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Exhibit 4.6
FORM OF AMENDED AND RESTATED PLEDGE AGREEMENT
This AMENDED AND RESTATED PLEDGE AGREEMENT (this "Pledge
Agreement") is made and entered into as of _________, 2000 by PATHNET, INC., a
Delaware corporation (the "Pledgor"), THE BANK OF NEW YORK, a New York banking
corporation, having an office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ 21 West, New York,
New York 10286, as trustee (the "Trustee") for the holders from time to time
(the "Holders") of the Notes (as defined herein) issued by the Pledgor under the
Indenture referred to below and THE BANK OF NEW YORK, as securities intermediary
(the "Pathnet Securities Intermediary").
W I T N E S S E T H
WHEREAS, the Pledgor and the Trustee have entered into that
certain indenture dated as of April 8, 1998 (the " Original Indenture"),
pursuant to which the Pledgor issued on April 8, 1998 $350,000,000 in aggregate
principal amount of 12-1/4 % Senior Notes due 2008 (and along with such notes
that may from time to time be issued in substitution therefor, the "Notes"); and
WHEREAS, the Pledgor agreed, pursuant to the Original
Indenture, to (i) purchase or cause the purchase of Pledged Securities (as
defined in the Original Indenture) in an amount that would be sufficient upon
receipt of scheduled interest and principal payments in respect thereof to
provide for the payment of the first four scheduled interest payments due on the
Notes and (ii) place such Pledged Securities (or cause them to be placed) in an
account maintained by the Trustee with the Pathnet Securities Intermediary for
the benefit of Holders of the Notes; and
WHEREAS, the Pledgor agreed to purchase United States Treasury
securities in an amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Pledgor and delivered to
the Trustee, upon receipt of scheduled interest and principal payments of such
securities, to provide for payment in full of each of the first four scheduled
interest payment due on the Notes and interest on the Notes in the event that
the Notes become due and payable prior to such time as the first four scheduled
interest payments thereon shall have been paid in full (the "Original
Obligations"); and
WHEREAS, the Pledgor agreed to (i) pledge to the Trustee for
its benefit and the ratable benefit of the Holders of the Notes a security
interest in the Pledged Securities and related collateral and (ii) execute and
deliver the Pledge Agreement dated as of April 8, 1998 by and between the
Pledgor and the Trustee in order to secure the payment and performance by the
Pledgor of all the Original Obligations (the "Original Pledge Agreement"); and
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WHEREAS, pursuant to the Original Pledge Agreement the Trustee
opened an account (the "Escrow Account") with the Pathnet Securities
Intermediary, at its office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Account No. 281251, in the name of The Bank of New York, as Trustee, for the
benefit of the Holders of the 12-1/4% Senior Notes due 2008 of Pathnet, Inc.
(along with such notes that may from time to time be issued in substitution
therefor), with respect to which the Trustee is the sole entitlement holder and
which is under the sole dominion and control of the Trustee but subject to the
terms of the Original Pledge Agreement.
WHEREAS, the first three scheduled interest payments on the
Notes have been paid in accordance with the terms of the Original Indenture; and
WHEREAS, Pathnet has entered into a Contribution and
Reorganization transaction (the "Transaction") as at the date hereof, as more
particularly described in the Registration Statement of Pathnet
Telecommunications, Inc., and filed with the SEC with Registration No.
333-91469; and
WHEREAS, in connection with the Transaction, the Original
Indenture has been supplemented by that Supplemental Indenture of even date
herewith by and among the Pledgor, Pathnet Telecommunications Inc., and the
Trustee (the "Supplemental Indenture"); and
WHEREAS, pursuant to the Supplemental Indenture Pathnet has
agreed to (i) purchase and pledge to the Trustee additional United States
Treasury securities as security for the benefit of the holders of the Notes with
respect to the fifth scheduled interest payment on the Notes on the same terms
as the Original Pledge Agreement; and (ii) execute and deliver this Amended and
Restated Pledge Agreement in order to secure the payment in full of the fourth
and fifth scheduled interest payments due on the Notes and interest on the Notes
in the event that the Notes become due and payable prior to such time as the
fourth and fifth scheduled interest payments thereon shall have been paid in
full (the "Outstanding Obligations").
Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to them in the Indenture. References herein to the
"Indenture" shall be deemed to be references to the Original Indenture as
amended by the Supplemental Indenture unless expressly stated to the contrary.
NOW THEREFORE, in consideration of the mutual promises herein
contained and in order to induce the Holders of the Notes to consent to the
amendments to the Original Indenture contained in the Supplemental Indenture,
the Pledgor hereby agrees with the Trustee, for the benefit of the Trustee and
for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Pledge and Grant of Security Interest. As security
for the prompt and complete payment and performance when due of the Outstanding
Obligations (whether at the stated maturity or otherwise), the Pledgor hereby
pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and grants to the Trustee for its benefit and for the
ratable benefit of the Holders of the Notes, a continuing
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first priority security interest in and to all of the Pledgor's right, title and
interest in, to and under the following (wherever located), whether investment
property, general intangibles, other rights, interests, claims and remedies or
proceeds or otherwise (collectively, the "Pledged Collateral"): (a) the United
States Treasury securities identified by CUSIP Number in Exhibit A to this
Pledge Agreement (the "Pledged Securities"), (b) any and all applicable Security
Entitlements to the Pledged Securities, (c) the Escrow Account and all funds,
certificates, instruments, assets and properties, if any, from time to time
carried therein or representing or evidencing the Escrow Account (d) any and all
related accounts in which Security Entitlements to the Pledged Securities are
carried and (e) all proceeds of any and all of the Pledged Collateral
(including, without limitation, proceeds that constitute property of the types
described in clauses (a) - (d) of this Section 1).
SECTION 2. Security for Outstanding Obligation. This Pledge
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Outstanding Obligations.
