SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- ----------------
Commission File No. 333-91469
Pathnet Telecommunications, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-2201331
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11720 Sunrise Valley Drive
Reston, VA 20191
(Address of principal executive offices) (Zip Code)
(703) 390-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name,former address and former fiscal year,if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [ X ]
As of May 12, 2000, there were 3,178,477 shares of the Registrant's common
stock, par value $.01 per share, outstanding.
<PAGE>
2
PATHNET TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited) and
December 31, 1999 3
Unaudited Consolidated Statements of Operations for the three months ended
March 31, 2000 and 1999 4
Unaudited Consolidated Statements of Comprehensive Loss for the three
months ended March 31, 2000 and 1999 5
Unaudited Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 28
Signatures 29
Exhibits Index 30
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PATHNET TELECOMMUNICATIONS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 118,599,060 $ 90,661,837
Accounts receivable 1,610,835 254,894
Interest receivable 408,353 1,048,417
Marketable securities available for sale 11,675,066 42,651,836
Prepaid expenses and other current assets 1,000,342 1,182,570
------------- -------------
Total current assets 133,293,656 135,799,554
Property and equipment, net 158,365,020 131,928,365
Intangible assets - rights of way 187,275,006 -
Deferred financing costs, net 15,956,145 9,649,680
Restricted cash 25,275,159 16,921,559
Marketable securities available for sale 22,092,539 5,088,458
Pledged marketable securities held to maturity - 20,796,563
Other assets 416,394 351,808
------------- -------------
Total assets $ 542,673,919 $ 320,535,987
============= =============
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 17,756,350 $ 18,543,195
Accrued interest 19,651,044 8,932,293
Accrued expenses and other current liabilities 3,125,698 3,113,181
------------- -------------
Total current liabilities 40,533,092 30,588,669
12 1/4% Senior Notes, net of unamortized bond discount of $3,276,000 and $3,378,375
respectively 346,724,000 346,621,625
Other noncurrent liabilities 7,991,061 3,092,779
------------- -------------
Total liabilities 395,248,153 380,303,073
------------- -------------
Commitments and contingences
Mandatorily redeemable preferred stock:
Series A convertible preferred stock, $0.01 par value, 0 and 1,000,000 shares
authorized, issued and outstanding at March 31, 2000 and December 31, 1999,
respectively (liquidation preference $1,000,000) - 1,000,000
Series B convertible preferred stock, $0.01 par value, 0 and 1,651,046 shares
authorized, issued and outstanding at March 31, 2000 and December 31, 1999,
respectively (liquidation preference $5,033,367) - 5,008,367
Series C convertible preferred stock, $0.01 par value, 0 and 2,819,549 shares
authorized, issued and outstanding at March 31, 2000 and December 31, 1999,
respectively (liquidation preference $30,000,052) - 29,961,272
Series E convertible preferred stock, $0.01 par value, 4,506,145 and 0 shares
authorized, 2,867,546 and 0 issued and outstanding and March 31, 2000
and December 31, 1999, respectively 37,871,966 -
------------- -------------
Total mandatorily redeemable preferred stock 37,871,966 35,969,639
------------- -------------
Stockholders' equity (deficit):
Series A convertible preferred stock, $0.01 par value, 2,899,999 and 0 shares
authorized, issued and outstanding at March 31, 2000 and December 31, 1999,
respectively 29,000 -
Series B convertible preferred stock, $0.01 par value, 4,788,030 and 0 shares
authorized, issued and outstanding at March 31, 2000 and December 31, 1999,
respectively 47,880 -
Series C convertible preferred stock, $0.01 par value, 8,176,686 and 0 shares
authorized, issued and outstanding at March 31, 2000 and December 31, 1999,
respectively 81,767 -
Series D convertible preferred stock, $0.01 par value, 9,250,000 and 0 shares
authorized, 8,511,607 and 0 shares issued and outstanding at March 31,2000 and
December 31, 1999, respectively 85,116 -
Undesignated preferred stock, par value $0.01 per share, 0 and 10,000,000 shares
authorized, 0 shares issued and outstanding - -
Common stock, $0.01 par value, 60,000,000 shares authorized, 3,176,107 and
3,068,218 shares issued and outstanding 31,761 30,682
Deferred compensation (8,977,266) (441,760)
Additional paid-in capital 240,001,666 6,264,362
Accumulated other comprehensive loss (14,869) (90,240)
Accumulated deficit (121,731,255) (101,499,769)
------------- -------------
Total stockholders' equity (deficit) 109,553,800 (95,736,725)
------------- -------------
Total liabilities, mandatorily redeemable preferred stock and
stockholders' equity $ 542,673,919 $ 320,535,987
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
PATHNET TELECOMMUNICATIONS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Revenue $ 1,926,554 $ 826,104
----------- -----------
Operating expenses:
Cost of revenue (including non cash deferred compensation
of $532,657 and $20,582, respectively) 4,268,997 2,651,200
Selling, general and administrative (including non cash deferred
compensation of $899,712 and $113,494, respectively) 6,243,490 2,795,360
Reorganization expenses 1,408,468 -
Depreciation expense 2,557,984 537,639
----------- -----------
Total operating expenses 14,478,939 5,984,199
----------- -----------
Net operating loss (12,552,385) (5,158,095)
Interest expense (9,741,793) (10,270,211)
Interest income 2,235,057 3,814,608
Other income (expense), net (172,365) 88,096
----------- -----------
Net loss $(20,231,486) $(11,525,602)
=========== ===========
Basic and diluted loss per
common share $ (6.59) $ (3.97)
=========== ===========
Weighted average number of
common shares outstanding 3,068,240 2,902,895
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
PATHNET TELECOMMUNICATIONS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Net loss $ (20,231,486) $ (11,525,602)
Other comprehensive income:
Net unrealized (loss) gain on marketable
securities available for sale 75,371 (133,891)
----------- -----------
Comprehensive loss $ (20,156,115) $ (11,659,493)
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
PATHNET TELECOMMUNICATIONS, INC. AND SUBSIDIARIES AND PREDECESSOR COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (20,231,486) $(11,525,602)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation expense 2,557,984 537,639
Amortization of deferred financing costs 285,160 284,005
Provision for write down of spare parts 120,000 -
Provision for losses on accounts receivable 21,000 -
Loss on sale of equipment (279) -
Interest expense resulting from amortization of discount on the
bonds payable 102,375 102,375
Amortization of premium on pledged securities 71,563 167,295
Amortization of deferred compensation 1,432,369 134,076
Changes in assets and liabilities:
Accounts receivable (1,376,941) 404,215
Interest receivable 1,108,446 339,068
Prepaid expenses and other current assets 182,228 (4,573,224)
Accounts payable 2,734,227 (1,234,100)
Accrued interest 10,718,752 10,718,751
Accrued expenses and other liabilities 1,876,611 973,861
Other assets (64,586) (108,565)
------------- ------------
Net cash used in operating activities (462,577) (3,780,206)
------------- ------------
Cash flows from investing activities:
Expenditures for network in progress (28,731,555) (16,668,923)
Expenditures for property and equipment (1,144,690) (125,589)
Sale and maturity of marketable securites available for sale 50,942,232 58,493,029
Purchase of marketable securities available for sale (35,894,172) -
Sale and maturity of pledged marketable securities held to maturity (20,725,261) 41,092
Restricted cash (8,822,243) (155,930)
Repayment of note receivable - 3,206,841
------------- ------------
Net cash provided by (used in) investing activities (3,925,167) 44,790,520
------------- ------------
Issuance of series E convertible preferred stock 38,000,000 -
Proceeds from option to purchase series E convertible preferred stock 1,000,000 -
Exercise of employee common stock options 396,718 1,091
Payment of deferred financing costs (7,071,751) -
------------- ------------
Net cash provided by (used in) financing activities 32,324,967 1,091
------------- ------------
Net increase in cash and cash equivalents 27,937,223 41,011,405
Cash and cash equivalents at the beginning of period 90,661,837 57,521,887
------------- ------------
Cash and cash equivalents at the end of period $ 118,599,060 $ 98,533,292
============= ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
6
<PAGE>
PATHNET TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
AND PREDECESSOR COMPANY
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Pathnet, Inc. (Pathnet), is a wholesale telecommunications provider
building a nationwide network designed to provide other wholesale and retail
telecommunications service providers with access to underserved and second and
third tier markets throughout the United States.
Pathnet Telecommunications, Inc. (Pathnet Telecommunications) was
formed on November 1, 1999 by certain former shareholders of Pathnet in order to
facilitate the reorganization transaction which became effective on March 30,
2000 (see Note 11) and to continue the activity of Pathnet. Upon finalization of
the reorganization transaction, Pathnet became a wholly-owned subsidiary of
Pathnet Telecommunications. Hereafter, Pathnet Telecommunications, together with
Pathnet and its subsidiaries, are referred to as the Company.
The Company's network will enable its customers including existing
local telephone companies, long distance companies, internet service providers,
competitive telecommunications companies, cellular operators and other
telecommunications providers to offer additional services to new and existing
customers in these markets without having to expend their own resources to
build, expand or upgrade their own networks.
As of March 31, 2000, the Company's network consisted of over 6,300
wireless route miles providing wholesale transport services to 44 cities and 700
miles of installed fiber. The Company is constructing an additional 1,000 route
miles of fiber optic network, 500 of which is scheduled for completion by the
end of the second quarter. During 2000, the Company intends to deploy additional
products and services including bundled wholesale transport and local access
services.
The Company's business is funded primarily through equity investments
by the Company's stockholders and by proceeds from Pathnet's $350.0 million
aggregate principal amount of units consisting of 12 1/4% Senior Notes due 2008
(Senior Notes), which have been registered under the Securities Act of 1933, as
amended (Securities Act), and warrants to purchase Common Stock issued by
Pathnet on April 8, 1998 (Debt Offering).
2. BASIS OF PRESENTATION
Pathnet was formed to build a nationwide network designed to provide
other wholesale and retail telecommunications service providers with access to
underserved and second and third tier markets throughout the United States.
Pathnet Telecommunications was formed to continue the activity of Pathnet with
strategic investments from Colonial Pipeline Company, Burlington Northern and
Santa Fe Corporation and CSX Corporation received in connection with the
reorganization transaction. Since inception, Pathnet and Pathnet
Telecommunications' activities consist principally of constructing and deploying
digital networks utilizing both wireless and fiber-optic technologies. Pathnet
and Pathnet Telecommunications were considered companies under common control.
Consequently, for purposes of the accompanying consolidated financial
statements, Pathnet has been treated as a "predecessor" entity. Therefore, the
consolidated financial statements as of December 31, 1999 and for the three
months ended March 31, 1999 represent the historical financial information of
Pathnet, the predecessor entity. The accompanying consolidated financial
statements incorporate the combined business activities of Pathnet and Pathnet
Telecommunications. Collectively, Pathnet and Pathnet Telecommunications are
referred to as the Company in the accompanying consolidated financial
statements.
The Company recently commenced providing telecommunications services to
customers and recognizing the revenue from the sale of such telecommunication
services. The Company's principal activities to date have been securing
contractual alliances with its co-development partners, designing and
constructing network path segments, obtaining capital and planning its proposed
service. As of March 31, 2000 the Company had 25 customers for its
telecommunications services. As a result, the Company exited the development
stage in the three months ended March 31, 2000.
In the opinion of management, the accompanying unaudited consolidated
financial statements of the Company contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the Company's
consolidated financial position, and the results of operations and cash flows
for the periods indicated. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These unaudited
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto for Pathnet, Inc. included in the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission and made effective on March 14, 2000. The results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the operating results to be expected for the full year.
3. CONSOLIDATION
These consolidated financial statements include the accounts of Pathnet
Telecommunications and its wholly owned subsidiaries, Pathnet and Pathnet/Idaho
Power License, LLC (a wholly owned subsidiary of Pathnet). All material
intercompany accounts and transactions have been eliminated in consolidation.
4. LOSS PER SHARE
Basic loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the applicable
period. Diluted loss per share is computed by dividing net loss by the weighted
average common and potentially dilutive common equivalent shares outstanding
during the applicable period. For each of the periods presented, basic and
diluted loss per share are the same. The exercise of 3,394,473 employee common
stock options, the exercise of warrants to purchase 1,116,500 shares of common
stock, and the conversion of 27,243,868 shares of Series A, B, C, D and E
convertible preferred stock into shares of common stock as of March 31, 2000,
which could potentially dilute basic loss per share in the future, were not
included in the computation of diluted loss per share for the periods presented
because to do so would have been antidilutive in each case.
5. SEGMENT REPORTING
The Company identifies its segments based on management responsibility.
The Company measures segment loss as operating loss, which is defined as loss
before interest income and expense, and income taxes. The service revenue from
the telecommunications division includes all revenues generated from the sale of
telecommunications products, including high capacity, digital transport and
competitive local access services. The construction division includes the
operating activity and the assets relating to the network build out. The
revenues for the construction division primarily relate to the management of
construction projects and the sale of dark fiber through indefeasible rights of
use agreements ("IRUs"). The corporate division includes certain general and
administrative functions and operating expenses. All of the Company's revenues
are attributable to customers in the United States, and all assets are located
in the United States
The following tables reflect the financial information for the reportable
segments;
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
TELECOMMUNICATIONS CONSTRUCTION CORPORATE CONSOLIDATED
<S> <C> <C> <C> <C>
Revenue $ 921,849 $ 1,004,705 $ -- $ 1,926,554
Operating expenses 1,743,086 2,525,911 10,209,942 14,478,939
----------------------- ------------------ --------------- ---------------
Operating loss $ (821,237) $ (1,521,206) $ (10,209,942) $ (12,552,385)
======================== =================== ================ ================
THREE MONTHS ENDED MARCH 31, 1999
TELECOMMUNICATIONS CONSTRUCTION CORPORATE CONSOLIDATED
Revenue $ 576,504 $ 249,600 $ -- $ 826,104
Operating expenses 2,033,900 915,945 3,034,354 5,984,199
----------------------- ------------------ --------------- ---------------
Operating loss $ (1,784,300) $ (339,441) $ (3,034,354) $ (5,158,095)
======================== =================== ================ ================
</TABLE>
The majority of revenues for the quarter comprise construction services
(approximately 52.2 per cent) arising mainly from its co-development agreements
with Tri-State Generation and Transmission Association, Inc. (Tri-State). The
remainder of the Company's revenues for the quarter (approximately 47.8 per
cent) has been derived from the sale of bandwidth along the Company's digital
network including approximately $528,000 from one customer. The Company has
experienced significant operating and net losses and negative operating cash
flow to date and expects to continue to experience operating and net losses and
negative operating cash flow until such time as it is able to generate revenue
sufficient to cover its operating expenses.
6. AVAILABLE FOR SALE MARKETABLE SECURITIES
The Company's marketable securities are considered "available for
sale," and, as such, are stated at market value. Marketable securities include
restricted cash of approximately $22.1 million at March 31, 2000. The net
unrealized gains and losses on marketable securities are reported as part of
accumulated other comprehensive income (loss). Realized gains or losses from the
sale of marketable securities are based on the specific identification method.
The following is a summary of the investments in marketable securities
at March 31, 2000:
<PAGE>
<TABLE>
<CAPTION>
GROSS UNREALIZED
COST GAINS LOSSES MARKET VALUE
<S> <C> <C> <C> <C>
Available for sale marketable securities:
U.S. Treasury securities and debt securities
of U.S. Government agencies $ 23,302,385 $ 44,315 $ 23,118 $ 23,367,896
Corporate debt securities 8,976,442 1,615 32,999 8,944,795
Debt Securities issued by foreign
governments 1,503,649 -- 4,684 1,498,965
------------------ ----------- ---------- -----------------
33,782,475 45,930 60,801 33,811,656
Less: long term restricted cash (22,048,488) (44,315) (263) (22,092,540)
------------------ ----------- ---------- -----------------
$ 11,433,987 $ 1,615 $ 60,538 $ 11,719,116
================== =========== ============= ==================
</TABLE>
Net proceeds from the sales and maturity of available for sale
securities were approximately $50.9 million during the three months ended March
31, 2000.
The amortized cost and market value of available for sale marketable
securities by contractual maturity, regardless of their balance sheet
classification, at March 31, 2000 is as follows:
<TABLE>
<CAPTION>
COST MARKET VALUE
<S> <C> <C>
Due in one year or less $ 33,782,475 $ 33,811,656
Due after one year through two years -- --
------------------ ------------------
33,782,475 33,811,656
Less: long term restricted cash (22,018,488) (22,092,540)
------------------ ------------------
$ 11,433,987 $ 11,719,116
================== ==================
</TABLE>
Expected maturities may differ from contractual maturities because the
issuers of the securities may have the right to prepay obligations without
prepayment penalties.
7. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is comprised of the following
at March 31, 2000 and December 31, 1999:
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------------- ---------
<S> <C> <C>
Network in progress $ 86,655,041 $ 63,123,322
Communications network 75,594,507 71,604,029
Office and computer equipment 4,288,020 2,262,934
Furniture and fixtures 956,536 1,555,771
Leasehold improvements 377,749 337,181
---------------- ------------------
167,871,853 138,883,237
Less: accumulated depreciation (9,506,833) (6,954,872)
----------------- ------------------
Property and equipment, net $158,365,020 $ 131,928,365
================= ==================
</TABLE>
Network in progress includes (i) all direct material and labor costs
together with related allocable interest costs, necessary to construct
components of a high capacity digital wireless and fiber optic network, and (ii)
network related inventory parts and equipment. The network in progress balance
as March 31, 2000 includes approximately $53.8 million for costs incurred to
construct digital fiber optic networks and $2.8 million for a right of use under
an agreement with Northern Border Pipeline for microwave access. When a portion
of the network has been completed and made available for use by the Company, the
accumulated costs are transferred from network in progress to communications
network and depreciated.
8. DEFERRED FINANCING COSTS
The Company has incurred costs related to Pathnet's Debt Offering and
the amendment to the Senior Notes in connection with the reorganization
transaction. Such costs are amortized over the term of the debt or financing
arrangement other than when financing has not been obtained, in which case, the
costs are expensed immediately.
9. RESTRICTED CASH
Restricted cash comprises amounts held in escrow to collateralize the
Company's obligations under certain of its development agreements together with
cash and cash equivalents of approximately $21.6 million held as collateral for
repayment of interest on the Company's Senior Notes through April 2000. The
funds in each escrow account are available only to fund the projects to which
the escrow is related. Generally, funds are released from escrow to pay project
costs as incurred. During the three months ended March 31, 2000, the Company
deposited approximately $9.2 million in escrow and $0.2 million was released
from escrow.
10. COMMITMENTS AND CONTINGENCIES
As of March 31, 2000, the Company had capital commitments of up to
approximately $84.8 million relating to telecommunication and transmission
equipment and its agreement with WFI, Tri-States and CapRock.
On April 19, 2000, Pathnet, Inc. was sued by several plaintiffs
purporting to represent a class of landowners damaged by Pathnet in connection
with the development of Pathnet's fiber optic network. Specifically, the
complaint alleges that Pathnet installed fiber optic facilities on the property
of the landowners in the class without obtaining the necessary legal rights from
the landowners. Based on the information currently available to us, in the vast
majority of the jurisdictions in which Plaintiff alleges violations, we are
unaware of any facts that would support Plaintiff's claims. In the jurisdictions
in which there is uncertainty as to the factual basis for Plaintiff's claims, we
believe that we have valid defenses to Plaintiff's claims. We also believe that
we would be indemnified against Plaintiff's claims by our co-development partner
on that project. Accordingly, based upon our current understanding of the
factual basis for Plaintiff's claims and the likelihood of success, we do not
believe that Plaintiff's claims will have a material adverse effect on the
earnings, cash flow or financial position of the Company.
11. REORGANIZATION
On March 30, 2000, the Company completed a strategic investment
transaction with Colonial Pipeline Company, The Burlington Northern and Santa Fe
Corporation and CSX Corporation. As part of the transaction, the Company
received a contribution of over 12,000 miles of rights of way with an estimated
value of approximately $187.0 million. Generally, the Company does not begin
amortizing rights of way used in its network until the network is completed and
available for use. As of March 31, 2000, none of the rights of way obtained in
the reorganization transaction were available for use.
In return for the rights of way, the Company issued 8,511,607 shares of
the Company's Series D convertible preferred stock. In addition to providing a
portion of the rights of way access, Colonial Pipeline paid $43.0 million in
cash to the Company, comprised of $38.0 million at the initial closing for
1,729,631 shares of the Company's Series E redeemable preferred stock, $1.0
million for the issuance of an option to purchase 1,593,082 shares of the
Company's Series E redeemable preferred stock for $21.97 per share in connection
with an initial public offering and $4.0 million for rights in 2,200 conduit
miles of our future network. Colonial Pipeline will pay an additional $25.0
million for 1,137,915 shares of the Company's Series E redeemable preferred
stock upon the completion of a fiber-optic network segment that the Company
expects to complete during the second calendar quarter of 2000. The new
investors collectively received an approximate one-third equity stake in the
Company, as well as representation on the Company's Board of Directors.
Upon the closing of the transaction, all of the Pathnet's common stock
was exchanged for common stock of the Company resulting in Pathnet becoming a
wholly-owned subsidiary of the Company and all of the Pathnet's 5,470,595 shares
of mandatorily redeemable preferred stock being converted into 15,864,715 of the
Company's convertible preferred stock.
The Company obtained consents to the waiver and the amendment of
certain provisions of the indenture from the holders of a majority of Pathnet's
Senior Notes. In return for such consents, (i) Pathnet made consent fee payments
to consenting noteholders of approximately $7.3 million in the aggregate and
purchased and pledged to the trustee under the indenture for the benefit of the
noteholders, additional U.S. Treasury Securities as security covering the
October 16, 2000 interest payment on the Senior Notes and (ii) Pathnet
Telecommunications issued its senior guarantees of the Senior Notes. The $7.3
million consent payment to the bondholders increased deferred financing costs
and is being amortized over the remaining term of the Senior Notes. In addition,
for the quarter ended March 31, 2000, the Company had expensed approximately
$1.4 million of fees for printing, legal, solicitation and other transaction
fees.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THIS ITEM CONSTITUTE FORWARD-LOOKING
STATEMENTS. SEE. "FORWARD-LOOKING STATEMENTS" BELOW. IN THIS REPORT, WE REFER TO
PATHNET TELECOMMUNICATIONS, INC., AS THE "COMPANY," "WE," "US," AND "OUR." WHERE
APPLICABLE, SUCH REFERENCES REFER TO PATHNET, INC.,OR "PATHNET", THE PREDECESSOR
REPORTING COMPANY PRIOR TO THE REORGANIZATION TRANSACTION COMPLETED ON MARCH 30,
2000.
OVERVIEW
We were formed on November 1, 1999 in order to facilitate a
reorganization transaction with Pathnet, Inc. which is now our wholly owned
subsidiary. Our reorganization was completed on March 30, 2000. Together with
Pathnet, we are a wholesale telecommunications provider building a nationwide
network designed to provide other wholesale and retail telecommunications
service providers with access to underserved and second and third tier markets
throughout the United States.
Our network will enable our customers, including existing local
telephone companies, long distance companies, internet service providers,
competitive telecommunications companies, cellular operators and other
telecommunications providers, to offer additional services to new and existing
customers in these markets without having to expend their own resources to
build, expand or upgrade their own networks.
Since Pathnet's inception in November 1995, our business has focused on:
o Entering into strategic relationships with owners of
telecommunications assets and co-development partners;
o Developing and constructing our digital backbone network;
o Negotiating collocation and interconnection agreements and installing
collocations and interconnections off our backbone network;
o Designing and developing our network architecture and operations
support systems, including the buildout and launch of our 24-hour
network operations center;
o Raising capital and hiring management and other key personnel;
o Developing "leading edge" products and services; and
o Procuring governmental authorizations.
On March 30, 2000, we completed a strategic investment transaction with
Colonial Pipeline Company, The Burlington Northern and Santa Fe Corporation and
CSX Transportation, Inc. We received the right to develop over 12,000 miles of
these investors' rights of way holdings, 8,000 of which have some form of
exclusivity. In addition to providing a portion of the rights of way access,
Colonial also made a contribution of $43.0 million in cash (consisting of $38.0
million as a first tranche cash investment, $1.0 million for options to purchase
additional shares of our stock and $4.0 million for rights in a single fiber
optic conduit) and agreed to make a second cash investment of $25.0 million in
our business upon the completion of our Chicago to Aurora (a suburb of Denver)
fiber optic network build. Our new investors hold approximately one-third of our
equity and have representation on our Board of Directors.
As of March 31, 2000, our network consisted of over 6,300 wireless
route miles, providing wholesale transport services to 44 cities, and 700 miles
of installed fiber. We are constructing an additional 1,000 route miles of fiber
optic network, 500 of which is scheduled for completion by the end of the second
quarter of this year. During 2000, we intend to deploy additional products and
services including bundled wholesale transport and local access services.
We have experienced operating losses since our inception, and we expect
these operating losses to continue as we expand our operations. Implementing our
business plan will require significant capital expenditures. Our financial
performance will vary from market to market, and the time when we will achieve
positive earnings before interest, taxes, depreciation and amortization, if at
all, will depend on the:
o Size of our target markets;
o Timely completion of backbone routes, collocations and interconnections;
o Cost of the necessary infrastructure;
o Timing of and barriers to market entry; and
o Commercial acceptance of our services.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH THE THREE MONTHS ENDED
MARCH 31, 1999
During the three months ended March 31, 2000, we completed our
reorganization, which included our acquisition of rights of way and cash from
our investors. We also continued to focus on:
o expanding the number of cities and collocations in our network,
o building out our fiber network,
o obtaining the regulatory status and entering into interconnection
agreements in each of our target markets to enable us to obtain
unbundled network elements and central office space from existing
local telephone companies, and
o developing our infrastructure including the hiring of key management
personnel.
REVENUE
For the three months ended March 31, 2000 and 1999, we generated
revenue of approximately $1.9 million and $826,000, respectively, comprised of
revenue from telecommunications services of approximately $922,000 and $526,000,
respectively, together with revenue from construction services of approximately
$1.0 million and $250,000, respectively. The increase in revenue from
construction services arises mainly from our co-development agreement with
Tri-State Generation and Transmission Association, Inc. entered into during the
third quarter of 1999. We expect that a substantial portion of our future
revenue will be generated from our sale of construction services, local access
services and backbone infrastructure services.
OPERATING EXPENSES
For the three months ended March 31, 2000 and 1999, we incurred
operating expenses of approximately $13.1 million and $6.0 million,
respectively. This increase is primarily a result of additional staff costs
incurred as we continued to develop our infrastructure, depreciation expenses as
more of our network came on line, administrative costs related to obtaining
regulatory status, deferred expense for compensatory stock options and costs
associated with our reorganization transaction. Cost of revenue reflects direct
costs we incurred in performing construction and management services and
providing telecommunications services. We expect selling, general and
administrative expenses to continue to increase in the remainder of 2000 as we
continue to develop or infrastructure and increase our staff level.
INTEREST EXPENSE
Interest expense for the three months ended March 31, 2000 and 1999 was
approximately $9.7 million and $10.3 million, respectively. Interest expense
primarily represents interest on Pathnet's 12 1/4% Senior Notes due 2008 issued
in April 1998 together with the amortization expense related to bond issuance
costs in respect to those notes and the amortization expense related to deferred
financing costs.
INTEREST INCOME
Interest income for the three months ended March 31, 2000 and 1999 was
approximately $2.2 million and $3.8 million, respectively. The decrease in
interest income reflects a decrease in cash and cash equivalents and marketable
securities as those funds were used in building our network, funding operations,
and making interest payments on the senior notes.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had approximately $130.3 million of cash, cash
equivalents and marketable securities to fund future operations. In addition, we
had $25.8 million in restricted cash to be used to build our network. We expect
to receive an additional $25 million equity investment upon the completion of a
fiber optic network during the second calendar quarter of 2000.
In addition, we expect to finance the cost of some of our equipment through
vendor financing arrangements. We have negotiated with Lucent Technologies, Inc.
a proposed credit facility in which Lucent will, subject to certain conditions
(including the closing of our reorganization), provide us with financing for
fiber optic cable that we purchase from them.
We estimate that our current available resources, together with those
received in our reorganization, will be sufficient to fund the implementation of
our long term business plan, as currently contemplated, including the capital
commitments described above, operating losses in new markets and working capital
needs through the fourth quarter of 2000. After such time, we expect we will
require additional financing, which may include commercial bank borrowings,
additional vendor financing or the sale or issuance of equity or debt
securities.
Our expectations of our future capital requirements and cash flows from
operations are based on current estimates. If our plans or assumptions change or
prove to be inaccurate, we may require additional sources of capital or
additional capital sooner than anticipated.
FORWARD-LOOKING STATEMENTS
The matters discussed in this quarterly report may include
forward-looking statements, including statements which can be identified by the
use of forward-looking terminology such as "believes," "anticipates," "expects,"
"may," "will," or "should" or the negative of such terminology or other
variations on such terminology or comparable terminology, or by discussions of
strategies that involve risks and uncertainties. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we
cannot assure you that such expectations will prove to be correct. Important
factors that could cause actual results to differ materially from expectations
include, without limitation, those described in conjunction with the
forward-looking statements in this quarterly report, as well as the amount of
capital needed to deploy our network; our substantial leverage and need to
service our indebtedness; the restrictions imposed by our current and possible
future financing arrangements; our ability to successfully manage the
cost-effective and timely completion of our network and our ability to attract
and retain customers for our products and services; our ability to implement our
newly expanded business plan; our ability to retain and attract relationships
with the incumbent owners of the telecommunications assets with which we expect
to build our network; our ability to obtain and maintain rights of way for the
deployment of our network; our ability to retain and attract key management and
other personnel as well as our ability to manage the rapid expansion of our
business and operations; our ability to compete in the highly competitive
telecommunications industry in terms of price, service, reliability and
technology; our dependence on the reliability of our network equipment, our
reliance on key suppliers of network equipment and the risk that our technology
will become obsolete or otherwise not economically viable; and our ability to
conduct our business in a regulated environment. We do not intend to update
these forward-looking statements. These and other risks and uncertainties
affecting us are contained from time to time in our filings with the Securities
and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to minimal market risks. We manage sensitivity of our results
of operations to market risks by maintaining a conservative investment
portfolio, (which primarily consists of debt securities, that typically mature
within one year), and entering into long-term debt obligations with appropriate
pricing and terms. We do not hold or issue derivative, derivative commodity or
other financial instruments for trading purposes. Financial instruments held for
other than trading purposes do not impose a material market risk on us.
We are exposed to interest rate risk. We periodically need additional debt
financing due to our large operating losses, and capital expenditures associated
with establishing and expanding our network coverage increase our financing
needs. The interest rate that we will be able to obtain on debt financing will
depend on market conditions at that time, and may differ from the rates we have
obtained on our current debt.
Although all of our long-term debt bears fixed interest rates, the fair
market value of our fixed rate long-term debt is sensitive to changes in
interest rates. We have no cash flow or earnings exposure due to market interest
rate changes for our fixed long-term debt obligations. As of March 31, 2000, the
fair value of our debt was approximately $237.6 million.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
OUR REGISTERED OFFERING
On March 14, 2000, the Securities and Exchange Commission declared our
Registration Statement on Form S-1 (No. 333-91469) effective. Our Registration
Statement relates to our offer of our absolute, unconditional and continuing
guarantees of the obligations of Pathnet under the indenture governing Pathnet's
12 1/4 % Senior Notes due 2008, including Pathnet's obligations to make interest
and principal payments on those notes. We commenced the offer of our guarantees
on March 14, 2000 and terminated the offer on March 27, 2000.
On March 30, 2000, after receipt of noteholder consent to the waivers
under and amendments of the our original Pathnet indenture relating to Pathnet's
notes, we entered into a supplemental indenture with Pathnet and the indenture
trustee and issued our guarantees of all of Pathnet's notes under the indenture.
Pursuant to the terms of our guarantees, we are guaranteeing to the holder of
any outstanding note(s) all obligations, covenants, liabilities, undertakings
and agreements of any kind of Pathnet contained in the indenture (as amended),
including:
o the prompt payment in full, in United States currency, when due, of the
principal and of the interest on the notes and all other amounts that may
be owing from Pathnet to the holders of the notes under the indenture and
the notes; and
o the prompt performance and observance by Pathnet of all covenants,
agreements and conditions to be performed and observed by Pathnet under the
indenture.
The guarantees are absolute, unconditional and continuing guarantees of
the obligations of Pathnet under the indenture, including its obligations to
make interest and principal payments. If Pathnet does not comply with its
obligations under the indenture the holders may proceed directly against us
without being required to seek payment or performance from Pathnet. The
guarantees will continue in effect with respect to any note until the holder of
that note has received payment in full of the redemption price with respect to
that note, when the guarantees terminate. A copy of our guarantee is attached as
an exhibit hereto.
We had conditioned the issuance of our guarantees upon, among other
things, the waiver and amendment of certain provisions of the indenture. In
particular, we sought consent from holders of the notes to the (1) waiver of
Pathnet's compliance, for purposes of the reorganization transaction, with the
"Change of Control" repurchase obligation and the "Excess Proceeds Offer"
requirements of the indenture, which otherwise would be triggered by the closing
of the transaction; and (2) adoption of amendments to the terms of the indenture
that are intended to subject us to indenture covenants parallel to those that
were applicable solely to Pathnet (and, in some cases, its subsidiaries) and
extend the scope of indenture tests and covenants to us and any of our future
subsidiaries. A summary of the indenture amendments is provided below.
SUMMARY OF THE INDENTURE AMENDMENTS
The indenture amendments were designed to impose upon us and our
Restricted Subsidiaries restrictions parallel to those that the original
indenture imposed upon Pathnet and its Restricted Subsidiaries, and to permit
transactions between Pathnet and us (and our other Restricted Subsidiaries) to
the same extent that the original indenture permitted such transactions between
Pathnet and its Restricted Subsidiaries. The necessary amendments to the
indenture are contained in the supplemental indenture, which binds both Pathnet
and us.
The following table summarizes the material changes to the original
indenture as implemented by the supplemental indenture. The table does not
restate the supplemental indenture in its entirety and it may omit detailed
information important to some investors in understanding the operation of
relevant covenants of the indenture and the supplemental indenture in specific
circumstances. Capitalized terms used in this description have the meaning given
to them in the indenture as amended by the supplemental indenture unless we
refer to the "original indenture," in which case terms are used as defined in
that version. As used in the table, "Pathnet" refers to Pathnet, Inc. and
"Pathnet Telecom" refers to us. For more detailed information regarding the
provisions summarized here, you should refer to the supplemental indenture filed
as an exhibit hereto. In addition to the supplemental indenture, the original
indenture is incorporated by reference as set forth in our exhibit list.
<TABLE>
<CAPTION>
CHANGES AS INCORPORATED IN THE
PROVISION ORIGINAL INDENTURE SUPPLEMENTAL INDENTURE
- - ---------------------- -------------------------------------- ----------------------------
<S> <C> <C>
EVENTS OF DEFAULT Payment defaults on the notes. No change for notes; adds failure
of guarantees to be in effect.
Covenant defaults on the indenture. Covenant defaults on the
indenture, including obligations
imposed directly on Pathnet
Telecom.
Cross defaults to other indebtedness or Cross defaults to other
adverse judgments over $7.5 million indebtedness or adverse judgments
against Pathnet or any Significant over $7.5 million against any of
Subsidiary of Pathnet. Pathnet, Pathnet Telecom, or any
Significant Subsidiary of either
Pathnet or Pathnet Telecom.
Bankruptcy proceedings by or in respect Bankruptcy proceedings by or in
of Pathnet or any Significant respect of Pathnet, Pathnet
Subsidiary of Pathnet. Telecom, or any Significant
Subsidiary of Pathnet or Pathnet
Telecom.
Pledge Agreement ceases to be in full No change.
force and effect.
CONSOLIDATION, Restricts the ability of Pathnet and Expands the covenant so that it
MERGER, CONVEYANCE, its Restricted Subsidiaries to enter applies to Pathnet Telecom and its
TRANSFER OR LEASE into transactions involving a merger or consolidated group, rather than
disposition of all or substantially all solely to Pathnet and its
of Pathnet's and its Restricted consolidated group. Provisions
Subsidiaries' assets on a consolidated relating to the required
basis. substitution of successors and the
requirement to secure the notes in
certain circumstances apply to
Pathnet obligations under the
notes and as appropriate to
Pathnet Telecom obligations under
the guarantees.
