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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(A)
(AMENDMENT NO. __)1
FASTNET CORPORATION
--------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, no par value
--------------------------------------------------------------------------------
(Title of Class of Securities)
311877-10-4
--------------------------------------------------------------------------------
(CUSIP Number)
John H. Martinson Heather M. Stone
Edison Venture Fund Testa, Hurwitz & Thibeault, LLP
1009 Lenox Drive #4 125 High Street
Lawrenceville, NJ 08648 Boston, MA 02110
(609) 896-1900 (617) 248-7000
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 5, 2001
--------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box. [_]
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7
for other parties to whom copies are to be sent.
(Continued on following pages)
(PAGE 1 OF 15)
________________________________
1The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 311877-10-4 13D PAGE 2 OF 15
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Edison Venture Fund IV, L.P.
------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [_]
------- ------------------------------------------------------------------------
3 SEC USE ONLY
------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC
------- ------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [_]
------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
------- ------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,034,066
EACH ------- -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------- -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,034,066
------- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,034,066
------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [_]
------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.9%
------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 3 OF 15
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Edison Partners IV, L.P.
------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [_]
------- ------------------------------------------------------------------------
3 SEC USE ONLY
------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
------- ------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [_]
------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
------- ------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,034,066
EACH ------- -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------- -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,034,066
------- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,034,066
------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [_]
------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.9%
------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
PN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 4 OF 15
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
John H. Martinson
------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [_]
------- ------------------------------------------------------------------------
3 SEC USE ONLY
------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
------- ------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [_]
------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
------- ------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,034,066
EACH ------- -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------- -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,034,066
------- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,034,066
------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [_]
------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.9%
------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 5 OF 15
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Gary P. Golding
------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [_]
------- ------------------------------------------------------------------------
3 SEC USE ONLY
------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
------- ------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [_]
------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
------- ------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,034,066
EACH ------- -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------- -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,034,066
------- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,034,066
------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [_]
------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.9%
------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 5 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 6 OF 15
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Bruce H. Luehrs
------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [_]
------- ------------------------------------------------------------------------
3 SEC USE ONLY
------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
------- ------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [_]
------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
------- ------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,034,066
EACH ------- -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------- -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,034,066
------- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,034,066
------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [_]
------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.9%
------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 6 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 7 OF 15
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Ross T. Martinson
------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [_]
------- ------------------------------------------------------------------------
3 SEC USE ONLY
------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
------- ------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [_]
------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
------- ------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,034,066
EACH ------- -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------- -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,034,066
------- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,034,066
------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [_]
------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.9%
------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 7 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 8 OF 15
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Joseph A. Allegra
------- ------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [_]
(b) [_]
------- ------------------------------------------------------------------------
3 SEC USE ONLY
------- ------------------------------------------------------------------------
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
AF
------- ------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) OR 2(e) [_]
------- ------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
------- ------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------- -----------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,034,066
EACH ------- -----------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH 0
------- -----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,034,066
------- ------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,034,066
------- ------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(SEE INSTRUCTIONS) [_]
------- ------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.9%
------- ------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN
================================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 8 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 9 OF 15
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SCHEDULE 13D
Item 1. Security and Issuer.
-------------------
The class of equity security to which this Statement relates is the
common stock, no par value (the "Common Stock"), of FASTNET Corporation, a
Pennsylvania corporation (the "Issuer"). The name and address of the principal
executive offices of the Issuer is FASTNET Corporation, Two Courtney Place,
Suite 130, 3864 Courtney Street, Bethlehem, Pennsylvania 18017.
Item 2. Identity and Background.
-----------------------
(a) This Schedule 13D is being filed jointly by each of the following
persons pursuant to Rule 13d-1(k) promulgated by the Securities and Exchange
Commission pursuant to Section 13 of the Securities and Exchange Act of 1934, as
amended (the "Act"):
Edison Venture Fund IV, L.P. ("Edison Venture IV"), a Delaware limited
partnership, by virtue of its deemed beneficial ownership of 4,034,066
shares of Common Stock.
Edison Partners IV, L.P. ("Edison Partners IV"), a Delaware limited
partnership, by virtue of it being the general partner of Edison
Venture IV.
John H. Martinson ("J. Martinson"), by virtue of his being a general
partner of Edison Partners IV.
Gary P. Golding ("Golding"), by virtue of his being a general partner
of Edison Partners IV.
Bruce H. Luehrs ("Luehrs"), by virtue of his being a general partner of
Edison Partners IV.
Ross T. Martinson ("R. Martinson"), by virtue of his being a general
partner of Edison Partners IV.
Joseph A. Allegra ("Allegra"), by virtue of his being a general partner
of Edison Partners IV.
All of the foregoing persons are collectively referred to as the
"Reporting Persons." The Reporting Persons have entered into a Joint Filing
Agreement, dated the date hereof, a copy of which is filed with this Schedule
13D as EXHIBIT 1 (which is hereby incorporated by reference) pursuant to which
the Reporting Persons have agreed to file this statement jointly in accordance
with the provisions of Rule 13d-1(k)(1) under the Act.
Pursuant to Rule 13d-4 of the Act, the Reporting Persons expressly
declare that the filing of this statement shall not be construed as an admission
that any such person is, for the purposes of Section 13(d) and/or Schedule 13(g)
of the Act or otherwise, the beneficial owner of any securities covered by this
statement held by any other person.
(b) The address of the principal business office of each of the
Reporting Persons is Edison Venture Fund, 1009 Lenox Drive #4, Lawrenceville,
New Jersey 08648.
(c) Edison Venture IV is principally engaged in the business of
investing in securities. Edison Partners IV is engaged primarily in the business
of serving as the general partner of Edison Venture IV. The principal business
of each of J. Martinson, R. Martinson, Golding, Luehrs and Allegra
Page 9 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 10 OF 15
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is to act as a general partner of Edison Partners IV and a number of affiliated
partnerships with similar businesses.
(d) During the five years prior to the date hereof, none of the
Reporting Persons has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the five years prior to the date hereof, none of the
Reporting Persons was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to Federal or
State securities laws or finding any violation with respect to such laws.
(f) The jurisdiction of organization of each of Edison Venture IV and
Edison Partners IV is Delaware. Each of J. Martinson, R. Martinson, Golding,
Luehrs and Allegra is a United States citizen.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
On September 5, 2001 (the "First Closing Date"), Edison Venture IV
entered into the following agreements: (i) a Series A Convertible Preferred
Stock Purchase Agreement by and among Edison Venture IV, the Issuer and a
certain other investor (the "Preferred Purchase Agreement"), pursuant to which
Edison Venture IV agreed to acquire a number of shares of Series A Convertible
Preferred Stock of the Issuer, no par value, (the "Preferred Stock") and
warrants to purchase a number of shares of Common Stock from the Issuer and (ii)
a Common Stock Purchase Agreement by and between Edison Venture IV and Sonny
Hunt, a founder of the Issuer (the "Common Purchase Agreement"), pursuant to
which Edison Venture IV agreed to acquire a number of shares of Common Stock
from Sonny Hunt. Both agreements contemplated a potential second closing,
contingent upon approval of the shareholders of the Issuer with respect to the
issuance of the securities to be sold at such second closing. Pursuant to these
two agreements, Edison Venture IV acquired the following on the First Closing
Date:
a) 456,169 shares of Common Stock (the "First Closing Common
Shares") pursuant to the Common Purchase Agreement for an
aggregate purchase price of $228,085;
b) 2,088,684 shares of the Preferred Stock (the "First Closing
Preferred Shares") pursuant to the Preferred Purchase Agreement
for an aggregate purchase price of $1,900,702; and
c) a warrant to purchase up to 522,171 shares of Common Stock (the
"First Closing Warrant") from the Issuer, either currently
exercisable or exercisable within 60 days of September 5, 2001,
for an aggregate purchase price of $5,222.
On November 14, 2001 (the "Second Closing Date"), the Issuer having
obtained the requisite shareholder approval, there was a second closing pursuant
to the terms of the Preferred Purchase Agreement and the Common Purchase
Agreement.
On the Second Closing Date, Edison Venture IV acquired the Following:
(a) 143,831 shares of Common Stock (the "Second Closing Common
Shares" and together with the First Closing Common Shares, the
"Common Shares") pursuant to the Common Purchase Agreement, for
an aggregate purchase price of $71,916;
(b) 658,569 shares of Preferred Stock (the "Second Closing Preferred
Shares" and together with the First Closing Preferred shares,
the "Preferred Shares") pursuant to the Preferred Purchase
Agreement for an aggregate purchase price of $599,298; and
Page 10 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 11 OF 15
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(c) and a warrant to purchase up to 164,642 shares of Common Stock
(the "Second Closing Warrant" and together with the First
Closing Warrant the "Warrants"), from the Issuer, either
currently exercisable or exercisable within 60 days of September
5, 2001, for an aggregate purchase of $1,646.
The working capital of Edison Ventures IV was the source of funds for
each of the foregoing purchases. No part of the purchase price paid by Edison
Venture IV was represented by funds or other consideration borrowed or otherwise
obtained for the purchase of acquiring, holding, trading or voting any of the
shares acquired in the foregoing purchases.
Item 4. Purpose of Transaction.
----------------------
Edison Venture IV acquired the Common Shares, the Preferred Shares
and the Warrants in the transactions described in Item 3 above for investment
purposes. Depending on market conditions, its continuing evaluation of the
business and prospects of the Issuer and other factors, Edison Venture IV may
dispose of or acquire additional shares of Common Stock. Pursuant to the
Preferred Purchase Agreement, Luehrs was appointed to serve on the Board of
Directors of the Issuer on the First Closing Date. Except as set forth above,
none of the Reporting Persons has any present plans which relate to or would
result in:
(a) The acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of
its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Issuer
or any of its subsidiaries;
(d) Any change in the present board of directors or management of
the Issuer, including any plans or proposals to change the
number or term of directors or to fill any existing vacancies on
the board;
(e) Any material change in the present capitalization or dividend
policy of the Issuer;
(f) Any other material change in the Issuer's business or corporate
structure;
(g) Changes in the Issuer's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person;
(h) Causing a class of securities of the Issuer to be delisted from
a national securities exchange or to cease to be authorized to
be quoted in an inter-dealer quotation system of a registered
national securities association;
(i) A class of equity securities of the Issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
Page 11 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 12 OF 15
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Item 5. Interest in Securities of the Issuer.
(a) Edison Venture IV is the record owner of 600,000 shares of
Common Stock, the Common Shares. As the sole general partner of
Edison Venture IV, Edison Partners IV may be deemed to own
beneficially the Common Shares. As the individual general
partners of Edison Partners IV, each of J. Martinson, R.
Martinson, Golding, Luehrs and Allegra may also be deemed to own
beneficially the Common Shares.
Edison Venture IV is the record owner of 2,747,253 shares of the
Preferred Stock, the Preferred Shares, which, pursuant to the
current conversion formula set forth in the Issuer's Amended and
Restated Articles of Incorporation (which is subject to
adjustment) (the "Charter"), are convertible into 2,747,253
shares of Common Stock on the earlier of: (i) September 4, 2002,
(ii) such date that the Issuer is required to give notice to the
holders to convert any such shares into Common Stock pursuant to
the Charter or (iii) the date upon which mandatory conversion
occurs as provided in the Charter. As the sole general partner
of Edison Venture IV, Edison Partners IV may be deemed to own
beneficially the Preferred Shares. As the individual general
partners of Edison Partners IV, each of J. Martinson, R.
Martinson, Golding, Luehrs and Allegra may also be deemed to own
beneficially the Preferred Shares.
Edison Venture IV holds warrants to purchase 686,813 shares of
Common Stock (the "Warrants Shares"). As the sole general
partner of Edison Venture IV, Edison Partners IV may be deemed
to own beneficially the Warrant Shares. As the individual
general partners of Edison Partners IV, each of J. Martinson, R.
Martinson, Golding, Luehrs and Allegra may also be deemed to own
beneficially the Warrant Shares.
Each Reporting Person may be deemed to own beneficially 13.9% of
the Common Stock of the Issuer. The foregoing percentage is
based on the 25,571,323 shares of Common Stock reported to be
outstanding as of November 13, 2002 in the Issuer's Quarterly
Report on Form 10-Q, filed on November 19, 2002 with the
Securities and Exchange Commission, as adjusted pursuant to Rule
13d-3(d)(1) of the Act.
Each of the Reporting Persons expressly disclaims beneficial
ownership of any shares of the Common Shares, the Preferred
Shares or the Warrant Shares, except to the extent of his or its
pecuniary interest therein and, in the case of Edison Venture IV
for the Common Shares and the Preferred Shares which it holds of
record and the Warrant Shares of which the underlying warrant is
issued in its name.
(b) Regarding the number of shares as to which such person has:
(i) Sole power to vote or to direct the vote: 0 shares
for each Reporting Person.
(ii) Shared power to vote or to direct the vote: 4,034,066
shares for each Reporting Person.
(iii) Sole power to dispose or to direct the disposition: 0
shares for each Reporting Person.
(iv) Shared power to dispose or to direct the disposition:
4,034,066 shares for each Reporting Person.
Page 12 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 13 OF 15
===================== =============
(c) Except as set forth above, none of the Reporting Persons has
effected any transaction in the Common Stock in the last 60
days.
(d) No other person is known to have the right to receive or the
power to direct the receipt of dividends from, or any proceeds
from the sale of, shares beneficially owned by any of the
Reporting Persons.
(e) Not applicable.
Item 6. Contracts, Arrangements, Undertakings or Relationships with Respect
-------------------------------------------------------------------
to Securities of the Issuer.
---------------------------
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
The Preferred Purchase Agreement attached hereto as EXHIBIT 3,
provides that the Board of Directors of the Issuer shall consist of seven
members, with two members elected by the holders of the Preferred Stock, which
as of the First Closing Date were to be Luehrs of Edison Venture IV and Brit
Murdock, a representative of another party to the Preferred Purchase Agreement.
Additionally, the Preferred Purchase Agreement provides that, as of the First
Closing Date, Luehrs was to be appointed by the Board of Directors to serve on
the Compensation Committee and that Brit Murdock, a representative of another
party to the Preferred Purchase Agreement, was to be appointed by the Board of
Members to serve on the Audit Committee.
As described in Item 3, the Preferred Purchase Agreement provided for
a subsequent purchase after the First Closing Date, contingent upon the approval
of the shareholders of the Issuer approving the issuance of the Preferred Shares
and Warrants to Edison Venture IV and a certain other investor. Such approval
was obtained and Edison Venture IV acquired additional securities on the Second
Closing Date, as described in Item 3.
INVESTOR RIGHTS AGREEMENT
Pursuant to the terms of the Preferred Purchase Agreement, the Issuer
entered into an investor rights agreement in the form attached hereto as EXHIBIT
4 (the "Investor Rights Agreement") with Edison Venture IV and a certain other
shareholder of the Issuer. The Investor Rights Agreement provides Edison Venture
IV certain registration rights and the right of first refusal in the event of
certain future issuances, sales or exchanges of shares of the Issuer's capital
stock by the Issuer.
SHAREHOLDERS AGREEMENT
Pursuant to the terms of the Preferred Agreement, the Issuer entered
into a shareholders agreement in the form attached hereto as EXHIBIT 5 (the
"Shareholders Agreement") with Edison Venture IV and certain other shareholders
of the Issuer. The Shareholders Agreement provides for certain permitted
transfers by the parties, the right of first refusal on certain dispositions by
the shareholder parties and the right to participate in certain sales of shares
of the capital stock of the Issuer by the shareholders parties. In addition, the
parties to the Shareholders Agreement agreed that they will, to the extent
possible vote to keep the number of members of the Board of Directors to no more
then seven members.
The Shareholders Agreement provides that any vacancy on the Board of
Directors created by the resignation, removal, incapacity or death of any person
designated by the holders of the majority of the Preferred Stock shall be filled
by a person designated by the holders of the majority of the Preferred Stock and
that any vacancy created by the resignation, removal, incapacity or death of any
person
Page 13 of 15 pages
===================== =============
CUSIP NO. 311877-10-4 13D PAGE 14 OF 15
===================== =============
designated by the holders of the Common Stock shall be filled by a person
designated by the holders of the majority of the Common Stock. The parties to
the Shareholders Agreement also agreed to cause at least one director elected by
the majority of the Preferred Stock to be a member of the Compensation Committee
and the other director elected by the majority of the Preferred Stock to be a
member of the Audit Committee of the Board of Directors.