SECTION 3. Delivery of New Pledged Securities; Escrow Account;
Interest. (a) The Pledged Securities shall, if and to the extent that
they have not previously been pledged and transferred to the Trustee
pursuant to the Original Pledge Agreement (such unpledged and
untransferred securities being hereinafter referred to as the "New
Pledged Securities" and the Pledged Collateral, in so far as it relates
to the New Pledged Securities being referred to as the New Pledged
Collateral) be pledged and transferred to the Trustee and the Trustee
shall become the holder of a Security Entitlement to the New Pledged
Securities through action by the Pathnet Securities Intermediary, as
confirmed (in writing or electronically or otherwise in accordance with
standard industry practice) to the Trustee by the Pathnet Securities
Intermediary (i) indicating by book-entry that the New Pledged
Securities and all Security Entitlements thereto have been credited to
the Escrow Account, or (ii) acquiring the New Pledged Securities or a
Security Entitlement thereto for the Trustee and accepting the same for
credit to the Escrow Account.
(b) The Trustee has pursuant to the Original Pledge Agreement,
established with the Pathnet Securities Intermediary the Escrow Account
on the books of the Pathnet Securities Intermediary as a Securities
Account segregated from all other custodial or collateral accounts,
such Escrow Account to be maintained at the offices of the Pathnet
Securities Intermediary at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and the Pathnet Securities Intermediary has established
and maintained a Securities Account at the Federal Reserve Bank of New
York ("FRBNY"). Upon transfer of the New Pledged Securities to the
Pathnet Securities Intermediary (or the Pathnet Securities
Intermediary's acquisition of the Security Entitlements thereto), as
confirmed to the Pathnet Securities Intermediary by FRBNY or another
securities intermediary, the Pathnet Securities Intermediary shall make
appropriate book entries indicating that the New Pledged Securities
and/or such Security Entitlement have been credited to the Trustee and
the Escrow Account and that all of the Pledged
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Securities are therefore credited to the Trustee and the Escrow
Account. Subject to the other terms and conditions of this Pledge
Agreement, all funds or other property held by the Trustee pursuant to
this Pledge Agreement and the Original Pledge Agreement shall be held
in the Escrow Account subject (except as expressly provided in Section
4(a), (b) and (c) hereof) to the exclusive dominion and control
(including "control" as defined in Section 9-115(l)(e) of the UCC) of
the Trustee and exclusively for the benefit of the Trustee and for the
ratable benefit of the Holders of the Notes and segregated from all
other funds or other property otherwise held by the Trustee.
(c) The Trustee shall, in accordance with all applicable laws,
have sole dominion and control (including "control" as defined in UCC
Section 9-115(l)(e)) over the Escrow Account, and it shall be a term
and condition of the Escrow Account and the Pledgor irrevocably
instructs the Trustee, notwithstanding any other term or condition to
the contrary in any other agreement, that no Pledged Collateral shall
be released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person except as expressly
provided in this Pledge Agreement.
(d) The Trustee shall, in accordance with and subject to all
applicable laws, be the sole entitlement holder of, and have the sole
power to originate "Entitlement Orders" (as defined in UCC Section
8-102(a)(8)) with respect to, the Escrow Account and all United States
Treasury securities held therein, and it shall be a term and condition
of the Escrow Account that the Trustee shall have the right to issue
such Entitlement Orders with respect to the Escrow Account and all
assets and properties from time to time carried in the Escrow Account,
including such securities, Security Entitlements and other "Financial
Assets" (as defined in UCC Section 8-102(a)(9)) without further consent
of the Pledgor or any other Person (except, to the extent required
under the Indenture, of the Holders), and that no Pledged Collateral
shall be released to or for the account of, or withdrawn by or for the
account of, the Pledgor or any other Person except as expressly
provided in this Pledge Agreement.
(e) All Pledged Collateral shall be retained in the Escrow
Account pending disbursement pursuant to the terms hereof.
(f) Concurrently with the execution and delivery of this
Pledge Agreement the Trustee and the Pathnet Securities Intermediary
are delivering to the Pledgor a duly executed certificate, in the form
of Exhibit A hereto, of an officer of the Trustee, confirming the
Trustee's receipt and holding of the Pledged Securities or a Security
Entitlement thereto and the crediting of the Pledged Securities or such
Security Entitlement to the Escrow Account, all in accordance with this
Pledge Agreement.
(g) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor shall deliver to the Trustee
acknowledgement copies or stamped receipt copies of proper financing
statements, duly filed under the UCC
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of the State of New York, covering the New Pledged Collateral described
in this Pledge Agreement.
(h) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor shall deliver to the Trustee an opinion
of a nationally recognized firm of independent public accountants,
selected by the Pledgor, substantially in the form of Exhibit B
hereto.]
SECTION 4. Disbursements.
(a) At least three Business Days prior to the due date of each
of the fourth or the fifth scheduled interest payments on the Notes,
the Pledgor may, pursuant to written instructions given by the Pledgor
to the Trustee (a "Company Order"), direct the Trustee to release from
the Escrow Account and pay to the Holders of the Notes on behalf of the
Issuer proceeds sufficient to provide for payment in full of such
interest then due on the Notes. Upon receipt of a Company Order, the
Trustee will take any action necessary to provide for the payment of
the interest on the Notes in accordance with the Company Order and the
payment provisions of the Indenture to the Holders of the Notes from
(and to the extent of) proceeds of the Pledged Securities in the Escrow
Account. Nothing in this Section 4 shall affect the Trustee's rights to
apply the Pledged Collateral to the payments of amounts due on the
Notes upon acceleration thereof.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Pledged Collateral is security from a
source of funds other than the Escrow Account ("Other Funds"), the
Pledgor may, after payment in full of such interest payment, direct the
Trustee pursuant to a Company Order to release to the Pledgor or to
another party at the direction of the Pledgor (the "Pledgor's
Designee") proceeds from the Escrow Account in an amount less than or
equal to the amount of Other Funds applied to such interest payment.
