EXHIBIT 4.6
AMENDED AND RESTATED PLEDGE AGREEMENT
This AMENDED AND RESTATED PLEDGE AGREEMENT (this "PLEDGE
AGREEMENT") is made and entered into as of March 30, 2000 by PATHNET, INC., a
Delaware corporation (the "PLEDGOR"), THE BANK OF NEW YORK, a New York banking
corporation, having an office at 000 Xxxxxxx Xxxxxx, Xxxxx 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
WHEREAS, pursuant to the Original Pledge Agreement the Trustee
opened an account (the "ESCROW ACCOUNT") with the Pathnet Securities
Intermediary, at its office at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
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.
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 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
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secures the prompt and completepayment 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 000 Xxxxxxx Xxxxxx, Xxxxx 00 Xxxx, Xxx Xxxx, Xxx Xxxx
00000, 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 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
inss.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 ss.
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 UCCss.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 UCCss.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 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.
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(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.
(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 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
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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 (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 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
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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 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 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 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. ss. 357.2) and shall be eligible to maintain, and does maintain, a
Participant's Securities Account (as defined in 31 C.F.R. ss. 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
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 ss. 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 ss.
8-1 10(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.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Telecopier: (000) 000-0000
Attention: General Counsel
WITH A COPY TO:
--------------
Xxxxx Xxxxxx, Esq.
Xxxxxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx X.X. 00000
Telecopier: (000) 000-0000
IF TO THE TRUSTEE:
-----------------
The Bank of New York
000 Xxxxxxx Xxxxxx
Xxxxx 00 Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
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 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 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.
(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 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
THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS OF THE NOTES ON THE
OTHER HAND.
[Intentionally Left Blank]
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: /s/ Xxxxxxx. X. Xxxxxxxx V
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxx, V
Title: Executive Vice President, Corporate
Development
Trustee:
THE BANK OF NEW YORK, Trustee
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Assistant Vice President
THE BANK OF NEW YORK,
as Pathnet Securities Intermediary
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Assistant Vice President
CERTIFICATE
Pursuant to Section 3(f) of the Pledge Agreement (the "PLEDGE
AGREEMENT") dated as of March 30, 2000 between Pathnet, Inc. (the "PLEDGOR") and
The Bank of New York, trustee (the "TRUSTEE") for the holders of the 12 `A %
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.
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 30th day of March, 2000.
THE BANK OF NEW YORK,
Trustee
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK,
As Pathnet Securities
Intermediary
------------------------------------
Name:
Title:
PLEDGED SECURITIES
-------------------------- ---------------- ------------------ ---------------------- -----------------------
ORIGINAL PRINCIPAL
DESCRIPTION OF DEBT CUSIP NO(S) FINAL MATURITY AMOUNT COST OF CLOSING
------------------- ----------- -------------- ------ ---------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
-------------------------- ---------------- ------------------ ---------------------- -----------------------
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 March 30, 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 or 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:
(i) The principal amounts, coupon rates, and related maturities for the
Securities 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
March 30, 2000
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.
Coupon Interest Total Available Interest Payment Net Cash Flow
SECURITY COUPON RATE MATURITY DATE PAR AMOUNT (1) CASH FLOW (2) (3) (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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