References to and descriptions of the Preferred Purchase Agreement,
the Investor Rights Agreement and the Shareholders Agreement are qualified in
their entirety by reference to Exhibits 3, 4 and 5 to this Statement, which are
incorporated into this statement in their entirety where such references and
descriptions appear.
Item 7. Material to be Filed as Exhibits.
--------------------------------
Exhibit 1 - Agreement regarding the filing of joint Schedule 13D.
Exhibit 2 - Powers of Attorney regarding Schedule 13D filings.
Exhibit 3 - Series A Convertible Preferred Stock Purchase Agreement,
dated as of September 5, 2001.
Exhibit 4 - Investor Rights Agreement, dated as of September 5, 2001.
Exhibit 5 - Shareholders Agreement, dated as of September 5, 2001.
Page 14 of 15 pages
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CUSIP NO. 311877-10-4 13D PAGE 15 OF 15
===================== =============
SIGNATURE
---------
After reasonable inquiry and to the best of its or his knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: February 14, 2003
EDISON VENTURE FUND IV, L.P.
By: Edison Partners IV, L.P.,
its General Partner
By: /s/ John H. Martinson
------------------------------
Name: John H. Martinson
Title: General Partner
EDISON PARTNERS IV, L.P.
By: /s/ John H. Martinson
------------------------------
Name: John H. Martinson
Title: General Partner
/s/ John H. Martinson
----------------------------------
John H. Martinson
/s/ Gary P. Golding
----------------------------------
Gary P. Golding
/s/ Bruce H. Luehrs
----------------------------------
Bruce H. Luehrs
/s/ Ross T. Martinson
----------------------------------
Ross T. Martinson
/s/ Joseph A. Allegra
----------------------------------
Joseph A. Allegra
Page 15 of 15 pages
EXHIBIT 1
---------
AGREEMENT REGARDING THE JOINT FILING OF
SCHEDULE 13D
Pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934,
the undersigned hereby agree that only one statement containing the information
required by Schedule 13D need be filed with respect to the ownership by each of
the undersigned of shares of stock of FASTNET Corporation.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
EXECUTED this 14th day of February, 2003.
EDISON VENTURE FUND IV, L.P.
By: Edison Partners IV, L.P.,
its General Partner
By: /s/ John H. Martinson
------------------------------
Name: John H. Martinson
Title: General Partner
EDISON PARTNERS IV, L.P.
By: /s/ John H. Martinson
------------------------------
Name: John H. Martinson
Title: General Partner
/s/ John H. Martinson
----------------------------------
John H. Martinson
/s/ Gary P. Golding
----------------------------------
Gary P. Golding
/s/ Bruce H. Luehrs
----------------------------------
Bruce H. Luehrs
/s/ Ross T. Martinson
----------------------------------
Ross T. Martinson
/s/ Joseph A. Allegra
----------------------------------
Joseph A. Allegra
EXHIBIT 2
---------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints John H. Martinson and Ross T.
Martinson, and each of them, with full power to act without the others, his true
and lawful attorney-in-fact, with full power of substitution, to sign any and
all instruments, certificates and documents that may be necessary, desirable or
appropriate to be executed on behalf of himself as an individual or in his
capacity as a general partner of any partnership, pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any and
all regulations promulgated thereunder, and to file the same, with all exhibits
thereto, and any other documents in connection therewith, with the Securities
and Exchange Commission, and with any other entity when and if such is mandated
by the Exchange Act or by the By-laws of the National Association of Securities
Dealers, Inc., granting unto said attorney-in-fact full power and authority to
do and perform each and every act and thing necessary, desirable or appropriate,
fully to all intents and purposes as he might or could do in person, thereby
ratifying and confirming all that said attorney-in-fact, or his substitutes, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed as of the
14th day of February, 2003.
/s/ John H. Martinson
----------------------------------
John H. Martinson
/s/ Gary P. Golding
----------------------------------
Gary P. Golding
/s/ Bruce H. Luehrs
----------------------------------
Bruce H. Luehrs
/s/ Ross T. Martinson
----------------------------------
Ross T. Martinson
/s/ Joseph A. Allegra
----------------------------------
Joseph A. Allegra
EXHIBIT 3
---------
FASTNET CORPORATION
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 5, 2001
FASTNET CORPORATION
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
DATED AS OF SEPTEMBER 5, 2001
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I PURCHASE, SALE AND TERMS OF SHARES................................1
1.01. The Series A Convertible Preferred Shares; Definitions.................1
1.02. The Converted Shares...................................................1
1.03. The Warrants...........................................................2
1.04. The Shares.............................................................2
1.05. Purchase Price and Closings............................................2
1.06. Use of Proceeds........................................................3
1.07. Representations and Warranties by the Purchasers.......................3
1.08. Purchase Price Allocation..............................................5
ARTICLE II CONDITIONS TO PURCHASERS' OBLIGATION.............................6
2.01. Representations and Warranties.........................................6
2.02. Performance............................................................6
2.03. Documentation at Initial Closing.......................................6
2.04. Private Sale of Common Stock...........................................7
2.06. Board of Directors.....................................................8
2.07. Qualifications.........................................................8
2.08. Consents, Waivers, Etc.................................................8
2.09. Due Diligence Results..................................................8
2.10. No Adverse Changes.....................................................8
2.11. Conditions Precedent to Subsequent Closing.............................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................9
3.01. Organization and Standing; Subsidiaries................................9
3.02. Corporate Action......................................................10
3.03. NASDAQ Compliance.....................................................11
3.04. Reporting Status......................................................11
3.05. Listing...............................................................11
3.06. No Manipulation of Stock..............................................11
3.07. Company not an "Investment Company"...................................12
3.08. Governmental Approvals................................................12
3.09. Litigation............................................................12
3.10. Certain Agreements of Officers and Key Employees......................13
3.11. Compliance with Other Instruments.....................................13
3.12. Financial Information.................................................13
3.13. No Insolvency.........................................................14
-i-
3.14. ERISA.................................................................14
3.15. Transactions with Affiliates..........................................14
3.16. Assumptions or Guaranties of Indebtedness of Other Persons............14
3.17. Investments in Other Persons..........................................15
3.18. Securities Act of 1933................................................15
3.19. Brokers or Finders....................................................15
3.20. Capitalization; Status of Capital Stock...............................15
3.21. Registration Rights...................................................16
3.22. Insurance.............................................................16
3.23. Books and Records.....................................................16
3.24. Title to Assets; Patents..............................................16
3.26. Computer Programs.....................................................17
3.27. Intellectual Property Rights..........................................18
3.28. Real Property Holding Corporation.....................................18
3.29. Taxes.................................................................18
3.30. Other Agreements......................................................18
3.31. Disclosure............................................................20
ARTICLE IV - DEFINITIONS AND ACCOUNTING TERMS.............................21
4.01. Certain Defined Terms.................................................21
4.02. Accounting Terms......................................................24
ARTICLE V - MISCELLANEOUS.................................................24
5.01. No Waiver; Cumulative Remedies........................................24
5.02. Amendments, Waivers and Consents......................................24
5.03. Addresses for Notices.................................................25
5.04. Costs, Expenses and Taxes.............................................25
5.05. Binding Effect; Assignment............................................26
5.06. Prior Agreements......................................................26
5.07. Severability..........................................................26
5.08. Governing Law.........................................................26
5.09. Headings..............................................................26
5.10. Counterparts..........................................................26
5.11. Further Assurances....................................................26
5.12. Indemnification.......................................................27
-ii-
EXHIBITS
--------
1.01 List of Purchasers
1.01A Terms of Series A Convertible Preferred Stock
1.03 Form of Common Stock Purchase Warrant
2.03B Opinion of Morgan, Lewis & Bockius LLP
2.03F Shareholders Agreement
2.03I Investor Rights Agreement
2.04-A Common Stock Purchase Agreement between Founder and Edison
2.04-B Escrow Agreement between Founder, the Company and Edison
3.01 Subsidiaries
3.09 Litigation
3.10 Agreements with Officers and Key Employees
3.15 Transactions with Affiliates
3.20 Capitalization
3.24 Title to Assets
3.26 Computer Programs
3.29 Taxes
3.30 Agreements
-iii-
FASTNET CORPORATION
3864 COURTNEY STREET
TWO COURTNEY PLACE, SUITE 130
BETHLEHEM, PA 18017
As of September 5, 2001
TO: The Persons listed on Exhibit 1.01 hereto
------------
Re: Series A Convertible Preferred Stock
------------------------------------
Ladies and Gentlemen:
FASTNET CORPORATION, a Pennsylvania corporation (the "Company"), agrees
with each of you as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01 The Series A Convertible Preferred Shares; Definitions. The
Company has authorized the issuance and sale of up to 5,494,505 shares (the
"Series A Preferred Shares") of its previously authorized but unissued shares of
Series A Convertible Preferred Stock, no par value (the "Series A Preferred
Stock"), at a purchase price of $0.91 per share to the persons (collectively,
the "Purchasers" and, individually, a "Purchaser") and in the respective amounts
set forth in Exhibit 1.01 hereto. A copy of the Company's "Statement With
Respect Shares," which contains a description of the preferences, voting powers,
qualifications, and special or relative rights or privileges of the Series A
Preferred Stock, is attached hereto as Exhibit 1.01A hereto. Capitalized terms
in this Agreement are defined in Section 4.01.
1.02. The Converted Shares. The Company has authorized and has reserved
and covenants to continue to reserve a sufficient number of its previously
authorized but unissued shares of Common Stock to satisfy the rights of
conversion of the holders of the Series A Preferred Stock. Any shares of Common
Stock issuable upon conversion of the Series A Preferred Stock, and such shares
when issued, are herein referred to as the "Converted Shares."
1.03. The Warrants. The Company has also authorized the issuance to the
Purchasers at the Closings (as defined herein) Common Stock Purchase Warrants
(the "Warrants") for the purchase (subject to adjustment as provided therein) of
up to an aggregate of 1,373,627 shares of the Common Stock in the respective
amounts set forth on Exhibit 1.01 hereto under the heading
Series A Convertible Preferred Stock Purchase Agreement -- Page 2
"Warrants." The Warrants shall be in the form set forth in Exhibit 1.03 hereto.
The Company has authorized and has reserved and covenants to reserve a
sufficient number of its previously authorized but unissued shares of Common
Stock to satisfy the exercise rights of the holders of the Warrants (the
"Warrant Shares"). The term "Warrants" shall also include any warrant delivered
in exchange or replacement therefor.
1.04. The Shares. The Series A Preferred Shares, the Converted Shares
and the Warrant Shares are sometimes collectively referred to herein as the
"Shares."
1.05. Purchase Price and Closings.
(a) The Initial Closing. The Company agrees to issue and sell to
the Purchasers and, subject to and in reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers,
severally but not jointly, agree to purchase that number of the Series A
Preferred Shares and Warrants set forth opposite their respective names under
the heading "Initial Closing" in Exhibit 1.01. The aggregate purchase price of
the Series A Preferred Shares and Warrants being purchased by each Purchaser is
set forth opposite such Purchaser's name under the heading "Initial Closing" in
Exhibit 1.01. The purchase and sale shall take place at a closing (the "Initial
Closing") to be held on or before September 5, 2001, at 10:00 A.M., at Morgan,
Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania 19103 or at
such other location and at such other time as may be mutually agreed upon,
subject to the satisfaction of all of the conditions to the Initial Closing
specified in Article II herein. At the Initial Closing, the Company will issue
and deliver certificates evidencing the Series A Preferred Shares and the
Warrants to be sold at the Initial Closing to each of the Purchasers (or its
nominee) against payment of the full purchase price therefor by wire transfer to
the Company.
(b) Subsequent Closing. The Company and the Purchasers agree that
if, and within ten days after, Shareholder Approval (as defined in Section 5.13
hereof) is obtained, the Company shall issue and sell to the Purchasers and,
subject to and in reliance upon the representations, warranties, covenants,
terms and conditions of this Agreement, the Purchasers, severally but not
jointly, agree to purchase that number of the Series A Preferred Shares and
Warrants set forth opposite their respective names under the heading "Subsequent
Closing" in Exhibit 1.01. The aggregate purchase price of the Series A Preferred
Shares and Warrants being purchased by each Purchaser is set forth opposite such
Purchaser's name under the heading "Subsequent Closing" in Exhibit 1.01. The
purchase and sale shall take place at a closing (the "Subsequent Closing"; the
Initial Closing and the Subsequent Closing referred to herein as a "Closing" and
collectively as the "Closings") to be held on or before the tenth day after
Shareholder Approval is obtained, at 10:00 A.M., at Morgan, Lewis & Bockius LLP,
1701 Market Street, Philadelphia, Pennsylvania 19103 or at such other time as
may be mutually agreed upon, subject to the satisfaction of all of the
conditions to the Subsequent Closing specified in Article II herein. In
addition, the Company may issue and sell at the Subsequent Closing up to
2,197,801 shares of Series A Preferred Stock ("Additional Shares") and Warrants
for one share of Common Stock for each four Additional Shares sold (the
"Additional Warrants") to one or more investors (which may include the
Purchasers, the "Additional Purchasers); provided, however, that Edison shall
have consented to such sale to the Additional Purchasers. The
Series A Convertible Preferred Stock Purchase Agreement -- Page 3
purchase price for the Additional Shares to be sold to the Additional Purchasers
hereunder shall be $0.91 per share and $0.01 per Warrant Share. At the
Subsequent Closing, the Company will issue and deliver certificates evidencing
the Series A Preferred Shares and the Warrants to be sold at the Subsequent
Closing to each of the Purchasers and Additional Purchasers (or its nominee)
against payment of the full purchase price therefor by wire transfer to the
Company. As a condition to the Additional Purchaser's investment, the Additional
Purchaser shall execute and deliver to the Company and the other Purchasers a
counterpart signature page to this Agreement, the Investor Rights Agreement and
the Shareholders Agreement and the other documents reasonably required by the
Company (the "Other Documents"). All Purchasers agree to amend Exhibit 1.01 at
the time of the Subsequent Closing to properly reflect the number of Shares and
Warrants being purchased at that time. The Additional Purchasers shall be deemed
to be, upon execution and delivery of a counterpart of this Agreement and each
of the Other Documents, a "Purchaser" for all purposes under this Agreement,
with all of the rights and obligations thereof. The terms "Series A Preferred
Shares", "Purchaser" and "Purchasers", when used in this Agreement, shall
respectively be deemed to include such Additional Shares and Additional Warrants
as are issued and the Additional Purchaser.
1.06. Use of Proceeds. The Company shall use the proceeds for working
capital acquisitions and other general corporate purposes.
1.07. Representations and Warranties by the Purchasers. Each of the
Purchasers represents and warrants severally, but not jointly, that:
(a) Authorization. Such Purchaser has full corporate, partnership
or limited liability company power, as applicable, and authority to enter into
this Agreement and the Other Documents, and to purchase the Series A Preferred
Shares, and the Agreement and the Other Documents, constitute valid and legally
binding obligations of each Purchaser, enforceable in accordance with their
terms. All action on the part of each Purchaser's officers, directors,
shareholders, members, partners, trustees or other governing body necessary for
the authorization, execution and delivery of this Agreement and the Other
Documents by such Purchaser, to the extent such Purchaser is a party thereto,
and the performance of all of such Purchaser's obligations hereunder and
thereunder has been taken. Each of this Agreement and the Other Documents has
been duly executed and delivered by such Purchaser. Neither the execution and
delivery of this Agreement and the Other Documents, nor the consummation by such
Purchaser of the transactions contemplated hereby, violates or conflicts with
any contract, commitment, agreement, understanding or arrangement of any kind to
which such Purchaser is a party or by which such Purchaser is bound.
(b) Purchase Entirely for Own Account. This Agreement is made
with such Purchaser in reliance upon such Purchaser's representation to the
Company, which by such Purchaser's execution of this Agreement such Purchaser
hereby confirms, that it will acquire the Series A Preferred Stock and the
Warrants to be acquired by it for its own account, not as a nominee or agent,
and that the Series A Preferred Stock and the Warrants are being and will be
acquired by it for the purpose of investment and not with a view to distribution
or resale thereof.
Series A Convertible Preferred Stock Purchase Agreement -- Page 4
(c) Investment Experience. Such Purchaser is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment
indefinitely and has such knowledge and experience in financial and business
matters that it its capable of evaluating the merits and risks of its investment
in the Series A Preferred Shares. Such Purchaser also represents it has not been
organized for the purpose of acquiring the Series A Preferred Shares. Such
Purchaser understands that the Company has no current intention of registering
the Series A Preferred Shares or the Converted Shares, except at contemplated by
the Investor Rights Agreement.