Upon receipt by the Trustee of such Company Order and provided the
Trustee has received such interest payment, if no Default or Event of
Default (as defined in the Indenture) shall have occurred and be
continuing, the Trustee shall pay over to the Pledgor or the Pledgor's
Designee, as the case may be, the requested amount from proceeds in the
Escrow Account as soon as practicable. Concurrently with any release of
funds to the Pledgor pursuant to this Section 4(b), the Pledgor shall
deliver to the Trustee a certificate signed by an officer of the
Pledgor stating that the Pledgor has made the interest payment from a
source of funds other than the Escrow Account, and that such release
has been duly authorized by the Pledgor and will not contravene any
provision of applicable law or the Certificate of Incorporation or the
By-laws of the Pledgor or any material agreement or other material
instrument binding upon the Pledgor or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Pledgor or any of its subsidiaries or
result in the creation or imposition of any Lien on any assets of the
Pledgor, except for the security interest granted under the Pledge
Agreement.
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(c) If at any time the principal of and interest on the
Pledged Securities exceeds 100% of the amount sufficient, in the
written opinion of a nationally recognized firm of independent
accountants selected by the Pledgor and delivered to the Trustee, to
provide for payment in full of the remaining fourth and fifth scheduled
interest payments due on all of the outstanding Notes, the Pledgor may
direct the Trustee to release any such excess amount to the Pledgor or
to any Pledgor's Designee. Upon receipt of a Company Order (which shall
include a certificate from such nationally recognized firm of
independent accountants stating the amount by which the Pledged
Securities exceed the amount required to be held in the Escrow
Account), if no Default or Event of Default (as defined in the
Indenture) shall have occurred and be continuing, the Trustee shall pay
over to the Pledgor or the Pledgor's Designee, as the case may be, any
such excess amount.
(d) Upon payment in full of the Outstanding Obligations, or if
the Company shall become obligated under the Indenture to redeem all of
the outstanding Notes and such Notes shall have been redeemed, then, if
no Default or Event of Default (as defined in the Indenture) shall have
occurred and be continuing, the security interest in the Pledged
Collateral evidenced by this Pledge Agreement will automatically
terminate and be of no further force and effect and the Pledged
Collateral shall promptly be paid over and transferred to the Pledgor.
Furthermore, upon the release of any Pledged Collateral from the Escrow
Account in accordance with the terms of this Pledge Agreement, whether
upon release of Pledged Collateral to Holders as payment of interest or
otherwise, the security interest evidenced by this Pledge Agreement in
such released Pledged Collateral will automatically terminate and be of
no further force and effect.
(e) At least three Business Days prior to the due date of each
of the fourth and fifth scheduled interest payments on the Notes, the
Pledgor shall give the Trustee notice (by Company Order) as to whether
such interest payment will be made pursuant to Section 4(a) or 4(b) and
the respective amounts of interest that will be paid from the Escrow
Account and from Other Funds. Any Other Funds to be used to make any
interest payment shall be delivered to the Trustee, in immediately
available funds, prior to 10:00 a.m. (New York City time) on such
interest payment date. If no such notice is given or such Other Funds
have not been so delivered, the Trustee will act pursuant to Section
4(a) as if it had received a Company Order pursuant thereto for the
payment in full of the interest then due from the Escrow Account.
(f) The Trustee shall liquidate Pledged Collateral in the
Escrow Account (pursuant to written instructions from Pledgor) in order
to make any scheduled payment of interest unless there are sufficient
funds in the Escrow Account on such interest payment date.
(g) Nothing contained in Section 1, Section 3, this Section 4,
Section 11 or any other provision of this Pledge Agreement shall (i)
afford the Pledgor any right to issue Entitlement Orders with respect
to any Security Entitlement to
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the Pledged Securities or any Securities Account in which any such
Security Entitlement may be carried, or otherwise afford the Pledgor
rights to of any such Security Entitlement or (ii) except as otherwise
specified under this Agreement (or required by applicable law) give
rise to any other rights of the Pledgor with respect to the Pledged
Securities, any Security Entitlement thereto or any Securities Account
in which any such Security Entitlement may be carried (except as
expressly provided in Sections 4(a), (b) and (c) hereof) of the Trustee
in its capacity as such (and not as a securities intermediary).
SECTION 5. Representations and Warranties. The Pledgor hereby
represents and warrants that, as of the date hereof.
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge
Agreement will not contravene any provision of applicable law or
statute or the organization documents of the Pledgor or any material
agreement or other material instrument binding upon the Pledgor or any
of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Pledgor
or any of its subsidiaries, or result in the creation or imposition of
any Lien on any assets of the Pledgor, except for the security
interests granted under this Pledge Agreement; no consent, approval,
authorization or order of, or qualification with, or other action by,
any governmental or regulatory body or agency or any third party is
required (i) for the execution, delivery or performance by the Pledgor
of this Pledge Agreement, (ii) for the grant by the Pledgor of the
security interest granted hereby, for the pledge by the Pledgor of the
Pledged Collateral pursuant to this Pledge Agreement, (iii) for the
perfection and maintenance of the pledge and security interest created
hereby (including the first-priority nature of such pledge and security
interest, assuming compliance by the Pathnet Securities Intermediary
with all obligations contained in this Pledge Agreement or (iv) except
for any such consents, approvals, authorizations or orders required to
be obtained by the Trustee (or the Holders) for reasons other than the
consummation of this transaction, for the exercise by the Trustee of
the rights provided for in this Pledge Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Pledge Agreement.
