EXHIBIT 10.21
H&Q You Tools Investors, L.P.
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
August 9, 1999
Xxxxx X. Xxx Xxxxx
FASTNET Corporation
Two Xxxxxxxx Place -- Suite 130
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Dear Xxxxx:
In connection with and in consideration for the proposed public offering (the
"Offering") of common stock of FASTNET Corporation (the "Company"), this
letter confirms the agreement of H&Q You Tools Investors, L.P. ("H&Q") to
(i) amend the Convertible Promissory Note between H&Q and the Company, dated
May 27, 1998 (the "Note"), to extend the maturity date of the Note from
November 30, 1999 to January 31, 2001, effective immediately, and (ii) convert
the Note into shares of the Company's common stock pursuant to the terms
relating to the conversion option that are set forth in the Note, effective
immediately prior to the consummation of the Offering.
H&Q YOU TOOLS INVESTORS, L.P.
/s/ Xxxxxx Xxxx
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By: Xxxxxx Xxxx
Title: Principal
Acknowledged and Agreed to:
FASTNET CORPORATION
/s/ Xxxxx X. Xxx Xxxxx
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By: Xxxxx X. Xxx Xxxxx
Title: Chief Executive Officer
CHANGE OF TERMS
TO
PROMISSORY NOTE
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Borrower: Lender:
FASTNET CORPORATION H&Q YOU TOOLS INVESTMENT HOLDING, L.P.
(FORMERLY YOU TOOLS CORPORATION) Xxx Xxxx Xxxxxx
0000 Xxxxxxxx Xxxxxx Xxx Xxxxxxxxx, XX 00000
Xxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
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Principal Amount: $3,050,000.00 Original Date of Note: May 28, 1998
Date of Change of Terms: May 14, 1999
The Promissory Note referenced above is amended as follows:
1. "Initial Conversion Price" shall be One and 50/100 Dollars ($1.50),
notwithstanding the occurrence of a Qualified Equity Financing.
All other terms to the Promissory Note referenced above remain unchanged.
BORROWER:
FASTNET CORPORATION
By: /s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
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Title: President
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AGREEMENT
Whereas, You Tools Corporation ("You Tools") wants to borrow
$3,050,000 from H&Q You Tools Investment Holding, L.P., ("H&Q"), pursuant
to the terms of the Convertible Promissory Note attached hereto (the "Note");
and
Whereas, the Note is convertible into common stock of You Tools
pursuant to the terms of the Note; and
Whereas, the conversion of the Note may require You Tools to
authorize an additional amount of shares necessary to allow H&Q to exercise
the Convertible Option pursuant to the Note; and
Whereas, H&Q requires assurance that in the event H&Q determines to
convert the Note that the authorization of the additional amount of shares
required to effect such conversion will be approved by the voting majority of
investors in You Tools;
Whereas, Xxxxx Xxxx, Xxxxx Xxx Xxxxx, X. Xxxxxxxxxx and X. Xxxxxx
are investors in You Tools (each, an "Investor"), and in aggregate have a
voting majority of the shares of You Tools;
Whereas, each Investor recognizes the benefit of a loan made to You
Tools pursuant to the Note,
Therefore, each Investor agrees as follows:
1. Each Investor agrees that should H&Q elect to convert its Note, each
Investor will vote to approve the authorization of any additional
shares required to effect such conversion; and
2. Each Investor agrees that should he or she sell any of their shares
of You Tools to any other party, they will first obtain in writing
from such acquiring party written acknowledgment acceptable to H&Q
that such acquiring party will also agree that should H&Q elect to
convert its Note, such acquiring party will vote to approve the
authorization of any additional shares required to effect such
conversion.
Agreed: Dated: 5/28/98
/s/ Xxxxx Xxxx /s/ Xxxxx Xxx Xxxxx
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Xxxxx Xxxx Xxxxx Xxx Xxxxx
/s/ Xxxx Xxxxxxxxxx /s/ Xxxxxxx Xxxxxx
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X. Xxxxxxxxxx X. Xxxxxx
ADDENDUM TO CONVERTIBLE PROMISSORY NOTE
With regard to paragraph IV titled "Reserving Shares" that sentence
should be replaced as follows:
Upon notice by Lender of the intent to exercise the Conversion Option
Borrower agrees to immediately amend its Articles of Incorporation to
authorize an additional amount of shares required so as to allow Lender
to exercise the Conversion Option pursuant to the provisions of this
Note.
All other terms and conditions of the Convertible Promissory Note dated
May 28, 1998 shall remain the same.
BORROWER:
YOU TOOLS CORPORATION:
By: /s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
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Title: President
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CONVERTIBLE PROMISSORY NOTE
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BORROWER: LENDER
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YOU TOOLS CORPORATION H&Q YOU TOOLS INVESTMENT HOLDING, L.P.
