Exhibit 10.20
EXECUTION COPY
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is made and
entered into as of April 8, 1998 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 the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "INDENTURE"), pursuant
to which the Pledgor is issuing on the date hereof $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 has agreed, pursuant to the Indenture, to
(i) purchase or cause the purchase of Pledged Securities (as defined herein) in
an amount that will 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 has 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
"OBLIGATIONS"); and
WHEREAS, the Pledgor has 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
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Securities and related collateral and (ii) execute and deliver this Pledge
Agreement in order to secure the payment and performance by the Pledgor of all
the Obligations; and
WHEREAS, the Trustee has 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 this Pledge Agreement. Capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in the Indenture. Unless otherwise defined herein or in the
Indenture, terms used in Articles 8 or 9 of the Uniform Commercial Code as in
effect in the State of New York (the "UCC") are used herein as therein defined.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and in order to induce the Holders of the Notes to purchase the Notes,
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 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 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 Obligations.
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SECTION 3. DELIVERY OF PLEDGED SECURITIES; ESCROW ACCOUNT;
INTEREST. (a) The Pledged Securities shall be pledged and transferred to the
Trustee and the Trustee shall become the holder of a Security Entitlement to the
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 Pledged Securities and all Security
Entitlements thereto has been credited to the Escrow Account, or (ii) acquiring
the Pledged Securities or a Security Entitlement thereto for the Trustee and
accepting the same for credit to the Escrow Account.
(b) Prior to or concurrently with the execution and delivery
hereof and prior to the transfer to the Trustee of the Pledged Securities (or
acquisition by the Trustee of any Security Entitlement thereto) as provided in
subsection (a) of this Section 3, the Trustee shall establish 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 shall
maintain a Securities Account at the Federal Reserve Bank of New York ("FRBNY").
Upon transfer of the 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 Pledged Securities
and/or such Security Entitlement have been 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 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 ss. 9-115(1)(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(1)(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 ss. 8-102(a)(8)) with respect
to, the Escrow Account and all
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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 ss. 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 and to Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated, Bear, Xxxxxxx & Co., Inc., TD Securities (USA) Inc. and Salomon
Brothers Inc, as the initial purchasers of the Notes, a duly executed
certificate, in the form of Exhibit A hereto, of an officer of the Trustee,
confirming the Trustee's establishment and maintenance of the Escrow Account and
its 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 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 any of the first four 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.
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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
first four 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 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
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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 first four 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 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
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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 Pledged Securities into
the Escrow Account, the Pledgor is the legal and beneficial owner of the
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 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 Obligations for the benefit of the Trustee and
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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).
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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 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 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
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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
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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 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
12
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 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 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 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
13
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(1)(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. 8-110(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.
14
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:
Xxxx Xxxxxxxx
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
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.
15
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.
16
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 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 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 Obligations, protest and notice of dishonor or default
with respect to any of the 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
17
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
18
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.
19
(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.
20
IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused
this Pledge Agreement to be duly executed and delivered as of the date first
above written.
Pledgor:
PATHNET, INC.
By: /s/ Xxxxx Xxxxxxxxx
---------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chairman
Trustee:
THE BANK OF NEW YORK,
Trustee
By: /s/ Xxxx Xxxx X. Xxxxxxx
---------------------------
Name: Xxxx Xxxx X. Xxxxxxx
Title: Assistant Vice President
THE BANK OF NEW YORK,
as Pathnet Securities
Intermediary
By: /s/ Xxxx Xxxx X. Xxxxxxx
---------------------------
Name: Xxxx Xxxx X. Xxxxxxx
Title: Assistant Vice President
CERTIFICATE
Pursuant to Section 3(f) of the Pledge Agreement (the "PLEDGE
AGREEMENT") dated as of April 8, 1998 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 initial
purchasers of the Notes. Capitalized terms used and not defined in this
Certificate have the meanings set forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and
delivery of this Certificate, the Trustee has 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.
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 8th day of April, 1998.
THE BANK OF NEW YORK,
Trustee
------------------------------
Name:
Title:
THE BANK OF NEW YORK,
As Pathnet Securities
Intermediary
-----------------------------
Name:
Title:
3
EXHIBIT A
4
EXHIBIT B
REPORT OF COOPERS & XXXXXXX LLP
[To come.]
ANNEX 1
to
OFFICER'S CERTIFICATE
Schedule of U.S. Government Obligations
Pledged under the Pledge Agreement
Designation by Name, Series, Maturity Date and CUSIP Number
NAME CUSIP NO. AMOUNT (AT MATURITY) MATURITY DATE