(b) Immediately before the depositing the New Pledged
Securities into the Escrow Account, the Pledgor is the legal and
beneficial owner of the New Pledged Collateral free and clear of any
Lien or claims of any person or entity (except for the security
interests granted under this Pledge Agreement). No financing statement
or other instrument similar in effect covering the Pledgor's interest
in the Pledged Securities is on file in any public office, other than
any financing statements filed pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized, validly
executed and delivered by the Pledgor and assuming the due
authorization, execution and delivery thereof by the Trustee,
constitutes a valid and binding agreement of the Pledgor, enforceable
against the Pledgor in accordance with its terms, except as
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(i) the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, preference, reorganization, moratorium or
similar laws now or hereafter in effect relating to or affecting
creditors' rights or remedies generally, (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability, (iii) the exculpation provisions and rights to
indemnification hereunder may be limited by U.S. federal and state
securities laws and public policy considerations and (iv) the waiver of
rights and defenses contained in Section 11(b), Section 15.11 and
Section 15.15 hereof may be limited by applicable law.
(d) Upon the transfer to the Trustee of the New Pledged
Securities and the acquisition by the Trustee of a Security Entitlement
thereto in accordance with Section 3, and the compliance by the Pathnet
Securities Intermediary with the provisions of this Pledge Agreement,
the pledge of and grant of a security interest in the Pledged
Collateral securing the payment of the Outstanding Obligations for the
benefit of the Trustee and the Holders of the Notes will constitute a
valid first priority perfected security interest in such Pledged
Collateral, enforceable as such against all creditors of the Pledgor
(and any persons purporting to purchase any of the Pledged Collateral
from the Pledgor) and all filings and actions (other than the transfer
to the Trustee of the Pledged Securities) necessary or desirable to
perfect and protect such security interest have been duly taken.
(e) There are no legal or governmental proceedings pending or,
to the best of the Pledgor's knowledge, threatened to which the Pledgor
or any of its subsidiaries is a party or to which any of the properties
of the Pledgor or any such subsidiary is subject that would materially
adversely affect the power or ability of the Pledgor to perform its
obligations under this Pledge Agreement or to consummate the
transactions contemplated hereby.
(f) The pledge of the Pledged Collateral pursuant to this
Pledge Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default (as defined herein) exists.
SECTION 6. Further Assurances. The Pledgor will, promptly upon
request by the Trustee, execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, all in form and substance reasonably
satisfactory to the Trustee, execute and deliver any instruments to the Trustee
and take any other actions that are necessary or desirable, to perfect, continue
the perfection of, or protect the first priority of the Trustee's security
interest in and to the Pledged Collateral, to protect the Pledged Collateral
against the rights, claims, or interests of third persons (other than any such
rights, claims or interests created by or arising through the Trustee), to
enable the Trustee to enforce its rights and remedies hereunder, or to effect
the purposes of this Pledge Agreement. A photocopy or other reproduction of this
Agreement or any financing statement covering the Pledged
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Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. The Pledgor will promptly pay all reasonable costs
incurred in connection with any of the foregoing. The Pledgor also agrees to
take all actions that are necessary to perfect or continue the perfection of, or
to protect the first priority of, the Trustee's security interest in and to the
Pledged Collateral, including the filing of all necessary financing and
continuation statements, and to protect the Pledged Collateral against the
rights, claims or interests of third persons (other than any such rights, claims
or interests created by or arising through the Trustee).
SECTION 7. Covenants. The Pledgor covenants and agrees with
the Trustee and the Holders of the Notes that from and after the date of this
Pledge Agreement until the payment in full in cash of the Outstanding
Obligations:
(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to,
any of the Pledged Collateral or its beneficial interest therein, and
(ii) it will not create or permit to exist any Lien or other adverse
interest in or with respect to its beneficial interest in any of the
Pledged Collateral (except for the security interests granted under
this Pledge Agreement) and at all times will be the sole beneficial
owner of the Pledged Collateral; and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or
inhibit the Trustee's rights or remedies hereunder, including, without
limitation, the Trustee's right to sell or otherwise dispose of the
Pledged Collateral or (ii) fail to pay or discharge any tax, assessment
or levy of any nature with respect to its beneficial interest in the
Pledged Collateral not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment with
respect to such beneficial interest.
SECTION 8. Power of Attorney. Upon the occurrence of an Event
of Default, in addition to all of the powers granted to the Trustee pursuant to
the Indenture, the Pledgor hereby appoints and constitutes the Trustee as the
Pledgor's attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in the
Trustee's discretion, to take any action and to execute any instrument that the
Trustee may deem necessary or advisable to accomplish the purposes of this
Pledge Agreement, including, without limitation, the following powers: (a)
collection of proceeds of any Pledged Collateral; (b) conveyance of any item of
Pledged Collateral to any purchaser thereof; (c) giving of any notices or
recording of any Liens under Section 6 hereof; and (d) paying or discharging
taxes or Liens levied or placed upon the Pledged Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by the Trustee in its sole reasonable discretion, and such payments
made by the Trustee to become part of the Outstanding Obligations of the Pledgor
to the Trustee, due and payable immediately upon demand. The Trustee's authority
under this Section 8 shall include, without limitation, the authority to endorse
and negotiate any checks or instruments representing proceeds of Pledged
Collateral in the name of the Pledgor, execute and give receipt for any
certificate
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of ownership or any document constituting Pledged Collateral, transfer title to
any item of Pledged Collateral, sign the Pledgor's name on all financing
statements (to the extent permitted by applicable law) or any other documents
deemed necessary or appropriate by the Trustee to preserve, protect or perfect
the security interest in the Pledged Collateral and to file the same, prepare,
file and sign the Pledgor's name on any notice of Lien, and to take any other
actions arising from or incident to the powers granted to the Trustee in this
Pledge Agreement. This power of attorney is coupled with an interest and is
irrevocable by the Pledgor. Notwithstanding anything to the contrary stated
herein, the Trustee has no duty or obligation to exercise any of the powers
stated in this Section 8.