(d) Accredited Investor. Such Purchaser is an "accredited
investor" within the meaning of Securities and Exchange Commission Rule 501 of
Regulation D, as currently in effect.
(e) Restricted Securities. Such Purchaser understands that the
Series A Preferred Shares and the Converted Shares it is purchasing are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act,
only in certain limited circumstances. In this connection, such Purchaser
represents that it is familiar with SEC Rule 144, as currently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
Such Purchaser is aware that SEC Rule 144 is not currently available for use by
such Purchaser for immediate resale of any of the Series A Preferred Shares or
Converted Shares to be acquired by such Purchaser upon consummation of the
transactions contemplated herein.
(f) Company Information. Each Purchaser has had access to the
Exchange Act Documents (as defined below) and has had an opportunity to discuss
the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. Each Purchaser has also had the opportunity
to ask questions of, and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(g) Residence. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on Exhibit 1.01; if the Purchaser is a partnership,
corporation, limited liability company or other entity, the office or offices of
the Purchaser in which its investment decision was made is located at the
address or addresses of the Purchaser set forth on Exhibit 1.01.
(h) Brokers' Fees. No Purchaser has taken any action which would
give rise to any claim by any other person for any brokerage commissions,
finders' fees or the like relating to this Agreement or the transactions
contemplated hereby.
(i) Securities Act Restrictions. The acquisition by each
Purchaser of the Series A Preferred Shares and the Warrants acquired by it shall
constitute a confirmation of the representations and warranties made by each
such Purchaser as at the date of such acquisition. Each of the Purchasers
further represents that it understands and agrees that, until registered
Series A Convertible Preferred Stock Purchase Agreement -- Page 5
under the Securities Act of 1933, as amended (the "Securities Act") or
transferred pursuant to the provisions of Rule 144 as promulgated by the
Securities and Exchange Commission (the "SEC"), all certificates evidencing any
of the Shares or the Warrants shall bear a legend, prominently stamped or
printed thereon, reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
ASSIGNED MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS, OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
FOR SUCH SALE, TRANSFER OR ASSIGNMENT."
1.08. Purchase Price Allocation. The Company and the Purchasers having
adverse interests and as a result of arm's length bargaining, agree that (i)
neither the Purchasers nor any of their partners, members or employees has
rendered or has agreed to render any services to the Company in connection with
this Agreement or the issuance of Warrants; (ii) the Warrants are not being
issued as compensation; and (iii) for the purpose, and within the meaning, of
Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"), the issue price of the Warrants is $0.01 per Warrant Share. The Company
and the Purchasers acknowledge that this allocation is based on the relative
fair market values of the Preferred Shares and Warrants. The Company and the
Purchasers recognize that this Agreement determines the original issue discount
to be taken into account by the Company and the Purchasers for federal income
tax purposes and they agree to adhere to this Agreement for such purposes.
ARTICLE II
CONDITIONS TO PURCHASERS' OBLIGATION
The obligation of each Purchaser to purchase and pay for the Series A
Preferred Stock and the Warrants to be purchased by it at the Initial Closing is
subject to the fulfillment to Edison's satisfaction of each of the following
conditions as of the applicable Closing date:
2.01. Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article III hereof shall be true and
correct in all material respects on the date of the Initial Closing.
Series A Convertible Preferred Stock Purchase Agreement -- Page 6
2.02. Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company at or prior to
the Initial Closing shall have been performed or complied with in all material
respects.
2.03. Documentation at Initial Closing. The Purchasers shall have
received prior to or at the Initial Closing all of the following documents or
instruments, or evidence of completion thereof, each in form and substance
reasonably satisfactory to Edison and its counsel:
(a) A copy of the Articles of Incorporation of the Company, as
amended (the "Articles of Incorporation"), certified by the Department of State
of the Commonwealth of Pennsylvania as of a date not more than seven (7) days
prior to the Initial Closing date, together with a certified copy of the
Statement With Respect to Shares of the Series A Preferred Stock (the "Series A
Statement"), a copy of the resolutions of the Board of Directors evidencing the
adoption of the Series A Statement, the approval of this Agreement, the issuance
of the Series A Preferred Stock and the Warrants and the other matters
contemplated hereby, a copy of any required vote or consent of the shareholders
of the Company in connection with the transaction contemplated hereby and a copy
of the Bylaws of the Company, as amended, all of which shall have been certified
by the Secretary of the Company to be true, complete and correct, and certified
copies of all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Agreement and the Shares.
(b) An opinion of Morgan, Lewis & Bockius LLP, counsel to the
Company, in the form of Exhibit 2.03B attached hereto.
(c) A certificate of the Secretary of the Company certifying the
names of the officers of the Company authorized to sign this Agreement, the
certificates for the Series A Preferred Stock, the Warrants and the other
documents, instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with the true
signatures of such officers. The Purchasers may conclusively rely on such
certificate until they shall receive a further certificate of the Secretary or
an Assistant Secretary of the Company canceling or amending the prior
certificate and submitting the signatures of the officers named in such further
certificate.
(d) A certificate of the President of the Company stating that
the representations and warranties of the Company contained in Article III
hereof and otherwise made by the Company in writing in connection with the
transactions contemplated hereby are true and correct in all material respects
and that all conditions required to be performed prior to or at the Initial
Closing have been performed in all material respects as of the Initial Closing.
(e) The Series A Statement of the Series A Preferred Stock of the
Company shall provide for the designation of the rights and preferences of the
Series A Preferred Stock, in the form set forth in Exhibit 1.01A attached
hereto.
(f) A Shareholders Agreement in the form set forth in Exhibit
2.03F (the "Shareholders Agreement") duly executed and delivered by the parties
named therein.
Series A Convertible Preferred Stock Purchase Agreement -- Page 7
(g) A Certificate of Good Standing for the Company certified by
the Department of State of the Commonwealth of Pennsylvania as of a date not
more than three (3) days prior to the Initial Closing date. Certificates of good
standing with respect to the Company, certified by the respective state officer
of the states in which the conduct of the Company's business requires it to be
licensed or qualified to transact business as a foreign corporation and in good
standing, in each case as of a date not more than three (3) days prior to the
Initial Closing date. A certificate of good standing or other document similar
in substance for each of the Company's Subsidiaries issued by the appropriate
government official of all of the jurisdictions of incorporation and
jurisdictions of foreign qualification or licensing of such Subsidiaries.
(h) Payment for the costs, expenses, taxes and filing fees
identified in Section 5.04.
(i) An Investor Rights Agreement in the form set forth in Exhibit
2.03I (the "Investor Rights Agreement") duly executed and delivered by the
parties named therein.
2.04 Private Sale of Common Stock. Sonny Hunt (the "Founder"), a holder
of Common Stock of the Company, shall have sold 456,169 shares of Common Stock
to Edison pursuant to a Common Stock Purchase Agreement in the form of Exhibit
2.04-A and acceptable to Edison in its sole discretion, and shall have escrowed
an additional 543,831 shares pursuant to an Escrow Agreement in the form of
Exhibit 2.04-B and acceptable to Edison in its reasonable discretion.
2.05 [intentionally omitted]
2.06. Board of Directors. The Board of Directors of the Company at the
Initial Closing shall consist of seven (7) members, of which the two members
elected solely by the holders of the Series A Preferred Shares shall initially
be Bruce Luehrs and Brit Murdoch (the "Series A Preferred Directors").
Additionally, Bruce Luehrs shall be appointed by the Board of Directors to serve
on the Compensation Committee and Brit Murdoch shall be appointed by the Board
of Directors to serve on the Audit Committee of the Company.
2.07. Qualifications. As of the Closing, all authorizations, approvals
or permits of or filings with, any governmental authority, including state
securities or "Blue Sky" offices, that are required by law in connection with
the lawful sale and issuance of the Series A Preferred Stock and the Warrants
shall have been duly obtained by the Company and shall be effective as of the
Closing, except for any notice that may be required subsequent to the Closing
under applicable state and/or federal securities laws (which, if required, shall
be filed on a timely basis).
2.08. Consents, Waivers, Etc. Prior to the Initial Closing, the Company
shall have obtained all consents or waivers, if any, necessary to execute and
deliver this Agreement and issue the Series A Preferred Stock and the Warrants,
and to carry out the transactions contemplated hereby and thereby, and all such
consents and waivers shall be in full force and
Series A Convertible Preferred Stock Purchase Agreement -- Page 8
effect. All corporate and other action and governmental filings necessary to
effectuate the terms of this Agreement, the Series A Preferred Stock, the
Warrants and other agreements and instruments executed and delivered by the
Company in connection herewith shall have been made or taken, except for any
post-sale filing that may be required under federal or state securities laws. In
addition to the documents set forth above, the Company shall have provided to
the Purchasers any other information or copies of documents that the Purchasers
may reasonably request.
2.09. Due Diligence Results. Edison shall have completed its due
diligence review of the Company to its satisfaction.
2.10 No Adverse Changes. Edison shall not have concluded that a
material adverse change in the financial condition or prospects of the Company
has occurred, nor that any fact exists nor has any event or circumstance
occurred which reasonably could give rise to such a material adverse change.
2.11. Conditions Precedent to Subsequent Closing.
(a) The Shareholder Approval shall have been obtained.
(b) Each of the representations and warranties of the Company set
forth in Article III hereof shall be true and correct in all material respects
on the date of the Subsequent Closing.
(c) All covenants, agreements and conditions contained in this
Agreement to be performed or complied with by the Company at or prior to the
Subsequent Closing shall have been performed or complied with.
(d) The Purchasers shall have received prior to or at the
Subsequent Closing all of the documents or instruments specified in Section
2.03, or evidence of completion thereof, each in form and substance satisfactory
to Edison and its counsel.
(e) The Founder shall have sold 543,831 shares of Common Stock to
Edison pursuant to a Common Stock Purchase Agreement in the form of Exhibit 2.04
and acceptable to Edison in its sole discretion.
(f) Prior to the Subsequent Closing, the Company shall have
obtained all consents or waivers, if any, necessary to issue the Series A
Preferred Stock and the Warrants to be issued at such Closing, and to carry out
the transactions contemplated hereby and thereby, and all such consents and
waivers shall be in full force and effect. All corporate and other action and
governmental filings necessary to effectuate the terms of this Agreement, the
Series A Preferred Stock, the Warrants and other agreements and instruments
executed and delivered by the Company in connection herewith shall have been
made or taken, except for any post-sale filing that may be required under
federal or state securities laws. In addition to the documents set forth above,
the Company shall have provided to the Purchasers any other information or
copies of
Series A Convertible Preferred Stock Purchase Agreement -- Page 9
documents that the Purchasers may reasonably request.
(g) Edison shall not have concluded that an adverse change in the
financial condition or prospects of the Company has occurred, nor that any fact
exists nor has any event or circumstance occurred which reasonably could give
rise to such an adverse change.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For purposes of this Article III, unless otherwise specified or the
context otherwise requires, the term "Company" shall include the Company and
each of its Subsidiaries. The Company represents and warrants to the Purchasers
as follows:
3.01. Organization and Standing; Subsidiaries.
(a) The Company is duly incorporated and validly subsisting
corporation in good standing under the laws of the Commonwealth of Pennsylvania
and has all requisite corporate power and authority for the ownership and
operation of its properties and for the carrying on of its business as now
conducted and as now proposed to be conducted and as described in the documents
filed by the Company under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since the end of its most recently completed fiscal year
through the date hereof, including, without limitation, its most recent report
on Form 10-K and its quarterly reports on 10-Q for the quarters ended March 31,
2001 and June 30, 2001 (the "Exchange Act Documents"). The Company is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in all jurisdictions wherein the character of the property owned
or leased, or the nature of the activities conducted, by it makes such licensing
or qualification necessary, except in those jurisdictions in which failure to do
so, individually or in the aggregate, would not have a material adverse effect
on the Company or its business.
(b) The attached Exhibit 3.01 contains a list of all Subsidiaries
of the Company. Except for such Subsidiaries, the Company does not (i) own of
record or beneficially, directly or indirectly, (A) any shares of capital stock
or securities convertible into capital stock of any other corporation or (B) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise, or (C) any assets comprising the business or obligations of
any other corporation, partnership, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
(c) Each of the Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification,
except in those jurisdictions in which failure to do so, individually or in the
aggregate, would not have a material
Series A Convertible Preferred Stock Purchase Agreement -- Page 10
adverse effect on the Company or its business. Each of the Subsidiaries has the
corporate power and authority to own and hold its properties and to carry on its
business as now conducted and as proposed to be conducted. All of the
outstanding shares of capital stock of each of the Subsidiaries are owned
beneficially and of record by the Company, one of its other wholly owned
Subsidiaries, or any combination of the Company and/or one or more of its other
wholly owned Subsidiaries, all as specified in Exhibit 3.01, in each case free
and clear of any liens, charges, restrictions, claims or encumbrances of any
nature whatsoever, except for those disclosed in Exhibit 3.01; and, except as
disclosed in Exhibit 3.01, there are no outstanding subscriptions, warrants,
options, convertible securities, or other rights (contingent or other) pursuant
to which any of the Subsidiaries is or may become obligated to issue any shares
of its capital stock to any person other than the Company or one of the other
Subsidiaries.
3.02. Corporate Action. The Company has all necessary corporate power
and has taken all corporate action required to enter into and perform this
Agreement and any other agreements and instruments contemplated hereby or
executed in connection herewith (collectively, the "Financing Documents"). The
Financing Documents are valid and binding obligations of the Company,
enforceable in accordance with their respective terms. The issuance, sale and
delivery of the Series A Preferred Stock and the Warrants in accordance with
this Agreement, and the issuance and delivery of the Converted Shares upon
conversion of the Series A Preferred Stock, and the issuance and delivery of the
Warrant Shares upon exercise of the Warrants, have been duly authorized by all
necessary corporate action on the part of the Company. Sufficient authorized but
unissued shares of Common Stock have been reserved by appropriate corporate
action in connection with the prospective conversion of the Series A Preferred
Stock at the conversion price and at the prospective exercise price of the
Warrants. The Series A Preferred Stock, when issued, sold and delivered in
accordance with the terms of this Agreement, and upon receipt of the respective
purchase price, will be duly and validly issued, fully paid, non-assessable and
is not, the Converted Shares upon the conversion of the Series A Preferred Stock
will not be, and the Warrant Shares upon exercise of the Warrants will not be
subject to, any Lien, and will not conflict with any provision of any agreement
or instrument to which the Company is a party or by which it or its property is
bound.
3.03. Nasdaq Compliance. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and listed on The Nasdaq Stock
Market, Inc. National Market (the "Nasdaq National Market"). The Company is
currently in full compliance with Nasdaq requirements and will not take any
action which will cause it to fail to comply.
3.04 Reporting Status. The Company has filed in a timely manner all
documents that the Company was required to file under the Exchange Act during
the 12 months preceding the date of this Agreement. The following documents
complied in all material respects with the SEC's requirements as of their
respective filing dates, and the information contained therein as of the date
thereof did not contain an 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 in light of the circumstances under which they were made not
misleading:
Series A Convertible Preferred Stock Purchase Agreement -- Page 11
(a) the Company's Annual Report on Form 10-K filed with the SEC
on April 2, 2001, Definitive Proxy Statement filed with the
SEC on April 30, 2001, Quarterly Reports on Form 10-Q filed
with the SEC on May 15, 2001 and August 14, 2001 and the
registrations on Form S-8 filed with the SEC on July 13,
2001;
(b) All other documents, if any, filed by the Company with the
SEC since June 30, 2001 pursuant to the reporting
requirements of the Exchange Act.
3.05. Listing. The Company has complied and shall continue to comply
with all requirements of the NASD with respect to the issuance of the Shares and
the listing thereof on the Nasdaq National Market, and the consummation of the
transactions contemplated hereby shall not violate any rule or regulation of, or
any agreement with, the NASD or the Nasdaq National Market.
3.06. No Manipulation of Stock. The Company has not taken and will not,
in violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
3.07. Company not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and immediately
after receipt of payment for the Shares will not be, an "investment company" or
an entity "controlled" by an "investment company" within the meaning of the
Investment Company Act and shall conduct its business in a manner so that it
will not become subject to the Investment Company Act.
3.08. Governmental Approvals. Except for the filing of any notice
subsequent to a Closing that may be required under applicable state and/or
federal securities laws (which, if required, shall be filed on a timely basis),
no authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for the execution and delivery by the Company of this Agreement, for the offer,
issue, sale and delivery of the Series A Preferred Stock and the Warrants, for
the issue and delivery of the Converted Shares upon conversion of the Series A
Preferred Stock or for the issue and delivery of the Warrant Shares upon
exercise of the Warrants or for the performance by the Company of its
obligations under this Agreement.