AMENDMENTS Certain types of amendments (and Provides that Pathnet Telecom and
TO THE INDENTURE supplemental indentures) may be adopted Pathnet can amend the indenture in
without consent of noteholders. the same circumstances, and with
the same levels of approvals, as
Pathnet is permitted to make such
amendments under the original indenture.
Most types of amendments (and Applies to the supplemental
supplemental indentures) may be adopted indenture the same majority consent
with the consent of a majority of the threshold for those amendments that
noteholders. require such a majority
in the original indenture.
Certain types of amendments (and Subjects Pathnet Telecom to the
supplemental indentures) may not be unanimous consent threshold for the
adopted without the consent of all amendments requiring unanimous
noteholders. consent in the original indenture,
and adds to that list any
amendment that modifies the
provisions of the indenture
relating to the guarantees in a
manner adverse to the noteholders.
MAINTENANCE OF Pathnet must maintain an office or Both Pathnet and Pathnet Telecom
OFFICE agency in New York City for service of must maintain an office or agency
notices and demands. in New York City for the service of
notices and demands under the notes
and the guarantees, on the same
terms as that obligation
applies to Pathnet.
MONEY FOR NOTE Regulates Pathnet's dealings with Regulates Pathnet Telecom's
PAYMENTS Paying Agents and its ability to act as dealings with Paying Agents and
its own Paying Agent. Pathnet
Telecom's ability to make payments
directly to the holders of the
guarantees in the same manner as
Pathnet's dealings are regulated
under the indenture.
CORPORATE Pathnet and its subsidiaries must Expands the covenant so that it
EXISTENCE maintain corporate existence. also applies to Pathnet Telecom and
its other subsidiaries.
PAYMENT OF TAXES Pathnet and its subsidiaries must pay Expands the covenant so that it
AND OTHER CLAIMS taxes and other claims. also applies to Pathnet Telecom and
its other subsidiaries.
MAINTENANCE OF Pathnet and Restricted Subsidiaries Expands the covenant so that it
PROPERTIES must maintain material properties in also applies to Pathnet Telecom and
good condition and repair. its Restricted Subsidiaries.
INSURANCE Pathnet and Restricted Subsidiaries Expands the covenant so that it
must maintain customary insurance. also applies to Pathnet Telecom and
its Restricted Subsidiaries.
OFFICERS COMPLIANCE Required from Pathnet. Required from Pathnet and from
CERTIFICATE Pathnet Telecom.
FINANCIAL STATEMENTS Pathnet must file Exchange Act reports Pathnet Telecom must file Exchange
with the SEC (whether or not required Act reports (including consolidated
by law to do so) and must provide reports) with the SEC (whether or
Trustee with copies. not required by law to do so) and
must provide Trustee with copies.
To the extent permitted in the
future by applicable law, releases
Pathnet from separate SEC and
Trustee periodic report filing
obligations.
CHANGE OF CONTROL Pathnet required to offer to repurchase No change to Pathnet's obligation.
REPURCHASE the notes at a premium upon occurrence Expands the provision so that
OBLIGATION of a Change of Control. Pathnet's repurchase obligation is
also triggered by a Change of
Control of Pathnet Telecom;
guarantees apply to this
obligation.
LIMITATION ON Subject to a ratio test for Expands the existing covenant so
INDEBTEDNESS Consolidated Indebtedness to that both Pathnet and Pathnet
Consolidated Operating Cash Flow Test Telecom are subject to the same
for Pathnet and its Restricted limitations (including the
Subsidiaries, neither Pathnet nor its limitations on their respective
Restricted Subsidiaries can incur Restricted Subsidiaries), except
Indebtedness other than Permitted that:
Indebtedness. Permitted Indebtedness
includes Telecommunications (1) the definition of Permitted
Indebtedness of either Pathnet or any Indebtedness continues to
Restricted Subsidiary; subordinated include Telecommunications
indebtedness of Pathnet to its Indebtedness, but applies to
Restricted Subsidiaries; and any Pathnet Telecom's Restricted
indebtedness of a Restricted Subsidiary Subsidiaries as well as
to Pathnet or to any other Restricted Pathnet's, and allows
Subsidiary. intercompany Indebtedness among
Pathnet Telecom, Pathnet, and
their respective Restricted
Subsidiaries subject to the
corresponding restrictions; and
(2) the Consolidated Indebtedness
to Consolidated Operating Cash
Flow Ratio used to determine
whether any of the covered
entities can incur additional debt
is calculated by reference to
Pathnet Telecom, Pathnet and all
Restricted Subsidiaries on a
consolidated basis.
RESTRICTED PAYMENTS Restricts Pathnet and its Restricted Changes the cash dividend
LIMITATION Subsidiaries from declaring cash declaration and capital stock
dividends on Pathnet capital stock, redemption restrictions to apply to
redeeming capital stock or subordinated Pathnet Telecom rather than to
debt of Pathnet, or making investments Pathnet. Imposes parallel restrictions
(other than Permitted Investments), on Pathnet Telecom's ability to make
unless Pathnet could, after such other Restricted Payments.
payment, incur additional Indebtedness
under the Permitted Indebtedness
covenant and the aggregate amount of
permitted Restricted Payments does not
exceed an amount determined as
described in the Restricted Payments
covenant.
SALE OF CAPITAL STOCK Restricts the sale or issuance of Expands the covenant to apply to
OF RESTRICTED Capital Stock of Restricted capital stock of Pathnet and
SUBSIDIARIES Subsidiaries of Pathnet to third Restricted Subsidiaries of both
parties. Pathnet Telecom and Pathnet.
TRANSACTIONS WITH Restricts transactions by Pathnet and Imposes the same restriction on
AFFILIATES its Restricted Subsidiaries with Pathnet Telecom and its Restricted
Affiliates unless conducted on an Subsidiaries and expands the
arms'-length basis. definition of Affiliates to include
all Affiliates of Pathnet Telecom.
As provided in the original
indenture for transactions among
Pathnet and its own Restricted
Subsidiaries, the supplemental
indenture provides that
transactions among any of Pathnet
Telecom, Pathnet and any
Restricted Subsidiary are not
restricted.
LIEN RESTRICTIONS Neither Pathnet nor any Restricted Expands the restriction to include
Subsidiary can permit any Lien to exist Pathnet Telecom and its Restricted
other than Permitted Liens, unless the Subsidiaries, and expands the
notes are equally and ratably secured. definition of "Permitted Liens" to
Permitted Liens include liens for include liens among Pathnet
Telecommunications Indebtedness and Telecom, Pathnet and their
liens among Pathnet and any Restricted respective Restricted Subsidiaries.
Subsidiary.
LIMITATIONS ON Prohibits Restricted Subsidiaries of Expands the restrictions to apply
GUARANTEES AND Pathnet from issuing or guaranteeing to Pathnet Telecom's Restricted
OTHER DEBT Debt Securities unless they Subsidiaries; exception for vendor
concurrently guarantee the notes; financings and other borrowings
specific exception excludes from the continues to apply.
definition of Debt Securities any
vendor equipment financing facilities
or similar financings and other
borrowings incurred in a manner not
customarily viewed as a securities
offering.
LIMITATION ON ASSET Pathnet and its Restricted Subsidiaries Retains unmodified Pathnet's
SALES may not engage in an Asset Sale unless obligations in respect of Asset
the transaction is for fair market Sales. Imposes corresponding
value and meets other requirements as obligations on Pathnet Telecom and
to the nature of the consideration; if its Restricted Subsidiaries.
the amount of proceeds exceeds a
specified threshold, Pathnet is
required to commence an offer to
purchase notes up to such amount within
15 business days of the closing of the
Asset Sale.
PROHIBITION AGAINST Subject to exceptions, including, among Expands the existing covenant to
DIVIDEND RESTRICTIONS others, those for Secured Indebtedness apply to Pathnet and to Restricted
and Telecommunications Indebtedness, Subsidiaries of both Pathnet and
Pathnet cannot permit any Restricted Pathnet Telecom.
Subsidiary to accept a restriction on
its ability to pay dividends or make
other payments to Pathnet or any
Restricted Subsidiary of Pathnet to the
extent necessary to permit Pathnet to
make payment on the notes.
SECURITY Pathnet acquired Government Securities Pathnet acquired additional
and pledged them to the Trustee as Government Securities and pledged
security for the benefit of the noteholders them to the trustee as security for
with respect to the payment of the first the benefit of the noteholders
four scheduled interest payments on with respect to the October 16, 2000
the notes (through the April 15, 2000 interest payment on the notes.
interest payment date).
</TABLE>
<PAGE>
SALES OF UNREGISTERED SECURITIES DURING THE FIRST QUARTER
OVERVIEW. On March 30, 2000, we completed a transaction involving a single
plan of contribution and reorganization in
which, among other things:
o existing stockholders of Pathnet exchanged their shares of Pathnet's
common stock and Series A, B and C Convertible Preferred Stock solely
in return for substantially similar shares of our common stock and our
Series A, B and C Convertible Preferred Stock;
o warrants to purchase shares of Pathnet common stock were exchanged for
warrants to purchase similar shares of our common stock;
o we adopted the employee stock option plans formerly held by Pathnet
(and the option grants made under those plans);
o Pathnet became our wholly owned subsidiary;
o three new investors - The Burlington Northern and Santa Fe Railway
Company, CSX Transportation, Inc. and Colonial Pipeline Company -
contributed to us rights of way, with a value of $187 million, to
permit us to build our telecommunications network along their existing
railroad and pipeline corridors, in return for shares of our Series D
Convertible Preferred Stock; and
o Colonial also contributed $38 million in cash to purchase shares of
our Series E Convertible Preferred Stock and an additional $1 million
for options to purchase additional shares of our stock.
SHARES OF STOCK. In connection with the closing of the reorganization
transaction, we issued the following shares of our capital stock (each
issued on March 30, 2000):
<TABLE>
<CAPTION>
AMOUNT (IN THE
TITLE OF OUR SHARES AGGREGATE) HOLDER(S)
- - ------------------- ---------- ---------
<S> <C> <C>
Series A Convertible Preferred Stock 2,899,999 Former holders of Pathnet's Series A Convertible
Preferred Stock
Series B Convertible Preferred Stock 4,725,457 Former holders of Pathnet's Series B Convertible
Preferred Stock
Series C Convertible Preferred Stock 7,126,576 Former holders of Pathnet's Series C Convertible
Preferred Stock
Series D Convertible Preferred Stock 8,511,607 The Burlington Northern and Santa Fe Railway Company,
CSX Transportation, Inc. and Colonial Pipeline Company
Series E Convertible Preferred Stock 1,729,631 Colonial Pipeline Company
Common stock 2,977,593 Former holders of Pathnet's common stock
</TABLE>
OUR WARRANTS. On March 30, 2000, in connection with the reorganization,
we issued warrants to purchase a total of 1,116,500 shares of our common stock
at $0.01 per share to holders of, and in exchange for, similar warrants issued
by Pathnet in 1998 to purchase shares of Pathnet's common stock. Our warrants
are exercisable upon the earliest to occur of:
o the time immediately prior to the occurrence of a Change of Control
(as defined in the indenture);
o the 180th day (or an earlier date determined by us) following the
closing of an "Initial Public Equity Offering" (as defined in the
Warrant Agreement);
o upon the closing of an Initial Public Equity Offering but only for
those warrants required to be exercised to permit their holders to
sell Warrant Shares (as defined in the Warrant Agreement) pursuant to
their respective registration rights;
o the time when a class of our equity securities is listed on a national
securities exchange, authorized for quotation on the Nasdaq National
Market or its otherwise subject to registration under the Exchange
Act; or
o April 30, 2001.
We entered into a Supplemental Warrant Agreement, containing substantially
identical terms as Pathnet's original Warrant Agreement, with modifications
reflecting the substitution of us in place of Pathnet as the contracting party
and related conforming changes. The terms governing our warrants are set forth
in the Warrant Agreement, Supplemental Warrant Agreement, Warrant Agreement
Amendment and Waiver, Warrant Registration Rights Agreement, Warrant
Registration Rights Agreement Waiver, Amended and Restated Warrant Registration
Rights Agreement and the form of warrant certificate, all of which are attached
as exhibits hereto.
COLONIAL OPTIONS. On March 30, 2000, in connection with the
reorganization, Colonial received two options pursuant to the terms of the
Colonial Option Agreement, which is attached as an exhibit hereto, for which
Colonial paid us $1 million:
o The first option may be exercised by Colonial and/or a number of Colonial's
affiliated companies, and permits the purchase of up to 1,593,082
additional shares of our series E convertible preferred stock at an
exercise price of $21.97 per share and, under certain circumstances, the
contribution of additional rights of way in exchange for shares of our
series D convertible preferred stock at $21.97 per share pursuant to a new
contribution agreement between Colonial and us.
o The second option permits Colonial to purchase a number of shares of our
common stock equal to 10% of the total number of shares of common stock
that we actually sell in any initial public offering of our common stock.
This second option must be exercised by Colonial at least ten days prior to
the filing of our registration statement for an initial public offering of
our common stock, but the shares will be issued only if and when we close
on a firm commitment underwritten initial public offering. The price at
which Colonial may purchase our shares under this option will be 90% of the
price per share of the common stock offered by us to the public, as
reflected in the final prospectus filed with respect to our initial public
offering.
EMPLOYEE STOCK OPTIONS. As of March 31, 2000, pursuant to the exercise
of stock options, we issued 198,514 shares of common stock to certain former
employees at exercise prices ranging from $1.13 to $5.20 per share. All of these
stock options were granted under Pathnet's 1997 Stock Incentive Plan, which we
assumed at the closing of the reorganization transaction.
There were no underwriters involved in the sale of any of these
securities. Our equity securities were issued in private placement transactions
exempt from registration in accordance with Section 4(2) of the Securities Act
of 1933, as amended, and where applicable, Rule 506 under Regulation D, and were
issued without general solicitation or advertising.
USE OF PROCEEDS
We did not receive any proceeds from the issue of our guarantees.
The aggregate amount of expenses incurred for our account in connection
with the issuance and distribution of the guarantees is estimated at $9,504,517,
consisting of the following:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee........... $ 60,326
Blue Sky fees and expenses.................................... 1,300
Accounting fees and expenses.................................. 50,000
Legal fees and expenses....................................... 1,550,603
Printing and engraving fees................................... 345,000
Solicitation Agent fees and expenses.......................... 768,163
Information Agent fees and expenses........................... 6,591,625
Miscellaneous................................................. 25,000
Trustee/Depositary/Warrant Agent fees and expenses............ 112,500
---------------
Total.................................................... $ 9,504,517
===============
</TABLE>
*Also attributable to the overall reorganization transaction.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 30, 2000, we solicited written consents from the holders of
our Series D Convertible Preferred Stock and Series E Convertible Preferred
Stock to (i) approve the election of Messrs A. R. "Pete" Carpenter, Thomas Hund
and David Lemmon as the Series D/E Stockholder Directors (as defined in the
Company's Stockholders Agreement dated as of March 30, 2000); and (ii) approve
and ratify the election of Richard A. Jalkut, Chief Executive Officer, as a
Director. Effective March 30, 2000, we received written consents approving such
proposals from our Series D and E Preferred Stockholders representing 10,241,238
votes with no abstentions. The terms of office as directors of Messrs. Kevin
Maroni, Peter Barris, Patrick Kerins and Stephen Reinstadtler continued after
March 30, 2000.
On March 30, 2000, we solicited written consents from the holders of
our Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and
Series E Convertible Preferred Stock to approve our issuance of (i) a promissory
note to Pathnet due March 30, 2010 in the principal amount of $70 million in
exchange for certain fiber assets under assignment and acceptance agreements;
and (ii) a promissory note to Pathnet due March 30, 2010 in the principal amount
of $50 million in exchange for cash. Effective March 30, 2000, we received
unanimous written consent approving such proposals from our preferred
stockholders representing 26,105,953 votes.
On March 30, 2000, we solicited written consents from the holders of
our Common Stock, Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock, Series D Convertible
Preferred Stock and Series E Convertible Preferred Stock to approve (i) the
assumption Pathnet's of stock option plans and all stock options outstanding
under those stock option plans; and (ii) the reservation of shares of our common
stock for issuance under our stock option plans. Effective March 30, 2000, we
received written consents approving such proposals from our stockholders
representing 21,149,709 votes, with stockholders representing 6,821,154 votes
abstaining.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit Index
(B) REPORTS ON FORM 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PATHNET TELECOMMUNICATIONS, INC.,
a Delaware corporation
(Registrant)
Date: May 15, 2000 By: /S/ RICHARD A. JALKUT
----------------------
Richard A. Jalkut
President and Chief Executive
Officer
Date: May 15, 2000 By: /S/ JAMES M. CRAIG
-------------------
James M. Craig
Executive Vice-President, Chief
Financial Officer and Treasurer
(Principal Financial Officer and
Controller)
<PAGE>
EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
3.1 (i) Certificate of Incorporation of Pathnet Telecommunications,
Inc.
3.2 (i) By-laws of Pathnet Telecommunications, Inc.
4.1 (iii) Stockholders Agreement, by and among the Pathnet Telecommunications, Inc. and
certain stockholders of the Pathnet Telecommunications, Inc.
4.2 (ii) Indenture, dated as of April 8, 1998, between Pathnet, Inc. and The Bank of
New York, Inc. as Trustee
4.3 (iii) Supplemental Indenture, dated as of March 30, 2000, by and among Pathnet, Inc., Pathnet
Telecommunications, Inc. and the Bank of New York
4.4 (ii) Form of Note
4.5 (ii) Pledge Agreement, dated as of April 8, 1998, by and among Pathnet, Inc., The
Bank of New York as Trustee and as the Securities Intermediary
4.6 (iii) Amended and Restated Pledge Agreement dated as of March 30, 2000, by and among
Pathnet, Inc, and the Bank of New York
4.7 (iii) Form of Guarantee dated as of March 30, 2000 by Pathnet Telecommunications, Inc.
4.8 (ii) Warrant Agreement, dated as of April 8, 1998, between Pathnet, Inc. and
The Bank of New York, as Warrant Agent
4.9 (ii) Warrant Registration Rights Agreement, dated as of April 8, 1998, by and among Pathnet, Inc.,
Spectrum Equity Investors, L.P., New Enterprise Associates VI, Limited Partnership, Onset
Enterprise Associates II, L.P., FBR Technology Venture Partners, L.P., Toronto Dominion Capital
(U.S.A.) Inc., Grotech Partners IV, L.P., Richard A. Jalkut, David Schaeffer and the Initial
Purchasers
4.10 (iii) Warrant Agreement Amendment and Waiver, dated as of March 30, 2000, between Pathnet, Inc. and the
Bank of New York
4.11 (iii) Warrant Registration Rights Agreement Waiver, dated as of March 30, 2000, by Pathnet, Inc. with
the consent of Spectrum Equity Investors, L.P., New Enterprise Associates VI, Limited Partnership,
Onset Enterprise Associates II, L.P., FBR Technology Venture Partners, L.P., Grotech Partners IV,
L.P. and Richard A. Jalkut
4.12 (iii) Supplemental Warrant Agreement, dated as of March 30, 2000, between Pathnet Telecommunications,
Inc. and the Bank of New York
4.13 (iii) Form of Pathnet Telecommunications, Inc. Warrant Certificates issued March 30, 2000
4.14 (iii) Amended and Restated Warrant Registration Rights Agreement, dated as of March 30, 2000, among
Pathnet Telecommunications, Inc., Spectrum Equity Investors, L.P., New Enterprise Associates VI,
Limited Partnership, Onset Enterprise Associates II, L.P., FBR Technology Venture Partners, L.P.,
Toronto Dominion Capital (U.S.A.), Inc., Grotech Partners IV, L.P., and Richard A. Jalkut
10.1 (i) + Pathnet Telecommunications, Inc. 1995 Stock Option Plan, as amended ( adopted as of March 30, 2000
by Pathnet Telecommunications, Inc.)
10.2 (i) + Pathnet Telecommunications, Inc. 1997 Stock Incentive Plan, as amended by Amendment No. 1 to the
Pathnet, Inc. 1997 Plan dated March 24, 1998 (adopted as of March 30, 2000 by Pathnet
Telecommunications, Inc.)
10.3 (iii) ++ Fiber Optic Access Agreement, dated as of March 30, 2000 by and between Pathnet
Telecommunications, Inc. and The Burlington Northern and Santa Fe Railway Company
10.4 Intentionally omitted
10.5 (iii) Master Right-of-Way Lease Agreement, dated as of March 30, 2000 by and between Pathnet
Telecommunications, Inc. and Colonial Pipeline Company
10.6 (iii) ++ Fiber Optic Access and Purchase Agreement, dated as of March 30, 2000 by and between Pathnet
Telecommunications, Inc. and Colonial Pipeline Company
10.7 (iii) Option Agreement, dated as of March 30, 2000 by and between Pathnet Telecommunications, Inc. and
Colonial Pipeline Company
10.8 (iii) ++ Fiber Optic Access and License Agreement, dated as of March 30, 2000 by and between Pathnet
Telecommunications, Inc. and CSX Transportation, Inc.
10.9 (iii) ++ Right of Way Operating Agreement, dated as of March 30, 2000, by and between Pathnet
Telecommunications, Inc. and CSX Transportation, Inc.
10.10 (iii) Assignment and Acceptance Agreement, dated as of March 30, 2000, by and between Pathnet, Inc. and
Pathnet Telecommunications, Inc..
10.11 (iii) Assignment and Acceptance Agreement, dated as of March 30, 2000, by and between Pathnet, Inc. and
Pathnet Fiber Optics, LLC
10.12 (iii) License of Marks, dated as of March 30, 2000, by and between Pathnet Telecommunications, Inc. and
Pathnet, Inc.
10.13 (iii) $70 million Promissory Note by Pathnet Telecommunications, Inc. in favor of Pathnet, Inc.
10.14 (iii) $50 million Promissory Note by Pathnet Telecommunications, Inc. in favor of Pathnet, Inc. dated as
of March 30, 2000.
27.1 Financial Data Schedule for the three months ended March 31, 2000.
99.1 Press release dated May 9, 2000 announcing the Company's results for the first quarter of 2000.
</TABLE>
(i) Filed as exhibit to Pathnet Telecommunications, Inc.'s Registration
Statement on Form S-1 (Registration No. 333-91469), filed with the SEC
on November 22, 1999, as amended by Amendment No. 1 to such
Registration Statement filed with the SEC on December 16, 1999, and as
further amended by Amendment No. 2 to such Registration Statement
filed with the SEC on February 22, 2000, and as further amended by
Amendment No. 3 to such Registration Statement filed with the SEC on
March 10, 2000 and as further amended by Amendment No.4 dated March
13, 2000, and incorporated herein by reference.
(ii) Incorporated by reference to the corresponding exhibit to Pathnet,
Inc.'s Registration Statement on Form S-1 (Registration No. 333-52247)
filed by Pathnet, Inc. with the SEC on May 8, 1998, as amended by
Amendment No. 1 to such Registration Statement filed with the SEC on
July 16, 1998, and as further amended by Amendment No. 2 to such
Registration Statement filed with the SEC on July 27, 1998, and as
further amended by Amendment No. 3 to such Registration Statement
filed with the SEC on August 10, 1998.
(iii) Filed herewith.
+ Constitutes management contract or compensatory arrangement.
++ Certain portions of this exhibit have been omitted based on a request
for confidential treatment filed separately with the SEC.
EXHIBIT 4.1
STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT (the "Agreement") is made as of this 30th day
of March 2000, by and among PATHNET TELECOMMUNICATIONS, INC., a Delaware
corporation (the "Company"); and the undersigned parties identified on Exhibit A
(collectively the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Company has entered into the following contribution agreements
(collectively, the "Contribution Agreements"): (i) Contribution Agreement (the
"BNSF Contribution Agreement") by and among the Company and The Burlington
Northern and Santa Fe Railway Company and certain affiliates thereof
(collectively, "BNSF"); (ii) Contribution Agreement (the "CSX Contribution
Agreement") by and between the Company and CSX Transportation, Inc. ("CSX");
(iii) Contribution Agreement (the "Colonial Contribution Agreement") by and
between the Company and Colonial Pipeline Company, a Delaware and Virginia
corporation ("Colonial"); and (iv) Contribution Agreements (the "Pathnet
Stockholders Contribution Agreements") by and among the Company and the
stockholders (the "Pathnet Stockholders") of Pathnet, Inc., a Delaware
corporation ("Pathnet"). Each of BNSF, CSX, Colonial and certain individual
Pathnet Stockholders, together with Jalkut (as defined below), is a Stockholder
under this Agreement.
WHEREAS, pursuant to the Contribution Agreements, the Company and the
Stockholders have agreed to enter into this Agreement to provide certain rights
to the Stockholders of shares of the Company's Series A Convertible Preferred
Stock (the "Series A Preferred Stock"), Series B Convertible Preferred Stock
(the "Series B Preferred Stock"), Series C Convertible Preferred Stock (the
"Series C Preferred Stock"), Series D Convertible Preferred Stock (the "Series D
Preferred Stock") and Series E Convertible Preferred Stock (the "Series E
Preferred Stock" and, collectively with the other aforementioned series, the
"Series Preferred Stock") in the amounts set forth in Exhibit A, which shall be
convertible into shares of the Company's common stock, $.01 par value per share
(the "Common Stock") in accordance with the terms of the Company's Certificate
of Incorporation.
WHEREAS, the undersigned Stockholders wish to enter into this Agreement in
order better to regulate the conduct of the business of the Company and to
provide for certain voting and stock transfer arrangements both before and after
the conversion of the Series Preferred Stock into shares of the Common Stock as
contemplated in the Certificate of Incorporation of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties hereto agree as follows:
SECTION 1 DEFINED TERMS
1.1. Certain Definitions.
For purposes of this Agreement, the following defined terms shall have the
meanings set forth below:
<PAGE>
"Affiliate" of a party or other person (whether a natural person,
corporation, partnership, association, company, or other entity) shall mean (i)
the spouse, child, parent, sibling, or other familial relation of any natural
person, and (ii) any natural person, corporation, partnership, association,
company or other entity, in each case controlled by or operating at the
direction of, under common control or operating in conjunction with, or
controlling or otherwise directing, any such party or other person;
"Board of Directors" shall mean the Board of Directors of the Company, as
duly elected and qualified from time to time;
"Bylaws" shall mean the duly adopted bylaws of the company, as such Bylaws
may be amended from time to time hereafter;
"Certificate of Incorporation" shall mean the Company's Certificate of
Incorporation, as such Certificate may be amended from time to time hereafter;
"Electing Purchasers" shall mean those Eligible Stockholders electing, by
notice in writing to the Company delivered within the thirty-day notice period
set forth in Section 8.1(c) hereof, to purchase additional securities of the
Company pursuant to the exercise of their rights to purchase such additional
securities pursuant to Section 8.1 hereof;
"Eligible Stockholder" shall mean each and all of such of the Series
Preferred Stockholders and the Founder as shall in each case and at the
applicable date continue to own at least fifty percent (50%) of the number of
shares of the Company's voting capital stock (as adjusted for any split,
recombination, stock dividend, or other reclassification of the voting capital
stock of the Company, as may be provided in the Company's Certificate of
Incorporation) as such person owned immediately following the closing of the
initial transactions contemplated in the Contribution Agreements including any
shares of voting capital stock held by Affiliates of such Series Preferred
Stockholder;
"Founder" shall mean David Schaeffer, an individual resident of Potomac,
Maryland;
"Founder Securities" shall mean shares of Common Stock issued to the
Founder whether initially or by way of a stock dividend, stock split, or in
connection with any combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, however, that the term "Founder
Securities" shall not include any shares of Common Stock that have previously
been registered with the SEC under the provisions of Article 9 or otherwise, or
which have been sold to the public either pursuant to a registration statement
or SEC Rule 144, or that may be sold by the holder thereof pursuant to SEC Rule
144(k);
"Holder" shall mean a holder of Registrable Securities or Founder
Securities;
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified;
"Jalkut" shall mean Richard A. Jalkut, an individual resident of Bedford,
New York ;
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<PAGE>
"Jalkut Employment Agreement" shall mean that certain Employment Agreement,
dated as of August 4, 1997, by and between Jalkut and Pathnet, Inc., as amended
and assigned to the Company as of March 30, 2000;
"Pathnet" shall have the meaning set forth in the preamble to this
Agreement.
"Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, a limited liability company and a governmental entity or any
department, agency or political subdivision thereof.
"Pro Rata Share" shall mean that portion of the total number of securities
proposed to be sold or otherwise issued by the Company determined by a fraction
(i) the numerator of which is the aggregate number of shares of Common Stock
owned by such party immediately prior to any proposed sale or other issuance of
securities (assuming the full conversion of any shares of the capital stock of
the Company held by such party that are convertible into shares of Common
Stock); and (ii) the denominator of which is the total number of shares of
Common Stock owned by all such parties owning Common Stock, assuming the
exercise of all outstanding options, warrants, and other rights to acquire
Common Stock (or securities convertible into Common Stock) and the full
conversion of any shares of the capital stock of the Company convertible into
shares of Common Stock;
"Qualified Public Offering" shall mean the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock to the
public (i) in which the proceeds received by the Company, net of underwriting
discounts and commissions, equal or exceed $75,000,000; (ii) immediately prior
to the consummation of which the Company is valued (based on the per-share price
paid in such public offering, but without regard to any proceeds to be received
by the Company in connection with such public offering) at greater than
$600,000,000; and (iii) in which the Company uses a nationally recognized
underwriter acceptable to the Board of Directors;
"Registrable Securities" shall have the meaning ascribed to such term in
Section 9.4 hereof;
"Required Holders" shall mean: (i) prior to the first Qualified Public
Offering, the holders at any time and from time to time of at least sixty-seven
percent (67%) of the Registrable Securities; and (ii) after the first Qualified
Public Offering, the holders at any time and from time to time of at least
twenty percent (20%) of the Registrable Securities;
"SEC" shall mean the United States Securities and Exchange Commission, or
any successor entity thereto;
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations from time to time promulgated thereunder;
"Series A Preferred Stockholders" shall mean the holders of the shares of
Series A Preferred Stock;
"Series B Preferred Stockholders" shall mean the holders of the shares of
Series B Preferred Stock;
-3-
<PAGE>
"Series C Preferred Stockholders" shall mean the holders of the shares of
Series C Preferred Stock;
"Series D Preferred Stockholders" shall mean the holders of the shares of
Series D Preferred Stock;
"Series E Preferred Stockholders" shall mean the holders of the shares of
Series E Preferred Stock;
"Series Preferred Stockholder" shall mean the holder of any shares of any
one or more of the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock or the Series E Preferred
Stock;
"Series Preferred Stockholder Director" shall mean any nominee of any of
the Series Preferred Stockholders appointed in accordance with the provisions
hereof and serving from time to time as a director of the Company;
"Shares" shall mean any shares of the capital stock of the Company;
"Stockholder Director" shall mean any of the directors of the Company
appointed pursuant to the provisions of Section 5.1(b)(i) through (v) hereof;
"Stock Incentive Plan" shall mean the Company's 1995 Stock Incentive Plan,
in substantially the form attached as Exhibit B hereto and as contemplated to be
adopted by the Board of Directors as of the date hereof;
"Stock Option Plan" shall mean the Company's 1997 Stock Option Plan, in
substantially the form attached as Exhibit C hereto and as contemplated to be
adopted by the Board of Directors as of the date hereof;
"Subsidiary" shall mean Pathnet and (i) any other corporation of which the
securities having a majority of the ordinary voting power in electing the board
of directors are, at the time as of which any determination is being made, owned
by the Company either directly or through one or more Subsidiaries, (ii) any
partnership, joint venture or similar entity of which or in which such Person,
such Person and one or more of its Subsidiaries, or one or more Subsidiaries of
such Person directly or indirectly own more than 50% of the capital interest or
profits interest, or (iii) any trust, association or other unincorporated
organization of which or in which such Person, such Person and one or more of
its Subsidiaries, or one or more Subsidiaries of such Person directly or
indirectly own more than 50% of the beneficial interest.
"Treasury Regulations" means the United States Treasury Regulations
promulgated under the IRC, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
"Warrant Registration Rights Agreement" shall mean that certain Amended and
Restated Warrant Registration Rights Agreement, dated as of March 30, 2000, by
and among the Company and the Permitted Holders named therein, relating to
certain Warrants proposed to be issued by the Company in exchange for certain
warrants previously issued by Pathnet pursuant to the terms of the Warrant
Agreement, dated April 8, 1998, by and between
-4-
<PAGE>
Pathnet and certain other parties thereto, in connection with the placement of
certain senior indebtedness of Pathnet, all as more fully described in such
Amended and Restated Warrant Registration Rights Agreement, which Amended and
Restated Warrant Registration Rights Agreement shall be on terms substantially
similar to those of the Warrant Registration Rights Agreement, dated April 8,
1998, by and between Pathnet and certain other parties thereto.
1.2. Interpretation of Provisions. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any person (whether natural, corporate, or otherwise) shall be
construed to include such person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Sections, Exhibits and Schedules
shall be construed to refer to Sections of, and Exhibits and Schedules to, this
Agreement and (e) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Stockholders to enter into this Agreement, the Company
represents and warrants, as of the date hereof, to each of the Stockholders as
follows:
2.1. Organization and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is qualified to do
business as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a material adverse effect on its business, financial
condition or results of operations.
(b) The Company has all required corporate power and authority to
carry on its business as presently conducted, to enter into and perform this
Agreement and to carry out the transactions contemplated hereby.
(c) The Company is not in violation of any term of its Certificate of
Incorporation or Bylaws, each as amended to date, or in violation of any
material term of any agreement, instrument, judgment, decree, order, statute,
rule or government regulation applicable to the Company or to which the Company
is a party, in each case in any manner that could reasonably be expected to have
a material adverse effect on the Company's business, financial condition,
prospects, assets, liabilities or results of operations.
-5-
<PAGE>
2.2. Authorization and Non-Contravention.
(a) This Agreement and all documents executed pursuant hereto or
otherwise in connection herewith (including without limitation the Contribution
Agreements and the documents and other agreements executed in connection
therewith) are valid and binding obligations of the Company, enforceable in
accordance with their terms, except as such enforcement may be limited by laws
of general application relating to bankruptcy, reorganization, insolvency,
moratorium or other laws affecting creditors' rights and the availability of
equitable remedies which are subject to the discretion of the court before which
an action may be brought.
(b) The execution, delivery and performance of this Agreement and all
agreements, documents and instruments executed pursuant hereto or otherwise in
connection herewith (including without limitation the Contribution Agreements
and the documents and other agreements executed in connection therewith) have
been duly authorized by all necessary corporate action of the Company.
(c) The execution of this Agreement and the performance of any
transaction contemplated hereby shall not (i) violate, conflict with or result
in a default under any contract or obligation to which the Company or any
Subsidiary is a party or by which it or any Subsidiary or any of their assets
are bound, or any provision of its Certificate of Incorporation or Bylaws, each
as amended to date, or cause the creation of any encumbrance upon any of the
assets of the Company or any Subsidiary; (ii) violate or result in a violation
of, or constitute a default (whether after the giving of notice, lapse of time
or both) under any provision of any law, regulation or rule, or any order of, or
any restriction imposed by, any court or other governmental agency; (iii)
require from the Company or any Subsidiary any notice to, declaration or filing
with, or consent or approval of any governmental authority or other third party;
or (iv) accelerate any obligation under or give rise to a right of termination
of, any material agreement, permit, license or authorization to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound.
2.3. Tax-Related Representations.
(a) There is no plan or intention by the Company to dispose of any of
the property contributed to the Company pursuant to the Contribution Agreements
except that the Company may (i) transfer certain contributed property to Pathnet
or another Subsidiary in a transaction that will qualify as a tax-free transfer
pursuant to Section 351, and (ii) effect the conversion of certain shares of
preferred stock of Pathnet into shares of common stock of Pathnet.
(b) There is no current plan or intention on behalf of the Company to
redeem or otherwise reacquire any of the Shares issued pursuant to the
transactions set forth in the Contribution Agreements.
