attention.
4. RETURN OF MATERIALS. Any materials or documents which have been furnished by
the Discloser to Promisor will be promptly returned to the Discloser,
accompanied by all copies of such documentation, after the business possibility
has been rejected or concluded, or at any time upon the Discloser's request. No
copies of the Discloser's Confidential Information may be made unless approved
in writing by the Discloser.
5. NO LICENSE. Nothing in this Agreement shall be construed as granting any
rights to Promisor under any patent or copyright, nor shall this Agreement be
construed to grant Promisor any rights in or to the Discloser's Confidential
Information, except the limited right to review such Confidential Information
solely for the purpose of determining whether to enter into the proposed
business relationship with the Discloser.
6. TERM. The foregoing commitments of Promisor shall survive any termination of
discussions between the Parties and shall continue (i) as to matters involving
"Business Information" for a period of three (3) years following the date of
this Agreement and (ii) as to Technical Information, until such Technical
Information is no longer required to be protected as set forth in the second
sentence of Paragraph 2 above.
7. MISCELLANEOUS. This Agreement shall be binding upon and for the benefit of
the undersigned Parties, their successors and assigns, provided that
Confidential Information of the Discloser may not be disclosed by means of any
assignment without the prior written consent of the Discloser. Failure to
enforce any provision of this Agreement shall not constitute a waiver of any
term hereof.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
California and enforced in accordance with the laws of the State of California.
The federal and state courts within the State of California, Northern District,
shall have exclusive jurisdiction to adjudicate any dispute arising with the
Agreement or any disclosure by the Discloser
<PAGE>
of its Confidential Information to Promisor, and Promisor hereby consents to
such jurisdiction.
9. REMEDIES. Promisor agrees that the obligations of Promisor provided herein
are necessary and reasonable in order to protect the Discloser and its business,
and Promisor expressly agrees that monetary damages alone may be inadequate to
compensate the Discloser for any breach of Promisor of its covenants and
agreements set forth herein. Accordingly, Promisor agrees and acknowledges that
any such violation or threatened violation will cause irreparable injury to the
Discloser and that, in addition to any other remedies that may be available in
law, in equity, or otherwise, the Discloser shall be entitled to obtain
injunctive relief against the threatened breach of this Agreement or the
continuation of any such breach by Promisor without the necessity of proving
actual damages.
10. ENTIRE AGREEMENT. This document contains the entire Agreement between the
Parties with respect to the subject matter contained herein and supersedes any
previous understandings or commitments, oral or written.
First Party: Second Party:
WebTV Networks, Inc. You Tools Corporation / FASTNET
-------------------------------
Company
/s/ Cathy Curry /s/ David K. Van Allen
- ------------------------------- -------------------------------
Signature Signature
Cathy Curry David K. Van Allen
- ------------------------------- -------------------------------
Name (printed) Name (printed)
IAP Manager CEO
- ------------------------------- -------------------------------
Title Title
8/28/97 8/28/97
- ------------------------------- -------------------------------
Date Date
<PAGE>
EXHIBIT 10.20
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FOCAL COMMUNICATIONS CORPORATION
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE ORDER
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ORDER TYPE: / /LOCAL TSG / /NATIONAL TSG / /CORPORATE /X/ LOCAL ISP / /NATIONAL ISP
- -------------------------------------------------------------------------------------------------------------
CUSTOMER INFORMATION SALESPERSON: Tom Loch
<S> <C>
- ------------------------------------------------------- -----------------------------------------------------
Customer: FASTNET Contact: Phil Weller
- ------------------------------------------------------- -----------------------------------------------------
Address: 3864 Courtney Street Telephone: (610) 266-6700
- ------------------------------------------------------- -----------------------------------------------------
Suite 130 Pager: (610) 606-3956
- ------------------------------------------------------- -----------------------------------------------------
Bethlehem, PA 18017 E-mail: [email protected]
- ------------------------------------------------------- -----------------------------------------------------
1. Initial Term of Agreement: / /One Year /X/Two Years / /Three Years Other:
2. Indicate the Switch providing Service: Philadelphia
3. Date of Commence: 6/14/99 Date of Installation: 7/14/99
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------- -------------- -------------------------------------------------------
4. SERVICES QTY. PRICING
- -------------------------------------- -------------- -------------------------------------------------------
Colo Non-colo Recurring (Unit Price) Non-recurring (Unit Price)
- -------------------------------------- -------------- ------------------------- -----------------------------
<S> <C> <C> <C>
/X/PRI 18NJ /X/ 18 [*] [*]
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DID
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DID
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DIOD
- -------------------------------------- -------------- ------------------------- -----------------------------
Channelized DIODs
- -------------------------------------- -------------- ------------------------- -----------------------------
Number of DIDs to channelize
- -------------------------------------- -------------- ------------------------- -----------------------------
BRI
- -------------------------------------- -------------- ------------------------- -----------------------------
Colocation Cabinet
- -------------------------------------- -------------- ------------------------- -----------------------------
T1s per Cabinet
- -------------------------------------- -------------- ------------------------- -----------------------------
Cross-connect
- -------------------------------------- -------------- ------------------------- -----------------------------
Telephone Numbers
- -------------------------------------- -------------- ------------------------- -----------------------------
Analog Lines
- -------------------------------------- -------------- ------------------------- -----------------------------
Toll-free Number
- -------------------------------------- -------------- ------------------------- -----------------------------
Toll-free Vanity Number Charge
- -------------------------------------- -------------- ------------------------- -----------------------------
Calling Cards
- -------------------------------------- -------------- ------------------------- -----------------------------
Myosphere User
- -------------------------------------- -------------- ------------------------- -----------------------------
LD Port Charge
- -------------------------------------- -------------- ------------------------- -----------------------------
Fail Safe Routing
CDR
Conference Calling: / /Yes (Conference Call Attachment Required)
Ported Numbers: Porting 30 TCG NJ Numbers (SEE ATTACHED LIST) 800 Rebate:
Indicate Local Rate Plan Rate Per Minute:
Focal Long Distance Rate per Minute: Long Distance
Focal Toll-Free Rate per Minute: Pic Choice
Single Exchange Rate: FocaLINC:
Multi-exchange Rate:
T1 Card Program / / DID / / DIOD / / PRI
Special Considerations (please include service address): 401 North Broad Street, 9th Floor, Room 990 Space
A1, Switch & Data Facilities, Philadelphia, PA 19103
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
By: By: /s/ Phillip Weller
Title: Title: V.P. - Engineering
Date: Date: 6/19/99
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FOCAL COMMUNICATIONS CORPORATION
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE ORDER
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ORDER TYPE: / /LOCAL TSG / /NATIONAL TSG / /CORPORATE /X/ LOCAL ISP / /NATIONAL ISP
- -------------------------------------------------------------------------------------------------------------
CUSTOMER INFORMATION SALESPERSON: Tom Loch
<S> <C>
- ------------------------------------------------------- -----------------------------------------------------
Customer: FASTNET Contact: Phil Weller
- ------------------------------------------------------- -----------------------------------------------------
Address: 3864 Courtney Street Telephone: (610) 266-6700
- ------------------------------------------------------- -----------------------------------------------------
Suite 130 Pager: (610) 606-3956
- ------------------------------------------------------- -----------------------------------------------------
Bethlehem, PA 18017 E-mail: [email protected]
- ------------------------------------------------------- -----------------------------------------------------
1. Initial Term of Agreement: / /One Year /X/Two Years / /Three Years Other:
2. Indicate the Switch providing Service: NY
3. Date of Commence: 6/14/99 Date of Installation: 7/14/99
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------- -------------- -------------------------------------------------------
4. SERVICES QTY. PRICING
- -------------------------------------- -------------- -------------------------------------------------------
<S> <C> <C> <C>
Colo Non-colo Recurring (Unit Price) Non-recurring (Unit Price)
- -------------------------------------- -------------- ------------------------- -----------------------------
/X/PRI 18NJ /X/ 28 [*] [*]
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DID
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DID
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DIOD
- -------------------------------------- -------------- ------------------------- -----------------------------
CHANNELIZED DIODS
- -------------------------------------- -------------- ------------------------- -----------------------------
Number of DIDs to channelize
- -------------------------------------- -------------- ------------------------- -----------------------------
BRI
- -------------------------------------- -------------- ------------------------- -----------------------------
Colocation Cabinet
- -------------------------------------- -------------- ------------------------- -----------------------------
T1s per Cabinet
- -------------------------------------- -------------- ------------------------- -----------------------------
Cross-connect
- -------------------------------------- -------------- ------------------------- -----------------------------
Telephone Numbers
- -------------------------------------- -------------- ------------------------- -----------------------------
Analog Lines
- -------------------------------------- -------------- ------------------------- -----------------------------
Toll-free Number
- -------------------------------------- -------------- ------------------------- -----------------------------
Toll-free Vanity Number Charge
- -------------------------------------- -------------- ------------------------- -----------------------------
Calling Cards
- -------------------------------------- -------------- ------------------------- -----------------------------
Myosphere User
- -------------------------------------- -------------- ------------------------- -----------------------------
LD Port Charge
- -------------------------------------- -------------- ------------------------- -----------------------------
Fail Safe Routing
- -------------------------------------- -------------- ------------------------- -----------------------------
CDR
- -------------------------------------- -------------- ------------------------- -----------------------------
- -------------------------------------- -------------- ------------------------- -----------------------------
Conference Calling: / / Yes (Conference Call Attachment Required)
Ported Numbers: 800 Rebate
Indicate Local Rate Plan Rate Per Minute:
Focal Long Distance Rate per Minute: Long Distance
Focal Toll-Free Rate per Minute: Pic Choice:
Single Exchange Rate: FocaLINC:
Multi-exchange Rate:
T1 Card Program / / DID / / DIOD / / PRI
Special Considerations (please include service address): Level 3 will provide DS3 Circuit to deliver PRIs
- -------------------------------------------------------------------------------------------------------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
<TABLE>
<S> <C>
By: By: /s/ Phillip Weller
Title: Title: V.P. - Engineering
Date: Date: 6/19/99
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FOCAL COMMUNICATIONS CORPORATION
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE ORDER
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
ORDER TYPE: / /LOCAL TSG / /NATIONAL TSG / /CORPORATE /X/ LOCAL ISP / /NATIONAL ISP
- -------------------------------------------------------------------------------------------------------------
<S> <C>
CUSTOMER INFORMATION SALESPERSON: Tom Loch
- ------------------------------------------------------- -----------------------------------------------------
Customer: FASTNET Contact: Phil Weller
- ------------------------------------------------------- -----------------------------------------------------
Address: 3864 Courtney Street Telephone: (610) 266-6700
- ------------------------------------------------------- -----------------------------------------------------
Suite 130 Pager: (610) 606-3956
- ------------------------------------------------------- -----------------------------------------------------
Bethlehem, PA 18017 E-mail: [email protected]
- ------------------------------------------------------- -----------------------------------------------------
1. Initial Term of Agreement: / /One Year /X/Two Years / /Three Years Other:
2. Indicate the Switch providing Service: Philadelphia
3. Date of Commence: 6/14/99 Date of Installation: _______________
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------- -------------- -------------------------------------------------------
4. SERVICES QTY. PRICING
- -------------------------------------- -------------- ------------------------- -----------------------------
<S> <C> <C> <C>
Colo Non-colo Recurring (Unit Price) Non-recurring (Unit Price)
- -------------------------------------- -------------- ------------------------- -----------------------------
/X/PRI PA&DE /X/ 28 [*] [*]
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DID
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DID
- -------------------------------------- -------------- ------------------------- -----------------------------
Digital T1 DIOD
- -------------------------------------- -------------- ------------------------- -----------------------------
Channelized DIODs
- -------------------------------------- -------------- ------------------------- -----------------------------
Number of DIDs to channelize
- -------------------------------------- -------------- ------------------------- -----------------------------
BRI
- -------------------------------------- -------------- ------------------------- -----------------------------
Colocation Cabinet
- -------------------------------------- -------------- ------------------------- -----------------------------
T1s per Cabinet
- -------------------------------------- -------------- ------------------------- -----------------------------
Cross-connect
- -------------------------------------- -------------- ------------------------- -----------------------------
Telephone Numbers
- -------------------------------------- -------------- ------------------------- -----------------------------
Analog Lines
- -------------------------------------- -------------- ------------------------- -----------------------------
Toll-free Number
- -------------------------------------- -------------- ------------------------- -----------------------------
Toll-free Vanity Number Charge
- -------------------------------------- -------------- ------------------------- -----------------------------
Calling Cards
- -------------------------------------- -------------- ------------------------- -----------------------------
Myosphere User
- -------------------------------------- -------------- ------------------------- -----------------------------
LD Port Charge
- -------------------------------------- -------------- ------------------------- -----------------------------
Fail Safe Routing
- -------------------------------------- -------------- ------------------------- -----------------------------
CDR
- -------------------------------------- -------------- ------------------------- -----------------------------
- -------------------------------------------------------------------------------------------------------------
Conference Calling: / /Yes (Conference Call Attachment Required)
Ported Numbers: Porting (SEE ATTACHED LIST) 800 Rebate:
Indicate Local Rate Plan Rate Per Minute:
Focal Long Distance Rate per Minute: Long Distance
Focal Toll-Free Rate per Minute: Pic Choice
Single Exchange Rate: FocaLINC:
Multi-exchange Rate:
T1 Card Program / / DID / / DIOD / / PRI
Special Considerations (please include service address): 401 North Broad Street, 9th Floor, Room 990 Space
A1, Switch & Data Facilities, Philadelphia, PA 19103
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
By: By: /s/ Phillip Weller
Title: Title: V.P. - Engineering
Date: Date: 6/19/99
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CUSTOMER ORDER SUMMARY
ORDER DATE: 18-Jun-99
QUOTE ID: 000002055
CUSTOMER INFORMATION: BILLING INFORMATION:
NAME: FASTNET (Focal Communications Site) NAME: FastNet
ADDRESS: 32 Old Slip Slip ADDRESS: 3864 Courtney Street -
2 Courtney Place
Suite 130
CITY: New York CITY: Bethlehem
STATE: NY STATE: PA
ZIP: 10005 ZIP: 18017
CONTACT: Phil Weller
PHONE: (610) 266-6700
FAX: (610) 231-9525
PRODUCT DESCRIPTION AND CHARGES:
<TABLE>
<CAPTION>
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
MONTHLYRECURRING NON-RECURRING
SO# PRODUCT QUANTITY ORDER TYPE
AMOUNT AMOUNT
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
<S> <C> <C> <C> <C> <C>
10000 Private Line Metro 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10001 Private Line Intercity 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10002 Private Line Metro 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10003 Private Line Metro 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10004 Private Line Intercity 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10005 Private Line Metro 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10006 Telephony Colocation 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10007 Telephony Colocation 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10008 Telephony Colocation 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10009 Telephony Colocation 1 [*] [*] New
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
10 $14,288.72 $13,200.00
TOTAL:
- --------------- -------------------------- ------------ ------------------------ ------------------- ---------------
</TABLE>
CUSTOMER COMMITMENT:
VOLUME: $0.00 TERM: 1 YEAR RAMP UP (MONTHS): 0
CUSTOMER APPROVAL:
This Customer Order is governed by Level 3 Communications LLC's Terms and
Conditions for Delivery of Service (which are available for Customer's review
either upon request or on Level 3's web site), which are hereby incorporated
into this Customer Order. Neither party shall be liable for any indirect,
incidental, special, consequential, exemplary or punitive damages (including but
not limited to damages for lost profits or lost revenues), whether or not caused
by the acts or omissions or negligence of its employees or agents, and
regardless of whether such party has been informed of the possibility or
likelihood of such damages. Relevant Service Detail forms are attached hereto,
setting forth specific information regarding the Services ordered by Customer.
Authorized Customer Signature: /s/ Phillip Weller
Authorized Customer Name: Title: V.P. Engineering
By: Phillip L. Weller
[ ] WE ARE SEEKING CONFIDENTIAL TREATMENT OF THE TERMS THAT HAVE BEEN BRACKETED.
<PAGE>
FOCAL COMMUNICATION CORPORATION
CUSTOMER SERVICE ORDER
<TABLE>
<CAPTION>
Order Type: / / Local / / National T.G / / Corporate /X/ Local ISP / / National ISP
<S> <C> <C> <C> <C> <C>
- ----------------------------------- --------------------------------- -------------------------------- -----------------------------
CUSTOMER INFORMATION: SALESPERSON: TOM LOCH
1. Customer: FASTNET CONTACT: PHIL WELLER
ADDRESS: 3864 COURTNEY STREET TELEPHONE 610-266-6700
SUITE 130 PAGER: 610-606-3956
BETHLEHEM, PA 18017 E-MAIL: [email protected]
- ------------------------------------------------------------------------------------------------------------------------------------
Initial Term of Agreement / / One Year / / Two years / / Three Years Other:
Indicate the Switch providing Service: DC Desired Due Date: 10/20/99
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICES QTY. PRICING
Colo Non-colo Recurring (Unit Price) Non-recurring (Unit Price)
<S> <C> <C> <C>
- ------------------------------------------ -------------------------- -------------------------------- -----------------------------
PRI -------------------- -------------------------- --------------------------
- ---------- -------------------- -------------------------- --------------------------
----------- -------------------- -------------------------- --------------------------
----------- -------------------- -------------------------- --------------------------
----------- -------------------- -------------------------- --------------------------
Calling Name Delivery (PRI)
2B Channel transfer (PRI)
Digital T1 DID - Inbound Only
-------------------- -------------------------- --------------------------
-------------------- -------------------------- --------------------------
-------------------- -------------------------- --------------------------
Digital T1 DOD - Outbound Only
Digital T1 DIODs
DIOD
/ / 2 way -------------------- -------------------------- --------------------------
/ / 2 Way with DID -------------------- -------------------------- --------------------------
/ / Channelized Quantity of -------------------- -------------------------- --------------------------
DID Channels
----------
Outbound ANI over T1 (T1 Only)
-------------------- -------------------------- --------------------------
BRI
-------------------- -------------------------- --------------------------
Analog Lines 2 $[ * ] $
T1s per Cabinet 6 1 $[ * ]
-------
Cross-Connect
-------------------- -------------------------- --------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Toll Free Number
-------------------- -------------------------- --------------------------
Calling Cards
-------------------- -------------------------- --------------------------
Fall Safe Routing
-------------------- -------------------------- --------------------------
LD Port Change
-------------------- -------------------------- --------------------------
- ------------------------------------------ -------------------------- -------------------------------- -----------------------------
CDR Express
- ------------------------------------------ -------------------------- -------------------------------- -----------------------------
Carrier (Conference Call Attachment Required) Intralata
Conference Calling / / PIC Choice:
Ported Numbers:
----------------------- ----------------------- -----------------------
</TABLE>
(Name & CIC Code)
Indicate Local Rate Plan ______________ ________________________
Focal Long Distance Rate Per minute____ ________________________
Focal Toll-free Rate per Minute ____ ________________________
Intralata Carrier
PIC Choice
- -----------------
(Name & CIC Code)
Toll-Free Rewards Rate Per Minute ____ FocaLINC: _____________
T1 Card Program / / DID / / DIOD / / PRI Special Considerations (please include
service address): THIS ORDER WILL NOW BE COLO FOR 12 PRIS (PREVIOUSLY ORDERED).
COLO IN 2 LARGE CABINETS. ELECTRICAL REQUIREMENTS TO BE DETERMINED.
Focal Communication Corporation Customer
By: ________________________ By: /s/ Phillip L. Weller
Title: _______________________ Title: _______________________
Date: _______________________ Date: _______________________
[ ] WE ARE SEEKING CONFIDENTIAL TREATMENT OF THE TERMS THAT HAVE BEEN BRACKETED.
<PAGE>
AGREEMENT FOR COLOCATION
This Agreement made this 7th day of October, 1999 (the "Effective Date") by and
between Focal Communications Corporation, a Delaware corporation hereinafter
called "Focal", and FASTNET, a(n) Pennsylvania corporation, hereinafter called
"Customer."
RECITALS
WHEREAS, Focal owns, controls, or is affiliated with entities (Hereinafter,
"Focal Affiliates") having leasehold interests in certain office and storage
space within commercial buildings throughout the United States (generally
described herein as the "Premises") which may be suitable for the placement and
operation of telecommunications equipment, and
WHEREAS, Customer desires access to the Premises in one or more locations for
the purpose of placing therein certain telecommunications equipment and cabling
(hereinafter, the "Equipment") at each individual location for such. Equipment
to be referred to herein as a "Terminal Facility": and
WHEREAS, one or more of the Focal Affiliates may be willing to grant Customer
licenses to occupy or use portions of the Terminal Facilities upon the term and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, Focal
and Customer (Collectively the "Parties") hereby agree as follows:
I. LICENSE TO OCCUPY, PERMISSIBLE USE AND RELOCATION PROVISIONS.
A. This document shall comprise a complete and binding agreement between
Customer and a Focal Affiliate only upon execution by the Focal Affiliate
and Customer of a Colocation Schedule pertaining to an individual Terminal
Facility, of which the Focal Affiliate has a leasehold interest. Each
Colocation Schedule, and any amendments thereto, when dates and subscribed
by Customer and the applicable Focal Affiliate, shall incorporate the terms
and conditions of this Agreement. Reference in this Agreement to rights or
obligations of Focal shall refer to the rights and obligations of the Focal
affiliate named in the appropriate Colocation Schedule for the Terminal
Facility to which it pertains. In the event of any conflict or
inconsistency between this Agreement and the terms set forth in a
Colocation Schedule, terms of the Colocation Schedule shall in all cases
prevail, but only for the Terminal Facility identified in the conflicting
or inconsistent Colocation Schedule.
B. Each Colocation Schedule shall have attached thereto the following
Exhibits: Facility Drawings, identified as "Exhibit 1" General Description
of Work Tasks and Special Terms and Conditions, identified as "Exhibit 2";
and Dispatch Labor Charges' identified as "Exhibit 3". Except as expressly
provided in this paragraph 1.C, Customer shall utilize the equipment rack
locations only for interconnection of the Equipment to the network services
of Focal. If Customer requires telecommunications services that Focal is
unable or unwilling to provide
<PAGE>
(after having been given a reasonable opportunity by Customer to provide
the required services) Customer shall have the right to interconnect the
Equipment to facilities of the dominant local exchange carrier (LEC).
Customer must obtain the prior written consent of Focal before allowing the
Equipment to be interconnected with the LEC network, which consent shall
not be unreasonably withheld, and any consent not given or denied within
three business days after such written notice shall be deemed to be
granted.
C. In connection with the rack locations made available hereunder, Focal shall
perform services which support the overall operation of the Terminal
Facility (e.g., janitorial services, environmental systems maintenance, and
power plant maintenance) at no additional charge to Customer. However,
Customer shall be required to maintain the equipment rack locations in an
orderly manner and shall be responsible for the removal of trash, packing,
cartons, etc. from the Space. Further, Customer shall maintain the
equipment rack location in a safe condition, including but not limited to
the preclusion of storing combustible or hazardous materials.
D. Customer acknowledges that it has been granted only a license to occupy the
equipment racks and that it has not been granted any reason property
interests in the rack location.
II. TERM OF AGREEMENT, TERMINATION AND RENEWAL
A. Customer's license to occupy each equipment rack location shall begin on
the "Requested Service Date," as set forth in paragraph 3 of each
individual Colocation Schedule or on the date Focal completes the build-out
of the rack location, whichever is later. The minimum term of the
Customer's license to occupy the equipment rack(s) shall be the period set
forth in the Colocation Schedule (the "Minimum Term").
B. If Focal fails for any reason to tender possession of the rack location to
Customer on or before the Requested Service Date (specified in the Colocate
Schedule relevant thereto) this Agreement shall not be void or violable.
Notwithstanding the foregoing, if Focal fails to tender possession of the
equipment rack(s) to Customer within a sixty (60) day period after such
Requested Service Date (due to any reason other than the acts or omissions
of Customer), Customer may, upon written notice to Focal, declare relevant
Colocate Schedule null and void with no further obligation by Customer
under the relevant Colocate Schedule, and Focal shall refund all fees and
charges paid in advance by Customer. In the Event that Focal is delayed in
tendering possession of the equipment rack(s) to Customer for any reason
other than the acts or omissions of Customer, Customer shall not be
obligated to pay the Occupancy Fee or Service Fee (as hereinafter defined)
hereunder until such time as Focal tenders possession of the equipment rack
location to the Customer. Except as provided herein, Focal shall not be
liable to Customer in any way as a result of such delay or failure to
tender possession.
C. Subject to the conditions specified in this Section II, and provided
Customer is not in default of its Agreement with Focal, Customer shall have
the option, upon thirty (30) days prior written notice to Focal, to renew
its license to occupy the equipment rack (the "Renewal
<PAGE>
Periods") for the period(s) of time and on the terms and conditions which
are set forth in this Agreement and the Colocation Schedule relevant
thereto. The Minimum Term and any Renewal Periods may be collectively
referred to as the "Term."
D. Any option Granted to Customer to renew its license to occupy the equipment
rack location shall be contingent on the election by Focal to continue to
own or lease the Premises in which the equipment rack(s) is located for the
duration of the Renewal Periods), such election to be exercised at the sole
discretion of Focal.
E. Following the expiration of the Term for each equipment rack or failure of
the Parties to enter into any Renewal Periods, Customer's license shall
continue to effect on a month-to-month basis upon the same terms and
conditions specified herein, unless terminated by either Customer or Focal
upon thirty (3) days prior written notice.
F. Upon termination or expiration of the Term for each equipment rack(s),
Customer agrees to remove the Equipment and other property that has been
installed by Customer or Customer's agents. In the event such equipment or
property has not been removed within thirty (30) days of the effective
termination or expiration date, the Equipment shall be deemed abandoned and
Customer shall lose all rights and title thereto.
G. In the event the Terminal Facility becomes the subject of a taking by
eminent domain by any authority having such power, Focal shall have the
right to terminate this Agreement. Focal shall attempt to give Customer
reasonable advance notice of the removal schedule. Customer shall have no
claim against Focal for any relocation expenses, any part of any award that
may be made for such taking or the value of any unexpired term or renewed
periods that result from a termination by Focal under this provision, or
any loss of business from full or partial interruption of interference due
to any termination. However, nothing contained in this Agreement shall
prohibit Customer from seeking any relief or remedy against the condemning
authority in the event of an eminent domain proceeding or condemnation that
affects the equipment rack location.
III. PRICES AND PAYMENT TERMS
A. Customer shall pay Focal monthly recurring fees (the "Recurring Fees"),
which shall include charges for use and occupy of the equipment rack(s)
(the "Occupancy Fees"), as well as power charges (the "Power Charges"), if
applicable. In addition to any Recurring Fees, customer shall be charged
non-recurring fees for build-out of the equipment rack location (the
"Build-Out Charges"), including where applicable, cross-connect
installation fees and/or Dispatch Labor Charges, where applicable, which
shall be set forth in the relevant Colocation Schedule and the Exhibits
thereto. If Customer requests that Focal provide services not delineated
herein or in the Colocation Schedules at any time during the Term, Customer
agrees to pay Focal's price for such service in effect at the time such
service was rendered.
B. Prices do not include taxes, except is specifically stated herein. Customer
agrees to pay or reimburse Focal for any applicable taxes that are levied
based on the transactions hereunder, exclusive of taxes on Focal's income.
Any such charges shall be invoiced and payable
<PAGE>
within the payment terms of this Agreement. Focal agrees to provide
Customer with reasonable documentation to support invoiced amounts for
taxes within thirty (30) calendar days of receipt of a Customer's written
request.
C. All Recurring Fees shall be invoiced in the beginning of each month
commencing on the first day of the Term as identified in the Colocation
Schedule and thereafter, on the first day of each calendar month. Charges
for partial months shall be prorated accordingly. All Recurring Fees shall
be payable net thirty (30) days from date of invoice. Late payments shall
be subject to late charges if payment is not received within the payment
term period. The late payment charges will be calculated based on 1.5% per
month of the unpaid amount.
D. Charges delineated in the Colocation Schedule for build-out of the
equipment rack location shall be invoiced and paid by Customer when
invoiced. Focal may require payment of up to fifty (50%) of the "Build Out
Fees" prior to commencing construction.
E. Customer agrees to reimburse Focal for a reasonable repaid or restoration
costs associated with damage or destruction caused by Customer's personnel,
customer's agents or Customer's suppliers/contractors or Customer's
visitors during the Term or as a consequence of Customer's removal of the
Equipment or property installed in the Equipment rack location.
IV. ADDITIONAL TERMS GOVERNING USE OF COLOCATED EQUIPMENT INSTALLATION OF
EQUIPMENT.
A. Before beginning any delivery, installation, replacement or removal work,
Customer must obtain Focal's written approval of Customer's choice of
suppliers and contractors which approval shall not be unreasonably withheld
or unduly delayed. Focal may request additional information before granting
approval. Approval by Focal is not an endorsement of Customer's supplier or
contractor, and Customer will remain solely responsible for the selection
of the supplier or contractor and all payments for construction work.
B. Customer shall not make any construction changes or material alterations to
the interior or exterior portions of the equipment rack location, including
any cabling or power supplies for the Equipment, without obtaining Focal's
written approval for Customer to have the work performed or have Focal
perform the work. Focal reserves the right to perform and manage any
construction or material alterations within the Terminal Facility and
Colocation Space areas at rates to be negotiated between the Parties
hereto.
C. Customer's use of the equipment rack location, installation of Equipment
and access to the Terminal Facility shall at all times be subject to
Customer's adherence to the generally accepted industry standards, security
rules and rules of conduct established by Focal for the Terminal Facility.
Customer agrees not to erect any signs or devices to the exterior portion
of the equipment rack(s) without submitting the request to the Focal and
obtaining Focal's written approval.
<PAGE>
D. Customer may not provide, or make available to any third party, space
within the equipment rack location without Focal's prior written consent.
If Customer should provide, or make available to any third party, space
within the equipment rack location without obtaining the written consent of
Focal, Customer shall be in breach of this Agreement and Focal may pursue
any legal or equitable remedy, including but not limited to the immediate
termination of the license pursuant to Section VI, below.
E. Focal shall not arbitrarily or discriminatorily require Customer to
relocate the Equipment; however, upon sixty (60) days prior written notice or,
in the event of an emergency, such time as may be reasonable, Focal reserves the
right to change the location of the equipment rack(s) or the Terminal Facility
to a site which shall afford comparable environmental conditions for the
Equipment and comparable accessibility to the Equipment. Focal and Customer will
work together in good faith to minimize any disruption of Customer's service as
a result of such relocation. Focal shall be responsible for the cost of
improving the equipment rack location to which the Equipment interconnected to
Focal services, except that Focal shall not be responsible for relocating
facilities installed in violation of Section VI (B) below.