SECTION 9. No Assumption of Duties: Reasonable Care. The
rights and powers granted to the Trustee hereunder are being granted in order to
preserve and protect the security interest of the Trustee and the Holders of the
Notes in and to the Pledged Collateral granted hereby and shall not be
interpreted to, and shall not impose any duties on the Trustee in connection
therewith other than those expressly provided herein or imposed under applicable
law. Except as provided by applicable law or by the Indenture, the Trustee shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Trustee accords similar property
held by the Trustee for similar accounts, it being understood that the Trustee
in its capacity as such shall not have any responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities or
other matters relative to any Pledged Collateral, whether or not the Trustee has
or is deemed to have knowledge of such matters or (b) investing or reinvesting
any of the Pledged Collateral or any loss on any investment; provided, however,
that nothing contained in this Pledge Agreement shall relieve the Trustee of any
responsibilities as a securities intermediary under applicable law.
SECTION 10. Indemnity. The Pledgor shall indemnify, hold
harmless and defend the Trustee and its directors, officers, agents and
employees from and against any and all claims, actions, obligations, liabilities
and expenses, including reasonable defense costs, reasonable investigative fees
and costs and reasonable legal fees and expenses and damages arising from the
Trustee's performance as Trustee under this Pledge Agreement, except to the
extent that such claim, action, obligation, liability or expense is directly
attributable to the gross negligence or wilful misconduct of such indemnified
person.
SECTION 11. Remedies Upon Event of Default. If any Event of
Default under the Indenture (any such Event of Default being referred to in this
Pledge Agreement as an "Event of Default") shall have occurred and be
continuing:
(a) The Trustee and the Holders of the Notes shall have, in
addition to all other rights given by law or by this Pledge Agreement
or the Indenture, all of the rights and remedies with respect to the
Pledged Collateral of a secured party under the UCC. In addition, with
respect to any Pledged Collateral that shall then be in or shall
thereafter come into the possession or custody of the Trustee, the
Trustee may sell or cause the same to be sold at any broker's board or
at public or
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private sale, in one or more sales or lots, at such price or prices as
the Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk. The purchaser of any
or all Pledged Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind
whatsoever created by or through the Pledgor. Unless any of the Pledged
Collateral threatens, in the reasonable judgment of the Trustee, to
decline speedily in value or is or becomes of a type sold on a
recognized market, the Trustee will give the Pledgor reasonable notice
of the time and place of any public sale thereof, or of the time after
which any private sale or other intended disposition is to be made. To
the extent permitted by applicable law, any sale of the Pledged
Collateral conducted in conformity with reasonable commercial practices
of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Pledged
Collateral shall be deemed to be commercially reasonable. Any
requirements of reasonable notice shall be met if such notice is mailed
to the Pledgor as provided in Section 15.1 hereof at least 10 days
before the time of the sale or disposition. The Trustee or any Holder
of Notes may, in its own name or in the name of a designee or nominee,
buy any of the Pledged Collateral at any public sale and, if permitted
by applicable law, at any private sale. All expenses (including court
costs and reasonable attorneys' fees, expenses and disbursements) of,
or incident to, the enforcement of any of the provisions hereof shall
be recoverable from the proceeds of the sale or other disposition of
the Pledged Collateral.
(b) The Pledgor further agrees to use its reasonable best
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Pledged Collateral pursuant to this Section 11 valid and binding and in
compliance with any and all other applicable requirements of law. The
Pledgor further agrees that a breach of any of the covenants contained
in this Section 11 will cause irreparable injury to the Trustee and the
Holders of the Notes, that the Trustee and the Holders of the Notes
have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 11
shall be specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no
Event of Default has occurred.
(c) The Trustee may, without notice to the Pledgor except as
required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Outstanding Obligations
against the Escrow Account or any part thereof.
SECTION 12. Expenses. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Pledged Collateral, (c) the
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exercise or enforcement of any of the rights of the Trustee and the Holders of
the Notes hereunder or (d) the failure by the Pledgor to perform or observe any
of the provisions hereof.
SECTION 13. Security Interest Absolute. All rights of the
Trustee and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Outstanding Obligations, or any
other amendment or waiver of or any consent to any departure from the
Indenture;
(c) any taking, exchange, surrender, release or non-perfection
of any other collateral or any taking, release or amendment or waiver
from any guaranty for all or any of the Outstanding Obligations;
(d) any change, restructuring or termination of the corporate
structure or the existence of the Pledgor or any of its subsidiaries;
or
(e) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, the Pledgor in respect of the Outstanding
Obligations or of this Pledge Agreement.