0000 Xxxxxxxx Xxxxxx One Xxxx Street
Xxx Xxxxxxxx Xxxxx, Xxxxx 000 Xxx Xxxxxxxxx, XX 00000
Xxxxxxxxx, XX 00000
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Principal Amount: $3,050,000.00 Interest Rate: 7.00% Date of Note: MAY 28, 1998
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PROMISE TO PAY: YOU TOOLS CORPORATION, A.K.A. FASTNET ("Borrower") promises
to pay to H&Q YOU TOOLS INVESTMENT HOLDING, L.P. ("Lender"), or order, in
lawful money of the United States of America, the principal amount of THREE
MILLION FIFTY THOUSAND DOLLARS ($3,050,000.00), or so much as may be
outstanding, together with interest on the unpaid outstanding principal
balances from the date of this Note until such balance is paid in full.
PAYMENT: Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to collection costs
and late charges, then fees, and then to accrued unpaid interest, and any
remaining amount to principal.
FIXED INTEREST RATE: The interest rate on this Loan is seven percent (7.00%) per
annum, or, if lower, the maximum rate of interest allowed by applicable law.
Interest shall be computed on a 365 days per year simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 365 days,
times the outstanding principal balance, times the actual number of days that
the principal balance was outstanding.
INTEREST ONLY PAYMENTS: Borrower will pay interest in arrears on the principal
amount outstanding on this Note with quarterly payments beginning on June 30,
1998 and continuing on the last day of each September, December, March and June
thereafter through Maturity and on the Maturity Date.
MATURITY: The Borrower shall repay all principal and any other amounts
outstanding on this Note including interest on November 30, 1999, (the "Maturity
Date"). Borrower may not prepay the principal on this Note before the Maturity
Date. The Maturity Date may be modified by the Early Acceleration provision
below.
EARLY ACCELERATION: All principal, interest, and any other amounts outstanding
on this Note shall become immediately due and payable upon the sole discretion
of Lender if (a) there is a Change of Control, as defined in the Loan and
Security Agreement, or (b) there is a Qualified Equity Financing, as defined
below.
LOAN FEE: This Note is subject to a Thirty Two Thousand Five Hundred Dollar
($32,500) loan fee.
REPAYMENT: Borrower agrees that all loan fees are earned fully as of the date
received by Lender and will not be subject to refund, except as otherwise
required by law.
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Promissory Note, Page 2
CONVERSION OPTION: The Lender may, at any time on or before the Maturity Date,
require the Borrower to convert all or part of the principal into a number of
shares of common stock equal to the quotient of (a) the principal amount subject
to conversion divided by (b) the Conversion Price, as defined herein, which
option shall be referred to as the "Conversion Option". Borrower agrees to
deliver to Lender shares of the Borrower's common stock pursuant to the
provisions herein within seven (7) days of the receipt of any Conversion Notice.
I. CERTAIN DEFINITIONS. As used in this Promissory Note the
following terms shall have the following respective meanings:
(a) "Common Stock" shall mean shares of the presently authorized
common stock of the Borrower and any stock into which such common stock
may hereafter be exchanged.
(b) "Conversion Notice" shall mean a written notice given to the
Borrower from the Lender in which the Lender notifies the Borrower that
the Lender elects to exercise the Conversion Option for all or part of
the principal on this Note.
(c) "Conversion Price" shall be the Initial Conversion Price as
adjusted herein.
(d) "Convertible Amount" shall mean the aggregate dollar amount
which is subject to conversion pursuant the Conversion Option.
(e) "Convertible Securities" shall mean any evidence of
indebtedness, shares of stock or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(f) "Initial Conversion Price" shall mean the price per share at
which the Borrower issues additional shares of Common Stock, Options or
Convertible Securities in a Qualified Equity Financing, or if no
Qualified Equity Financing has occurred before Lender elects to exercise
its Conversion Option, then the Initial Conversion Price shall mean One
and 50/100 Dollars ($1.50).
(g) "Options" shall mean the rights, options or warrants to
subscribe for, purchase or otherwise acquire shares of Common Stock or
Convertible Securities.
(h) "Qualified Equity Financing" shall mean the sale of Common
Stock or Convertible Securities by the Borrower to "accredited investors"
within the meaning of Rule 501 of Regulation D under the Securities Act
of 1933 for gross proceeds of Three Million Dollars ($3,000,000) or more
after the date of this Note and prior to the exercise of the Conversion
Option.
II. ADJUSTMENTS. The Conversion Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as
follows:
(a) RECLASSIFICATION, REORGANIZATION, CONSOLIDATION OR MERGER. In
the case of any reclassification of the Common Stock, or any
reorganization, consolidation or merger of the Borrower with or into
another corporation (other than a merger or reorganization with respect
to which the Borrower is the continuing corporation and which does not
result in any reclassification of the Common Stock), each share of
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Promissory Note, Page 3
Common Stock theretofore issuable upon exercise of any Conversion Option,
shall be properly adjusted as to the number and kind of securities
receivable upon the exercise of any Conversion Option, such that Lender
shall receive the number and kind of securities which a holder of Common
Stock would have been entitled to receive after the happening of any of
the events described in this subsection (a) had the conversion pursuant
to any Conversion Option been made immediately prior to the happening of
such event or the record date for such event, whichever is earlier. The
provisions of this subsection (a) shall similarly apply to successive
reclassifications, reorganizations, consolidations or mergers.