V. INSURANCE
A. Customer agrees to maintain, at Customer's expense, during the entire
time this Agreement is in effect (i) Comprehensive General Liability Insurance
in an amount not less than One Million Dollars ($1,000,000.00) per occurrence
for bodily injury or property damage, (ii) Employers Liability in an amount not
less than Five Hundred Thousand Dollars ($500,000.00) per occurrence, (iii)
Property insurance coverage for the full value of Customer's equipment colocated
on Focal's premise, and (iv) Workers' Compensation in an amount not less than
that prescribed by statutory limits. Prior to placing equipment, Customer shall
furnish Focal with certificates of insurance which evidence the minimum levels
of insurance set forth herein and which name Focal as an additional insured.
VI. DEFAULT
A. If Customer fails to perform its obligations, or fails to pay for service
rendered hereunder, Focal may, at its sole option and with written notice,
issue a default notice letter to Customer, demanding the default condition
be cured. If the default condition is not remedied within the time period
specified in the notice letter, which shall not be less than fourteen (14)
calendar days, Focal may then, without the necessity of any further notice,
discontinue performance and terminate this Agreement, for default, and
pursue any other remedies available at law or in equity. Focal's failure to
exercise any of its rights hereunder shall not constitute or be construed
by Customer as being a waiver of any past, present, or future right or
remedy.
B. At any time during the term of this Agreement, Focal may, at Focal's sole
option, immediately terminate this Agreement if Customer is not then
maintaining the Equipment solely for the purpose of originating and/or
terminating telecommunications transmissions carried over the Focal Network
or as otherwise set forth in Paragraph 1 of this Agreement, or
<PAGE>
pursuant to the terms and conditions, if any, contained in any Colocation
Schedule identified herein.
C. If Customer commits an act of default with respect to the purchase of
telecommunications service from Focal, which would entitle Focal under its
separate tariffs and agreement to terminate its service to Customer, then
Focal and all Focal Affiliates shall be entitled to terminate this
Agreement and all Colocation Schedules to which this Agreement pertains.
VII. WARRANTIES, REMEDIES AND DISCLAIMERS
A. Focal shall, at Focal's own expense defend Customer against any and all
claims that the equipment rack(s) used by Customer hereunder infringes on
any third party's property or ownership rights. Focal shall, at Focal's
sole option, either (i) settle any such claim, (ii) secure valid rights for
Customer's continued use, or (iii) furnish equivalent equipment rack
location that is not infringing and that can be used to satisfy the
original specifications in Focal's determination. This warranty and remedy
by Focal shall be valid only if (i) Customer gives Focal prompt written
notice upon Customer's receipt of any such claim, (ii) Customer provides
Focal with all pertinent information in its possession relative to such
claim and (iii) Focal shall have sole control over the settlement or
defense of such claim.
B. THE EQUIPMENT RACK LOCATION IS ACCEPTED "AS IS" BY CUSTOMER. CUSTOMER
ACKNOWLEDGES THAT NO REPRESENTATION HAS BENE MADE BY FOCAL AS TO THE
FITNESS OF THE EQUIPMENT RACK LOCATION FOR CUSTOMER'S INTENDED PURPOSE.
EXCEPT FOR THE WARRANTIES SET FORTH IN THIS ARTICLE, THERE ARE NOT
WARRANTIES, WHETHER EXPRESS, IMPLIED, ORAL, OR WRITTEN, WITH RESPECT TO THE
EQUIPMENT RACK LOCATION OR SERVICE OCVERED OR FURNISHED PURSUANT TO THIS
AGREEMENT, INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR POURPOSE. MOREOVER, THE
REMEDIES PROVIDED IN THIS ARTICLE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
REMEDIES.
VIII. EXCUSED PERFORMANCE
Neither Party shall be liable to the other Party under this Agreement for any
failure nor delay in performance that is due to causes beyond its reasonable
control, including but not limited to, acts of nature, governmental actions,
fires, civil disturbances, interruptions of power.
<PAGE>
IX. ASSIGNMENT OR TRANSFER
Customer shall not assign or transfer the rights or obligations associated with
this Agreement, in whole or in part, without Focal's prior written consent.
Focal may assign its interest in this agreement to another party without prior
consent and without subsequent notification.
X. PUBLICITY
Customer shall not use Focal's name in publicity or press releases without
Focal's prior written consent.
XI. LIMITATION OF LIABILITY
A. In no event shall Focal, Focal Affiliates, Customer, or any of their
respective officers or employees, be liable, one to the other, or any loss
of profit or revenue or for indirect, incidental, special, punitive or
exemplary damages incurred or suffered by each other, arising from or
pertaining to Customer's use or occupancy of the equipment rack(s)
including (without limitation) damages arising from interruption of
electrical power or HVAC serves.
B. Customer shall indemnify and hold harmless Focal, Focal Affiliates, and
their respective officers and employees, servants, and agents from and
against any and all claims, cost, expenses or liability (including
reasonable attorney's fees) arising out of Customer's use of the equipment
rack(s) or Customer's operation of the Equipment within the equipment rack
location.
C. Each Party shall be liable to the other for damage to property and death or
injury to persons if such damage, loss, or injury is caused by the
negligent or willful acts or omissions of such Party, or its officers,
employees, servants, agents, affiliates or contractors, or by the
malfunction of any equipment supplied or operated by said Party.
XII. SURVIVAL PROVISIONS
The Parties' rights and obligations which by their nature would extend beyond
the termination, cancellation or expiration of this Agreement, shall survive
such termination, cancellation or expiration.
XIII. NOTICES
All formal notifications and transmittals to Focal issued pursuant to the
provisions of this Agreement shall be sent to:
Focal Communications Corporation
<PAGE>
Attn: John Barnicle
200 North LaSalle
Chicago, IL 60601
All formal notices and transmittals to Customer shall be sent to:
FASTNET - ATTN: PHIL WELLER
3864 Courtney Street
Suite 130
Bethlehem, PA 18017
Either Party may change the notice address or addresses by providing prior
written notice.
XIV. APPLICABLE LAW.
This agreement shall be governed by the laws of the State of Illinois, without
regard to Illinois' choice of law principles.
XV. ENTIRE AGREEMENT
This Agreement, including all Attachments, constitutes the entire agreement
between the Parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements of such Parties in connection herewith.
Customer acknowledges that it has not been induced to enter into this Agreement
by any representative or promise not specifically expressed in this Agreement.
Any modification made hereto shall not be valid and binding unless it is in
writing and signed by both Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
FOCAL: CUSTOMER:
BY: BY:
----------------------- ------------------------
TITLE: TITLE:
-------------------- ---------------------
DATE: DATE:
--------------------- ----------------------
<PAGE>
COLOCATION SCHEDULE
This Colocation Schedule is made on this 7th day of October, 1999 (the
"Effective Date") and subject to all definitions, terms and conditions of that
certain Agreement for Colocation, dated 10/7, 1999 the ("Agreement") by and
between the Focal Communications Corporation ("Focal") and FASTNET ("Customer").
Focal Communications accepts and satisfies the terms and conditions of the
Agreement, with respect to the Equipment Rack Facility identity below, as
specifically set forth herein.
1. ADDRESS OF EQUIPMENT RACK FACILITY: 2. CABINET ALLOCATION: #
and identification
-------------------------------
-------------------------------
3. MINIMUM TERM: Year(s)
-------
Requested service date: 10/20/99
4. MONTHLY RECURRING SERVICE FEES:
Monthly Fees $[ * ] (PER CABINET)
POWER
AC (120 volt): #Amps Battery and Generator Back-up
Yes / / No / /
------------
DC # Amps Battery and Generator Back-up
Yes / / No. / /
-----------
5. NON-RECURRING FEES
Additional Build-Out Fees $____.00 (TO BE DETERMINED)
Cross-Connect Installation Fees2 $[ * ]
6. Access Card Received Yes / /
There is a $25 fee for lost or replaced access cards
Notes:
1. AC Power charges will be applied based on Customer connected Equipment load
based on an initial survey and adjusted annually based on surveys performed
on or about the anniversary of the original survey.
2. A "cross-connect" is an electrical connection made between two DS-1
circuits on a DSX-1 cross-connect panel or equivalent, or two DS-3 circuits
on a DC-3 cross-connect panel which interconnects the Equipment with other
telecommunication services. Focal shall provide appropriate cable
facilities (i.e., patch cords and cables required to connect DSX-N jacks)
between the Equipment and Focal's common-connect panel located at the
Premises. Cross- connect charges are determined by the level and type of
facilities connected. No cross-connect shall be provided for any prior
expiration of the Agreement.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
FOCAL: CUSTOMER:
BY: /S/ Phillip L. Weller
------------------------ ----------------------
DATE: DATE: 10/29/99
---------------------- -----------------
<PAGE>
EXHIBIT A
To Colocation Schedule No.
FACILITY DRAWINGS
(to be attached)
<PAGE>
EXHIBIT 2
To Colocation Schedule No.
GENERAL DESCRIPTION OF WORK TASKS AND SPECIAL TERMS AND CONDITIONS
1. GENERAL DESCRIPTION - FOCAL WORK TASKS
2. GENERAL DESCRIPTION - CUSTOMER WORK TASKS
3. SPECIAL TERMS AND CONDITIONS (WHERE APPLICABLE)
INCLUDE SPECIAL ELECTRICAL REQUIREMENTS BELOW:
TOTAL 60 AMPS BEYOND STANDARD:
1-30 AMP CIRCUIT PER CABINET, TWIST LOCK PLUG
<PAGE>
EXHIBIT 3
To Colocation Schedule No.
The following charges shall be applied for labor performed by Focal on the
request of Customer.
1. Normal Focal business hours................ $[ * ] for the first 1/2 hour
$[ * ] each add'l 1/2 hour
(Monday to Saturday 7:00 a.m. to 7:00 p.m., except Focal holidays)
2. Off Hour Focal business hours.............. $[ * ] for the first 1/2 hour
[ * ] each add'l 1/2 hour
(Monday to Saturday p.m. to 7:00 a.m., except Focal holidays)
3. Sundays and Holidays Focal business hours...$[ * ] for the first 1/2hour
[ * ] each add'l 1/2hour
Note: Labor hours are billed in half hour increments.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
FOCAL COMMUNICATIONS CORPORATION
OF PENNSYLVANIA
E-MAIL: [email protected]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COLOCATION SERVICE ATTACHMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Customer
Name: PHILLIP L. WELLER DATE: 10/27/99
- ------------------------------------------------------------------------------------------------------------------------------------
COLOCATION INFORMATION:
Number of Cabinets: 2
Power Requirements: (check one)
<S> <C> <C> <C> <C>
/ / ACM (120 volt) # of Amps 30/CAB Battery and Generator Back Up: / / Yes / / No
/ / DC #of Amps Battery and Generator Back Up: / / Yes / / No
------
Line Coding (check one): / / AMI / / B8SZ
Framing (check one): / / D4 / / ESF
Demarcation Specified (check one):
/ / 66 Block / / Rh48 / / NIU / / DSX / / Other CDAX DS3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
Access Card Agreement
I, PHILLIP WELLER, of FASTNET, INC. on this date of 10/27/99, hereby
recognize request for 1 keycard to access the Focal Communications Corporation
colocation room at In the case of a lost or stolen card, I understand it is my
responsibility to report the incident to Focal Communications Corporation
within 24 hours and accept a replacement fee of $25 for anew access card.
Card # N/A. CUSTOMER REPRESENTATIVE FOCAL COMMUNICATIONS CORPORATION
----------------------------- --------------------------------
Signature Signature: /s/ Phillip L. Weller
-------------------------------- -------------------------
Company Company FASTNET
---------------------------------- -------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.24
<TABLE>
<S> <C>
- ------------------------------------------------------------- --------------------------------------------------------
Cisco Systems Capital Corporation MASTER LEASE AGREEMENT
- ------------------------------------------------------------- --------------------------------------------------------
5500 Wayzats Boulevard, Suite 725
- ------------------------------------------------------------- --------------------------------------------------------
Golden Valley, MN 55416
- ------------------------------------------------------------- --------------------------------------------------------
Tel. 612-593-1904 FAX 612-513-3299
- ------------------------------------------------------------- --------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
LEGAL NAME OF LESSEE D.B.A. NAME FEDERAL TAX ID #
FASTNET CORPORATION
- ----------------------------------------------------------------------------------------------------------------------
ADDRESS COUNTY
TWO COURTNEY PLACE, 3864 COURTNEY STREET, SUITE 130 NORTHHAMPTON
- ----------------------------------------------------------------------------------------------------------------------
CITY STATE/PROVINCE ZIP / / CORPORATION / / PARTNERSHIP / / PROPRIETORSHIP
BETHLEHEM PA 18017
- ----------------------------------------------------------------------------------------------------------------------
CONTACT NAME PHONE NUMBER FAX NUMBER
PHILLIP WELLER 610-266-6700 610-231-2525
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
SUPPLIER/VENDOR SALES REPRESENTATIVE
Cisco Systems Capital Corporation
- ----------------------------------------------------------------------------------------------------------------------
ADDRESS CITY STATE ZIP
170 West Tasman Drive San Jose CA 95134-1706
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
LEASE TERMS AND CONDITIONS
The terms and conditions of this Master Lease Agreement ("Master Agreement")
shall apply to each and every Equipment Schedule ("LEASE") which shall become
part of and attached to this Master Agreement. The Master Agreement and all
Leases subsequently executed shall be referred to jointly as "Agreements."
1. Sunrise Leasing Corporation ("LESSOR") agrees to lease to LESSEE and
Lessee agrees to lease from LESSOR the equipment listed on each LEASE
("EQUIPMENT").
2. TERMS, RENEWALS AND EXTENSIONS. The initial term and the rights and
obligations of the parties shall commence on the Acceptance Date (hereinafter
defined) and continue from the Commencement Date (hereinafter defined) for the
number of months set forth in the LEASE. The Acceptance Date with respect to
each item of EQUIPMENT shall be the sixteenth (16th) day after the date of
shipment to LESSEE. The Commencement Date shall be the first day of the month
following the Acceptance Date. THIS LEASE IS NON-CANCELABLE FOR THE FULL TERM
HEREOF. This LEASE shall renew automatically in one-year non-cancelable
increments unless LESSOR receives written notice of LESSEE'S intent to: (a)
purchase the EQUIPMENT or (b) terminate the LEASE. All notices must be received
by LESSOR in writing by certified mail, return receipt. Ninety (90) days prior
to the expiration date of the initial term or any of the non-cancelable
increments of the LEASE.
3. PAYMENT. LESSEE agrees to pay to LESSOR monthly LEASE payments as
stated herein in advance on the Commencement Date and on the first day of each
month thereafter during the LEASE term. If the Commencement Date is not the same
date as the Acceptance Date, LESSEE shall pay LESSOR interim rent on the
Acceptance Date for that period of time from the Acceptance Date up to, but not
including the Commencement Date in an amount equal to 1/30th of the monthly
LEASE payment multiplied by the number of days from (and including) the
Acceptance Date. LESSOR shall bill LESSEE by invoice for LEASE payments at
LESSEE's address set forth above. LESSEE shall remit payment to the address set
forth on the invoice. The obligation of LESSEE to make lease payments is
unconditional.
4. WARRANTIES. LESSOR HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATION,
WARRANTY, PROMISE, OR COVENANT, EXPRESS OR IMPLIEDM AS TO THE CONDITION,
QUALITY, DURABILITY, CAPABILITY, FUNCTION, PERFORMANCE, OR SUITABILITY OF THE
EQUIPMENT, ITS MERCHANTABILITY, OR ITS FITNESS FOR A PARTICULAR PURPOSE OR
AGAINST INTERFERENCE OR AGAINST INFRINGEMENT. THE PARTIES AGREE THAT AS THE
LESSEE SELECTED BOTH THE EQUIPMENT AND THE SUPPLIER OF THE EQUIPMENT, NO DEFECT,
EITHER PATENT OR LATENT, SHALL RELIEVE LESSEE OF ITS OBLIGATION HEREUNDER.
LESSEE AGREES THAT LESSOR SHALL NOT BE LIABLE FOR SPECIFIC PERFORMANCE OR ANY
LIABILITY, LOSS, DAMAGE, INCLUDING CONSEQUENTIAL, AND INCIDENTAL DAMAGES ARISING
OUT OF LESSEE'S USE OF THE EQUIPMENT; OR SUPPLIER'S FAILURE TO TIMELY DELIVER
THE EQUIPMENT.
<PAGE>
5. ASSIGNMENT. (A) LESSEE SHALL NOT ASSIGN, SUBLET, LEND, TRANSER, LEND,
OR PLEDGE THIS LEASE OR THE EQUIPMENT WITHOUT LESSOR'S PRIOR WRITTEN APPROVAL.
THIS LEASE AND THE COVENANTS AND OBLIGATIONS HEREUNDER SHALL BE BINDING UPON ANY
SUCH ASSIGN, SUCCESSOR, REPRESENTATIVE OR TRANSFEREE OR LESSEE; (B) LESSOR may
assign, transfer, pledge or sell LESSOR'S interest in this LEASE or the
EQUIPMENT. Upon notification of such assignment, LESSEE shall remit lease
payments directly to the address set forth on the notification. In no event
shall any assignment of LESSOR be obligated to perform any duty, covenant,
condition, or promise under this LEASE. (C) All terms and conditions hereof
shall be binding upon all successors and assigns of the parties hereto but only
to the extent such successors and assigns are permitted hereunder.
6. UCC FILINGS. LESSEE hereby agrees to execute such financing statements,
amendments thereto and other instruments as may be requested by LESSOR and
hereby constitutes and appoints LESSOR its true and lawful attorney-in-fact to
execute such financing statements on behalf of LESSEE without the LESSEE'S
signature. LESSEE agrees that the filing of this LEASE or a photocopy thereof
shall constitute and be the equivalent of the filing of an original financing
statement with respect to the EQUIPMENT under the Uniform Commercial Code and
LESSEE hereby adopts any photocopy or other reproduction of its signature on
this LEASE as its own.
7. PURCHASE OPTION. Upon lawful termination of this LEASE and provided
that no Event of Default has occurred during the term of the LEASE, LESSEE shall
have an option to purchase all (not part) of the EQUIPMENT without recourse or
warranty ("Purchase Option"). The LESSEE, however, is required to give ninety
(90) days written notice to LESSOR prior to the end of the LEASE of its
intention to purchase the EQUIPMENT. The payment for the EQUIPMENT purchase must
be made prior to the next usual LEASE rental payment date for that LEASE;
otherwise LESSEE shall be billed for the next LEASE payment under the terms of
the LEASE and the LEASE payment must be made promptly. If an Event of Default
has occurred during the term of the LEASE or payment for the EQUIPMENT is not
made pursuant to the terms of this Option, LESSEE'S Purchase Option shall be
canceled forthwith. LESSEE does not have the right to assign its Purchase Option
rights to any other entity. THE FAIR MARKET VALUE OF EQUIPMENT SHALL BE THE
RETAIL MARKET PRICE FOR USED, WELL MAINTAINED EQUIPMENT AT THE TERMINATION OF
THE LEASE.
8. USE OF EQUIPMENT. LESSEE shall use the EQUIPMENT solely at the business
locations as set forth in the Equipment Schedule. LESSEE shall use the EQUIPMENT
in compliance with the Manufacturer's or Supplier's suggested guidelines.
Provided LESSEE is not in default hereunder, LESSEE shall have the right to
quiet and peaceful use of the EQUIPMENT. LESSOR shall be permitted to inspect
the EQUIPMENT during LESSEE'S regular working hours.
9. REPAIRS. LESSEE, at its own expense, shall keep the EQUIPMENT in good
repair, and maintain a service agreement in full force throughout the term of
the LEASE which fulfills all of the manufacturer's or vendor's maintenance
requirements as set forth in its full service maintenance contract.
Notwithstanding, LESSEE agrees to pay LESSOR for any expense incurred to cause
the EQUIPMENT to meet vendor's specifications. LESSEE shall pay such charges
immediately upon request.
10. INSURANCE. LESSEE shall provide, and pay for (a) insurance against the
loss or theft of or damage to the EQUIPMENT for the full replacement and (b)
public liability and property damage insurance naming LESSOR as Loss Payee or
Additional Insured. Upon request from LESSOR, LESSEE shall provide with a
Certificate of Insurance.
11. NET LEASE. LESSEE intends the LEASE payments hereunder to be net to
LESSOR. LESSEE shall pay, or reimburse, LESSOR, property taxes, fees,
assessments, charges and taxes (municipal, state and federal) which are imposed
upon this LEASE or the EQUIPMENT or its ownership, leasing, renting, possession
or use while it is subject to this LEASE, excluding, however, taxes based on
LESSOR'S net income. Unless otherwise specified in the LEASE, LESSOR shall be
responsible for filing all personal property tax returns with respect to the
EQUIPMENT and shall pay all taxes in connection with such filing LESSEE shall
reimburse LESSOR for such personal property tax payments within ten (10) days of
receipt of LESSOR'S invoice therefor.
12. TITLE. Title to the EQUIPMENT shall remain in LESSOR except upon the
exercise of the Purchase Option by LESSEE. All replacement parts, accessories,
additions to, or modifications of the EQUIPMENT shall
<PAGE>
become property of LESSOR. LESSEE shall affix to the EQUIPMENT, in a prominent
place, any tags, stickers, labels or markings supplied by LESSOR stating
ownership of the EQUIPMENT. Lessee shall give LESSOR immediate notice of any
attachment or judicial process affecting the EQUIPMENT OR LESSOR'S ownership
thereof.
13. RISK OF LOSS. Upon acceptance of the EQUIPMENT, LESSEE shall bear the
risk of loss from any cause whatsoever and any such loss shall not relief LESSEE
from any obligation hereunder including the duty to make LEASE payments. In the
event the EQUIPMENT is lost or damaged beyond repair, LESSEE shall replace the
EQUIPMENT with identical equipment, which shall become the EQUIPMENT for
purposes of this LEASE.
14. DELIVERY AND RETURN OF PRODUCT. LESSEE assumes the full expense of
transportation, insurance, and installation to LESSEE'S site. Upon lawful
termination of this LEASE or upon LESSEE'S default, and not less than fifteen
(15) days or more than thirty (30) days prior to the return of the EQUIPMENT,
LESSEE shall, at LESSEE'S sole expense, provide LESSOR a letter from the
manufacturer certifying the Product is in good operating condition and is
eligible for continued maintenance and that the operating system is at the then
current level. LESSEE shall remain obligated to pay Rent on the Product until
the Product and certification are received by LESSOR. LESSEE, at its own
expense, shall crate, insure, and transport the EQUIPMENT to LESSOR or to a
location within the Continental U.S. designated by LESSOR to receive the
EQUIPMENT in the same condition it was at the commencement of the LEASE,
reasonable wear and tear excepted.
15. EVENT OF DEFAULT. The following shall be "Events of Default": (a)
LESSEE fails to make any LEASE payment within five (5) days after the date the
payment is due; (b) LESSEE fails to allow LESSOR to inspect the EQUIPMENT during
business hours; (c) LESSEE fails to provide insurance on EQUIPMENT; (d) LESSEE
fails to maintain the EQUIPMENT and maintain a service contract; (e) LESSEE
assigns or otherwise transfers this lease or the EQUIPMENT without LESSOR'S
prior written approval, (f) LESSEE creates, incurs, or assumes any mortgage,
lien, pledge, or other encumbrance or attachment of any kind whatsoever, with
respect to the EQUIPMENT or this LEASE or any of LESSOR'S interest hereunder;
(g) LESSEE moves the EQUIPMENT to a location other than as stated on the front
page hereof without LESSOR'S prior written approval, (h) LESSEE fails to return
the equipment to LESSOR upon termination of this LEASE; (i) LESSEE files or has
filed against it a petition in bankruptcy or seeking similar relief; (j) LESSEE
becomes insolvent; or (k) LESSEE defaults under any other lease agreement
between the parties.
16. REMEDIES. Unless LESSSSEE cures an event of default within 10 business
days from when it has received written notice from LESSOR, the parties agree
that upon the occurrence of an Event of Default, LESSOR may take one or more of
the following actions: (i) declare the entire amount of the remaining LEASE
payments, including arrearages, due and immediately payable, (ii) take peaceful
possession of the EQUIPMENT with our without court order, and (iii) recover all
commercially reasonable costs and expenses incurred by LESSOR in any
repossession, recovery, storage or repair, sale, release or other disposition of
the EQUIPMENT. No right or remedy herein conferred upon or reserved to LESSOR is
exclusive of any other right or remedy hereunder or allowed by law. Each right
and remedy shall be cumulative and may be exercised singly or in combination. To
the extent permitted by applicable law, LESSEE also hereby waives any rights now
or hereafter conferred by statute or otherwise which may require LESSOR to sell,
lease or otherwise use the EQUIPMENT in mitigation of LESSOR'S damages, or which
may otherwise limit or modify any of LESSOR'S rights or remedies under this
paragraph.
17. LESSOR'S EXPENSES: LESSEE shall pay LESSOR all costs and expenses,
including reasonable attorney's fees, incurred by LESSOR in exercising any of
its rights or remedies hereunder. To the extent allowed by law, LESSEE shall be
obligated to pay a late payment penalty equal to 5% of the monthly rental for
each month the payment is delinquent, or the maximum rate permitted by law.
18. INDEMNITY: LESSEE shall indemnify LESSOR against, and hold LESSOR
harmless from, any and all claims, actions, suits, proceedings, costs, expenses,
damages and liabilities, including reasonable attorney's fees, arising out of,
connected with, or resulting from this LEASE or the EQUIPMENT without
limitation. The indemnities contained herein shall survive termination of this
LEASE.
19. NON-WAIVER. Lessor's failure to require strict performance by LESSEE of
any of the provisions of this LEASE shall not be a waiver thereof.
<PAGE>
20. SEVERABILITY. If any of provision of this LEASE be declared invalid,
such provision shall be inapplicable and deemed omitted, but the remaining
provisions, including the default and remedy provisions, shall remain in full
force and effect.
21. WAIVER. Except as hereinafter specifically provided and to the extent
allowed by law, LESSEE and LESSOR agree that the provisions of Uniform
Commercial Code Article 2, as enacted by the State of Minnesota, shall not be
applicable to this Agreement. Notwithstanding the foregoing, UCC Sections
2A-109, 2A, 523, 2AZ-525, 2A-526 and 2A-531 shall remain applicable in their
current form.
22. CHOICE OF LAW, JURISDICTION AND VENUE. The parties herein expressly
agree that this Agreement shall be governed by the laws of the State of
Minnesota and shall be interpreted, construed and enforced in accordance with
the laws of the State of Minnesota. In any legal action hereunder, LESSEE hereby
consents to personal jurisdiction and venue in the Courts of the State of
Minnesota, and LESSEE will not object to any personal jurisdiction or venue in
the Courts of the State of Minnesota.
23. Monthly Lease Payments and other Lease terms shall be shown on
Equipment Schedules to this Master Agreement and are incorporated herein by
reference.
- -------------------------------------------------------------------------------
LESSEE HAS READ AND IS SUBJECT TO THE CONDITIONS SET FORTH HEREIN. This Master
Agreement constitutes the entire Agreement between the parties and no provision
of this Master Agreement shall be deemed waived, amended or modified by either
party unless such waiver, amendment, or modification is in wiring signed by the
party to be charged thereby.
IN WITNESS WHEREOF LESSEE HAS HEREBY EXECUTED THIS NON-CANCELABLE LEASE THIS
____ DAY OF _____________, 19____.
<TABLE>
<S> <C>
NAME OF LESSEE: FASTNET CORPORATION LESSOR: SUNRISE LEASING CORPORATION
Signed: X_________________________ Date 11/3/99 Signed: X___________________________ Date ________
authorized signature signature signifies acceptance by Lessor
NAME AND TITLE: ________________________ NAME AND TITLE _________________________
</TABLE>
<PAGE>
Cisco Systems Capital Corporation ----------------------------------------
5500 Wayzats Boulevard, Suite 725 MASTER LEASE NUMBER
Golden Valley, MN 55416 ----------------------------------------
Tel. 612-593-1904 FAX 612-513-3299 | | | | | | |
----------------------------------------
EQUIPMENT SCHEDULE
----------------------------------------
AIA
--------------
- --------------------------------------------------------------------------------
EQUIPMENT SCHEDULE FOR MASTER LEASE AGREEMENT
The Equipment listed on this Equipment Schedule is subject to the applicable
Master Lease Agreement and all the conditions and terms stated therein.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION LEASE TERM
3864 COURTNEY ST., SUITE 130 BETHLEHEM PA 18017 NORTHHAMPTON 36 MONTHS
- ----------------------------------------------------------------------------------------------- --
STREET ADDRESS CITY STATE ZIP COUNTY
- ----------------------------------------------------------------------------------------------- -------------------------------
EQUIPMENT DESCRIPTION
QUANTITY MAKE/MODEL SERIAL NUMBER
-------------------------------
- --------------- -------------------------------------------------------------------------------
PAYMENT SCHEDULE
MONTHLY LEASE PAYMENT
PLEASE SEE ATTACHED QUOTE #63T-PE FOR $14,519.90/month
EQUIPMENT DESCRIPTION AND PRICING Excludes Applicable Taxes
-------------------------------
ADVANCE PAYMENT
$15,391.09 for last month's
payment in advance
(Including Applicable Taxes)
-------------------------------
REMAINING MONTHLY
PAYMENTS
35 months at $14,519.90/month
(Excluding Applicable Taxes)
-------------------------------
15% DOWN PAYMENT
$ 80,073.00
PURCHASE OPTIONS / / Fair Market Value -------------------------------
/X/ Other ______________________________
The Purchase Option terms and conditions are listed in section 7
of the Master Lease Agreement.
-------------------------------------------------------------------------------
SALE TAX OPTIONS: /X/ Each lease payment is subject to sales tax
/ / Total Sales Tax required in advance
</TABLE>
Upon receipt and acceptance of the Equipment subject to this Equipment Schedule,
please complete the attached Equipment Receipt and Acceptance Report and return
it to Sunrise Leasing Corporation.
- --------------------------------------------------------------------------------
LESSEE HAS READ AND IS SUBJECT TO THE CONDITIONS SET FORTH ON THE REVERSE SIDE
OF THE MASTER LEASE IN WITNESS WHEREOF LESSEE HAS HEREBY EXECUTED THIS
NON-CANCELABLE LEASE THIS ______ DAY OF ______________, 19____
<TABLE>
<S> <C>
NAME OF LESSEE: FASTNET CORPORATION LESSOR: SUNRISE LEASING CORPORATION
SIGNED _____________________ DATE 6/13/97 SIGNED ________________________________________
authorized signature signature signifies acceptance by Lessor
NAME AND TITLE _______________________________ DATE: _____________________________
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 1 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
1.0 CISCO7507/4x2 Cisco 7507 7-Slot 2 CyBus. 2 1 1 [ * ] [ * ]
RSP4.