3.09. Litigation. Except as set forth in Exhibit 3.09, there is no
litigation or governmental proceeding or investigation pending or, to the
Company's knowledge, threatened against the Company affecting any of its
respective properties or assets, or against any officer, Key Employee or holder
of more than 5% of the capital stock of the Company (other than any Purchaser)
relating to such person's performance of duties for the Company or relating to
his stock ownership in the Company or otherwise relating to the business of the
Company, nor to the knowledge of the Company has there occurred any event or
does there exist any condition on the
Series A Convertible Preferred Stock Purchase Agreement -- Page 12
basis of which any such material litigation, proceeding or investigation might
properly be instituted. The Company is not in default with respect to any order,
writ, injunction, decree, ruling or decision of any court, commission, board or
other governmental agency. There are no actions, suits, claims, investigations
or proceedings pending or, to the knowledge of the Company, threatened (or any
basis therefor) which could reasonably be expected to result, either in any case
or in the aggregate, in any material adverse effect on the business, operations,
affairs or condition (financial or otherwise) of the Company or in its
properties or assets taken as a whole, or which directly or indirectly challenge
the validity of this Agreement, any of the Shares, or any action taken or to be
taken pursuant hereto or thereto (each a "Material Adverse Effect"). The
foregoing sentences include, without limiting their generality, actions pending
or, to the knowledge of the Company, threatened (or any basis therefor)
involving the prior employment of any of the Company's officers or employees or
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers.
3.10. Certain Agreements of Officers and Key Employees.
(a) Except as listed in Exhibit 3.10, the Company is not a party
to or obligated in connection with its business with respect to (i) outstanding
contracts with employees, agents, consultants, advisers, sales representatives,
distributors, sales agents or dealers or (ii) collective bargaining agreements
or contracts with any labor union or other representative of employees or any
employee benefits provided for by any such agreement.
(b) To the knowledge of the Company, no officer or Key Employee
of the Company is in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, or any other contract or agreement or any restrictive covenant
relating to the right of any such officer or Key Employee to be employed by the
Company because of the nature of the business conducted or to be conducted by
the Company or relating to the use of trade secrets or proprietary information
of others.
(c) To the knowledge of the Company, no officer of the Company
nor any Key Employee of the Company whose termination, either individually or in
the aggregate, would have a Material Adverse Effect, has expressed any present
intention of terminating his employment with the Company.
3.11. Compliance with Other Instruments. The Company is in compliance
with the terms and provisions of this Agreement and of its Articles of
Incorporation, as amended, and Bylaws, as amended, and with any material
provision of all mortgages, indentures, leases, agreements and other
instruments, if any, by which it is bound or to which it or any of its
respective properties or assets are subject. The Company is in compliance with
all judgments, decrees, governmental orders, statutes, rules or regulations by
which it is bound or to which any of its properties or assets are subject.
Neither the execution and delivery of this Agreement or the issuance of the
Shares, nor the consummation of any transaction contemplated by this Agreement,
has constituted or resulted in or will constitute or result in a material
default or
Series A Convertible Preferred Stock Purchase Agreement -- Page 13
violation of any term or provision of any of the foregoing documents,
instruments, judgments, agreements, decrees, orders, statutes, rules and
regulations.
3.12. Financial Information. The financial statements of the Company
and the related notes contained in the Exchange Act Documents present fairly, in
accordance with generally accepted accounting principles, in all material
respects the financial position of the Company and its Subsidiaries as of the
dates indicated, and the results of its operations and cash flows for the
periods therein specified (the "Financial Statements"). Such Financial
Statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified, except as disclosed in the Exchange
Act Documents. The other financial information contained in the Exchange Act
Documents has been prepared on a basis consistent with the Financial Statements
of the Company. The Company does not have reasonable grounds to know of, any
material liability, contingent or otherwise, not adequately reflected in or
reserved against in the Financial Statements or in the notes thereto. Except as
set forth in the Financial Statements, since June 30, 2001, (i) there has been
no Material Adverse Change in the business, assets or condition, financial or
otherwise, operations or prospects of the Company or any of its Subsidiaries,
(ii) neither the business, condition, or operations of the Company nor any of
the properties or assets of the Company have been materially adversely affected
as the result of any legislative or regulatory change, any revocation or change
in any franchise, permit, license or right to do business, or any other event or
occurrence, whether or not insured against; and (iii) the Company has not
entered into any material transaction other than in the ordinary course of
business, made any dividend or distribution on its capital stock, or redeemed or
repurchased any of its capital stock.
3.13. No Insolvency. No insolvency proceeding of any character,
including, without limitation, bankruptcy, receivership, reorganization,
composition or arrangement with creditors, voluntary or involuntary, affecting
the Company or any of its assets or properties, is pending or, to the knowledge
of the Company, threatened. The Company has not taken any action in
contemplation of, or that would constitute the basis for, the institution of any
such insolvency proceedings.
3.14. ERISA. The Company has complied in all material respects with all
applicable laws relating to wages, hours and collective bargaining. Except as
listed in Exhibit 3.14, the Company has not maintained, sponsored, adopted, made
contributions to or obligated itself to make contributions to or to pay any
benefits or grant rights under or with respect to any "Employee Pension Benefit
Plan" as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), "Employee Welfare Benefit Plan" (as defined in
Section 3(1) of ERISA), "multi-employer plan" (as defined in Section 3(37) of
ERISA), plan of deferred compensation, medical plan, life insurance plan,
long-term disability plan, dental plan or other plan providing for the welfare
of any of the Company's or any Affiliate's employees or former employees or
beneficiaries thereof.
3.15. Transactions with Affiliates. Except as set forth on Exhibit 3.15
and except as contemplated hereby or consented to by the Purchasers in
accordance with this Agreement, there
Series A Convertible Preferred Stock Purchase Agreement -- Page 14
are no loans, leases, royalty agreements or other continuing transactions
between the Company and (a) any officer, employee or director of the Company, or
(b) any Person owning 5% or more of any class of capital stock of the Company,
or (c) any member of the immediate family of such officer, employee, director or
shareholder, or (d) any corporation or other entity controlled by such officer,
employee, director or shareholder or a member of the immediate family of such
officer, employee, director or shareholder.
3.16. Assumptions or Guaranties of Indebtedness of Other Persons.
Except as contemplated hereby or consented to by the Purchasers in accordance
with this Agreement, the Company has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on (including, without
limitation, liability by way of agreement, contingent or otherwise, to purchase,
to provide funds for payment, to supply funds to or otherwise invest in the
debtor or otherwise to assure the creditor against loss), any Indebtedness of
any other Person.
3.17. Investments in Other Persons. The Company has not made any loan
or advance to any Person, other than in the normal course of business and on an
arm's length basis on commercially reasonable terms and as reflected in the
Financial Statements, which, after giving effect to the transactions
contemplated hereby, is outstanding on the date of this Agreement, nor is it
committed or obligated to make any such loan or advance.
3.18. Securities Act of 1933. The Company has complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Shares. Neither the Company nor anyone acting on
its behalf has or will sell, offer to sell or solicit offers to buy Shares, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any Person, so as to bring
the issuance and sale of Shares under the registration provisions of the
Securities Act and applicable state securities laws.
3.19. Brokers or Finders. No Person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or valid
claim against or upon the Company for any commission, fee or other compensation
as a finder or broker because of any act or omission by the Company or any of
their respective agents.
3.20. Capitalization; Status of Capital Stock. The Company has a total
authorized capitalization consisting of (i) 50,000,000 shares of Common Stock,
no par value, of which 17,990,947 shares are issued and outstanding on the date
hereof; and (ii) 10,000,000 shares of preferred stock, no par value, 5,494,505
of which shares are designated as Series A Preferred Stock, of which no shares
are issued and outstanding on the date hereof, without giving effect to the
transactions contemplated hereby. All the outstanding shares of capital stock of
the Company have been duly authorized, and are validly issued, fully paid and
non-assessable. The Series A Preferred Stock, when issued and delivered in
accordance with the terms hereof and after payment of the purchase price
therefor, the Converted Shares, when issued and delivered upon conversion of the
Series A Preferred Stock pursuant to the Company's Articles of Incorporation, as
amended by the Series A Statement, and the Warrant Shares when issued and
delivered upon exercise of the Warrants, will be duly authorized, validly
issued, fully-paid and non-assessable.
Series A Convertible Preferred Stock Purchase Agreement -- Page 15
Except as otherwise set forth in Exhibit 3.20, no preemptive, conversion or
other rights, options, warrants, subscriptions or purchase rights of any nature
to acquire from the Company shares of capital stock or other securities are
authorized, issued or outstanding, nor is the Company obligated in any other
manner to issue shares of its capital stock or other securities except as
contemplated by this Agreement. Except as set forth in Exhibit 3.20, there are
no restrictions on the transfer of shares of capital stock of the Company other
than those imposed by relevant federal and state securities laws and as
otherwise contemplated by this Agreement, the Shareholders Agreement and the
Investor Rights Agreement. Other than as provided in this Section, there are no
agreements, understandings, trusts or other collaborative arrangements or
understandings concerning the voting of the capital stock of the Company. The
offer and sale of all capital stock and other securities of the Company issued
before the Initial Closing complied with or were exempt from all applicable
federal and state securities laws and, to the Company's knowledge, no
shareholder has a right of rescission with respect thereto.
3.21. Registration Rights. Except as listed on Exhibit 3.21 and except
for the rights granted to the Purchasers pursuant to the Investor Rights
Agreement, no Person has demand or other rights to cause the Company to file any
registration statement under the Securities Act relating to any securities of
the Company or any right to participate in any such registration statement.
3.22. Insurance. The Company carries insurance covering its properties
and businesses customary for the type and scope of its properties and
businesses.
3.23. Books and Records. The books of account, ledgers, order books,
records and documents of the Company accurately and completely reflect all
material information relating to the business of the Company, the location and
collection of its assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company.
3.24. Title to Assets; Patents.
(a) The Company has good and marketable title in fee to such of
its fixed assets, if any, as are real property, and good and marketable title to
all of its other assets and properties, free of any mortgages, pledges, charges,
Liens, security interests or other encumbrances of any kind, except for those
disclosed on Exhibit 3.24. All leases under which the Company is operating are
valid and subsisting and in full force and effect.
(b) Set forth in Exhibit 3.24 is a list and brief description of
all patents, patent applications, trademarks, trademark applications, service
marks, service mark applications, trade names and registered copyrights, and
applications for such that are in the process of being prepared, owned by or
registered in the name of the Company, or of which the Company is a licensor or
licensee or in which the Company has any right, and in each case a brief
description of the nature of such right. Except as set forth in Exhibit 3.24,
there is no adverse claim that would interfere with the Company's right to use
the patents, patent rights, permits, licenses, trade secrets, trademarks,
trademark rights, trade names or trade name rights or franchises, copyrights,
inventions, software and Intellectual Property Rights being used in the
Company's business as
Series A Convertible Preferred Stock Purchase Agreement -- Page 16
now operated, the conduct of the Company's business as now operated does not
conflict and will not conflict with valid U.S. patents, patent rights, permits,
licenses, trade secrets, trademarks, trademark rights, tradenames or tradename
rights or franchises, copyrights, inventions, and U.S. Intellectual Property
Rights of any other Person. No product or process presently used, manufactured,
marketed, offered, sold or used by the Company will violate any license or
infringe on any U.S. Intellectual Property Rights of any other Person; and,
except as set forth in Exhibit 3.24, neither the Company's property rights nor
the present operation of the Company's business conflicts with the rights of
others. Except as set forth in Exhibit 3.24, no claim is pending or, to the
Company's knowledge, threatened to the effect that any such intellectual
property owned or licensed by the Company, or which the Company otherwise has
the right to use, is invalid or unenforceable by the Company, and the Company
has no reason to believe that any patents or Intellectual Property Rights owned
or used by the Company may be invalid. The Company has no obligation to
compensate any Person for the use of any such patents or rights and the Company
has not granted any Person any license or other rights to use in any manner any
of the patents or rights of the Company, whether requiring the payment of
royalties or not. The Company has not entered into any agreement to indemnify
any other Person against any charge of infringement of any patent, trademark,
trade name, service mark or copyright.
3.25. [intentionally omitted]
3.26. Computer Programs.
(a) Set forth in Exhibit 3.26 is a list and brief description of
the Computer Programs (other than off-the-shelf Computer Programs) owned,
licensed or otherwise used by the Company in connection with the operation of
its business as currently conducted (such Computer Programs being referred to
herein as the "Company Software"), identifying with respect to each such
Computer Program whether it is owned, licensed or otherwise used by the Company.
Exhibit 3.26 identifies all material agreements relating to the Company Software
(the "Software Contracts") and further classifies each such Software Contract
under one of the following categories: (A) license to use third party software;
(B) development contract, work-for-hire agreement, or consulting agreement; (C)
distributor, dealer or value added reseller agreement; (D) license or sublicense
to a third party (including agreements with end-users); (E) maintenance, support
or enhancement agreement; or (F) other.
(b) Except as disclosed in Exhibit 3.26, the Computer Programs
included in the Company Software are (i) owned by the Company, (ii) currently in
the public domain or otherwise available to the Company without the approval or
consent of any third party, or (iii) licensed or otherwise used by the Company
pursuant to the terms of valid, binding written agreements (assuming the due
authorization and execution by all other parties thereto).
(c) No portion of the Company Software sold or licensed by the
Company directly or indirectly to end users contained, on the date of shipment
by the Company, no portion of the Company Software currently for sale or license
directly or indirectly to end users contains, and, to the knowledge of the
Company, no portion of any other Company Software contains any
Series A Convertible Preferred Stock Purchase Agreement -- Page 17
software routines or hardware components designed to permit unauthorized access;
or, without permission, to disable or erase software, hardware or data.
(d) All personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the conception and
development of any of the Company Software either (i) have been party to a
"work-for-hire" arrangement or agreement with the Company, whether in accordance
with applicable federal and state law, domestic or foreign, or otherwise, that
has accorded the Company full, effective, exclusive and original ownership of
all tangible and intangible property thereby arising, or (ii) have executed
appropriate instruments of assignment in favor of the Company as assignee that
have conveyed to the Company full, effective and exclusive ownership of all
tangible and intangible property thereby arising.
3.27. Intellectual Property Rights. The Company owns or possesses or
otherwise has the legally enforceable perpetual right to use, and has the right
to bring actions for infringement of, all U.S. Intellectual Property Rights
necessary or required for the conduct of its business as currently conducted,
including all U.S. Intellectual Property Rights pertaining to the Company
Software.
3.28. Real Property Holding Corporation. Since its date of
incorporation, the Company has not been, and as of the date of the Initial
Closing shall not be, a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Code, and in Section 1.897-2(b) of the
Treasury Regulations issued thereunder. The Company has no current plans or
intentions which would cause the Company to become a "United States real
property holding corporation," and the Company has filed with the IRS all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of the Treasury Regulations.
3.29. Taxes. The Company has filed all tax returns, federal, state,
county and local, domestic and foreign, required to be filed by it (giving
effect to validly invoked extensions of time within which to file such returns),
and the Company has paid all taxes shown to be due by such returns as well as
all other taxes, assessments and governmental charges which have become due or
payable, including without limitation all taxes which the Company is obligated
to withhold from amounts owing to employees, creditors and third parties. The
Company has established adequate reserves for all taxes accrued but not yet
payable to the extent required by generally accepted accounting principles.
Except as set forth in Exhibit 3.29, all material tax elections of any type
which the Company has made as of the date hereof are set forth in the Financial
Statements. No deficiency assessment with respect to or, proposed adjustment of
the Company's federal, state, county or local taxes, domestic and foreign, is
pending or, to the knowledge of the Company, threatened. There is no tax lien
(other than for current taxes not yet due and payable), whether imposed by any
federal, state, county or local taxing authority, domestic or foreign,
outstanding against the assets, properties or business of the Company.