SECTION 14. Pathnet Securities Intermediary's Representations,
Warranties and Covenants. The Pathnet Securities Intermediary represents and
warrants that it is as of the date hereof, and it agrees that for so long as it
maintains the Escrow Account and acts as securities intermediary pursuant to
this Pledge Agreement it shall be a "Securities Intermediary" (as defined in the
UCC and in 31 C.F.R. Section 357.2) and shall be eligible to maintain, and does
maintain, a Participant's Securities Account (as defined in 31 C.F.R. Section
357.2) in the name of the Pathnet Securities Intermediary with the FRBNY (a
"FRBNY Member Securities Account"). In furtherance of the foregoing, the Pathnet
Securities Intermediary hereby:
(a) represents and warrants that it is a corporation that in
the ordinary course of its business maintains Securities Accounts for
others and is acting in that capacity hereunder and with respect to the
Escrow Account;
(b) represents and warrants that it maintains the FRBNY Member
Securities Account with the FRBNY and that the United Stated Treasury
securities constituting the Pledged Securities transferred to the
Pathnet Securities Intermediary pursuant to Section 3(b) have been
credited to the FRBNY Member Securities Account;
(c) agrees that the Escrow Account shall be an account to
which Financial Assets may be credited, and the Pathnet Securities
Intermediary
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undertakes to treat the Trustee as the sole person entitled to exercise
rights that comprise (and entitled to the benefits of) such Financial
Assets, and entitled to exercise the rights of an entitlement holder
and control in the manner contemplated by the UCC, and further agrees
to identify the Trustee in the records of the Pathnet Securities
Intermediary as the sole person having a Securities Entitlement against
the Pathnet Securities Intermediary with respect to the Escrow Account
and all Financial Assets credited thereto;
(d) hereby represents that it has not granted, and covenants
that so long as it acts as Pathnet Securities Intermediary hereunder it
shall not grant, control (including without limitation, "control" as
defined in UCC Section 9-115(l)(e)) over or with respect to any Pledged
Collateral credited to the Escrow Account from time to time to any
other Person other than the Trustee;
(e) covenants that in its capacity as Pathnet Securities
Intermediary hereunder and with respect to the Escrow Account, it shall
not take any action inconsistent with, and represents and covenants
that it is not and so long as this Pledge Agreement remains in effect
will not become party to any agreement, the terms of which are
inconsistent with the provisions of this Pledge Agreement;
(f) agrees, with the other parties to this Pledge Agreement,
that any item of property credited to the Escrow Account shall be
treated as a Financial Asset;
(g) agrees, with the other parties to this Pledge Agreement,
so long as it serves as Pathnet Securities Intermediary pursuant to
this Pledge Agreement, to maintain the Escrow Account as a Securities
Account and maintain appropriate books and records in respect thereof
in accordance with its usual procedures and subject to the terms of
this Pledge Agreement;
(h) agrees, with the other parties to this Pledge Agreement,
that the Pathnet Securities Intermediary's jurisdiction, for purposes
of UCC Section 8-110(e) and 31 C.F.R. 357.11(b) as it pertains to this
Pledge Agreement, the Escrow Account and Security Entitlements relating
thereto, shall be the State of New York.
SECTION 15. Miscellaneous Provisions.
Section 15.1. Notices. Any notice or communication given
hereunder shall be sufficiently given if in writing and delivered in person or
mailed by first class mail, commercial courier service or telecopier
communication, addressed as follows:
if to the Pledgor:
PathNet, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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Attention: General Counsel
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇
if to the Trustee:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Trust Administration
Section 15.2. No Adverse Interpretation of Other Agreements.
This Pledge Agreement may not be used to interpret another pledge, security or
debt agreement of the Pledgor or any subsidiary thereof. No such pledge,
security or debt agreement (other than the Indenture) may be used to interpret
this Pledge Agreement.
Section 15.3. Severability. The provisions of this Pledge
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
of this Pledge Agreement in any jurisdiction.
Section 15.4. Headings. The headings in this Pledge Agreement
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
Section 15.5. Counterpart Originals. This Pledge Agreement may
be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same agreement.
Section 15.6. Benefits of Pledge Agreement. Nothing in this
Pledge Agreement, express or implied, shall give to any person, other than the
parties hereto and their successors hereunder, and the Holders of the Notes, any
benefit or any legal or equitable right, remedy or claim under this Pledge
Agreement.
Section 15.7. Amendments, Waivers and Consents. Any amendment
or waiver of any provision of this Pledge Agreement and any consent to any
departure by the Pledgor from any provision of this Pledge Agreement shall be
effective only if made or duly given in compliance with all of the terms and
provisions of the Indenture, and
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neither the Trustee nor any Holder of Notes shall be deemed, by any act, delay,
indulgence, omission or otherwise, to have waived any right or remedy hereunder
or to have acquiesced in any Default or Event of Default (as defined herein) or
in any breach of any of the terms and conditions hereof. Consistent with the
foregoing, this Pledge Agreement may be amended, its provisions may be waived
and departures from its provisions may be consented to by action of the Pledgor
and the Trustee, and (if applicable) the Holders of the Notes, as provided in
the Indenture, and no such amendment, waiver or consent shall require any action
or approval by the Initial Purchasers. Failure of the Trustee or any Holder of
Notes to exercise, or delay in exercising, any right, power or privilege
hereunder shall not preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Trustee or any
Holder of Notes of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy that the Trustee or such Holder of
Notes would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
Section 15.8. Interpretation of Agreement. All terms not
defined herein or in the Indenture shall have the meaning set forth in the UCC,
except where the context otherwise requires. Acceptance of or acquiescence in a
course of performance rendered under this Pledge Agreement shall not be relevant
to determine the meaning of this Pledge Agreement even though the accepting or
acquiescing party had knowledge of the nature of the performance and opportunity
for objection.
Section 15.9. Continuing Security Interest, Termination. (a) This
Pledge Agreement shall create a continuing security interest in and to
the Pledged Collateral and shall, unless otherwise provided in this
Pledge Agreement, remain in full force and effect until the payment in
full in cash of the Outstanding Obligations. This Pledge Agreement
shall be binding upon the Pledgor, its transferees, successors and
assigns, and shall inure, together with the rights and remedies of the
Trustee hereunder, to the benefit of the Trustee, the Holders of the
Notes and their respective successors, transferees and assigns.
(b) This Pledge Agreement (other than the Pledgor's
obligations under Sections 10 and 12) shall terminate upon the payment
in full in cash of the Outstanding Obligations or if the Company shall
become obligated under the Indenture to redeem all of the outstanding
Notes and such Notes shall have been redeemed, and if no Default or
Event of Default (as defined in the Indenture shall have occurred and
be continuing. At such time, the Trustee shall, pursuant to a Company
Order, reassign and redeliver to the Pledgor all of the Pledged
Collateral hereunder that has not been sold, disposed of, retained or
applied by the Trustee in accordance with the terms of this Pledge
Agreement and the Indenture and take all actions that are necessary to
release the security interest created by this Pledge Agreement in and
to the Pledged Collateral, including the execution and delivery of all
termination statements necessary to terminate any financing or
continuation statements filed with respect to the Pledged Collateral.