(c) The Company intends that the contributions of property to the
Company in exchange for Shares pursuant to the Contribution Agreements will be
treated as part of a single integrated transaction in which gain or loss will
not be recognized pursuant to IRC Section 351 and, in the case of Persons who
contribute Pathnet stock to the Company in exchange for Shares, the
contributions also will qualify as a tax-free reorganization under IRC Section
368(a)(1)(B) pursuant to which gain or loss will not be recognized.
-6-
<PAGE>
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
In order to induce the other Stockholders and the Company to enter into
this Agreement, their respective Contribution Agreements (between the Company
and such other Stockholders), and the other documents being executed in
connection herewith and therewith, each Stockholder individually represents and
warrants, as of the date hereof, to the Company and to each of the other
Stockholders as follows:
3.1. Organization and Corporate, Partnership and Individual Power.
(a) Such Stockholder is either (i) a partnership or corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction, and is qualified to do business as a foreign
partnership or corporation in each jurisdiction in which the failure to be so
qualified would have a material adverse effect on its business, financial
condition or results of operations, (ii) a natural person whose individual net
worth, or joint net worth with such person's spouse, as of the date hereof
exceeds $1,000,000, or (iii) a natural person who has a preexisting personal or
business relationship with one of the directors of the Company, or by reason of
his or her business or financial experience or the business or financial
experience of his or her professional advisors who are unaffiliated with and who
are not compensated by the Company or any selling agent of the Company, directly
or indirectly, could be reasonably assumed to have the capacity to protect his
or her own interests in connection with the transactions contemplated by this
Agreement.
(b) Such Stockholder, if a partnership or a corporation, has all
required corporate or partnership power and authority to carry on its business
as presently conducted, to enter into and perform this Agreement and the
agreements contemplated hereby to which it is a party and to carry out the
transactions contemplated hereby and thereby; provided, however, that no
representation or warranty is made herein with respect to any agreement by any
Stockholder to contribute any assets to the Company. Such Stockholder, if an
individual, has the capacity to enter into and perform this Agreement and the
agreements contemplated hereby to which he is a party and to carry out the
transactions contemplated hereby and thereby.
3.2. Authorization and Non-Contravention.
(a) This Agreement and all documents executed pursuant hereto or
otherwise in connection herewith (including without limitation the applicable
Contribution Agreement and the documents and other agreements executed in
connection therewith) are valid and binding obligations of such Stockholder,
enforceable in accordance with their terms, except as such enforcement may be
limited by laws of general application relating to bankruptcy, reorganization,
insolvency, moratorium or other laws affecting creditors' rights and the
availability of equitable remedies which are subject to the discretion of the
court before which an action may be brought.
(b) The execution, delivery and performance of this Agreement and all
agreements, documents and instruments executed pursuant hereto or otherwise in
connection herewith (including without limitation the respective Contribution
Agreement and the documents and other agreements executed in connection
therewith) have been duly authorized by all necessary corporate, partnership, or
individual action of such Stockholder, and represent the exercise of such
Stockholder's own free will and have not been executed under any compulsion or
duress.
-7-
<PAGE>
(c) The execution of this Agreement and the performance of any
transaction contemplated hereby shall not: (i) violate, conflict with or result
in a default under any contract or obligation to which such Stockholder is a
party or by which it or its assets are bound, or, in the case of any Stockholder
that is a partnership or corporation, any provision of such Stockholder's
certificate of incorporation, bylaws, partnership agreement, or other
organizational or voting documents, each as amended to date, or cause the
creation of any encumbrance upon any of the assets of any Stockholder; (ii)
violate or result in a violation of, or constitute a default (whether after the
giving of notice, lapse of time or both) under any provision of any law,
regulation or rule normally applicable to the transactions contemplated hereby
(and excluding any federal, state or local antitrust, tax, environmental,
health, safety or employment laws or laws, regulations or rules applicable to
such Stockholder solely as a result of its business activities), or any order
of, or any restriction imposed by, any court or other governmental agency; (iii)
require from such Stockholder any notice to, declaration or filing with, or
consent or approval of any governmental authority or other third party; or (iv)
accelerate any obligation under or give rise to a right of termination of, any
material agreement, permit, license or authorization to which such Stockholder
is a party or by which such Stockholder is bound; provided, however, that no
representation or warranty is made herein with respect to the contribution to
the Company by any Stockholder of any assets.
3.3. Tax-Related Representations.
(a) Such Stockholder has no present intention or plan, formally or
informally, on the date hereof, to transfer or dispose of any of the Shares
received by such Stockholder pursuant to its Contribution Agreement.
(b) Each Stockholder intends that the contributions of property to the
Company in exchange for Shares pursuant to the Contribution Agreements will be
treated as part of a single integrated transaction in which gain or loss will
not be recognized and, in the case of Persons who contribute Pathnet stock to
the Company in exchange for Shares, the contributions also will qualify as a
tax-free reorganization under IRC Section 368(a)(1)(B) pursuant to which gain or
loss will not be recognized.
SECTION 4 COVENANTS OF THE COMPANY AND THE STOCKHOLDERS
The Company hereby covenants with and for the benefit of the Series
Preferred Stockholders to comply, and, in order to induce the Series Preferred
Stockholders to enter into this Agreement, all of the undersigned Stockholders
shall, if required, vote their shares of the Company's capital stock in a manner
consistent with the covenants set forth in this Section 4, until the earlier of
the date on which no shares of the Series Preferred Stock remain outstanding or
the Company's first Qualified Public Offering, except as otherwise provided
herein, and until such date the Series Preferred Stockholders hereby agree to
comply with the covenants set forth in Section 4.10.
4.1. Financial Statements and Budgetary Information.
(a) The Company shall deliver to the Stockholders internally prepared
unaudited quarterly financial statements and audited annual financial
statements, as well as annual budgetary information. The quarterly financial
information and reports shall be provided to the Stockholders within forty-five
(45) days after the end of each fiscal quarter of the Company's fiscal year.
Annual financial statements audited by a Big Five accounting firm selected by
the Board of Directors shall
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be provided to the Stockholders within ninety (90) days after the end of each
fiscal year of the Company.
(b) The annual budgetary information for each upcoming fiscal year
shall be presented at the Board of Directors' meeting at least 60 days prior to
each fiscal year-end of the Company and shall be subject to approval by the
Board of Directors. Such budgetary information shall include a budget for the
upcoming fiscal year and the succeeding two years describing in detail, at a
minimum, assumptions with respect to revenues, key operating expenses and
capital expenditures and financing. Any material deviations from the budget for
any fiscal year shall be subject to prior approval by the Board of Directors.
(c) The Company shall deliver to the Stockholders such other periodic
information as it may provide to holders of the Company's outstanding debt
obligations.
4.2. Indemnification and Insurance.
For so long as any of the shares of Series Preferred Stock remain
outstanding, the Certificate of Incorporation shall at all times during which
any Series Preferred Stockholder Director serves as a director of the Company,
provide for indemnification of the directors and limitations on the liability of
the directors to the fullest extent permitted under applicable state law. Upon
the reasonable request of any Series Preferred Stockholder Director, and in any
event prior to the effective date of a public offering by the Company of equity
securities registered pursuant to the Securities Act, the Company shall use its
best efforts to obtain and maintain on reasonable business terms directors and
officers liability insurance coverage at a level reasonably suitable for the
Company but in no event less than $1,000,000 per occurrence, including coverage
of knowing violations under federal and state securities laws, which coverage
shall apply to, but not be limited to, the Company's initial public offering.
4.3. Restrictions on other Agreements.
The Company shall not enter into any agreement with any party which
eliminates, amends or restricts the rights and preferences of the Series
Preferred Stock as set forth in the Certificate of Incorporation or otherwise
take any other action that adversely affects the rights of the Series Preferred
Stockholders or any class of Series Preferred Stock.
4.4. Stock Options.
(a) Except as set forth on Schedule 4.4, the Company shall not issue
stock, grant stock options, warrants, or other rights to purchase stock in the
Company, except pursuant to and in accordance with the terms of the Stock Option
Plan and the Stock Incentive Plan. Unless otherwise approved by the Board of
Directors, the Company shall not issue or grant any of such securities with
respect to the purchase of more than 5.5 million shares of Common Stock, or any
shares of Preferred Stock, under the Stock Option Plan and Stock Incentive Plan
(including options issued in exchange for options for shares of Common Stock of
Pathnet which are issued and outstanding as of the date hereof, and as adjusted
for stock splits, stock dividends, reclassification and similar events).
(b) Notwithstanding any of the foregoing clause 4.4(a), the Company
shall be permitted to grant stock options (and issue Common Stock upon the
exercise thereof) of the Company to the individuals and entities listed on
Schedule 4.4 in the amounts and under the terms
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and conditions set forth opposite such individual or entity. Pursuant to the
terms of the Stock Option Plan and the Stock Incentive Plan, qualified incentive
stock options and nonqualified options may be granted to employees, officers,
directors and consultants of the Company pursuant to and in accordance with the
terms of this Agreement and the terms of the Stock Option Plan and the Stock
Incentive Plan as adopted as of the date hereof, and the exercise of any options
shall be conditioned on the optionee making satisfactory provisions for the
payment of any withholding taxes due on such exercise and agreeing to be bound
by the provisions of Section 5 and Section 7 hereof. Neither the Stock Option
Plan nor the Stock Incentive Plan may be amended, revised or waived after the
date hereof without the consent of a majority of the Series Preferred
Stockholder Directors.
(c) Notwithstanding anything set forth in this Section 4.4 to the
contrary, management may change the composition and compensation and
remuneration of existing management, consultants and employees of the Company
and may hire new management, consultants and employees of the Company, provided
the compensation and remuneration of such new and existing management,
consultants and employees (including any capital stock of the Company issued to
such new existing management, consultants or employees and any vesting schedules
relating to the grant of any such capital stock) is within the ranges
established from time to time by the Board of Directors with the approval of a
majority of the Series Preferred Stockholder Directors. Pursuant to the terms of
the Stock Option Plan and the Stock Incentive Plan, all awards under such plans
must be administered by a "Committee" whose members must be designated by the
Board of Directors.
(d) The Company shall cause Pathnet not to issue or grant any options,
warrants, or other rights to purchase, or securities convertible into or
exchangeable for, shares of the capital stock of Pathnet; provided, however,
that the foregoing covenant shall not apply to the existing rights and
obligations of Pathnet under options, warrants, purchaser rights or convertible
securities that are issued and outstanding on the date hereof.
4.5. Conduct of Business.
(a) The Company shall engage principally in the business of acquiring,
constructing, developing and/or operating telecommunications networks in the
United States or a business or businesses similar or otherwise related or
incidental thereto or reasonably compatible therewith. The Company shall keep in
full force and effect its corporate existence and all intellectual property
rights useful in its business and shall use its best efforts to cause (i) each
existing and new employee to execute a Non-Disclosure Agreement in such form as
may from time to time be approved by the Board of Directors, (ii) each new
engineer and information technology professional to execute a Non-Disclosure and
Assignment of Inventions Agreement in such form as may from time to time be
approved by the Board of Directors, and (iii) each new employee holding an
office of vice president or higher of the Company to execute a Non-Disclosure,
Assignment of Inventions and Non-Competition Agreement in such form as may from
time to time be approved by the Board of Directors.
(b) The Company shall maintain all properties used or useful in the
conduct of its business in good repair, working order and condition, ordinary
wear and tear excepted, as necessary to permit such business to be properly and
advantageously conducted.
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4.6. Payment of Taxes, Compliance with Laws, etc.
The Company shall pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon it or upon its income, franchise or
property before the same shall become in default, as well as all lawful claims
for labor, materials and supplies which if not paid when due, might become a
lien or charge upon its property or any part thereof; provided, however, that
the Company shall not be required to pay and discharge any such tax, assessment,
charge, levy or claim so long as the validity thereof is being contested by the
Company in good faith by appropriate proceedings and an adequate reserve
therefor has been established on its books. The Company shall comply with all
applicable laws and regulations in the conduct of its business, including,
without limitation, all applicable federal and state securities laws in
connection with the issuance of any securities.
4.7. Material Events.
The Company will continuously monitor and promptly advise the Series
Preferred Stockholders and the Founder in writing of any event that, in the good
faith judgment of the Company, represents a material adverse change in the
condition, financial or otherwise, or business of the Company, and of each suit
or proceeding commenced or threatened against the Company which, if adversely
determined, in the good faith judgment of the Company, could have a material
adverse effect on the Company or its financial condition, business or prospects.
4.8. Management and Compensation.
The Board of Directors may establish a Compensation Committee, consisting
of such members as the Board shall determine. Subject to the provisions of
applicable law, the Board of Directors may delegate to any such Compensation
Committee all or any part of the authority of the Board of Directors regarding
the employment and compensation of all officers and employees of the Company.
4.9. Inspection.
The Company shall, upon reasonable prior notice to the Company and so long
as not unduly disruptive to the Company's business, permit authorized
representatives of the holders of the Series Preferred Stock to visit and
inspect any of the properties of the Company, including its books or accounts
(and to make copies thereof and take extracts therefrom), and to discuss its
affairs, finances and accounts with its officers, administrative employees and
independent accountants, all at such reasonable times and as often as may be
requested.
4.10. Tax Free Transfers.
(a) The Company and the Stockholders will prepare and file their
Federal and state income tax returns in a manner that characterizes the
contributions set forth in the Contribution Agreements in the manner described
in Sections 2.3(c) and 3.3(b) of this Agreement; provided, however, that neither
the representations in Section 2.3(c) nor the covenants in this Section 4.10
shall apply to any transfers of property or the provision of services to any
Stockholder subsequent to the date of this Agreement.
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(b) The Stockholders agree to file the information required by
Treasury Regulation Section 1.351-3 for their respective Federal income tax
returns for the taxable year of the contribution, and the Company agrees to
furnish to the Stockholders information necessary to enable the Stockholders to
comply with the information reporting requirements of Treasury Regulation
Section 1.351-3.
(c) The Company will exercise reasonable care not to take any action
subsequent to the date hereof that will cause the transfers of property to the
Company in exchange for Shares as set forth in the Contribution Agreements not
to qualify as tax-free transfers pursuant to IRC Sections 351 and 368(a)(1)(B),
as applicable.
(d) Notwithstanding the introductory sentence of this Section 4, the
covenants of the Stockholders and the Company pursuant to this Section 4.10
shall survive the closing of the Company's first Qualified Public Offering and
the conversion of the Series Preferred Stock and shall remain in full force and
effect for a period of 20 years from the date hereof.
SECTION 5 BOARD OF DIRECTORS
5.1. Appointments to the Board of Directors Prior to a Qualified Public
Offering.
Until the earlier of the date on which no shares of the Series Preferred
Stock remain outstanding or the Company's first Qualified Public Offering, the
Company shall comply, and the Stockholders shall vote their shares of the
Company's capital stock in compliance with, and to cause the Company to comply
with, the covenants set forth in this Section 5.1:
(a) Size of Board of Directors. The Company and the Stockholders shall
fix the number of members of the Board of Directors at ten (10) directors.
(b) Composition of Board of Directors
(i) Series A Preferred Stockholder Directors. The holders of the
Series A Preferred Stock shall be entitled to vote as a class
separately from all other classes of stock of the Company in any vote
for the election of directors of the Company, and shall be entitled to
elect by such class vote two directors (the "Series A Stockholder
Directors"), one of which Series A Stockholder Directors shall be
designated by Spectrum Equity Investors, L.P. ("Spectrum") for so long
as it owns shares of Series A Preferred Stock and thereafter by the
holders of a majority of the issued and outstanding shares of Series A
Preferred Stock, and the other of which shall be designated by New
Enterprise Associates VI, Limited Partnership or its affiliates
(collectively, "NEA VI") for so long as it owns shares of Series A
Preferred Stock and thereafter by the holders of a majority of the
issued and outstanding shares of Series A Preferred Stock.
(ii) Series B Preferred Stockholder Director. The holders of the
Series B Preferred Stock shall be entitled to vote as a class
separately from all other classes of stock of the Company in any vote
for the election of directors of the Company, and shall be entitled to
elect by such class vote one director (the "Series B Stockholder
Director"), which shall be designated by Grotech Partners IV, L.P.
("Grotech IV") for
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so long as it owns shares of Series B Preferred Stock, and thereafter
by the holders of a majority of the issued and outstanding shares of
Series B Preferred Stock.
(iii) Series C Preferred Stockholder Director. The holders of the
Series C Preferred Stock shall be entitled to vote as a class
separately from all other classes of stock of the Company in any vote
for the election of directors of the Company and shall be entitled to
elect by such class vote one director (the "Series C Stockholder
Director") to be designated by the holders of a majority of the issued
and outstanding shares of Series C Preferred Stock, provided, however,
that if the holders of a majority of the issued and outstanding shares
of Series C Preferred Stock designate for election as the Series C
Stockholder Director an individual who is not a partner or associate
of a Series C Stockholder or an entity under substantially the same
management as a Series C Stockholder, such designee shall be elected
as a director only with the vote of a majority of the Series A
Stockholder Directors and the Series B Stockholder Director, voting
together. Initially, the Series C Stockholder Director shall be
designated by Toronto Dominion Capital (U.S.A.), Inc. In no event
shall the Series C Stockholder Director be: (A) a partner or associate
of Spectrum or an entity under substantially the same management as
Spectrum for so long as Spectrum has designation rights under this
Section 5.1(b); (B) a partner or associate of NEA VI or an entity
under substantially the same management as NEA VI for so long as NEA
VI has designation rights under this Section 5.1(b); or (C) a partner
or associate of Grotech IV or an entity under substantially the same
management as Grotech IV for so long as Grotech IV has designation
rights under this Section 5.1(b).
(iv) Series D/E Stockholder Directors. The holders of the Series
D Preferred Stock and Series E Preferred Stock, voting together as a
single class, shall be entitled to vote as a class separately from all
other classes of stock of the Company in any vote for the election of
directors of the Company, and shall be entitled to elect by such class
vote three directors (the "Series D/E Stockholder Directors"). The
Series D/E Stockholder Directors shall be designated as follows:
(A) one Series D/E Stockholder Director shall be designated by
CSX for so long as it owns shares of Series D Preferred
Stock, and thereafter shall be designated by the holders of
a majority of the issued and outstanding shares of Series D
Preferred Stock and Series E Preferred Stock, voting
together as a single class;
(B) one Series D/E Stockholder Director shall be designated by
BNSF for so long as it owns shares of Series D Preferred
Stock, and thereafter shall be designated by the holders of
a majority of the issued and outstanding shares of Series D
Preferred Stock and Series E Preferred Stock, voting
together as a single class; and
(C) one Series D/E Stockholder Director shall be designated by
Colonial for so long as it owns shares of Series E Preferred
Stock or Series D Preferred Stock, and thereafter shall be
designated by the holders of a majority of the issued and
outstanding shares of Series D Preferred Stock and Series E
Preferred Stock, voting together as a single class.
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(v) Independent Director. The holders of all classes of Shares,
voting as a single class, shall elect one independent director who is
not an officer or employee of the Company or any Subsidiary and not a
holder or an Affiliate of any holder of Shares of any class as of the
date of such election.
(vi) Chief Executive Officer. The holders of all classes of
Shares, voting as a single class, shall elect the Chief Executive
Officer (and any replacement or successor Chief Executive Officer) as
a director.
5.2. Appointments to the Board of Directors Following a Qualified Public
Offering.
Following the earlier of the date on which no shares of the Series
Preferred Stock remain outstanding or the Company's first Qualified Public
Offering, the Stockholders shall, for so long as they own shares of the
Company's voting capital stock, vote their shares of the Company's voting
capital stock in compliance with the covenants set forth in this Section 5.2;
provided, however, that the terms of this Section 5.2 shall not apply to any
transferee of the shares owned by such Stockholders if such transferee is not an
Affiliate of such Stockholder:
(a) Representative of BNSF. For so long as BNSF shall be the
beneficial owner of not less than five percent (5%) of the outstanding voting
capital stock of the Company, the Stockholders shall cast their votes as the
holders of shares of the voting capital stock of the Company to cause the
designee of BNSF to be elected as a director of the Company.
(b) Representative of CSX. For so long as CSX shall be the beneficial
owner of not less than five percent (5%) of the outstanding voting capital stock
of the Company, the Stockholders shall cast their votes as the holders of shares
of the voting capital stock of the Company to cause the designee of CSX to be
elected as a director of the Company
(c) Representative of Colonial. For so long as Colonial shall be the
beneficial owner of not less than five percent (5%) of the outstanding voting
capital stock of the Company, the Stockholders shall cast their votes as the
holders of shares of the voting capital stock of the Company to cause the
designee of Colonial to be elected as a director of the Company.
5.3. Other Covenants Concerning Officers and Directors.
For so long as a Stockholder is bound by the provisions of Sections 5.1 or
5.2 hereof, such Stockholder shall vote their shares of the Company's capital
stock in compliance with and to cause the Company to comply with the following
covenants:
(a) Selection of Chief Executive Officer. The first Chief Executive
Officer of the Company shall be Jalkut. Upon the termination, resignation, death
or disability of the Chief Executive Officer of the Company, the Company shall
select and hire a successor Chief Executive Officer (and any successor thereto)
by the affirmative vote of a majority of the Board of Directors.
(b) Meetings of Board of Directors. A meeting of the Board of
Directors shall be held at least four times each calendar year at intervals of
not more than three months.
(c) Removal of Directors. Each of the Stockholder Directors shall be
nominated, elected and continued as a director of the Company as provided in
Section 5.1 or Section 5.2, as
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applicable, and shall not be removed for any reason other than in connection
with the designation and election of a successor Series A Stockholder Director
by the Series A Stockholders, a successor Series B Stockholder Director by the
Series B Stockholders, a successor Series C Stockholder Director by the Series C
Stockholders, or a successor Series D/E Stockholder Director by the Series D
Stockholders and Series E Stockholders, as applicable, in each case as provided
in Section 5.1(b) hereof or 5.2 hereof, as applicable. All Stockholders agree to
vote for the removal of a Stockholder Director, if required, by the person or
persons entitled to designate such Stockholder Director, and for the election to
the Board of Directors of a substitute designated by the person or persons
entitled to designate such replacement director under this Section 5.3(c), if
requested by the person or persons entitled to designate such replacement
director.
5.4. Other Matters. For so long as a Stockholder is bound by the provisions
of Section 5.1, 5.2 or 5.3, such Stockholder shall vote all of his or its shares
of the Company and shall take all other necessary or desirable actions within
his or its control in its capacity as a stockholder, (including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum, execution of written consents in lieu of meetings and
placing into nomination the names of the board designees permitted hereunder) to
satisfy its obligations pursuant to this Section 5, and the Company shall take
all necessary or desirable actions within its control (including, without
limitation, calling special board and stockholder meetings and placing into
nomination the names of the board designees permitted hereunder) to enable and
facilitate the satisfaction by the stockholders of their obligations pursuant to
this Section 5 and the election of members of the board of directors as
described herein.
SECTION 6 NEGATIVE COVENANTS OF THE COMPANY
So long as not less than 25% of the shares of Series Preferred Stock
outstanding immediately after the closing of the transactions contemplated in
the Contribution Agreements (as such number may be adjusted for any stock split,
reverse stock split, recombination, reclassification, or other similar
transaction) remain outstanding, the Company shall comply with the following
covenants, except as (i) in the case of Sections 6.1 through 6.5, the holders of
more than two-thirds of the then-outstanding shares of Series Preferred Stock,
voting together as a single class, may otherwise consent, and (ii) in the case
of Section 6.6, as provided therein:
6.1. Mergers, Dispositions, Acquisitions and Other Actions.
The Company shall not: (a) sell, lease or otherwise dispose of (whether in
one transaction or in a series of related transactions) all or substantially all
of its assets; (b) merge with or into or consolidate with another entity; (c)
acquire any other corporation or business concern for more than $5 million,
whether by acquisition of assets, capital stock or otherwise, and whether in
consideration of the payment of cash, the issuance of capital stock or otherwise
whether in one or a series of installments or make any loans to or investments
in any other entities or persons (other than cash equivalents) of more than $5
million in any one or a series of related transactions; (d) voluntarily
liquidate or wind up its operations; (e) issue any shares of its capital stock
which are senior to or on a parity with any shares of Series Preferred Stock
with respect to dividends, liquidation, redemptions or otherwise, or with any
special voting rights; (f) incur, create, assume or become liable in any manner
(by way of guarantee, surety, or otherwise) any new or additional indebtedness
for borrowed money, whether by the issue of notes, other debt securities, or
otherwise, except that the Company may so incur, create, assume or become liable
for: (A) indebtedness (and any refinancing thereof) existing within the Company
or its Subsidiaries upon the completion of the transactions contemplated
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in the Contribution Agreements; or (B) any indebtedness the principal amount of
which so incurred, created, assumed by, or otherwise becoming a liability of,
the Company in any one transaction or series of related transaction is less than
or equal to $5 million; or (C) indebtedness incurred, created, or assumed by the
Company in the ordinary course of its business.
6.2. No Amendments to Certificate of Incorporation or Bylaws.
The Company shall not make any amendment to its Certificate of
Incorporation or Bylaws.
6.3. Restrictions on Other Agreements.
The Company shall not enter into any agreement with any party which by its
terms (a) restricts the payments due the holders of the shares of Series
Preferred Stock, or (b) except as contemplated by Section 10.11, grants any
right relating to the registration of its Common Stock superior to or on a
parity with the rights granted to the Stockholders pursuant to Section 9 hereof.
6.4. Affiliated Transactions.
The Company shall not enter into or amend any transactions, agreements or
arrangements with, or make any payments to, any director, officer or key
employee of the Company or any person or entities which or who are relatives of,
controlled by, or otherwise affiliated with any of the foregoing persons or
entities (an "Affiliate") other than in the ordinary course of business and on
terms no less favorable to the Company than those that would be available from
unaffiliated third parties.
6.5. Issuances of, Distributions on, and Redemptions of, Capital Stock.
Except as otherwise expressly provided in this Agreement and in the
Certificate of Incorporation, the Company shall not authorize or issue, or
obligate itself to issue, any additional shares of capital stock of the Company
of any class, declare or pay any dividends, or make any distributions of cash,
property or securities of the Company with respect to any shares of its Common
Stock or any other class of its capital stock, or directly or indirectly redeem
purchase, or otherwise acquire for consideration, any shares of its Common Stock
or any other class of its capital stock; provided, however, that this
restriction shall not apply to (x) the repurchase of shares of the Common Stock
from individuals and entities who have entered into stockholder agreements when
the Company has the option to repurchase such shares upon the occurrence of
certain events, including the termination of employment and involuntary
transfers by operation of law (and their permitted transferees), provided that
the aggregate amount of repurchase thereunder shall not exceed $250,000 plus the
cash proceeds from the issuance of any stock to employees of the Company other
than pursuant to the Stock Option Plan or the Stock Incentive Plan or (y)
transactions contemplated by the Jalkut Employment Agreement. Any redemption,
repurchase or other acquisition by the Company of any shares of its capital
stock shall be made in compliance with all laws, including but not limited to
federal and state securities laws.
Notwithstanding the foregoing, the Company shall have the right to (i)
enter into and perform the Colonial Option Agreement, including the issuance of
Series E Preferred Stock and Common Stock thereunder, and (ii) issue shares of
the Series D Preferred Stock of the Company in exchange for the contribution of
right-of-way rights on terms acceptable to the Board of Directors of the Company
and add any such purchaser as a "Stockholder" hereunder as contemplated by
Section
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10.11 below, in each case without the consent of the holders of two-thirds of
the shares of Series Preferred Stock as contemplated above, provided, in the
case of clause (ii) above, that such issuance of Series D Preferred Stock in
excess of the amount currently authorized does not materially prejudice the
rights of the existing holders of the Series D Preferred Stock of the Company.
6.6. Adverse Change in Terms or Rights of a Series of Preferred Stock. The
Company shall not modify the terms of any Series of Preferred Stock as set forth
in the Certificate of Incorporation of the Company without, in addition to any
other consent required, the consent of the holders of a majority of such Series
of Preferred Stock. The Company shall not amend the Certificate of Incorporation
or Bylaws in a manner that materially and adversely affects the rights of any
Series of Preferred Stock, relative to the rights of any other Series of
Preferred Stock, without, in addition to any other consent required, the consent
of the holders of a majority of such adversely affected Series of Preferred
Stock. Any increase in the authorized number of any class of shares of the
Company shall not be deemed to be adverse to any Series of Preferred Stock by
reason of the effects of differing levels of protection against dilution as set
forth in the Certificate of Incorporation.
SECTION 7 TRANSFER BY FOUNDER; RIGHTS TO PURCHASE
The following provisions of this Section 7 shall terminate upon the Company's
first Qualified Public Offering:
7.1. General Restrictions on Transfer by the Founder.
(a) The Founder agrees that he will not directly or indirectly offer,
transfer, donate, sell, assign, pledge, hypothecate or otherwise dispose of (any
such action a "Transfer"), all or any portion of the shares of capital stock of
the Company now owned or hereafter acquired by him, except in connection with,
and strictly in compliance with, the conditions of any of the following
(hereinafter "Permitted Transfers"):
(i) Transfers effected pursuant to Section 7.2 and Section 7.3
hereof, in each case made in accordance with the procedures set forth
therein;
(ii) Transfers by the Founder to his spouse or children or to a
trust of which he is the settlor or a trustee for the benefit of his spouse
or children, provided that such trust does not require or permit
distribution of such shares during the term of this Agreement, and
provided, further, that the transferee shall have entered into an
enforceable written agreement satisfactory to the Company and a majority of
the Series Preferred Stockholders (voting together as a single class)
providing that all shares so Transferred shall continue to be subject to
all provisions of this Agreement as if such shares were still held by the
Founder; and
(iii) Transfers upon the Founder's death to his heirs, executors
or administrators or to a trust under his will or Transfers between the
Founder and his guardian or conservator, provided that the transferee shall
have entered into an enforceable written agreement satisfactory to the
Company and the Series Preferred Stockholders, voting together as a single
class, providing that all shares so Transferred shall continue to be
subject to all provisions of this Agreement as if such shares were still
held by the Founder; and
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(iv) Transfers constituting a bona fide pledge, hypothecation or
other granting of a security interest in the Founder Securities to secure a
loan for borrowed money, provided that:
(A) the financial institution making such loan shall have net
assets in excess of $100 million;
(B) neither the purpose nor the effect of such loan shall be to
establish, support, or facilitate any short position in the
Company's securities;
(C) the documentation and structure of such pledge,
hypothecation, or other granting of a security interest and the
underlying loan documentation shall have been reviewed for
compliance with the terms of this Agreement by, and shall be
reasonably satisfactory to, outside counsel to the Company; and
(D) no such Transfer under this clause (iv) shall be permitted
during any period in which the Founder Securities are otherwise
subject to the provisions of Section 9.8 hereof, other than
pursuant to a bona fide pledge, hypothecation or other security
interest outstanding in accordance with the terms of this clause
(iv) on the date that the market stand-off agreement restrictions
imposed by Section 9.8 become effective.
(b) Anything to the contrary in this Agreement notwithstanding,
transferees of the Founder permitted by clauses (ii) and (iii) of Section 7.1(a)
shall take any shares so Transferred subject to all provisions of this Agreement
as if such shares were still held by the Founder, whether or not they so agree
with the Founder.
7.2. Right of Refusal.
If at any time on or after the Closing Date, the Founder (including for all
purposes of this Section 7.2, any permitted transferee of his shares pursuant to
Section 7.1(a)(ii) or Section 7.1(a)(iii)) receives a bona fide offer to
purchase any or all of his shares (the "Offer") from an unaffiliated third party
(the "Offeror") which the Founder wishes to accept (whether initiated by the
Founder or the third party), the Founder may transfer such shares pursuant to
and in accordance with the following provisions of this Section 7.2:
(a) The Founder shall cause the Offer to be reduced to writing and
shall notify the Series Preferred Stockholders in writing of his desire to
accept the Offer and otherwise comply with the provisions of this Section 7.2
and Section 7.3. The Founder's notice shall constitute an irrevocable offer to
sell such shares to the Series Preferred Stockholders at a purchase price equal
to the price contained in, and on the same terms and conditions of, the Offer.
The notice shall be accompanied by a true copy of the Offer (which shall
indemnify the Offeree).
(b) At any time within thirty (30) days after the date of the giving
of notice pursuant to Section 7.2(a) (the "Notice Period"), one or more of the
Series Preferred Stockholders may, subject to the terms hereof, choose to accept
the Offer with respect to all or a portion of the shares covered thereby by
giving written notice to the Founder to such effect; provided, however, that if
two or more Series Preferred Stockholders choose, in the aggregate, to accept
such Offer with respect to an aggregate number of shares which exceeds the
number of shares subject to such Offer
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and available for purchase by the Series Preferred Stockholders taken as a
whole, the number of shares for which the Offer may be accepted by each such
Series Preferred Stockholder shall, in each case, be reduced by the smallest
number of shares as shall be necessary to reduce the aggregate number of shares
for which the Offer may be accepted by the Series Preferred Stockholders as
contemplated herein to the number of shares for which the Offer was made and
which are available for purchase by them; provided, further, that the number of
shares for which any Series Preferred Stockholder may accept such Offer as
contemplated herein shall in no event be reduced to less than the number of
shares which bears the same proportion to the total number of shares for which
the Offer was made and which are available for purchase by the Series Preferred
Stockholders as the number of shares of capital stock of the Company (or other
securities convertible into shares of capital stock of the Company) (any such
shares being referred to hereinafter as "Securities") then held by such Series
Preferred Stockholder bears to the total number of Securities then held by all
Series Preferred Stockholders accepting such Offer; and provided, further, that
the Series Preferred Stockholders who elect to purchase shares may purchase any
shares which other Series Preferred Stockholders do not elect to purchase based
on the relative holdings of such electing Series Preferred Stockholders.
(c) If shares covered by any Offer are purchased pursuant to Section
7.2(b), such purchase shall be (i) at the same price and on the same terms and
conditions as the Offer if the Offer is for cash and/or notes or (ii) if the
Offer includes any consideration other than cash and notes, then at the
equivalent all cash price for such other consideration as determined by the
Board of Directors. The closing of the purchase of the shares subject to an
Offer pursuant to this Section 7.2 shall take place within fifteen (15) days
after the expiration of the Notice Period, or upon satisfaction of any
governmental approval requirements, if later, by delivery by the respective
Series Preferred Stockholders of the purchase price for the shares being
purchased as provided above to the Founder against delivery of the certificates
representing the shares so purchased appropriately endorsed for transfer by the
Founder.
7.3. Sales by the Founder.
Any shares covered by an Offer which are not acquired pursuant to Section
7.2 that the Founder desires to sell following compliance with Section 7.2 may
be sold to the Offeror only during the 90-day period after the expiration of the
Notice Period and only on terms no more favorable to the Founder than those
contained in the Offer. Promptly after such sale, the Founder shall notify the
Series Preferred Stockholders of the consummation thereof and shall furnish such
evidence of the completion and time of completion of such sale and of the terms
thereof as may reasonably be requested by the Series Preferred Stockholders. So
long as the Offeror is neither a party, nor an affiliate or relative of a party
to this Agreement, such Offeror shall take the shares so Transferred free and
clear of the provisions of this Agreement, other than Section 5.1 and 5.3
hereof. If, at the end of such 90-day period, the Founder has not completed the
sale of such shares as aforesaid, all the restrictions on Transfer contained in
this Agreement shall again be in effect with respect to such shares.
SECTION 8 RIGHTS TO PURCHASE
Notwithstanding anything herein to the contrary, the following provisions
of this Section 8 shall not apply to, and shall thereafter terminate immediately
upon, the Company's first Qualified Public Offering.
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8.1 Right to Participate in Certain Sales of Additional Securities.
(a) The Company agrees that it shall not sell or issue any shares of
capital stock of the Company, or other securities convertible into or
exchangeable for capital stock of the Company, or options, warrants or rights
carrying any rights to purchase capital stock of the Company unless the Company
first submits a written offer to each Eligible Stockholder, identifying the
terms of the proposed sale (including cash price, number or aggregate principal
amount of securities and all other material terms).