Dual Power Supply
Shipment # 8306862.
Serial # 76041098.
1.7 SF75CV-11.1.26 R RSP1, RSP2, IOS IP and Basic 1 1 [ * ] [ * ]
VIP Feature Set
1.9 FR-IR75 Cisco IOS RSP Series InterDomain 1 1 [ * ] [ * ]
Routing/Tag Switching Lic
1.13 MEM-RSP4 - 128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
1.15 MEM-RSP4 FLC20M RSP4 Flash Card 20 MB Option 1 1 [ * ] [ * ]
1.19 MEM-RSP4 - 128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
1.21 MEM-RSP4 FLC20M RSP4 Flash Card 20 MB Option 1 1 [ * ] [ * ]
1..23 VIP2-50 Versatile Interface Processor 2 Model 50 1 1 [ * ] [ * ]
Shipment #8306862
Serial # 13964558 13964773 13965329
1.25 MEM-VIP250-128M-D 128 Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/xlP-50
1.29 PA-FE-TX 1- Port Fast Ethernet 100BaseTx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8306862
Serial #014293448 014204669
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 2 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
1.30 PA-213+2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8306662.
Serial #012368000. 0-12368201.
1.32 VIP2-50 Versatile Interface Processor 2, Model 1 1 [ * ] [ * ]
50
Shipment #8306862.
Serial #13964558, 13964773, 13965329
1.34 MEM-VIP250-128M-D 128 Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/x1P-50
1.38 PA-FE-TX 1-Port Fast Ethernet 100 Base Tx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8306862
Serial #014203448, 014204669
1.39 Pa-213+ 2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8306862
Serial #012368000, 012368201
1.41 Vip2-50 Versatile Interface Processor 2 Model 50 1 1 [ * ] [ * ]
Shipment #8306862
Serial #13964558, 13964773, 13965329
1.43 MEM-VIP250-128M-D 128 Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/xIP-50
1.47 PA-MC-T3 1 port multichannel T3 port adapter 1 1 [ * ] [ * ]
Shipment #8306862.
Serial #015230362.
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 3 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
2.0 018007607/4 x 2 Cicso 7507 7-5101.2 CyBus,, 2 1 1 [ * ] [ * ]
RSP4 Dual power Supply
Shipment #8303741
Seriel #76041994
2.7 SF75OV-11.1 26R RSP1, RSP2, 105 1P and Basiv 1 1 [ * ] [ * ]
VIP Feature Set
2.9 FR-1R75 Cicso IOS RSP Series InterDomain 1 1 [ * ] [ * ]
Routing/Tag Switching Lic
2.13 MEM-RSPF-128 MB DRAM Option 1 1 [ * ] [ * ]
2.15 MEM-RSP4-FLC20M RSP4 Flash Card 20 MB Option 1 1 [ * ] [ * ]
2.19 MEM-RSP40128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
2.21 MEM-RSP4-FLC20M RSP4 Flash Card 20MB Option 1 1 [ * ] [ * ]
2.23 VIP2-50 Versatile Interface Processor 2 Model 1 1 [ * ] [ * ]
50 Shipment #8303741
Serial #13964538, 13965236
2.25 MEM-VIP250-128M-D 128 Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/xP-50
2.29 PA-FE-TX 1-Port Fast Ethernet 100Base TX Port 1 1 [ * ] [ * ]
Adapter Shipment #8303741
Serial #014204267,
015195396
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 4 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
2.30 PA-2T3+2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8303741
Serial #-012367978, 012368094
2.32 VIP2-50 Versatile Interface Processor 2, Model 1 1 [ * ] [ * ]
50
Shipment #8303741
Serial #13964538, 13965236
2.34 MEM-VIP250-128M-D 128 Mybtes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/xP-50
2.38 PA-FE-TX-Port Ethernet 100Base Tx Port Adapter 1 1 [ * ] [ * ]
Shipment #8303741
Seriel #014204267, 015195396
2.39 PA-213+2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8303741
Serial #012367978, 012368094
3.0 CISCO7507/4X2 Cisco 7507 7-Slot 2 CyBus 2 RSP4 1 1 [ * ] [ * ]
Dual Power Supply
Shipment #8309790
Serial #76041102
3.7 SF75CV-11.126R RSP1, RSP2, 105 P and Basic VIP 1 1 [ * ] [ * ]
Feature Set
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 5 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
3.9 IR-IR/5 Cisco 105 RSP Series InterDomain 1 1 [ * ] [ * ]
Routing/Tag Switching Lic
3.13 MEM-RSP4-128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
3.15 MEM-RSP4-PLC20M RSP4 Flash Card: 20 MB Option 1 1 [ * ] [ * ]
3.19 MEM-RSP4-128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
3.21 MEM-RSP4-FLC20M RSP4 Flash Card 20MB Option 1 1 [ * ] [ * ]
3.23 VIP2-50 Versatile Interface Processor 2, Model 1 1 [ * ] [ * ]
50
Shipment #8309790
Serial # 13965281, 13965676
3.25 MEM-VIP250-128M Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/x1P5-50
3.29 PA-FE-TX 1-Port East Ethernet 100 Base Tx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8309790
Serial #414204198, 415196158
3.30 PA-2T3+2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8309790
Serial #412368146, 412368188
3.32 VIP20-50 Versatile Interface Processor 2 Model 1 1 [ * ] [ * ]
50
Shipment #8309790
Serial #13965281, 13965676
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 6 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
3.34 MEM-VIP250-128M-D Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/x1P-50
3.38 PA-FE-TX 1-Port Ethernet 100Base TX Port Adapter 1 1 [ * ] [ * ]
Shipment #8309790
Serial #414204198, 415196158
3.39 PA-2T3+ 2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8309790
Serial #412368146, 412368188
4.0 CISCO7507/4x2 Cisco 7507 7-Slot 2 CyBus, 2 RSP4 1 1 [ * ] [ * ]
Dual Power Supply
4.7 SF75CV-11.126R RSP1. RSP2, 105 1P and Basic VIP 1 1 [ * ] [ * ]
Feature Set
4.9 FR-IR75 Cisco IOS RSP Series InterDomain 1 1 [ * ] [ * ]
Routing/Tag
Switching Lic
4.13 MEM-RSP4-128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
4.15 MEM-RSP4-FLC20M RSP4 Flash Card 20MB Option 1 1 [ * ] [ * ]
4.19 MEM-RSP4-128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 7 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
4.21 MEM-RSP4-FLC2OM RSP1 Flash Card 20 MB Option 1 1 [ * ] [ * ]
4.23 VIP2-50 Versatile Interface Processor 2 Model 1 1 [ * ] [ * ]
50
Shipment #13965415, 15099844
4.25 MEM-VIP250-128M-D 128 Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/x1P-50
4.29 PA-FE-TX 1-Port Fast Ethernet 100Base Tx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8315526
Serial #14203454, 15195514
4.30 PA-2T3+ 2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8315526
Serial #12367989, 12368128
4.32 VIP2-50 Versatile Interface Processor 2, Model 1 1 [ * ] [ * ]
50
Shipment #8315526
Serial #13965415, 15099844
4.34 MEM-VIP250 - 128M-D 128 Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/xIP-50
4.38 PA-FE-TX 1 Port East Ethernet 100Base Tx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8315526
Serial #14203454, 15195514
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 8 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
4.39 PA-2T3+2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Shipment #8315526
Serial # 12367989, 12368128
5.0 CISCO7206VXR Cisco 7206VXR 6-slot chassis 1AC 1 1 [ * ] [ * ]
Supply w/IP Software
Shipment #8365112
Serial #72650357
5.3 PWR-7200/2 Cisco 7200 Dual AC Power Supply 1 1 [ * ] [ * ]
Option 28W
Shipment #8365112
Serial #9935093776
5.10 C7200-I/O-FE Cisco 7200 Input/Output Controller 1 1 [ * ] [ * ]
with Fast Ethernet Port
Shipment #8365112
Serial #1504122
5.12 MEM-I/0-FLC20M Cisco 7200 I/O PCMCIA Flash 1 1 [ * ] [ * ]
Memory 20 MB Option
5.14 NPE-300 Cisco 7200VXR Network Processing Engine 1 1 [ * ] [ * ]
300
Shipment #8365112
Serial #13961517
5.16 MEM-SD-NPE-128MB 128MB Memory for 1 1 [ * ] [ * ]
NPE0-300/NPE-225/NPE-175 in 7200 Series
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 9 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
5.18 PA-FE-TX 1-Port Fast Ethernet 100Base Tx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8365112
Serial #15196706
5.19 PA-MC-T3 1port multichannel T3 port adapter 1 1 [ * ] [ * ]
Shipment #8365112
Serial #15238094
6.0 CISCO7206VXR Cisco 7206VX4, 6-Slot chassis, 1AC 1 1 [ * ] [ * ]
Supply w/IP Software
Shipment #8366068
Serial #72650364
6.3 PWR-7200/2 Cisco 7200 Dual AC Power Supply 1 1 [ * ] [ * ]
Option 80W
Shipment #8366068
Serial #9935093775
6.10 C7200-1/0-FE Cisco 7200 Input/Output Controller 1 1 [ * ] [ * ]
with Fast Ethernet Port
Shipment #8366068
Serial #11191093
6.12 MEM-1/0-FLC20M Cisco 7200 I/0 PCMICIA Flash 1 1 [ * ] [ * ]
Memory 20 MB Option
6.14 NPE-300 Cisco 7200VXR Network Processing Engine 1 1 [ * ] [ * ]
300
Shipment #8366068
Serial #13961497
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 10 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
6.16 MEM-SD-NPE-128MB 128MB Memory for 1 1 [ * ] [ * ]
NPE-300/NPE-225/NPE-0175 in 7200 Series
6.18 PA-FE-TX 1-Port Fast Ethernet 100Base Tx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8366068
Serial #15199100
6.19 PA-MC-T3 1 port multichannel T3 port adapter 1 1 [ * ] [ * ]
Shipment #866068
Serial #15230517
7.0 CISCO7206VXR Cisco 7206VXR 6-slot chassis, 1AC 1 1 [ * ] [ * ]
Supply w/IP Software
Shipment #8365958
Serial #72650358
7.3 PWR-7200/2 Cisco 7200 Dual AC Power Supply 1 1 [ * ] [ * ]
Option 280W
Shipment #8365958
Serial #9935093791
7.10 C7200-I/0-FE Cisco 7200 Input/Output Controller 1 1 [ * ] [ * ]
with Fast Ethernet Port
Shipment #8365958
Serial #14309292
7.12 MEM-I/0-FLC20M Cisco 7200 I/0 PCMCIA Flash 1 1 [ * ] [ * ]
Memory 20MB Option
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 11 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
7.14 NPE-300 Cisco 7200VXR Network Processing Engine 1 1 [ * ] [ * ]
300
Shipment #8365958
Serial #13961539
7.16 MEM-SD-NPE-128MB 128MB Memory for 1 1 [ * ] [ * ]
NPE-300/NPE-225/NPE-175 in 7200 Series
7.18 PA-FE-TX 1-Port Fast Ethernet 100Base Tx Port 1 1 [ * ] [ * ]
Adapter
Shipment #8365958
Serial #15196563
7.19 PA-MC-T3 1 Port multichannel T3 port adapter 1 1 [ * ] [ * ]
Shipment #8365958
Serial #15230596
8.0 CISCO7507/4 Cisco 7507 7-Slot 2 CyBus 1RSP4 1 1 [ * ] [ * ]
Single Power Supply
Shipment #8300537
Serial #76041073`
8.7 SF75CV-11.126R RSP1. RSP2. 10S 1P and Basic VIP 1 1 [ * ] [ * ]
Feature Set
8.11 MEM-RSP4-128M RSP4 128MB DRAM Option 1 1 [ * ] [ * ]
8.13 MEM-RSP4-FLC20M RSP4 Flash Card 20 MB Option 1 1 [ * ] [ * ]
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 12 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
9.0 VIP2-50 = Versatile Interface Processor 2 Model 1 1 [ * ] [ * ]
50
Shipment #8454206
Serial #13968076
9.4 MEM-VIP250-128M Mbytes DRAM Option for 1 1 [ * ] [ * ]
VIP2-50/xIP-50
11.0 PA-2T3+=2 Port T3 Serial Port Adapter Enhanced 1 1 [ * ] [ * ]
Spare
Shipment #8410908
Serial #12367986
12.0 PA-MC-T3=1 port mutlichannel T3 port adapter 1 1 [ * ] [ * ]
Shipment #840908
Serial #15230485
Billing Iquiries: Elaine Lopez 408-525-9650
Document Type: STANDARD INVOICE FROM OE
Invoice Format: MAJOR AND NON ZERO OPTION LINES
Commercial Invoice #2714170
CISCO SYSTEMS, INC., IS THE DOMESTIC SUPPLIER
FOR THIS SHIPMENT AND MAY NOT BE SHOWN AS THE
EXPORTER OF RECORD ON ANY INTERNATIONAL
SHIPPING DOCUMENTS. CONSIGNEE OR THEIR
APPOINTED AGENT IS RESPONSIBLE FOR COMPLIANCE
WITH U.S. GOVERNMENT RULES AND REGULATIONS
COVERING THIS SHIPMENT OR ANY PORTION OF THIS
SHIPMENT. CISCO SYSTEMS, INC. EQUIPMENT IS
SUBJECT TO EXPORT CONTROLS UNDER THE EXPORT
ADMINISTRATION REGULATIONS OF THE U.S. BUREAU
OF EXPORT ADMINISTRATION.
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
CISCO SYSTEMS REMIT TO
NUMBER PURCHASE ORDER NUMBER DATE PAGE
---------------------- ---------------------------- ----------------- ----------------
P O BOX 91232 3745711 33PW-3003 24-SEP-1999 13 of 13
CHICAGO, IL 60693-1232 ---------------------- ---------------------------- ----------------- ----------------
OUR REFERENCE SALES ORDER NUMBER CUSTOMER NO LOCATION NO
---------------------- ---------------------------- ----------------- ----------------
---------------------- ---------------------------- ----------------- ----------------
</TABLE>
BILL TO: SHIP TO
29-2,-80cis0772f.XTX P. WELLER
ATTN: A/P FASTNET CORPORATION
FASTNET CORPORATIN 3864 COURTNEY STREET
2 COURTNEY PLACE SUITE 130
SUITE 130 BETHLEHEM PA 18017
3864 COURTNEY STREET
BETHLEHEM PA 18017
<TABLE>
<S> <C> <C>
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
TERMS DUE DATE SALESPERSON
- ---------------------------------------------- ------------------------- -----------------------------------------------------------
30 NET 24-OCT-1999 Parris, Chad
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
CUSTOMER CONTACT SHIP DATE SHIP VIA SHIPPING REFERENCE
- ---------------------------------------------- ------------------------- --------------------------------- -------------------------
ATTN: 24-SEP-1999 FedEx: 2 day Heavy X
- ---------- ------------------------------------------------- -------------------------------------- --- --------------- ------------
QUANTITY EXTENDED
ITEM NO INVOICE DESCRIPTION ORDERED BACKORD SHIPPED TAX UNIT PRICE AMOUNT
- ---------- ------------------------------------------------- ------------ ------------ ------------ --- --------------- ------------
INCOTERMS: EX-WORKS
Export classification data may be found at:
http:/www.cisco.com/www/export/matrix.html
TWO COURTNEY PLACE SUITE 130 PO#33PW-3003
PO#33PW-3003
INFORMATION, INVOICE AGENT AND MUCH MORE!
Http://www.cisco.com FOR ORDER STATUS
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
SHIPPING
SPECIAL INSTRUCTIONS SUBTOTAL TAX HANDLING TOTAL
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
- -------------------------------------------------------------------------------------- ------------ --- --------------- ------------
</TABLE>
<PAGE>
Advantage Program Addendum
- --------------------------------------------------------------------------------
EXHIBIT 10.26
SERVICES AGREEMENT
This Agreement is made as of 12/3 , 199 9 ("Effective Date"), between Covad
Communications Company, a California corporation) ("Covad") FASTNET, A
PENNSYLVANIA CORPORATION, the "Customer" listed below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Customer Information
- ------------------------------------------------------------------------- --------------------------------------------
<S> <C>
Customer Name: FastNet Contact: Scot Reynolds
- ------------------------------------------------------------------------- --------------------------------------------
Address: Two Courtney Place, Suite 130, 3864 Courtney St. Phone: 610-266-6700
- ------------------------------------------------------------------------- --------------------------------------------
City: Bethlehem State: Pa. Zip: 18015 Fax: 610-231-9525
- ------------------------------------------------------------------------- --------------------------------------------
Type: -X- ISP ______ Corporate E-Mail: [email protected]
- ------------------------------------------------------------------------- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------ ------------------------------ ----------------
Exhibits Terms Page
------------------------------------------------------ ------------------------------ ----------------
<S> <C> <C>
Terms and Conditions Expires: 1-2
------------------------------------------------------ ------------------------------ ----------------
Volume Commitment 5,000 line commitment 3
------------------------------------------------------ ------------------------------ ----------------
Price Schedule - TeleSpeed" Services 4-6
------------------------------------------------------ ------------------------------ ----------------
Service Level Agreement 7-10
------------------------------------------------------ ------------------------------ ----------------
Price Schedule TeleSurfer Services
------------------------------------------------------ ------------------------------ ----------------
Advantage Addendum with National Circuit
------------------------------------------------------ ------------------------------ ----------------
Marketing Development Funds
</TABLE>
THIS AGREEMENT INCLUDES THE ATTACHED TERMS AND CONDITIONS AND ALL OTHER EXHIBITS
REFERENCED HEREIN, AND CONTAINS, AMONG OTHER THINGS, WARRANTY DISCLAIMERS AND
LIABILITY LIMITATIONS. Any different or additional terms of any related purchase
order, confirmation, or similar form shall have no force or effect, unless
signed by both parties after the date hereof. References in this Agreement or
any exhibit to a capitalized term appearing on this cover page shall have the
meaning or value of such term on this cover page.
COVAD COMMUNICATIONS COMPANY: CUSTOMER: FASTNET
/s/ David Van Allen 12/3/99
- -------------------------------- ------------------------------------------
Name Date Name Date
CEO
- -------------------------------- ------------------------------------------
Title Title
1
<PAGE>
ADVANTAGE PROGRAM ADDENDUM
This Advantage Program Addendum ("Addendum") is made effective as of the third
day of December, 1999 ("Addendum Effective Date") by and between Covad
Communications Company, a California corporation ("Covad"), and the "Customer"
described in the Services Agreement between Covad and Customer (the
"Agreement"). Covad and Customer now wish to amend the Agreement.
The parties agree: that this Addendum supersedes all proposals, oral or written,
all negotiations, conversations, or discussions between or among parties
relating to the subject matter of this Addendum and all past dealing or industry
custom; that this Addendum shall be integrated in and form part of the Agreement
upon execution; and that all terms and conditions of the Agreement shall remain
unchanged except as modified in this Addendum, and where the terms of the
Agreement conflict with those of this Addendum, however, the terms of this
Addendum shall control.
In consideration of the foregoing and the mutual covenants contained in this
Addendum, and other consideration, which the parties acknowledge is sufficient,
Covad and Customer agree that the Agreement is hereby amended in the manner set
forth in the attachment hereto ("Addendum Specifics").
IN WITNESS WHEREOF this Addendum has been executed by the parties hereto by
their employees duly authorized as they so declare.
COVAD COMMUNICATIONS COMPANY: CUSTOMER: FASTNET
/s/ David Van Allen 12/3/99
- -------------------------------- ------------------------------------------
Name Date Name Date
CEO
- -------------------------------- ------------------------------------------
Title Title
2
<PAGE>
Advantage Program Addendum - Schedule A
- --------------------------------------------------------------------------------
The parties hereby amend the Agreement to provide as follows:
1. Customer agrees that Covad shall be Customer's preferred DSL provider
such that 90% of all DSL services (or similar services) sold or resold
by Customer to its End Users shall be purchased from Covad and not from
any other provider, provided that if Covad is unable to provide DSL
service to an End User within 60 days of a bona fide order being placed
with Covad for such, Customer may provide DSL service to such End User
through a party other than Covad. Customer will provide Covad on a
quarterly basis, an accounting of all DSL services sold or resold by
Customer during such prior quarter so that Covad may verify Customer's
compliance with the 90% preferred provider commitment set forth above.
2. Customer agrees to staff a subject matter expert on Covad and DSL that
is dedicated to receiving information from Covad about DSL as well as
any sales leads that Covad may send to Customer as part of any demand
generation programs.
3. Customer agrees to develop a strategy to implement e-commerce links
between Customer and Covad. These links include, but are not limited
to, API implementation, Covad-branded landing pages on Customer's web
site from which End Users can place orders, and detailed reporting on
End User lines sold through e-commerce links.
4. If customer abides by all of its obligations under this Addendum and
under the Agreement, customer will be eligible to participate in
Covad's then-applicable Advantage Program as such Program may exist
from time to time. Pricing and other terms for services specifically
related to the Advantage program are attached as schedules to this
Addendum.
3
<PAGE>
TERMS AND CONDITIONS
SCHEDULE A
National Customer Circuit Service
Covad hereby offers to Customer a National Customer Circuit Service
(the "National Service") option to its TeleSpeed and TeleSurfer
Services.
The National Service will provide National backhaul connectivity across
Covad's National network and will include local access connectivity
over one (1) DS-3 Customer Circuit to a single point within Covad's
current service area. Pricing does not include TeleSpeed and TeleSurfer
End User monthly charges.
NATIONAL CUSTOMER CIRCUIT MONTHLY RECURRING CHARGES:
Subscribed Data Rate -- Billed-in advance
<TABLE>
<CAPTION>
------------------ ------------
Data Price per
Rate* Month
------------------ ------------
<S> <C>
5 Mbps [ * ]
------------------ ------------
10 Mbps [ * ]
------------------ ------------
20 Mbps [ * ]
------------------ ------------
30 Mbps [ * ]
------------------ ------------
Full DS-3 [ * ]
------------------ ------------
</TABLE>
*Total peak bit rate, including all ATM headers
EXCESS USAGE - if Customers actual aggregate data rate utilization over a
National Circuit exceeds the subscribed data rate on the above schedule, the
following excess usage charges shall apply, billed in arrears:
<TABLE>
<S> <C>
------------------------------------------------------------------ -------------------------------------
0-5% of usage samples (per month) above subscribed rate: [NO CHARGE]
------------------------------------------------------------------ -------------------------------------
------------------------------------------------------------------ -------------------------------------
5% or higher of usage samples (per month) above subscribed rate: [ * ]
------------------------------------------------------------------ -------------------------------------
</TABLE>
Customer shall have the option to change the subscribed data rate for the
current month until 5:00 p.m. PST on the day prior to the last business day of
each current month. Changes in the subscribed data rate will be credited or
debited in the following billing cycle.
NATIONAL CUSTOMER CIRCUIT NON-RECURRING CHARGES:
New Customer Circuits - [ * ]
Conversion of Existing Local Customer Circuit to a National Circuit -
No charge.
Conversion of National Customer Circuit to a Local Circuit* - No
charge.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
4
<PAGE>
TERMS AND CONDITIONS
Re-provisioning ("Migration") of end-user PVCs between two different
Local and National Circuits - [*] per end user PVC until such time as
Covad introduces an automated tool on support.covad.com. Covad expects
to introduce such tool on or before February 28, 2000. Migration of
end-user PVCs between any two individual Local and National Circuits
with the automated tool will incur a charge of [*] per use, for an
unlimited number of PVC migrations.
All non-local TeleSurfer end user PVCs must be migrated off of the
National Circuit before it can be converted to a Local Circuit.
TERMS OF USE
Customer will pay the applicable Monthly and Non-Recurring Charges specified
above pursuant to the terms of the Agreement. Remote region End User traffic can
be combined with and carried with local region traffic on the National Service
Customer Circuit, however all traffic will be included in the data rate
subscribed to as indicated in the above table.
National Service is to be used expressly for the provisioning of TeleSpeed and
TeleSurfer Service to individual End Users. Customer represents that the actual
aggregate data rate utilization by End Users shall not exceed the maximum data
rate subscribed to above (95% or more of Customer Circuit data rate usage
samples, sampled at 5-minute intervals, shall be less than subscribed data rate
in any calendar month). If the actual Customer Circuit data rate used by
Customer (for more than 5% of samples over specified intervals) for National
Service exceeds the subscribed data rate, then Customer shall pay the
appropriate monthly excess usage charges outlined above.
Covad expects to introduce SLAs for TeleSpeed Service provisioned on a National
Circuit prior to December 31, 1999, which will replace the standard TeleSpeed
SLA Agreement outlined elsewhere in the Agreement. Customer shall not receive
the benefit of the SLA for National Service prior to its introduction.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
5
<PAGE>
TERMS AND CONDITIONS
1. DEFINITIONS. As used herein: "Services" are services using digital subscriber
line ("DSL") technology to provide high-speed telecommunications data services
identified in the attached Price Schedule(s) which may include business-grade
TeleSpeed and TeleSpeed Remote Services and consumer-grade Telesurfer Services)
to Customer's Internet and network access customers ("End User"), that Covad
makes available at its discretion, and as more fully described on the Covad Web
Site: "End User Circuit" is a digital data telecommunications service that
consists of one permanent virtual circuit to an End User's premise utilizing DSL
technology. An End User Circuit provides upstream and downstream maximum
throughout rates that range from 144Kbp,-up to 1.5 Mbps (depending on what
Customer orders for that End User). Provision of an End User Circuit does not
include any Internet access service: "Customer Circuit" is a backhaul circuit
between Covad's regional data center or hub and Customers point-of-presence in a
particular region, this is generally required before Covad can provide Services
in that region. Customer may order a Customer Circuit from the Web Site. "Web
Site" means Covad's customer ordering web site located at:
http://support.covad.com.
2. PROVISION OF SERVICES. Subject to payment of all applicable fees, Covad will
use reasonable commercial efforts to supply the Services that Customer may order
from time to time through the Web Site. All Services will be supplied in
accordance with the Agreement, these Terms and Conditions, and the current
standard Customer Policies. Customer shall purchase Services for each End User
for an initial term of one (1) year ("End User Term"), and shall maintain each
Customer Circuit for a minimum one (1) year term ("Customer Term"), after which
Covad shall continue to provide Services to such Customer on a monthly basis,
subject to continuing payment of applicable fees and Customer's compliance of
terms and conditions requested by Covad. Covad reserves the sole and exclusive
right to determine the expansion of its service area, and the fight to maintain,
reconfigure, or discontinue any Service. Customer understands that Covad's
performance is dependent in part on third party actions, including, without
limitation, Customer and its End Users. Accordingly, any performance to be
rendered by Covad hereunder shall be appropriately waived or delayed to account
for such actions or inactions. Customer shall provide Covad with all information
reasonably requested (including, without limitation, information about each End
User) in connection with each order placed.
3. CUSTOMER CIRCUITS. Customer must order, and Covad must provide, a Customer
Circuit before Covad can supply any End User Circuits or Services through such
Customer Circuit. All one-time fees ("One-time Fees") will be due, and all
monthly fees will start, for each Customer Circuit upon Covad's notification to
Customer that the Customer Circuit is complete.
4. END USER CIRCUITS. Customer must order and Covad must successfully provide,
an End User Circuit for each End User before Covad can supply any Services for
that End User. Covad and Customer agree that an End User Circuit shall be
successfully provided if the maximum throughput of such End User Circuit is 80%
of the ordered Service. If Covad is unable to
6
<PAGE>
TERMS AND CONDITIONS
successfully provide an End User Circuit for the ordered service, Covad will
offer the End User the maximum available throughput rate and available Service.
Covad will notify Customer if End User declined the Circuit, or at what
throughput rate the End User accepted the Circuit. All One-time Fees will be
due, and all monthly fees will start, for each End User Circuit upon Covad's
notification to Customer of successfully providing of such End User Circuit.
5. EQUIPMENT. Customer may choose to have Covad supply and configure the
necessary equipment for an End User Circuit and Services at the End User
premises. Customer is responsible for changes to any End User premise equipment,
software and configuration after Covad completes its service setup. Covad will
bill any equipment charges to Customer as part of the One-time Fees for the End
User Circuit. Covad shall have no obligation or liability in connection, with
any equipment not purchased through Covad and configured by Covad, or for any
abuse or misuse of any equipment by any party other than Covad. Covad shall pass
through to Customer any warranties from the manufacturers of equipment that
Covad installs at Customer's or an End User's premises. Covad shall have no
obligation to repair or maintain any equipment, and Customer shall be
responsible for seeking warranty and other service directly from the
manufacturer. However, Covad shall provide replacement End User premise
equipment as described in the Service Level Agreement ("SLA"). If Customer
purchases End User premise equipment directly from Covad, it can be returned to
Covad only if the equipment is in original working condition and in its original
packing within thirty (30) days from Covad's original shipment date. A 25%
equipment handling and restocking charge will be charged to the Customer by
Covad. Customer should call Covad Customer Care to receive a Return Materials
Authorization (RMA) number and to ship the equipment back to Covad. (the
Customer shall pay all shipping charges associated with this return).
6. FEES AND PAYMENT TERMS. Customer shall pay Covad the One-time monthly fees
and other fees shown in the applicable Pricing Schedule(s) for the setup,
operation and providing of Services, Customer Circuits, and End User Circuits.
The fees billed to Customer for Services shall not change during the Initial
Term (as defined below); thereafter. Covad shall be free to change any of the
fees upon notice to Customer. Covad shall invoice Customer once a month, Covad's
invoices shall bill Customer for Services one month in advance. For new End
Users, setup during a month, Covad's invoice will reflect all One-time Fees,
prorated monthly fees for such month and the advance monthly fees. Customer
shall pay all invoiced fees no later than thirty days from invoice date. Late
payments will accrue interest at a rate of one and one-half percent (1 1/2%) per
month, or the highest rate allowed by applicable law, whichever s lower, and
Customer shall pay all collection costs incurred by Covad (including, without
limitation, reasonable attorney's fees). In certain situations, Covad may
require Customer to deposit funds with Covad to secure payment of fees owed by
Customer hereunder. Such deposited funds shall not bear interest If Customer has
a bone Fide dispute with any of the amounts on an invoice ("Disputed Amounts"),
Customer must pay all amounts not in dispute as set forth above. and provide
Covad with a written request for billing adjustment together with all supporting
documentation within sixty (60) days from the date of the invoice or customers'
fight to billing adjustment shall be waived. In the event of a billing dispute
the parties shall promptly resolve the dispute by mutual agreement or by
arbitration. Unless otherwise specified by Covad air payments shall be made to
Covad Communications Company and mailed to Accounts
7
<PAGE>
TERMS AND CONDITIONS
Receivable Dept., Covad Communications Company, 2330 Central Expressway, Santa
Clara, CA 95050. Customer shall be responsible for all applicable Federal,
state, and local mandated surcharges, fees, user's fees, universal service
contributions and taxes applicable under this Agreement.