Such reassignment and redelivery shall be without warranty by or
recourse to the
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Trustee in its capacity as such, except as to the absence of any Liens
on the Pledged Collateral created by or arising through the Trustee,
and shall be at the reasonable expense of the Pledgor.
Section 15.10. Survival of Representations and Covenants. All
representations, warranties and covenants of the Pledgor contained herein shall
survive the execution and delivery of this Pledge Agreement, and shall terminate
only upon the termination of this Pledge Agreement.
Section 15.11. Waivers. The Pledgor waives presentment and
demand for payment of any of the Outstanding Obligations, protest and notice of
dishonor or default with respect to any of the Outstanding Obligations, and all
other notices to which the Pledgor might otherwise be entitled, except as
otherwise expressly provided herein or in the Indenture.
Section 15.12. Authority of the Trustee. (a) The Trustee shall
have the right to exercise all powers hereunder that are specifically granted to
the Trustee by the terms hereof, together with such powers as are reasonably
incident hereto. The Trustee may perform any of its duties hereunder or in
connection with the Pledged Collateral by or through agents or employees and
shall be entitled to retain counsel and to act in reliance upon the advice of
counsel concerning all such matters. Except as otherwise expressly provided in
this Pledge Agreement or the Indenture, neither the Trustee nor any director,
officer, employee, attorney or agent of the Trustee shall be liable to the
Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own gross negligence or willful
misconduct, and the Trustee shall not be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. The Trustee and its directors, officers, employees, attorneys
and agents may conclusively rely on any communication, instrument or document
believed by it or them to be genuine and correct and to have been signed or sent
by the proper person or persons.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Trustee under this Pledge Agreement with
respect to any action taken by the Trustee or the exercise or
non-exercise by the Trustee of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising out
of this Pledge Agreement shall, as between the Trustee and the Holders
of the Notes, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as
between the Trustee and the Pledgor, the Trustee shall be conclusively
presumed to be acting as agent for the Holders of the Notes with full
and valid authority so to act or refrain from acting, and the Pledgor
shall not be obligated or entitled to make any inquiry respecting such
authority.
(c) The Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Pledge Agreement, and
no implied covenants or obligations shall be read into this Pledge
Agreement against the Trustee or the Pathnet Securities Intermediary.
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(d) No provision of this Pledge Agreement shall require the
Trustee or the Pathnet Securities Intermediary to expend or risk its
own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights
and powers.
(e) The Trustee and the Pathnet Securities Intermediary may
consult with counsel of its selection and the advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(f) The Trustee and the Pathnet Securities Intermediary may
execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the
Trustee and the Pathnet Securities Intermediary shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it hereunder.
Section 15.13. Final Expression. This Pledge Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Pledge
Agreement and is intended as a complete and exclusive statement of the terms and
conditions thereof.
Section 15.14. Rights of Holders of the Notes. No Holder of
Notes shall have any independent rights hereunder other than those rights
granted to individual Holders of the Notes pursuant to Section 508 of the
Indenture; provided that nothing in this subsection shall limit any rights
granted to the Trustee under the Notes or the Indenture.
Section 15.15. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE
NOTES IN CONNECTION WITH THIS PLEDGE AGREEMENT AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS
IDENTIFIED IN 31 C.F.R. PART 357, 61 FED. REG. 43626 (AUG. 23, 1996) SHALL BE
GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY
AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED
AGAINST THE PLEDGOR OR THE PLEDGED COLLATERAL IN A COURT IN ANY
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LOCATION REASONABLY SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN
REM JURISDICTION OVER THE PLEDGOR OR THE PLEDGED COLLATERAL, AS THE
CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH PLEDGED
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF THE TRUSTEE. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY
COUNTERCLAIMS, SET OFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE
TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SET
OFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH PROCEEDING,
COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF
NEW YORK ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(c) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR
(EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE
INDENTURE) THE TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY
LIABILITY TO THE PLEDGOR (WHETHER ARISING IN TORT, CONTRACT OR
OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION WITH,
ARISING OUT OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED
AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE AGREEMENT, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE,
THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF
THE TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING
BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY
HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING
TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE
AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE
TRUSTEE OR ANY HOLDER OF NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE,
TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION,
THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN THE
PLEDGOR ON
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THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS OF THE NOTES ON THE
OTHER HAND.
IN WITNESS WHEREOF, the Pledgor and the Trustee have each
caused this Amended and Restated Pledge Agreement to be duly executed and
delivered as of the date first above written.
Pledgor:
PATHNET, INC.
By:____________________________
Name:
Title:
Trustee:
THE BANK OF NEW YORK, Trustee
By:______________________________
Name:
Title:
THE BANK OF NEW YORK,
as Pathnet Securities Intermediary
By:______________________________
Name:
Title:
20
CERTIFICATE
Pursuant to Section 3(f) of the Pledge Agreement (the "Pledge
Agreement") dated as of ___________, 2000 between Pathnet, Inc. (the "Pledgor")
and The Bank of New York, trustee (the "Trustee") for the holders of the 12 1/4%
Senior Notes due 2008 (the "Notes") of the Pledgor, and The Bank of New York, as
securities intermediary (the "Pathnet Securities Intermediary"), the undersigned
officer of the Trustee, on behalf of the Trustee, and the undersigned officer of
the Pathnet Securities Intermediary, on behalf of the Pathnet Securities
Intermediary, make the following certifications to the Pledgor and the Holders
of the Outstanding Notes. Capitalized terms used and not defined in this
Certificate have the meanings set forth or referred to in the Pledge Agreement.
1. The Trustee has previously established with the Pathnet
Securities Intermediary, as Securities Intermediary, the Escrow Account. The
Pathnet Securities Intermediary has acquired a Security Entitlement to the
United States Treasury securities identified in Annex 1 to this Certificate (the
"Pledged Securities") from the FRBNY and holds a Security Entitlement thereto in
the FRBNY's Security Account. The Pathnet Securities Intermediary has made
appropriate book entries in its records establishing that the Pledged Securities
and the Trustee's Securities Entitlement thereto have been credited to and are
held in the Escrow Account.