(b) Pursuant to such notice, the Company shall offer to each Eligible
Stockholder the opportunity to purchase its Pro Rata Share of the securities
proposed to be sold by the Company on terms and conditions, including price, not
less favorable to the Eligible Stockholders than those on which the Company
proposes to sell such securities to a third party. Each Eligible Stockholder
shall have a right of over-allotment such that if any Eligible Stockholder fails
to exercise its right hereunder to purchase its Pro Rata Share, the Electing
Purchasers may purchase the non-purchasing Eligible Stockholder's Pro Rata Share
(allocated among them, pro rata in proportion to the aggregate number of shares
of Common Stock owned by such Electing Purchasers (assuming the full conversion
of any shares of the capital stock of the Company convertible into shares of
Common Stock)).
(c) The Company's offer to the Eligible Stockholders shall remain open
and irrevocable, for a period of thirty (30) days. Any securities so offered
which are not purchased pursuant to such offer may be sold by the Company, at
any time within one hundred twenty (120) days following the termination of the
above-referenced 30-day period, but such securities may not be sold on terms and
conditions, including price, that are more favorable to the purchaser than those
set forth in such offer. No securities may be sold by the Company after such
120-day period without renewed compliance with this Section 8.1.
(d) Notwithstanding the foregoing, the Company may (i) issue options,
warrants or rights to subscribe for shares of its Common Stock (as appropriately
adjusted for stock splits, stock dividend and the like) to officers, employees
and directors of the Company pursuant to the terms of the Stock Option Plan and
the Stock Incentive Plan and Section 4.4 hereof and may issue shares of its
Common Stock upon the exercise of any such stock options, or upon exercise of
warrants outstanding as of the Closing, (ii) issue shares of its Common Stock
upon the conversion of the Series Preferred Stock (as appropriately adjusted for
stock splits, stock dividends and the like); (iii) issue shares of its Common
Stock in connection with the acquisition of another Company approved consistent
with Section 6.1; (iv) issue shares of its Common Stock pursuant to the exercise
of the outstanding options listed on Exhibit D hereto (as appropriately adjusted
for stock splits, stock dividends and the like), and (v) issue shares of its
capital stock as contemplated by the Contribution Agreements and the Colonial
Option Agreement.
SECTION 9 REGISTRATION RIGHTS; STAND-OFF AGREEMENT
9.1. Optional Registrations.
(a) If, at any time or from time to time after the date hereof, the
Company shall determine to register any shares of its capital stock or
securities convertible into capital stock under the Securities Act (whether in
connection with a public offering of securities by the Company (a "primary
offering"), for the account of any security holder or holders of the Company (a
"secondary
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offering"), or both), the Company shall promptly give written notice thereof to
each Series Preferred Stockholder holding Registrable Securities (as hereinafter
defined in Section 9.4 below) then outstanding, Jalkut (for so long as he shall
hold Registrable Securities) and the Founder (for so long as he shall hold
Founder Securities); provided, however, that such notice obligation shall not
apply to any registration:
(i) relating to a public offering pursuant to any demand
registration rights under the Warrant Registration Rights Agreement;
(ii) relating to the registration of any of the Company's
employee benefit plans;
(iii) on any form that does not permit secondary offerings; or
(iv) relating to a corporate reorganization or other transaction
under Rule 145 or any similar rule of the SEC.
(b) If, within thirty (30) days after their receipt of a notice
delivered pursuant to clause (a) of this Section 9.1, one or more Series
Preferred Stockholders, Jalkut or the Founder request the inclusion of some or
all of the Registrable Securities or Founder Securities held by them in such
registration, the Company shall use its best efforts to effect the registration
under the Securities Act of all Registrable Securities and Founder Securities
which such Holders may request in a writing delivered to the Company within such
thirty (30) days.
(c) In the case of the registration of shares of capital stock by the
Company in connection with any underwritten public offering, if the
underwriter(s) shall have informed the Company and the Holders requesting
inclusion in such offering, in writing, that in such underwriter's opinion the
number of Registrable Securities and Founder Securities to be included in the
offering is such as to materially and adversely affect the price at which the
securities can be sold, the Company shall not be required to register
Registrable Securities and Founder Securities of such Holders in excess of the
amount, if any, of shares of the capital stock which the principal underwriter
of such underwritten offering shall reasonably and in good faith agree to
include in such offering in excess of any amount to be registered for the
Company. If any limitation of the number of shares of capital stock to be
registered by the Holders is required pursuant to this clause 9.1(c), the number
of shares that may be included in the registration on behalf of the Holders
shall be allocated among the Holders or the holders of any other registration
rights in proportion, as nearly as practicable, to their relative holdings of
Registrable Securities and Founder Securities, in the aggregate (provided that
for such purpose the Series E Preferred Stockholders shall be deemed to own two
times their actual holdings of Series E Preferred Stock, and provided further
that if any Holder does not register all shares that it is entitled to register
under the foregoing formula, then its unused shares shall be reallocated among
the remaining requesting Holders in proportion to their relative holdings of
Registrable Securities and Founder Securities), after first excluding from such
registration statement all shares of Common Stock, other than Founder
Securities, sought to be included therein by:
(i) any director, officer or employee of the Company, including
Jalkut (unless and until Jalkut has been involuntarily terminated as
an officer of the Company pursuant to Sections 6(d) or 6(f) of the
Jalkut Employment Agreement), pro rata based on the number of shares
of Registrable Securities requested by each such individual to be
included in such registration;
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(ii) any holder thereof not having any such contractual
incidental registration rights; and
(iii) any holder thereof having contractual incidental
registration rights subordinate and junior to the rights of the Series
Preferred Stockholders.
If such underwritten public offering is an initial public offering of the
Company's Common Stock, the Company may limit or exclude, to the extent so
advised by the underwriter as provided above, the amount of Registrable
Securities and Founder Securities to be included in the registration. If such
underwritten public offering is not an initial public offering of the Company's
Common Stock, then the Series Preferred Stockholders holding Registrable
Securities, the Founder, and Jalkut if he has been involuntarily terminated as
an officer of the Company pursuant to Sections 6(d) and 6(f) of the Jalkut
Employment Agreement, shall be allowed to include in the aggregate not less than
thirty-five percent (35%) of the shares subject to such registration statement,
provided, however, that in addition to any limitations imposed by this clause
(c), in connection with any registration that includes securities pursuant to
the Warrant Registration Rights Agreement, the terms of the Warrant Registration
Rights Agreement as in effect on the date hereof shall govern the inclusion (and
limitations on inclusion) of Registrable Securities, Founder Securities and
other securities in such registration.
(d) The Company shall not grant any rights relating to the piggy-back
registration of its capital stock which are superior to or on a parity with the
rights granted to the Series Preferred Stockholders, the Founder and Jalkut in
this Section 9.1 other than pursuant to this Agreement and the Warrant
Registration Rights Agreement.
9.2. Required Registrations.
(a) If on any three (3) occasions after the date hereof the Required
Holders notify the Company in writing that the Required Holders intend to offer
or cause to be offered for public sale all or any portion of its or their
Registrable Securities, the Company shall notify all of the Holders who would be
entitled to notice of a proposed registration under Section 9.1 above of its
receipt of such notification from such Required Holders. Upon the written
request of any such Holder or Holders delivered to the Company within twenty
(20) days after the Company's delivery of such notification to the Holders, the
Company shall either:
(i) elect to make a primary offering, in which case the rights of
such Holders to participate in such offering shall be as set forth in
Section 9.1 above (except that the Company shall not be permitted to
limit the number of shares which may be registered by any Holder, and
Holders holding a majority of the Registrable Securities requested to
be included in such required registration will have the right to
select the underwriter); or
(ii) use its best efforts to cause such of the Registrable
Securities and Founder Securities as may be requested by any Holders
to be registered under the Securities Act in accordance with the terms
of this Section 9.2.
(b) In the event that (i) the Company shall have completed its initial
Qualified Public Offering, and (ii) the registration statement filed by the
Company under the Securities Act in respect of such Qualified Public
Offering shall:
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(A) have ceased to be effective on or before the date which is
thirty (30) days following the expiration of the lock-up
period specified in Section 9.8 hereof; or
(B) not have included pursuant to the provisions of section 9.1
hereof the shares of Common Stock proposed to be registered
by the Founder,
then, in either of such events but only in either of such events (the
"Triggering Event"), the Founder shall have the rights set forth in this Section
9.2(b). If on any one occasion at any time following the Triggering Event, and
subject to the other terms and conditions of this Agreement, the Founder
notifies the Company in writing that the Founder intends to offer or cause to be
offered for public sale all or any portion of his Founder Securities, the
Company shall notify all of the Holders who would be entitled to notice of a
proposed registration under Section 9.1 above of its receipt of such
notification from the Founder. Upon the written request of any such Holder or
Holders delivered to the Company within twenty (20) days after the Company's
delivery of such notification to the Holders, the Company shall either:
(x) elect to make a primary offering, in which case the rights
of all such Holders to participate in such offering shall be
as set forth in Section 9.1 above (except that the Company
shall not be permitted to limit the number of shares which
may be registered by any Holder); or
(y) use its best efforts to cause such of the Registrable
Securities and Founder Securities as may be requested by any
Holders to be registered under the Securities Act in
accordance with the terms of this Section 9.2;
provided, however, that in the event that the notification delivered by the
Founder under this Section 9.2(b) shall have been delivered to the Company on or
before the date which is one year following the completion of the Qualified
Public Offering of the Company, the number of shares of Founder Securities that
may be included in such notification by the Founder hereunder (and in respect of
which the Company shall have the obligations under this Section 9.2(b)) shall be
limited and:
(1) shall not, in the case of an initial Qualified Public
Offering in which shares constituting fewer than fifteen
percent (15%) of the equity capital of the Company on a
fully diluted basis shall have been so registered in
connection with such initial Qualified Public Offering,
exceed thirty percent (30%) of the aggregate number of
shares so registered in connection with such initial
Qualified Public Offering, and
(2) shall not, in all other cases, exceed twenty percent (20%)
of the aggregate number of shares so registered in
connection with such initial Qualified Public Offering.
(c) The Company may postpone the filing of any registration statement
required by this Section 9.2 for a reasonable period of time, not to exceed
sixty (60) days during any twelve month period, if the Company has been advised
by legal counsel that such filing would require a special audit or the
disclosure of a material impending transaction or other matter and the Company
determines reasonably and in good faith that such disclosure would have a
material adverse effect on the Company. The Company shall not be required to
cause a registration statement requested
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pursuant to this Section 9.2 to become effective prior to the later of (i) 90
days following the effective date of a registration statement initiated by the
Company (other than a registration effected solely to implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
SEC under the Securities Act is applicable), if the request for registration has
been received by the Company subsequent to the giving of written notice by the
Company made in good faith to the Holders holding Registrable Securities and
Founder Securities that the Company is commencing to prepare a Company-initiated
registration statement, and (ii) the end of any 'lock-up" or "black-out" period
imposed on the Company or any of the holders of its securities pursuant to or in
connection with any underwriting or purchase agreement relating to an
underwritten offering under Rule 144A of the Securities Act or a registered
public offering of equity securities of the Company, such period not to exceed
180 days; provided, however, that the Company shall use its best efforts to
achieve such effectiveness promptly following the end of the period set forth in
clause (i) or (ii) of this clause (c), as applicable.
(d) Notwithstanding the provisions of clauses (a), (b) or (c) of
this Section 9.2, the Company shall not be obligated to effect any registration
pursuant to:
(1) Section 9.2(a), if the Required Holders propose to register
Registrable Securities that may be immediately registered on
SEC Form S-3 pursuant to a request made under Section 9.3
hereof;
(2) Section 9.2(a) if the Required Holders do not request that
the offering which is the subject of such registration be
firmly underwritten by underwriters selected by the Required
Holders and reasonably acceptable to the Company;
(3) Section 9.2(b), if the Founder does not request that the
offering which is the subject of such registration be firmly
underwritten by underwriters selected by the Founder and
reasonably acceptable to the Company; or
(4) Section 9.2(a) or 9.2(b), if the Company, after using its
best efforts to do so, is unable to obtain the commitment of
the underwriter selected in clauses (2) or (3) above, as
applicable, to underwrite such offering on a firm commitment
basis.
9.3. Form S-3.
Following its initial public offering, the Company shall timely file all
reports required to be filed with the SEC under the Exchange Act and shall
otherwise use reasonable efforts to qualify for registration on SEC Form S-3 or
any comparable or successor form promulgated by the SEC. If the Company becomes
eligible to use SEC Form S-3 or a comparable successor form, the Company shall
use its best efforts to continue to qualify at all times for registration on
Form S-3 or such successor form. One or more of the Holders other than the
Founder shall have the right to request and have effected one registration per
year of shares of Registrable Securities on Form S-3 or such successor form for
a public offering of shares of Registrable Securities and having an aggregate
proposed offering price exceeding $1,000,000 (such requests shall be in writing
and shall state the number of shares of Registrable Securities to be disposed of
and the intended method of disposition of such shares by such Holder or
Holders). The Company shall give notice to all Holders of the receipt of a
request for registration pursuant to this Section 9.3 and shall provide a
reasonable opportunity for such Holders to participate in the registration. The
Company shall not be required to cause a registration statement requested
pursuant to this Section 9.3 to become effective prior to the later of
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(i) 90 days following the effective date of a registration statement initiated
by the Company (other than a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 or any other similar
rule of the SEC under the Securities Act is applicable), if the request for
registration has been received by the Company subsequent to the giving of
written notice by the Company made in good faith to the Holders holding
Registrable Securities and Founder Securities that the Company is commencing to
prepare a Company-initiated registration statement, and (ii) the end of any
"lock-up" or "black out" period imposed on the Company pursuant to or in
connection with any underwriting or purchase agreement relating to an
underwritten SEC Rule 144A or a registered public offering of equity securities
of the Company, such period not to exceed 180 days; provided, however, that the
Company shall use its best efforts to achieve such effectiveness promptly
following the end of the period set forth in clauses (i) or (ii) above, as
applicable, if the request pursuant to this Section 9.3 has been made prior to
the expiration of such period. The Company may postpone the filing of any
registration statement required hereunder for a reasonable period of time, not
to exceed 60 days during any twelve-month period, if the Company has been
advised by legal counsel that such filing would require the disclosure of a
material transaction or other factor and the Company determines reasonably and
in good faith that such disclosure would have a material adverse effect on the
Company. Subject to the foregoing, the Company shall use its best efforts to
effect promptly the registration of all shares of Common Stock on Form S-3 or
such successor form to the extent requested by the Holder or Holders thereof for
purposes of disposition. If so requested by any Holder in connection with a
registration under this Section 9.3, the Company shall take such steps as are
required to register such Holder's Registrable Securities or Founder Securities
for sale on a delayed or continuous basis under SEC Rule 415, and to keep such
registration effective for the shorter of (x) six months or (y) until all of
such Holder's Registrable Securities or Founder Securities registered thereunder
are sold.
9.4. Registrable Securities.
For purposes of this Agreement, the term "Registrable Securities" shall
mean any shares of Common Stock:
(a) purchased by, or issued to, a Series Preferred Stockholder, or
issuable upon conversion of the Series Preferred Stock or other Preferred Stock
of the Corporation;
(b) issued or issuable to Jalkut upon the exercise of options granted
to him by the Company; or
(c) issued by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, or any exchange or other replacement of the shares referred to
in clauses (i) or (ii) above;
provided, however, that (x) if a Series Preferred Stockholder owns or holds
shares of Series Preferred Stock (or, in the case of Jalkut, owns or holds
options exercisable for shares of Common Stock), such Series Preferred
Stockholder (or optionholder) shall not be required to cause such shares of
Series Preferred Stock to be converted to Common Stock (or, in the case of
Jalkut, shall not be required to exercise such options) until immediately prior
to the effective date of any applicable registration statement pursuant to which
such shares shall be sold, and (y) notwithstanding any other provision of this
Agreement, the term "Registrable Securities" shall not include any shares of
Common Stock which have previously been registered or which have been sold to
the public either pursuant to a
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registration statement or SEC Rule 144, or that may be sold by the holder
thereof pursuant to SEC Rule 144(k).
9.5. Further Obligations of the Company.
Whenever the Company is required hereunder to register any Registrable
Securities or Founder Securities it agrees that it also shall do the following:
(a) Pay all expenses of such registrations and offerings (exclusive of
underwriting discounts and commissions) and the reasonable fees and expenses,
not to exceed $60,000 per offering, of not more than one independent counsel for
the Holders satisfactory to a majority in interest of the Holders with
Registrable Securities included in such registration, voting as a single class.
(b) Use its best efforts (with due regard to management of the ongoing
business of the Company and the allocation of managerial resources) diligently
to prepare and file with the SEC a registration statement and such amendments
and supplements to said registration statement and the prospectus used in
connection therewith as may be necessary to keep said registration statement
effective for at least 90 days (6 months in the case of a Form S-3 registration
statement under Section 9.3) or such earlier date on which the Holder or Holders
have completed the distribution described in such registration statement, and to
comply with the provisions of the Securities Act with respect to the sale of
securities covered by said registration for the period necessary to complete the
proposed public offering;
(c) Furnish to each selling Holder such copies of each preliminary and
final prospectus and such other documents as such Holder may reasonably request
to facilitate the public offering of its Registrable Securities or Founder
Securities, as the case may be;
(d) Enter into any reasonable underwriting agreement required by the
proposed underwriter for the selling Holders, if any, in such form and
containing such terms as are customary; provided, however, that no Holder shall
be required to make any representations or warranties other than with respect to
its title to the Registrable Securities or Founder Securities, as the case may
be, and if the underwriter requires that representations or warranties be made,
the Company shall make all such representations and warranties relating to the
Company;
(e) Use its best efforts to register or qualify the securities covered
by said registration statement under the securities or blue-sky laws of such
jurisdictions as any selling Holder may reasonably request, provided that the
Company shall not be required to register or qualify the securities in any
jurisdictions which require it to qualify to do business therein or in which the
Company would be required to consent generally to service of process in such
jurisdiction unless the Company is already so subject;
(f) Immediately notify each selling Holder, at any time when a
prospectus relating to his Registrable Securities or Founder Securities, as the
case may be, is required to be delivered under the Securities Act, of the
happening of any event as a result of which such prospectus contains an untrue
statement of a material fact or omits any material fact necessary to make the
statements therein not misleading, and, at the request of any such selling
Holder, prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities and
Founder Securities, as the case may be, such prospectus shall not
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contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading.
(g) Cause all such Registrable Securities and Founder Securities, as
the case may be, to be listed on each securities exchange or quotation system on
which similar securities issued by the Company are then listed or quoted:
(h) Otherwise use its best efforts to comply with the applicable
securities laws of the United States and other applicable jurisdictions and all
applicable rules and regulations of the SEC and comparable governmental agencies
in other applicable jurisdictions and make generally available to its Holders,
in each case as soon as practicable, but not later than 45 days after the close
of the period covered thereby, an earnings statement of the Company which shall
satisfy the provisions of Section 11(a) of the Securities Act;
(i) Use best efforts to obtain and furnish to each selling Holder,
immediately prior to the effectiveness of the registration statement (and, in
the case of an underwritten offering, at the time of delivery of any Registrable
Securities or Founder Securities sold pursuant thereto), a cold comfort letter
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters as the
holders of a majority of the Registrable Securities and Founder Securities being
sold may reasonably request;
(j) Make available appropriate management personnel for participation
in the preparation and drafting of such registration statement, for due
diligence meetings and, to the extent that doing so does not interfere with the
operations and management of the Company, for "road show" meetings, in each case
as reasonably requested by the Holders or the lead managing underwriter; and
(k) Otherwise cooperate with the underwriter or underwriters, the
Commission and other regulatory agencies and take all actions and execute and
deliver or cause to be executed and delivered all documents necessary to effect
the registration of any Registrable Securities and Founder Securities under this
Section 9.
9.6. Indemnification; Contribution.
(a) Incident to any registration statement referred to in this Section
9, and subject to applicable law, the Company shall indemnify and hold harmless
each underwriter, each Holder who offers or sells any such Registrable
Securities or Founder Securities in connection with such registration statement
(including its partners (including partners of partners and stockholders of any
such partners)), and directors, officers, employees and agents of any of them (a
"Selling Holder"), and each person who controls any of them within the meaning
of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
of 1934, as amended (hereinafter the "Exchange Act") (a "Controlling Person")),
from and against any and all losses, claims, damages, expenses and liabilities,
joint or several (including any investigation, legal and other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based on (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement (including any related preliminary or definitive
prospectus, or any amendment or supplement to such registration statement
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or prospectus), (ii) any omission or alleged omission to state in such document
a material fact required to be stated in it or necessary to make the statements
in it not misleading, or (iii) any violation by the Company of the Securities
Act, any state securities or blue sky laws or any rule or regulation thereunder
in connection with such registration; provided, however, that the Company shall
not be liable to the extent that such loss, claim, damage, expense or liability
arises from and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
furnished in writing to the Company by such underwriter, Selling Holder or
Controlling Person expressly for use in such registration statement. With
respect to such untrue statement or omission or alleged untrue statement or
omission in the information furnished to the Company by such Selling Holder
expressly for use in such registration statement, such Selling Holder shall
indemnify and hold harmless each underwriter, the Company (including its
directors, officers, employees and agents), each other Holder (including its
partners (including partners of partners and stockholders of such partners) and
directors, officers, employees and agents of any of them) whose securities are
so registered, and each person who controls any of them within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, expenses and liabilities, joint or
several, to which they, or any of them, may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise to the same extent provided in the immediately preceding
sentence. In no event, however, shall the liability of a Selling Holder for
indemnification under this Section 9.6(a) in its capacity as such (and not in
its capacity as an officer or director of the Company) exceed the lesser of (i)
that proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to that proportion of the total securities sold under
such registration statement which is being sold by such Selling Holder or (ii)
the proceeds received by such Selling Holder from its sale of Registrable
Securities (or Founder Securities, as the case may be) under such registration
statement.
(b) If the indemnification provided for in Section 9.6(a) above for
any reason is held by a court of competent jurisdiction to be unavailable to an
indemnified party in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this Section
9.6, in lieu of indemnifying such indemnified party thereunder, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the other
Selling Holders and the underwriters from the offering of the Registrable
Securities and Founder Securities, as applicable, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, the other
Selling Holders and the underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, the Selling Holders and the
underwriters shall be deemed to be in the same respective proportions that the
net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Holders and the underwriting discount received by the
underwriters, in each case as set forth in the table on the cover page of the
applicable prospectus, bear to the aggregate public offering price of the
Registrable Securities and Founder Securities, as applicable. The relative fault
of the Company, the Selling Holders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Holders or the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
-28-
<PAGE>
(c) The Company, the Selling Holders and the underwriters agree that
it would not be just and equitable if contribution pursuant to this Section
9.6(b) were determined by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. In no event, however, shall
a Selling Holder be required to contribute any amount under this Section 9.6(b)
in excess of the lesser of (i) that proportion of the total of such losses,
claims, damages or liabilities indemnified against equal to that proportion of
the total securities sold under such registration statement which is being sold
by such Selling Holder or (ii) the proceeds received by such Selling Holder from
its sale of Registrable Securities or Founder Securities, as the case may be,
under such registration statement. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not found guilty of
such fraudulent misrepresentation.
(d) The amount paid by an indemnifying party or payable to an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in this Section 9.6 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim, payable as the same are incurred. The indemnification and
contribution provided for this Section 9.6 shall remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified parties
or any officer, director, employee, agent or controlling person of the
indemnified parties. Any indemnification of legal fees and costs pursuant to
this Section 9.6 shall be paid by the indemnifying party when and as such fees
and costs are incurred by the indemnified party.
9.7. Rule 144 and Rule 144A Requirements.
In the event that the Company becomes and for so long as it remains subject
to Section 13 or Section 15(d) of the Exchange Act, the Company shall use its
best efforts to take all action as may be required as a condition to the
availability of Rule 144 or Rule 144A under the Securities Act (or any successor
or similar exemptive rules hereafter in effect). The Company shall furnish to
any Series Preferred Stockholder holding Registrable Securities and to the
Founder holding Founder Securities, within fifteen (15) days of a written
request, a written statement executed by the Company as to the steps it has
taken to comply with the current public information requirement of Rule 144 or
Rule 144A or such successor rules.
9.8. Market Stand-off Agreement.
Each and all of the Stockholders party to this Agreement, if so requested
by the underwriter of the Company's securities, shall agree not to sell, pledge,
encumber or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Stockholders during the 180-day period
following the effective date of the Company's initial public offering or any
other registration statement of the Company in which such Stockholder has
included securities for registration, or during any shorter period agreeable to
the managing underwriter. Such agreement shall be in writing and in a form
reasonably satisfactory to the Company and such underwriter. The Company may
impose stop-transfer instructions with respect to the shares of Common Stock,
Series Preferred Stock, or any other securities of the Company subject to the
foregoing restriction until the end of such period.
-29-
<PAGE>
SECTION 10 GENERAL.
10.1. Amendments, Waivers and Consents.
(a) For the purposes of this Agreement and all agreements executed
pursuant hereto, no course of dealing between the Company and any Stockholder
and no delay on the part of any party hereto in exercising any rights hereunder
or thereunder shall operate as a waiver of the rights hereof and thereof. Except
as otherwise provided in Section 10.1(c) hereof, no provision hereof may be
waived otherwise than by a written instrument signed by the party so waiving
such covenant or other provision.
(b) Except as otherwise provided by the terms of this Agreement
(including Section 10(c) hereof), all and any amendments to and consents
required by this Agreement may be made, and compliance with any term, covenant,
condition or provision set forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
by the consent of the holders of a majority of the issued and outstanding shares
of Series Preferred Stock and Common Stock, voting together as a single class.
(c) No amendment, waiver or consent that adversely affects the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock,
the Series D Preferred Stock, or the Series E Preferred Stock, or affects any
rights specifically granted to the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, or
the Series E Preferred Stock shall be approved without the approval of the
holders of a majority of the issued and outstanding Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, or
Series E Preferred Stock, respectively, each voting separately as a class;
provided, however, that any amendment, waiver or consent that adversely affects
one Series Preferred Stockholder, or affects any rights specifically granted to
such Series Preferred Stockholder, in a manner different than all other Series
Preferred Stockholders holding the same series of Series Preferred Stock,
including, but not limited to, the right to designate certain directors set
forth in Sections 5.1 and 5.2 hereof, shall not be approved without such Series
Preferred Stockholder's consent.
(d) No amendment to Articles 7, 8 or 9 hereof that would, relative to
the rights of any other class of Stock, adversely affect any rights granted to
the Founder under this Agreement shall be approved without the Founder's
consent.
(e) Except as otherwise expressly provided by the terms of this
Agreement, any amendment or waiver effected in accordance with this Section 10.1
shall be binding upon:
(i) the Company;
(ii) each holder of the shares Series Preferred Stock at the time
outstanding and each future holder of the shares of Series Preferred Stock;
(iii) the Founder and any transferee of the shares of Common
Stock owned by the Founder as of the date hereof; and
(iv) Jalkut and any transferee of the Shares of Common Stock owned
by Jalkut as of the date hereof.
-30-
<PAGE>
10.2. Legend on Securities.
The Company and the Stockholders acknowledge and agree that the following
legend shall be typed on each certificate evidencing any of the shares of
capital stock of the Company issued hereunder held at any time by the
Stockholders.
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS. THESE SECURITIES ARE ALSO SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS'
AGREEMENT DATED AS OF MARCH 30, 2000, INCLUDING CERTAIN RESTRICTIONS ON
TRANSFER, INDEMNITY PROVISIONS AND VOTING PROVISIONS SET FORTH THEREIN. A
COMPLETE AND CORRECT COPY OF THIS AGREEMENT IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND
WITHOUT CHARGE."
The Company shall be obligated to reissue promptly at the request of any Holder
thereof unlegended certificates if the Holder thereof shall have obtained an
opinion of counsel at such Holder's expense reasonably acceptable to the Company
to the effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification, or legend, whether pursuant to
Rule 144(k), an effective registration statement, or otherwise.
10.3. Governing Law.
This Agreement shall be deemed to be a contract made under, and shall be
construed in accordance with, the laws of the State of Delaware, without giving
effect to conflict of laws principles thereof.
10.4. Section Headings and Gender.
The descriptive headings in this Agreement have been inserted for
convenience only and shall not be deemed to limit or otherwise affect the
construction of any provision thereof or hereof. The use in this Agreement of
the masculine pronoun in reference to a party hereto shall be deemed to include
the feminine or neuter as the context may require.
10.5. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute but one and the
same document.
-31-
<PAGE>
10.6. Notices and Demands.
Any notice or demand which is required or provided to be given under this
Agreement shall be deemed to have been sufficiently given and received for all
purposes when delivered by hand, telecopy, telex or other method of facsimile,
or five business days after being sent by certified or registered mail, postage
and charges prepaid, return receipt requested, or two business days after being
sent by overnight delivery providing receipt of delivery to the following
addresses: If to the Company, at 1015 31st Street, N.W., Washington, D.C. 20007,
or at any other address designated by the Company to the Stockholders in
writing; if to a Stockholder, at his or its mailing address as shown on Exhibit
A hereto, or at any other address designated by such Stockholder to the Company
and the Stockholders in writing.
10.7. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be deemed prohibited or invalid under such
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
10.8. Integration.
This Agreement, including the exhibits, documents and instruments referred
to herein or therein, constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject mater hereof.
10.9. Review with Counsel.
Each party to this Agreement hereby confirms and acknowledges for the
benefit of each and all of the other parties hereto that he has obtained the
advice of counsel with respect to its execution, and that he has entered into
this Agreement of his own free will and not under compulsion or duress.
10.10. Waiver of Jury Trial.
EACH PARTY HERETO HEREBY WAIVES ANY RIGHT WHICH IT MAY OTHERWISE HAVE AT
LAW OR IN EQUITY TO A TRIAL BY JURY IN CONNECTION WITH ANY SUIT OR PROCEEDING AT
LAW OR IN EQUITY BROUGHT BY ANY PARTY HERETO AGAINST ANOTHER WAIVING PARTY OR
WHICH OTHERWISE RELATES TO THIS AGREEMENT.
10.11.Subsequent Series D or E Preferred Stockholders. To the extent that
the Company issues in accordance with the terms hereof any Series D Preferred
Stock or Series E Preferred Stock subsequent to the date hereof, each purchaser
thereof (i) shall be required to become a party to this Agreement, with all of
the benefits, rights and obligations of a Stockholder hereunder by executing a
written agreement between such purchaser and the Company, which agreement shall
not require the execution of the then current Stockholders hereunder, and (ii)
shall make the representations in Section 3, provided that, with respect to
Section 3.3(a), such purchaser shall make the representation of no present
intention or plan as of the date thereof, formally or informally, to transfer or
dispose of any of the purchased shares to any person who is not a member of the
controlling group of
-32-
<PAGE>
shareholders for purposes of IRC Section 351. The Company shall provide each
Stockholder notice of any parties added to this Agreement pursuant to the terms
hereof.
10.12. Transferees. Except as specifically set forth in this Agreement, any
transferee of Founder Securities or Series Preferred Stock shall be bound by and
subject to the restrictions and agreements and entitled to the benefits and
rights set forth in Sections 2, 4, 5, 6, 7, 8, 9 and 10 of this Agreement as if
such transferee was a Founder or Series Preferred Stockholder as defined herein.
The relevant Holder or Holders, as the case may be, shall notify the Company at
the time of such transfer. All certificates representing shares held by such
transferees shall bear a legend to such effect. Any transfers of shares subject
to this Agreement shall be effected in compliance with all applicable
requirements of the Federal Communications Commission (the "FCC") and federal
telecommunications law, including any relevant limitations on foreign ownership
of FCC licenses.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
PATHNET TELECOMMUNICATIONS, INC.
By:/s/ Richard Jalkut
---------------------------------
Name: CEO
Title:
STOCKHOLDERS
SPECTRUM EQUITY INVESTORS, L.P.
By:/s/ Chris J. Maroni
---------------------------------
Name: K.J. Maroni
Title:
SPECTRUM EQUITY INVESTORS II, L.P.
By:/s/ Chris J. Maroni
---------------------------------
Name:K.J. Maroni
Title:
/s/ Shawn J. Colo
-------------------------------------
Shawn J. Colo
/s/ Ben Coughlin
-------------------------------------
Benjamin M. Coughlin
/s/ illegible
-------------------------------------
Michael J. Kenneally
-34-
<PAGE>
/s/ illegible
-------------------------------------
Matthew N. Mochary
/s/ illegible
-------------------------------------
Robert A. Nicholson
/s/ F Wang
-------------------------------------
Fred Wang
NEW ENTERPRISE ASSOCIATES VI, LIMITED
PARTNERSHIP
By: /s/ illegible
---------------------------------
Name:
Title:
ONSET ENTERPRISE ASSOCIATES II, L.P.
By: /s/ illegible
---------------------------------
Name:
Title: illegible
ONSET ENTERPRISES ASSOCIATES III, L.P.
By: /s/ illegible
---------------------------------
Name:
Title: Managing Director
OEA III Management, LLC
The General Partner of
Onset Enterprise Associates III
L.P.
-35-
<PAGE>
MONTAUK PARTNERS, L.P.
By: /s/ Brian M Smith
---------------------------------
Name: Brian M Smith
Title: Managing Member of
General Partner
PAUL CAPITAL PARTNERS V, L.P.
By: /s/ Bryon T. Sheets
---------------------------------
Name: Bryon T. Sheets
Title: Manager of Paul Capital
Management, LLC
PAUL CAPITAL PARTNERS V (DOMESTIC ANNEX
FUND), L.P.
By:/s/ Bryon T. Sheets
---------------------------------
Name: Bryon T. Sheets
Title: Manager of Paul Capital
Management, LLC
PAUL CAPITAL PARTNERS V INTERNATIONAL, L.P.
By:/s/ Bryon T. Sheets
---------------------------------
Name: Bryon T. Sheets
Title: Manager of Paul Capital
Management, LLC
-36-
<PAGE>
PAUL CAPITAL PARTNERS VI, L.P.
By:/s/ Bryon T. Sheets
---------------------------------
Name: Bryon T. Sheets
Title: Manager of Paul Capital
Management, LLC
PCP ASSOCIATES, L.P.
By:/s/ Bryon T. Sheets
---------------------------------
Name: Bryon T. Sheets
Title: Manager of Paul Capital
Management, LLC
/s/ Thomas Domencich
-------------------------------------
Thomas Domencich
/s/ Dennis R. Patrick
-------------------------------------
Dennis R. Patrick
TORONTO DOMINION CAPITAL (U.S.A.), INC.
By: /s/ Martha L. Gariepy
---------------------------------
Name: Martha L. Gariepy
Title: Secretary/Treasurer
GROTECH PARTNERS IV, L.P.
By:/s/ Patrick Kerins
---------------------------------
Name: Patrick Kerins
Title: Managing Director
-37-
<PAGE>
UTECH CLIMATE CHALLENGE FUND, L.P.
By:/s/ Robert W. Shaw Jr
---------------------------------
Name: Robert W. Shaw Jr
Title: Managing Member
UTILITY COMPETITIVE ADVANTAGE FUND
By:/s/ William T. Heflin
---------------------------------
Name: William T. Heflin
Title: Managing Director
FBR TECHNOLOGY VENTURE PARTNERS, L.P.
By: /s/ Gene Riechers
---------------------------------
Name: Gene Riechers
Title: Managing Director
THE BURLINGTON NORTHERN AND SANTA FE
RAILWAY COMPANY
By: /s/ Illegible
---------------------------------
Name:
Title:
COLONIAL PIPELINE COMPANY
By: /s/ D.L. Lemmon
---------------------------------
Name: D.L. Lemmon
Title: President and Chief Executive
Officer
-38-
<PAGE>
CSX TRANSPORTATION, INC.
By: /s/ Paul Sandler
---------------------------------
Name: Paul D. Sandler
Title: Senior Vice President -
Corporate Services
/s/ David Schaeffer
-------------------------------------
David Schaeffer
-39-
PATHNET, INC.
PATHNET TELECOMMUNICATIONS, INC.