7. CANCELLATION AND DISCONNECTION. Customer shall give thirty (30) days written
notice to Covad to disconnect a Customer Circuit. All End User Circuits served
by a Customer Circuit must be disconnected at the same time or before
disconnecting such Customer Circuit. If Customer disconnects a Customer Circuit
during the Customer Term for that Customer Circuit, Customer shall incur fees
for the balance of the Customer Term. If Customer disconnects Services for an
End User during the End User Term, Customer shall incur the lesser of the fees
for the balance of the End User Term or the Disconnect Fee set forth in the
Pricing Schedule. In any case, Customer will be obligated to pay Service Setup
fees and will not be entitled to a refund of any fees at any time. If Customer
cancels an End User Circuit prior to setup of such End User Circuit, Customer
shall incur the End User Cancellation Fee as set forth in the Price Schedule.
8. SUPPORT AND MAINTENANCE. Customer shall provide all first-level support for
all End Users. Covad shall use reasonable commercial efforts to provide
second-level support for the Customer Circuits, End User Circuits and Services.
Customer understands that Covad may, from time to time, need to interrupt
services . for maintenance and other operational reasons, and that Customer
shall not receive any compensation for such interruptions. Covad will give
Customer reasonable advance notice of all such interruptions.
9. LIMITED PERFORMANCE WARRANTY. Covad warrants to Customer, and only Customer,
that the Services shall perform in substantial accordance with the performance
criteria set forth in the SLA. This warranty shall be void if: (i) any equipment
has been subjected to physical or electrical stress, misuse, neglect, accident
or abuse, or damaged by any other external causes; (ii) the Service or any
equipment has been repaired or altered by anyone other than Covad or Covad's
subcontractors or affiliates, without Covad's express and prior written
approval; (iii) the Service or any equipment has been provided by someone other
than Covad or Covad's subcontractors or affiliates; or (iv) the Service or any
equipment is used in violation of applicable law or in violation of instructions
furnished by Covad. During the term of this Agreement. Covad shall supply
Customer with the reports specified in the SLA showing performance of the
Services. Covad's sole obligation if the Services fail to meet the SLA shall be
to use reasonable commercial efforts to correct such failure, provided that
Customer promptly reports such failure and the failure can be reproduced by
Covad, and the cause of the failure is within Covad's control. Such a failure to
meet the SLA shall not be a material breach of this Agreement. If a performance
failure occurs that is within Covad's control, and Covad is unable to correct
such failure within the time periods set forth in the SLA, then. as Customer's
sole remedy, Covad will credit Customer's account with the amounts set forth in
the SLA for that type of failure, but only up to the amount paid by Customer for
such Services in the month in which such failure occurred. Covad shall have no
liability in connection with the future of the Services to meet any transmission
speed. throughput rates or other performance criteria.
8
<PAGE>
TERMS AND CONDITIONS
10. YEAR 2000 WARRANTY. Covad warrants to its Customer, and only Customer, that
the Services, provided are used correctly and are supplied with dates in proper
format, will be capable of processing dates before and after the year 2000.
Customer acknowledges that the Services are dependent on third party equipment,
software, and systems, including, without limitation, those of local telephone
companies and other carriers. Covad makes no representations and will not be
liable with respect to Year 2000 compliance of such equipment, software, systems
and third parties. Covad's sole obligation for a failure or the Services to
comply with the foregoing warranty is to use its best efforts to correct such a
failure.
11. WARRANTY DISCLAIMER EXCEPT FOR THE WARRANTIES SET OUT IN SECTIONS 9 AND
10, THE SERVICES, CUSTOMER CIRCUITS, AND END-USER CIRCUITS, AND ALL OTHER
PRODUCTS AND SERVICES THEREUNDER ARE PROVIDED ON AN "AS IS" BASIS, AND
CUSTOMER'S AND END USER'S USE THEREOF IS AT ITS OWN RISK. COVAD DOES NOT
MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS AND IMPLIED WARRANTIES,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING
FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE. COVAD DOES NOT WARRANT
THAT THE SERVICES, CUSTOMER CIRCUITS, AND END-USER CIRCUITS WILL PERFORM AT
A PARTICULAR SPEED, OR WILL BE UNINTERRUPTED, ERROR-FREE, OR COMPLETELY
SECURE.
12. CUSTOMER REPRESENTATIONS AND WARRANTIES. Customer represents and warrants
that: (i) Covad has informed Customer that the Services constitute
telecommunications or telecommunications services ("Telecommunication Services")
as defined by federal law, and as a result, Covad will assume the obligations of
providing such Telecommunications Services, including, billing, collecting and
remitting to governmental authorities the applicable taxes such as the universal
service tax (collectively, "Telecommunication Obligations"). In the event,
Customer chooses to use the Services to provide Telecommunication Services,
Customer will provide Covad thirty (30) days prior written notice so that Covad
may discontinue such Telecommunication Obligations and Customer will assume such
Telecommunication Obligations thereafter); (ii) it shall not, in the ordinary
course of its business, when using Services, be able to identify, and
distinguish between, packet data transmissions that originate and terminate
within the same state (intrastate transmissions), and those packet data
transmissions that originate and terminate in different states (interstate
transmissions), and states that it is impractical to identify, distinguish and
measure its intrastate and interstate transmissions on Covad's network; (iii)
Customer estimates in good faith that more than ten percent (10%) of all data
packets transmitted through Services will consist of interstate transmissions;
and. (iv) it will inform all End Users that Services do not include 911 or other
emergency and ancillary services conventionally available from incumbent local
phone companies.
13. TERM AND TERMINATION. This Agreement shall remain in effect until terminated
as set forth in this Section. The initial term of this Agreement shall be one
(1) year (the "Initial Term"). After the Initial Term, either party may
terminate this Agreement with thirty (30) days written notice to the other
party. After ten (10) business days of non payment from any due date,
9
<PAGE>
TERMS AND CONDITIONS
Covad may suspend Services. After thirty (30) days of nonpayment from any due
date, Covad may terminate the Services, and/or this Agreement. Customer shall
remain responsible for all fees accrued prior to the date of termination. In
addition, either party may terminate this Agreement if the other party
materially breaches any term or condition of this Agreement and fails to cure
such breach within thirty (30) days after receipt of written notice of the same.
14. EFFECT OF TERMINATION. Upon expiration or termination of this Agreement,
Covad will continue to maintain all existing Customer Circuits and End User
Circuits, and provide Services pursuant to the terms hereof, provided that
Customer continues to pay all applicable fees therefor and complies with any
additional terms and conditions requested by Covad. Any accrued rights to
payment. any remedies, and Sections 6,7, 9, 11, 12, 14, 15. 16, and 17 will
survive any expiration or termination of this Agreement.
15. LIMITATIONS OF LIABILITY. IN NO EVENT WILL COVAD BE LIABLE TO CUSTOMER,
ANY END-USER, OR ANY THIRD PARTY FOR ANY CLAIMS ARISING OUT OF OR RELATED TO
CUSTOMER'S BUSINESS, ITS RELATIONSHIP WITH ITS END-USERS, OR OTHERWISE. COVAD
SHALL NOT BE LIABLE FOR ANY DAMAGES ASSOCIATED WITH THE INTERRUPTION OR LOSS
OF USE OF SERVICES. EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
COVAD'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO CLAIM ARISING
UNDER THIS AGREEMENT, UNDER ANY CONTRACT. NEGLIGENCE, STRICT LIABILITY OR
OTHER THEORY WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY CUSTOMER TO COVAD
FOR THE SERVICES GIVING RISE TO SUCH CLAIM IN THE SIX (6) MONTHS PRIOR TO THE
OCCURRENCE OF SUCH CLAIM. NEITHER PARTY WILL BE LIABLE UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR ANY LOST REVENUE, LOST
PROFITS, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES WITH RESPECT
TO ANY SUBJECT MATTER OF THIS AGREEMENT.
16. INDEMNITY. Covad hereby indemnities and holds harmless Customer and its End
Users from any personal injury or tangible property damage caused by Covad or
its agents during the course of providing or maintaining the End User Circuits
or any End User premise equipment End User provided, however, that such
indemnity shall not be available if the cause of such damage is due to
Customer's or End Users willful or negligent acts or omissions.
17. FORCE MAJEURE. Neither Party hereto shall be responsible for any failure to
perform its obligations under this Agreement (other than obligations to pay
money) if such failure is caused by acts of God, war, strikes, revolutions,
earthquake, lack or failure of transportation facilities, laws or governmental
regulations or other causes that are beyond the reasonable control of such
party.
18. MISCELLANEOUS. This Agreement is not assignable or transferable by either
party without the prior written consent of the other party, except for an
assignment to an acquirer of all or substantially all of the assets or business
of such party. Covad may subcontract the performance of Services to third
parties. The parties agree that they are independent contractors and that this
10
<PAGE>
TERMS AND CONDITIONS
Agreement and relations between Covad and Customer hereby established do not
constitute a, joint venture, agency or contract of employment between them, or
any other similar relationship. Neither party has the right or authority to
assume or create any obligation or responsibility on behalf of the other. Each
party shall keep all information designated as confidential that is received
from the other party in confidence, and shall not disclose such information to a
third party, unless and until such information becomes publicly available
through no fault of the party receiving it. Any notice, report, approval or
consent required or permitted hereunder shall be in writing, and effective on
the date of delivered (if sent by hand, first class US mail, or courier), or on
the date sent (if sent by facsimile). No failure or delay in exercising any
right hereunder will operate as a waiver thereof, nor will any partial exercise
of any right or power hereunder preclude further exercise. If any provision of
this Agreement shall be adjudged by any court of competent jurisdiction to be
unenforceable or invalid, that provision shall be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and enforceable. This Agreement shall be deemed to have been
made in, and shall be construed pursuant to the laws of the State of California
and the United States without regard to conflicts of laws provisions thereof.
Any waivers or amendments shall be effective only if made in writing. This
Agreement is the complete and exclusive statement of the mutual understanding of
the parties and superseded and cancels all previous written and oral agreements
and communications relating to any of the subject matter of this Agreement.
Binding arbitration shall be the sole and exclusive remedy for resolution of
disputes between the parties. Such dispute shall be submitted for arbitration in
San Francisco. California under the rules of the American Arbitration
Association. The arbitrator's decision will be final and entered into any court
of competent jurisdiction. The prevailing party will be entitled to recover its
attorney's fees and costs in connection with such arbitration.
11
<PAGE>
Price Schedule - TeleSpeed-Registered Trademark- Services
- -------------------------------------------------------------------------------
VOLUME COMMITMENT PRICING
If Customer has committed to a specified Volume Level ("Volume Commitment
Level") as set forth on the cover page of the Agreement, then Customer will
receive the applicable pricing as of the Effective Date of the Agreement
("Volume Commitment Pricing"). For example, if Customer commits to a 2,000
Volume Level, all End User TeleSpeed Circuits will be billed at the Volume Level
Price for 1,000 -2,499 circuits, for the respective Regional Classification,
In order to maintain such Volume Commitment Pricing, Customer agrees to meet the
following Volume Milestones:
VOLUME MILESTONE SCHEDULE
<TABLE>
<CAPTION>
- -------------------------------------------------- -------------------------------------------------------------------
MILESTONES
- -------------------------------------------------- ---------------- ----------------- -------------- -----------------
Timeframe (after the Effective Date) 3 months 6 months 9 months 12 months
- -------------------------------------------------- ---------------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C>
Percentage of Volume Commitment Achieved Based 15% 35% 65% 100%
on Invoiced End User Circuits
- -------------------------------------------------- ---------------- ----------------- -------------- -----------------
</TABLE>
In the event that the Customer fails to meet each of the above Volume
Milestones, pricing will revert to the standard Volume Level Pricing FOR ALL END
USER CIRCUITS, BOTH EXISTING AND NEW CIRCUITS. In this event, Customer would be
required to pay the End User TeleSpeed Monthly Charges corresponding to
Customers actual order volume as of the respective Volume Milestone (i.e., 3
months, 6 months, etc.).
For example, if Customer has a Volume Commitment of 5,000 circuits, within 6
months of to applicable Effective Date, Customer must have at least 1,750 End
User TeleSpeed Circuits invoiced. Assuming that at the six month Volume
Milestone, Customer has only 1,250 End User TeleSpeed Circuits invoiced, then
the Customer is obligated to pay the monthly charges associated with the
$1,000 - 2.499 Volume Level (e.g., TeleSpeed Regional Classification A:
TeleSpeed 144-$[*] Speed 384-$[*]; etc.) for the subsequent month(s)
FOR ALL END USER CIRCUITS. The Customer would pay the End User TeleSpeed
Monthly Charges associated with its actual order volume FOR ALL END USER
CIRCUITS BOTH EXISTING AND NEW CIRCUITS until Customer satisfies its
subsequent Volume Milestone. If at the nine month Volume Milestone, Customer
has met or exceeded its Volume Milestone (e.g. 3,250 End User Telespeed
Circuits invoiced), then Customer will receive Volume Commitment Pricing for
future End User Telespeed Circuits. As part of Customer's Volume Commitment,
Service Setup charges for services are billed at the level of Customer's
commitment, as long as Customer is within the milestones established above.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
12
<PAGE>
Price Schedule - TeleSpeed-Registered Trademark- Services
---------------------------------------------------------
ONE-TIME SERVICE SETUP CHARGES
One-time Service Setup charges are listed in the Price Schedule for TeleSpeed
and TeleSurfer services. For example, if Customer has a volume commitment of
1,000 lines or greater, Customer will be billed for Service Setup charges of
$[*] for all circuits, starting with the first circuit, as long as Customer
meets the Milestones listed above.
DESCRIPTION OF TELESPEED SERVICES
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- -------------------------------------
SERVICE NAME MAXIMUM THROUGHPUT MAXIMUM THROUGHPUT
- ---------------------------------------- -------------------------------------- -------------------------------------
<S> <C> <C>
TeleSpeed 144 Up to 144 Kbps Up to 144 Kbps
- ---------------------------------------- -------------------------------------- -------------------------------------
TeleSpeed 192 Up to 192 Kbps Up to 192 Kbps
- ---------------------------------------- -------------------------------------- -------------------------------------
TeleSpeed 384 Up to 384 Kbps Up to 384 Kbps
- ---------------------------------------- -------------------------------------- -------------------------------------
TeleSpeed 768 Up to 768 Kbps Up to 768 Kbps
- ---------------------------------------- -------------------------------------- -------------------------------------
TeleSpeed 1.1 Up to 1.1 Mbps Up to 1.1 Mbps
- ---------------------------------------- -------------------------------------- -------------------------------------
TeleSpeed 1.5 Up to 384 Kbps Up to 384 Kbps
- ---------------------------------------- -------------------------------------- -------------------------------------
</TABLE>
TELESPEED SERVICES VOLUME LEVEL PRICING
The following are the monthly charges for End User TeleSpeed Circuits based on
actual order volume ("Volume Level Pricing"). The applicable Volume Level Price
shall be determined based on the location of the End User Circuit in a Regional
Classification.
The applicable Volume Level Pricing for each month will be determined based
on the number of End User Circuits invoiced (i.e., in service), in aggregate,
at the end of the prior month. Such Volume Level Pricing will apply only to
incremental End User Circuits. To clarify, the first 999 End User TeleSpeed
Circuits will be billed at the Volume Level Price associated with the 0-999
row, and the next 1,499 End User TeleSpeed Circuits will be billed at the
Volume Level Price associated with the 1,000-2,499 row, etc.
All End User Circuits are counted in determining the applicable Volume Level
Price regardless of the Regional Classification.
END USER TELESPEED MONTHLY CHARGES
REGIONAL CLASSIFICATION A METRO AREAS:
<TABLE>
<S> <C> <C>
- ---------------------------------------- -------------------------------------- --------------------------------------
Austin. Texas (AUS) Dallas, Texas (DAL) Houston. Texas (HOU)
- ---------------------------------------- -------------------------------------- --------------------------------------
Los Angeles, California (LAX) Sacramento, California (SAC) San Diego, California (SAN)
- ---------------------------------------- -------------------------------------- --------------------------------------
San Francisco, California (SFO)
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
13
<PAGE>
Price Schedule - TeleSpeed-Registered Trademark- Services
---------------------------------------------------------
TELESPEED REGIONAL CLASSIFICATION A
<TABLE>
<CAPTION>
- --------------------- --------------- ---------------- --------------- --------------- --------------- ---------------
VOLUME LEVEL TELESPEED TELESPEED TELESPEED TELESPEED TELESPEED TELESPEED
INVOICED 144 192 384 768 1.1 1.5
- --------------------- --------------- ---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
0 - 999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- --------------------- --------------- ---------------- --------------- --------------- --------------- ---------------
1,000 - 2,499 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- --------------------- --------------- ---------------- --------------- --------------- --------------- ---------------
2.500 - 4,999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- --------------------- --------------- ---------------- --------------- --------------- --------------- ---------------
5,000 - 9,999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- --------------------- --------------- ---------------- --------------- --------------- --------------- ---------------
</TABLE>
REGIONAL CLASSIFICATION B METRO AREAS:
<TABLE>
<S> <C> <C>
- ---------------------------------------- -------------------------------------- --------------------------------------
Atlanta. Georgia (ATL) Baltimore. Maryland (BAL) Boston, Massachusetts (BOS)
- ---------------------------------------- -------------------------------------- --------------------------------------
Chicago, Illinois (CHI) Detroit, Michigan (DET) Miami, Florida (MIA)
- ---------------------------------------- -------------------------------------- --------------------------------------
New York, New York (NYC) Philadelphia, Pennsylvania (PHL) Raleigh, North Carolina (RAL)
- ---------------------------------------- -------------------------------------- --------------------------------------
Washington, D.C. (WAS)
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
TELESPEED REGIONAL CLASSIFICATION B
<TABLE>
<CAPTION>
- ------------------------- -------------- -------------- --------------- -------------- --------------- --------------
VOLUME LEVEL INVOICED TELESPEED TELESPEED TELESPEED TELESPEED TELESPEED TELESPEED
144 192 384 768 1.1 1.5
- ------------------------- -------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------- -------------- -------------- --------------- -------------- --------------- --------------
0 - 999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- -------------- --------------- --------------
1,000 - 2,499 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- -------------- --------------- --------------
2,500 - 4,999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- -------------- --------------- --------------
5,000 - 9,999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- -------------- --------------- --------------
</TABLE>
REGIONAL CLASSIFICATION C METRO AREAS:
<TABLE>
<S> <C> <C>
- ---------------------------------------- ------------------------------------- --------------------------------------
Denver, Colorado (DEN) Minneapolis, Minnesota (MSP) Portland, Oregon (PDX
- ---------------------------------------- ------------------------------------- --------------------------------------
Phoenix, Arizona (PHX Seattle Washington (SEA)
- ---------------------------------------- ------------------------------------- --------------------------------------
</TABLE>
TELESPEED REGIONAL CLASSIFICATION C
<TABLE>
<CAPTION>
- ------------------------- -------------- -------------- --------------- ------------- ---------------- --------------
VOLUME LEVEL INVOICED TELESPEED TELESPEED TELESPEED TELESPEED TELESPEED TELESPEED
144 192 384 768 1.1 1.5
- ------------------------- -------------- -------------- --------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
0 - 999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- ------------- ---------------- --------------
1,000 - 2,499 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- ------------- ---------------- --------------
2,500 - 4,999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- ------------- ---------------- --------------
5,000 - 9,999 $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] $[ * ]
- ------------------------- -------------- -------------- --------------- ------------- ---------------- --------------
</TABLE>
END USER TELESPEED CIRCUIT ORDER AND OTHER ONE-TIME CHARGES
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ---------------------------------- -----------------------
END USER PROMISE EQUIPMENT APPLICABLE TELESPEED SERVICE ONE-TIME CHARGE
- ---------------------------------------------------------- ---------------------------------- -----------------------
<S> <C> <C>
FlowPoint 144 IDSL Router TS144 $[ * ]
- ---------------------------------------------------------- ---------------------------------- -----------------------
FlowPoint 2200 SDSL Router TS192, TS384, TS768, TSI.1 $[ * ]
- ---------------------------------------------------------- ---------------------------------- -----------------------
FlowPoint 2 1 00 ADSL Router TSI.5 $[ * ]
- ---------------------------------------------------------- ---------------------------------- -----------------------
Efficient Networks Speedstream 5250 SDSL Modem TS192, TS384, TS768, TSI.1 $[249.00]
- ---------------------------------------------------------- ---------------------------------- -----------------------
</TABLE>
14
<PAGE>
Price Schedule - TeleSpeed-Registered Trademark- Services
---------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------- -----------------------
TELESPEED SERVICE ORDER CHARGES ONE-TIME CHARGE
- --------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Service Setup including provisioning of PVC (G-999 circuits invoiced) $[ * ]
- --------------------------------------------------------------------------------------------- -----------------------
Service Setup including provisioning of PVC (1000 + circuits invoiced) $[ * ]
- --------------------------------------------------------------------------------------------- -----------------------
Inside wiring from RJ45 Wall Jack to NID (optional) $[ * ]*
- --------------------------------------------------------------------------------------------- -----------------------
Field Technician Dispatch (during normal business hours) $[ * ]*
- --------------------------------------------------------------------------------------------- -----------------------
* First hour minimum Charge. For each additional 15 minutes .
- --------------------------------------------------------------------------------------------- -----------------------
Field Technician Dispatch (other hours: after hours, weekends, holidays) $[ * ]**
- --------------------------------------------------------------------------------------------- -----------------------
** First hour/Minimum Charge. For each additional 15 minutes: $[25.] $[ * ]
- --------------------------------------------------------------------------------------------- -----------------------
<CAPTION>
- --------------------------------------------------------------------------------------------- ----------------------
OTHER SERVICE CHARGES ONE-TIME CHARGE
- --------------------------------------------------------------------------------------------- ----------------------
<S> <C>
Upgrade/downgrade of End User TeleSpeed Service (involves a dispatch of FT) $[ * ]
- --------------------------------------------------------------------------------------------- ----------------------
Upgrade/downgrade of End User TeleSpeed Service (no dispatch of FT) $[ * ]
- --------------------------------------------------------------------------------------------- ----------------------
End User TeleSpeed Circuit Disconnect Fee (per circuit) $[ * ]
- --------------------------------------------------------------------------------------------- ----------------------
End User TeleSpeed Circuit Cancellation Fee (per circuit) $[ * ]
- --------------------------------------------------------------------------------------------- ----------------------
Missed Appointment (i.e., End User no-show) Charge $[ * ]
- --------------------------------------------------------------------------------------------- ----------------------
</TABLE>
CUSTOMER CIRCUIT CHARGES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------- -----------------------
DESCRIPTION OF CUSTOMER CIRCUIT ORDER CHARGES ONE-TIME CHARGE
- --------------------------------------------------------------------------------------------- -----------------------
<S> <C>
DS3 /ATM $[ * ]
- --------------------------------------------------------------------------------------------- -----------------------
<CAPTION>
DESCRIPTION OF CUSTOMER CIRCUIT MONTHLY CHARGES MONTHLY CHARGE
- --------------------------------------------------------------------------------------------- -----------------------
<S> <C>
IDS3 / ATM $[ * ]
- --------------------------------------------------------------------------------------------- -----------------------
</TABLE>
DESCRIPTION OF TELESPEED REMOTE SERVICES
TeleSpeed Remote-TM- Service is an additional service to Covad's standard
TeleSpeed Service offerings. TeleSpeed Remote provides long-distance
connectivity for TeleSpeed End Users located in distant metropolitan areas.
TELESPEED REMOTE SERVICE - MONTHLY RECURRING SERVICE CHARGE (PER END USER)
<TABLE>
<CAPTION>
- --------------------------------- ------------- -------------- ------------- ------------- ------------- ---------------
DISTANCE BETWEEN END USER METRO TELESPEED TELESPEED TELESPEED TELESPEED TELESPEED
AREA AND CUSTOMER METRO AREA REMOTE 144 REMOTE 192 REMOTE 384 REMOTE 768 REMOTE 1.1 TELESPEED
MONTHLY MONTHLY MONTHLY MONTHLY MONTHLY REMOTE 1.5
CHARGE CHARGE CHARGE CHARGE CHARGE MONTHLY CHARGE
- --------------------------------- ------------- -------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Less than 500miles $[ * ] $[ * ] $[ * ] $[ * ] $[ * ] [ * ]
- --------------------------------- ------------- -------------- ------------- ------------- ------------- ---------------
Greater than 500 miles $[55.00] $[55.00] $[95.00] $[180.00] $[210.00] [NA]
- --------------------------------- ------------- -------------- ------------- ------------- ------------- ---------------
</TABLE>
In addition to the other charges for TeleSpeed Services, Customer shall pay the
applicable TeleSpeed Remote Monthly Charges set forth above. If TeleSpeed Remote
is ordered at the same time as the TeleSpeed End User Circuit, then no
additional one-time order charges apply.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
15
<PAGE>
Additional service charges may apply if TeleSpeed Remote Service is added to or
removed from an installed End User TeleSpeed Circuit. TeleSpeed Remote Services
are not included for purposes of determining whether Customer has met its Volume
Commitment Level.
For Customer to order TeleSpeed Remote Services, such service must be available
in both the metropolitan area where the End User TeleSpeed Circuit will be
ordered and the metropolitan area where the Customer maintains a Customer
Circuit. Standard TeleSpeed Services may be available within a metropolitan area
before TeleSpeed Remote Service is available.
<TABLE>
<CAPTION>
- ------------------------------------------------------- -------------------------------------------------------------
REGION METRO AREAS WITHIN 500 MILES
- ------------------------------------------------------- -------------------------------------------------------------
<S> <C>
Atlanta, Georgia Raleigh, NC
- ------------------------------------------------------- -------------------------------------------------------------
Austin, Texas Dallas, TX; Houston, TX
- ------------------------------------------------------- -------------------------------------------------------------
Baltimore, Maryland/Washington, D.C.* Boston, MA; New York, NY; Philadelphia, PA; Raleigh, NC;
Detroit, MI
- ------------------------------------------------------- -------------------------------------------------------------
Boston, Massachusetts New York, NY; Philadelphia, PA; Baltimore, MD; Washington,
D.C.
- ------------------------------------------------------- -------------------------------------------------------------
Chicago, Illinois Detroit, MI; Minneapolis, MN
- ------------------------------------------------------- -------------------------------------------------------------
Dallas, Texas Austin, TX; Houston, TX
- ------------------------------------------------------- -------------------------------------------------------------
Denver, Colorado - none -
- ------------------------------------------------------- -------------------------------------------------------------
Detroit, Michigan Chicago, IL; Philadelphia, PA; Baltimore. MD; Washington,
D.C.
- ------------------------------------------------------- -------------------------------------------------------------
Houston, Texas Dallas, TX; Austin, TX
- ------------------------------------------------------- -------------------------------------------------------------
Los Angeles, California San Diego, CA; San Francisco, CA; Sacramento, CA;
Phoenix, AZ
- ------------------------------------------------------- -------------------------------------------------------------
Miami, Florida none -
- ------------------------------------------------------- -------------------------------------------------------------
Minneapolis, Minnesota Chicago, IL; Detroit, Ml
- ------------------------------------------------------- -------------------------------------------------------------
New York, New York Boston. MA; Philadelphia, PA; Baltimore, MD; Washington,
D.C.;
- ------------------------------------------------------- -------------------------------------------------------------
Portland, Oregon Raleigh, NC
- ------------------------------------------------------- -------------------------------------------------------------
Philadelphia, Pennsylvania Seattle, WA
- ------------------------------------------------------- -------------------------------------------------------------
Phoenix, Arizona Boston, MA; New York, NY; Baltimore, MD; Washington, D.C.;
Raleigh, NC: Detroit, Ml
- ------------------------------------------------------- -------------------------------------------------------------
Raleigh, North Carolina San Diego, CA; Los Angeles, CA, Atlanta, GA,
New York, NY; Philadelphia, PA; Baltimore, MD, Washington, D.C.
- ------------------------------------------------------- -------------------------------------------------------------
Sacramento, California San Diego, CA; San Francisco, CA; Los Angeles, CA; San
Francisco, CA; Los Angeles, CA; Phoenix, AZ
- ------------------------------------------------------- -------------------------------------------------------------
San Diego, California Portland, OR
- ------------------------------------------------------- -------------------------------------------------------------
Seattle, Washington San Diego, CA; Sacramento, CA; Los Angeles, CA
- ------------------------------------------------------- -------------------------------------------------------------
</TABLE>
16
<PAGE>
Price Schedule - TeleSpeed-Registered Trademark- Services
---------------------------------------------------------
* The Baltimore, MD and Washington, D.C. metro areas are considered the
same metropolitan region for purposes of TeleSpeed Remote.
17
<PAGE>
Price Schedule - TeleSurfer-SM- Services
----------------------------------------
OVERVIEW
This Service Level Agreement (SLA) covers the business-grade TeleSpeed Services
applies only to Covad Regional Networks, End User TeleSpeed Circuits and
Customer Circuits provided by Covad. This SLA does not apply to any other
Services, such TeleSpeed Remote Services or consumer-grade TeleSurfer-TM-
Services, or Customer-provided Customer Circuits (except for Network
Availability SLA which does include the Customer Circuit). Covad will provide
detailed reports to our Customers, an activity that is now in progress. This SLA
covers the following performance parameters:
- - Network Availability
- - Network Delay
- - Message Delivery
- - Mean Response Time
- - Mean Time to Restore Service
- - End User Premise Equipment Warranty
- - Inside Wire Warranty
This SLA will assist Covad and Customer in providing business-level service to
End Users. In this SLA, "End User" refers to teleworkers, small businesses, and
other End Users of Covad TeleSpeed service; "Customer" refers to channel
partners (ISPs and other value-added resellers) and corporations who directly
purchase TeleSpeed Services. "Regional Network" refers to the Covad network
within a served metropolitan area (e.g. the Boston Regional Network, the Los
Angeles Regional Network). "PVC" refers to a Permanent Virtual Circuit,
permanent configured paths on the Covad network connecting End Users to
corporations or ISPS. "Ingress" is the point where End User traffic enters the
Covad network (e.g. DSLAM); the "Egress" is the point where End User traffic
leaves the Covad network (e.g. where data leaves the Covad ATM switch and enters
the Customer Circuit). Finally, "Effected PVCs" discussed in the service credits
refer only to End Users who notify the Customer regarding performance issues
covered hereunder.