2. The Trustee has established and maintained and will
maintain the Escrow Account and all Securities Entitlements and other positions
carried in the Escrow Account solely in its capacity as Trustee and has not
asserted and will not assert any claim to or interest in the Escrow Account or
any such Securities Entitlements or other positions except in such capacity.
3. The Trustee and the Pathnet Securities Intermediary have
acquired their Security Entitlements to the Pledged Securities for value and
without notice of any adverse claim thereto. Without limiting the generality of
the foregoing, the Pledged Securities are not and the Pathnet Securities
Intermediary's and the Trustee's Security Entitlements to the Pledged Securities
are not, to their knowledge, subject to any Lien granted by either of them in
favor of any Securities Intermediary (including, without limitation, NFSC or the
FRBNY) through which the Trustee derives its Security Entitlement to the Pledged
Securities.
4. Neither the Pathnet Securities Intermediary nor the Trustee
has caused or permitted the Pledged Securities or any Security Entitlement
thereto to become subject to any Lien created by or arising through either of
the Trustee or the Pathnet Securities Intermediary.
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2
IN WITNESS WHEREOF, the undersigned officers have executed
this Certificate on behalf of The Bank of New York, Trustee, and on behalf of
the Pathnet Securities Intermediary, respectively, this _________ day of
_________, 2000.
THE BANK OF NEW YORK,
Trustee
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK,
As Pathnet Securities
Intermediary
------------------------------------
Name:
Title:
22
PLEDGED SECURITIES
Original Principal
------------------
Description of Debt Cusip No(s) Final Maturity Amount Cost of Closing
------------------- ----------- -------------- ------ ---------------
------------------- ----------- -------------- ------------------ ---------------
------------------- ----------- -------------- ------------------ ---------------
------------------- ----------- -------------- ------------------ ---------------
------------------- ----------- -------------- ------------------ ---------------
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INDEPENDENT ACCOUNTANTS' REPORT ON APPLYING
AGREED-UPON PROCEDURES
To the Board of Directors
Pathnet, Inc.
Washington, D.C,
We understand that $350,000,000 12-1/4% Senior Notes due 2008 ("Notes") of
Pathnet, Inc. (the "Issuer"), were issued on April 8, 1998. We also understand
that in connection with the payment of the fourth and fifth scheduled interest
payments on the Notes The Bank of New York (the "Trustee") will hold the
Securities listed on the attached schedule (Schedule 11) (the "Securities")
pursuant to Section 3(h) of the Pledge Agreement, between the Issuer and the
Trustee, dated as of ___________, 2000 (the "Pledge Agreement").
We have been requested by the Issuer and the Trustee (collectively the "Intended
Users") to prove the arithmetic accuracy of the computations shown on the
attached schedules, prepared by the Issuer.
We have performed the procedures enumerated below, which were agreed to by the
Intended Users, solely to assist you and the Trustee with respect to proving the
arithmetic accuracy of the computations shown on the attached schedules. This
agreed upon procedures engagement was performed in accordance with standards
established by the American Institute of Certified Public Accountants. The
sufficiency of the procedures is solely the responsibility of the specified
users of the report. Consequently, we make no representation regarding the
sufficiency of the procedures described below either for the purpose for which
this report was requested or for any other purpose. The procedures that we
performed and our findings are, as follows:
1. We have proved the arithmetic accuracy of the computations of the
fourth and fifth scheduled interest payments, as shown on the attached
Schedule (Schedule I), which was prepared by the Issuer.
2. We have proved the arithmetic accuracy of the computation of the
scheduled receipts of maturing principal and interest to be received
from the Securities and cash on deposit as shown on Schedule II, which
was prepared by the Issuer. Other than proving such arithmetic
accuracy, we have not confirmed or otherwise verified the information
on that schedule.
3. We recomputed each amount in the net cash flow column on Schedule II by
deducting each amount in the interest payment column from each amount
in the total available column, individually and in total.
In performing the above calculations, we have relied solely on the data set
forth in the attached schedules prepared and provided to us by the Issuer. The
scope of our engagement did not include the verification of any underlying data,
assumptions or definitions necessary to derive the calculations. Such underlying
data, assumptions and definitions include, but are not limited to, the
following:
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(i) The principal amounts, coupon rates, and related maturities for
the Securities and Notes; and
(ii) Interest start dates, maturity dates, and interest payment dates
for the Securities and the Notes.
We were not engaged to, and did not, perform an examination, the objective of
which would be the expression of an opinion on the specified elements, accounts,
or items included in the attached schedules. Accordingly, we do not express such
an opinion. Had we performed additional procedures, other matters might have
come to our attention that would have been reported to you.
This report is intended solely for the use of the Intended Users listed above
and should not be used by those who have not agreed to the procedures and taken
responsibility for the sufficiency of the procedures for their purposes.
McLean, Virginia
April 8, 1998
25
SCHEDULE I
Interest Payment
Date on the Notes Principal Annual Interest Rate Interest Payment (1)
----------------- --------- -------------------- --------------------
(1) Interest payments for each period are calculated assuming a 180-day
semi-annual period and 360-day year.
26
Coupon Total Interest Net Cash
Security Coupon Rate Maturity Date Par Amount Interest(1) Cash Flow Available(2) Payment(3) Flow(4)
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(1) Coupon interest is calculated assuming a 180-day semi-annual period and a
360-day year.
(2) Total Available for each period is equal to the Cash Flow for the period
plus Net Cash Flow from the previous period.
(3) See SCHEDULE I attached hereto.
(4) Net Cash Flow for each period is equal to Total Available for the period
less the Interest Payment for each period.
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