THE BANK OF NEW YORK
------------------------------
SUPPLEMENTAL INDENTURE
Dated as of March 30, 2000
To
Indenture, Dated as of April 8, 1998,
Between
Pathnet, Inc.
and
The Bank of New York, as Trustee
------------------------------
<PAGE>
-81-
<TABLE>
TABLE OF CONTENTS
PAGE
<CAPTION>
<S> <C>
RECITALS..........................................................................................................1
AMENDMENTS TO "DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION"...........................................2
Section 101. Introduction................................................................................2
Section 102. Revised Definitions.........................................................................3
Accounts Receivable Subsidiary..............................................................................3
Amendment Date..............................................................................................4
Asset Sale..................................................................................................4
Board of Directors..........................................................................................4
Board Resolution............................................................................................4
Cash Equivalents............................................................................................4
Change of Control...........................................................................................5
Consolidated Adjusted Net Income............................................................................6
Consolidated Indebtedness...................................................................................6
Consolidated Indebtedness to Consolidated Operating Cash Flow Ratio.........................................6
Consolidated Interest Expense...............................................................................7
Consolidated Operating Cash Flow............................................................................8
Consolidated Tax Expense....................................................................................8
Credit Facilities...........................................................................................8
Currency Agreements.........................................................................................8
Debt Securities.............................................................................................8
Disinterested Director......................................................................................8
Event of Default............................................................................................9
Fair Market Value..........................................................................................10
Guarantee..................................................................................................10
Incumbent..................................................................................................10
Incumbent Agreement........................................................................................10
Incur......................................................................................................11
Indebtedness...............................................................................................11
Invested Capital...........................................................................................12
Investment.................................................................................................12
Net Cash Proceeds..........................................................................................12
Officers' Certificate......................................................................................13
Parent.....................................................................................................13
Permitted Indebtedness.....................................................................................13
Permitted Investment.......................................................................................16
Permitted Liens............................................................................................17
Permitted Telecommunications Asset Sale....................................................................19
Permitted Telecommunications Joint Venture.................................................................19
Redeemable Capital Stock...................................................................................19
Restricted Company Subsidiary..............................................................................19
Restricted Entity..........................................................................................20
Restricted Parent Subsidiary...............................................................................20
Restricted Subsidiary......................................................................................20
Sale-Leaseback Transaction.................................................................................20
Significant Subsidiary.....................................................................................20
Subsidiary.................................................................................................20
Telecommunications Assets..................................................................................20
Telecommunications Business................................................................................21
Telecommunications Indebtedness............................................................................21
Unrestricted Subsidiary....................................................................................21
Section 103. Definitions for Purposes of Section 1017(a)................................................22
Accounts Receivable Subsidiary.............................................................................22
Allowable Company Indebtedness.............................................................................22
Asset Sale.................................................................................................22
Board of Directors.........................................................................................23
Board Resolution...........................................................................................23
Cash Equivalents...........................................................................................23
Consolidated Adjusted Net Income...........................................................................23
Consolidated Indebtedness..................................................................................24
Consolidated Indebtedness to Consolidated Operating Cash Flow Ratio........................................24
Consolidated Interest Expense..............................................................................25
Consolidated Operating Cash Flow...........................................................................25
Consolidated Tax Expense...................................................................................26
Event of Default...........................................................................................26
Fair Market Value..........................................................................................27
Incumbent..................................................................................................27
Incumbent Agreement........................................................................................27
Incur......................................................................................................27
Indebtedness...............................................................................................28
Invested Capital...........................................................................................29
Investment.................................................................................................29
Net Cash Proceeds..........................................................................................29
Permitted Indebtedness.....................................................................................30
Permitted Investment.......................................................................................32
Permitted Liens............................................................................................33
Permitted Restriction......................................................................................35
Permitted Telecommunications Asset Sale....................................................................35
Permitted Telecommunications Joint Venture.................................................................36
Permitted Transaction......................................................................................36
Restricted Payment.........................................................................................37
Sale-Leaseback Transaction.................................................................................41
Significant Subsidiary.....................................................................................41
Telecommunications Assets..................................................................................41
Telecommunications Business................................................................................41
Telecommunications Indebtedness............................................................................42
Unrestricted Company Subsidiary............................................................................42
Section 104. Amendment to Section 103...................................................................43
AMENDMENTS TO "NOTE FORMS".......................................................................................43
Section 105. Amendment to Section 202........................................................................43
Section 106. Amendment to Section 203...................................................................46
Section 107. Addition of Section 203A...................................................................48
Section 108. Amendment to Section 501...................................................................53
AMENDMENTS TO "CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE".............................................53
Section 109. Amendment to Article Eight.................................................................53
AMENDMENTS TO "SUPPLEMENTAL INDENTURES"..........................................................................55
Section 110. Amendment to Section 901...................................................................55
Section 111. Amendment to Section 902...................................................................56
Section 112. Amendment to Section 1002..................................................................57
Section 113. Amendment to Section 1003..................................................................58
Section 114. Amendment to Section 1004..................................................................59
Section 115. Amendment to Section 1005..................................................................59
Section 116. Amendment to Section 1006..................................................................60
Section 117. Amendment to Section 1007..................................................................60
Section 118. Amendment to Section 1008..................................................................61
Section 119. Amendment to Section 1009..................................................................61
Section 120. Amendment to Section 1010..................................................................62
Section 121. Amendment to Section 1011..................................................................63
Section 122. Amendment to Section 1012..................................................................63
Section 123. Amendment to Section 1013..................................................................66
Section 124. Amendment to Section 1014..................................................................67
Section 125. Amendment to Section 1015..................................................................68
Section 126. Amendment to Section 1016..................................................................68
Section 127. Amendment to Section 1017..................................................................69
Section 128. Amendment to Section 1018..................................................................71
AMENDMENTS TO "SECURITY".........................................................................................72
Section 129. Amendments to Article 12...................................................................72
AMENDMENTS TO "DEFEASANCE AND COVENANT DEFEASANCE"...............................................................74
Section 130. Amendments to Article 13...................................................................74
PARENT GUARANTEE.................................................................................................77
Section 131. Guarantee..................................................................................78
MISCELLANEOUS....................................................................................................78
Section 132 Waiver.....................................................................................78
Section 133. Acts of Holders............................................................................78
Section 134. Notice of Holders; Waiver..................................................................79
Section 135. Counterparts...............................................................................79
Section 136. Governing Law..............................................................................79
Section 137. Separability Clause........................................................................80
Section 138. Headings...................................................................................80
Section 139. Effect of Supplemental Indenture...........................................................80
Section 140. Indenture in Full Force and Effect as Supplemented.........................................80
</TABLE>
<PAGE>
SUPPLEMENTAL INDENTURE, dated as of March 30, 2000 (the
"Supplemental Indenture"), among PATHNET, INC., a Delaware corporation (herein
called the "Company") having its principal office at 1015 31st Street, N.W.,
Washington D.C. 20007, PATHNET TELECOMMUNICATIONS, INC., a Delaware corporation
(herein called the "Parent") having its principal office at 1015 31st Street,
N.W., Washington D.C. 20007, and THE BANK OF NEW YORK, a New York banking
corporation, as Trustee (herein called the "Trustee") to the Indenture, dated as
of April 8, 1998, between the Company and the Trustee (the "Original
Indenture").
RECITALS
The Company and the Trustee have entered into the Original
Indenture. The Company has issued $350,000,000 in aggregate principal amount of
12 1/4% Senior Notes due 2008. The Company originally issued the notes in a
so-called A/B private placement transaction pursuant to which, in September 1998
(as required by the terms of the Original Indenture), the Company exchanged the
privately placed notes for substantially identical series notes (the "Notes") in
an offering registered under the Securities Act. The Notes, which were
registered with the SEC in the "B" portion of the "A/B" exchange offering,
continue to be governed by the terms of the Original Indenture;
The Company and the Parent are proposing to enter into a
contribution and re-organization transaction (the "Transaction"). In connection
with the Transaction, the Parent and the Company have entered into a series of
Contribution Agreements with the parties to the Transaction pursuant to which
the Parent will (i) issue shares of Series D Convertible Preferred Stock, with a
par value of $0.01 per share and Series E Convertible Preferred Stock, with a
liquidation preference of $0.01 per share in exchange for the contribution of
leasehold interests in rights of way owned by the several counterparties to the
Contribution Agreements, and (ii) exchange shares of Common Stock, par value
$0.01 per share and Series A, B and C Convertible Preferred Stock, each with a
par value of $0.01 per share, for shares of Common Stock, par value $0.01 per
share, and Series A, B and C Preferred Stock, each with a liquidation preference
of $0.01 per share, of the Company held by existing holders of such securities
of the Company;
In connection with the Transaction, the Parent will deliver an
irrevocable and unconditional guarantee of the Company's obligations under the
Notes;
In addition, the Parent has agreed to accept covenant obligations
similar to the covenant obligations that are currently imposed on the Company
under the Original Indenture and the Parent and the Company wish to ensure that
transactions between the Company and the Parent or the Company and certain other
subsidiaries of the Parent are permitted to the same extent that such
transactions were permitted between the Company and its Restricted Subsidiaries
under the Original Indenture;
Pursuant to Section 902 of the Original Indenture, the parties
hereto desire to enter into this Supplemental Indenture and the holders of at
least a majority in aggregate principal amount of the Outstanding Notes have
consented to the amendments to the Original Indenture set forth in this
Supplemental Indenture as required by Section 902 of the Original Indenture;
Any references herein to the "Indenture" shall be deemed to be a
reference to the Original Indenture as amended by this Supplemental Indenture,
and unmodified references to Sections or Subsections are to such Sections or
Subsections of the Indenture;
It is the intent of the parties that this Supplemental Indenture
be effective as of the date set forth above;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the foregoing premises and for other
good and valuable consideration, the receipt of which is hereby acknowledged, it
is mutually covenanted and agreed for the equal and proportionate benefit of all
Holders of the Notes as follows:
AMENDMENTS TO "DEFINITIONS
AND OTHER PROVISIONS OF GENERAL APPLICATION"
SECTION 101. INTRODUCTION.
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(a) The definitions in the Original Indenture are amended in this Supplemental
Indenture to the extent necessary (1) to impose covenant obligations upon the
Parent that are substantively equivalent to those imposed on the Company under
the Original Indenture, and (2) to permit transactions between the Parent and
the Company or any other Restricted Subsidiaries of the Parent that may be
created in the future to the extent that such transactions are permitted between
the Company and its Restricted Subsidiaries under the Original Indenture. These
amended definitions are contained in Section 102 of this Supplemental Indenture.
(b) It is the intent of the parties to this Supplemental Indenture to preserve
unmodified the substance of the covenant and other obligations imposed upon the
Company under the Original Indenture.
(c) Section 902(2) of the Original Indenture provides that the obligation of the
Company (1) to make and consummate an Excess Proceeds Offer with respect to any
Asset Sale by the Company or any of its Restricted Subsidiaries in accordance
with Section 1017 of the Original Indenture, and (2) to make and consummate a
Change of Control Offer in the event of a Change of Control of the Company in
accordance with Section 1010 of the Original Indenture (together, the "Specified
Obligations") cannot be amended, changed or modified without the consent of the
Holder of each Outstanding Note affected thereby. Section 902(2) of the Original
Indenture further provides that the definitions relating to the Specified
Obligations cannot be amended, changed or modified so as to amend, change or
modify the obligations of the Company with respect to the Specified Obligations
without the consent of the Holder of each Outstanding Note affected thereby.
(d) In order to effect the amendments described in paragraph (a) above, it is
necessary to amend certain defined terms that are otherwise used in Section 1017
of the Original Indenture. In order to comply with the provisions of Section
902(2) of the Original Indenture, as described in paragraph (c) above, the
obligations on the Company and the Restricted Company Subsidiaries pursuant to
Section 1017 of the Original Indenture have been reproduced without the
inclusion of references to the Parent in Section 122(a) of this Supplemental
Indenture, and will be incorporated as Section 1017(a) of the Indenture. The
definitions from Section 102 of this Supplemental Indenture used in Section
1017(a) of the Indenture are also reproduced without the inclusion of references
to the Parent. Certain technical modifications to these definitions are
necessary to preserve the economic substance of these Company-specific covenants
and obligations. These "Section 1017(a) only" definitions are set forth in
Section 103 of this Supplemental Indenture.
(e) It is not necessary to reproduce the obligations of the Company and the
Restricted Company Subsidiaries pursuant to Section 1010 without the inclusion
of reference to the Parent in order to comply with Section 902(2). This is
because the proposed amendment does not modify or amend the obligation of the
Company and its Restricted Company Subsidiaries to make and consummate a Change
of Control Offer, but rather provides that such obligation is also triggered by
a Change of Control of the Parent. The definition of "Change of Control" is
modified accordingly and the revised definition is contained in Section 102 of
this Supplemental Indenture. All other capitalized terms used in Section 1010
are defined within that Section or have the meaning given to them in the
Original Indenture.
(f) Defined terms set forth in Section 101 of the Original Indenture that do not
need to be amended for the purposes of this Supplemental Indenture, and are not
included in the revised definitions in Section 102 or 103 of this Supplemental
Indenture, retain the meaning given to them in the Original Indenture.
(g) Wherever used in this Supplemental Indenture, "including" shall be deemed to
mean "including without limitation".
SECTION 102. REVISED DEFINITIONS.
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For all purposes of this Supplemental Indenture, except as
otherwise expressly provided herein and subject to Section 103 of this
Supplemental Indenture, the defined terms listed below shall have the meanings
ascribed thereto below. For the avoidance of doubt, any capitalized terms used
in Section 1017(a) shall have the meanings ascribed thereto in Section 103 of
this Supplemental Indenture, and to the extent any such term is also defined in
this Section 102, the definition contained in this Section 102 shall not apply
to such term as used in Section 1017(a);
"ACCOUNTS RECEIVABLE SUBSIDIARY" means any Restricted Company
Subsidiary or Restricted Parent Subsidiary that is, directly or indirectly,
wholly owned by the Company or the Parent (as the case may be) (other than
directors qualifying shares) and organized for the purpose of and engaged in (i)
purchasing, financing and collecting accounts receivable obligations of
customers of any Restricted Entity, (ii) the sale or financing of accounts
receivable or interests therein and (iii) other activities directly related
thereto.
"AMENDED AND RESTATED PLEDGE AGREEMENT" means the amended and
restated pledge agreement dated as of the date hereof, by and between the
Trustee and the Company, governing the disbursement of funds in the Escrow
Account.
"AMENDMENT DATE" means the date as of which this Supplemental
Indenture is executed by the parties hereto.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease
or other disposition (including by way of merger, consolidation or
Sale-Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital Stock
of any Subsidiary; (ii) all or substantially all of the properties and assets of
the Parent or any Subsidiary; or (iii) any other properties or assets of the
Parent or any Subsidiary, other than in the ordinary course of business (it
being understood that the ordinary course of business includes, but is not
restricted to, any transfer or sale of, or the grant of a right to use, an asset
to an Incumbent pursuant to (x) an Incumbent Agreement, (y) applicable law or
(z) an agreement to which such Incumbent is a party which exists on the date of,
and is not entered into in contemplation of, such Incumbent Agreement). For the
purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties or assets (A) that is governed by the provisions of
Article Eight of this Indenture (B) of the Parent to any Restricted Parent
Subsidiary, or of any Restricted Parent Subsidiary to the Parent or any other
Restricted Parent Subsidiary in accordance with the terms of this Indenture, (C)
having an aggregate Fair Market Value of less than $2,000,000 (or the equivalent
thereof in any other currency) in any given fiscal year, (D) by the Parent or a
Restricted Parent Subsidiary to a Person who is not an Affiliate of the Parent
in exchange for Telecommunications Assets (or not less than 66 2/3% of the
outstanding Voting Stock of a Person that becomes a Restricted Subsidiary, the
assets of which consist primarily of Telecommunications Assets) or related
telecommunications services where, in the good faith judgment of the board of
directors of the Parent evidenced by a board resolution, the Fair Market Value
of such Telecommunications Assets (or such Voting Stock) or services so received
is at least equal to the Fair Market Value of the properties or assets disposed
of or, if less, the difference is received by the Parent in cash in an amount at
least equal to such difference, (E) constituting Capital Stock of an
Unrestricted Subsidiary or other Investment that was permitted under Section
1012 of the Indenture when made, (F) constituting accounts receivable of the
Parent or a Restricted Parent Subsidiary to an Accounts Receivable Subsidiary
or, in consideration of Fair Market Value thereof, to Persons that are not
Affiliates of the Parent or any Subsidiary of the Parent in the ordinary course
of business, including in connection with financing transactions, (G) in
connection with a Sale-Leaseback Transaction otherwise permitted to be incurred
under Section 1011 of the Indenture, (H) to a Permitted Telecommunications Joint
Venture if such transfer of properties or assets is permitted under the
definition of "Permitted Investments", (I) in connection with a Permitted
Telecommunications Asset Sale or (J) to an Unrestricted Subsidiary if permitted
under Section 1012 of the Indenture.
"BOARD OF DIRECTORS" means (i) either the board of directors of
the Company or any duly authorized committee of that board, when used with
respect to the Company, or (ii) either the board of directors of the Parent or
any duly authorized committee of that board, when used with respect to the
Parent.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Parent to have been duly adopted by
the Board of Directors of the Parent and to be in full force and effect on the
day of such certification and delivered to the Trustee; unless used with respect
to the Company when references to the "Parent" in the preceding sentence shall
be replaced by references to the "Company".
"CASH EQUIVALENTS" means:
(a) any evidence of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (PROVIDED that the full faith and credit of
the United States of America is pledged in support thereof);
(b) certificates of deposit or acceptances with a maturity of 180 days or less
of any financial institution that is a member of the Federal Reserve System, in
each case having combined capital and surplus and undivided profits of not less
than $500,000,000;
(c) commercial paper with a maturity of 180 days or less issued by a corporation
that is not an affiliate of the Parent and is organized under the laws of any
state of the United States and rated at least A-1 by S&P or at least P-1 by
Moody's; and
(d) money market mutual funds that invest substantially all of their assets in
securities of the type described in the preceding clauses.
"CHANGE OF CONTROL" means any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total outstanding Voting Stock of the
Company or of the Parent.
(b) the Company or the Parent consolidates with, or merges with or into, another
Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with,
or merges with or into, the Company or the Parent, in any such event pursuant to
a transaction in which the outstanding Voting Stock of the Company or the Parent
(as the case may be) is converted into or exchanged for cash, securities or
other property, other than any such transaction (i) where the outstanding Voting
Stock of the Company or the Parent (as the case may be) is not converted or
exchanged at all (except to the extent necessary to reflect a change in the
jurisdiction of incorporation of the Company or the Parent (as the case may be))
or is converted into or exchanged for (A) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or (B) cash,
securities and other property (other than Capital Stock of the Surviving Entity)
in an amount that could be paid by the Parent as a Restricted Payment as
described in Section 1012 of the Indenture in the event of a conversion or
exchange by the Parent or that could be paid by the Company as a Restricted
Payment as described in Section 1012 of the Indenture in the event of a
conversion or exchange by the Company and (ii) immediately after such
transaction, no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total outstanding Voting Stock of the surviving or transferee
corporation;
(c) during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of the Company or the Board of
Directors of the Parent (together with any new directors whose election to such
Board of Directors, or whose nomination for election by the stockholders of the
Company or the Parent (as the case may be) was approved by a vote of 66 2/3% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company or the Parent (as the case may be) then in office; or
(d) the Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which constitutes a Permitted
Transaction, or the Parent is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions of Article 8 of the Indenture.
"CONSOLIDATED ADJUSTED NET INCOME" means, with respect to any
period, the consolidated net income (or loss) of all Restricted Entities for
such period as determined in accordance with GAAP, adjusted by excluding,
without duplication:
(a) any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto);
(b) any net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to asset dispositions other than in the ordinary course of
business;
(c) the portion of net income (or loss) of any Person (other than a Restricted
Entity), including Unrestricted Subsidiaries, in which any Restricted Entity has
an ownership interest, except to the extent of the amount of dividends or other
distributions actually paid to any Restricted Entity in cash dividends or
distributions during such period;
(d) the net income (or loss) of any Person combined with any Restricted Entity
on a "pooling of interests" basis attributable to any period prior to the date
of combination;
(e) the net income of the Company or any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by the
Company or such Restricted Subsidiary is not at the date of determination
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to the Company or such Restricted Subsidiary
or its stockholders (except, for purposes of determining compliance with Section
1011 of the Indenture, any restriction permitted under clause (vii) or (viii) of
Section 1018 of the Indenture; and
(f) any net income (or loss) from the Company or any Restricted Subsidiary that
was an Unrestricted Subsidiary at any time during such period other than any
amounts actually received from the Company or such Restricted Subsidiary.
"CONSOLIDATED INDEBTEDNESS" means, with respect to any period, the
aggregate amount of Indebtedness of all Restricted Entities outstanding at the
date of determination as determined on a consolidated basis in accordance with
GAAP.
"CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED OPERATING CASH FLOW
RATIO" means, at any date of determination, the ratio of (i) Consolidated
Indebtedness of all Restricted Entities to (ii) Consolidated Operating Cash Flow
of all Restricted Entities for the two preceding fiscal quarters for which
financial information is available immediately prior to the date of
determination, multiplied by two; PROVIDED further that any Indebtedness
incurred or retired by any Restricted Entity during the fiscal quarter in which
the transaction date occurs shall be calculated as if such Indebtedness were so
incurred or retired on the first day of the fiscal quarter in which the date of
determination occurs (PROVIDED further that, in making any such computation, the
aggregate amount of Indebtedness under any revolving credit or similar facility
shall be deemed to include an amount of funds equal to the average daily balance
of such Indebtedness during such two fiscal quarter period); and PROVIDED
further that (x) if the transaction giving rise to the need to calculate the
Consolidated Indebtedness to Consolidated Operating Cash Flow Ratio would have
the effect of increasing or decreasing Consolidated Indebtedness or Consolidated
Operating Cash Flow in the future, Consolidated Indebtedness and Consolidated
Operating Cash Flow shall be calculated on a pro forma basis as if such
transaction had occurred on the first day of such two fiscal quarter period
preceding the date of determination; (y) if during such two fiscal quarter
period, any Restricted Entity shall have engaged in any Asset Sale in respect of
any company, entity or business, Consolidated Operating Cash Flow for such
period shall be reduced by an amount equal to the Consolidated Operating Cash
Flow (if positive), or increased by an amount equal to the Consolidated
Operating Cash Flow (if negative), directly attributable to the company, entity
or business that is the subject of such Asset Sale and any related retirement of
Indebtedness as if such Asset Sale and any related retirement of Indebtedness
had occurred on the first day of such period; or (z) if during such two fiscal
quarter period any Restricted Entity shall have acquired any company, entity or
business, Consolidated Operating Cash Flow shall be calculated on a pro forma
basis as if such acquisition and any related financing had occurred on the first
day of such period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, without
duplication, the sum of:
(a) the consolidated interest expense of all Restricted Entities for such
period, including (i) amortization of debt discount, (ii) the net cost of
Interest Rate Agreements (including amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) accrued interest, (v)
the consolidated amount of any interest capitalized by the Company or the Parent
and (vi) amortization of debt issuance costs; plus
(b) the consolidated interest component of Capitalized Lease Obligations of all
Restricted Entities paid, accrued and/or scheduled to be paid or accrued during
such period; excluding, however, any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Consolidated Adjusted Net Income pursuant to clause (e) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Consolidated Adjusted
Net Income pursuant to clause (e) of the definition thereof); PROVIDED that in
making such computation, (x) the Consolidated Interest Expense attributable to
interest on any Indebtedness computed on a pro forma basis and (A) bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of the Parent, a fixed or floating rate of interest,
shall be computed by applying, at the option of the Parent, either the fixed or
floating rate, (y) the Consolidated Interest Expense attributable to interest on
any Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period and (z) the interest rate with respect to any
Indebtedness covered by an Interest Rate Agreement shall be deemed to be the
effective interest rate with respect to such Indebtedness after taking into
account such Interest Rate Agreement.
"CONSOLIDATED OPERATING CASH FLOW" means, with respect to any
period, the Consolidated Adjusted Net Income of all Restricted Entities for such
period:
(a) increased by (to the extent deducted in computing Consolidated Adjusted Net
Income) the sum of (i) the Consolidated Tax Expense of such Restricted
Subsidiaries as are subject to the immediately preceding parenthetical clause
for such period (other than taxes attributable to extraordinary, unusual or
non-recurring gains or losses); (ii) Consolidated Interest Expense of all
Restricted Entities for such period; (iii) depreciation of all Restricted
Entities for such period, determined on a consolidated basis in accordance with
GAAP; (iv) amortization of all Restricted Entities for such period, determined
on a consolidated basis in accordance with GAAP; and (v) any other non-cash
charges that were deducted in computing Consolidated Adjusted Net Income
(excluding any non-cash charge which requires an accrual or reserve for cash
charges for any future period) of the Restricted Entities for such period in
accordance with GAAP; and
(b) decreased by any non-cash gains of the Restricted Entities that were
included in computing Consolidated Adjusted Net Income.
"CONSOLIDATED TAX EXPENSE" means, for any period, the provision
for U.S. federal, state, provincial, local and foreign income taxes of all
Restricted Entities for such period as determined on a consolidated basis in
accordance with GAAP.
"CREDIT FACILITIES" means, with respect to a Restricted Entity,
one or more debt facilities or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, terms loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"CURRENCY AGREEMENTS" means any spot or forward exchange
agreements and currency swap, currency option or other similar financial
agreements or arrangements entered into by the any Restricted Entity.
"DEBT SECURITIES" means any debt securities (including any
Guarantee of such securities) issued by any Restricted Entity in connection with
a public offering (whether or not underwritten) or a private placement (PROVIDED
that such private placement is underwritten for resale pursuant to Rule 144A,
Regulation S or otherwise under the Securities Act or sold on an agency basis by
a broker-dealer or one of its Affiliates to 10 or more non-affiliated beneficial
holders); it being understood that the term "Debt Securities" shall not include
any evidence of indebtedness under the Vendor Credit Facility, any financing by
the Company or a Restricted Subsidiary similar to the Vendor Credit Facility or
any Credit Facility or other commercial bank borrowings, any vendor equipment
financing facility or any similar financings, recourse transfers of financial
assets, capital leases or other types of borrowings incurred in a manner not
customarily viewed as a "securities offering".
"DISINTERESTED DIRECTOR" means, with respect to any transaction or
series of transactions in respect of which the board of directors of the Company
is required to deliver a resolution thereof under this Indenture, a member of
the board of directors of the Company who does not have any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions, and with respect to any transaction or series of transactions in
respect of which the board of directors of the Parent is required to deliver a
resolution thereof under this Indenture, a member of the board of directors of
the Parent who does not have any material direct or indirect financial interest
in or with respect to such transaction or series of transactions. For purposes
of this definition, no Person shall be deemed not to be a Disinterested Director
solely because such Person or an Affiliate of such Person holds or beneficially
owns Capital Stock of the Company, the Parent or any of their Restricted
Subsidiaries.
"ESCROW ACCOUNT" means the account established with the Trustee in
its name pursuant to the terms of the Original Pledge Agreement for the deposit
of Pledged Securities.
"EVENT OF DEFAULT", means any one of the following events
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest on any Note when it becomes due and
payable, and continuance of such default for a period of 30 days or more
(provided that such 30-day grace period shall not be applicable to the first
four interest payments due on the Notes);
(b) default in the payment of the principal of (or premium, if any, on) any Note
at its Maturity (upon acceleration, optional redemption, required purchase or
otherwise);
(c) default in the performance, or breach, of any covenant or agreement of the
Company or of the Parent contained in this Indenture (other than a default in
the performance, or breach, of a covenant or agreement which is specifically
dealt with in the immediately preceding clause (a) or (b) or in clause (B), (C)
or (D) of this clause (c)) and continuance of such default or breach for a
period of 30 days after written notice shall have been given to the Company or
the Parent (as the case may be) by the Trustee or to the Company or the Parent
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the Notes then Outstanding; (B) default in the performance or breach of the
provisions of Section 1017; (C) default in the performance or breach of the
provisions of Article Eight; and (D) default in the performance or breach of
Section 1010;
(d) (A) one or more defaults in the payment of principal of or premium, if any,
or interest on Indebtedness of the Company or the Parent or any Significant
Subsidiary aggregating $7,500,000 or more, when the same becomes due and payable
at the Stated Maturity thereof, and such default or defaults shall have
continued after any applicable grace period and shall not have been cured or
waived or (B) Indebtedness of the Company or the Parent or any Significant
Subsidiary aggregating $7,500,000 or more shall have been accelerated or
otherwise declared due and payable, or required to be prepaid or repurchased
(other than by regularly scheduled required prepayment), prior to the Stated
Maturity thereof;
(e) one or more final judgments, orders or decrees of any court or regulatory
agency shall be rendered against the Company or the Parent or any Significant
Subsidiary or their respective properties for the payment of money, either
individually or in an aggregate amount, in excess of $7,500,000 and either (A)
an enforcement proceeding shall have been commenced by any creditor upon such
judgment or order or (B) there shall have been a period of 30 days during which
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, was not in effect; (f) the entry of a decree or order by a court
having jurisdiction in the premises adjudging the Company or the Parent or any
Significant Subsidiary as bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or composition of or
in respect of the Company or the Parent or any Significant Subsidiary under the
Federal Bankruptcy Code or any other applicable federal or state law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or the Parent or any Significant Subsidiary or
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 90 consecutive days;
(g) the institution by the Company or the Parent or any Significant Subsidiary
of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it
to the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Federal Bankruptcy Code or any other applicable federal or state law,
or the consent by it to the filing of any such petition or to the appointment of
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or the Parent or any Significant Subsidiary or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due;
(h) the Amended and Restated Pledge Agreement ceases to be in full force and
effect before payment in full of the obligations thereunder; or
the Guarantee ceases to be in full force and effect before payment
in full of the obligations thereunder.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the sale value that would be obtained in an arms' length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Unless otherwise specified in the
Indenture, Fair Market Value shall be determined by the Board of Directors of
the Parent acting in good faith and as of the date on which such determination
is made.
"GUARANTEE" means the guarantee dated as of March 30, 2000 by the
Parent for the benefit of each of the Holders of the outstanding Notes, a copy
of which is attached to this Supplemental Indenture as Exhibit 1.
"INCUMBENT" means any railroad, utility, governmental entity,
pipeline or other licensed owner (which ownership is determined immediately
prior to any transaction with a Restricted Entity) of Telecommunications Assets
to be used in the network of the Company or the Parent pursuant to an Incumbent
Agreement (and any subsidiary or affiliate of such Person that is a party to an
Incumbent Agreement for the sole purpose of receiving payments from a Restricted
Entity pursuant to such agreement).
"INCUMBENT AGREEMENT" means an agreement between an Incumbent and
a Restricted Entity pursuant to which, among other things, such Incumbent
receives a payment equal to such Restricted Entity's revenues, if any,
attributable, in whole or in part, to Telecommunications Assets transferred or
leased, or with respect to which a right of use has been granted, by such
Incumbent such Restricted Entity and upon or with respect to which such
Restricted Entity has constructed or intends to construct a portion of its
network.
"INCUR" OR "INCUR" means, with respect to any Indebtedness, to
incur, create, issue, assume, guarantee or otherwise become directly or
indirectly liable or responsible for the payment of, or otherwise incur, such
Indebtedness, contingently or otherwise; PROVIDED that neither the accrual of
interest nor the accretion of original issue discount shall be considered an
incurrence of Indebtedness. With respect to Indebtedness to be borrowed under a
binding commitment previously entered into that provides for the Company or the
Parent to Incur Indebtedness on a revolving basis, the Company or the Parent (as
the case may be) shall be deemed to have Incurred the greater of:
(a) the Indebtedness actually Incurred; or
(b) all or a portion of the amount of such unborrowed commitment that the
Company or the Parent (as the case may be) shall have so designated to be
Incurred in an Officer's Certificate delivered to the Trustee (in which case the
Company or the Parent (as the case may be) shall not be deemed to incur such
unborrowed amount at the time or times it is actually borrowed).
"INDEBTEDNESS" means, with respect to any Person at any date of
determination, without
duplication:
(a) all liabilities, contingent or otherwise, of such Person: (i) for borrowed
money (including overdrafts), (ii) in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities (including reimbursement obligations with respect
thereto), (iii) evidenced by bonds, notes, debentures or other similar
instruments, (iv) for the deferred and unpaid purchase price of property or
services or created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person or (v) for
Capitalized Lease Obligations (including any Sale-Leaseback Transaction);
(b) all obligations of such Person under or in respect of Interest Rate
Agreements and Currency Agreements;
(c) all Indebtedness referred to in (but not excluded from) the preceding
clauses of other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or with
respect to any property (including accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for the payment
of such Indebtedness (the amount of such obligation being deemed to be the
lesser of (i) the Fair Market Value of such property or asset and (ii) the
amount of such obligation so secured);
(d) all guarantees by such Person of Indebtedness referred to in this definition
of any other Person; and
(e) all Redeemable Stock of such Person valued at the greater of its voluntary
or involuntary maximum fixed repurchase price, plus accrued and unpaid
dividends.
The amount of Indebtedness of any Person at any date will be the
outstanding balance at such date (or, in the case of a revolving credit or other
similar facility, the total amount of funds outstanding and/or designated as
incurred and certified by an officer of the Parent to have been Incurred on such
date pursuant to clause (b) of the last sentence of the definition of "Incur")
of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; PROVIDED (i) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
equals the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP and (ii) that Indebtedness shall not include
any liability for U.S. federal, state, local or other taxes owed by such Person.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value will be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock. Notwithstanding the
foregoing, trade accounts and accrued liabilities arising in the ordinary course
of business will not be considered Indebtedness for purposes of this definition.
"INVESTED CAPITAL" means the sum of:
(a) 75% of the aggregate net cash proceeds received by the Company from the
issuance of (or capital contributions with respect to) any Qualified Capital
Stock of the Company subsequent to the Issue Date, or received by the Parent
from the issuance of (or capital contribution with respect to) Qualified Capital
Stock of the Parent subsequent to the Amendment Date, other than the Issuance of
Qualified Capital Stock to the Company or to a Restricted Subsidiary; and
(b) 75% of the aggregate net proceeds from sales of Redeemable Capital Stock of
the Company or the Parent or Indebtedness of the Company or the Parent
convertible into Qualified Capital Stock of the Company or the Parent (as the
case may be), in each case upon such redemption or conversion thereof into
Qualified Capital Stock.
"INVESTMENT" means, with respect to the Parent's or the Company's
investment with any Person, any direct or indirect advance, loan or other
extension of credit or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others) or any purchase, acquisition or ownership by such
Person of any Capital Stock, bonds, notes, debentures or other securities or
evidences of Indebtedness issued or owned by, any other Person and all other
items that would be classified as investments on a balance sheet prepared in
accordance with GAAP. In addition, the portion (proportionate to the Company's
or the Parent's equity interest in such Subsidiary) of the Fair Market Value of
the net assets of any Subsidiary at the time that such Subsidiary is designated
an Unrestricted Subsidiary shall be deemed to be an "Investment" made by the
Company or the Parent (as the case may be) in such Unrestricted Subsidiary at
such time and the portion (proportionate to the Company's or the Parent's equity
interest in such Subsidiary) of the Fair Market Value of the net assets of any
Subsidiary at the time that such Subsidiary is designated a Restricted
Subsidiary shall be considered a reduction in outstanding Investments.
"Investments" shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"NET CASH PROCEEDS" means:
(a) with respect to any Asset Sale, the proceeds thereof in the form of cash or
Cash Equivalents, including payments in respect of deferred payment obligations
when received in the form of, or stock or other assets when disposed of for,
cash or Cash Equivalents (except to the extent that such obligations are
financed or sold with recourse to any Restricted Entity), net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel and investment banks) related to such Asset Sale, (ii) provisions for
all taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties which are the subject of such Asset Sale, (iv) amounts required to be
paid to any Person (other than any Restricted Entity) owning a beneficial
interest in the assets subject to the Asset Sale and (v) appropriate amounts to
be PROVIDED by any Restricted Entity, as the case may be, as a reserve required
in accordance with GAAP against any liabilities associated with such Asset Sale
and retained by any Restricted Entity after such Asset Sale, including pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate of
the Parent or the Company, as the case may be, delivered to the Trustee; and
(b) with respect to any issuance or sale of Capital Stock or options, warrants
or rights to purchase Capital Stock, or debt securities or Redeemable Capital
Stock that has been converted into or exchanged for Qualified Capital Stock, as
referred to in Section 1012(b)(3), the proceeds of such issuance or sale in the
form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of, or stock or other assets when
disposed of for, cash or Cash Equivalents (except to the extent that such
obligations are financed or sold with recourse to the Parent or any Subsidiary
of the Parent), net of fees, commissions and expenses actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NEW PLEDGED SECURITIES" means the securities purchased by the
Company to be deposited in the Escrow Account as security for the fifth
scheduled interest payment on the Notes pursuant to the Indenture.