NETWORK AVAILABILITY
Covad is committed to providing a reliable network for its Customers. With that
goal, Covad's target for Network Availability is an average of 99.9% per month.
Covad's Network Operations Center maintains data to support the measurement of
availability. Covad Network Availability is defined as:
18
<PAGE>
Price Schedule - TeleSurfer-SM- Services
----------------------------------------
1 - (TOTAL MINUTES OF PVC DOWNTIME IN GIVEN MONTH)
--------------------------------------------
( # of available minutes in same month )
Network Availability is measured from the ingress interface on Covad's Regional
Network up to, but not including, the Egress interface at the Customer network
(see Figure 1).
FIGURE 1: SLA BOUNDARIES FOR COVAD NETWORK AVAILABILITY
------------------------------------------------
Diagram of Covad Regional Network
------------------------------------------------
The availability target does not account for scheduled outages on Covad's
Regional Network or events outside of Covad's control, including, but not
limited to, force majeure events, scheduled or unscheduled outages on the
Customer Network, or End User or Customer equipment outages. Network downtime is
calculated commencing with the date and time on which the Customer or Covad
opens the trouble ticket (whichever was first) and ending upon confirmation from
Covad that the network is restored.
If Covad does not meet 99.9% Network Availability per the above definition,
Covad will credit the Customer for each affected End User according to the
following table:
<TABLE>
<CAPTION>
--------------------------------- ------------------------------------------------------
IF AVAILABILITY IS IN THE SERVICE CREDIT PER AFFECTED END USER PER
RANGE: MONTH IS:
--------------------------------- ------------------------------------------------------
<S> <C>
99.5% - 99.89% 5% of monthly End User Tele pee service charger
Average per month
--------------------------------- ------------------------------------------------------
LESS THAN 99.5 10% of monthly End User TeleSpeed service charges
Average per month
--------------------------------- ------------------------------------------------------
</TABLE>
Reports and service credits will be available by December 31, 1999.
NETWORK DELAY
Covad is committed to providing a fast network for its Customers. Covad supports
targets for the time to transmit a 64-byte message from the ingress interface on
Covad's Regional Network up to the egress interface on Covad's Regional Network
(see Figure 2).
19
<PAGE>
Price Schedule - TeleSurfer-SM- Services
----------------------------------------
FIGURE 2: BOUNDARIES FOR DELAY TARGETS
------------------------------------------------
Diagram of Covad Regional Network
------------------------------------------------
Covad defines round trip message delay as the sum of the following:
- - time from when the last bit of the message originating from the End
User arrives at Covad's Regional Network unfit when the last bit of the
message leaves Covad's Regional Network
- - time from when the last bit of the return message arrives at Covad's
Network until when the last bit of the message leaves Covad's Regional
Network
Covad's delay targets for its offered TeleSpeed services for 64-byte messages,
when the network is available as defined in the Network Availability SLA are as
follows
<TABLE>
<S> <C>
--------------------------------------------- ----------------------------------------------
END USER TELESPEED SERVICE AVERAGE MESSAGE DELAY TARGET
--------------------------------------------- ----------------------------------------------
TeleSpeed 192, 384, 768. 1.1, 1.5 10ms
--------------------------------------------- ----------------------------------------------
TeleSpeed 144 15ms
--------------------------------------------- ----------------------------------------------
</TABLE>
When reporting is available, the delay target will be measured and averaged on
the hour. By December 31, 1999, Covad will make reports and service credits
available around its network delay targets.
DELIVERY
Covad is committed to minimizing network congestion for its Customers. Covad's
target for delivery of cells/frames over Covad's Regional Network is 99.9% over
a 1-hour period when the network is available.
Covad defines delivery as the percentage of cells or frames entering Covad's
Regional Network that are successfully carried through the network and not
dropped before exiting the network (see Figure 3).
FIGURE 3: SLA BOUNDARIES FOR DELIVERY
------------------------------------------------
Diagram of Covad Network
------------------------------------------------
20
<PAGE>
Price Schedule - TeleSurfer-SM- Services
----------------------------------------
By December 31. 1999, Covad will make reports and service credits available
around its network delivery targets.
MEAN RESPONSE TIME
Covad is committed to providing the best Customer care experience in the
telecommunications industry. To that end, Covad promises to respond to Customer
requests for repair and other technical problems within a mean time of 15
minutes (averaged per month on all response times for all submitted web-based
Trouble Tickets) during normal TAC (Technical Assistance Center) business hours.
MEAN TIME TO RESTORE SERVICE
Covad is committed to restoring service within certain periods of time based on
the seventy of the problem, and whether single or multiple End Users are
affected. Covad manages to and the following targets for restoration of
services:
END USER TELESPEED CIRCUIT:
- - End User TeleSpeed circuit defined as the copper loop from (but not
including) the End User premise equipment to the copper loop entry
point into the Covad Regional Network
- - MEAN time to repair for all submitted Trouble Tickets shall target 24
hours averaged on a per month basis
CUSTOMER TELESPEED CIRCUIT:
- - Customer TeleSpeed circuit is defined as the Covad-provided DS1/Frame
Relay or DS3/ATM Customer WAN circuit from the egress of the Covad
Network up to Covad's point of demarcation at the Customer premise, up
to but not including the Customer-owned router or other equipment
- - MEAN time to repair of the Customer TeleSpeed circuit is targeted at 4
hours
- - Outage of Customer TeleSpeed circuit shall be compensated by credits in
Network Availability Service Level Agreement
Covad will manage the local loop vendor (or Incumbent Local Exchange Carrier) on
behalf of the Customer for any repairs or problems related to Covad-provided
Customer TeleSpeed WAN Circuits or End User TeleSpeed Circuits.
21
<PAGE>
Price Schedule - TeleSurfer-SM- Services
----------------------------------------
END USER PREMISE EQUIPMENT WARRANTY
If the Customer purchases End User premise equipment directly from Covad, Covad
will assign, to the extent permitted, the manufacturer's warranty of at least
one (1) year. In the event that the equipment is determined to be faulty within
the applicable warranty period, Covad will mail the pre-configured replacement
equipment to the Customer to arrive within 3 business days of Covad's
determination that the End User premise equipment requires replacement.
Customers who request that a Covad Field Service Technician (FST) provide
replacement equipment will be charged applicable Service Order Charges as set
forth in the applicable Price Schedule. Covad will also provide any equipment
software upgrades for the duration of the applicable warranty at no charge to
the Customer.
After one year, repair and replacement of Covad-supplied End User premise
equipment becomes the responsibility of the Customer.
Customer is responsible for all equipment configuration or Covad-supplied
equipment after initial setup.
INSIDE WIRE WARRANTY
All Covad-provided End User premise wiring is warranted to be free from defects
for a period of 30 days.
CREDIT AVAILABILITY
Service credits hereunder must be claimed within 7 calendar days of the date of
the reported incident. In the event that two or more credits are simultaneously
claimed, a credit will be applied toward the single claim resulting in the
largest credit. Covad will apply any service credits to the Customer's next
monthly invoice.
22
<PAGE>
Market Development Funds - TeleSpeed-Registered Trademark- Services
-------------------------------------------------------------------
DESCRIPTION OF TELESURFER SERVICES
<TABLE>
<S> <C> <C>
- ------------------------------------------- ---------------------------------------- -----------------------------------------
Service Name Maximum Throughput Downstream Maximum Throughput Upstream
- ------------------------------------------- ---------------------------------------- -----------------------------------------
TeleSurfer Up to 384 Kbps Up to 128 Kbps
- ------------------------------------------- ---------------------------------------- -----------------------------------------
TeleSurfer Pro Up to 768 Kbps Up to 384 Kbps
- ------------------------------------------- ---------------------------------------- -----------------------------------------
</TABLE>
For TeleSurfer and TeleSurfer Pro, Covad guarantees no less than 64 Kbps of
bandwidth, downstream and upstream, in congested network traffic situations.
Customer is also responsible for dynamic configuration of IP addresses for End
Users using consumer-grade TeleSurfer and TeleSurfer Pro Services.
TELESURFER SERVICE VOLUME COMMITMENT PRICING
The following are the monthly charges for End User TeleSurfer Circuits.
The applicable monthly charges for TeleSurfer Services shall be as set forth on
the table below based upon Customer's applicable Volume Commitment Level.
Customer must be current on all invoices to be eligible for such pricing. If
Customer fails to meet its Volume Milestones for such Volume Commitment Level,
the monthly charges shall be adjusted based upon the number of End User Circuits
(TeleSpeed and TeleSurfer) invoiced for the prior month. Customer must be
current on all invoices to be eligible for such pricing.
END USER TELESURFER MONTHLY CHARGES
TELESURFER MONTHLY CHARGES
<TABLE>
<S> <C> <C>
--------------------------- ------------------------- ----------------------
Volume Level Invoiced TeleSurfer TeleSurfer Pro
--------------------------- ------------------------- ---------------------
0 - 999 $[ * ] $[ * ]
--------------------------- ------------------------- ---------------------
1,000 - 2,499 $[ * ] $[ * ]
--------------------------- ------------------------- ---------------------
2,500 - 4,999 $[ * ] $[ * ]
--------------------------- ------------------------- ---------------------
5,000 $[ * ] $[ * ]
--------------------------- ------------------------- ---------------------
</TABLE>
END USER TELESURFER CIRCUIT ORDER CHARGES
<TABLE>
<S> <C> <C>
- ------------------------------------------------------ --------------------------------------- -------------------------
END USER PROMISE EQUIPMENT APPLICABLE TELESURFER SERVICE ONE-TIME CHARGE
- ------------------------------------------------------ --------------------------------------- -------------------------
Efficient Networks Speedstream 5250 SDSL Modem TeleSurfer, TeleSurfer Pro $[ * ]
- ------------------------------------------------------ --------------------------------------- -------------------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
23
<PAGE>
Market Development Funds - TeleSpeed-Registered Trademark- Services
-------------------------------------------------------------------
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------- -------------------------
TELESURFER SERVICE ORDER CHARGES ONE-TIME CHARGE
- ---------------------------------------------------------------------------------------------- -------------------------
Service Setup including provisioning of PVC (0-999 circuits invoiced) $[ * ]
- ---------------------------------------------------------------------------------------------- -------------------------
Service Setup including provisioning of PVC (1 000 + circuits invoiced) $[ * ]
- ---------------------------------------------------------------------------------------------- -------------------------
Inside wiring from RJ45 Wall Jack to NID (optional) $[ * ]*
- ---------------------------------------------------------------------------------------------- -------------------------
Field Technician Dispatch (during normal business hours) $[ * ]*
- ---------------------------------------------------------------------------------------------- -------------------------
*. FIRST HOUR/MINIMUM CHARGE. FOR EACH ADDITIONAL 15 MINUTES: $[20]
- ---------------------------------------------------------------------------------------------- -------------------------
Field Technician Dispatch (other hours: after hours, weekends, holidays) $[ * ]**
- ---------------------------------------------------------------------------------------------- -------------------------
** First hour/Minimum Charge. For each additional 15 minutes: $[25]
- ---------------------------------------------------------------------------------------------- -------------------------
- ---------------------------------------------------------------------------------------------- -------------------------
OTHER SERVICE CHARGES ONE-TIME CHARGE
- ---------------------------------------------------------------------------------------------- -------------------------
Upgrade/downgrade of End User TeleSurfer Service (involves a dispatch of FT) $[ * ]
- ---------------------------------------------------------------------------------------------- -------------------------
Upgrade/downgrade of End User TeleSurfer Service (no dispatch of FT) $[ * ]
- ---------------------------------------------------------------------------------------------- -------------------------
End User TeleSurfer Circuit Disconnect ee (pr circuit) $[ * ]
- ---------------------------------------------------------------------------------------------- -------------------------
End User TeleSurfer Circuit Cancellation Fee (per circuit) $[ * ]
- ---------------------------------------------------------------------------------------------- -------------------------
Missed Appointment (i.e., End User no-show) Charge $[ * ]
- ---------------------------------------------------------------------------------------------- -------------------------
</TABLE>
As a condition of Covad making TeleSurfer Services available to Customer,
Customer is required to commit to construct an Electronic Customer Interface
(ECI) between Customer and Covad in order to process orders for all End User
Circuits (TeleSpeed and TeleSurfer). Customer agrees to create a plan for an
Electronic Customer Interface. Covad will contact Customer to offer guidance,
planning, and ECI implementation milestones. Customer agrees to use commercially
reasonable efforts to ensure that TeleSurfer lines are installed at residential
addresses only.
COVAD RESERVES THE RIGHT TO BILL CUSTOMER FOR SERVICES AT APPLICABLE TELESPEED
SERVICES PRICES FOR ANY TELESURFER CIRCUITS INSTALLED AT LOCATIONS DEEMED TO BE
NON-RESIDENTIAL.
Market Development Funds will not accrue for TeleSurfer Circuits invoiced.
Market Development Funds are not available for marketing activities that only
promote TeleSurfer Services.
Customer agrees to use commercially reasonable efforts to fully disclose to End
Users the features and limitations of TeleSurfer Services prior to ordering
TeleSurfer Services for such End User.
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
24
<PAGE>
Market Development Funds - TeleSpeed-Registered Trademark- Services
-------------------------------------------------------------------
As a part of Covad's Channel Marketing Program, Customer is eligible for Market
Development Funds ("MDF"). Disbursement of all MDF is contingent upon a jointly
agreed upon, integrated marketing plan and Customer's ability to match MDF
"dollar for dollar." The timing, form, message, media, substance, and geographic
focus of the marketing spending will be jointly determined by Customer and
Covad. Customer agrees to abide by Covad's standard MDF Program Guidelines
including use of the Covad brand and MDF disbursement criteria.
INITIAL MARKET DEVELOPMENT FUNDS
During the first six (6) months of the Agreement, Covad will contribute Initial
MDF to Customers' Covad-managed MDF account based on the following schedule, in
accordance with Customer's Volume Commitment for TeleSpeed Services:
<TABLE>
<S> <C> <C> <C>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
ANNUAL VOLUME COMMITMENT 6-MONTH RAMP BASED ON INITIAL MDF PER TELESPEED RANGE OF MOF ALLOCATION
(INVOICED END USER CIRCUITS) VOLUME COMMITMENT (35% OF END USER CIRCUIT
VOLUME COMMITMENT)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
1,000 350 $[ * ] $[ * ]
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
2,500 875 $[ * ] $[ * ]
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
5.000 1,750 $[ * ] $[ * ]
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
Initial MDF must be spent within 6 months following the Effective Date of the
Agreement. Customer can choose to spend up to 70% of Initial MDF at any time
during the first 3 months and the remaining 30% at any time during the second 3
months after the Effective Date of the Agreement. Customer forfeits any unspent
MDF at the end of the 6-month period.
For example, if Customer commits to a 1,000 Circuit Volume Commitment, Covad
will place $[ * ] into a Covad-managed MDF account for Customer. This amount
is derived by multiplying the initial MDF per circuit $[ * ] by the 6-month ramp
(1,000 x 35% = 350). Of the $[ * ], $[ * ] (or 70%) must be spent any time
within the first three months, and the remaining $[ * ] (30%) must be spent
any time within the following 3 months.
Initial MDF is in lieu of Accrual MDF (defined below) during the first six (6)
months of the Agreement. Accrual MDF will begin to accrue in month seven (7)
based on the six-months (6) invoice to Customer.
ACCRUAL MARKET DEVELOPMENT FUNDS
Accrual MDF is available to Customer beginning in month seven (7) after the
Effective Date to develop or continue demand generation programs associated with
the purchase of TeleSpeed Services. The MDF Accrual Percentage is determined by
Customer's Volume Commitment as per the table below. THE MDF ACCRUAL PERCENTAGE
IS APPLIED TO CUSTOMER'S TOTAL END USER TELESPEED CIRCUITS (TELESPEED 144,
TELESPEED 384, TELESPEED 768, TELESPEED 1.1, AND TELESPEED 1.5) INVOICED EACH
MONTH, THROUGH TERMINATION OF THE AGREEMENT. MDF will not
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
25
<PAGE>
Market Development Funds - TeleSpeed-Registered Trademark- Services
-------------------------------------------------------------------
accrue for TeleSurfer-SM- Circuits invoiced. Customer must be current on all
invoices to be eligible for MDF. MDF are not available for marketing activities
that only promote TeleSurfer Services. Accrual MDF are placed into a
Covad-managed Customer account every month after each invoice has been paid.
Disbursement of Accrual MDF follows standard MDF Guidelines including
development of joint-marketing plans and Covad logo usage. Accrual MDF will only
accumulate for six (6) months. Any Accrual MDF that remains unused for longer
than six (6) months WHI be forfeited and returned to Covad.
<TABLE>
<S> <C>
- ------------------------------------------------------ ---------------------------------------------------------------
NUMBER OF INVOICED END USER TELESPEED MONTHLY-MDF ACCRUAL PERCENTAGE
CIRCUITS AS OF THE END OF THE MONTH
- ------------------------------------------------------ ---------------------------------------------------------------
1,000 - 2,499 [ * ]%
- ------------------------------------------------------ ---------------------------------------------------------------
2,500 - 4.999 [ * ]%
- ------------------------------------------------------ ---------------------------------------------------------------
5,000 - 9,999 [ * ]%
- ------------------------------------------------------ ---------------------------------------------------------------
</TABLE>
EXAMPLE: MONTHLY INVOICE AFTER VOLUME DISCOUNT (ASSUME 5,000 VOLUME COMMITMENT
LEVEL IN REGION A)
Accrual MDF will accrue at a rate associated with the Customer's Volume
Commitment Level. An example of one month's accrual calculation is listed below.
MDF CALCULATION
<TABLE>
<S> <C>
Number of End User TeleSpeed Circuits: 5,100
Total End User TeleSpeed Circuit invoice: $[ * ]
MDF %: [ * ]
MDF accrued for the month: $[ * ] x [ * ] = $[ * ]
</TABLE>
Covad places this $[ * ] Customer's MDF account upon receipt of payment of
all outstanding invoices.
FAILURE TO MEET COMMITMENT
If Customer does not meet or exceed its Volume Commitment Level in month three
(3), as detailed in the Volume Milestone Schedule, Customer will receive only
Accrual MDF. Accrual MDF will be calculated as detailed above. if Customer does
not meet or exceed its line commitment in month three (3), but does meet or
exceed its volume commitment in month six (6), Covad will credit MDF for months
4-6 to Customer's MDF account up to the Initial MDF for those months. In no case
will Covad credit both Accrual MDF and Initial MDF for the same month.
If Customer does not meet or exceed any of its Volume Commitments as detailed in
the Volume Milestone Schedule for months 3, 6, or 9, then Customer will receive
Accrual MDF at the Accrual Percentage associated with Customer's actual Volume
Level (as opposed to Volume Commitment Level).
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
26
<PAGE>
Exhibit 10.27
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Agreement"), made as of the 15 day of November,
1999, between 65 PUBLIC SQUARE ASSOCIATES, PNC Bank Building (hereinafter
referred to as "Lessor"), and FASTNET CORPORATION (hereinafter referred to as
"Lessee").
W I T N E S S E T H:
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. DEMISED PREMISES. Lessor hereby leases to Lessee that certain space
commonly referred to as Suite 11 17 located on the Eleventh (11th) floor of
Lessor's PNC Bank building at Sixty Nine Public Square, in the City of
Wilkes-Barre, Lucerne County, Pennsylvania, (hereinafter referred to as the
"Building"), and that additional space on the roof of the Building necessary to
accommodate the installation of one six (6') foot microwave dish. The Building
and rooftop space described above are hereinafter referred to as the "Demised
Premises" and are more particularly shown in the attached Exhibit A which is
incorporated herein by reference. This Facility is defined as and includes
utility connections and necessary technical appurtenances, for the purposes of
establishing a cellular, paging, microwave, wireless, or related (including such
other forms of data transmission as may be developed based on existing or future
technologies)
<PAGE>
communications facility. Included with this Lease is Lessee's right to install a
sprinkler system(s), fire suppression system, HVAC system and a security system
(as determined necessary by Lessee) in the entranceway, and the right to add
sealed batteries. Also included with this Lease is Lessee's right to install a
generator in the basement of the Building at a location to be agreed upon by
Lessor and Lessee as depicted on the attached Exhibit A-1, which is incorporated
herein by reference. Lessee shall have twenty-four (24) hour access seven (7)
days a week to the basement of the Building. An escorted access to the basement
shall be provided by Lessor upon Lessee paging Lessor's designated maintenance
person. Lessee, its agents, employees, contractors and business visitors shall
have at all times the free and uninterrupted right to use public entrances,
elevators and stairways in the Building in order to gain access to the Demised
Premises. Lessee shall be afforded all necessary access to construct, maintain,
and inspect its equipment and to permit officials from the Federal
Communications Commission to make any necessary inspections.
2. TERM. This Agreement shall commence on the date hereof and shall
continue in effect for an initial term (hereinafter referred to as the "Original
Term") of five (5) years from the Rental Commencement Date (as defined below).
Thereafter, this Agreement shall continue in force and effect upon the terms and
conditions contained herein for four (4) renewal terms of five (5) years each
(hereinafter referred to as the "Renewal Term(s)"), at Lessee's sole
determination, unless Lessee provides to Lessor written notice of its intention
not to renew this Agreement at least ninety (90) days before the expiration of
the Original Term or any Renewal Term. Lessee shall have the right to
2
<PAGE>
terminate this Agreement at any time during any Renewal Term, any such
termination to be effective sixty (60) days after notice of termination is
received by Lessor If Lessee terminates this Agreement during a Renewal Term,
Lessee shall pay Lessor a termination fee equal to three (3) months of the then
current rent.
3. RENT.
(a) The rent for each year of the Original Term shall be in the amount
[ * ] to be paid in equal monthly installments of [ * ] beginning on the
Rental Commencement Date (as defined below), provided, however, that
beginning on the date that this Agreement is executed by Lessor, and
continuing until the Rental Commencement Date, Lessee shall pay to Lessor
monthly rent ("Interim Rent") in the amount of [ * ].
(b) Monthly rental payments shall be due and payable on the first day of
the month. If the date upon which this Agreement is executed by Lessor is not
the first day of the month, the Interim Rent for the first month shall be
prorated and shall be due on the first day of the following month along with the
first full monthly Interim Rent payment. Monthly rental payments shall be paid
to Lessor at the address set forth in Section 28 or to such other address as
Lessor may, from time to time, designate in writing at least thirty (30) days in
advance of any rental payment date. Such monthly installments shall be deemed
late if not received by Lessor by the tenth (10th) day of each
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
3
<PAGE>
month, and shall bear interest at the rate of six percent (6%) per annum
thereafter until paid with interest accruing upon the first day late, i.e., the
eleventh (11th) day of the month. Lessor must notify Lessee in writing of
failure to receive a rental payment as set forth in Section 13 in the manner
prescribed in Section 28.
(c) The Rental Commencement Date shall be the first day of the first month
following the date upon which Lessee or its contractor first commences physical
construction of the improvements described in Section 1. The conducting of any
Engineering Analysis (as defined in Section 7(a)) or any pre-construction
activities (including but not limited to surveying, frequency coordination,
installation coordination) shall not be deemed to be physical construction.
(d) If the Rental Commencement Date has not occurred on or before ninety
(90) days after execution of this Agreement, Lessor shall have the conditional
right to terminate this Agreement. Should Lessor elect to terminate pursuant to
this section, Lessor shall provide written notice of such intent to Lessee.
Within thirty (30) days of receipt of such notice, Lessee shall have the option
to commence payment of full rent, in which case the Rental Commencement Date
shall be deemed to be the date of Lessee's receipt of Lessor's notice to
terminate and such notice to terminate shall be null and void.
(e) The annual rent for each Renewal Term shall be equal to the rent paid
for the immediately preceding Renewal Term or Original Term plus [ * ].
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
4
<PAGE>
4. Taxes. Lessor is responsible for the timely payment of all property
taxes affecting the Demised Premises. Lessee, upon presentation of sufficient
and proper documentation, shall pay as additional rent an amount equal to any
increase in real estate taxes levied against the Demised Premises which are
directly attributable to the improvements constructed by Lessee on the Demised
Premises.
5. Utilities. Lessee's electrical service shall be separately metered, at
Lessee's sole cost and expense, Lessee shall promptly pay all utility charges
attributable to Lessee's use of the Demised Premises directly to the utility
company. Lessor shall fully cooperate with any utility company requesting an
easement over and across the land upon which the Demised Premises is located in
order that such utility company may provide service to Lessee. Lessee and the
utility company providing services to Lessee shall have access to all areas of
the Building necessary for installation, maintenance and/or repair of such
service.
6. PERMITTED USE. Lessee shall use the Demised Premises for the purpose of
constructing, maintaining and operating a cellular, paging, microwave, wireless
or related (including other forms of data transmission as may be developed or
modified based on existing or future technologies) communications facility
(hereinafter referred to as the "Facility). Such communications operations shall
be conducted in accordance with the standards imposed by the Federal
Communications Commission, and any other local, state or federal body with
authority over such operations. All improvements required by Lessee shall be at
Lessee's expense and shall in no event be considered a part of the
5
<PAGE>
Building for purposes of ownership. Any alterations or attachments to the
Building by Lessee shall require the written consent of Lessor, which shall not
be unreasonably withheld or delayed. The rules and regulations set forth in
Exhibit "B" of this Agreement shall be considered a part of this Agreement and
Lessee covenants that the rules and regulations shall be faithfully observed and
performed by Lessee and Lessee's employees.
7. Necessity of Permits, Right to Terminate.
(a) This Agreement and Lessee's obligations hereunder are contingent upon
its obtaining, after the execution date of this Agreement, all certificates,
permits, zoning relief and other approvals that may be required by any federal,
state or local authority, including without limitation the Federal
Communications Commission and the Federal Aviation Administration, (hereinafter
referred to as the "Permits"), as well as satisfactory engineering tests,
including profile analysis, frequency coordination and other site or
environmental testing (hereinafter referred to as the "Engineering Analysis"),
which will permit Lessee to use the Facility and Demised Premises for its
intended purposes, as set forth herein. Lessee is hereby given the right to
conduct surveys, radio coverage tests, and other investigations needed to secure
the foregoing Permits and Engineering Analysis, including the right to enter
Lessor's property as required.
Lessee shall diligently pursue all Permits and complete the Engineering
Analysis in a reasonable and timely manner. Notwithstanding this obligation of
Lessee, the determination as to the initiation of or response to judicial or
administrative appeals shall rest solely with Lessee, and Lessor agrees that
such determination shall be conclusive.
6
<PAGE>
Lessor shall cooperate with Lessee in its effort to obtain any and all
Permits, if requested, and shall neither take nor permit any action that would
adversely affect the status of the Demised Premises or the Facility with respect
to the proposed use thereof by Lessee.
(b) With respect to the Engineering Analysis, such activities require
ongoing site investigations, which will transpire after the execution date of
this Agreement. Lessor specifically acknowledges and agrees that Lessee shall
have the fight to terminate this Agreement in the event that its Engineering
Analysis, in the sole discretion of Lessee, indicates that the Demised Premises
and/or Facility is not acceptable or capable of being used as contemplated under
this Agreement. The period for completing the Engineering Analysis, which would
allow Lessee's termination hereunder, shall be ninety (90) days from the
execution date of this Agreement. In the event of termination pursuant to this
Section, Lessee agrees to pay Lessor an amount equal to three (3) months' full
rent as a termination fee, which shall render this Agreement null and void and
shall terminate the obligations of the parties hereunder (excluding, however,
the obligations set forth in Section 8 hereunder).
(c) If any one or more of the Permits is denied, refused, canceled or is
otherwise withdrawn, terminated, or materially modified by any governmental
authority, or if any third party action or Act of God substantially limits the
Facility's operations or utility to Lessee, Lessee may terminate this Agreement
upon written notice to Lessor, whereupon this Agreement shall become null and
void and the parties shall have no
7
<PAGE>
further obligations to each other under the terms of this Agreement (excluding,
however, the obligations set forth in Section 8 hereunder). If any rental
payments have been made before the effective date of termination, they shall be
retained by Lessor- If any permits are refused or denied following commencement
of construction, resulting in this Agreement being terminated, Lessee shall pay
Lessor an amount equal to three (3)months full rent as a termination fee.
8. REMOVAL OF LESSEE'S IMPROVEMENTS UPON TERMINATION. Lessor covenants and
agrees that no part of the improvements constructed, erected or placed by Lessee
on the Demised Premises shall become, or be considered as being affixed to or a
part of, the Demised Premises or Lessor's Property, it being agreed by Lessor
that all improvements of any kind and nature constructed or placed by Lessee on
the Demised Premises shall not be considered fixtures, but shall be and remain
the personal property of Lessee. Lessee, upon termination or expiration of this
Agreement shall within 120 days, remove all such improvements from the Demised
Premises. Lessee shall be required to continue making monthly rental payments
until such time as all improvements are removed from the Demised Premises. The
Demised Premises shall be returned in a condition that reasonably matches its
original condition, reasonable wear and tear, condemnations, casualty and
destruction, and any hazardous materials not placed on or about the Demised
Premises by Lessee, its agents, employees or contractors excepted. In the event
Lessee fails to remove its improvements within the requisite time period, Lessee
shall be liable to Lessor for double the rental amounts during Lessees holdover
period.
8
<PAGE>
9. MAINTENANCE OF DEMISED PREMISES. Lessee shall maintain the Demised
Premises in reasonable condition, free and clear of any debris and waste
products. Lessor shall be responsible for the removal of reasonable trash and
debris, provided such trash and debris can be readily disposed. Lessee will
resolve technical interference problems with other then existing equipment
located at the Building on the Rental Commencement Date or any future equipment
that Lessee attaches to the Building at the time of installation of that
equipment. Lessor shall not permit the installation of any future equipment to
result in the technical interference with Lessee's then existing equipment. In
the event Lessee experiences such interference, Lessor shall immediately take
all steps necessary to eliminate the interference.
10. ENVIRONMENTAL WARRANTY. Lessor represents and warrants, to the best of
its knowledge, that the Demised Premises contain none of the following: (1)
hazardous substances, pollutants or contaminants as defined in the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA), and successor or
related statutes, or other local, state or federal environmental law; or (2)
underground storage tanks. Further, Lessor represents and warrants that the
Demised Premises (including subsurface conditions thereof) are not in violation
of any state, federal, or local law, regulation, or ordinance. Lessor agrees to
indemnify, release, defend and save Lessee, its parents, subsidiaries and
affiliates, harmless from any and all losses, claims, liabilities, judgments,
damages, penalties, expenditures, costs, including reasonable attorneys' fees,
or other expenses (collectively "Damages") which Lessee may suffer or incur as a
result of, or related to, the environmental condition of the Demised Premises or
a breach of the
9
<PAGE>
foregoing warranties. Lessor represents and warrants, to the best of its
knowledge, that the Building does not contain any asbestos or asbestos products.