Series A Convertible Preferred Stock Purchase Agreement -- Page 18
3.30. Other Agreements. Except for the Software Contracts identified in
Exhibit 3.26 or as otherwise set forth in the attached Exhibit 3.30, the Company
is not a party to or otherwise bound by any written or oral ("Contracts"):
(a) distributor, dealer or manufacturer's representative contract
or agreement which is not terminable on less than ninety (90) days' notice
without cost or other liability to the Company (except for contracts which, in
the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate or
right of set-off, to return any product to the Company after acceptance thereof
or to delay the acceptance thereof, or which varies in any material respect from
the Company's standard form contracts (except for contracts which, in the
aggregate, are not material to the business of the Company);
(c) agreement with any labor union in the United States (and, to
the Company's knowledge, no organizational effort is being made with respect to
any of its employees);
(d) agreement with any supplier containing any provision
permitting any party other than the Company to renegotiate the price or other
terms, or containing any pay-back or other similar provision, upon the
occurrence of a failure by the Company to meet its obligations under the
agreement when due or the occurrence of any other event (except for contracts
which, in the aggregate, are not material to the business of the Company);
(e) agreement for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, individual,
employee or other Person (whether of a legally binding nature or in the nature
of informal understandings) on a full-time or consulting basis which is not
terminable on notice without cost or other liability to the Company, except
accrued vacation pay (an "Employment Agreement");
(g) bonus, incentive, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or similar plan,
agreement or understanding pursuant to which benefits are provided to any
employee of the Company (other than group insurance plans applicable to
employees generally or as otherwise required by law);
(h) agreement or indenture relating to the borrowing of money or
to the mortgaging or pledging of, or otherwise placing a lien or security
interest on, any material asset of the Company;
(i) agreement, or group of related agreements with the same party
or any group of affiliated parties, under which the Company has advanced or
agreed to advance money, has agreed to lease any real property as lessee or
lessor, or has agreed to lease any
Series A Convertible Preferred Stock Purchase Agreement -- Page 19
personal property as lessee or lessor if such lease for personal property was
not entered into in the ordinary course of business;
(j) agreement or obligation (contingent or otherwise) to issue,
sell or otherwise distribute or to repurchase or otherwise acquire or retire any
shares of its capital stock or any of its other equity securities (other than in
connection with the transactions contemplated by this Agreement);
(k) assignment, license or other agreement with respect to any
form of intangible property, which assignment, license or other agreement was
entered into other than in the ordinary course of business;
(l) agreement under which it has granted any person registration
rights with respect to its capital stock (other than the Investor Rights
Agreement);
(m) agreement under which it has limited or restricted its right
to compete with any person in any respect; or
(n) except as set forth above, any other agreement or group of
related contracts with the same party involving more than $100,000, which
agreement or group of agreements is not terminable by the Company without
penalty upon notice of thirty (30) days or less, but excluding any agreement or
group of agreements with a customer of the Company for the sale, lease or rental
of the Company's products or services if such agreement or group of agreements
was entered into by the Company in the ordinary course of business.
Except as set forth on Exhibit 3.30, the Company and, to the Company's knowledge
after due inquiry, each other party thereto have in all material respects
performed all the actions required to be performed by them to date, have
received no notice of default and are not in material default under any lease,
agreement or contract now in effect to which the Company is a party or by which
it or its property may be bound. The Company has no present expectation or
intention of not fully performing all its respective material obligations under
each such lease, contract or other agreement, and the Company has no knowledge
of any material breach or anticipated breach by the other party to any contract
or commitment to which the Company is a party. The Company is in material
compliance with all of the terms and provisions of its articles of incorporation
and bylaws.
3.31. Disclosure. Neither this Agreement, the Exchange Act Documents
nor any other agreement, document, certificate or written statement furnished to
the Purchasers or their special counsel by or on behalf of the Company in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. There is no fact
within the knowledge of the Company that has not been disclosed herein or in
writing to the Purchasers or in the Exchange Act Documents and which could have
a Material Adverse Effect. Without limiting the generality of the foregoing,
except as disclosed in the Exchange Act Documents, neither the Company nor any
of its
Series A Convertible Preferred Stock Purchase Agreement -- Page 20
Subsidiaries has any knowledge that there exists, or there is pending or
planned, any statute, rule, law, regulation, standard or code that would have a
Material Adverse Effect.
ARTICLE IV
DEFINITIONS AND ACCOUNTING TERMS
4.01. Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Additional Shares" and "Additional Warranties" have the meanings
attributable to them in Section 1.05 of this Agreement.
"Affiliate" means any Person who, directly or indirectly, controls, is
controlled by or is under common control with any other Person.
"Agreement" means this Series A Convertible Preferred Stock Purchase
Agreement as from time to time amended and in effect between the parties,
including all Exhibits hereto.
"Board of Directors" means the board of directors of the Company as
constituted from time to time.
"Closing" has the meaning attributable to it in Section 1.04 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" includes (a) the Company's Common Stock, no par value,
as authorized on the date of this Agreement, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies or in the absence of any provision to the contrary in
the Articles of Incorporation, be entitled to vote for the election of a
majority of directors of the Company (even though the right so to vote has been
suspended by the happening of such a contingency or provision), and (c) any
other securities into which or for which any of the securities described in (a)
or (b) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Company" means and shall include, unless otherwise specified or the
context otherwise requires, FASTNET CORPORATION, a Pennsylvania corporation, and
each of its predecessors, successors and assigns.
Series A Convertible Preferred Stock Purchase Agreement -- Page 21
"Computer Programs" means (i) any and all computer programs (consisting
of sets of statements or instructions to be used directly or indirectly in a
computer in order to bring about a certain result), and (ii) all associated data
and compilations of data, regardless of their form or embodiment. "Computer
Programs" shall include, without limitation, all source code, object code and
natural language code therefor, all versions thereof, all screen displays and
designs thereof, all component modules, all descriptions, flow-charts and other
work product used to design, plan, organize and develop any of the foregoing,
and all documentation, including without limitation user manuals and training
materials, relating to any of the foregoing.
"Consolidated" and "consolidating" when used with reference to any term
defined herein mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles.
"Converted Shares" has the meaning attributable to it in Section 1.02
of this Agreement.
"Edison" shall mean Edison Venture Fund IV, L.P.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Documents" has the meaning attributable to it in Section
3.01(a).
"Financial Statements" has the meaning attributable to it in Section
3.12.
"Financing Documents" has the meaning attributable to it in Section
3.02.
"Founder" has the meaning attributable to it in Section 2.04,.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles, be
classified upon the obligor's balance sheet (or the notes thereto) as
liabilities, but in any event including liabilities secured by any mortgage on
property owned or acquired subject to such mortgage, whether or not the
liability secured thereby shall have been assumed, and also including (i) all
guaranties, endorsements and other contingent obligations, in respect of
Indebtedness of others, whether or not the same are or should be so reflected in
said balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (ii) the present value of any lease payments due
under leases required to be capitalized in accordance with applicable Statements
of Financial Accounting Standards, determined by discounting all such payments
at the interest rate determined in accordance with applicable Statements of
Financial Accounting Standards.
"Initial Closing" has the meaning attributable to it in Section 1.05 of
this Agreement.
Series A Convertible Preferred Stock Purchase Agreement -- Page 22
"Intellectual Property Rights" means all of the following: (i) patents,
patent applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination, utility, model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service marks, trade dress,
logos, tradenames, service names and corporate names and registrations and
applications for registration thereof, (iii) copyrights and registrations and
applications for registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) trade secrets and confidential
business information, whether patentable or nonpatentable and whether or not
reduced to practice, know-how, manufacturing and product processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information, (vi)
Computer Programs, (vii) other proprietary rights relating to any of the
foregoing (including without limitation associated goodwill and remedies against
infringements thereof and rights of protection of an interest therein under the
laws of all jurisdictions) and (viii) copies and tangible embodiments thereof.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Investor Rights Agreement" has the meaning attributable to it in
Section 2.03(i).
"Key Employee" means and includes the President, chief executive
officer, chief financial officer, chief operating officer, chief technology
officer, or vice president of operations, research, development, sales or
marketing.
"Lien" means, any mortgage, pledge, assessment, securities interest,
encumbrance, lien, lease, levy, claim or charge of any kind, including, without
limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction and including
any lien or charge arising by statute or other law.
"Material Adverse Change" means a material adverse change in the
business, operations, affairs, or condition (financial or otherwise) of the
Company and its Subsidiaries, as a whole.
"Material Adverse Effect" has the meaning attributable to it in Section
3.09.
"Nasdaq National Market" and "NASD" have the meanings attributable to
them in Section 3.03.
"Other Documents" has the meaning attributable to it in Section
1.05(b).
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Purchaser" and "Purchasers" has the meaning attributable to those
words in Section 1.01 of this Agreement and shall include the Purchasers and
also any other valid holder of any of the
Series A Convertible Preferred Stock Purchase Agreement -- Page 23
Series A Preferred Stock and any Converted Shares issued or issuable upon
conversion of such Series A Preferred Stock.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Directors" has the meaning attributable to Section
2.06 of this Agreement.
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock of the Company, no par value, having the preferences, voting powers,
qualifications and special or relative rights or privileges set forth in Exhibit
1.01A hereto.
"Series A Statement" has the meaning attributable to it in Section
2.03.
"Shares" has the meaning attributable to it in Section 1.04 of this
Agreement.
"Shareholders Agreement" has the meaning attributable in Section
2.03(f).
"Subsequent Closing" has the meaning attributable to it in Section 1.05
of this Agreement.
"Subsidiary" or "Subsidiaries" means any corporation or trust of which
the Company and/or any of its other Subsidiaries directly or indirectly owns at
the time outstanding shares of every class of such corporation or trust other
than directors' qualifying shares comprising at least fifty percent (50%) of the
voting power of such corporation or trust.
"Warrant" and "Warrant Shares" have the meaning attributable to them in
Section 1.03 of this Agreement.
4.02. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles consistently applied, and all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
ARTICLE V
MISCELLANEOUS
5.01. No Waiver; Cumulative Remedies. No failure or delay on the part
of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Series A Convertible Preferred Stock Purchase Agreement -- Page 24
5.02. Amendments, Waivers and Consents. Except as otherwise provided in
this Agreement, changes in or additions to this Agreement may be made, and
compliance with any covenant or provision set forth herein may be omitted or
waived, with the written consent of the Company if the Company (i) shall obtain
consent thereto in writing from the holder or holders of at least a majority in
interest of the Series A Preferred Shares, and (ii) shall deliver copies of such
consent in writing to any holders of any Shares who did not execute such
consent. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Notwithstanding anything to the contrary contained herein, any amendment which
(i) increases any Purchaser's obligations hereunder, or (ii) grants to any one
or more Purchasers any rights more favorable than any rights granted to all
other Purchasers hereunder, must be approved by each Purchaser so as to be
effective against such Purchaser.
5.03. Addresses for Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including facsimile
communication) and mailed, faxed or delivered to each applicable party at the
address set forth in Exhibit 1.01 hereto or at such other address as to which
such party may inform the other parties in writing in compliance with the terms
of this Section.
If to any other holder of the Shares: at such holder's address for
notice as set forth in the register maintained by the Company, or, as to each of
the foregoing, at the addresses set forth on Exhibit 1.01 hereto or at such
other address as shall be designated by such Person in a written notice to the
other parties complying as to delivery with the terms of this Section.
If to the Company: at the address set forth on page 1 hereof, or at
such other address as shall be designated by the Company in a written notice to
the other parties complying as to delivery with the terms of this Section.
All such notices, requests, demands and other communications shall,
when mailed (which mailing must be accomplished by first class mail, postage
prepaid; express overnight courier service; or registered mail, return receipt
requested) or transmitted by facsimile, be effective three days after deposited
in the mails or upon transmission by facsimile, respectively, addressed as
aforesaid, unless otherwise provided herein.
5.04. Costs, Expenses and Taxes. The Company agrees to pay in
connection with the preparation, execution and delivery of this Agreement and
the issuance of the Preferred Shares, the fees and expenses of Testa, Hurwitz &
Thibeault, LLP, special counsel for the Purchasers; provided, however, after the
Company has paid $30,000 in fees and expenses, the Company will only be
obligated to pay fifty percent (50%) of any additional fees and expenses, with
the Purchasers paying the remaining fifty percent (50%). In addition, the
Company shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement, the
issuance of the Preferred Shares and the other instruments and documents to be
delivered hereunder or thereunder, and agrees to hold the Purchasers
Series A Convertible Preferred Stock Purchase Agreement -- Page 25
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes.
5.05. Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchasers and their respective
heirs, successors and valid assigns, except no party hereto shall have the right
to delegate any of its respective obligations hereunder or to assign its
respective rights hereunder or any interest herein without the prior written
consent of the holders of at least a majority in interest of the Shares.
5.06. Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the purchase and sale of the Shares.
5.07. Severability. The provisions of this Agreement and the terms of
the Series A Preferred Stock are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of a provision contained in this Agreement or the Preferred Stock shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement or the terms of the Series A
Preferred Stock; but this Agreement and the terms of the Series A Preferred
Stock shall be reformed and construed as if such invalid or illegal or
unenforceable provision, or part of a provision, had never been contained
herein, and such provisions or part reformed so that it would be valid, legal
and enforceable to the maximum extent possible.
5.08. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the internal laws of the Commonwealth of
Pennsylvania, without regard to its principles of conflicts of laws.
5.09. Headings. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
5.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
5.11. Further Assurances. From and after the date of this Agreement,
upon the request of any Purchaser or the Company, the Company and the Purchasers
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the Shares.
Series A Convertible Preferred Stock Purchase Agreement -- Page 26
5.12 Survival of Representations and Warranties. The representations
and warranties set forth in this Agreement shall survive until the expiration of
twelve (12) months following the Subsequent Closing and be of no further force
or effect after such expiration, except with respect to any action commenced
prior to such expiration and except that the representations and warranties set
forth in Sections 3.20, 3.24, 3.26, 3.27 and 3.29 shall survive for the
applicable statutory period.
5.13 Shareholder Approval. The Company covenants and agrees that it
shall, promptly after the date hereof but in any event within 45 days of the
date hereof, convene a meeting of its shareholders at which it shall seek their
approval to issue the securities to be sold to the Purchasers (including any
Additional Purchasers) at the Subsequent Closing in light of the overall
transactions contemplated hereby (the "Shareholder Approval"). The Board of
Directors of the Company shall recommend the transactions contemplated hereby to
the Company's shareholders and request that they approve such issuance.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Series A Convertible Preferred Stock Purchase Agreement -- Page 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as an instrument under seal as of the date first above written.
**********
THE COMPANY: PURCHASERS:
FASTNET CORPORATION EDISON VENTURE FUND IV, L.P.
By: EDISON PARTNERS IV, L.P.
---------------------------------
By: /s/ Stephen Hurly
------------------------------
Name: Stephen Hurly By: /s/ Bruce Luehrs
----------------------- ---------------------------------
Title: President & CEO Bruce Luehrs, General Partner
----------------------
STRATTECH PARTNERS I, L.P.
By: Strattech Partners, LLC
---------------------------------
By: /s/ Steve Holstad, Jr.
---------------------------------
Name: Steve Holstad, Jr.
--------------------------
Title: Managing Director
-------------------------
EXHIBIT 1.01
------------
INITIAL CLOSING
---------------------------- ------------------ ----------------- --------------
SERIES A PREFERRED COMMON STOCK AGGREGATE
NAME OF PURCHASER SHARES PURCHASE WARRANTS PURCHASE PRICE
---------------------------- ------------------ ----------------- --------------
Edison Venture Fund IV, L.P. 2,088,684 522,171 $1,905,924.15
Strattech Partners I, L.P. 417,737 104,434 $381,185.01
TOTAL: 2,506,421 626,605 $2,287,109.16
SUBSEQUENT CLOSING
---------------------------- ------------------ ----------------- --------------
SERIES A PREFERRED COMMON STOCK AGGREGATE
NAME OF PURCHASER SHARES PURCHASE WARRANTS PURCHASE PRICE
---------------------------- ------------------ ----------------- --------------
Edison Venture Fund IV, L.P. 658,569 164,642 $600,944.21
Strattech Partners I, L.P. 131,714 32,929 $120,189.03
Up to
Additional Purchasers Up to 2,197,801 Up to 549,451 $2,005,493.42
TOTAL: 2,988,084 747,022 $2,726,626.66
EXHIBIT 4
---------
INVESTOR RIGHTS AGREEMENT
September 5, 2001
To each of the several Purchasers named in
Exhibit 1.01 to the Series A Convertible
Preferred Stock Purchase Agreement of
even date herewith (the "Investors")
This will confirm that in consideration of (i) the Investors' agreement
on the date hereof to purchase up to an aggregate of 5,494,505 shares (the
"Preferred Shares") of Series A Convertible Preferred Stock, no par value
("Preferred Stock"), of FASTNET CORPORATION, a Pennsylvania corporation
(together with all of its subsidiaries, the "Company"), pursuant to the Series A
Convertible Preferred Stock Purchase Agreement of even date herewith (the
"Purchase Agreement") between the Company and the Investors and as an inducement
to the Investors to consummate the transactions contemplated by the Purchase
Agreement.