"OFFICERS' CERTIFICATE" means a certificate signed by the
Chairman, the CEO, the President or any executive vice president or vice
president, and by the Treasurer, an assistant treasurer, the Secretary or an
assistant secretary of the Company (when used with respect to the Company) or of
the Parent (when used with respect to the Parent), and, in each case, delivered
to the Trustee.
"PARENT" means Pathnet Telecommunications, Inc. a corporation
organized and existing under the laws of the state of Delaware.
"PARENT REQUEST" or "PARENT ORDER" means a written request or
order signed in the name of the Parent by its Chairman, its Chief Executive
Officer ("CEO"), its President, any executive vice president or vice president
or the Treasurer and delivered to the Trustee.
"PERMITTED INDEBTEDNESS" means:
(a) Indebtedness of the Company pursuant to the Notes or of the Parent pursuant
to the Guarantee;
(b) Indebtedness of the Company or any Restricted Company Subsidiary outstanding
on the Issue Date or Indebtedness of the Parent or any Restricted Parent
Subsidiary outstanding on the Amendment Date;
(c) Indebtedness of the Company or the Parent owing to any Restricted Subsidiary
or of the Parent owing to the Company (but only so long as such Indebtedness is
held by such Restricted Subsidiary) or by the Company, as the case may be;
PROVIDED that any Indebtedness of the Company or the Parent (as the case may be)
owing to any such Restricted Subsidiary or the Company is subordinated in right
of payment from and after such time as the Notes shall become due and payable
(whether at Stated Maturity, by acceleration or otherwise) to the payment and
performance by the Company or the Parent (as the case may be) of its obligations
under the Notes or the Guarantee; and PROVIDED further that any transaction
pursuant to which any Restricted Subsidiary or the Company to which such
Indebtedness is owed ceases to be a Restricted Subsidiary or, in the case of the
Company, a Subsidiary of the Parent, shall be deemed to be an incurrence of
Indebtedness by the Parent or the Company that is not permitted by this clause
(c);
(d) Indebtedness of any Restricted Subsidiary owing to the Company or the
Parent, of the Company owing to the Parent or of any Restricted Subsidiary owing
to another Restricted Subsidiary;
(e) Indebtedness of any Restricted Entity in respect of performance, surety or
appeal bonds or under letter of credit facilities PROVIDED in the ordinary
course of business and, in the case of letters of credit, under which recourse
to the Company or the Parent is limited to the cash securing such letters of
credit;
(f) Indebtedness of any Restricted Entity under Currency Agreements and Interest
Rate Agreements entered into in the ordinary course of business; PROVIDED that
such agreements are designed to protect any Restricted Entity against, or manage
exposure to, fluctuations in currency exchange rates and interest rates,
respectively, and that such agreements do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder;
(g) Telecommunications Indebtedness and any Indebtedness issued in exchange for,
or the net proceeds of which are used to refinance or refund, such
Telecommunications Indebtedness in an amount not to exceed the amount so
refinanced or refunded (plus premiums, accrued interest, and reasonable fees and
expenses);
(h) Indebtedness of any Restricted Entity consisting of guarantees, indemnities
or obligations in connection with (1) Telecommunications Indebtedness, (2)
Indebtedness permitted under clause (j) or (m) of this "Permitted Indebtedness"
definition or (3) in respect of purchase price adjustments in connection with
the acquisition of or disposition of assets, including shares of Capital Stock;
(i) Indebtedness of the Company or the Parent (or consolidated Indebtedness of
the Company and the Parent) not to exceed, at any time outstanding, 2.0 times
the Net Cash Proceeds from the issuance and sale after the Issue Date, other
than an issuance and sale by the Company to a Restricted Subsidiary or issuance
and sale by the Parent to the Company or to any Restricted Subsidiary, of
Qualified Capital Stock of the Company or the Parent, to the extent such Net
Cash Proceeds have not been used to make Restricted Payments pursuant to clause
(a)(3)(B) or clauses (b)(ii) and (iii) of Section 1012 or to make any Permitted
Investments under clause (h) of the definition of Permitted Investments;
PROVIDED that such Indebtedness does not mature prior to the Stated Maturity of
the Notes and has an Average Life longer than the Notes;
(j) Indebtedness of any Restricted Entity under one or more Credit Facilities;
PROVIDED that the aggregate principal amount of any Indebtedness incurred
pursuant to this clause (j) (including any amounts refinanced or refunded under
this clause (j)) does not exceed at any time outstanding the greater of (x) 80%
of eligible consolidated accounts receivable of the Company and the Parent as of
the last fiscal quarter for which financial statements are prepared or (y)
$50,000,000 (or the equivalent thereof in one or more foreign currencies); and
any Indebtedness issued in exchange for, or the net proceeds of which are used
to refinance or refund, Indebtedness incurred under this clause (j) in an amount
not to exceed the amount so refinanced or refunded (plus premiums, accrued
interest, and reasonable fees and expenses);
(k) Indebtedness of any Restricted Entity issued in exchange for, or the net
proceeds of which are used to refinance or refund, then-outstanding Indebtedness
of any Restricted Entity incurred under the ratio test set forth in clause (i)
or (ii) of Section 1011 or under clauses (b) through (f), (h), (i) and (m) of
this definition of "Permitted Indebtedness," and any refinancings thereof in an
amount not to exceed the amount so refinanced or refunded (plus premiums,
accrued interest, and reasonable fees and expenses); PROVIDED that such new
Indebtedness shall only be permitted under this clause (k) if (A) in case the
Notes are refinanced in part, or the Indebtedness to be refinanced ranks equally
with the Notes, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is issued or
remains outstanding is expressly made to rank equally with, or subordinate in
right of payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding is
expressly made subordinate in right of payment to the Notes at least to the same
extent that the Indebtedness to be refinanced is subordinated to the Notes and
(C) such new Indebtedness, determined as of the date of incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness
to be refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness being
refinanced or refunded; PROVIDED further that no Indebtedness incurred under
this clause (k) in exchange for, or the proceeds of which refinance or refund,
any Indebtedness incurred under the ratio test set forth under clause (i) or
(ii) of Section 1011 will mature prior to the Stated Maturity of the Notes or
have an Average Life shorter than the Notes; PROVIDED further that in no event
may Indebtedness of the Company or the Parent be refinanced by means of any
Indebtedness of any Restricted Subsidiary (in the case of the Company) or of the
Company or any Restricted Subsidiary (in the case of the Parent) issued pursuant
to this clause (k);
(l) Indebtedness arising by reason of the recharacterization of a sale of
accounts receivable to an Accounts Receivable Subsidiary; and
(m) Indebtedness of any Restricted Entity in addition to that permitted to be
incurred pursuant to clauses (a) through (l) above in an aggregate principal
amount not in excess of $30,000,000 (or the equivalent thereof in one or more
foreign currencies) at any time outstanding.
"PERMITTED INVESTMENT" means any of the following:
(a) Investments in Cash Equivalents; PROVIDED that the term "with a maturity of
180 days or less" in clauses (a), (b) and (c) of the definition of "Cash
Equivalents" is changed to "with a maturity of one year or less" for the
purposes of this definition of "Permitted Investments" only;
(b) Investments in any Restricted Entity;
(c) Investments by any Restricted Entity in another Person if, as a result of
such Investment, (i) such other Person becomes a Restricted Entity or (ii) such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to a Restricted Entity;
(d) Investments in the form of intercompany Indebtedness to the extent permitted
under clauses (c) and (d) of the definition of "Permitted Indebtedness;"
(e) Investments by the Company or any Restricted Company Subsidiary in existence
on the Issue Date and Investments by the Parent or any Restricted Parent
Subsidiary in existence on the Amendment Date;
(f) Investments in the Pledged Securities to the extent required by the Amended
and Restated Pledge Agreement;
(g) Investments in an amount not to exceed $1,000,000 (or the equivalent thereof
in one or more foreign currencies) at any one time outstanding;
(h) Investments in an aggregate amount not to exceed the sum of (1) Invested
Capital, (2) the Fair Market Value of Qualified Capital Stock of the Company and
the Parent, Redeemable Capital Stock of the Company and the Parent convertible
into Qualified Capital Stock of the Company or the Parent (as the case may be),
and Indebtedness of the Company and the Parent convertible into Qualified
Capital Stock of the Company or the Parent (as the case may be), in the latter
two cases upon such redemption or conversion thereof into Qualified Capital
Stock of the Company or the Parent (as the case may be), issued by any
Restricted Entity as consideration for any such Investments made pursuant to
this clause (h), and (3) in the case of the disposition or repayment of any
Investment made pursuant to this clause (h) after the Issue Date (including by
redesignation of an Unrestricted Subsidiary to a Restricted Subsidiary), an
amount equal to the lesser of the return of capital with respect to such
Investment and the initial amount of such Investment, in either case, less the
cost of the disposition of such Investment; PROVIDED, however, that the amount
of any Permitted Investments under this clause (h) shall be excluded from the
computation of the amount of any Restricted Payment under Section 1012;
(i) Investments in trade receivables, prepaid expenses, negotiable instruments
held for collection and lease, utility and worker's compensation, performance
and other similar deposits or escrow;
(j) Loans, advances and extensions of credit to employees made in the ordinary
course of business of the Company or the Parent not in excess of $500,000 (or
the equivalent thereof in one or more foreign currencies) in any fiscal year;
(k) Bonds, notes, debentures or other securities evidencing indebtedness
received as a result of Asset Sales permitted under Section 1017;
(l) Endorsements for collection or deposit in the ordinary course of business by
any Restricted Entity of bank drafts and similar negotiable instruments of any
other person received as payment for ordinary course of business trade
receivables;
(m) Investments deemed to have been made as a result of the acquisition of a
Person that at the time of such acquisition held instruments constituting
Investments that were not acquired in contemplation of, or in connection with,
the acquisition of such Person;
(n) Investments in or acquisitions of Capital Stock, indebtedness, securities or
other property of Persons (other than Affiliates of the Company or the Parent)
received by the any Restricted Entity in the bankruptcy or reorganization of or
by such Person or any exchange of such Investment with the issuer thereof or
taken in settlement of or other resolution of claim or disputes, and, in each
case, extensions, modifications and renewals thereof;
(o) Investments in any Person to which Telecommunications Assets used in an
Initial System have been transferred and which person has PROVIDED to a
Restricted Entity the right to use such assets pursuant to an Incumbent
Agreement; PROVIDED that, in the good faith determination of the Board of
Directors of the Parent or the Company, as the case may be, the present value of
the future payments expected to be received by the Company or the Parent in
respect of any such Investment plus the Fair Market Value of any capital stock
or other securities received in connection therewith shall be at least equal to
the Fair Market Value of such Investment; and
(p) Investments in one or more Permitted Telecommunications Joint Ventures;
PROVIDED that the total original cost of all such Permitted Telecommunications
Joint Ventures plus the cost or Fair Market Value, as applicable, of all
additions thereto less the sum of all amounts received as returns thereon shall
not exceed $20,000,000 (or the equivalent thereof in one or more foreign
currencies).
"PERMITTED LIENS" means:
(a) Liens existing on the Issue Date, when used with respect to the Company or
any Restricted Company Subsidiary, or Liens existing on the Amendment Date, when
used with respect to the Parent or any Restricted Parent Subsidiary;
(b) Liens on any property or assets of the Company or any Restricted Subsidiary
granted in favor of any Restricted Entity;
(c) Liens on any property or assets of the Company or any Restricted Subsidiary
securing the Notes or the Guarantee;
(d) any interest or title of a lessor under any Capitalized Lease Obligation or
operating lease permitted by this Indenture;
(e) Liens securing Indebtedness incurred under clauses (g), (j) or (m) of the
definition of "Permitted Indebtedness";
(f) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the ordinary
course of business of any Restricted Entity and, with respect to amounts not yet
delinquent or being contested in good faith by appropriate proceeding, if a
reserve or other appropriate provision, if any, as required in conformity with
GAAP shall have been made therefor;
(g) Liens for taxes, assessments, government charges or claims that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor;
(h) Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, government contracts,
performance bonds, escrows and other obligations of a like nature incurred in
the ordinary course of business (other than contracts for the payment of money);
(i) easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the business of any
Restricted Entity incurred in the ordinary course of business;
(j) Liens arising by reason of any judgment, decree or order of any court so
long as such Lien is adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of such judgment, decree or
order shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(k) Liens securing Acquired Indebtedness created prior to (and not in connection
with or in contemplation of) the incurrence of such Indebtedness by any
Restricted Entity; PROVIDED that such Lien does not extend to any property or
assets of any Restricted Entity other than the assets acquired in connection
with the incurrence of such Acquired Indebtedness;
(l) Liens securing obligations of the Company or the Parent under Interest Rate
Agreements or Currency Agreements permitted to be incurred under clause (f) of
the definition of "Permitted Indebtedness" or any collateral for the
Indebtedness to which such Interest Rate Agreements or Currency Agreements
relate;
(m) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security;
(n) Liens securing reimbursement obligations of any Restricted Entity with
respect to letters of credit that encumber documents and other property relating
to such letters of credit and the products and proceeds thereof;
(o) Liens arising from purchase money mortgages and purchase money security
interests; PROVIDED that (i) the related Indebtedness shall not be secured by
any property or assets of any Restricted Entity other than the property and
assets so acquired and (ii) the Lien securing such Indebtedness shall be created
within 60 days of such acquisition;
(p) Liens securing the Escrow Account, the Pledged Securities and the proceeds
thereof and the security interest created by the Amended and Restated Pledge
Agreement;
(q) any extension, renewal or replacement, in whole or in part, of any Lien
described in the foregoing clauses (a) through (o); PROVIDED that any such
extension, renewal or replacement shall be no more restrictive in any material
respect than the Lien so extended, renewed or replaced and shall not extend to
any additional property or assets;
(r) Liens with respect to the equipment and related assets of the Company or the
Parent installed on their respective networks in favor of Persons that have
licensed, leased, transferred or granted to any Restricted Entity a right to use
Telecommunications Assets or financed the purchase of Telecommunications Assets
or securing the obligations of such Restricted Entity under an Incumbent
Agreement; PROVIDED that such Liens will (1) be created on terms that the
Company or the Parent (as the case may be) reasonably believes to be no less
favorable to the Company or the Parent than Liens granted under clause (e) of
this definition and (2) not secure any Indebtedness in excess of the Fair Market
Value of the equipment and assets so secured;
(s) Liens relating to revenues of any Restricted Entity arising as a result of
obligations under an Incumbent Agreement; and
(t) Liens on the property or assets or Capital Stock of Accounts Receivable
Subsidiaries and Liens arising out of any sale of Accounts Receivable in the
ordinary course of business (including in connection with a financing
transaction) to or by an Accounts Receivable Subsidiary or to Persons that are
not Affiliates of the Company or the Parent.
"PERMITTED TELECOMMUNICATIONS ASSET SALE" means any transfer,
conveyance, sale, lease or other disposition of a capital asset that is a
Telecommunications Asset, the proceeds of which are treated as revenues
(including deferred revenues) by the Parent or the Company in accordance with
GAAP.
"PERMITTED TELECOMMUNICATIONS JOINT VENTURE" means a corporation,
partnership or other entity engaged in one or more Telecommunications Business
in which the Company or the Parent owns, directly or indirectly, an equity
interest.
"PLEDGED SECURITIES" means the securities, consisting of
Government Securities, deposited in the Escrow Account pursuant to the Original
Pledge Agreement together with the New Pledged Securities.
"REDEEMABLE CAPITAL STOCK" means any class or series of Capital
Stock that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is or, upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Notes or is redeemable at the option of the
holder thereof at any time prior to such final Stated Maturity of the Notes or
is redeemable at the option of the holder thereof at any time prior to such
final Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity; PROVIDED that any
Capital Stock that would not otherwise constitute Redeemable Capital Stock but
for provisions giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Notes shall
not constitute Redeemable Capital Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable in
any material respect to holders of such Capital Stock that then provisions
contained in Section 1017 and Section 1010 are to holders of the Notes and the
Guarantees, and such Capital Stock specifically provides that such Person will
not repurchase or redeem any such Capital Stock pursuant to any provision prior
to the repurchase by the Company or the Parent of such Notes and Guarantees as
are required to be repurchased pursuant to Section 1017 and Section 1010.
"RESTRICTED COMPANY SUBSIDIARY" means any Subsidiary of the
Company other than an Unrestricted Subsidiary.
"RESTRICTED ENTITY" means (i) any Restricted Subsidiary, (ii) the
Parent, and (iii) the Company.
"RESTRICTED PARENT SUBSIDIARY" means any Subsidiary of the Parent
other than (i) the Company, (ii) a Restricted Company Subsidiary, and (iii) an
Unrestricted Subsidiary.
"RESTRICTED SUBSIDIARY" means any Restricted Company Subsidiary
and any Restricted Parent Subsidiary.
"SALE-LEASEBACK TRANSACTION" means any direct or indirect
arrangement, or series of related arrangements, with any Person (other than a
Restricted Entity) or to which any Person (other than a Restricted Entity) is a
party, providing for the leasing to a Restricted Entity of any property for an
aggregate term exceeding three years, whether owned by the Company, the Parent
or by any Subsidiary of either of them at the Issue Date or later acquired,
which has been or is to be sold or transferred by such Restricted Entity to such
Person or to any other Person from whom funds have been or are to be advanced by
such Person on the security of such property; PROVIDED that the transfer by any
Restricted Entity of Telecommunications Assets to, and the leasing by any
Restricted Entity of such assets from, a Permitted Telecommunications Joint
Venture shall not constitute a Sale-Leaseback Transaction.
"SIGNIFICANT SUBSIDIARY" means at any date of determination, the
Company and any Restricted Subsidiary that, together with its Subsidiaries, (i)
for the most recent fiscal year of the Parent accounted for more than 10% of the
consolidated revenues of the Parent and the Restricted Parent Subsidiaries, (ii)
as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Parent and the Restricted Parent Subsidiaries, or
(iii) owns one or more FCC licenses the aggregate cost or Fair Market Value of
which represents 5% or more of the net asset value of the Parent and the
Restricted Parent Subsidiaries on a consolidated basis as of the end of such
fiscal year, in the case of (i), (ii) or (iii) as set forth on the most recently
available consolidated financial statements of the Parent for such fiscal year.
"SUBSIDIARY" means, any Person a majority of the equity ownership
or Voting Stock of which is at the time owned, directly or indirectly, by the
Parent or by one or more other Subsidiaries or by the Parent and one or more
other Subsidiaries, unless used with respect to the Company, in which event as
shall mean any Person a majority of the equity ownership or Voting Stock of
which is at the time owned, directly or indirectly, by the Company or by one or
more other of its Subsidiaries or by the Company and one or more other its
Subsidiaries.
"TELECOMMUNICATIONS ASSETS" means, with respect to any Person,
assets (including rights of way, trademarks and licenses) other than current
assets that are utilized by such Person, directly or indirectly, for the design,
development, construction, installation, integration or provision of the
Company's or the Parent's network, including, without limitation, any businesses
or services in which the Company or the Parent is currently engaged and
including any computer systems used in a Telecommunications Business.
Telecommunications Assets also include 66 2/3% of the Voting Stock of another
Person, PROVIDED that substantially all of the assets of such other Person
consist of Telecommunications Assets, and PROVIDED further such Voting Stock
shall be held by a Restricted Entity, such other Person either is, or
immediately following the relevant transaction shall become, a Restricted
Subsidiary pursuant to this Indenture or a Permitted Telecommunications Joint
Venture subject to the limitations set forth under clause (p) of the definition
of "Permitted Investment" contained in Section 102 of this Supplemental
Indenture. The determination of what constitutes Telecommunications Assets shall
be made by the Board of Directors of the Parent and evidenced by a Board
Resolution delivered to the Trustee.
"TELECOMMUNICATIONS BUSINESS" means, the business of (i)
transmitting, or providing services relating to the transmission of, voice,
video or data through owned or leased transmission facilities, (ii)
constructing, creating, developing, acquiring or marketing Telecommunication
Assets or other communications related network equipment, software and other
devices for use in a telecommunications business or (iii) evaluating,
participating or pursuing any other activity or opportunity that is primarily
related to those identified in clause (i) or (ii) above; PROVIDED that the
determination of what constitutes a Telecommunications Business shall be made in
good faith by the Board of Directors of the Parent or the Company, as the case
may be.
"TELECOMMUNICATIONS INDEBTEDNESS" means Indebtedness of any
Restricted Entity incurred at any time within 315 days of, and for the purpose
of financing all or any part of the cost of, the construction, expansion,
installation, acquisition or improvement by any Restricted Entity of any new
Telecommunications Assets; PROVIDED that the proceeds of such Indebtedness are
expended for such purposes within such 315-day period; and PROVIDED further that
the Net Cash Proceeds from the issuance of such Indebtedness does not exceed, as
of the date of incurrence thereof, 100% of the lesser of the cost or Fair Market
Value of such Telecommunications Assets; PROVIDED further that, to the extent an
Incumbent Agreement is characterized as a Capitalized Lease Obligation, it shall
be considered Telecommunications Indebtedness.
"UNRESTRICTED SUBSIDIARY" means:
(a) any Subsidiary that at the time of determination shall be an Unrestricted
Subsidiary (as designated by the Board of Directors of the Parent as provided
below); and
(b) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Parent may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary so long as (i) neither the Company, the Parent nor any other
Subsidiary is directly or indirectly liable for any Indebtedness of such
Subsidiary, (ii) no default with respect to any Indebtedness of such Subsidiary
would permit (upon notice, lapse of time or otherwise) any holder of any other
Indebtedness of the Company or the Parent or any Restricted Subsidiary to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its Stated Maturity, (iii) any Investment in
such Subsidiary made as a result of designating such Subsidiary an Unrestricted
Subsidiary will not violate the provisions of Section 1012, (iv) no Restricted
Entity has a contract, agreement, arrangement, understanding or obligation of
any kind, whether written or oral, with such Subsidiary other than those that
might be obtained at the time from persons who are not Affiliates of the Parent,
and (v) none of the Company, the Parent, nor any other Subsidiary of either of
them has any obligation (1) to subscribe for additional shares of Capital Stock
or other equity interest in such Subsidiary, or (2) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors of
the Parent shall be evidenced to the Trustee by filing a Board Resolution with
the Trustee giving effect to such designation. The Board of Directors may
designate any Unrestricted Subsidiary as a Restricted Subsidiary if, immediately
after giving effect to such designation, there would be no Default or Event of
Default under this Indenture and the Company or the Parent (as the case may be)
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 1011.
SECTION 103. DEFINITIONS FOR PURPOSES OF SECTION 1017(A).
The following definitions will apply for the purposes of
interpretation of Section 1017(a) and the defined terms contained in this
Section 103. Capitalized terms used in Section 1017(a) or in this Section 103
which are not defined in this Section 103 shall be given the meaning ascribed to
them in Section 102 of this Supplemental Indenture, or, if such term is not
defined in such Section 102, in Section 101 of the Indenture.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means any Restricted Company
Subsidiary that is, directly or indirectly, wholly owned by the Company (other
than directors qualifying shares) and organized for the purpose of and engaged
in (i) purchasing, financing and collecting accounts receivable obligations of
customers of any Restricted Company Subsidiary, (ii) the sale or financing of
accounts receivable or interests therein and (iii) other activities directly
related thereto.
"ALLOWABLE COMPANY INDEBTEDNESS" means Indebtedness incurred by
the Company if, at the time of such incurrence, the Consolidated Indebtedness to
Consolidated Operating Cash Flow Ratio would have been less than or equal to (i)
6.0 to 1.0 but greater than zero, for Indebtedness incurred on or prior to
December 31, 2001, or (ii) 5.0 to 1.0 but greater than zero for Indebtedness
incurred thereafter.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease
or other disposition (including by way of merger, consolidation or
Sale-Leaseback Transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital Stock
of any Subsidiary of the Company; (ii) all or substantially all of the
properties and assets of the Company or any Subsidiary of the Company; or (iii)
any other properties or assets of the Company or any Subsidiary of the Company,
other than in the ordinary course of business (it being understood that the
ordinary course of business includes, but is not restricted to, any transfer or
sale of, or the grant of a right to use, an asset to an Incumbent pursuant to
(x) an Incumbent Agreement, (y) applicable law or (z) an agreement to which such
Incumbent is a party which exists on the date of, and is not entered into in
contemplation of, such Incumbent Agreement). For the purposes of this
definition, the term "Asset Sale" shall not include any transfer of properties
or assets (A) that constitutes a Permitted Transaction, (B) of the Company to
any Restricted Company Subsidiary, or of any Restricted Company Subsidiary to
the Company or any other Restricted Company Subsidiary in accordance with the
terms of this Indenture, (C) having an aggregate Fair Market Value of less than
$2,000,000 (or the equivalent thereof in any other currency) in any given fiscal
year, (D) by the Company or a Restricted Company Subsidiary to a Person who is
not an Affiliate of the Company in exchange for Telecommunications Assets (or
not less than 66 2/3% of the outstanding Voting Stock of a Person that becomes a
Restricted Company Subsidiary, the assets of which consist primarily of
Telecommunications Assets) or related telecommunications services where, in the
good faith Judgment of the Board of Directors of the Company evidenced by a
Board Resolution, the Fair Market Value of such Telecommunications Assets (or
such Voting Stock) or services so received is at least equal to the Fair Market
Value of the properties or assets disposed of or, if less, the difference is
received by the Company in cash in an amount at least equal to such difference,
(E) constituting Capital Stock of an Unrestricted Company Subsidiary or other
Investment that was not a Restricted Payment when made, (F) constituting
accounts receivable of the Company or a Restricted Company Subsidiary to an
Accounts Receivable Subsidiary or in consideration of Fair Market Value thereof,
to Persons that are not Affiliates of the Company or any Subsidiary of the
Company in the ordinary course of business, including in connection with
financing transactions, (G) in connection with a Sale-Leaseback Transaction
otherwise permitted to be incurred as Permitted Indebtedness or as Allowable
Company Indebtedness, (H) to a Permitted Telecommunications Joint Venture if
such transfer of properties or assets is permitted under the definition of
"Permitted Investments", (I) in connection with a Permitted Telecommunications
Asset Sale or (J) to an Unrestricted Company Subsidiary if not a Restricted
Payment.
"BOARD OF DIRECTORS" means, either the board of directors of the
Company or any duly authorized committee of that board.
"BOARD RESOLUTION" means, a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors of the Company and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"CASH EQUIVALENTS" means:
(a) any evidence of Indebtedness with a maturity of 180 days or less issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (PROVIDED that the full faith and credit of
the United States of America is pledged in support thereof);
(b) certificates of deposit or acceptance with a maturity of 180 days or less of
any financial institution that is a member of the Federal Reserve System, in
each case having combined capital and surplus and undivided profits of not less
than $500,000,000;
(c) commercial paper with a maturity of 180 days or less issued by a corporation
that is not an Affiliate of the Company and is organized under the laws of any
state of the United States and rated at least A-1 by S&P or at least P-1 by
Moody's; and
(d) money market mutual funds that invest substantially all of their assets in
securities of the type described in the preceding clauses.
"CONSOLIDATED ADJUSTED NET INCOME" means, with respect to any
period, the consolidated net income (or loss) of the Company and all Restricted
Company Subsidiaries for such period as determined in accordance with GAAP,
adjusted by excluding, without duplication:
(a) any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto);
(b) any net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to asset dispositions other than in the ordinary course of
business;
(c) the portion of net income (or loss) of any Person (other than the Company or
a Restricted Company Subsidiary), including Unrestricted Subsidiaries, in which
the Company or any Restricted Company Subsidiary has an ownership interest,
except to the extent of the amount of dividends or other distributions actually
paid to the Company or any Restricted Company Subsidiary in cash dividends or
distributions during such period;
(d) the net income (or loss) of any Person combined with the Company or any
Restricted Company Subsidiary on a "pooling of interests" basis attributable to
any period prior to the date of combination;
(e) the net income of any Restricted Company Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Company Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Company Subsidiary or its stockholders (except,
for purposes of determining whether any Indebtedness is Allowable Company
Indebtedness, any Permitted Restriction); and
(f) any net income (or loss) from any Restricted Company Subsidiary that was an
Unrestricted Company Subsidiary at any time during such period other than any
amounts actually received from such Restricted Company Subsidiary.
"CONSOLIDATED INDEBTEDNESS" means, with respect to any period, the
aggregate amount of Indebtedness of the Company and its Restricted Company
Subsidiaries outstanding at the date of determination as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED OPERATING CASH FLOW
RATIO" means, at any date of determination, the ratio of (i) Consolidated
Indebtedness to (ii) Consolidated Operating Cash Flow for the two preceding
fiscal quarters for which financial information is available immediately prior
to the date of determination, multiplied by two; PROVIDED that any Indebtedness
incurred or retired by the Company or any of its Restricted Company Subsidiaries
during the fiscal quarter in which the transaction date occurs shall be
calculated as if such Indebtedness were so incurred or retired on the first day
of the fiscal quarter in which the date of determination occurs (PROVIDED
further that, in making any such computation, the aggregate amount of
Indebtedness under any revolving credit or similar facility shall be deemed to
include an amount of funds equal to the average daily balance of such
Indebtedness during such two fiscal quarter period); and PROVIDED FURTHER that
(x) if the transaction giving rise to the need to calculate the Consolidated
Indebtedness to Consolidated Operating Cash Flow Ratio would have the effect of
increasing or decreasing Consolidated Indebtedness or Consolidated Operating
Cash Flow in the future, Consolidated Indebtedness and Consolidated Operating
Cash Flow shall be calculated on a pro forma basis as if such transaction had
occurred on the first day of such two fiscal quarter period preceding the date
of determination; (y) if during such two fiscal quarter period, the Company or
any of its Restricted Company Subsidiaries shall have engaged in any Asset Sale
in respect of any company, entity or business, Consolidated Operating Cash Flow
for such period shall be reduced by an amount equal to the Consolidated
Operating Cash Flow (if positive), or increased by an amount equal to the
Consolidated Operating Cash Flow (if negative), directly attributable to the
company, entity or business that is the subject of such Asset Sale and any
related retirement of Indebtedness as if such Asset Sale and any related
retirement of Indebtedness had occurred on the first day of such period; or (z)
if during such two fiscal quarter period the Company or any of its Restricted
Company Subsidiaries shall have acquired any company, entity or business,
Consolidated Operating Cash Flow shall be calculated on a pro forma basis as if
such acquisition and any related financing had occurred on the first day of such
period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, without
duplication, the sum of:
(a) the consolidated interest expense of the Company and its Restricted Company
Subsidiaries for such period, including (i) amortization of debt discount, (ii)
the net cost of Interest Rate Agreements (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation, (iv) accrued
interest, (v) the consolidated amount of any interest capitalized by the Company
and (vi) amortization of debt issuance costs, plus
(b) the consolidated interest component of Capitalized Lease Obligations of the
Company and its Restricted Company Subsidiaries paid, accrued and/or scheduled
to be paid or accrued during such period; excluding, however, any amount of such
interest of any Restricted Company Subsidiary if the net income of such
Restricted Company Subsidiary is excluded in the calculation of Consolidated
Adjusted Net Income pursuant to clause (e) of the definition thereof (but only
in the same proportion as the net income of such Restricted Company Subsidiary
is excluded from the calculation of Consolidated Adjusted Net Income pursuant to
clause (e) of the definition thereof); PROVIDED that in making such computation,
(x) the Consolidated Interest Expense attributable to interest on any
Indebtedness computed on a pro forma basis and (A) bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period and (B) which was not outstanding
during the period for which the computation is being made but which bears, at
the option of the Company, a fixed or floating rate of interest, shall be
computed by applying, at the option of the Company, either the fixed or floating
rate, (y) the Consolidated Interest Expense attributable to interest on any
Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period and (z) the interest rate with respect to any
Indebtedness covered by an Interest Rate Agreement shall be deemed to be the
effective interest rate with respect to such Indebtedness after taking into
account such Interest Rate Agreement.
"CONSOLIDATED OPERATING CASH FLOW" means, with respect to any
period, the Consolidated Adjusted Net Income for such period:
(a) increased by (to the extent deducted in computing Consolidated Adjusted Net
Income) the sum of (i) the Consolidated Tax Expense of such Restricted Company
Subsidiaries as are subject to the immediately preceding parenthetical clause
for such period (other than taxes attributable to extraordinary, unusual or
non-recurring gains or losses); (ii) Consolidated Interest Expense for such
period; (iii) depreciation of the Company and the Restricted Company
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; (iv) amortization of the Company and the Restricted Company
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP; and (v) any other non-cash charges that were deducted in computing
Consolidated Adjusted Net Income (excluding any non-cash charge which requires
an accrual or reserve for cash charges for any future period) of the Company and
its Restricted Company Subsidiaries for such period in accordance with GAAP; and
(b) decreased by any non-cash gains of the Company and the Restricted Company
Subsidiaries that were included in computing Consolidated Adjusted Net Income.
"CONSOLIDATED TAX EXPENSE" means, for any period, the provision
for U.S. federal, state, provincial, local and foreign income taxes of the
Company and the Restricted Company Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP.
"EVENT OF DEFAULT" means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest on any Note when it becomes due and
payable, and continuance of such default for a period of 30 days or more
(provided that such 30-day grace period shall not be applicable to the first
four interest payments due on the Notes);
(b) default in the payment of the principal of (or premium, if any, on) any Note
at its Maturity (upon acceleration, optional redemption, required purchase or
otherwise);
(c) default in the performance, or breach, of any covenant or agreement of the
Company contained in this Indenture (other than a default in the performance, or
breach, of a covenant or agreement which is specifically dealt with in the
immediately preceding clause (a) or (b) or in clause (B), (C) or (D) of this
clause (c)) and continuance of such default or breach for a period of 30 days
after written notice shall have been given to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes then Outstanding; (B) default in the performance
or breach of the provisions of Section 1017; (C) completion of any transaction
or series of transactions pursuant to which the Company consolidates with or
merges into any other Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all of the properties and assets of the Company and the
Restricted Subsidiaries on a consolidated basis to any other Person or Persons,
which does not constitute a Permitted Transaction; and (D) default in the
performance or breach of Section 1010;
(d) (A) one or more defaults in the payment of principal of or premium, if any,
or interest on Indebtedness of the Company or any Significant Subsidiary
aggregating $7,500,000 or more, when the same becomes due and payable at the
Stated Maturity thereof, and such default or defaults shall have continued after
any applicable grace period and shall not have been cured or waived or (B)
Indebtedness of the Company or any Significant Subsidiary aggregating $7,500,000
or more shall have been accelerated or otherwise declared due and payable, or
required to be prepaid or repurchased (other than by regularly scheduled
required prepayment), prior to the Stated Maturity thereof;
(e) one or more final judgments, orders or decrees of any court or regulatory
agency shall be rendered against the Company or any Significant Subsidiary or
their respective properties for the payment of money, either individually or in
an aggregate amount, in excess of $7,500,000 and either (A) an enforcement
proceeding shall have been commenced by any creditor upon such judgment or order
or (B) there shall have been a period of 30 days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect;
(f) the entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company or any Significant Subsidiary as bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or any Significant
Subsidiary or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days;
(g) the institution by the Company or any Significant Subsidiary of proceedings
to be adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the filing by
it of a petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Code or any other applicable federal or state law, or the
consent by it to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Significant Subsidiary or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due; or
(h) the Pledge Agreement ceases to be in full force and effect before payment in
full of the obligations
thereunder.
"FAIR MARKET VALUE" means, with respect to any asset or property,
the sale value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Unless otherwise specified herein,
Fair Market Value shall be determined by the Board of Directors acting in good
faith and as of the date on which such determination is made.
"INCUMBENT" means any railroad, utility, governmental entity,
pipeline or other licensed owner (which ownership is determined immediately
prior to any transaction with the Company or a Restricted Company Subsidiary) of
Telecommunications Assets to be used in the Company's network pursuant to an
Incumbent Agreement (and any subsidiary or Affiliate of such Person that is a
party to an Incumbent Agreement for the sole purpose of receiving payments from
the Company or a Restricted Company Subsidiary pursuant to such agreement).