To the extent Lessee encounters any asbestos in the installation of the
Facility, Lessor shall indemnify Lessee, its parents, subsidiaries and
affiliates from any and all Damages which may be suffered by Lessee or any other
party as a result of the presence of asbestos. Lessor shall assume all
responsibility for such removal and in no event will Lessee be required to
remove any asbestos. Lessee represents and warrants that it shall comply with
all environmental laws set forth above and shall indemnify the Lessor, its
successors and assigns from all damage which Lessor may suffer or incur as a
result of or related to Lessees actions or omissions for the environmental
conditions of the Demised Premises or a breach of the foregoing warranties.
Lessee makes no other representations except as herein contained or as set forth
elsewhere in this Agreement.
11. INDEMNIFICATION. Lessee agrees to indemnify and save Lessor harmless
from and against any and all liability, damage, expense, claims or judgments,
including reasonable attorneys' fees, resulting from injury to person or damage
to property arising out of the use and occupancy of the Demised Premises by
Lessee if caused by the act or omission of Lessee, its agents, employees,
invitees or guests during the term of this Agreement. Lessor agrees to indemnify
and save Lessee, its parent, subsidiaries, affiliates, directors, officers,
employees, and agents, harmless from and against any and all liability, damage,
expense, claims or judgments, including reasonable attorneys' fees, resulting
from injury to person or damage to property arising out of the act or omission
of
10
<PAGE>
Lessor, its agents, employees, invitees, guests or third parties during the term
of this Agreement.
12. Insurance. Lessor and Lessee hereby mutually waive their respective
rights of recovery against each other to the extent of losses covered by
insurance for any loss insured by fire, extended coverage or other property
insurance policies, including "all risk" property insurance, existing for the
benefit of the respective parties, whether due to the negligence of Lessor,
Lessee or their respective agents, employees, contractors or invitees, or any
other cause. Each party shall ensure that each insurance policy obtained
provides that the insurer waives all rights of recovery by way of subrogation
against the other party and its agents and employees in connection with any
damage covered by such policies. Lessee agrees that it will, not later than the
Rental Commencement Date hereunder, maintain and pay for the following types of
insurance, and provide proof of such coverage when so requested by Lessor, and,
when requested in writing by Lessor, name Lessor as an additional insured:
(a) Worker's Compensation Insurance for all employees who work on and visit
the Demised Premises; and
(b) Commercial General Liability Insurance in the amount of $1,000,000.00
per occurrence $2,000,000.00 general aggregate $1,000,000.00 products/completed
operations Lessor shall maintain at all times during this Agreement fire and
property damage insurance policies in standard "all risk" form insuring Lessor
against loss from any physical damage to the Building with coverage of not less
than the full replacement
11
<PAGE>
cost thereof If the Demised Premises or the Building is damaged by fire or other
casualty, Lessor shall restore the same to substantially the same condition
existing immediately prior to such damage. If, however, the Demised Premises
cannot be repaired within sixty (60) days from the occurrence of the fire or
casualty, then this Agreement shall be terminated at the option of Lessee. If
the repairs can be completed within the referenced sixty (60) days, then Lessor
shall make the repairs and the rent shall be apportioned and suspended while the
repairs are being made. Lessor shall not be liable for property damage suffered
by Lessee as a result of damage caused by water, snow, frost, steam, sewage,
gas, odors, bursting or leaking of pipes, or disrepair or failure of the heating
or cooling system, whether such damage is caused by Lessor, Lessor's employees
or other tenants.
13. DEFAULT BY LESSEE. If Lessee defaults in the payment of the rent herein
agreed to be paid and such default is not cured within fifteen (15) days after
receipt by Lessee of written notice of such default, Lessor may terminate this
Agreement upon written notice to Lessee. If default is made in the performance
of any other material covenant of Lessee contained herein and such default is
not cured within thirty (30) days after receipt by Lessee of written notice of
such default, Lessor may terminate this Agreement upon written notice, provided
however, where any such default cannot reasonably be cured within thirty (30)
days, Lessor may not terminate this Agreement if Lessee commences to cure such
default within the thirty (30) day period and thereafter diligently pursues such
cure to completion.
12
<PAGE>
14. DEFAULT BY LESSOR. In the event Lessor fails to perform any of its
obligations under this Agreement and such default is not cured within thirty
(30) days after receipt of written notice from Lessee specifying the nature of
such default where such default could reasonably be cured, or fails to commence
such cure within said thirty (30) day period, Lessee shall have the option of
terminating this Agreement, proceeding in equity or at law or Lessee may cure
any default of Lessor. If all or any part of the Demised Premises is taken by
means of the exercise of eminent domain, whether by legal proceedings or
otherwise, or a voluntary sale or transfer by Lessor to any condemnor under
threat of condemnation or while legal proceedings for condemnation are pending,
or by inverse condemnation (a "Condemnation") and the Demised Premises is not
reasonably suitable for Lessee's continued occupancy for the permitted use, then
Lessee shall have the option to terminate this Agreement.
15. QUIET TITLE; MORTGAGES. Lessor covenants that Lessee, upon paying the
rent and performing its covenants hereunder, shall peaceably and quietly have,
hold and enjoy the Demised Premises. Lessor represents and warrants that it has
good and marketable title to the Demised Premises, free and clear of all liens
and encumbrances, except mortgage(s). Lessor further represents and warrants
that this Agreement is not contrary to the terms of any such mortgage(s). Lessor
agrees to use all reasonable efforts to have any future mortgagee(s) execute a
non-disturbance agreement in a form reasonably acceptable to Lessee.
16. AUTHORITY TO ENTER INTO AGREEMENT: NO RESTRICTIVE COVENANTS.
13
<PAGE>
(a) Lessor represents, covenants, and warrants that Lessor is seized of
good and sufficient title and interest to the Demised Premises and has full
authority to enter into and execute this Agreement. Lessor further represents,
covenants and warrants that there are no restrictive covenants, mortgage terms
or other matters encumbering the title to the Demised Premises which may
materially interfere with or prevent Lessee's use of the Demised Premises.
(b) Lessor further represents and covenants to the best of its knowledge:
(i) That Lessor is the sole party currently owning or having an
interest in the Demised Premises.
(ii) That there are no suits, claims, proceedings, tax claims or
liens, judgments or the like affecting Lessor's title to the Demised Premises or
its ability to enter into this Agreement, or with respect to Lessee's rights
hereunder.
(iii) That there are no rights, agreements, or interests in any third
party which would in any way limit Lessee's rights, use, or enjoyment hereunder.
(c) Lessor acknowledges, agrees, and understands that Lessee is making a
significant financial investment and commitment of facilities and equipment to
and in the Demised Premises and the proposed Facility, and that Lessee is
relying on Lessees representations, which have induced Lessee to enter into this
Agreement.
17. SALE OR FINANCING OF DEMISED PREMISES. Should Lessor, at any time
during the term of this Agreement, sell, refinance or otherwise encumber, all or
any part
14
<PAGE>
of the Demised Premises to a party other than Lessee, such sale or
financing shall be under and subject to this Agreement and Lessee's rights
hereunder.
18. ASSIGNMENT. This Agreement shall be freely assignable by Lessee,
provided, however, that Lessee shall provide thirty (30) days written notice of
assignment to Lessor. Lessee shall be permitted to sublet all or any portion of
the Demised Premises provided such sublet is necessary to accommodate the
equipment of Lessee's customers. Lessor may sell, assign, or transfer the
Demised Premises or its interest herein, subject, however, to the terms of this
Agreement and Lessee's tenancy hereunder.
19. CONFIDENTIALITY OF AGREEMENT TERMS. Lessor agrees that it shall keep
all terms of this Agreement confidential. No information regarding this
Agreement is to be divulged by Lessor without the written consent of Lessee.
20. REMEDIES CUMULATIVE. No remedy herein conferred upon or reserved to
Lessor or Lessee is intended to be exclusive of any other remedy herein
contained or by law provided, but each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute.
21. GOVERNING LAW. This Agreement and the performance thereof shall be
governed, interpreted, construed and regulated by the laws of the Commonwealth
of Pennsylvania. Jurisdiction and venue of any dispute arising hereunder shall
lie with the Court of Common Pleas in the County where the Demised Premises is
located, or with the U.S. District Court for the Middle District of
Pennsylvania; it being expressly agreed
15
<PAGE>
that the choice of jurisdiction and venue relative to such dispute shall be made
by Lessee in its sole discretion.
22. SUCCESSORS AND ASSIGNS. This Agreement shall extend to and bind the
heirs, personal representatives, successors, and assigns of the parties hereto.
23. MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. RECORDING. This Agreement shall not be recorded. The parties agree to
execute a Memorandum of this Agreement in the form attached hereto which Lessee
may record, at its expense, in the appropriate office for the recordation of
real estate conveyances for the county in which the Demised Premises is located.
Lessor shall execute and deliver to Lessee any other affidavits, statements, or
documents needed to record the Memorandum.
25. HEADINGS. Section headings in this Agreement are inserted only for
reference and in no way define, limit, or describe the scope or intent of this
Agreement nor affect its terms and provisions.
26. SEVERABILITY. The unenforceability or invalidity of any provision of
this Agreement shall not affect the validity or enforceability of the Agreement
as a whole or any other provision thereof.
16
<PAGE>
27. INTERPRETATION. Each party to this Agreement and their counsel have had
an opportunity to review and revise this Agreement. The normal rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or OF any
amendments or exhibits thereto.
28. NOTICES. Any notice provided for herein shall be given in writing and
shall be deemed validly given if delivered by personal delivery, nationally
recognized overnight air carrier service, or certified or registered United
States mail, postage prepaid, return receipt requested, addressed as follows:
Lessor: 65 Public Square Associates
One South Main Street
Wilkes-Barre, PA 18701
Lessee: Fastnet Corporation
Two Courtney Place, Suite 130
3864 Courtney Street
Bethlehem, PA 18017
Attention: Mark Horinko
Notice shall be deemed effective upon receipt or refusal to accept
delivery. The person to whom and the place to which notices are to be delivered
may be changed from time to time by either party by written notice given to the
other party,
29. ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the entire
agreement between the parties hereto and no other verbal or oral agreements,
promises, or understandings shall be binding upon either Lessor or Lessee in any
dispute, controversy, or proceeding at law. Any addition, variation, or
modification to this Agreement
17
<PAGE>
shall be void and ineffective unless made in a writing signed by Lessor and
Lessee.
IN WITNESS WHEREOF, the parties hereto have set their hands and affixed
their respective seals the day and year first above written.
LESSOR:
WITNESS: 65 Public Square Associates
By:
-------------------------- ---------------------------
Title:
------------------------
ATTEST: LESSEE:
FASTNET CORPORATION
--------------------------
By: /S/ DAVID K. VAN ALLEN
---------------------------
Title: CHIEF EXECUTIVE OFFICER
------------------------
EXHIBIT A- I
RULES AND REGULATIONS
1. The sidewalk, vestibules, elevators, stairways and corridors shall not be
obstructed by any of the tenants, or used by them, for any other purpose than
for ingress and egress from and to their respective offices.
2. The floors, skylights, windows, doors and transoms that reflect or admit
light into passageways, or into any place in said building, shall not be covered
or obstructed by any
18
<PAGE>
of the tenants. The toilet rooms, water closets, and other water apparatus shall
not be used for any purposes other than those for which they were constructed,
and sweepings, rubbish, rags, ashes, chemicals, or the refuse from electric
batteries, or other unsuitable substances, shall be thrown therein. Any damage
resulting from such misuse or abuse shall be home by the tenant by whom or by
whose employees it shall be caused.
3. No sign, advertisement, or notice shall be inscribed, painted, or affixed
on any part of the outside or inside of said building, or on any doors therein,
unless of such color, size and style and in such places, upon or in said
building, as shall be first designated by the Lessor and endorsed hereon.
4. No additional locks shall be placed upon any doors of the premises, and
the tenant will not permit any duplicate keys to be made (all necessary keys
will be furnished by the Lessor), but if more than two or by the tenant.. Upon
the termination of this lease, the tenant must leave the windows, and doors in
the demised premises, in a like condition as at the date of said lease, and must
then surrender all keys, delivered to said tenant, of rooms, water closets and
vaults.
5. No tenant shall do or permit anything to be done in said premises, or
bring anything therein which will in any way increase the rate of fire insurance
on said building, or on property kept therein, or conflict with any insurance
policy upon said building, or any part thereof, or in any way expose the
premises to damage by fire.
6. The bringing into the building, taking therefrom or therein of safes,
furniture, fixtures or supplies shall only be at such time and such manner as
the superintendent of the building shall designate. The Lessor shall have the
right to prescribe the weight and
19
<PAGE>
positions of all safes, which sale shall, in all cases, stand upon planks two
inches thick or metal equivalent thereto: and all damage to the building or any
part thereof caused by taking in, putting Out, removing or maintaining in the
building, safes, furniture, fixtures or supplies, shall be repaired at the
expense of the tenant responsible for the presence thereof.
7. The Lessor shall have the fight, in person or by its agent, to retain a
passkey and to enter any premises at reasonable hours in the day or night to
examine the same, or to run telegraph or electric wires, or to make such
repairs, additions and alterations as it shall deem necessary for the safety,
preservations, or restoration of the said building, or for the safety or
convenience of the occupants thereof, and also to exhibit the said premises to
be let, and put upon them the usual notice. "For Rent", which same notice shall
not be removed or obliterated by any tenant during the three months previous to
the expiration of the lease of the premises.
8. Tenants, their clerks or servants, shall not make or commit any improper
noises or disturbances of any kind in the building, smoke in the elevator, or
mark or defile it, or mark or defile the water closets, or toilet rooms, or the
walls, windows or doors of the building, or interfere in any way with tenants or
those having business with them.
9. No carpet, rug, or other article shall be hung or shaken out of any
window, and nothing shall be thrown or allowed to drop by the tenants, their
clerks, or employees out of the windows or doors or down the passages or sky,'
lights of the building: and no Lessee shall sweep or throw, or permit to be
swept from the ]eased premises, any dirt or
20
<PAGE>
other substance into any of the corridors or halls, elevators or stairways of
said building, or into any of the light shafts or ventilators thereof.
10. No animals or birds shall be kept in or about the premises.
11. Tenants shall not use or keep in the building any explosives, kerosene,
camphine, gasoline, burning fluid, or other illuminating material, except
electric light or candies.
12. No picture or other nails or screws shall be driven or inserted in any
part of the walls or woodwork of said building, nor shall any part thereof be
defaced by any Lessee; nor shall die walls or partitions be painted, papered, or
otherwise covered, or in any way marked or broken, without the consent of the
Lessor.
13. All ordinary cleaning, repairing and restoring of the public elevator
shall be affected out of ordinary business hours as far as possible: but in case
it shall become necessary, or proper at any time, from accident or for improving
the condition or operation or the elevator, boiler, machinery, or anything
appertaining thereto, Lessor shall be at liberty to stop the operation of it
during the day; but in such case due diligence shall be used to complete work.
Freight shall not be transported in the elevator if its weight is in excess of
the weight specified on the posted official notice in the said elevator. All
freight transported onto or from the said elevator shall be done so by use of a
device which will not damage or mar the flooring or walls of the said elevator.
14. That the tenant will not use or permit upon said premises anything that
will invalidate any policies of insurance now or hereafter carried on said
building- that the tenant will pay all extra insurance premiums on the said
building which may be caused
21
<PAGE>
by the use which said tenant shall make of said demised premises; that the
tenant will not use or permit upon said premises anything that may be dangerous
to life or limb, the tenant will comply with all governmental, health and policy
requirements and regulations respecting said premises and will not use said
premises for lodging or sleeping purposes.
16. Lessor shall have the right to prohibit any advertising by any tenant,
which, in Lessors opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from the Lessor,
tenant shall refrain or discontinue such advertising.
17. Canvassing, soliciting or peddling in the building is prohibited and each
tenant shall cooperate to prevent same.
18. There shall not be used in any space, or in the public halls of any
building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any handtrucks, except those equipped with rubber tires
and side guards.
19. The Lessor reserves the right to make such other and further reasonable
rules and regulations as, in its judgment, may from time to time be needful for
tile safety, care, and cleanliness of tile premises, and for the preservation of
good order therein, which when so made and notice thereof given to the Lessee,
shall have the same force and effect as if originally made a part of the
foregoing lease; such other and further rules not, however, to be inconsistent
with the proper and rightful enjoyment by the Lessee under the foregoing lease
of the premises therein referred to.
22
<PAGE>
Acknowledgment
COUNTY OF LUZERNE )
) ss
STATE OF PENNSYLVANIA )
On this 15th day of November 1999, before me personally appeared
to me known as the of 65 Public Square
Associates and acknowledged the within and foregoing instrument to be the
free and voluntary act and deed of 65 Public Square Associates, for the uses
and purposes therein mentioned and on oath stated that he/she was authorized
to execute said instrument on behalf of 65 Public Square Associates and that
the seal affixed (if any) is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal the day and year first above written.
-----------------------
Notary Public
My commission Expires: October 16, 2000
-----------------
<PAGE>
Acknowledgment
COUNTY OF )
) ss
STATE OF )
On this 15th day of November 1999, before me personally appeared David K.
Van Allen to me known as the Chief Executive Officer of FASTNET CORPORATION and
acknowledged the within and foregoing instrument to be the free and voluntary
act and deed of said corporation, for the uses and purposes therein mentioned
and on oath stated that he/she was authorized to execute said instrument and
that the seal affixed (if any) is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official
Seal the day and year first above written.
-----------------------
Notary Public
My commission Expires: November 8, 2003
-----------------
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A-1
RULES AND REGULATIONS
1. The sidewalk, vestibules, elevators, stairways and corridors shall
not be obstructed by any of the tenants, or used by them, for any other purpose
than for ingress and egress from and to their respective offices.
2. The floors, skylights, windows, doors and transoms that reflect or
admit light into passageways, or into any place in said building, shall not be
covered or obstructed by any of the tenants. The toilet rooms, water closets,
and other water apparatus shall not be used for any purposes other than those
for which they were constructed, and sweepings, rubbish, rags, ashes, chemicals,
or the refuse from electric batteries, or other unsuitable substances, shall be
thrown therein. Any damage resulting from such misuse or abuse shall be borne by
the tenant by whom or by whose employees it shall be caused.
3 . No sign, advertisement, or notice shall be inscribed, painted, or
affixed on any part of the outside or inside of said building, or on any doors
therein, unless of such color, size and style and in such places, upon or in
said building, as shall be first designated by the Lessor and endorsed hereon.
4. No additional locks shall be placed upon any doors of the
premises, and the tenant will not permit any duplicate keys to be made (all
necessary keys will be furnished by the Lessor), but if more than two keys for
any doorlock shall be desired, the additional number must be paid for by the
tenant. Upon the termination of this lease, the
<PAGE>
tenant must leave the windows, and doors in the demised premises, in a like
condition as at the date of said lease, and must then surrender all keys,
delivered to said tenant, of rooms, water closets and vaults.
5. No tenant shall do or permit anything to be done in said premises,
or bring anything therein which will in any way increase the rate of fire
insurance on said building, or on property kept therein, or conflict with any
insurance policy upon said building, or any part thereof, or in any way expose
the premises to damage by fire.
6. The bringing into the building, taking therefrom or therein of
safes, furniture, fixtures or supplies shall only be at such time and such
manner as the superintendent of the building shall designate. The Lessor shall
have the right to prescribe the weight and positions of all safes, which sale
shall, in all cases, stand upon planks two inches thick or metal equivalent
thereto: and all damage to the building or any part thereof caused by taking in,
putting Out, removing or maintaining in the building, safes, furniture, fixtures
or supplies, shall be repaired at the expense of the tenant responsible for the
presence thereof.
7. The Lessor shall have the night, in person or by its agent, to
retain a passkey and to enter any premises at reasonable hours in the day or
night to examine the same, or to run telegraph or electric wires, or to make
such repairs, additions and alterations as it shall deem necessary for the
safety, preservations, or restoration of the said building, or for the safety or
convenience of the occupants thereof, and also to exhibit the said premises to
be let, and put upon them the usual notice. "For Rent", which
<PAGE>
same notice shall not be removed or obliterated by any tenant during the three
months previous to the expiration of the lease of the premises.
8. Tenants, their clerks or servants, shall not make or commit any
improper noises or disturbances of any kind in the building, smoke in the
elevator, or mark or defile it, or mark or defile the water closets, or toilet
rooms, or the walls, windows or doors of the building, or interfere in any way
with tenants or those having business with them.
9. No carpet, rug, or other article shall be hung or shaken out of
any window, and nothing shall be thrown or allowed to drop by the tenants, their
clerks, or employees out of the windows or doors or down the passages or sky,'
lights of the building: and no Lessee shall sweep or throw, or permit to be
swept from the leased premises, any dirt or other substance into any of the
corridors or halls, elevators or stairways of said building, or into any of the
light shafts or ventilators thereof
10. No animals or birds shall be kept in or about the premises.
11. Tenants shall not use or keep in the building any explosives,
kerosene, camphine, gasoline, burning fluid, or other illuminating material,
except electric light or candles.
12. No picture or other nails or screws shall be driven or inserted in
any part of the walls or woodwork of said building, nor shall any part thereof
be defaced by any Lessee; nor shall die walls or partitions be painted, papered,
or otherwise covered, or in any way marked or broken, without the consent of the
Lessor.
<PAGE>
13. All ordinary cleaning, repairing and restoring of the public
elevator shall be affected out of ordinary business hours as far as possible:
but in case it shall become necessary, or proper at any time, from accident or
for improving the condition or operation or the elevator, boiler, machinery, or
anything appertaining thereto, Lessor shall be at liberty to stop the operation
of it during the day; but in such case due diligence shall be used to complete
work. Freight shall not be transported in the elevator if its weight is in
excess of the weight specified on the posted official notice in the said
elevator. All freight transported onto or from the said elevator shall be done
so by use of a device which will not damage or mar the flooring or walls of the
said elevator.
14. That the tenant will not use or permit upon said premises anything
that will invalidate any policies of insurance now or hereafter carried on said
building; that the tenant will pay all extra insurance premiums on the said
building which may be caused by the use which said tenant shall make of said
demised premises; that the tenant will not use or permit upon said premises
anything that may be dangerous to life or limb, the tenant will comply with all
governmental, health and policy requirements and regulations respecting said
premises and will not use said premises for lodging or sleeping purposes.
16. Lessor shall have the right to prohibit any advertising by any
tenant, which, in Lessors opinion, tends to impair the reputation of the
building or its desirability as a building for offices, and upon written notice
from the Lessor, tenant shall refrain or discontinue such advertising.
<PAGE>
17. Canvassing, soliciting or peddling in the building is prohibited
and each tenant shall cooperate to prevent same.
18. There shall not be used in any space, or in the public halls of
any building, either by any tenant or by jobbers or others, in the delivery or
receipt of merchandise, any handtrucks, except those equipped with rubber tires
and side guards.
19. The Lessor reserves the right to make such other and further
reasonable rules and regulations as, in its judgment, may from time to time be
needful for tile safety, care, and cleanliness of tile premises, and for the
preservation of good order therein, which when so made and notice thereof given
to the Lessee, shall have the same force and effect as if originally made a part
of the foregoing lease; such other and further rules not, however, to be
inconsistent with the proper and rightful enjoyment by the Lessee under the
foregoing lease of the premises therein referred to.
<PAGE>
UUNET EXHIBIT 10.28
An MCI WorldCom Company
CO: FASTNET Issue Date: 12/14/99
ATTN: Phil Weller Expiration Date: 12/31/99
TEL: 610-289-1100
FAX: 610-807-0902
SITE: 215-238
QUOTATION FOR UUDIRECT PRICE-PROTECTED T3 SERVICE
ONE-TIME SERVICE FEES
<TABLE>
<S> <C>
Price-Protected T3 Start Up Charge $[ * ]
ESTIMATED T1 Leased Line Install Charge $[ * ]
-------
TOTAL: ONE-TIME SERVICE FEES $[ * ]
</TABLE>
MONTHLY RECURRING FEES
<TABLE>
<S> <C>
Price Protected T3 Monthly Service Fee $[ * ]
ESTIMATED Monthly Leased Line Charge $[ * ]
----------
TOTAL: MONTHLY RECURRING FEES $30,716.00
EQUIPMENT OPTIONS: PLEASE SEE YOUR REP FOR DETAILS UUNET
recommends maintaining "cold spare" equipment for mission-critical
applications UUNET offers a wide variety of security solutions
utilizing Check Point and Raptor products
</TABLE>
The line charges contained in this Quote are estimates only. Terms and
conditions for UUNET services are set forth in the service agreement applicable
to each service that UUNET provides. Delivery times may vary. Purchase Orders
must include the total One-Time Service Fees, the first month's Monthly
Recurring Fees, and all equipment costs referenced above. Please note that
Purchase Orders must also indicate agreement to pay the subsequent monthly
recurring fees for the Term of the applicable service agreement.
Sincerely, Accepted By: Phillip L. Weller
/s/ Rick Tartaglino
Rick Tartaglino
Phone: 703-208-4928
Fax: 703-206-5988
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
UUNET UUNET Technologies +1 800 488-6383 (voice)
An MCI WorldCom Company
3060 Williams Drive +1 703-206-5800 (voice)
Fairfax, VA 22031 +1 703-208-3728 (fax)
http://www.uu.net [email protected]
UUNET is a registered trademark and the UUNET
logo design and The Internet At Work are
trademarks of UUNET Technologies, Inc.
All other trademarks acknowledged
- --------------------------------------------------------------------------------
UUDIRECT T3 PRICE-PROTECTED AGREEMENT
<TABLE>
<CAPTION>
Service 1 Monthly Fee Start-up Charge 2
- -------- ----------- ----------------
<S> <C> <C>
/X/ 45 Mbps port $[ * ] $[ * ]
</TABLE>
Prices above do not include any telco line charges, equipment costs3 or network
application fees. 4
TERM COMMITMENT 5
/ / 2-year Term (10% discount) /X/ 3-year Term ([ * ])
PAYMENT
If a Purchase Order is required, return the PO with this form and provide PO#
- ---------------
BILLING PREFERENCE
/X/ Bill my existing UUNET account number: U04435 / / Bill to a new account
------ number
PLEASE SIGN THIS AGREEMENT ON THE REVERSE.
Current customer status, U04435. Fastnet. Start Up Fee waived 100% and monthly
fee reduced with 3 year Term Commitment (Philadelphia site.)
- --------------------------
1 While Customer can resell Internet connectivity, Customer cannot resell
the service in the entirety to another person or entity without the
express written consent of UUNET. If Customer resells Internet
connectivity to end users, Customer is responsible for: (i) providing
the first point of contact for end user support inquiries; (ii)
providing software fulfillment to end users; (iii) running its own
primary and secondary domain name service ("DNS") for end users; (iv)
registering end users' domain names; (v) using BGP routing to the UUNET
Network if requested by UUNET; (vi) collecting route additions and
charges; and providing them to UUNET; and (vii) registering with the
appropriate agency all IP addresses provided by UUNET to Customer that
are allocated to end users.
2 To ensure proper installation, UUNET will order all telco lines. A $500
surcharge applies to Customer-ordered lines. Installation may be
scheduled between the hours of 8AM and 7PM ET Monday through Friday
(excluding holidays). If Customer requires installation of these hours
UUNET will charge an additional $500 fee.
3 UUNET is acting only as a reseller with respect to the hardware and
software offered under this Agreement ("Equipment"), which was
manufactured by a third party ("Manufacturer"). UUNET will provide
first-level support for Equipment, but will not repair or replace
Equipment. Customer's use of the Equipment is subject to the terms and
conditions of the Manufacturer's end-user agreement. Should Customer
purchase Equipment from UUNET, UUNET will ship the current UUNET tested
version of the Equipment to the Customer.
4 Descriptions of the domain name, mail news services, and other network
applications available in connection with this service, and the pricing
and additional terms applicable to these services, are set forth in the
Network Applications Fee Schedule available at www.uunet/terms. UUNET
reserves the right to change the Network Applications Fee Schedule from
time to time, effective upon posting of the changes to that URL or
other notice to Customer.
5 One (1) year minimum Term required. Discount applicable only to Monthly
Fee. At the conclusion of the Term Commitment, this Agreement shall
continue in effect on a month-to-month basis at UUNET's then current
list prices for the service.
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
Will your company require extended wiring beyond the location at which circuits
are installed at your location? Typically, if your company is located in an
office building with multiple occupations, this will be the case.
/X/ Yes / / No / / Unknown
If Yes, there will be an additional charge from the telephone company for
the extended wiring. This charge generally ranges from $80 to $500, and
could result in additional delay.
Please list the equipment you plan to use for this connection:
Router: Purchased from UUNET? / / Yes /X/ No
Modem: Purchased from UUNET? / / Yes /X/ No
If there are any other special circuit installation or termination needs for
your site, please explains:____________________________________________________
_______________________________________________________________________________
If you are upgrading an existing UUNET account, which is the site name you have
been assigned:
(Examples: U01234, site-it, site.com)_____________________________________
Usage Reports available only for Leased Line services: 56K, T1, T3 and CC3
(Not available for
SMIDS, 10 Plus or Frame
Relay)
Would you like UUNET to provide you with weekly usage reports: /X/ Yes / / No
ISDN INFORMATION FOR ISDN DIAL BACKUP
If you are using ISDN, we need some additional information to configure your
router before shipping. Because lead times on ISDN service can be significant,
we recommend that: a) you have your ISDN line scheduled for installation before
ordering your Internet 9-5 Basic service, or b) you have the UUNET-authorized
agent start the ISDN ordering process for you.
/ / ISDN already installed / / ISDN line scheduled for installation on
_____________________(Date)
B-channel phone number(s):______________________________________________________
SPID numbers:___________________________________________________________________
Please choose one of the following types of ISDN service:
/ / National (N-1)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
/ / Custom: please indicate service type: / /v Northern Telecom (NT) / / AT&T point-to-point / / AT&T multi-point
- ---------------------------------------------- -------------------------------------------------------------------------------
Line speed: / / 56K / / 64K
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL INFORMATION: (OPTIONAL)
If you currently have an internet service provider other than UUNET, please
indicate the name here:_________________________________________________________
Are there any other companies which you feel would benefit from UUNET's
services? If so, UUNET will give you a one-time 5% credit on your monthly
service fee when your referral obtains service from us.