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Board of Directors" shall mean the board of directors of the
Company as constituted from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" shall mean the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, no par value, of the
Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued or
issuable upon conversion of the Preferred Shares and/or upon exercise of the
Warrants.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Investor Rights Agreement - Page 2
"Indebtedness" shall mean all obligations, contingent and
otherwise, which should, in accordance with generally accepted accounting
principles, be classified upon the obligor's balance sheet (or the notes
thereto) as liabilities, but in any event including liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, whether or not
the liability secured thereby shall have been assumed, and also including (i)
all guaranties, endorsements and other contingent obligations, in respect of
Indebtedness of others, whether or not the same are or should be so reflected in
said balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (ii) the present value of any lease payments due
under leases required to be capitalized in accordance with applicable Statements
of Financial Accounting Standards, determined by discounting all such payments
at the interest rate determined in accordance with applicable Statements of
Financial Accounting Standards.
"Key Employee" or "Key Employees" shall mean and include the
President, chief executive officer, chief financial officer, chief operating
officer, chief technology officer, vice presidents of operations, research,
development, sales or marketing.
"Material Adverse Change" shall mean a material adverse change in
the business, operations, affairs, or condition (financial or otherwise) of the
Company.
"Person or Persons" shall mean an individual, corporation,
partnership, joint venture, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Registration Expenses" shall mean the expenses so described in
Section 9.
"Reserved Employee Shares" shall mean shares of Common Stock
issued pursuant to stock purchase, stock grant or stock option arrangements for
employees, directors or consultants or advisors of the Company, all under
arrangements approved by the Compensation Committee of the Board of Directors.
"Restricted Stock" shall mean the Conversion Shares; provided
that a Conversion Share shall only be treated as Restricted Stock if and so long
as (a) it has not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, (b) it has not been sold
in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale, and (c) it may not be publicly sold
pursuant to paragraph (k) of Rule 144 (or any similar provision then in force)
under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in
Section 9.
Investor Rights Agreement - Page 3
"Subsidiary" or "Subsidiaries" shall mean any corporation or
trust of which the Company and/or any of its other Subsidiaries (as herein
defined) directly or indirectly owns at the time outstanding shares of every
class of such corporation or trust other than directors' qualifying shares
comprising at least fifty percent (50%) of the voting power of such corporation
or trust.
"Warrants" means the warrants exercisable for Common Stock issued
pursuant to the Purchase Agreement.
2. Restrictive Legend. Each certificate representing Preferred Shares,
Conversion Shares or Restricted Stock shall, except as otherwise provided in
this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend
substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
ASSIGNED MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS, OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
FOR SUCH SALE, TRANSFER OR ASSIGNMENT."
3. Legends with Respect to Transfers. Each certificate for Preferred
Shares, Conversion Shares or Restricted Stock that is transferred to another
party shall bear the legend set forth in Section 2, except that such certificate
shall not bear such legend if (i) such transfer is in accordance with the
provisions of Rule 144 (or any other rule permitting public sale without
registration under the Securities Act), (ii) such transfer is effected pursuant
to a registration statement under the Securities Act or (iii) in the opinion of
counsel to the Company or an Investor the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a public sale without registration under the
Securities Act.
4. [intentionally omitted]
5. Incidental Registration. If the Company at any time (other than
pursuant to Section 6) proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with respect to corporate
reorganizations, transactions under Rule 145 of the Securities Act or
registration statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such holder, received by the
Company within 30 days after the giving of any such notice by the Company,
Investor Rights Agreement - Page 4
to register any of its Restricted Stock, the Company will use its best efforts
to cause the Restricted Stock as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by the holder of such Restricted Stock so
registered. In the event that any registration pursuant to this Section 5 shall
be, in whole or in part, an underwritten public offering of Common Stock, the
number of shares of Restricted Stock to be included in such an underwriting may
be reduced (PRO RATA among the requesting holders based upon the number of
shares of Restricted Stock owned by such holders) if and to the extent that the
managing underwriter shall be of the opinion that such inclusion would
materially adversely affect the offering price of the securities to be sold by
the Company therein, PROVIDED, HOWEVER, that such number of shares of Restricted
Stock shall not be reduced until all shares to be included in such underwriting
for the account of any person other than the Company and the requesting holders
of Restricted Stock are first excluded, and PROVIDED, FURTHER, HOWEVER, that in
no event may less than twenty percent (20%) of the total number of shares of
Common Stock to be included in such underwriting be made available for shares of
Restricted Stock unless all other shares are first excluded from such offering
and the managing underwriter shall in good faith advise the holders proposing to
distribute their securities through such underwriting that such level of
participation would, in its opinion, materially adversely affect the offering
price and its ability to complete the offering and shall specify the number of
shares of Restricted Stock which, in its opinion, can be included in the
registration and underwriting without such an effect. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 5 prior to the effectiveness of such registration whether or not any
holder of Restricted Stock has elected to include securities in such
registration. The registration expenses of such withdrawn registration shall be
borne by the Company in accordance with Section 7 hereof.
6. Registration on Form S-3.
(a) If at any time (i) a holder or holders of Restricted Stock
request that the Company file a registration statement on Form S-3 or any
successor thereto for a public offering of all or any portion of the shares of
Restricted Stock held by such requesting holder or holders which has an
anticipated aggregate price to the public (prior to underwriters commissions and
discounts) that would exceed $1,000,000, and (ii) the Company is a registrant
entitled to use Form S-3 or any successor thereto to register such shares, then
the Company shall use its best efforts to register under the Securities Act on
Form S-3 or any successor thereto, for public sale in accordance with the method
of disposition specified in such notice, the number of shares of Restricted
Stock specified in such notice.
(b) Following receipt of any notice under this Section 6, the
Company shall immediately notify all holders of Restricted Stock and Preferred
Shares from whom notice has not been received and such holders shall then be
entitled within 30 days thereafter to request the Company to include in the
requested registration all or any portion of their shares of Restricted Stock.
The Company shall use its best efforts to register under the Securities Act, for
public sale in accordance with the method of disposition described in paragraph
(a) above, the number of shares of Restricted Stock specified in such notice
(and in all notices received by the Company from other holders within 30 days
after the giving of such notice by the Company).
Investor Rights Agreement - Page 5
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 6 shares of Common Stock to be sold by the
Company for its own account, except as and to the extent that, in the opinion of
the managing underwriter, such inclusion would adversely affect the marketing of
the Restricted Stock to be sold. No other shares may be included in such
registration statement. Except for registration statements on Form S-4, S-8 or
any successor thereto, the Company will not file with the Commission any other
registration statement with respect to its Common Stock, whether for its own
account or that of other shareholders, from the date of receipt of a notice from
requesting holders requesting sale pursuant to an underwritten offering pursuant
to this Section 6 until the completion of the period of distribution of the
registration contemplated thereby.
(d) If in the opinion of the managing underwriter the inclusion
of all of the Restricted Stock requested to be registered under this Section 6
would adversely affect the marketing of such shares, shares to be sold by the
holders of Restricted Stock, if any, shall be excluded only after any shares to
be sold by the Company have been excluded, in such manner that the shares to be
sold shall be allocated among the selling holders PRO RATA based on their
ownership of Restricted Stock.
Notwithstanding anything to the contrary in this Section 6, the Company shall
not be required to effect any such registration, qualification or compliance
pursuant to this Section 6:
(i) if the Company has, within the six month period preceding
the date of such request, already effected a registration on Form S-3
for the holders of Restricted Stock pursuant to this Section 6;
(ii) if the Company shall furnish to the holders of Restricted
Stock a certificate signed by the Chairman of the Board stating that in
the good faith judgment of the Board of Directors, there exists at the
time material non-public information relating to the Company the
disclosure of which would be required in such registration statement,
and which disclosure would be seriously detrimental to the Company and
its shareholders, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of
not more than ninety (90) days after receipt of the request of the
holders of Restricted Stock under this Section 6; provided, that such
right to delay a request shall be exercised by the Company not more
than once in any twelve month period;
(iii) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance (provided the
Company has not already executed such a consent or is already qualified
to do business in such jurisdiction).
7. Registration Procedures. If and whenever the Company is required by
the provisions of Sections 5 or 6 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
Investor Rights Agreement - Page 6
(a) prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable efforts to
cause such registration statement to become and remain effective for the period
of the distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its commercially reasonable efforts to register or
qualify the Restricted Stock covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the sellers of Restricted
Stock or, in the case of an underwritten public offering, the managing
underwriter reasonably shall request, PROVIDED, HOWEVER, that the Company shall
not for any such purpose be required to qualify generally to transact business
as a foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
(e) use its commercially reasonable efforts to list the
Restricted Stock covered by such registration statement with any securities
exchange on which the Common Stock of the Company is then listed;
(f) provide a transfer agent and registrar for all such
Restricted Stock, not later than the effective date of such registration
statement;
(g) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing. The holders of
Restricted Stock covered by such registration statement agree upon receipt of
such notice forthwith to cease making offers and sales of Restricted Stock
pursuant to such registration statement or deliveries of the prospectus
contained therein for any purpose until the Company has prepared and furnished
such amendment or supplement to the prospectus as may be necessary so that, as
thereafter delivered to purchasers of such Restricted Stock, such prospectus
shall 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 in the light of the circumstances then existing. The
Company shall use
Investor Rights Agreement - Page 7
best efforts to prepare and furnish such amendment or supplement to the
prospectus within a commercially reasonable period of time;
(h) use its best efforts to furnish on the date that such
Restricted Stock is delivered to the underwriters for sale, if such securities
are being sold through underwriters: (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and to such seller and (ii) a letter
dated as of such date from the independent certified public accountants of the
Company, in form and substance as is customarily given by the independent
certified public accountants to underwriters in an underwritten public offering
addressed to the underwriters and to such seller;
(i) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement, except that the Company may refuse to provide such
information or access to any person that the Board of Directors reasonably
concludes is a competitor of the Company;
(j) advise each selling holder of Restricted Stock, promptly
after it shall receive notice or obtain knowledge thereof, of the issuance of
any stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
such purpose and promptly use all reasonable efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should be issued;
(k) cooperate with the selling holders of Restricted Stock and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Restricted Stock to be sold, such
certificates to be in such denominations and registered in such names as such
holders or the managing underwriters may request at least two business days
prior to any sale of Restricted Stock; and
(l) permit Edison Venture Fund IV, L.P. ("Edison") or any
affiliate or limited partner of Edison that is a holder of Restricted Stock
which holder, in the sole and exclusive judgment, exercised in good faith, of
such holder, might be deemed to be a controlling person of the Company, to
participate in good faith in the preparation of such registration or comparable
statement and to require the insertion therein of material, furnished to the
Company in writing, which in the reasonable judgment of such holder and its
counsel should be included, subject to review by the Company and its counsel
after consultation with such holder.
For purposes of Section 7(a) and 7(b) and of Section 6(c), the period
of distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Restricted Stock in any other registration shall be deemed to extend until
Investor Rights Agreement - Page 8
the earlier of the sale of all Restricted Stock covered thereby and 120 days
after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Sections 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
8. Assignment of Registration Rights. The registration rights of
holders of Restricted Stock pursuant to Sections 5 and 6 hereof may be assigned
by a holder to a transferee or assignee of Restricted Stock which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member,
retired member or affiliate of such holder, (b) is a holder's immediate family
member or a trust for the benefit of an individual holder or immediate family
members, or (c) acquires at least 25% of the Restricted Stock held by the
transferring holder (as adjusted for stock splits and the like); PROVIDED,
HOWEVER, (i) the transferor shall, within ten (10) days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned, and (ii) such transferee shall agree to be subject to all
restrictions set forth in this Agreement.
9. Expenses. All expenses incurred by the Company in complying with
Sections 5 and 6, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of insurance, and fees and
disbursements of one counsel for the sellers of Restricted Stock, but excluding
any Selling Expenses, are called "Registration Expenses". All underwriting
discounts and selling commissions applicable to the sale of Restricted Stock are
called "Selling Expenses". The Company shall not, however, be required to pay
for Registration Expenses regarding any registration proceeding begun pursuant
to Section 6, the request of which has been subsequently withdrawn by the
holders of Restricted Stock making such request (and such holders will indemnify
the Company against all such reasonable Registration Expenses) unless (a) the
withdrawal is based upon material adverse information concerning the Company
(including a material drop in the market price of the Company's Common Stock) of
which such holders of Restricted Stock were not aware at the time of such
request, or (b) such holders of Restricted Stock agree to forfeit their right to
one requested registration pursuant to Section 6, in which event such right
shall be forfeited by all holders of Restricted Stock. If the holders of
Restricted Stock are required to pay the Registration Expenses, such expenses
shall be borne by the holders of securities (including Restricted Stock)
requesting such registration in proportion to the number of shares for which
registration was requested.
Investor Rights Agreement - Page 9
The Company will pay all Registration Expenses in connection with each
registration statement under Sections 5 or 6. All Selling Expenses in connection
with each registration statement under Sections 5 or 6 shall be borne by the
participating sellers in proportion to the number of shares sold by each, or by
such participating sellers other than the Company (except to the extent the
Company shall be a seller) as they may agree.
10. Indemnification and Contribution.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 5 or 6, the Company will indemnify
and hold harmless each seller of such Restricted Stock thereunder, each
underwriter of such Restricted Stock thereunder and each other person, if any,
who controls such seller or underwriter within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which such seller, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Sections 5 or 6, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
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, and will reimburse each such seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company; and PROVIDED,
FURTHER, HOWEVER, that the Company will not be liable in any such case if and to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by any such
seller (or such seller's partner, officer, director, or controlling person), any
such underwriter or any such controlling person in writing specifically for use
in such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 5 or 6, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 5 or 6, any
preliminary prospectus or final prospectus contained therein,
Investor Rights Agreement - Page 10
or any amendment or supplement thereof, 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, and
will reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, PROVIDED, HOWEVER, that the indemnity agreement contained
in this Section 10(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the each seller; PROVIDED, FURTHER, HOWEVER that such seller will
be liable hereunder in any such case if and only to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such seller, as
such, furnished in writing to the Company by such seller specifically for use in
such registration statement or prospectus, and PROVIDED, FINALLY, HOWEVER, that
the liability of each seller hereunder shall be limited to the net proceeds
received by such seller from the sale of Restricted Stock covered by such
registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10 and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 10 if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, PROVIDED,
HOWEVER, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
holder of Restricted Stock exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 10 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or
Investor Rights Agreement - Page 11
the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 10 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
10; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The obligations of the Company and holders of Restricted
Stock under this Section 10 shall survive completion of any offering which
includes Restricted Stock in a registration statement and the termination of
this Agreement. No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each indemnified party, consent to
the entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a general release from all liability in respect to such
claim or litigation.
11. Changes in Common Stock or Preferred Stock. If, and as often as,
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock
and the Preferred Stock as so changed.
12. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
after 90 days after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) so long as a holder owns any Restricted Stock, furnish to
each holder of Restricted Stock forthwith upon request a written statement by
the Company as to its compliance
Investor Rights Agreement - Page 12
with the reporting requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration.
13. Right of First Refusal
(a) Right of First Refusal. The Company shall not issue, sell or
exchange, agree or obligate itself to issue, sell or exchange any (i) shares of
Common Stock, (ii) any other equity security of the Company, including without
limitation, Preferred Shares, (iii) any debt security of the Company (other than
debt with no equity feature) including without limitation, any debt security
which by its terms is convertible into or exchangeable for any equity security
of the Company, (iv) any security of the Company that is a combination of debt
and equity, or (v) any option, warrant or other right to subscribe for, purchase
or otherwise acquire any such equity security or any such debt security of the
Company, unless in each case the Company shall have first offered to sell such
securities (the "Offered Securities") to the Investors (each an "Offeree" and
collectively, the "Offerees") as follows: Each Offeree shall have the right to
purchase (x) that portion of the Offered Securities as the number of shares of
Restricted Stock then held by such Offeree bears to the total number of shares
of Restricted Stock held on such date by all Offerees (the "Basic Amount"), and
(y) such additional portion of the Offered Securities as such Offeree shall
indicate it will purchase should the other Offerees subscribe for less than
their Basic Amounts (the "Undersubscription Amount"), at a price and on such
other terms as shall have been specified by the Company in writing delivered to
such Offeree (the "Offer"), which Offer by its terms shall remain open and
irrevocable for a period of twenty (20) days from receipt of the offer.