"INCUMBENT AGREEMENT" means an agreement between an Incumbent and
the Company or a Restricted Company Subsidiary pursuant to which, among other
things, such Incumbent receives a payment equal to a percentage of the Company's
or such Restricted Company Subsidiary's revenues, if any, attributable, in whole
or in part, to Telecommunications Assets transferred or leased, or with respect
to which a right of use has been granted, by such Incumbent to the Company or
such Restricted Company Subsidiary and upon or with respect to which the Company
or such Restricted Company Subsidiary has constructed or intends to construct a
portion of its network.
"INCUR" OR "INCUR" means, with respect to any Indebtedness, to
incur, create, issue, assume, guarantee or otherwise become directly or
indirectly liable or responsible for the payment of, or otherwise incur, such
Indebtedness, contingently or otherwise; PROVIDED that neither the accrual of
interest nor the accretion of original issue discount shall be considered an
incurrence of Indebtedness. With respect to Indebtedness to be borrowed under a
binding commitment previously entered into that provides for the Company to
Incur Indebtedness on a revolving basis, the Company shall be deemed to have
Incurred the greater of (a) the Indebtedness actually Incurred or (b) all or a
portion of the amount of such unborrowed commitment that the Company shall have
so designated to be Incurred in an Officer's Certificate delivered to the
Trustee (in which case the Company shall not be deemed to incur such unborrowed
amount at the time or times it is actually borrowed).
"INDEBTEDNESS" means, with respect to any Person at any date of
determination, without duplication:
(a) all liabilities, contingent or otherwise, of such Person: (i) for borrowed
money (including overdrafts), (ii) in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities (including reimbursement obligations with respect
thereto), (iii) evidenced by bonds, notes, debentures or other similar
instruments, (iv) for the deferred and unpaid purchase price of property or
services or created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person or (v) for
Capitalized Lease Obligations (including any Sale-Leaseback Transaction);
(b) all obligations of such Person under or in respect of Interest Rate
Agreements and Currency Agreements;
(c) all Indebtedness referred to in (but not excluded from) the preceding
clauses of other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or with
respect to any property (including accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for the payment
of such Indebtedness (the amount of such obligation being deemed to be the
lesser of (i) the Fair Market Value of such property or asset and (ii) the
amount of such obligation so secured);
(d) all guarantees by such Person of Indebtedness referred to in this definition
of any other Person; and
(e) all Redeemable Stock of such Person valued at the greater of its voluntary
or involuntary maximum fixed repurchase price, plus accrued and unpaid
dividends.
The amount of Indebtedness of any Person at any date will be the
outstanding balance at such date (or, in the case of a revolving credit or other
similar facility, the total amount of funds outstanding and/or designated as
incurred and certified by an officer of the Company to have been Incurred on
such date pursuant to clause (b) of the last sentence of the definition of
"Incur") of all unconditional obligations as described above and, with respect
to contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; PROVIDED (i) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
equals the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP and (ii) that Indebtedness shall not include
any liability for U.S. federal, state, local or other taxes owed by such Person.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value will be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock. Notwithstanding the
foregoing, trade accounts and accrued liabilities arising in the ordinary course
of business will not be considered Indebtedness for purposes of this definition.
"INVESTED CAPITAL" means the sum of:
(a) 75% of the aggregate net cash proceeds received by the Company from the
issuance of (or capital contributions with respect to) any Qualified Capital
Stock subsequent to the Issue Date, other than the issuance of Qualified Capital
Stock to a Restricted Company Subsidiary; and
(b) 75% of the aggregate net cash proceeds from sales of Redeemable Capital
Stock of the Company or Indebtedness of the Company convertible into Qualified
Capital Stock of the Company, in each case upon such redemption or conversion
thereof into Qualified Capital Stock.
"INVESTMENT" means, with respect to the Company's relationship
with any Person, any direct or indirect advance, loan or other extension of
credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others) or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued or owned by, any other Person and all other items that would
be classified as investments on a balance sheet prepared in accordance with
GAAP. In addition, the portion (proportionate to the Company's equity interest
in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary
at the time that such Subsidiary is designated an Unrestricted Company
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Company Subsidiary at such time and the portion (proportionate to
the Company's equity interest in such Subsidiary of the Fair Market Value of the
net assets of any Subsidiary at the time that such Subsidiary is designated a
Restricted Company Subsidiary shall be considered a reduction in outstanding
Investments. "Investments" shall exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
"NET CASH PROCEEDS" means:
(a) with respect to any Asset Sale, the proceeds thereof in the form of cash or
Cash Equivalents, including payments in respect of deferred payment obligations
when received in the form of, or stock or other assets when disposed of for,
cash or Cash Equivalents (except to the extent that such obligations are
financed or sold with recourse to the Company or any Restricted Company
Subsidiary), net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of legal counsel and investment banks) related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) payments made to retire Indebtedness where payment of such
Indebtedness is secured by the assets or properties which are the subject of
such Asset Sale, (iv) amounts required to be paid to any Person (other than the
Company or any Restricted Company Subsidiary) owning a beneficial interest in
the assets subject to the Asset Sale and (v) appropriate amounts to be PROVIDED
by the Company or any Restricted Company Subsidiary, as the case may be, as a
reserve required in accordance with GAAP against any liabilities associated with
such Asset Sale and retained by the Company or any Restricted Company
Subsidiary, as the case may be, after such Asset Sale, including pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee; and
(b) with respect to any issuance or sale of Capital Stock or options, warrants
or rights to purchase Capital Stock, or debt securities or Redeemable Capital
Stock that has been converted into or exchanged for Qualified Capital Stock, as
referred to in the definition of "Restricted Payment" contained in this Section
103, the proceeds of such issuance or sale in the form of cash or Cash
Equivalents, including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed of for, cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Parent or any Subsidiary of the Parent), net of fees,
commissions and expenses actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"PERMITTED INDEBTEDNESS" means:
(a) Indebtedness of the Company pursuant to the Notes or of any Restricted
Company Subsidiary pursuant to a Guarantee of the Notes;
(b) Indebtedness of the Company or any Restricted Company Subsidiary outstanding
on the Issue Date;
(c) Indebtedness of the Company owing to any Restricted Company Subsidiary (but
only so long as such Indebtedness is held by such Restricted Company
Subsidiary); PROVIDED that any Indebtedness of the Company owing to any such
Restricted Company Subsidiary is subordinated in right of payment from and after
such time as the Notes shall become due and payable (whether at Stated Maturity,
by acceleration or otherwise) to the payment and performance of the Company's
obligations under the Notes; and PROVIDED further that any transaction pursuant
to which any Restricted Company Subsidiary to which such Indebtedness is owed
ceases to be a Restricted Company Subsidiary shall be deemed to be an incurrence
of Indebtedness by the Company that is not permitted by this clause (c);
(d) Indebtedness of any Restricted Company Subsidiary owing to the Company or of
any Restricted Company Subsidiary owing to another Restricted Company
Subsidiary;
(e) Indebtedness of the Company or any Restricted Company Subsidiary in respect
of performance, surety or appeal bonds or under letter of credit facilities
PROVIDED in the ordinary course of business and, in the case of letters of
credit, under which recourse to the Company is limited to the cash securing such
letters of credit;
(f) Indebtedness of the Company under Currency Agreements and Interest Rate
Agreements entered into in the ordinary course of business; PROVIDED that such
agreements are designed to protect the Company or any Restricted Company
Subsidiary against, or manage exposure to, fluctuations in currency exchange
rates and interest rates, respectively, and that such agreements do not increase
the Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder;
(g) Telecommunications Indebtedness and any Indebtedness issued in exchange for,
or the net proceeds of which are used to refinance or refund, such
Telecommunications Indebtedness in an amount not to exceed the amount so
refinanced or refunded (plus premiums, accrued interest, and reasonable fees and
expenses);
(h) Indebtedness of the Company or any Restricted Company Subsidiary consisting
of guarantees, indemnities or obligations in connection with (1)
Telecommunications Indebtedness, (2) Indebtedness permitted under clause (j) or
(m) of this "Permitted Indebtedness" definition or (3) in respect of purchase
price adjustments in connection with the acquisition of or disposition of
assets, including shares of Capital Stock;
(i) Indebtedness of the Company not to exceed, at any time outstanding, 2.0
times the Net Cash Proceeds from the issuance and sale after the Issue Date,
other than to a Restricted Company Subsidiary, of Qualified Capital Stock of the
Company, to the extent such Net Cash Proceeds have not been used to make
Restricted Payments pursuant to clause (a)(3)(B) or clauses (b)(ii) and (iii) of
the definition of "Restricted Payment" or to make any Permitted Investments
under clause (h) of the definition of Permitted Investments; PROVIDED that such
Indebtedness does not mature prior to the Stated Maturity of the Notes and has
an Average Life longer than the Notes;
(j) Indebtedness of the Company or any Restricted Company Subsidiary under one
or more Credit Facilities; PROVIDED that the aggregate principal amount of any
Indebtedness incurred pursuant to this clause (j) (including any amounts
refinanced or refunded under this clause (j)) does not exceed at any time
outstanding the greater of (x) 80% of eligible consolidated accounts receivable
of the Company as of the last fiscal quarter for which financial statements are
prepared or (y) $50,000,000 or the equivalent thereof in one or more foreign
currencies; and any Indebtedness incurred in exchange for, or the net proceeds
of which are used to refinance or refund, Indebtedness issued under this clause
(j) in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, and reasonable fees and expenses);
(k) Indebtedness of the Company or a Restricted Company Subsidiary issued in
exchange for, or the net proceeds of which are used to refinance or refund,
then-outstanding Indebtedness of the Company or a Restricted Company Subsidiary,
incurred under the ratio test set forth in clause (i) or (ii) of the definition
of "Allowable Company Indebtedness" or under clauses (b) through (f), (h), (i)
and (m) of this definition of "Permitted Indebtedness," and any refinancings
thereof in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, and reasonable fees and expenses); PROVIDED that
such new Indebtedness shall only be permitted under this clause (k) if (A) in
case the Notes are refinanced in part, or the Indebtedness to be refinanced
ranks equally with the Notes, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding, is expressly made to rank equally with, or
subordinate in right of payment to, the remaining Notes, (B) in case the
Indebtedness to be refinanced is subordinated in right of payment to the Notes,
such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding is expressly made subordinate in right of payment to the Notes at
least to the same extent that the Indebtedness to be refinanced is subordinated
to the Notes and (C) such new Indebtedness, determined as of the date of
incurrence of such new Indebtedness, does not mature prior to the Stated
Maturity of the Indebtedness to be refinanced or refunded, and the Average Life
of such new Indebtedness is at least equal to the remaining Average Life of the
Indebtedness being refinanced or refunded; PROVIDED further that no Indebtedness
incurred under this clause (k) in exchange for, or the proceeds of which
refinance or refund, any Indebtedness incurred under the ratio test set forth
under clause (i) or (ii) of the definition of "Allowable Company Indebtedness"
will mature prior to the Stated Maturity of the Notes or have an Average Life
shorter than the Notes; PROVIDED further that in no event may Indebtedness of
the Company be refinanced by means of any Indebtedness of any Restricted Company
Subsidiary issued pursuant to this clause (k);
(l) Indebtedness arising by reason of the recharacterization of a sale of
accounts receivable to an Accounts Receivable Subsidiary; and
(m) Indebtedness of the Company or any Restricted Company Subsidiary in addition
to that permitted to be incurred pursuant to clauses (a) through (l) above in an
aggregate principal amount not in excess of $30,000,000 (or the equivalent
thereof in one or more foreign currencies) at any time outstanding.
"PERMITTED INVESTMENT" means any of the following:
(a) Investments in Cash Equivalents; PROVIDED that the term "with a maturity of
180 days or less" in clauses (a), (b) and (c) of the definition of "Cash
Equivalents" is changed to "with a maturity of one year or less" for the
purposes of this definition of "Permitted Investments" only;
(b) Investments in the Company or any Restricted Company Subsidiary;
(c) Investments by the Company or any Restricted Company Subsidiary in another
Person if, as a result of such Investment, (i) such other Person becomes a
Restricted Company Subsidiary or (ii) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a Restricted Company Subsidiary;
(d) Investments in the form of intercompany Indebtedness to the extent permitted
under clauses (c) and (d) of the definition of "Permitted Indebtedness;"
(e) Investments in existence on the Issue Date;
(f) Investments in the Pledged Securities to the extent required by the Pledge
Agreement;
(g) Investments in an amount not to exceed $1,000,000 (or the equivalent thereof
in one or more foreign currencies) at any one time outstanding;
(h) Investments in an aggregate amount not to exceed the sum of (1) Invested
Capital, (2) the Fair Market Value of Qualified Capital Stock of the Company,
Redeemable Capital Stock of the Company, or Indebtedness of the Company
convertible into Qualified Capital Stock of the Company, in the latter two cases
upon such redemption or conversion thereof into Qualified Capital Stock of the
Company, issued by the Company or any Restricted Company Subsidiary as
consideration for any such Investments made pursuant to this clause (h), and (3)
in the case of the disposition or repayment of any Investment made pursuant to
this clause (h) after the Issue Date (including by redesignation of an
Unrestricted Company Subsidiary to a Restricted Company Subsidiary), an amount
equal to the lesser of the return of capital with respect to such Investment and
the initial amount of such Investment, in either case, less the cost of the
disposition of such Investment; PROVIDED, however, that the amount of any
Permitted Investments under this clause (h) shall be excluded from the
computation of the amount of any Restricted Payment;
(i) Investments in trade receivables, prepaid expenses, negotiable instruments
held for collection and lease, utility and worker's compensation, performance
and other similar deposits or escrow;
(j) Loans, advances and extensions of credit to employees made in the ordinary
course of business of the Company not in excess of $500,000 (or the equivalent
thereof in one or more foreign currencies) in any fiscal year;
(k) Bonds, notes, debentures or other securities evidencing Indebtedness
received as a result of Asset Sales permitted under Section 1017);
(l) Endorsements for collection or deposit in the ordinary course of business by
the Company or any Restricted Company Subsidiary of bank drafts and similar
negotiable instruments of any other person received as payment for ordinary
course of business trade receivables;
(m) Investments deemed to have been made as a result of the acquisition of a
Person that at the time of such acquisition held instruments constituting
Investments that were not acquired in contemplation of, or in connection with,
the acquisition of such Person;
(n) Investments in or acquisitions of Capital Stock, indebtedness, securities or
other property of Persons (other than Affiliates of the Company) received by the
Company or any of its Restricted Company Subsidiaries in the bankruptcy or
reorganization of or by such Person or any exchange of such Investment with the
issuer thereof or taken in settlement of or other resolution of claim or
disputes, and, in each case, extensions, modifications and renewals thereof;
(o) Investments in any Person to which Telecommunications Assets used in an
Initial System have been transferred and which person has PROVIDED to the
Company or a Restricted Company Subsidiary the right to use such assets pursuant
to an Incumbent Agreement; PROVIDED that, in the good faith determination of the
Board of Directors, the present value of the future payments expected to be
received by the Company in respect of any such Investment plus the Fair Market
Value of any capital stock or other securities received in connection therewith
shall be at least equal to the Fair Market Value of such Investment; and
(p) Investments in one or more Permitted Telecommunications Joint Ventures;
PROVIDED that the total original cost of all such Permitted Telecommunications
Joint Ventures plus the cost or Fair Market Value, as applicable, of all
additions thereto less the sum of all amounts received as returns thereon shall
not exceed $20,000,000 (or the equivalent thereof in one or more foreign
currencies).
"PERMITTED LIENS" means:
(a) Liens existing on the Issue Date;
(b) Liens on any property or assets of a Restricted Company Subsidiary granted
in favor of the Company or any Restricted Company Subsidiary;
(c) Liens on any property or assets of the Company or any Restricted Company
Subsidiary securing the Notes or any Guarantees thereof;
(d) any interest or title of a lessor under any Capitalized Lease Obligation or
operating lease permitted by this Indenture;
(e) Liens securing Indebtedness incurred under clauses (g), (j) or (m) of the
definition of "Permitted Indebtedness";
(f) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the ordinary
course of business of the Company or any Restricted Company Subsidiary and, with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceeding, if a reserve or other appropriate provision, if any, as
required in conformity with GAAP shall have been made therefor;
(g) Liens for taxes, assessments, government charges or claims that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor;
(h) Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, government contracts,
performance bonds, escrows and other obligations of a like nature incurred in
the ordinary course of business (other than contracts for the payment of money);
(i) easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the business of the
Company or any Restricted Company Subsidiary incurred in the ordinary course of
business;
(j) Liens arising by reason of any judgment, decree or order of any court so
long as such Lien is adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of such judgment, decree or
order shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(k) Liens securing Acquired Indebtedness created prior to (and not in connection
with or in contemplation of) the incurrence of such Indebtedness by the Company
or any Restricted Company Subsidiary; PROVIDED that such Lien does not extend to
any property or assets of the Company or any Restricted Company Subsidiary other
than the assets acquired in connection with the incurrence of such Acquired
Indebtedness;
(l) Liens securing obligations of the Company under Interest Rate Agreements or
Currency Agreements permitted to be incurred under clause (f) of the definition
of "Permitted Indebtedness" or any collateral for the Indebtedness to which such
Interest Rate Agreements or Currency Agreements relate;
(m) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security;
(n) Liens securing reimbursement obligations of the Company or any Restricted
Company Subsidiary with respect to letters of credit that encumber documents and
other property relating to such letters of credit and the products and proceeds
thereof;
(o) Liens arising from purchase money mortgages and purchase money security
interests; PROVIDED that (i) the related Indebtedness shall not be secured by
any property or assets of the Company or of any Restricted Company Subsidiary
other than the property and assets so acquired and (ii) the Lien securing such
Indebtedness shall be created within 60 days of such acquisition;
(p) Liens securing the Escrow Account, the Pledged Securities and the proceeds
thereof and the security interest created by the Pledge Agreement;
(q) any extension, renewal or replacement, in whole or in part, of any Lien
described in the foregoing clauses (a) through (o); PROVIDED that any such
extension, renewal or replacement shall be no more restrictive in any material
respect than the Lien so extended, renewed or replaced and shall not extend to
any additional property or assets;
(r) Liens with respect to the equipment and related assets of the Company
installed on its network in favor of Persons that have licensed, leased,
transferred or granted to the Company or any Restricted Company Subsidiary a
right to use Telecommunications Assets or financed the purchase of
Telecommunications Assets or securing the obligations of the Company or such
Restricted Company Subsidiary under an Incumbent Agreement; PROVIDED that such
Liens will (1) be created on terms that the Company reasonably believes to be no
less favorable to the Company than Liens granted under clause (e) of this
definition and (2) not secure any Indebtedness in excess of the Fair Market
Value of the equipment and assets so secured;
(s) Liens relating to revenues of the Company or any Restricted Company
Subsidiary arising as a result of obligations under an Incumbent Agreement; and
(t) Liens on the property or assets or Capital Stock of Accounts Receivable
Subsidiaries and Liens arising out of any sale of Accounts Receivable in the
ordinary course of business (including in connection with a financing
transaction) to or by an Accounts Receivable Subsidiary or to Persons that are
not Affiliates of the Company.
"PERMITTED RESTRICTION" means:
(a) any agreement or instrument governing or relating to Indebtedness under any
senior financing facility permitted to be incurred under clause (g), (j) or (m)
of the definition of Permitted Indebtedness if such encumbrance or restriction
applies only (A) to amounts which at any point in time (other than during such
periods as are described in the following clause (B)) (1) exceed scheduled
amounts due and payable (or which are to become due and payable within 30 days)
in respect of the Notes or this Indenture for interest, premium, and Liquidated
Damages, if any, and principal less the amount of cash that is otherwise
available to the Company at such time for the payment of interest, premium and
Liquidated Damages, if any, and principal due and payable in respect of the
Notes or this Indenture or (2) if paid, would result in an event described in
the following clause (B) of this sentence, or (B) during the tendency of any
event that causes, permits or, after notice or lapse of time, would cause or
permit the holder or holders of such Indebtedness to declare such Indebtedness
to be immediately due and payable or to require cash collateralization or cash
cover for such Indebtedness for so long as such cash collateralization or cash
cover has not been provided; and
(b) any encumbrance or restriction under the Vendor Credit Facility.
"PERMITTED TELECOMMUNICATIONS ASSET SALE" means any transfer,
conveyance, sale, lease or other disposition of a capital asset that is a
Telecommunications Asset, the proceeds of which are treated as revenues
(including deferred revenues) by the Company in accordance with GAAP.
"PERMITTED TELECOMMUNICATIONS JOINT VENTURE" means a corporation,
partnership or other entity engaged in one or more Telecommunications Business
in which the Company owns, directly or indirectly, an equity interest.
"PERMITTED TRANSACTION" means a transaction or a series of
transactions pursuant to which the Company consolidates with or merges with or
into any other Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its properties and assets to any other
Person or Persons, or pursuant to which any Restricted Company Subsidiary enters
into any such transaction or series of transactions, PROVIDED always that such
transaction or series of transactions, shall not be permitted if it or they in
the aggregate would result in the sale, assignment, conveyance, transfer, lease
or other disposition of all or substantially all of the properties and assets of
the Company and its Restricted Company Subsidiaries on a consolidated basis to
any other Person or Persons, unless at the time and immediately after giving
effect thereto:
(i) either (A) the Company shall be the continuing corporation or (B) the
Person (if other than the Company) formed by such consolidation or
into which the Company or such Restricted Company Subsidiary is
merged or the Person that acquires by sale, assignment,
conveyance, transfer, lease or disposition all or substantially
all the properties and assets of the Company and its Restricted
Company Subsidiaries on a consolidated basis, as the case may be
(the "Surviving Company Entity"), (1) shall be a corporation
organized and validly existing under the laws of the United States
of America, any state thereof or the District of Columbia and (2)
shall expressly assume, by a supplemental indenture to this
Indenture in form satisfactory to the Trustee, the Company's
obligations pursuant to the Notes for the due and punctual payment
of the principal of, premium, if any, and interest on all the
Notes and the performance and observance of every covenant herein
on the part of the Company to be performed or observed;
(b) immediately before and immediately after giving effect to such transaction
or series of transactions on a pro forma basis (and treating any obligation of
the Company or any Restricted Company Subsidiary incurred in connection with or
as a result of such transaction or series of transactions as having been
incurred at the time of such transaction), no Default or Event of Default shall
have occurred and be continuing;
(c) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (on the assumption that the transaction or
series of transactions occurred on the first day of the two fiscal quarter
period ending immediately prior to the consummation of such transaction or
series of transactions, with the appropriate adjustments with respect to the
transaction or series of transactions being included in such pro forma
calculation), the Company (or the Surviving Company Entity if the Company is not
the continuing obligor hereunder) could incur at least $1.00 of additional
Allowable Company Indebtedness (other than Permitted Indebtedness); and (d) the
Company or such Person shall have delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate
(attaching the computations to demonstrate compliance with clause (c) above) and
an Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, conveyance, transfer or lease or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture, constitute a Permitted Transaction for the purposes of
this definition and that all conditions precedent herein PROVIDED for relating
to such transaction have been complied with.
PROVIDED that:
(i) any merger or consolidation of a Restricted Company Subsidiary
with and into the Company (with the Company being the surviving
entity) or another Restricted Company Subsidiary need only comply
with clauses (c) and (d) above in order to qualify as a Permitted
Transaction. Further, any reincorporation of the Company or any
Restricted Company Subsidiary under the laws of the United States
of America, any state thereof or the District of Columbia shall be
a Permitted Transaction;
(ii) Upon any consolidation of the Company with or merger of the
Company with or into any other corporation or any sale,
assignment, conveyance, transfer, lease or disposition of the
properties and assets of the Company substantially as an entirety
to any Person that qualifies as a Permitted Transaction pursuant
to clauses (a) through (d) of this definition in which the Company
is not the continuing obligor hereunder, the Surviving Company
Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company hereunder with the same
effect as if such successor Person had been named as the Company
herein. When a successor assumes all of the obligations of its
predecessor under the Indenture, the predecessor shall be released
from such obligations; PROVIDED that, in the case of a transfer by
lease, the predecessor shall not be released from the payment of
principal of, premium and Liquidated Damages, if any, and interest
on the Notes.
(iii) If, upon any such consolidation of the Company with or merger of
the Company into any other corporation, or upon any sale,
assignment, conveyance, lease or transfer of the property of the
Company substantially as an entirety to any other Person, any
property or assets of the Company would thereupon become subject
to any Lien, then unless such Lien qualifies as a Permitted Lien
without equally and ratably securing the Notes, the Company, prior
to or simultaneously with such consolidation, merger, sale,
assignment, conveyance, lease or transfer, shall as to such
property or assets, secure the Notes Outstanding (together with,
if the Company shall so determine any other Indebtedness of the
Company now existing or hereinafter created which is not
subordinate in right of payment to the Notes) equally and ratably
with (or prior to) the Indebtedness which upon such consolidation,
merger, conveyance, lease or transfer is to become secured as to
such property or assets by such Lien, or shall cause such Notes to
be so secured.
"RESTRICTED PAYMENT" means any of the following actions whether
taken directly or indirectly and whether taken by the Company or any Restricted
Company Subsidiary:
(a) (1) the declaration or payment of any dividend
on, or making of any distribution to holders of, any shares of the
Capital Stock of the Company (other than dividends or
distributions payable solely in shares of its Qualified Capital
Stock or in options, warrants or other rights to acquire such
shares of Qualified Capital Stock);
(2) purchasing, redeeming or otherwise acquiring or
retiring for value, directly or indirectly, any shares of Capital
Stock of the Company or any Capital Stock of any of its Affiliates
(other than Capital Stock of the Parent, any Subsidiaries of the
Parent that are not Company Restricted Subsidiaries and any Wholly
Owned Restricted Subsidiary) or any options, warrants or other
rights to acquire such shares of Capital Stock;
(3) making any principal payment on, or
repurchasing, redeeming, defeasing or otherwise acquiring or
retiring for value, prior to the Stated Maturity of any principal
payment or any sinking fund payment, any Indebtedness of the
Company that is expressly subordinated in right of payment to the
Notes; or
(4) making any Investment (other than any Permitted
Investment) in any Person;
(such payments or other actions described in (but not excluded from)
clauses (1) through (4) are collectively referred to as "Restricted
Payments"); unless at the time of, and immediately after giving effect
to, the proposed Restricted Payment (the amount of any such Restricted
Payment, if other than cash, as determined by the Board of Directors
the Company, whose determination shall be conclusive and evidenced by a
Board Resolution), (A) no Default or Event of Default shall have
occurred and be continuing, (B) the Company could incur at least $1.00
of additional Allowable Company Indebtedness (other than Permitted
Indebtedness) and (C) the aggregate amount of all Restricted Payments
declared or made after the Issue Date shall not exceed the sum of:
(i) (A) 100% of Consolidated Operating Cash Flow of the Company less
1.5 times Consolidated Interest Expense of the Company or (B) if
Consolidated Operating Cash Flow of the Company is a negative,
minus 100% of such negative amount, in each case on a cumulative
basis for the period beginning on the first day of the Company's
first fiscal quarter after the Issue Date and ending on the last
day of the Company's last fiscal quarter ending prior to the date
of such proposed Restricted Payment; plus
(ii) the aggregate Net Cash Proceeds and the Fair Market Value of
Telecommunications Assets or Voting Stock of a Person that becomes
a Restricted Subsidiary, the assets of which consist primarily of
Telecommunications Assets, received by the Company after the Issue
Date as capital contributions or from the issuance or sale (other
than to any Subsidiary) of shares of Qualified Capital Stock of
the Company (including upon the exercise of options, warrants or
rights) or warrants, options or rights to purchase shares of
Qualified Capital Stock of the Company; plus
(iii) the aggregate Net Cash Proceeds and the Fair Market Value of
Telecommunications Assets or Voting Stock of a Person that becomes
a Restricted Subsidiary, the assets of which consist primarily of
Telecommunications Assets, received by the Company after the Issue
Date from the issuance or sale (other than to any Subsidiary) of
debt securities or Redeemable Capital Stock that have been
converted into or exchanged for Qualified Capital Stock of the
Company, together with the aggregate Net Cash Proceeds and the
Fair Market Value of Telecommunications Assets or Voting Stock of
a Person that becomes a Restricted Subsidiary, the assets of which
consist primarily of Telecommunications Assets, received by the
Company at the time of such conversion or exchange; plus
(iv) to the extent not otherwise included in Consolidated Operating
Cash Flow of the Company, an amount equal to the sum of (a) the
net reduction in Investments (other than Permitted Investments) in
any Person (other than a Restricted Subsidiary) resulting from the
payment in cash of dividends, repayments of loans or advances or
other transfers of assets, in each case to the Company or any
Restricted Subsidiary after the Issue Date from such Person and
(b) the amount of any net reduction in Investments resulting from
the redesignation of an Unrestricted Company Subsidiary as a
Restricted Company Subsidiary (valued as provided in the
definition of "Investment") at the time of such redesignation;
PROVIDED that, in the case of (a) or (b) above, the foregoing sum
shall not exceed the total amount of Investments (other than
Permitted Investments) previously made in such Person or
Unrestricted Company Subsidiary by the Company and its Restricted
Company Subsidiaries.
(b) Notwithstanding the above, the following actions by the Company or any
Restricted Company Subsidiary shall not constitute Restricted Payments so long
as (with respect to clauses (1) through (6) below) no Default or Event of
Default shall have occurred and be continuing:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration the payment of such
dividend would have complied with the provisions of paragraph (a) above
and such payment will be deemed to have been paid on such date of
declaration for purposes of the calculation required by paragraph (a)
above;
(2) the purchase, redemption or other acquisition or retirement for value
of any shares of Capital Stock of the Company (x) in exchange for, or
out of the Net Cash Proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
of the Company; (y) that are held by former officers, employees or
directors (or their estates or beneficiaries under their estates) of
the Company or any of its Subsidiaries; PROVIDED that the aggregate
amount of such purchase, redemption or other acquisition or retirement
for value under this clause (y) will not exceed $250,000 (or the
equivalent thereof in one or more foreign currencies) in any given
fiscal year; or (z) pursuant to the employment agreement dated August
4, 1997, between the Company and Richard Jalkut, as amended and as in
effect on the Issue Date (and any extensions or renewals thereof);
PROVIDED that the amount of such purchase, redemption or other
acquisition or retirement for value under this clause (z) will not
exceed $1,000,000 (or the equivalent thereof in one or more foreign
currencies) in any given fiscal year;
(3) the purchase, redemption, defeasance or other acquisition or retirement
for value of any Indebtedness of the Company that is expressly
subordinated in right of payment to the Notes in exchange for, or out
of the Net Cash Proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
of the Company;
(4) the purchase of any Indebtedness of the Company that is expressly
subordinated in right of payment to the Notes at a purchase price not
greater than 101% of the principal amount thereof in the event of a
Change of Control in accordance with provisions similar to Section
1010; PROVIDED that prior to such purchase the Company has made the
Change of Control Offer as provided in such covenant with respect to
the Notes and has purchased all Notes validly tendered for payment in
connection with such Change of Control Offer;
(5) the purchase, redemption, defeasance or other acquisition or retirement
for value of Indebtedness (other than Redeemable Capital Stock) of the
Company that is expressly subordinated in right of payment to the Notes
in exchange for, or out of the Net Cash Proceeds of a substantially
concurrent incurrence (other than to a Subsidiary) of, new Indebtedness
of the Company that is expressly subordinated in right of payment to
the Notes, so long as (A) the principal amount of such new Indebtedness
does not exceed the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Indebtedness being so purchased, redeemed, defeased, acquired or
retired, plus the lesser of (x) the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of
the Indebtedness being refinanced or (y) the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus, in either case, the amount of expenses of the
Company incurred in connection with such refinancing; (B) such new
Indebtedness is subordinated to the Notes to the same extent as such
Indebtedness so purchased, redeemed, defeased, acquired or retired; and
(C) such new Indebtedness has an Average Life longer than the Average
Life of the Indebtedness being refinanced and a final Stated Maturity
of principal later than the final Stated Maturity of the Indebtedness
being refinanced; and
(6) the payment of cash in lieu of fractional shares of Common Stock
pursuant to the Warrant Agreement.
The actions described in clauses (1) through (4) and (6) of
this paragraph (b) shall be Restricted Payments that shall be permitted in
accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (C) of paragraph (a)
above. The actions described in clause (5) of this paragraph (b) shall be
Restricted Payments that shall be permitted in accordance with this paragraph
(b) and shall not reduce the amount that would otherwise be available for
Restricted Payments under clause (C) of paragraph (a).
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other
than an Unrestricted Company Subsidiary.
"SALE-LEASEBACK TRANSACTION" means any direct or indirect
arrangement, or series of related arrangements, with any Person (other than the
Company or a Restricted Company Subsidiary) or to which any Person (other than
the Company or a Restricted Company Subsidiary) is a party, providing for the
leasing to the Company or to a Restricted Company Subsidiary of any property for
an aggregate term exceeding three years, whether owned by the Company or by any
Subsidiary of the Company at the Issue Date or later acquired, which has been or
is to be sold or transferred by the Company or such Restricted Company
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property; PROVIDED
that the transfer by the Company or any Restricted Company Subsidiary of
Telecommunications Assets to, and the leasing by the Company or any Restricted
Company Subsidiary of such assets from, a Permitted Telecommunications Joint
Venture shall not constitute a Sale-Leaseback Transaction.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, any
Restricted Company Subsidiary that, together with its Subsidiaries, (i) for the
most recent fiscal year of the Company accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Company Subsidiaries,
(ii) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Company Subsidiaries, or
(iii) owns one or more FCC licenses the aggregate cost or Fair Market Value of
which represents 5% or more of the net asset value of the Company and its
Restricted Company Subsidiaries on a consolidated basis as of the end of such
fiscal year, in the case of (i), (ii) or (iii) as set forth on the most recently
available consolidated financial statements of the Company for such fiscal year.
"TELECOMMUNICATIONS ASSETS" means, with respect to any Person,
assets (including rights of way, trademarks and licenses) other than current
assets that are utilized by such Person, directly or indirectly, for the design,
development, construction, installation, integration or provision of the
Company's network, including any businesses or services in which the Company is
currently engaged and including any computer systems used in a
Telecommunications Business. Telecommunications Assets also include 66 2/3% of
the Voting Stock of another Person, PROVIDED that substantially all of the
assets of such other Person consist of Telecommunications Assets, and PROVIDED
further such Voting Stock shall be held by the Company or a Restricted Company
Subsidiary, such other Person either is, or immediately following the relevant
transaction shall become, a Restricted Subsidiary of the Company pursuant to
this Indenture or a Permitted Telecommunications Joint Venture subject to the
limitations set forth under clause (p) of the definition of "Permitted
Investment" contained in this Section 103. The determination of what constitutes
Telecommunications Assets shall be made by the Board of Directors and evidenced
by a Board Resolution delivered to the Trustee.
"TELECOMMUNICATIONS BUSINESS" means, the business of (i)
transmitting, or providing services relating to the transmission of, voice,
video or data through owned or leased transmission facilities, (ii)
constructing, creating, developing, acquiring or marketing Telecommunication
Assets or other communications related network equipment, software and other
devices for use in a telecommunications business or (iii) evaluating,
participating or pursuing any other activity or opportunity that is primarily
related to those identified in clause (i) or (ii) above; PROVIDED that the
determination of what constitutes a Telecommunications Business shall be made in
good faith by the board of directors of the Company.
"TELECOMMUNICATIONS INDEBTEDNESS" means, Indebtedness of the
Company or any Restricted Company Subsidiary incurred at any time within 315
days of, and for the purpose of financing all or any part of the cost of, the
construction, expansion, installation, acquisition or improvement by the Company
or any Restricted Company Subsidiary of any new Telecommunications Assets;
PROVIDED that the proceeds of such Indebtedness are expended for such purposes
within such 315-day period; and PROVIDED further that the Net Cash Proceeds from
the issuance of such Indebtedness does not exceed, as at the date of incurrence
thereof, 100% of the lesser of the cost or Fair Market Value of such
Telecommunications Assets; PROVIDED further that, to the extent an Incumbent
Agreement is characterized as a Capitalized Lease Obligation, it shall be
considered Telecommunications Indebtedness.