(b) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If Borrower at
any time prior to Lender's exercise of any Conversion Option shall split,
subdivide or combine the Common Stock of the Borrower, the Conversion
Price shall be proportionately decreased in the case of a split or
subdivision or proportionately increased in the case of a combination.
Any adjustment under this subsection (b) shall become effective when the
split, subdivision or combination becomes effective.
(c) STOCK DIVIDENDS. If the Borrower at any time prior to Lender's
exercise of any Conversion Option shall pay a dividend with respect to
Common Stock of the Borrower payable in shares of Common Stock, Options,
or Convertible Securities, the Conversion Price shall be adjusted, from
and after the date of determination of the shareholders entitled to
receive such dividend or distributions, to that price determined by
multiplying the Conversion Price in effect immediately prior to such date
of determination by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to
such dividend or distribution, and (ii) the denominator of which shall be
the total number of shares of Common Stock outstanding immediately after
such dividend or distribution (including Common Stock issuable upon
exercise, conversion or exchange of any Option or Convertible Securities
issued as such dividend or distribution). If the Options or Convertible
Securities issued as such dividend or distribution by their terms
provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the, or any increase by the number of shares
issuable upon exercise, conversion or exchange thereof (by change of rate
or otherwise), the Conversion Price shall, upon any such decrease or
increase becoming effective, be reduced to reflect such decrease or
increased to reflect such increase as if such decrease or increase became
effective immediately prior to the issuance of the Options or Convertible
Securities as the dividend or distribution. Any adjustment under this
subsection (c) shall become effective on the record date.
(d) OTHER SECURITIES. In the event the Borrower at any time prior
to Lender's exercise of any Conversion Option makes, or fixes a record
date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Borrower other than shares of Common Stock, then, and in each such event,
provision shall be made so that the Lender shall receive, upon exercise
of any Conversion Option, in addition to the number of shares of Common
Stock receivable thereupon, the amount of securities of the Borrower
which the Lender would have received had the Convertible Amounts been
exercised for such Common Stock on the date of such event and had the
Lender thereafter, during the period from the date of such event to and
including the date of exercise, retained such securities receivable by
Lender as aforesaid during such period, subject to all other adjustment
called for during such period under the provisions of this Note with
respect to the rights of the Lender.
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Promissory Note, Page 4
(e) NEW SECURITIES. If the Borrower, at any time after a Qualified
Equity Financing and prior to the Maturity Date, shall issue additional
shares of Common Stock, Options or Convertible Securities at a price per
share below the Conversion Price, the Conversion Price shall be reduced
to such price. Notwithstanding the foregoing, the Borrower shall not be
required to make any adjustment to the Conversion Price in the case of
the issuance of up to Two Million shares of Common Stock or Convertible
Securities upon the exercise of any options or warrants to employees,
consultants or directors of Borrower.
III. FRACTIONAL SHARES. Pursuant to the Conversion Option no
fractions of shares of Common Stock shall be issued, but in lieu thereof
Borrower shall pay a cash adjustment to Lender in respect of such
fractional interest in an amount equal to such fractional interest
multiplied by the then applicable Conversion Price.
IV. RESERVING SHARES. Borrower shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the Conversion Options of Lender, as such number of
shares of Common Stock as shall from time to time be adjusted pursuant to
the provisions of this Note.
LOAN AND SECURITY AGREEMENT. This Note is subject to and shall be governed by
all the terms and conditions of the Loan and Security Agreement dated as of the
Date of this Note first written above between the Borrower and Lender as amended
from time to time (the "Loan and Security Agreement").
COLLATERAL: This Note is secured by certain collateral of the Borrower as more
thoroughly described in the Loan and Security Agreement and the Intellectual
Property Security Agreement dated as of the Date of this Note first written
above, between Borrower and Lender.
SERVICE CHARGE: Since it would be impractical or extremely difficult to fix
Lender's actual damages for collecting and accounting for a late payment, if any
payment to Lender required herein is not paid on or before three business days
after its due date, Borrower shall pay to Lender and amount equal to five
percent of any such late payment (but not less than $10 nor more than $250).
Borrower shall also pay interest on any such late payment from the due date
thereof until the date paid at the lesser of 18% per annum or the maximum rate
allowed by law.
WAIVER OF JURY TRIAL: BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER TO
THIS NOTE BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION.
BORROWER:
YOU TOOLS CORPORATION
BY: /s/ Xxxxx Xxxx
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NAME: Xxxxx Xxxx
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TITLE: President
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Promissory Note, Page 5