<TABLE>
<S> <C>
Contact: __________________________________________ Phone: ____________________________________
Company: __________________________________________ Fax: ______________________________________
Address: __________________________________________ E-mail: __________________________________
__________________________________________
__________________________________________
</TABLE>
Customer Authorized Approval:
Name: Phillip L. Weller Signature /s/ Phillip L. Weller Date: 12/14/99
------------------ --------------------- ---------
<PAGE>
CUSTOMER INFORMATION FORM - HIGH SPEED SERVICES
To process your order as quickly as possible, please complete this form and
return it to the UUNET sales department by fax at the number listed below. Thank
you for your assistance and we look forward to working with you and your
organization:
Return to fax number:________________ Attn: _________________________________
PRIMARY TECHNICAL CONTACT FOR INSTALL: SECONDARY TECHNICAL CONTACT FOR INSTALL:
Name:________________________________ Name:___________________________________
Phone:_______________________________ Phone:__________________________________
Fax:_________________________________ Fax:____________________________________
E-mail:______________________________ E-mail:_________________________________
Pager:_______________________________ Pager:__________________________________
PRIMARY BILLING CONTACT: SECONDARY BILLING CONTACT:
Name:________________________________ Name:___________________________________
Phone:_______________________________ Phone:__________________________________
Fax:_________________________________ Fax:____________________________________
E-mail:______________________________ E-mail:_________________________________
Pager:_______________________________ Pager:__________________________________
PRIMARY OUTAGE CONTACT FOR SLA SECONDARY OUTAGE CONTACT FOR SLA
REPORTING GUARANTEE: REPORTING GUARANTEE:
Name:________________________________ Name:___________________________________
Phone:_______________________________ Phone:__________________________________
Fax:_________________________________ Fax:____________________________________
E-mail:______________________________ E-mail:_________________________________
Pager:_______________________________ Pager:__________________________________
SHIP TO ADDRESS: CUSTOMER ADDRESS:
U.S. Mail ________________________________________
Address______________________________ ________________________________________
City/State/Zip:______________________ ________________________________________
Attn:________________________________ ________________________________________
Phone________________________________ ________________________________________
BILLING ADDRESS: CUSTOMER ADDRESS:
U.S. Mail ________________________________________
Address______________________________ ________________________________________
Floor/Ste/Rm:________________________ ________________________________________
City/State/Zip:______________________ ________________________________________
Site Phone___________________________ ________________________________________
Requested Install Dates 6: 1/6/99
------------------------------------------------------
Problematic Install Dates:
------------------------------------------------------
- -----------------
6 Installation completed on an expedited basis (under 3 weeks) will incur
a $495 service charge. UUNET does not guarantee installation on or by
the Requested Install Date.
[*] We are seeking confidential treatment of these terms,
which have been omitted. The confidential portion has been
filed separately with the Securities and Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
Circle Service Type/Bandwidth:
<S> <C> <C> <C> <C> <C> <C>
LEASED LINE: / / 56 Kbps / / T1 / / Shadow T1 / / Double T1 / / SMDS / / 10Plus (10Mbps)
/X/ Tiered T3 / / Burstable T3 / / ATM Tiered T3 / / Shadow T3 / / OC3
FRAME RELAY: / / 56 Kbps / / 128 Kbps / / 256 Kbps Other: (specify)_____________________
</TABLE>
Would you like ISDN Dial Backup? / / Yes /X/ No (If yes, please complete ISDN
information on Page 2.)
<PAGE>
GENERAL TERMS AND CONDITIONS
1. UUNET Technologies, Inc. ("UUNET") exercises no control over, and accepts
no responsibility for, the content of the information passing through
UUNET's host computers, network hubs and points of presence (the "UUNET
Network"). EXCEPT AS EXPRESSLY SET FORTH IN SECTION 7 BELOW, UUNET (a)
MAKES NO WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, FOR THE
SERVICES AND EQUIPMENT IT IS PROVIDING, AND (b) DISCLAIMS ANY WARRANTY OF
TITLE, MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE. Use of any information obtained via the UUNET Network is at
Customer's own risk. UUNET specifically denies any responsibility for the
accuracy or quality of information obtained through its services. UUNET
shall not be liable for any delay or failure in performance due to Force
Majeure, which shall include without limitation acts of God, earthquake,
labor disputes, changes in law, regulation or government policy, riots,
war, fire, epidemics, acts or omissions of vendors or suppliers, equipment
failures, transportation difficulties, or other occurrences which are
beyond UUNET's reasonable control.
2. All use of the UUNET Network and the service must comply with the
then-current version of the UUNET Acceptable Use Policy ("Policy") which is
made a part of this Agreement and is available at the following URL:
www.uu.net/terms. UUNET reserves the right to amend the Policy from time to
time, effective upon posting of the revised Policy at the URL or other
notice to Customer. UUNET reserves the right to suspend the service or
terminate this Agreement effective upon notice for a violation of the
Policy. Customer agrees to indemnify and hold harmless UUNET from any
losses, damages, costs or expenses resulting from any third party claim or
allegation ("Claim") arising out of or relating to use of the service,
including any Claim which, if true, would constitute a violation of the
Policy.
3. NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL,
PUNITIVE OR CONSEQUENTIAL DAMAGES THAT RESULT FROM CUSTOMER'S OR CUSTOMER'S
USERS' USE OF THE UUNET NETWORK AND THE SERVICE INCLUDING, WITHOUT
LIMITATION, ANY SUCH DAMAGES FOR LOSS OF DATA RESULTING FROM DELAYS,
NON-DELIVERIES, MISDELIVERIES OR SERVICE INTERRUPTIONS. Notwithstanding
anything to the contrary stated in this Agreement, Customer's sole remedies
for any claims relating to this service or the UUNET Network are set forth
in Section 7 below.
4. Networks assigned from a UUNET net-block are non-portable. Network space
allocated by UUNET must be returned to UUNET in the event Customer
discontinues service.
5. Payment is due 30 days after date of invoice. Accounts are in default if
payment is not received within 30 days after date of invoice. If payment is
returned to UUNET unpaid Customer is immediately in default and subject to
a returned check charge of $25 from UUNET. Accounts unpaid 60 days after
date of invoice may have service interrupted or terminated. Such
interruption does not relieve Customer of the obligation to pay the Monthly
Fee. Only a written request to terminate Customer's service relieves
Customer of the obligation to pay the Monthly Fee. Accounts in default are
subject to an interest charge on the outstanding balance of the lesser of
1.5% per month or the maximum rate permitted by law. Customer agrees to pay
UUNET its reasonable expenses, including attorney and collection agency
fees, incurred in enforcing its rights under this Agreement. Prices are
exclusive of any taxes which may be levied or assessed upon the Equipment
or services provided hereunder. Any such taxes shall be paid by Customer.
If Customer is exempt from otherwise applicable taxes, Customer must submit
its tax identification number and exemption certificate at the same time it
submits this Agreement.
6. Billing for UUNET service will commence when a UUNET hub and a functioning
telephone circuit are prepared to route IP packets to Customer's site. The
Start-up Charge is invoiced upon acceptance of this Agreement by UUNET.
Charges for Equipment shall be invoiced upon shipment. Service is invoiced
monthly in advance, and may be canceled only by 60 days' advance written
notice. In the event of early cancellation of a Term Commitment, Customer
will be required to pay 75% of UUNET's standard Monthly Fee for each month
remaining in the Term Commitment. UUNET reserves the right to change the
rates by notifying Customer 60 days in advance of the effective date of the
change.
7. The Service Level Agreement ("SLA") for this service, which is made a part
of this Agreement, is set forth at www.uu.net/terms and applies only to
customers agreeing to a Term Commitment of at least one year. UUNET
reserves the right to amend the SLA from time to time effective upon
posting of the revised SLA to the URL or other notice to Customer;
provided, that in the event of any amendment resulting in a material
reduction of the SLA's service levels or credits, Customer may terminate
this Agreement without penalty by providing UUNET written notice of
termination
<PAGE>
during the 30 days following notice of such amendment. The SLA sets forth
Customer's sole remedies for any claim relating to this service or the
UUNET Network, including any failure to meet any guarantee set forth in the
SLA. UUNET's records and data shall be the basis for all SLA calculations
and determinations. Notwithstanding anything to the contrary, the maximum
amount of credit in any calendar month under the SLA shall not exceed the
Monthly Fee and/or Start-up Charge which, absent the credit, would have
been charged for UUNET service that month (collectively the "UUNET Fees");
provided, that the maximum amount of credit for failure to meet the
Availability Guarantee shall not exceed the sum of (a) the UUNET Fees, plus
(b) the telephone company line charge which, absent the credit, would have
been charged for such month.
8. Neither party may use the other party's name, trademarks, tradenames or
other proprietary identifying symbols without the prior written approval of
the other party. Neither party may assign or transfer any of its rights or
obligations under this Agreement without the express, prior written consent
of the other party; provided, that either party may assign or transfer this
Agreement to any affiliate of such party upon advance written notice to the
other party. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof nor shall any single or partial exercise of any right or
remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by law.
9. MCI WORLDCOM, Inc. or its affiliates or subcontractors may perform some or
all of UUNET's duties and/or obligations hereunder.
10. This Agreement supersedes all previous representations, understandings or
agreements and shall prevail notwithstanding any variance with terms and
conditions of any order submitted. Acceptance of this Agreement by UUNET
may be subject, in UUNET's absolute discretion, to satisfactory completion
of a credit check. Activation of service shall indicate UUNET's acceptance
of this Agreement. Use of the UUNET Network constitutes acceptance of this
Agreement.
AGREED AND ACCEPTED BY CUSTOMER:
Philadelphia Site:
Signature: /s/ Phillip L. Weller Company Name: FASTNET/Switch & Data
----------------------- -----------------------------
Printed Name: PHILLIP L. WELLER Address: 401 N. Broad Street
-------------------- ----------------------------------
Title: CTO Bethlehem, PA 19013
--------------------------- ------------------------------------------
Date: 12/13/99 Telephone Fax
---------------------------- -------------- ----------------
<PAGE>
EXHIBIT 10.29
NEXTLINK
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICE ORDER AND AGREEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Salesperson: Mike Margle CC Representative: Date: 12/7/99
-------------------------- -------------------------- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Type of Service
- ------------------------------------------------------------------------------------------------------------------------------------
Local: Long Distance: Calling Card Other: X Promo: Centrex (see attached)
------ ------------ ------ ----- ------ --------
- ------------------------------------------------------------------------------------------------------------------------------------
Address Information
- ------------------------------------------------------------------ -----------------------------------------------------------------
<S> <C>
Customer Name: Fastnet Physical Address: Same as billing
------------------------------------------------ -----------------------------------------------
Billing Address: Two Courtney Place
---------------------------------------------- -----------------------------------------------
Suite 130
---------------------------------------------- -----------------------------------------------
3864 Courtney Street City: ST: Zip:
---------------------------------------------- ----------------------------- ------- --------------
City: Bethlehem ST: PA Zip: 18017 Install Contact: Phil Weller
---------------------- ----------- ------------- ------------------------------------------------
Customer Contact: Phil Weller Date to be Contacted: M-F 8-5
--------------------------------------------- -------------------------------------------
Title: V.P.-Engineering Phone: 610-266-6700 Title: V.P. Engineering Phone: 610-266-6700
------------------------------ ------------------ ------------------------------ ---------------------
Fax: 610-231-9525 E-Mail: Fax: 610-231-9525 E-Mail:
-------------------------------- ----------------- -------------------------------- --------------------
Web site address: ISP:
--------------------------------------------- ------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGREEMENT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Lines Contract Type: (Monthly): Term (Specify): 3 yrs Promo/Special Event: Tax Payer ID:
------ ------ ------------ ------- --------
- ------------------------------------------------------------------------------------------------------------------------------------
MONTHLY CHARGES
- ------------------------------------------------------------------- ----------------------------------------------------------------
Amount Qty Total Amount Qty Total
-------- --- ----- -------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Local Line/DID Trunk Connection $65.00 x
Basic Access Package $15.95 x DID Number Charge (first 20) $10.00 x
Basic Access No Toll/LD $25.00 x DID Number Charge (each add'l. 20) $13.50 x
Basic Access Package (Phila.) $11.50 x Local T-1 Charge $590.00 x
Hunting NC x Local T-1, per Activated Channel $65.00 x
DID Trunk $39.00 x Presubscription Change $5.00 x
DID Numbers (block of 20) $5.95 x Remote Call Forwarding , Per Palh $65.00 x
Local T-1 (span) $390.00 x Voice Mail Installation $13.50 x
Local T-1 (Per activated channel) $10.00 x Other Tariffed NRC * x
Call Forward Busy $1.00 x ------ ------
Call Forward No Answer $1.00 x $900.00
Call Forward Variable $1.00 x ------
Call Forward, Remote Access $6.00 x (900.00) credit
Calling Number Delivery $8.50 x
Calling Number Deliver w/Name $9.00 x Metro Intralata Long Distance
Calling Number Delivery Blocking $ NC x NEXTLINK Services (Check all that apply)
Additional Directory Listing $2.05 x Calling Cards: Number of Cards (Attach Calling Card Form)
Speed Dial - 8 Numbers $1.00 x --- ---
Speed Dial - 30 Numbers $2.00 x 800/8XX Service (Attach Resp. Org. form)
Call Pick-Up $1.00 x ---
Call Transfer $1.00 x Other Carrier: Metro Intralata Long Distance
Call Waiting $1.00 x Carrier Name
Conference, Three Way $1.00 x ---------------
Remote Call Forward $12.00 x Carrier PIC Code
------------
Basic Single Voice Mailbox $5.00 x
Point to Point $[ * ] x [ * ] Basic Single Voice Mailbox + Paging $65.00 x
- ---------------------------------- ---------- Basic Single Voice Mailbox + Transfer
DS-3 $9015.20 to Attendant $13.50 x
- ----------------------------------- -------- Basic Single Voice Mailbox +Paging
+Transfer to Attendant $12.50 x
Requested Due Date: 11/15/99 Enhanced Single Voice Mailbox $15.50 x
Extension Voice Mailbox System*
(Extensions add'l. charge) $7.50 x
Extension Boxes (Each) $2.50 x
9 or more mailboxes (Each) $ x
----
ALL VOICE MAIL ORDERS REQUIRE SEPARATE FORM
Multilocation: List Main Billing Number Here (attach form)
--- -------
Tax Exempt (Attach Federal, State and/or Local Certificates)
---
Account Codes - Outbound ONLY (Attach Detail Sheet)
---
- ------------------------------------------------------------------ -----------------------------------------------------------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the Securities
and Exchange Commission.
<PAGE>
- --------------------------------------------------------------------------------
CUSTOMER SIGNED AND APPROVED
- --------------------------------------------------------------------------------
By signing this order form, I authorize NEXTLINK Pennsylvania, (herein referred
to as NEXTLINK) to make whatever inquiries are necessary, including checking my
credit history, to verify any statements made on this application and to
determine my eligibility for local and/or long distance service whenever
NEXTLINK deems it necessary. I authorize any person or corporation to compile
and furnish NEXTLINK such information as is necessary to allow NEXTLINK to
process this application. I agree to pay all charges incurred on my NEXTLINK
account, including any applicable state, federal or local use, excise, sales
privilege taxes, duties or similar liabilities by the stated due date and to
adhere to all of the terms and conditions stated in NEXTLINK's tariffs and the
Terms and Conditions on the back of this Service Order and Agreement. Further, I
represent that I am authorized to approve and accept the responsibility of the
terms and conditions herein.
- --------------------------------------------------------------------------------
Authorized
Signature: /s/ Phillip L. Weller Authorized Signature:
---------------------- --------------------
Company Name: FASTNET Company Name: NEXTLINK Pennsylvania, Inc.
------------------- ----------------------------
Title/Date: VP Engineering Title/Date: Sales Mgr 12/7/99
--------------------- ------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TERMS AND CONDITIONS
1. SERVICE: During the term hereof, NEXTLINK Pennsylvania ("NEXTLINK")
shall provide Customer with the telecommunications services designated on this
Service Order and Agreement ("Agreement"). The services offered by NEXTLINK
under this Agreement are offered pursuant to applicable tariffs, which are filed
with applicable federal and state regulatory agencies, and these terms and
conditions. In the event of a conflict between this Agreement and such tariffs,
the tariffs shall control. Tariffs are available for review at NEXTLINK's
offices. This Agreement and any attachments, together with the applicable
tariffs constitute the entire agreement of the parties and supercedes all prior
discussions or agreements, whether written or oral, including but not limited to
any advertising, brochures, or solicitations. Should Customer request additional
service(s) subsequent to execution of this Agreement, Customer and NEXTLINK
agree to execute an additional agreement for such service(s). Customer agrees to
cooperate with NEXTLINK to accomplish service activation by providing NEXTLINK
access to Customer's premises and facilitating testing and any other service
delivery requirements. Service activation shall commence when NEXTLINK equipment
has been installed and telephone service is made available to Customer.
2. PAYMENT OBLIGATION: Customer shall pay NEXTLINK for service pursuant to
the terms and conditions of the applicable tariff(s) and this Agreement. Prices
for service are exclusive of applicable taxes. No later than thirty (30)
calendar days after service activation, NEXTLINK will bill Customer monthly for
service provided hereunder and usage itemization shall accompany each invoice.
Invoices shall be due and payable upon receipt. Undisputed charges for service
that are not paid within thirty (30) days after the invoice date shall be past
due. The lower of interest of 1.5% per month, or the maximum amount permitted by
law, will be charged on past due amounts beginning the 31st day following the
invoice date. If charges are not paid within ninety (90) days of the due date,
and NEXTLINK submits the account for collections, Customer shall pay all
collection costs including, but not limited to, reasonable Attorney's fees.
Failure to pay said bill within ninety (90) days may result in discontinuance of
service.
3. TERM & RENEWAL: This Agreement shall be effective upon complete
execution by the parties. The term is set forth on the Service Order and shall
commence on the service activation date. If no term is specified or following
the expiration of the term, this Agreement shall continue on a month-to-month
basis, upon the terms and conditions in the applicable tariff(s) and specified
herein. In the event of early termination of this Agreement by Customer, or
termination by NEXTLINK for material breach, Customer shall pay NEXTLINK all
non-recurring charges reasonably expended to establish service to the Customer;
any disconnect, early cancellation, or termination charges incurred and paid to
third parties on behalf of customer; plus all recurring charges for the balance
of the then current term.
4. LIABILITY/INDEMNIFICATION/WARRANTY: NEXTLINK agrees to respond to
emergency interruptions of service in a timely manner. NEXTLINK agrees to
maintain and service all NEXTLINK equipment necessary to fulfill the terms of
this Agreement at no expense to the Customer.
With respect to claims or suits by Customer, its customers, or any others for
damages relating to or arising out of acts or omissions involving initiation,
installation, provisioning or restoration of any services or facilities offered
under this Agreement, NEXTLINK's liability, if any, shall be limited to the
lesser of $500 or, in the event of any failure of service, an amount equal to no
more than the proportionate charge (based on the rates then in effect) for the
service for the period of time during which the service was affected. NEXTLINK
shall in no event be liable for loss of profits, or incidental, indirect,
exemplary, punitive, special or consequential damages suffered by Customer,
Customer's customers, or any other persons or entities and relating to or
arising out of the services, the system equipment, or any other obligation of
NEXTLINK under this Agreement or otherwise, including but not limited to,
temporary service interruptions or the failure by NEXTLINK or any third party to
repair the system equipment or services, or for any act or omission of any other
entity, company or companies furnishing a portion of the service.
IN ACCORDANCE WITH THE REQUIREMENTS OF UNIFORM COMMERCIAL CODE, NEXTLINK MAKES
NO REPRESENTATION OR WARRANTY EITHER EXPRESS OR IMPLIED REGARDING THE SERVICES
OR SYSTEM EQUIPMENT, AND SPECIFICALLY DISCLAIMS ANY WARRANTY, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A
PARTICULAR PURPOSE, AND ASSUMES NO OBLIGATION WITH RESPECT TO THE ENFORCEMENT OF
ANY MANUFACTURER'S WARRANTIES AND GUARANTEES. NO DEFECT, UNFITNESS, OR OTHER
CONDITION OF SYSTEM EQUIPMENT OR SERVICES SHALL RELIEVE CUSTOMER OF THE
OBLIGATION TO PAY ANY CHARGES HEREUNDER OR PERFORM ANY OTHER OBLIGATIONS UNDER
THIS AGREEMENT.
<PAGE>
EXHIBIT 10.30
NEXTLINK
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SERVICE ORDER AND AGREEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
Salesperson: Mike Margle CC Representative: Date: 10/19/99
-------------------------- -------------------------- -------------
- ------------------------------------------------------------------------------------------------------------------------------------
Type of Service
- ------------------------------------------------------------------------------------------------------------------------------------
Local: Long Distance: Calling Card Other: X Promo: Centrex (see attached)
------ ------------ ------ ----- ------ --------
- ------------------------------------------------------------------------------------------------------------------------------------
Address Information
- ------------------------------------------------------------------------------------------------------------------------------------
Customer Name: Fastnet Physical Address: Same as billing
---------------------------------------------- ---------------------------------------------------
Billing Address: Two Courtney Place
---------------------------------------------- ---------------------------------------------------
Suite 130
---------------------------------------------- ---------------------------------------------------
3864 Courtney Street City: ST: Zip:
---------------------------------------------- -------------------------------- ------ ------------
City: Bethlehem ST: PA Zip: 18017 Install Contact: Phil Weller
----------------------- ------------ ----------- -------------------------------------------------
Customer Contact: Phil Weller Date to be Contacted: M-F 8-5
------------------------------------------- --------------------------------------------
Title: V.P.-Engineering Phone: 610-266-6700 Title: V.P. Engineering Phone: 610-266-6700
------------------------------- ---------------- ------------------------------ ----------------------
Fax: 610-231-9525 E-Mail: Fax: 610-231-9525 E-Mail:
--------------------------------- --------------- -------------------------------- ----------------------------
Web site address: ISP:
------------------------------------------- -------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGREEMENT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
No. of Lines Contract Type: (Monthly): Term (Specify): 3 yrs Promo/Special Event: Tax Payer ID:
------ ----- ------------- ------------ ----
- ------------------------------------------------------------------------------------------------------------------------------------
MONTHLY CHARGES
- ------------------------------------------------------------------- ----------------------------------------------------------------
Amount Qty Total Amount Qty Total
-------- --- ----- -------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Local Line/DID Trunk Connection $65.00 x
Basic Access Package $15.95 x DID Number Charge (first 20) $10.00 x
Basic Access No Toll/LD $25.00 x DID Number Charge (each add'l. 20) $13.50 x
Basic Access Package (Phila.) $11.50 x Local T-1 Charge $590.00 x
Hunting NC x Local T-1, per Activated Channel $65.00 x
DID Trunk $39.00 x Presubscription Change $5.00 x
DID Numbers (block of 20) $5.95 x Remote Call Forwarding , Per Palh $65.00 x
Local T-1 (span) $390.00 x Voice Mail Installation $13.50 x
Local T-1 (Per activated channel) $10.00 x Other Tariffed NRC $ x
Call Forward Busy $1.00 x ------ ------
Call Forward No Answer $1.00 x Metro Intralata Long Distance
Call Forward Variable $1.00 x NEXTLINK Services (Check all that apply)
Call Forward, Remote Access $6.00 x Calling Cards: Number of Cards (Attach Calling Card Form)
Calling Number Delivery $8.50 x --- ---
Calling Number Deliver w/Name $9.00 x 800/8XX Service (Attach Resp. Org. form)
Calling Number Delivery Blocking $ NC x ---
Additional Directory Listing $2.05 x Other Carrier: Metro Intralata Long Distance
Speed Dial - 8 Numbers $1.00 x
Speed Dial - 30 Numbers $2.00 x
Call Pick-Up $1.00 x Carrier Name
Call Transfer $1.00 x ---------------
Call Waiting $1.00 x Carrier PIC Code
Conference, Three Way $1.00 x -----------
Remote Call Forward $12.00 x
Basic Single Voice Mailbox $5.00 x
Point to Point $[*] x [*] $8296.82 Basic Single Voice Mailbox + Paging $65.00 x
- ---------------------------- Basic Single Voice Mailbox + Transfer $13.50 x
DS-3 Bethlehem to to Attendant
- ---------------------------- Basic Single Voice Mailbox +Paging
Mechanicsburg +Transfer to Attendant $12.50 x
- ---------------------------- Enhanced Single Voice Mailbox $15.50 x
Requested Due Date: 11/15/99 Extension Voice Mailbox System*
(Extensions add'l. charge) $7.50 x
Extension Boxes (Each) $2.50 x
9 or more mailboxes (Each) $ x
----
ALL VOICE MAIL ORDERS REQUIRE SEPARATE FORM
Multilocation: List Main Billing Number Here (attach form)
--- -------
Tax Exempt (Attach Federal, State and/or Local Certificates)
---
Account Codes - Outbound ONLY (Attach Detail Sheet)
---
- ------------------------------------------------------------------- ----------------------------------------------------------------
</TABLE>
[*] We are seeking confidential treatment of these terms, which have been
omitted. The confidential portion has been filed separately with the
Securities and Exchange Commission.
<PAGE>
- --------------------------------------------------------------------------------
CUSTOMER SIGNED AND APPROVED
- --------------------------------------------------------------------------------
By signing this order form, I authorize NEXTLINK Pennsylvania, (herein referred
to as NEXTLINK) to make whatever inquiries are necessary, including checking my
credit history, to verify any statements made on this application and to
determine my eligibility for local and/or long distance service whenever
NEXTLINK deems it necessary. I authorize any person or corporation to compile
and furnish NEXTLINK such information as is necessary to allow NEXTLINK to
process this application. I agree to pay all charges incurred on my NEXTLINK
account, including any applicable state, federal or local use, excise, sales
privilege taxes, duties or similar liabilities by the stated due date and to
adhere to all of the terms and conditions stated in NEXTLINK's tariffs and the
Terms and Conditions on the back of this Service Order and Agreement. Further, I
represent that I am authorized to approve and accept the responsibility of the
terms and conditions herein.
- --------------------------------------------------------------------------------
Authorized
Signature: /s/ Phillip L. Weller Authorized Signature:
---------------------- --------------------
Company Name: FASTNET Company Name: NEXTLINK Pennsylvania, Inc.
------------------- ----------------------------
Title/Date: VP Engineering Title/Date: Sales Mgr 10/19/99
--------------------- ------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TERMS AND CONDITIONS
1. SERVICE: During the term hereof, NEXTLINK Pennsylvania ("NEXTLINK") shall
provide Customer with the telecommunications services designated on this Service
Order and Agreement ("Agreement"). The services offered by NEXTLINK under this
Agreement are offered pursuant to applicable tariffs, which are filed with
applicable federal and state regulatory agencies, and these terms and
conditions. In the event of a conflict between this Agreement and such tariffs,
the tariffs shall control. Tariffs are available for review at NEXTLINK's
offices. This Agreement and any attachments, together with the applicable
tariffs constitute the entire agreement of the parties and supercedes all prior
discussions or agreements, whether written or oral, including but not limited to
any advertising, brochures, or solicitations. Should Customer request additional
service(s) subsequent to execution of this Agreement, Customer and NEXTLINK
agree to execute an additional agreement for such service(s). Customer agrees to
cooperate with NEXTLINK to accomplish service activation by providing NEXTLINK
access to Customer's premises and facilitating testing and any other service
delivery requirements. Service activation shall commence when NEXTLINK equipment
has been installed and telephone service is made available to Customer.
2. PAYMENT OBLIGATION: Customer shall pay NEXTLINK for service pursuant to the
terms and conditions of the applicable tariff(s) and this Agreement. Prices for
service are exclusive of applicable taxes. No later than thirty (30) calendar
days after service activation, NEXTLINK will bill Customer monthly for service
provided hereunder and usage itemization shall accompany each invoice. Invoices
shall be due and payable upon receipt. Undisputed charges for service that are
not paid within thirty (30) days after the invoice date shall be past due. The
lower of interest of 1.5% per month, or the maximum amount permitted by law,
will be charged on past due amounts beginning the 31st day following the invoice
date. If charges are not paid within ninety (90) days of the due date, and
NEXTLINK submits the account for collections, Customer shall pay all collection
costs including, but not limited to, reasonable Attorney's fees. Failure to pay
said bill within ninety (90) days may result in discontinuance of service.
3. TERM & RENEWAL: This Agreement shall be effective upon complete execution by
the parties. The term is set forth on the Service Order and shall commence on
the service activation date. If no term is specified or following the expiration
of the term, this Agreement shall continue on a month-to-month basis, upon the
terms and conditions in the applicable tariff(s) and specified herein. In the
event of early termination of this Agreement by Customer, or termination by
NEXTLINK for material breach, Customer shall pay NEXTLINK all non-recurring
charges reasonably expended to establish service to the Customer; any
disconnect, early cancellation, or termination charges incurred and paid to
third parties on behalf of customer; plus all recurring charges for the balance
of the then current term.
4. LIABILITY/INDEMNIFICATION/WARRANTY: NEXTLINK agrees to respond to emergency
interruptions of service in a timely manner. NEXTLINK agrees to maintain and
service all NEXTLINK equipment necessary to fulfill the terms of this Agreement
at no expense to the Customer.
With respect to claims or suits by Customer, its customers, or any others for
damages relating to or arising out of acts or omissions involving initiation,
installation, provisioning or restoration of any services or facilities offered
under this Agreement, NEXTLINK's liability, if any, shall be limited to the
lesser of $500 or, in the event of any failure of service, an amount equal to no
more than the proportionate charge (based on the rates then in effect) for the
service for the period of time during which the service was affected. NEXTLINK
shall in no event be liable for loss of profits, or incidental, indirect,
exemplary, punitive, special or consequential damages suffered by Customer,
Customer's customers, or any other persons or entities and relating to or
arising out of the services, the system equipment, or any other obligation of
NEXTLINK under this Agreement or otherwise, including but not limited to,
temporary service interruptions or the failure by NEXTLINK or any third party to
repair the system equipment or services, or for any act or omission of any other
entity, company or companies furnishing a portion of the service.
IN ACCORDANCE WITH THE REQUIREMENTS OF UNIFORM COMMERCIAL CODE, NEXTLINK MAKES
NO REPRESENTATION OR WARRANTY EITHER EXPRESS OR IMPLIED REGARDING THE SERVICES
OR SYSTEM EQUIPMENT, AND SPECIFICALLY DISCLAIMS ANY WARRANTY, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A
PARTICULAR PURPOSE, AND ASSUMES NO OBLIGATION WITH RESPECT TO THE ENFORCEMENT OF
ANY MANUFACTURER'S WARRANTIES AND GUARANTEES. NO DEFECT, UNFITNESS, OR OTHER
CONDITION OF SYSTEM EQUIPMENT OR SERVICES SHALL RELIEVE CUSTOMER OF THE
OBLIGATION TO PAY ANY CHARGES HEREUNDER OR PERFORM ANY OTHER OBLIGATIONS UNDER
THIS AGREEMENT.