(b) Notice of Acceptance. Notice of each Offeree's intention to
accept, in whole or in part, any Offer made pursuant to Section 13(a) shall be
evidenced by a writing signed by such Offeree and delivered to the Company prior
to the end of the 20-day period of such offer, setting forth such of the
Offeree's Basic Amount as such Offeree elects to purchase and, if such Offeree
shall elect to purchase all of its Basic Amount, such Undersubscription Amount
as such Offeree shall elect to purchase (the "Notice of Acceptance"). If the
Basic Amounts subscribed for by all Offerees are less than the total Offered
Securities, then each Offeree who has set forth Undersubscription Amounts in its
Notice of Acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, all Undersubscription Amounts it has subscribed for;
PROVIDED, HOWEVER, that should the Undersubscription Amounts subscribed for
exceed the difference between the Offered Securities and the Basic Amounts
subscribed for (the "Available Undersubscription Amount"), each Offeree who has
subscribed for any Undersubscription Amount shall be entitled to purchase only
that portion of the Available Undersubscription Amount as the Undersubscription
Amount subscribed for by such Offeree bears to the total Undersubscription
Amounts subscribed for by all Offerees, subject to rounding by the Board of
Directors to the extent it reasonably deems necessary.
Investor Rights Agreement - Page 13
(c) Conditions to Acceptances and Purchase.
(i) Permitted Sales of Refused Securities. In the event that
Notices of Acceptance are not given by the Offerees in respect of all the
Offered Securities, the Company shall have ninety (90) days from the expiration
of the period set forth in Section 13(a) to close the sale of all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
the Offerees (the "Refused Securities") to the Person or Persons specified in
the Offer, but only in all respects upon terms and conditions, including,
without limitation, unit price and interest rates, which are no more favorable,
in the aggregate, to such other Person or Persons or less favorable to the
Company than those set forth in the Offer.
(ii) Reduction in Amount of Offered Securities. In the event
the Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 13(c)(i) above),
then each Offeree may, at its sole option and in its sole discretion, reduce the
number of, or other units of the Offered Securities specified in its respective
Notices of Acceptance to an amount which shall be not less than the amount of
the Offered Securities which the Offeree elected to purchase pursuant to Section
13(b) multiplied by a fraction, (i) the numerator of which shall be the amount
of Offered Securities which the Company actually proposes to sell, and (ii) the
denominator of which shall be the amount of all Offered Securities. In the event
that any Offeree so elects to reduce the number or amount of Offered Securities
specified in its respective Notices of Acceptance, the Company may not sell or
otherwise dispose of more than the reduced amount of the Offered Securities
until such securities have again been offered to the Offerees in accordance with
Section 13(a).
(iii) Closing. Upon the closing of the sale to such other
Person or Persons of all or less than all the Refused Securities, the Offerees
shall purchase from the Company, and the Company shall sell to the Offerees, the
number of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 13(c)(ii) if the Offerees have so elected, upon the terms
and conditions specified in the Offer. The purchase by the Offerees of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Offerees of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Offerees and their respective counsel.
(d) Further Sale. In each case, any Offered Securities not
purchased by the Offerees or other Person or Persons in accordance with Section
13(c) may not be sold or otherwise disposed of until they are again offered to
the Offerees under the procedures specified in Sections 13(a), 13(b) and 13(c).
(e) Waiver of Right of First Refusal. The rights of the Investors
pursuant to this Section 13 may be waived as to all of such Investors by the
affirmative vote or written consent of holders of at least a majority in
interest of the then outstanding Restricted Stock, and any such waiver shall be
binding on all Investors, even if any of such Investors do not execute such
waiver and irrespective of whether one or more Investors participates in the
purchase of the Offered Securities.
Investor Rights Agreement - Page 14
(f) Exception. The rights of the Investors under this Section 13
shall not apply to:
(i) Common Stock issued as a stock split or as a stock
dividend to holders of Common Stock or upon any subdivision or combination of
shares of Common Stock,
(ii) Preferred Stock issued as a dividend to holders of
Preferred Stock upon any subdivision or combination of shares of Preferred
Stock,
(iii) the Conversion Shares,
(iv) any Reserved Employee Shares, and the shares of Common
Stock issuable upon exercise thereof,
(v) any shares of capital stock issued pursuant to any of the
rights, options, warrants or agreement outstanding on the date hereof and listed
on Schedule I hereto,
(vi) any securities issued pursuant to the acquisition of
another entity by the Company by merger (whereby the Company owns no less than
51% of the voting power of such corporation) or purchase of substantially all of
such entity's stock or assets, if such merger or purchase is approved by the
Board of Directors (which approval shall include the affirmative vote or consent
of the directors elected by the holders of Preferred Stock),
(vii) any securities issued in connection with a strategic
partnership, joint venture or other similar agreement, provided that such is
approved by a majority of the Board of Directors and such majority includes the
directors elected by the holders of Preferred Stock, and
(viii) any warrants to purchase Common Stock issued in
connection with a bank loan, lease, equipment financing arrangement or debt
financing with a financial institution or the issuance of Common Stock upon the
exercise of any such warrant provided that such is approved by a majority of the
Board of Directors and such majority includes the directors elected by the
holders of the Preferred Stock.
14. Covenants of the Company. For so long as at least 25% of the
Preferred Shares issued under the Purchase Agreement remain outstanding, the
Company will comply with the covenants set forth below:
(a) Affirmative Covenants of the Company Other Than Reporting
Requirements. Without limiting any other covenants and provisions hereof, and
except to the extent the following covenants and provisions of this Section
14(a) are waived in any instance by the holders of a majority in interest of the
holders of Restricted Stock, the Company covenants and agrees that for so long
as any shares of Preferred Stock are outstanding it will perform and observe the
following covenants and provisions, and will cause each Subsidiary, if and when
such Subsidiary exists, to perform and observe such of the following covenants
and provisions as are applicable to such Subsidiary:
Investor Rights Agreement - Page 15
(i) Preservation of Corporate Existence. Preserve and
maintain, and, unless the Company deems it not to be in its best interests,
cause each Subsidiary to preserve and maintain, its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. Secure, preserve and maintain, and cause each
Subsidiary to secure, preserve and maintain, all licenses and other rights to
use intellectual property rights owned or possessed by it and deemed by the
Company to be necessary to the conduct of its business and the businesses of its
Subsidiaries, taken as a whole.
(ii) Compliance with Laws. Comply, and cause each Subsidiary
to comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, where noncompliance would have a Material
Adverse Effect.
(iii) Inspection. Permit, upon reasonable request and notice,
each of the Investors or any agents or representatives thereof, to examine and
make copies of and extracts from the books of account of, and visit and inspect
the properties of the Company and any Subsidiary, to discuss the affairs,
finances and accounts of the Company and any Subsidiary with any of its
officers, directors or Key Employees and independent accountants, and consult
with and advise the management of the Company and any Subsidiary as to their
affairs, finances and accounts, all at reasonable times during normal business
hours. Subject to the disclosure of information of a non-technical nature,
including financial information, which such Investor discloses to its partners
and/or shareholders generally, each Investor agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Investor may obtain from the Company pursuant to
financial statements, reports and other materials submitted by the Company as
required hereunder, or pursuant to visitation or inspection rights granted
hereunder unless such information is or becomes known to the Investor from a
source other than the Company or is or becomes publicly known, or unless the
Company gives its written consent to such Investor's release of such
information, except that no such written consent shall be required (and the
Investor shall be free to release such information to such recipient) if such
information is to be provided to the Investor's counsel or accountant, or to an
officer, director or partner of such Investor, provided that the Investor shall
inform the recipient of the confidential nature of such information, and shall
instruct the recipient to treat the information as confidential.
(iv) Maintenance of Properties. Maintain and preserve, and
cause each Subsidiary to maintain and preserve, all of its properties and
assets, necessary for the proper conduct of its business, in good repair,
working order and condition, ordinary wear and tear excepted.
(v) Budgets Approval. Not later than 30 days prior to the
commencement of each fiscal year, prepare and submit to, and obtain the approval
of a majority of the Board of Directors of, a business plan and monthly
operating budgets in detail for the upcoming fiscal year, including capital and
operating expense budgets, cash flow projections and
Investor Rights Agreement - Page 16
profit and loss projections, all itemized in reasonable detail (including
itemization of provisions for officers' compensation).
(vi) [intentionally omitted]
(vii) By-laws. Within 180 days of this Agreement (and at all
times thereafter), cause the bylaws of the Company to provide that, unless
otherwise required by the laws of the Commonwealth of Pennsylvania any two
directors shall have the right to call a meeting of the Board of Directors. At
all times maintain provisions in the bylaws or articles of incorporation of the
Company indemnifying all directors against liability to the maximum extent
permitted under the laws of Commonwealth of Pennsylvania.
(viii) [intentionally omitted]
(ix) Meetings of Directors. Hold meetings of the Company's
Board of Directors not less than four (4) times a year on a quarterly basis.
(x) Expenses of Directors. Promptly reimburse in full, each
director of the Company who is not an employee of the Company for all of his
reasonable, documented out-of-pocket expenses incurred in attending each meeting
of the Board of Directors of the Company or any committee thereof.
(xi) Continued Business Operations. Use commercially
reasonable efforts to cause its officers and Key Employees to refrain from
carrying on any for-profit business activity outside of the Company.
(b) Negative Covenants of the Company. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, for so
long as any shares of Preferred Stock are outstanding, it will comply with and
observe the following covenants and provisions, and will cause each Subsidiary,
if and when such Subsidiary exists, to comply with and observe such of the
following covenants and provisions as are applicable to such Subsidiary, and
will not, without the written consent or waiver of a majority in interest of the
holders of Restricted Stock:
(i) Restrictions on Indebtedness. Create, incur or assume, or
permit any Subsidiary to create, incur or assume, more than $2,000,000 of
additional Indebtedness after September 5, 2001, other than Indebtedness (i)
incurred to refinance existing Indebtedness of the Company provided that the
outstanding principal amount of the Indebtedness so retired equals or exceeds
the aggregate principal amount of the Indebtedness so incurred or (ii) the
conversion of any of the Company's capital leases existing on September 5, 2001
into other Indebtedness provided that the aggregate amount owed under such
capital lease immediately prior to conversion equals or exceeds the aggregate
principal amount of the Indebtedness so incurred, or (iii) incurred as trade
payables in the ordinary course of the Company's business consistent with past
practices;
Investor Rights Agreement - Page 17
(ii) Distributions. Declare or pay any dividends, purchase,
redeem, retire, or otherwise acquire for value any of its capital stock (or
rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its shareholders as such, or make any
distribution of assets to its shareholders as such, or permit any Subsidiary to
do any of the foregoing (such transactions being hereinafter referred to as
"Distributions"), except that any such Subsidiary may declare and make payment
of cash and stock dividends, return capital and make distributions of assets to
the Company, and except as specifically provided for in the Company's Amended
and Restated Articles of Incorporation, as amended (the "Articles"); PROVIDED,
HOWEVER, that nothing herein contained shall prevent the Company from:
(x) effecting a stock split (except for a reverse stock
split) or declaring or paying any dividend consisting of shares of any class of
capital stock to the holders of shares of such class of capital stock, or
(y) redeeming any stock of a deceased shareholder out of
insurance held by the Company on that shareholder's life, or
(z) repurchasing the shares of Common Stock held by officers,
employees, directors or consultants of the Company which are subject to
restrictive stock purchase agreements under which the Company has the option to
repurchase such shares upon the occurrence of certain events, including the
termination of employment, at a price not in excess of the original purchase
price paid to the Company by such officer, employee, director or consultant for
such shares,
if in the case of any such transaction the payment can be made in compliance
with the other terms of this Agreement.
(iii) Change in Nature of Business. Make or permit any
Subsidiary to make, any material change in the nature of its business as
contemplated in the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 2001.
(iv) Issuance of Reserved Employee Shares. Grant any options
or other rights to purchase Reserved Employee Shares unless authorized by vote
of the Company's Board of Directors or its Compensation Committee.
(v) Amendments to the Existing Investor Rights Agreement.
Amend, modify, waive or change any provision or term of the of the Investor
Rights Agreement dated August 3, 1999, or admit any additional parties thereto,
without the prior written consent of the holders of a majority of the Restricted
Stock.
15. Representations and Warranties of the Company. The Company
represents and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by
the Company have been duly authorized by all requisite corporate action and will
not violate any provision of law, or any rule or order of any court or other
agency of government, the Articles or
Investor Rights Agreement - Page 18
By-laws of the Company or any provision of any indenture, agreement or other
instrument to which it or any or its properties or assets is bound, conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
16. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by
or on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
if to the Company or any other party hereto, at the address of
such party set forth in the Purchase Agreement;
if to any subsequent holder of Preferred Shares, Conversion
Shares or Restricted Stock, to it at such address as may have been furnished to
the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares,
Conversion Shares or Restricted Stock) or to the holders of Preferred Shares,
Conversion Shares or Restricted Stock (in the case of the Company) in accordance
with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Pennsylvania, without
regard to its principles of conflicts of laws.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company and
the holders of at least a majority in interest of the Restricted Stock.
(e) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Investor Rights Agreement - Page 19
(f) The Company shall not grant to any third party any
registration rights more favorable than or inconsistent with any of those
contained herein, so long as any of the registration rights under this Agreement
remains in effect.
(g) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(h) The Additional Purchasers (as defined in the Purchase
Agreement) shall become parties to this Agreement, and shall be entitled to all
of the benefits to and shall be subject to all of the obligations of "Investors"
under this Agreement, all upon execution by such Additional Purchaser of a
counterpart signature page to this Agreement.
Investor Rights Agreement - Page 20
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
FASTNET CORPORATION
By: /s/ Stephen Hurly
-------------------------------
Name: Stephen Hurly
-----------------------------
Title: President & CEO
-----------------------------
AGREED TO AND ACCEPTED as of the date first above written.
Investors named in Schedule I to the Purchase Agreement:
EDISON VENTURE FUND IV, L.P.
BY: Edison Partners IV, L.P.
By: /s/ Bruce Luehrs
-------------------------------
Bruce Luehrs, General Partner
STRATTECH PARTNERS I, L.P.
By: Strattech Partners, LLC
By: /s/ Steve Holstad, Jr.
--------------------------------
Name: Steve Holstad, Jr.
--------------------------
Title: Managing Director
--------------------------
EXHIBIT 5
---------
SHAREHOLDERS AGREEMENT
----------------------
SHAREHOLDERS AGREEMENT made this 5th day of September, 2001 by and
among (i) FASTNET CORPORATION, a Pennsylvania corporation (the "Company"), (ii)
holders of Common Stock or options to acquire Common Stock whose names are set
forth under the heading "Holders" on Schedule I hereto and each person who
shall, after the date hereof, join in and become a party to this Agreement by
executing and delivering to the Company an Instrument of Accession in the form
of Schedule II hereto (the persons described in this clause (ii) such persons
being referred to collectively as the "Holders" and singularly as a "Holder")
and (iii) those persons whose names are set forth under the heading "Investors"
on Schedule I hereto (the persons described in this clause (iii) being referred
to collectively as the "Investors").
WITNESSETH:
WHEREAS, the Holders currently own collectively 8,860,333 shares of the
Common Stock, no par value (the "Common Stock"), of the Company; and
WHEREAS, the Investors are acquiring an aggregate of up to 5,494,505
shares of the Company's Series A Convertible Preferred Stock, no par value (the
"Preferred Stock"), of the Company pursuant to a certain Series A Convertible
Preferred Stock Purchase Agreement dated as of the date hereof, by and among the
Investors and the Company (the "Purchase Agreement"). Capitalized terms used by
not defined herein shall have the meaning set forth in the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, intending to be legally bound hereby, the
Company, the Holders and the Investors agree as follows:
1. Prohibited Transfers. The Holders shall not sell, assign, transfer,
pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way
encumber, all or any part of the Shares (as hereinafter defined) owned by them
except in compliance with the terms of this Agreement. For purposes of this
Agreement, the term "Shares" shall mean and include all shares of Common Stock
and Preferred Stock of the Company owned by the Holders, whether presently held
or hereafter acquired. The Company shall not transfer on its books any shares of
its capital stock which are subject to this Agreement unless the provisions
hereof have been complied with in full. Any purported transfer by a Holder of
capital stock of the Company without full compliance with the provisions of this
Agreement shall be null and void.