<PAGE>
EXHIBIT 10.31
LEASE AND EXCLUSIVE OPTION TO PURCHASE AGREEMENT
This Lease and Exclusive Option to Purchase Agreement is made this 6th
day of January, 2000, by, between and among ISK Magnetics, Inc. (hereinafter
called "Landlord"), and FASTNET CORPORATION, A Pennsylvania Corporation,
(hereinafter called "Tenant").
1. LEASED SPACE AND PURPOSE. Landlord hereby rents to Tenant a certain
building located at 286 Broadhead Road, Lehigh Valley Industrial Park, IV,
Northampton County, Pennsylvania, consisting of the building and improvements
and parking lot, collectively referred to as the Leased Space herein and more
particularly described in Exhibit A attached hereto. This Lease and Option to
Purchase is for the entire Building and property and lot of Landlord at the
above-stated location.
(a) PERSONAL PROPERTY. Specifically included as part of this
Lease and together with the Leased space shall be the personal property
(equipment, inventory, furniture, fixtures, goods, etc.) contained in the Leased
Space during the inspection by Tenant and its representatives which took place
on December 16,1 999. The Leased Space and Personal Property shall be
collectively referred to herein as the Leased Property. If Tenant exercises its
Option to Purchase as set forth herein, the Personal Property shall become the
Tenants at Closing on said Option and Landlord represents that it has good title
to same and can transfer same by acceptable Bill of Sale at Closing under the
Option.
(b) Landlord will take all steps so that Tenant can occupy and
utilize the current office area portion of the Leased Space of 18,600 square
feet no later than January 5, 2000. Said portion of the Leased Space shall be in
broom swept condition and made ready by Landlord, in al respects necessary, for
occupancy by Tenant.
(c) Landlord shall be obligated and required under this Lease
to remove, extract and clean out all lab fixtures and equipment and related
fixtures and equipment in the remaining 15,980 square feet of the Leased Space
(known as the Research Lab and Development Area) by March 1, 2000 such that said
space can be converted and utilized as office space by Tenant. Completion by
Landlord of this portion by march 1, 2000 is a material part of this Lease. In
doing so Landlord will ensure and warrant that the Research Lab and Development
Area of the Leased Space complies, with all the terms and conditions in
paragraph 7 herein. Said obligations, without limitation, shall survive both
possession by Tenant and purchase of the Leased Space and Property, if any,
pursuant to the Exclusive Option to Purchase granted herein.
(d) Landlord will build and construct, at its sole cost and
expense, an additional 79 parking spaces (above and beyond the existing 55
parking spaces) by
<PAGE>
March 1, 2000. Landlord will obtain any and all required permits and approvals
from any and all local and municipal governing bodies and agencies and Landlord
represents that it has obtained and/or will be able to obtain any and all such
approvals under any and all local ordinances, codes and regulations. Tenant
understands that topcoat application may be delayed beyond March 1, 2000 due to
weather conditions but same shall be completed as soon as possible. The
completion of the additional 79 parking spaces is a material part of this Lease.
(e) ROOF RIGHTS. Tenant shall have the right to use the roof
of the building containing the Leased Space for the installation, construction
and maintenance of antennas and related equipment. Tenant will use all
reasonable precautions to avoid, prevent and minimize damage to the roof and
Leased Space and installation of any and all such equipment shall be in
accordance with all applicable codes and regulations. Tenant shall contract with
the original roofing installers to obtain warranties as to any and all needed
roof penetrations. If Tenant undertakes responsibility for same Tenant will
provide Landlord with appropriate engineering drawings and warranties. Tenant
will utilize and install rubber roof matting on the roof consistent with the
existing matting on any areas or access ways where the roof rights are exercised
by Tenant.
2. TERM. The term shall be Six (6) years beginning on the date of
possession by Tenant hereunder (the Commencement Date) and ending on the date
which is Six (6) years from and after the Commencement Date (the Term).
(a) Tenant shall have the Option to renew this Lease for an
additional Term of Five (5) years (Additional Term) upon the same conditions and
terms set forth in this Lease, except for rent payable which shall be negotiated
for the Additional Term, in good faith, and set based on the reasonable fair
rental value of the premises during the Additional Term.
(b) The Tenant's future obligations under this Lease shall
terminate when and if Tenant purchases the Leased Property pursuant to the
Exclusive Option to Purchase granted to Tenant herein and/or Tenant otherwise
purchases the property identified under the Right of First Refusal.
3. RENT. Tenant shall pay Landlord rent for the Leased Property during
the term hereof as follows:
(a) For the first Lease Year, beginning on the Commencement
Date and ending on the last day of the first Lease Year, annual rent shall be
$345,8000.00 (Three Hundred Forty Five Thousand Eight Hundred and 00/100
Dollars), payable in Twelve (12) consecutive monthly installments of $28,816.66
(Twenty Eight Thousand Eight Hundred Sixteen and 66/100 Dollars) per month due
on the first day of each calendar month. Even though Tenant shall be unable to
occupy and utilize the portion known as the Lab Area between Commencement Date
and March 1, 2000, Tenant agrees from Commencement Date of the Lease to pay for
said space as if it was fully occupied
2
<PAGE>
and utilized by Tenant provided that Landlord complies with its obligations set
forth in the first sentence of section 1(c) above.
(b) For the second through the sixth and final Lease Year,
annual rent shall be as follows:
<TABLE>
<S> <C>
Second Lease Year: $356,174.00
Third Lease Year: $366,859.22
Fourth Lease Year: $377,865.00
Fifth Lease Year: $389,200.95
Sixth Lease Year: $400,876.98
</TABLE>
All rent during the Second to Sixth Lease Years shall also be paid in
equal consecutive monthly installments, due on the first day of each calendar
month, during each such Lease Year.
(c) All rents shall be payable at such place as Landlord shall
direct.
4. ADDITIONAL RENT. Tenant agrees to pay during the term of the Lease
in a timely basis in addition to the minimum rent specified above:
(a) All real estate taxes imposed against the Leased Space as
may be prorated from the Commencement Date hereunder. It is represented herein
by Landlord that the annual Real Estate taxes for the Leased Space are as
follows:
<TABLE>
<S> <C>
Total Assessment: $1,632,600.00
County Taxes: $ 5,224.32
Township: $ 3,469.32
School Taxes: $ 20,423.34
-------------
Total: $ 29,116.98
</TABLE>
Prior to the commencement of each calendar year, Landlord shall provide Tenant
with a Real Estate Tax Statement outlining a reasonable estimate, based upon the
historical information available to the Landlord, together with reasonable
projections, of Tenant's Real Estate Tax expense. Commencing with the first
month of the succeeding Lease Year, Tenant shall pay to Landlord, monthly
installments in advance equal to one-twelfth (1/12th) of the Real Estate Tax
Expense for the succeeding Operating Year.
(b) All charges for water, sewer, oil, electricity, and gas
consumed in or with respect to the leased space prorated as of the Commencement
Date and all utility costs;
(c) All costs of interior repairs, replacements and
maintenance related to the Leased Spaced (but not related to structural building
or structural parking lot or code violation repairs which must be disclosed,
remedied and fully repaired by Landlord).
3
<PAGE>
Tenant will be responsible, and shall contract on its own, for landscaping; snow
removal; refuse and garbage service; janitorial and for repairs to the parking
lot and Leased Space resulting from general wear and tear arising from Tenant's
use. Tenant will maintain and monitor any and all security systems related to
the premises including, without limitation, theft prevention, security and fire
systems and alarms.
5. LATE CHARGE. In the event that any monthly installments shall become
overdue for a period in excess of ten (10) days, Tenant shall pay an additional
charge to defray the expense incident to handling such overdue installment
equivalent to two (2%) percent of each such overdue installment. Such additional
charge shall be due on demand and payable as additional rent.
6. CONDITION OF LEASED PROPERTY. Landlord has represented that the
Leased Space is in compliance with all applicable state, federal and local
rules, codes and regulations. Landlord knows of no condition or defect that
would prevent Tenant from operating its business on the Leased Space. Landlord
has no knowledge of any condition which would prevent Tenant from obtaining all
necessary licenses, building, zoning and occupancy permits required for its
business at the Leased Space.
(a) No pollutants or other toxic or hazardous substances,
including any solid, liquid, gaseous or thermal irritant or contaminant, such as
smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste (including
materials to be recycled, reconditions or reclaimed) (collectively Materials)
have been discharged, dispersed, released, stored, treated, generated, disposed
of, or allowed to escape (collectively referred to as the Incident) on or from
any property and/or asset being leased or transferred to Tenant pursuant to this
Agreement or disposed of by Landlord in connection with its business or, to the
best of its knowledge, any person acting on behalf of Landlord in violation of
any federal, state or local statutes, laws or regulations.
(b) To the best of Landlord's knowledge after due inquiry, no
asbestos or asbestos-containing materials have been installed (and have not
since been removed) used, incorporated into, or disposed of on any property
and/or asset being leased or transferred to Tenant pursuant to this Agreement
and Landlord has not installed, used, incorporated into, or disposed of any
asbestos or asbestos-containing materials on the Leased Space or in connection
with its business.
(c) To the best of Landlord's knowledge, no polychlorinated
biphenyls (PCBs) are located on the Leased Space in the form of electrical
transformers, fluorescent light fixtures with ballasts, cooling oils, or any
other device. Landlord has not installed, used, incorporated into, or disposed
of any PCBs or PCB-containing equipment or materials on or in any property
and/or asset being leased or transferred to Tenant pursuant to this Agreement in
violation of any federal, state or local statutes, laws or regulations.
4
<PAGE>
(d) No underground storage tanks are located on the Leased
Space or were located on any part of the Leased Space and/or asset being Leased
and/or transferred to Tenant pursuant to this Agreement and subsequently removed
or filled.
(e) No investigation, administrative order, consent order and
agreement, litigation or settlement (collectively referred to as the action)
with respect to the Leased Space is proposed; or to the best of Landlord's
knowledge threatened, or anticipated or in existence with respect to any part of
the Leased Space and/or any asset being leased and/or transferred to Tenant
pursuant to this Agreement.
(f) To the best of Landlord's knowledge, the Leased Space
being leased and/or offered for sale pursuant to the Exclusive Option under this
Agreement, has at all times been in compliance with all applicable federal,
state and local statutes, laws and regulations relating to the environment
including, without limitation, OSHA and the EPA and DEP. No notice has been
served on Landlord from any entity, governmental body, or individual claiming
any violation of any law, regulation, ordinance or code or requiring compliance
with any law, regulation, ordinance or code, or demanding payment or
contribution for environmental damage or injury to natural resources.
(g) Landlord represents that there are no structural defects
with regard to the Leased Space including, without limitation, roof; walls;
parking lot and any and all building parts and foundations. Landlord will be
fully responsible for, and obligated to repair and maintain, throughout the Term
and any Additional Term hereof, the structure of the building, including without
limitation, the roof, walls, floors and foundations and including any structural
defects or problems relating to the parking lot, except wear and tear from
Tenant's use on the parking lot as set forth herein.
(h) All plumbing, utility, electrical, HVAC, fire suppression,
sewer, storm water drainage and retention systems serving the Leased Space is in
compliance with all applicable codes and in working condition.
7. ENVIRONMENTAL CONCERN.
(a) With respect to hazardous substances deposited or employed
in the Leased Space prior to the Commencement Date, Landlord agrees to take full
responsibility for all financial consequences of hazardous substances arising
from and/or related to the Leased Space including, without limitation, as such
may relate to paragraph 6 above. The financial consequences include, but are not
limited to, those triggered by violations of the provisions of:
(i) the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.; Section 9601-9657 as amended by the
Super Fund Amendments and Reauthorization Act of 1986, Public Law No. 99-299,
100 Stat. 1613 (October 17, 1986);
5
<PAGE>
(ii) the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901-6991(I) as amended by the Super Fund Amendments and
Reauthorization Action of 1986, Public Law No. 99-499, 100 Stat. 1613 (October
17, 1986);
(iii) the Toxic Substances Control Act, 16 U.S.C.
Section 2601-1629;
(iv) the Pennsylvania Clean Streams Law, 35 Pa.C.S.A.
Section 691.1-1169.101 (Purdons 1977 and Supp. 1987);
(v) the Pennsylvania Solid Waste Management Act, 35
Pa.C.S.A. Sections 6018.101-6018.1003 (Purdons Supp. 1987);
(vi) any applicable Commonwealth of Pennsylvania
and/or Federal statute, whether directly or indirectly applicable;
(vii) the Hazardous Sites Cleanup Act of 1988, Act
No. 1988-108, 1989 Pa.Legis.Serv. No. 6 January 1989 at 657, et seq.; and
(viii) specific financial consequences will include,
but are not limited to, the costs entailed by the following:
(a) Investigations;
(b) Remediation;
(c) Loss of value of property;
(d) Loss of use of the property;
(e) Off-site property damage;
(f) Liability to third persons injuries from
exposure to the contamination;
(g) Criminal penalties; and/or
(h) Civil penalties.
(b) With respect to hazardous substances deposited or employed
in the Leased Space or on the Leased Property prior to the Commencement Date
Landlord agrees to indemnify and hold Tenant and its successors and assigns
harmless from and against all claims, demands, or liabilities, which may arise
from any such hazardous substance or structurally unsafe condition arising from
or related to the Leased Space and Property and/or any future costs due or
related to any contaminated materials not
6
<PAGE>
removed from any part of the Leased Space and/or any property owned, leased,
rented or used by Landlord at the Leased Space.
(c) Tenant may conduct a phase I environmental audit and/or
any other necessary environmental testing of the Leased Space as its cost and
expense. (Landlord shall, with all due diligence, cure and remediate any and all
environmental and hazardous material conditions and/or concerns created or
existing prior to the Commencement Date at its sole cost and expense and hold
harmless and indemnify Tenant as to same.) If after Commencement Tenant cannot
occupy any part of the Leased Space due to such environmental problems and
concerns, the Rent hereunder shall be abated for any such period. The
obligations of Landlord pursuant to this paragraph shall be in addition to
Landlord obligations under paragraphs 6 and 7 without limitation hereunder.
(d) With respect to hazardous substances deposited or employed
in the Leased Space on or subsequent to the Commencement Date, Tenant agrees to
take full responsibility for all financial consequences of such hazardous
substances arising from and/or related to the Leased Space, including without
limitation, as such may relate to paragraph 7 herein.
(e) With respect to hazardous substances deposited or employed
in the Leased Space or on the Leased Property on or subsequent to the
Commencement Date, Tenant agrees to indemnify and hold Landlord and its
successors and assigns harmless from and against all claims, demands, or
liabilities which may arise from any such hazardous substances and which are
related to the Leased Space and Property and/or future cost due or related to
any contaminated materials deposited or employed in the Leased Space after
Commencement Date not removed by Tenant upon the termination of this Lease from
any part of the Leased Space and/or any property owned, leased, rented or used
by Tenant at the Leased Space.
(f) Landlord, however, does not waive any of its rights
against third parties who may be responsible for any such hazardous conditions
or substances employed or deposited in the Leased Space prior to the
Commencement Date.
8. SURVIVAL OF REPRESENTATIONS. All representation, warranties and
agreements made by Landlord in this Agreement shall survive the execution and
delivery of this Agreement; shall survive possession by Tenant and shall also
survive Closing on the Exclusive Option to Purchase by Tenant hereunder.
9. AFFIRMATIVE AGREEMENTS OF LANDLORD. Landlord agrees;
(a) to maintain, repair and replace the structure of the
Leased Space and parking lot in the same good order and condition as on the
Commencement Date and to make all structural repairs and replacements
foreseeable and unforeseeable, to all portions of the leased space throughout.
Any and all repairs or improvements required of Landlord, shall be the
Landlord's responsibility who shall keep the property up to all
7
<PAGE>
applicable codes and building safety, inspection, construction and structural
requirements.
(b) Landlord has good and marketable title to the Leased Space
and Leased Property, free and clear of all liens, pledges, mortgages, security
interests, conditional sales contracts and/or other encumbrances.
(c) At execution of this Lease (and at Closing under the
Option to Purchase) Landlord shall deliver to Tenant certified copies of
Corporate Resolutions duly adopted by Landlord authorizing the within
transactions.
10. AFFIRMATIVE AGREEMENTS OF TENANT. Tenant agrees:
(a) to comply with any and all requirements, present or
future, of any of the constituted public authorities, as well as with
recommendations of the Board of Fire Underwriters and of the insurance carriers.
(b) to use every precaution against fire;
(c) to give Landlord proper notice of fire or material damage
occurring in or to the leased premises.
(d) to keep the payment, curb and parking lot which is part of
the Leased Space free from dangerous snow and ice.
(e) to permit Landlord to have access to the leased space and
the parking lot provided such access is necessary and twenty-four (24) hours
advance notice is given;
(f) to maintain in full force and effect with respect to the
leased space and parking lots and Tenant's use thereof, comprehensive public
liability insurance, naming Landlord as an additional insured, covering injury
to persons and property in sufficient amounts.
11. FURTHER AGREEMENTS TO TENANT. Tenant agrees that it will do none of
the following things without prior written consent of the Landlord:
(a) make any structural alterations, extensive improvements or
other material additions to the leased space, unless consented to by Landlord
prior to the initiation of work which consent shall not be unreasonably
withheld;
(b) Vacate or desert the leased space, or permit the same to
be empty or unoccupied without good reason and without prior notice to Landlord.
Tenant shall be responsible for any changes, repairs, replacements or additions
to the water system, plumbing system, heating system, air conditioning system,
or electrical
8
<PAGE>
system, servicing the Leased Space necessitated by the installation, maintenance
or use of any equipment of any kind or nature installed in the Leased Space
(whether with or without Landlord's consent) which are beyond the capacity of
any electric, water, heating, air conditioning, plumbing or sewer system
servicing the Leased Space;
12. ALTERATIONS BY TENANT. All of the work and improvements of the
Leased Space performed by Tenant shall be done in accordance with plans and
specifications which shall comply with all governmental regulations and codes
and Tenant, at its own cost and expense, shall obtain all governmental permits
required, if any, for its work and improvements. In making such alterations and
improvements, Tenant does so on its own behalf and not as an agent of Landlord.
In causing said alterations and improvements to be made, Tenant shall not affect
or weaken the structure of the building.
(a) It is understood that no materialman, mechanic or
contractor shall have the right to file any lien against said building by reason
of the said work and materials and in the event that any lien is filed, Tenant,
within twenty-four (24) hours, will commence legal and other action intended to
cause the said lien to be discharged or satisfied of record or in any other
manner pursuant to law removed from the records, so that the same shall no
longer be a lien against the said premises. Tenant agrees to hold the Landlord
harmless and indemnify Landlord against any and all loss, liability, costs,
damages, casualties, and expenses suffered or incurred by reason of any such
lien.
(b) Tenant shall require his contractor, for himself and all
subcontractors and parties acting through or under him, to agree that no
Mechanic's Lien or claim shall be filed or maintained by them, or any of them,
against the said real estate or against the building of which the premises
herein demised are a part for or on account of any work done as aforesaid, and
Tenant shall require his contractor, for himself and all subcontractors and
parties acting through or under him, to expressly waive or relinquish the right
to have, file or maintain any Mechanic's Liens or claims against said real
estate or buildings of which the premises herein demised are a part. Tenant
shall require said materialman, mechanic or contractor to execute prior to the
commencement of any work upon the leased space, a separate Waiver of Liens in
form and substance satisfactory to Landlord. Tenant shall, at its own cost and
prior to the commencement of any work, cause such Waiver to be filed of record.
(c) At the termination of the Term and the Additional Term (if
any) Tenant shall be entitled to remove, in addition to all its personal
property, any and all trade fixtures and other fixtures and/or improvements made
by Tenant during the Term.
(d) Landlord shall provide at Tenant's request complete
as-built mechanical and structural drawings, plans and specifications and any
and all related documents, drawings and plans related to the Leased Space.
(e) Tenant shall have the right to install, modify, add or
expend any and all utility systems on the Leased Space provided same is
reasonably necessary for
9
<PAGE>
Tenants' business and at all times is done in compliance with all applicable
codes and regulations and in accordance with drawings and specifications
approved by Landlord, provided further that such approval shall not be
unreasonably withheld. Tenant shall have the right to install any and all power
or emergency generators it requires provided same is in compliance with all
applicable safety and zoning codes and regulations.
13. NON-LIABILITY OF LANDLORD. Tenant expressly agrees to indemnify,
defend and hold Landlord harmless from any liability for any injury to any
person or damage to any property in the leased space or on the parking lot due
to Tenant's negligence.
14. With regard to all work, improvements, remediation cleaning,
inspection and removals which Landlord is obligated to undertake and complete
hereunder, Landlord shall exercise all reasonable care and diligence, to avoid
and minimize to the greatest degree possible, any and all interference with
Tenant business operations and activities.
15. Tenant shall have the complete and unrestricted right to place any
and all signs, lighting, advertising, awnings or billboards it wishes in its
sole discretion upon the Leased Space and/or exterior of the Leased Space and/or
on the lot containing the Leased Space, provided, however, Tenant complies with
applicable zoning ordinances and regulations. Tenant shall, after commencement,
remove all of Landlord's signs at Tenant's expense.
16. DEFAULTS AND REMEDIES. The following shall be an event of default
provided Tenant is first provided with Thirty (30) days written notice and
opportunity to cure:
(a) if tenant does not pay in full when due any amount due
hereunder or violates or fails to perform or otherwise defaults with respect to
any one or combination o the provisions of this Lease;
(b) if Tenant files a petition in bankruptcy or insolvency or
for reorganization or for the employment of a Receiver or Trustee, or if Tenant
makes an assignment for the benefit of creditors or takes advantage of any
insolvency act or if a petition in bankruptcy or insolvency or for
reorganization or the appointment of a Receiver or Trustee is filed against the
Tenant in any such event (described in (a) or (b) above) Landlord shall have the
right to do once or more often any or more of the following:
(i) declare due and payable and bring appropriate
action to recover all unpaid rent and additional rent and all rent for the
unexpired term of this Lease, together with all costs and commissions provided
or permitted by law;
(ii) declare this Lease ended;
10
<PAGE>
(iii) lease the leased space and parking lot to any
other person with or without first altering the leased space or parking lot;
(iv) avail itself of any other remedies permitted by
law.
17. ZONING. Landlord represents that the Leased Space is in compliance
with all local and county zoning, and municipal Ordinances, rules, regulations,
and furthermore, that it has full and complete permission and approval to
provide and construct the additional 79 parking spaces as required under this
Lease, on or before march 1, 2000.
18. EXCLUSIVE OPTION TO PURCHASE. For a period of one (1) year
following the Commencement Date (Option Period) hereunder Tenant shall have the
Exclusive Option to purchase the Leased Space being the building and land more
particularly described in Exhibit A hereto, as well as the Leased Property
referred to herein for the sum of Three Million Dollars 00/100 ($3,000,000.00)
certified funds at closing. Tenant may exercise this Option by giving written
notice to Landlord of its intent to exercise the Option within the Option
Period. Settlement shall be held no later than sixty (60) days following written
notice of Tenant/Option Holder's intent to exercise its option to purchase.
Landlord shall deliver before the settlement such Deeds and such other good and
sufficient instruments of conveyance and transfer, in form and substance
reasonably satisfactory to counsel for Tenant, as shall be effective to vest in
Tenant all of the Landlord's right, title and interest to the Leased Space and
property. Title to the real estate shall be such as will be insurable by a
reputable title insurance company in the Commonwealth of Pennsylvania at regular
rates. If required, Landlord shall comply with any and all bulk sales laws,
statutes and/or ordinances in the Commonwealth of Pennsylvania and shall execute
any and all documents and perform all acts required before and after Settlement
on the Tenants Exclusive Option to Purchase. Landlord shall not market or offer,
directly or indirectly the Leased Space and Property for sale to any other third
parties during the Option Period.
19. RIGHT OF FIRST REFUSAL. After the first year of this Lease (after
which Tenant's right to exercise its Exclusive Option to Purchase shall lapse,)
and during the remaining five (5) years of the Term and/or the Additional Term,
if any Tenant shall have the right of first refusal. If at any time during the
second through sixth years of the Term (and/or during the Additional Term, if
any) Landlord shall receive a bona fide offer in writing ("Offer") from any
person, firm or corporation to purchase the real property and building which
contains the Leased Space, which Offer is acceptable to Landlord, Landlord shall
send Tenant a copy of the offer notifying Tenant of Landlord's intention to
accept the same. Tenant shall have the right within one week to elect to
purchase the property in its own name or in the name of a nominee on the same
terms and conditions set forth in the Offer. If the Tenant elects not to
purchase the property within said period, Landlord may then sell the property to
the said prospective buyer provided the sale is in the same terms and conditions
and for the same price as set forth in the Offer.
11
<PAGE>
20. DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS. In the event of any
damage or loss to the leased space by reason of fire or other casualty, Tenant
shall give immediate notice thereof to Landlord. If the leased space is
partially or completely damaged or destroyed by fire or other casualty, Landlord
shall promptly and with all due diligence commence to fully repair or replace
the leased space. Tenant shall not be liable for any rent or additional rent
hereunder for any period during which Tenant cannot, in Tenant's reasonable
discretion, operate its business fully in the Leased Space. Landlord shall
maintain in full force and effect with respect to the building within which the
leased space is part, fire and extended casualty coverage insurance in amounts
for the full insurable value thereof and sufficient to rebuild the premises.
21. ASSIGNMENT. Tenant shall be free to assign this Lease and/or
Exclusive Option to Purchase and any and all rights hereunder, to any related or
affiliated entity including, without limitation, any parent, subsidiary, merged
corporation or entity having any common ownership with Tenant. Tenant shall have
the absolute right, subject to zoning and use restrictions to sublease any and
all portions of the Leased Space to any entity or individual consistent with the
business purpose and objectives of Tenant.
22. LANDLORD DUTY TO MITIGATE. Landlord shall have a duty to mitigate
all its damages hereunder.
23. CONDEMNATION. In the event that the leased space, the parking lot
or any part thereof shall be acquired or condemned by eminent domain for any
public or quasi-public use, Tenant reserves unto itself, all rights to any
awards that may be payable to Tenant under the terms of the Eminent Domain Code
of the Commonwealth of Pennsylvania.
Forthwith upon receipt by Landlord or Tenant of any notice of the
institution of any proceeding for the taking of the leased space or parking lot,
the party receiving such notice shall promptly give written notice thereof to
the other party.
24. NON-WAIVER OF DEFAULT. No delay or omission by Landlord or Tenant
in exercising any right upon any default by the other will impair any such right
or be construed as a waiver of any such default.
25. REMEDIES CUMULATIVE. All remedies available to Landlord and Tenant
hereunder, at law and in equity, shall be cumulative and concurrent. Neither the
termination of this Lease, nor the taking or recovering possession of the leased
space and parking lot shall deprive Landlord of any remedies or actions against
Tenant for rent or for damages for the breach of any covenant or condition
contained herein, nor shall the bringing of any action for rent or for damages,
nor the resort to any other remedy for the recovery of rent or damages, be
construed as a waiver or release of the right to obtain possession.
26. With regard to the obligation of the parties hereunder, time shall
be of the essence.
12
<PAGE>
27. QUIET ENJOYMENT. Landlord covenants and agrees that, upon Tenant's
payment of rent, and its observance and performance of the terms, covenants and
conditions on Tenant's part to be observed and performed under the Lease, Tenant
may peaceably and quietly enjoy the leased space and parking lot for the term of
this Lease. Landlord shall be liable for any interference with Tenant's business
or use of the parking lot.
28. END OF TERM. This Lease shall expire and terminate at the end of
the Term hereof or at the end of any Additional Term or sooner as provided
herein. Should Tenant continue to occupy the leased space and parking lot after
expiration of the term of this Lease or any renewal or extension hereof, or
after a forfeiture incurred, such tenancy shall (without limiting any of
Landlord's right or remedies therefor) be one at sufferance from month to month
at a minimum monthly rental equal to twice the rent payable for the last month
of the last term of the Lease.
29. It is expressly represented that Colliers Lanard & Axilbund, Inc.
are the only brokers involved in this Agreement and that any and all commission
to them shall be paid by Landlord.
30. ENTIRE AGREEMENT. All of the parties have read this Lease carefully
and understand it fully. The parties to these agreements state that they are
represented, and have sought the advise of legal counsel. The parties expressly
agree and understand that this Lease sets forth all of the promises, agreements,
conditions, inducements and understandings relative to the Leased Space and
parking lot, and there are no promises, agreements, conditions, inducements or
understandings, either oral or written other than are herein set forth.
31. PARTIES BOUND. All rights and liabilities given to, or imposed
upon, the parties to this Lease shall extend to and bind the several and
respective heirs, executors, administrators, successors and assigns of such
parties hereunder. Notices must be given by certified mail and shall be given at
the addresses listed below or to such other address as either party may in
writing give to the other from time to time:
To the Landlord:
ISK Magnetics, Inc.
C/O ISK Americas, Incorporated
7474 Auburn Road
P.O. Box 759
Concord, Ohio 44077-0759
To Tenant:
FASTNET Corporation
Two Courtney Place
13
<PAGE>
Suite 130
3864 Courtney Street
Bethlehem, Pennsylvania 18017
With a copy to:
George S. Kounoupis, Esquire
Hahalis & Kounoupis, P.C.
3400 Bath Pike, Suite 100
Bethlehem, Pennsylvania 18017
32. PARTIALLY INVALIDITY. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease and the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by law.
33. HEADINGS. Any headings preceding the text of the various Sections
and Subsections hereof are inserted solely for the convenience of reference and
shall not constitute a part of this Lease, nor shall they affect its meaning,
construction or effect.
34. MODIFICATIONS. The terms and conditions of this Lease shall not be
modified or changed in any way except by writing signed by Landlord and Tenant.
35. RECORDING. Tenant may not record this Lease or a memorandum hereof
without the written approval of Landlord.
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed the day and year first above written.
LANDLORD:
ISK MAGNETICS, INC.
- ---------------------------- ---------------------------------
Attest Franklin S. Barry, Jr., Chairman
TENANT:
FASTNET CORPORATION
By:
- ---------------------------- ---------------------------------
Attest EVP OPERATIONS
15
<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.,
February 1, 2000
<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.,
February 1, 2000