2. Right of First Refusal on Dispositions by the Holders. If at any
time any of the Holders wishes to sell, assign, transfer or otherwise dispose of
any or all Shares owned by him pursuant to the terms of a bona fide offer
received from a third party, he shall submit a written offer to sell such Shares
to the Company and the Investors on terms and conditions, including price, not
less favorable to the Company than those on which he proposes to sell such
Shares to such third party (the "Offer"). The Offer shall disclose the identity
of the proposed purchaser or
Shareholders Agreement - Page 2
transferee, the Shares proposed to be sold or transferred, the agreed terms of
the sale or transfer, including price, and any other material facts relating to
the sale or transfer. Within fifteen (15) days after receipt of the Offer, the
Company shall give notice to the Holder of its intent to purchase all or any
portion of the offered Shares on the same terms and conditions as set forth in
the Offer. If, for any reason whatever, the Company shall not exercise its right
to purchase all of the offered Shares as provided herein, then each of the
Investors shall have the right to purchase, on the same terms and conditions set
forth in the Offer, that portion of the offered Shares which the Company shall
not have agreed to purchase from the Holder (all such remaining shares being
referred to as the "Remaining Offered Shares") to be determined in the manner
set forth herein. Each Investor shall have the right to purchase that number of
the Remaining Offered Shares as shall be equal to the aggregate Remaining
Offered Shares multiplied by a fraction, the numerator of which is the number of
shares of Stock (as defined below) of the Company then owned by such Investor
and the denominator of which is the aggregate number of shares of said Stock
then issued and outstanding and held by all the Investors. The amount of Shares
each Investor or Qualified Transferee, as that term is defined below, is
entitled to purchase under this Section 2 shall be referred to as such
Investor's "Pro Rata Fraction." Each Investor shall have the right to transfer
his right to any Pro Rata Fraction or part thereof to any Qualified Transferee.
In the event an Investor does not wish to purchase or to transfer his right to
purchase his Pro Rata Fraction, then any Investors who so elect shall have the
right to purchase, on a PRO RATA basis with any other Investors who so elect,
any Pro Rata Fraction not purchased by an Investor or Qualified Transferee. Each
Investor shall act upon the Offer as soon as practicable after receipt from the
Company of notice that it has not elected to purchase all of the offered Shares,
and in all events within fifteen (15) days after receipt thereof. Each Investor
shall have the right to accept the Offer as to all or part of the Remaining
Offered Shares offered thereby. In the event that an Investor shall elect to
purchase all or part of the Remaining Offered Shares covered by the Offer, said
Investor shall individually communicate in writing such election to purchase to
whichever of the Holders has made the Offer, which communication shall be
delivered by hand or mailed to such Holder at the address set forth in Section 7
below and shall, when taken in conjunction with the Offer be deemed to
constitute a valid, legally binding and enforceable agreement for the sale and
purchase of the Shares covered thereby.
In the event that the Company and the Investors, taken together, do not
purchase all of the Shares offered by a Holder pursuant to the Offer within 45
days after the Offer is delivered to the Company, such unsold Shares may be sold
by such Holder at any time within the 90-day period thereafter, but subject to
the provisions of Section 3 below. Any such sale shall be at not less than the
price and upon other terms and conditions, if any, not more favorable to the
purchaser than those specified in the Offer. Any Shares not sold within such
90-day period shall continue to be subject to the requirements of a prior offer
and re-sale pursuant to this Section.
For the purposes of this Agreement, "Stock" shall mean and include all
shares of Common Stock, and all other securities of the Company (including the
Preferred Stock) which may be exchangeable for, convertible into or issued in
exchange for or in respect of shares of Common Stock (whether by way of stock
split, stock dividends, combination, reclassification, reorganization or any
other means); references to "shares of Stock" shall mean shares of Stock on an
as-converted and as-exchanged for Common Stock basis. For purposes of this
Section 2, a "Qualified Transferee" of an Investor shall mean any person (i) who
is an Investor, (ii) who is an
Shareholders Agreement - Page 3
"affiliated person" of an Investor, as that term is defined in the Investment
Company Act of 1940 or (iii) who is a partner of an Investor.
3. Right of Participation in Sales by Holders. If at any time any
Holder wishes to sell, or otherwise dispose of any Shares owned by him to any
person (the "Purchaser") in a transaction which is subject to the provisions of
Section 2 hereof and subject to the exercise of rights under such Section 2,
each Investor shall have the right to require, as a condition to such sale or
disposition, that the Purchaser purchase from each of the Holder and such
Investors at the same price per Share and on the same terms and conditions as
involved in such sale or disposition by the Holder a number of shares of Stock
based upon a fraction, the numerator of which is the number of shares of Stock
of the Company then owned by the Holder or such participating Investor, as
applicable, and the denominator of which is the aggregate number of shares of
Stock held by the Holder and all participating Investors. Each Investor wishing
so to participate in any such sale or disposition shall notify the selling
Holder of such intention as soon as practicable after receipt of the Offer made
pursuant to Section 2, and in all events within fifteen (15) days after receipt
thereof. In the event that an Investor shall elect to participate in such sale
or disposition, said Investor shall individually communicate such election to
the selling Holder, which communication shall be delivered by hand or mailed to
such Holder at the address set forth in Section 7 below. The Holder and/or each
participating Investor shall sell to the Purchaser all, or at the option of the
Purchaser, any part of the Stock proposed to be sold by them at not less than
the price and upon other terms and conditions, if any, not more favorable to the
Purchaser than those originally offered; PROVIDED, HOWEVER, that any purchase of
less than all of such Stock by the Purchaser shall be made from the Holder
and/or each participating Investor based upon a fraction, the numerator of which
is the number of shares of Stock of the Company then owned by the Holder or such
participating Investor and the denominator of which is the aggregate number of
shares of Stock held by the Holder and all of the participating Investors. The
selling Holder or Investor shall use his or its best efforts to obtain the
agreement of the Purchaser to the participation of the participating Investors
in the contemplated sale, and shall not sell any Stock to such Purchaser if such
Purchaser declines to permit the participating Investors to participate pursuant
to the terms of this Section 3. The provisions of this Section 3 shall not apply
to the sale of any Shares by a Holder to an Investor pursuant to an Offer under
Section 2.
4. Permitted Transfers.
(i) Anything herein to the contrary notwithstanding, the provisions of
Sections 1, 2, 3 and 8 shall not apply to: (a) any transfer of Shares by a
Holder or Investor by gift or bequest or through inheritance to, or for the
benefit of, any member or members of his or her immediate family (which shall
include any spouse, lineal ancestor or descendant or sibling) or to a trust,
partnership or limited liability company for the benefit of such members; (b)
any transfer of Shares by a Holder or Investor to a trust in respect of which he
or she serves as trustee, provided that the trust instrument governing said
trust shall provide that such transferee, as trustee, shall retain sole and
exclusive control over the voting and disposition of said Shares until the
termination of this Agreement; (c) any sale of Common Stock in a public offering
pursuant either to a registration statement filed by the Company with the
Securities and Exchange Commission, in accordance with Rule 144 (including for
this purpose paragraph (f) of Rule 144) or in a broker
Shareholders Agreement - Page 4
transaction sale into the public markets made in reliance on the exemption
provided by Section 4(1) of the Securities Act such that all transfer
restrictions, and restrictive legends with respect thereto, are removed upon
consummation of the sale; (d) any repurchase of shares of Common Stock from
officers, employees, directors or consultants of the Company which are subject
to restrictive stock purchase agreements under which the Company has the option
to repurchase such shares upon the occurrence of certain events, including
termination of employment; and (e) any transfer to a Qualified Transferee.
(ii) In the event of any such transfer, other than pursuant to
subsection (i)(c) of this Section 4, the transferee of the Shares shall hold the
Shares so acquired with all the rights conferred by, and subject to all the
restrictions imposed by this Agreement, and as a condition to such transfer,
each such transferee shall execute and deliver an instrument of accession in the
form of Schedule II agreeing to be bound as a Holder or Investor, as applicable,
by the provisions of this Agreement.
5. Board of Directors.
Each of the parties covenants and agrees to vote, to the extent
possible, all shares of Stock of the Company now owned or hereafter acquired by
such party so that the Company's Board of Directors shall consist of no more
than seven (7) members. Any vacancy on the Board of Directors created by the
resignation, removal, incapacity or death of any person designated by the
holders of Preferred Stock in accordance with the Articles shall be filled by
another person designated by the holders of a majority of the Preferred Stock
and any vacancy on the Board of Directors created by the resignation, removal,
incapacity or death of any person designated by the holders of Common Stock in
accordance with the Articles shall be filled by another person designated by the
holders of a majority of the Common Stock. Subject to applicable regulations and
Nasdaq requirements, and for as long as this Agreement is in effect, each of the
parties further covenants and agrees to cause at least one of the directors
elected by the Preferred Stock to be a member of the Compensation Committee of
the Board of Directors, and the other director elected by the Preferred Stock to
be a member of the Audit Committee of the Board of Directors.
6. Termination. This Agreement, and the respective rights and
obligations of the parties hereto, shall terminate at such time that less than
25% of the shares of Preferred Stock issued under the Purchase Agreement remain
outstanding.
7. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered or mailed by first
class, registered or certified mail (air mail if to or from outside the United
States), return receipt requested, postage prepaid, if to each Holder at his
respective address set forth on Schedule I hereto or on the Instrument of
Accession pursuant to which he became a party to this Agreement, and if to the
Investors, at their respective addresses set forth on Schedule I hereto or to
such other address as the addressee shall have furnished to the other parties
hereto in the manner prescribed by this Section 9.
8. Lock-up Agreement. Each Holder and Investor hereby agrees not to
sell any Shares now owned or hereafter acquired by it without the prior written
consent of the Board of Directors of the Company (including the directors
elected by the holders of Preferred Stock) until
Shareholders Agreement - Page 5
the first to occur of (i) March 3, 2002 or (ii) the consolidation or merger of
the Company into or with any other entity or entities if the shareholders of the
Company immediately prior to such merger own, upon consummation of such merger,
securities representing less than a majority of the voting power of the Company.
9. Specific Performance. The rights of the parties under this Agreement
are unique and, accordingly, the parties shall, in addition to such other
remedies as may be available to any of them at law or in equity, have the right
to enforce their rights hereunder by actions for specific performance to the
extent permitted by law.
10. Legend. The certificates representing the Shares shall bear a
legend indicating the existence of the restrictions imposed hereby.
11. Entire Agreement. This Agreement and the Purchase Agreement
(including any and all exhibits, schedules and other instruments contemplated
thereby) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
between them or any of them as to such subject matter.
12. Waivers and Further Agreements. Any of the provisions of this
Agreement may be waived by an instrument in writing executed and delivered by
Investors holding at least a majority in interest of the Common Stock (including
for this purpose shares of Common Stock issuable upon conversion of Preferred
Stock) then held or deemed to be held by all Investors. Any waiver by any party
of a breach of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach of that provision or of any other provision
hereof. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as any other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement. Notwithstanding the foregoing, no waiver approved in accordance
herewith shall be effective if and to the extent that such waiver grants to any
one or more Investors any rights more favorable than any rights granted to all
other Investors or otherwise treats any one or more Investors differently than
all other Investors.
13. Amendments. Except as otherwise expressly provided herein, this
Agreement may not be amended except by an instrument in writing executed by (i)
the Company, (ii) Investors holding at least a majority in interest of the
shares of Common Stock held by the Investors (including for this purpose shares
of Common Stock issuable upon conversion of Preferred Stock) and (iii) Holders
holding a majority of the Shares held by all Holders under this Agreement.
14. Assignment; Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, legal representatives, successors and permitted transferees,
except as may be expressly provided otherwise herein.
15. Severability. In case any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this
Shareholders Agreement - Page 6
Agreement and such invalid, illegal and unenforceable provision shall be
reformed and construed so that it will be valid, legal, and enforceable to the
maximum extent permitted by law.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
18. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the internal laws of the Commonwealth of
Pennsylvania, without regard to its principles of conflicts of laws.
19. Additional Parties. Any purchaser of Preferred Stock pursuant to
the Purchase Agreement shall become a party to this Agreement by executing and
delivering to the Company a counterpart to this Agreement. Upon such execution
and delivery, such purchaser shall be deemed to be an "Investor" hereunder with
all of the rights and obligations thereof.
20. Shareholder Approval. Each Large Holder (as defined below) agrees
with the Investors that it shall, in person or by proxy at the shareholder
meeting of the Company convened pursuant to Section 5.13 of the Purchase
Agreement, vote all of its Shares in favor of the issuance of the securities to
be sold by the Company to the Investors (including any Additional Purchasers) at
the Subsequent Closing in light of the overall transaction contemplated by the
Purchase Agreement. "Large Holder" shall mean the four Holders identified as
such on Schedule I hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have executed this Shareholders
Agreement as a sealed instrument as of the day and year first above written.
FASTNET CORPORATION
By: /s/ Stephen Hurly
-----------------------------------
Name: Stephen Hurly
-----------------------------
Title: President & CEO
-----------------------------
INVESTORS:
----------
EDISON VENTURE FUND IV, L.P,
By: Edison Partners IV, L.P., its General Partner
By: /s/ Bruce Luehrs
-----------------------------------
Bruce Luehrs, General Partner
STRATTECH PARTNERS I, L.P.
By: Strattech Partners, LLC
By: /s/ Steve Holstad, Jr.
-----------------------------------
Name: Steve Holstad, Jr.
-----------------------------
Title: Managing Director
-----------------------------
[SIGNATURES OF HOLDERS CONTINUE ON NEXT PAGE]
HOLDERS:
--------
H&Q You Tools Investment Holding, L.P.
By:_____________________, its General Partner
By: /s/ Lisa L. Lewis
--------------------------------
Name: Lisa L. Lewis
--------------------------
Title: Attorney-in-fact, VP
--------------------------
Cybertech Wireless, Inc.
By: /s/ William D. Palma
--------------------------------
Name: William D. Palma
--------------------------
Title: President & CEO
-------------------------
/s/ Stephen A. Hurly
-----------------------------------
Stephen A. Hurly
/s/ Sonny C. Hunt
-----------------------------------
Sonny C. Hunt
SCHEDULE I
----------
FASTNET CORPORATION
SCHEDULE OF HOLDERS AND INVESTORS
---------------------------------
Names and Addresses No. of Shares
------------------- -------------
HOLDERS
-------
H&Q You Tools Investment Holding, L.P.* 3,033,333
One Bush St
San Francisco, CA 94104
Cybertech Wireless, Inc.* 2,000,000
Attention: Bill Palma, CEO
50 Chestnut Street
FI 10
Rochester, New York 14604
Stephen A. Hurly* 1,102,000
1649 Briarwood Circle
Bethlehem, Pennsylvania 18015
Sonny C. Hunt* 2,725,000
5285 Princeton Road
Macungie, Pennsylvania 18062
---------
TOTAL 8,860,333
* DENOTES A "LARGE HOLDER" WITHIN THE MEANING OF SECTION 20 HEREOF.
INVESTORS
---------
Edison Venture Fund IV, L.P. 2,088,684 shares of
1009 Lenox Drive Series A
Suite #4 Convertible
Lawrenceville, NJ 08648 Preferred Stock
Attn: Ross Martinson
Strattech Partners I, L.P. 417,737 shares of
3 Radnor Corporate Center Series A
Suite 304 Convertible
100 Matsonford Road Preferred Stock
Radnor, Pennsylvania 19087
SCHEDULE II
-----------
FASTNET CORPORATION
INSTRUMENT OF ACCESSION
-----------------------
The undersigned, _________________, as a condition precedent to
becoming the owner or holder of record of ___________________ (______) shares of
the ___________ stock, no par value per share, of FASTNET CORPORATION, a
Pennsylvania corporation (the "Company"), hereby agrees to become a Holder under
that certain Shareholders Agreement dated as of September 5, 2001 by and among
the Company and other shareholders of the Company. The undersigned acknowledges
that he/she/it has read, and understands, the Shareholders Agreement. This
Instrument of Accession shall take effect and shall become an integral part of,
and the undersigned shall become a party to and bound by, said Shareholders
Agreement immediately upon execution and delivery to the Company of this
Instrument.
IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly executed
by or on behalf of the undersigned, as a sealed instrument under the laws of the
Commonwealth of Pennsylvania, as of the date below written.
Signature:
____________________________________
(Print Name) _______________________
Address:
____________________________________
____________________________________
Date: ______________________________
Accepted:
FASTNET CORPORATION
By: ________________________________
Name:
Title:
Date: ______________________________