"UNRESTRICTED COMPANY SUBSIDIARY" means:
(a) any Subsidiary of the Company that at the time of determination
shall be an Unrestricted Company Subsidiary (as designated by the
Board of Directors as provided below); and
(b) any Subsidiary of an Unrestricted Company Subsidiary.
The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Company
Subsidiary so long as (i) neither the Company nor any other
Subsidiary of the Company is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) no default with respect to
any Indebtedness of such Subsidiary would permit (upon notice,
lapse of time or otherwise) any holder of any other Indebtedness
of the Company or any Restricted Company Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its Stated Maturity, (iii) any
Investment in such Subsidiary made as a result of designating such
Subsidiary an Unrestricted Company Subsidiary will not violate the
provisions of Section 1012, (iv) neither the Company nor any
Restricted Company Subsidiary has a contract, agreement,
arrangement, understanding or obligation of any kind, whether
written or oral, with such Subsidiary other than those that might
be obtained at the time from persons who are not Affiliates of the
Company, and (v) neither the Company nor any other Subsidiary of
the Company has any obligation (1) to subscribe for additional
shares of Capital Stock or other equity interest in such
Subsidiary, or (2) to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing a Board
Resolution with the Trustee giving effect to such designation. The
Board of Directors may designate any Unrestricted Company
Subsidiary as a Restricted Company Subsidiary if, immediately
after giving effect to such designation, there would be no Default
or Event of Default under this Indenture and the Company could
incur $1.00 of additional Allowable Company Indebtedness (other
than Permitted Indebtedness).
SECTION 104. AMENDMENT TO SECTION 103. Section 103 of the Indenture is hereby
amended by deleting the existing Section 103 in its entirety and replacing it
with the following:
Section 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
---------------------------------------
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Any certificate or opinion of an officer of the Parent may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Parent, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
AMENDMENTS TO "NOTE FORMS"
SECTION 105. AMENDMENT TO SECTION 202. Section 202 of the Indenture is hereby
amended by deleting the existing Section 202 in its entirety and replacing it
with the following:
Section 202. FORM OF FACE OF NOTE.
--------------------
PATHNET, INC.
12 1/4% Senior Note due 2008
[CUSIP]_______________
[ISIN]_________________
No._____________ $________
Pathnet, Inc., a Delaware corporation (herein called the "Company", which
term includes any successor Person under the Indenture, as amended by the
Supplemental Indenture, each hereinafter referred to), for value received,
hereby promises to pay to _____________ or registered assigns, the principal sum
of ________________ Dollars on April 15, 2008, at the office or agency of the
Company and the Parent (as defined below) referred to below, and to pay interest
thereon on October 15, 1998 and semi-annually thereafter, on April 15 and
October 15 in each year, from April 8, 1998, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 12 1/4% per annum, until the principal hereof is paid or duly provided for,
and (to the extent lawful) to pay on demand interest on any overdue interest at
the rate borne by the Notes from the date on which such overdue interest becomes
payable to the date payment of such interest has been made or duly provided for.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date, as provided in such Indenture, shall be paid to the
Person in whose name this Note (or one or more Predecessor Notes) is registered
at the close of business of the Regular Record Date for such interest, which
shall be the April 1 or October 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. This Note has been issued
with original issue discount for U.S. federal income tax purposes.
This Note is unconditionally guaranteed by Pathnet Telecommunications, Inc.,
a Delaware corporation (herein called the "Parent") as set forth in the
Guarantee endorsed hereon.
The following information is supplied for purposes of Section 1273 and 1275
of the Internal Revenue Code.
Issue Date: April 8, 1998
Issue Price: $988.29
Original issue discount under Section 1273 of
the Internal Revenue Code (for each $1,000
principal amount): $11.71
Yield Maturity 12.46%
Any such interest not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and such defaulted interest, and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Notes, may be paid to the Person in
whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Notes not less than 10 days prior to such Special Record Date, or may be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, all as more fully provided in said
Indenture. Payment of the principal of (and premium, if any, on) and interest on
this Note will be made to the Depositary or its nominee, as the case may be, as
the registered owner thereof, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; PROVIDED, HOWEVER, the payment of interest may be made at the
option of the Company or the Parent, as the case may be (i) by its check mailed
to the address of the Person entitled thereto as such address shall appear on
the Note Register or (ii) by wire transfer to an account maintained by the payee
located in the United States.
The Holder of this Note is entitled to the benefits of the Notes Registration
Rights Agreements, dated as of April 8, 1998 (the "Notes Registration Right
Agreement"), between the Company and the Initial Purchasers named therein.
Reference is hereby made to the further provisions of this Note set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Indenture, as amended by the
Supplemental Indenture, or the Guarantee or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: PATHNET, INC.
By_____________________________________
Attest:
---------------------
________________Authorized Signature
SECTION 106.______AMENDMENT TO SECTION 203. Section 203 of the Indenture is
hereby amended by deleting the existing Section 203 in its entirety and
replacing it with the following:
Section 203. FORM OF REVERSE NOTE.
--------------------
This Note is one of a duly authorized issue of securities of the
Company designated as its 12 1/4% Senior Notes due 2008 (herein called the
"Notes"), limited (except as otherwise provided in the Indenture, as amended by
the Supplemental Indenture) in aggregate principal amount to $350,000,000, which
may be issued under an indenture dated as of April 8, 1998 between the Company
and The Bank of New York, as trustee, as amended by the Supplemental Indenture
dated as of March 30, 2000 between the Company, Pathnet Telecommunications,
Inc., and The Bank of New York, as trustee. References in this Note to the
Indenture shall be deemed to be references to the Indenture as amended by the
Supplemental Indenture. The Bank of New York, as trustee is herein called the
"Trustee", which term includes any successor trustee under the Indenture.
Reference is hereby made to the Indenture and all indentures supplemental
thereto for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Parent, the Trustee
and the Holders of the Notes, and of the terms upon which the Notes are, and are
to be, authenticated and delivered.
The Notes are subject to redemption upon not less than 30 nor more
than 60 days notice, at any time after April 15, 2003 as a whole or in part, at
the election of the Company, at a Redemption Price (expressed as percentages of
the principal amount) set forth below if redeemed during the 12-month period
beginning April 15, of the years indicated (subject to the right of Holders of
record on the relevant Regular Record Dates to receive interest due on an
interest payment date):
YEAR REDEMPTION PRICE
---- ----------------
2003 106.125%
2004 104.083%
2005 102.042%
2006 and thereafter 100.00%
together in the case of any such redemption with accrued interest,
if any, to the Redemption Date, all as provided in the Indenture.
Notwithstanding the foregoing, at any time on or prior to April 15, 2001, the
Company may redeem within 60 days of one or more Public Equity Offerings up to
35% of the aggregate principal amount of the Notes issued on the Issue Date at a
redemption price equal to 112.25% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any thereon to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date) with the Net Cash
Proceeds of one or more Public Equity Offerings; PROVIDED that at least 65% of
the principal amount of the Notes issued on the Issue Date remain Outstanding.
If less than all the Notes are to be redeemed, the Trustee will select the
particular Notes to be redeemed not more than 60 days prior to the redemption
date by such method as the Trustee deems fair and appropriate; PROVIDED that no
such partial redemption will reduce the principal amount of a Note not redeemed
to less than $1,000. Notice of redemption will be mailed, first-class postage
prepaid, at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. On and after the
date of redemption, interest will cease to accrue on Notes portions thereof
called for redemption and accepted for payment.
Upon the occurrence of a Change of Control, the Holder of this Note may
require the Company, subject to certain limitations provided in Section 1010 of
the Indenture and otherwise in this Indenture, to repurchase this Note at a
purchase price in cash in an amount equal to 101% of the principal amount
thereof, plus accrued and unpaid interest thereon to the Change of Control
Purchase Date (as defined in Section 1010 of the Indenture).
In the case of any redemption of Notes, interest installments whose Stated
Maturity is on or prior to the Redemption Date will be payable to the Holders of
record of such Notes, or one or more Predecessor Notes, at the close of business
on the relevant Record Date referred to on the face hereof. Notes (or portions
thereof) for whose redemption and payment provision is made in accordance with
the Indenture shall cease to bear interest from and after the Redemption Date.
In the event of redemption of this Note in part only, a new Note or Notes for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of all
the Notes may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related Defaults and Events of Defaults, upon compliance by
the Company with certain conditions set forth therein, which provisions apply to
this Notice.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modifications of the rights and obligations of the
Company, the Parent and the rights of the Holders under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all Notes, to waive compliance by the Company and
the Parent with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provisions of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of (and premium and Liquidated Damages,
if any) and interest on this Note at the times, place, and rate, and in the coin
or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note is registerable on the Note Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company and the Parent maintained for such purpose in The City
of New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company, the Parent and the Note Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Notes, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee and
transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Notes are
exchangeable for alike aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any registration of transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to the time of due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.
All terms used in this Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.
SECTION 107.______ADDITION OF SECTION 203A. The following Section 203A is hereby
added to the Indenture:
SECTION 203A. GUARANTEE OF NOTE. Each of the Notes shall have the
------------------
following Guarantee endorsed upon it:
1._______GUARANTEE OF PAYMENT AND PERFORMANCE OF OBLIGATIONS.
(a) For value received, Pathnet Telecommunications, Inc. (the "Parent")
unconditionally guarantees to the holder of any
Outstanding Note or Notes (a "Holder") the full and
punctual payment and performance of the Obligations
(as defined in subsection (b) below). This Guarantee
is an absolute, unconditional and continuing
guarantee of the full and punctual payment and
performance by the Company of each of the
Obligations, and not of collectability only, and is
no way conditioned upon any requirement that any
Holder first attempt to seek payment or performance
from the Company or any other guarantor or surety or
resort to any security or other means of obtaining
payment of all or any of the Obligations or upon any
other contingency. Upon any default by the Company
in the full and punctual payment or performance of
any of the Obligations, if such default remains
uncured after the giving of any required notice and
after any applicable period of cure, the liabilities
and obligations of the Parent hereunder shall at the
option of any Holder become forthwith effective,
matured, due and payable without further demand or
notice of any nature, all such demands and notices
being expressly waived by the Parent.
(b) As used herein, the term "Obligations" means all obligations,
covenants, liabilities, undertakings and agreements
of any kind of the Company to all or any of the
Holders contained in the Indenture, to be performed
after the date hereof, howsoever, incurred, arising
or evidenced, whether now or hereafter existing, due
or to become due or of payment or performance and
including, without limitation: (i) the prompt
payment in full, in United States currency, when due
(whether at stated maturity, by acceleration, by
mandatory or optional prepayment or otherwise) of
the principal of and interest on the Notes
(including interest on any overdue principal, and,
to the extent permitted by applicable law, on any
overdue interest) and all other amounts from time to
time owing by the Company under the Indenture and
under the Notes (including costs, expenses and
taxes); and (ii) the prompt performance and
observance by the Company of all covenants,
agreements and conditions on its part to be
performed and observed under the Indenture, in each
case strictly in accordance with the terms thereof
(such payments and other obligations being herein
collectively referred to as the "Obligations").
2. GUARANTEE CONTINUING AND LIABILITY UNAFFECTED.
(a) Subject to Section 2 (c), this is a continuing
guarantee and shall be binding upon the Parent
regardless of how long before or after the date
hereof any part of the Obligations was or is incurred
by the Company. Subject to Section 2 (c), this
Guarantee may be enforced by any or all of the
Holders from time to time and as often as occasion
for such enforcement may arise.
(b) If after receipt of any payment from the Parent made hereunder
the Holders, or any of them, are compelled to
surrender or voluntarily surrender such payment or
proceeds to any person because such payment or
application of proceeds is or may be avoided,
invalidated, recaptured, or set aside as a
preference, fraudulent conveyance, impermissible
setoff or for any other reason, whether or not such
surrender is the result of (i) any judgment, decree
or order of any court or administrative body having
jurisdiction over the Holders, or (ii) any
settlement or compromise by the Holders of any claim
as to any of the foregoing with any person
(including the Company), then the Obligations or
part thereof affected shall be reinstated and
continue and this Guarantee shall be reinstated and
continue in full force as to such Obligations or
part thereof as if such payment or proceeds had not
been received. The provisions of this Section 2(b)
shall survive the termination of this Guarantee and
any satisfaction and discharge of the Company by
virtue of any payment, court order or any federal or
state law.
(c) The Parent shall be subrogated to all rights of the
Holders in respect of any amounts paid by the Parent
pursuant to the provisions of this Guarantee;
provided, however, that Parent shall be entitled to
enforce, or to receive any payments arising out of or
based upon, such right of subrogation with respect to
any Obligation only after the payment of all amounts
owed by the Company to the Holders with respect to
all of the Obligations have been paid in full.
(d) This Guarantee shall terminate and be of no further
force and effect as to any Note upon full payment of
the Redemption Price with respect to such Note,
PROVIDED, however, that this Guarantee shall continue
to be effective or shall be reinstated, as the case
may be, if at any time the Company must restore
payment of any sums paid under such Note or under
this Guarantee for any reason whatsoever.
3. UNCONDITIONAL NATURE OF PARENT'S OBLIGATIONS AND LIABILITIES. The
obligations and liabilities of the Parent hereunder shall be absolute
and unconditional, and shall not be subject to any counterclaim,
set-off, deduction or defense based upon any claim the Parent may have
against the Company or any other person or entity. Such obligations and
liabilities shall remain in full force and effect for the period set
forth in Section 2 above without regard to any event, circumstance or
condition (whether or not the Parent shall have knowledge or notice
thereof) which but for the provisions of this Section might constitute
a legal or equitable defense or discharge of a guarantor or surety or
which might in any way limit recourse against the Parent, including:
(a) any amendment or modification or supplement to the
terms of the Indenture, this Guarantee or any of the
Notes, including the renewal or extension of the time
for payment of the Notes or the granting of time in
respect of the payment thereof;
(b) any waiver, consent, extension, granting of time,
forbearance, indulgence or other action or inaction
under or in respect of the Indenture or the Notes, or
any exercise or non-exercise of any right, remedy or
power in respect thereof;
(c) the invalidity or unenforceability, in whole or in
part of the Indenture or this Guarantee resulting
from the Company's or the Parent's lack of authority
to enter into the Indenture and/or to incur any or
all of the Obligations, by any person acting for the
Company or the Parent without or in excess of
authority;
(d) any actual, purported or attempted sale, assignment
or other transfer by any or all of the Holders or by
the Company or the Parent of the Indenture or the
Notes or of any of their rights, interests or
obligations thereunder;
(e) the addition of any party as a guarantor or
surety of all or any part of the Obligations
or any limitation of the liability of any additional
guarantor or surety of all or any part of the
Obligations under any other agreement;
(f) any merger or consolidation of the Company or of the
Parent into or with any other entity, or any sale,
lease, transfer or other disposition of any or all of
any Company's or the Parent's assets or any sale,
transfer or other disposition of any or all of the
economic interests in the Company or the Parent to
any other person or entity;
(g) the recovery of any judgment against the Company or
any action to enforce the same; or
(h) any change in the financial condition of the Company
or the Company's entry into an assignment for the
benefit of creditors, an arrangement or any other
agreement or procedure for the restructuring of its
liabilities, or the Company's insolvency, bankruptcy,
reorganization, dissolution, liquidation or any
similar action by or occurrence with respect to the
Company.
4. PARENT'S WAIVER. The Parent unconditionally waives, to the
---------------
fullest extent permitted by law:
(a) notice of any of the matters referred to in Section 3 hereof;
(b) diligence, presentment, demand of payment and filing of claims with a
court in the event of bankruptcy or insolvency of the Company;
(c) any right to the enforcement, assertion or exercise by any or all of the
Holders of any of their rights, powers or remedies under, against or
with respect to the Company (i) any other guarantor or surety, or (ii)
any security for all or any part of the Obligations;
(d) any requirement that the Parent be joined as a party in any action or
proceeding against the Company to enforce any of the provisions of the
Indenture;
(e) acceptance of this Guarantee by any Holder;
and covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in this Guarantee.
5. REPRESENTATIONS AND WARRANTIES. The Parent represents and
------------------------------
warrants that:
(a) the Parent is a corporation duly organized and
validly existing in good standing under the laws of
the State of Delaware and has the full power,
authority and legal right to enter into and perform
its obligations under this Guarantee;
(b) this Guarantee has been duly authorized, executed and
delivered by the Parent and constitutes the legal,
valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its
terms, except for the effect of bankruptcy,
insolvency, reorganization, moratorium, receivership
or similar laws affecting the enforcement of
creditors' rights generally;
(c) the execution, delivery and performance by the Parent
of this Guarantee do not and will not contravene any
applicable law, rule, regulation, judgment or order
and do not and will not contravene the provisions of,
constitute a breach of or default under, or result in
the creation of any security interest, lien or
encumbrance on any of the property of the Parent
pursuant to, the Parent's articles of incorporation
or by-laws or any indenture, mortgage, license or
other contract, agreement or instrument to which the
Parent is a party or by which it is bound.
6. ATTORNEY'S COSTS. The Parent agrees to pay all reasonable
-----------------
attorney's fees and disbursements and all other reasonable and actual costs and
expenses which may be incurred by the Holders in the enforcement of this
Guarantee.
7. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding
------------------------
upon the Parent and its respective successors and assigns, and shall inure to
the benefit of and be enforceable by the Holders and their respective successors
and assigns.
8. GOVERNING LAW. This Guarantee shall be governed by and
--------------
construed in accordance with the laws of the State of New York.
9. SEVERABILITY. Wherever possible, each provision of this Guarantee
shall be construed in such manner as to be valid and enforceable against the
Parent under applicable law, but if any provision hereof shall be deemed invalid
or unenforceable to any extent against the Parent in any jurisdiction, such
provision shall be ineffective only to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remainder
of such provision or any of the other provisions hereof, and any such invalidity
or unenforceability against the Parent in one jurisdiction shall not render such
provision ineffective in any other jurisdiction.
10. NOTICES.
-------
Any notice, request or other communication required or
permitted to be given hereunder to the Holders shall be given by the Parent in
the same manner as set forth in Section 106 of the Indenture.
11. TRANSFERABILITY. This Guarantee is solely for the benefit of
---------------
the Holders and is not separately transferable from the Notes.
12. HEADINGS. Section headings appearing in this Guarantee are
--------
for convenience of reference only and shall not define, limit, amplify or
otherwise modify any provision hereof. Capitalized terms used herein have the
meanings given to them in the Indenture.
This Guarantee shall not be valid or obligatory to any purpose
until the certificate of authentication on the Note on which this Guarantee has
been endorsed shall have been executed by the Trustee under the Indenture by the
signature of one of its authorized officers.
IN WITNESS WHEREOF, the Parent has caused this Guarantee to be executed on its
behalf by an officer or other person thereunto duly authorized as of the date
first above written.
PATHNET TELECOMMUNICATIONS, INC.
By:
Name:
Title:
AMENDMENT TO "REMEDIES"
SECTION 108. AMENDMENT TO SECTION 501. Section 501 of the Indenture is hereby
amended by deleting the existing Section 501 in its entirety and replacing it
(i) with the definition of "Event of Default" set forth in Section 103 for the
purposes of interpretation of Section 1017(a) and (ii) with the definition of
"Event of Default" set forth in Section 102 for all other purposes.
AMENDMENTS TO "CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE"
SECTION 109. AMENDMENT TO ARTICLE EIGHT. Article Eight of the Indenture is
--------------------------
hereby amended by deleting the existing Article Eight in its entirety and
replacing it with the following:
SECTION 801. COMPANY AND PARENT MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
---------------------------------------------------------------
Neither the Company nor the Parent will, in a single
transaction or a series of transactions, consolidate with or merge with or into
any other Person or sell, assign, convey, transfer, lease or otherwise dispose
of all or substantially all of its properties and assets to any other Person or
Persons, and neither will the Company or the Parent permit any Restricted
Subsidiary to enter into any such transaction or series of transactions, if such
transaction or series of transactions, in the aggregate, would result in the
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Restricted Entities on a
consolidated basis to any other Person or Persons, unless at the time and
immediately after giving effect thereto and subject always to the provisions of
Section 1010 and Section 1017:
(1) either (A) the Company or the Parent (as the case may be) shall be the
continuing corporation or (B) the Person (if other than the Company or
the Parent) formed by such consolidation or into which the Company, the
Parent or such Restricted Subsidiary is merged or the Person that
acquires by sale, assignment, conveyance, transfer, lease or
disposition all or substantially all the properties and assets of the
Restricted Entities on a consolidated basis, as the case may be (the
"Surviving Entity"), (i) shall be a corporation organized and validly
existing under the laws of the United States of America, any state
thereof or the District of Columbia and (ii) shall expressly assume, by
a supplemental indenture to this Indenture in form satisfactory to the
Trustee, the obligations of the Company or the Parent pursuant to the
Notes or the Guarantee, as the case may be, for the due and punctual
payment of the principal of, premium, if any, and interest on all the
Notes and the performance and observance of every covenant herein on
the part of the Company or the Parent to be performed or observed;
(2) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (and
treating any obligation of any Restricted Entity incurred in connection
with or as a result of such transaction or series of transactions as
having been incurred at the time of such transaction), no Default or
Event of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (on the assumption that the
transaction or series of transactions occurred on the first day of the
two fiscal quarter period ending immediately prior to the consummation
of such transaction or series of transactions, with the appropriate
adjustments with respect to the transaction or series of transactions
being included in such pro forma calculation), the Company or the
Parent (as the case may be) (or the Surviving Entity if the Company or
the Parent is not the continuing obligor hereunder) could incur at
least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 1011; and
(4) the Company, the Parent or such Person shall have delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee,
an Officers' Certificate (attaching the computations to demonstrate
compliance with clause (3) above) and an Opinion of Counsel, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer or lease or other disposition and, if a supplemental indenture
is required in connection with such transaction, such supplemental
indenture, comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
Any merger or consolidation of a Restricted Subsidiary or of
the Company with and into the Company or the Parent (with the Company or the
Parent (as the case may be) being the surviving entity) or another Restricted
Subsidiary need only comply with clauses (3) and (4) above. Further, this
section shall not apply to any reincorporation of any Restricted Entity under
the laws of the United States of America, any state thereof or the District of
Columbia.
SECTION 802. SUCCESSOR SUBSTITUTED.
---------------------
Upon any consolidation of the Company or the Parent with or
merger of the Company or the Parent with or into any other corporation or any
sale, assignment, conveyance, transfer, lease or disposition of the properties
and assets of the Company or the Parent substantially as an entirety to any
Person in accordance with Section 801 in which the Company or the Parent is not
the continuing obligor hereunder, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or the
Parent (as the case may be) hereunder with the same effect as if such successor
Person had been named as the Company or the Parent (as the case may be) herein.
When a successor assumes all of the obligations of its predecessor under the
Indenture, the predecessor shall be released from such obligations; PROVIDED
that, in the case of a transfer by lease, the predecessor shall not be released
from the payment of principal of, premium, if any, and interest on the Notes or,
in the case where the predecessor is the Parent, from the obligations under the
Guarantees in respect of the payment of principal of, premium, if any, and
interest on the Notes.
SECTION 803. NOTES TO BE SECURED IN CERTAIN EVENTS.
-------------------------------------
If, upon any such consolidation of the Company or the Parent
with or merger of the Company or the Parent into any other corporation, or upon
any sale, assignment, conveyance, lease or transfer of the property of the
Company or the Parent substantially as an entirety to any other Person, any
property or assets of the Company or the Parent (as the case may be) would
thereupon become subject to any Lien, then unless such Lien could be created
pursuant to Section 1015 without equally and ratably securing the Notes, the
Company or the Parent (as the case may be), prior to or simultaneously with such
consolidation, merger, sale, assignment, conveyance, lease or transfer, shall as
to such property or assets, secure the Notes Outstanding or the Guarantees (as
the case may be) (together with, if the Company or the Parent (as the case may
be) shall so determine, any other Indebtedness of the Company or the Parent (as
the case may be) now existing or hereinafter created which is not subordinate in
right of payment to the Notes or the Guarantees, as the case may be)) equally
and ratably with (or prior to) the Indebtedness which upon such consolidation,
merger, conveyance, lease or transfer is to become secured as to such property
or assets by such Lien, or shall cause such Notes or Guarantees to be so
secured.
AMENDMENTS TO "SUPPLEMENTAL INDENTURES"
SECTION 110. AMENDMENT TO SECTION 901. Section 901 of the Indenture is hereby
amended by deleting the existing Section 901 in its entirety and replacing it
with the following:
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
--------------------------------------------------
Without the consent of any Holders, the Company and the
Parent, when authorized by a Board Resolution, and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, the Parent
or any other obligor on the Notes, and the assumption by any such
successor of the covenants of the Company or the Parent or such obligor
contained herein and in the Notes in accordance with Article Eight of
this Indenture;
(2) to add to the covenants of the Company, the Parent or any other obligor
upon the Notes or the Guarantees for the benefit of the Holders or to
surrender any right or power herein conferred upon the Company, the
Parent or any other obligor upon the Notes or the Guarantees, as
applicable, in this Indenture or the Notes;
(3) to cure any ambiguity, to correct or supplement any provision herein or
in the Notes or the Guarantees that may be defective or inconsistent
with any other provision herein or in the Notes or the Guarantees, or
to make any other provisions with respect to matters or questions
arising under this Indenture or the Notes or the Guarantees; PROVIDED
that, in each case, such action shall not adversely affect the interest
of the Holders;
(4) to comply with the requirements of the Commission in order to effect or
maintain the qualification, if any, of the Indenture under the Trust
Indenture Act;
(5) to evidence and provide the acceptance of the appointment of a
successor Trustee under this Indenture;
(6) to mortgage, pledge, hypothecate or grant a security interest in favor
of the Trustee for the benefit of the Holders as additional security
for the payment and performance of the Company's or the Parent's
obligations hereunder, in any property or assets, including any of
which are required to be mortgaged, pledged or hypothecated, or in
which a security interest is required to be granted to the Trustee
pursuant to this Indenture or otherwise;
(7) to add a further guarantor of the Notes under the Indenture;
(8) to secure the Notes pursuant to the requirements of Section 803 or
Section 1015 or otherwise;
(9) to add any additional Events of Default; or
(10) to evidence and provide for the acceptance of appointment hereunder by
a successor Trustee pursuant to the requirements of Section 609.
SECTION 111. AMENDMENT TO SECTION 902. Section 902 of the Indenture is hereby
amended by deleting the existing Section 902 in its entirety and replacing it
with the following:
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Notes, by Act of said
Holders delivered to the Company, the Parent and the Trustee, the
Company and the Parent, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Indenture or of modifying
in any manner the rights of the Holders under this Indenture PROVIDED,
HOWEVER, that no such supplemental indenture shall, without the consent
of the Holder of each Outstanding Note affected thereby:
(1) change the Stated Maturity of the principal of or any installment of
interest on, any Note, or reduce the principal amount thereof (or
premium or Liquidated Damages, if any) or the rate of interest thereon,
alter any redemption provision with respect to any Note or change the
coin or currency in which any Note or any premium or Liquidate Damages
or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date);
(2) amend, change or modify the obligation of the Company to make and
consummate an Excess Proceeds Offer with respect to any Asset Sale in
accordance with Section 1017 or the obligation of the Company to make
and consummate a Change of Control Offer in the event of a Change of
Control in accordance with Section 1010, including, in each case
amending, changing or modifying any definition relating thereto;
(3) reduce the percentage of the principal amount of the Outstanding Notes,
the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver
of compliance with certain provisions and defaults of this Indenture
and their consequences provided for in this Indenture;
(4) modify any of the provisions of this Section or Sections 513 and
Section 1019, except to increase the percentage of the aggregate
principal amount of Outstanding Notes required for such actions
thereunder or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Note affected thereby;
(5) except as otherwise permitted under Article Eight consent to the
assignment or transfer by the Company of any of their rights or
obligations under the Indenture; or
(6) release any Lien created by the Amended and Restated Pledge Agreement,
except in accordance with the terms of the Amended and Restated Pledge
Agreement
(7) modify the provisions of this Indenture relating to the Guarantee in a
manner adverse to the Holders.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
AMENDMENTS TO "COVENANTS"
SECTION 112. AMENDMENT TO SECTION 1002.
Section 1002 of the Indenture is hereby amended by deleting the existing Section
1002 in its entirety and replacing it with the following:
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY:
-------------------------------
The Company and the Parent shall maintain in The City of New
York, an office or agency where Notes may be presented or surrendered for
payment, where Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company or the Parent in respect of
the Notes, this Indenture or the Guarantees may be served. The Corporate Trust
Office of the Trustee shall be such office or agency of the Company and the
Parent unless the Company or the Parent shall designate and maintain some other
office or agency for one or more of such purposes. The Company and the Parent
will give prompt written notice to the Trustee of any change in the location of
any such office or agency. If at any time the Company or the Parent shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demand may be made or served at the Corporate Trust Administration office of the
Trustee, and the Company and the Parent hereby appoint the Trustee as their
agent to receive all such presentations, surrenders, notices and demands.
The Company and the Parent may also from time to time
designate one or more other offices or agencies (in or outside of The City of
New York) where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind any such designation; PROVIDED, that
such designation or rescission shall not in any manner relieve the Company or
the Parent of their obligation to maintain an office or agency in The City of
New York for such purposes. The Company and the Parent will give prompt written
notice to the Trustee of any such designation or rescission and any change in
the location of any such other office or agency.
SECTION 113. AMENDMENT TO SECTION 1003. Section 1003 of the Indenture is hereby
amended by deleting the existing Section 1003 in its entirety and replacing it
with the following:
SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST
-------------------------------------------
If the Company or the Parent shall at any time act as their
own Paying Agent, they will, on or before each due date of the principal of (or
premium, if any) or interest on any of the Notes, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient to pay the
principal of (or premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided and
will promptly notify the Trustee of their action or failure so to act.
Whenever the Company and the Parent shall have one or more
Paying Agents for the Notes, the Company and/or the Parent will, on or before
10:00 a.m. on each due date of the principal of (or premium, if any) or interest
on any Notes, deposit with a Paying Agent a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such principal, premium or interest,
and (unless such Paying Agent is the Trustee) the Company and/or the Parent will
promptly notify the Trustee of such action or any failure so to act.
The Company and the Parent shall cause each Paying Agent (other than
the Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company or the Parent (or
any other obligor upon the Notes) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.
The Company or the Parent may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose, pay,
or by Company Order or Parent Order direct any Paying Agent to pay, to the
Trustee all sums held in trust by the Company, the Parent or such Paying Agent,
such sums to be held by the Trustee upon the same trusts as those upon which
such sums where held by the Company, the Parent or such Paying Agent; and, upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company or the Parent, in trust for the payment of the principal of (or
premium, if any) or interest on any Note and remaining unclaimed for two years
after such principal, premium, interest has become due and payable shall be paid
to the Company on Company Request or to the Parent on Parent Request, or (if
then held by the Company or the Parent) shall be discharged from such trust. The
Holder of such Note, as an unsecured general creditor, shall look thereafter
only to the Company and the Parent for the payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company or the Parent as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company and the
Parent cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in the Borough of Manhattan, The City of New York, notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Company or the Parent, as the
case may be.
SECTION 114. AMENDMENT TO SECTION 1004. Section 1004 of the Indenture is hereby
amended by deleting the existing Section 1004 in its entirety and replacing it
with the following:
SECTION 1004. CORPORATE EXISTENCE.
-------------------
Subject to Article Eight, (a) the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the
Company and each of its Subsidiaries, and (b) the Parent shall do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the Parent
and each of its Subsidiaries; PROVIDED, as the case may be, that neither the
Company nor the Parent, as the case may be, shall be required to preserve any
such right or franchise if the Board of Directors of the Company or the Parent,
as the case may be, shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company or the Parent and its
respective Subsidiaries as a whole.
SECTION 115. AMENDMENT TO SECTION 1005. Section 1005 of the Indenture is hereby
amended by deleting the existing Section 1005 in its entirety and replacing it
with the following:
SECTION 1005. PAYMENT OF TAXES AND OTHER CLAIMS.
---------------------------------
(a) The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries or upon the income, profits or property of the Company or
any Restricted Company Subsidiary and (ii) all material lawful claims for labor,
materials and supplies, which, if unpaid, might by law become a lien upon the
property of the Company or any of its Subsidiaries; and (b) the Parent shall pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges levied
or imposed upon the Parent or any of its Subsidiaries or upon the income,
profits or property of the Parent or any Restricted Subsidiary and (ii) all
material lawful claims for labor, materials and supplies, which, if unpaid,
might by law become a lien upon the property of the Parent or any of its
Subsidiaries PROVIDED, that neither the Company nor the Parent shall be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
SECTION 116. AMENDMENT TO SECTION 1006. Section 1006 of the Indenture is hereby
amended by deleting the existing Section 1006 in its entirety and replacing it
with the following:
SECTION 1006. MAINTENANCE OF PROPERTIES.
-------------------------
(a) The Company shall, or shall cause its Restricted Company
Subsidiaries to, cause all material properties owned by the Company or any
Restricted Company Subsidiary or used or held for use in the conduct of its
business or the business of any Restricted Company Subsidiary to be maintained
and kept in good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment and will cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times, and (b) the Parent shall, or shall cause the Restricted
Subsidiaries to, cause all material properties owned by the Parent or any
Restricted Subsidiary or used or held for use in the conduct of its business or
the business of any Restricted Subsidiary to be maintained and kept in good
condition, repair and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Parent may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
PROVIDED, that nothing in this Section 1006 shall prevent a Restricted Entity
from discontinuing the maintenance of any of such properties or disposing of
them as otherwise permitted herein if such discontinuance or disposition is, in
the judgment of the Parent, desirable in the conduct of its business or the
business of such Restricted Entity and not disadvantageous in any material
respect to the Holders.
SECTION 117. AMENDMENT TO SECTION 1007. Section 1007 of the Indenture is hereby
amended by deleting the existing Section 1007 in its entirety and replacing it
with the following:
SECTION 1007. INSURANCE.
---------
(a) The Company shall at all times keep all of its and its Restricted Company
Subsidiaries' properties which are of an insurable nature insured, and (b) the
Parent shall at all times keep all of its and the Restricted Subsidiaries'
properties, which are of an insurable nature insured, in each case with insurers
believed by the Company or the Parent (as the case may be) to be responsible
against loss or damage to the extent that property of similar character is
usually so insured by corporations similarly situated and owning like
properties.
SECTION 118. AMENDMENT TO SECTION 1008. Section 1008 of the Indenture is hereby
amended by deleting the existing Section 1008 in its entirety and replacing it
with the following:
SECTION 1008. STATEMENT BY OFFICERS AS TO DEFAULT.
-----------------------------------
(a) The Company and the Parent shall deliver to the Trustee, within 50 days
after the end of each fiscal quarter and within 120 days after the end of each
fiscal year, a brief certificate from the principal executive officer, principal
financial officer or principal accounting officer of each of the Company and the
Parent as to his or her knowledge of the compliance of the Company or the Parent
(as the case may be) with all conditions and covenants under this Indenture
since the beginning of such quarter or year, as the case may be. For purposes of
this Section 1008(a), such compliance shall be determined without regard to any
period of grace or requirement of notice under this Indenture.
(b) When any Default has occurred and is continuing under this Indenture, or if
the trustee for or the holder of any other evidence of Indebtedness of any
Restricted Entity gives any notice or takes any other action with respect to a
claimed default (other than with respect to Indebtedness in the principal amount
of less than $7,500,000 (or the equivalent thereof in one or more foreign
currencies)), the Company or the Parent (as the case may be) shall deliver to
the Trustee by registered or certified mail or by facsimile transmission an
Officers' Certificate specifying such event, notice or other action within five
Business Days of an officer of the Company or the Parent (as the case may be)
becoming aware of its occurrence.
SECTION 119. AMENDMENT TO SECTION 1009. Section 1009 of the Indenture is hereby
amended by deleting the existing Section 1009 in its entirety and replacing it
with the following:
SECTION 1009. PROVISION OF FINANCIAL STATEMENTS.
----------------------------------
(a) Subject to Section 1009(b) below the Company and the Parent shall file on a
timely basis with the Commission, to the extent such filings are accepted by the
Commission and whether or not the Company or the Parent (as the case may be) has
a class of securities registered under the Exchange Act, the annual reports,
quarterly reports and other documents that the Company or the Parent (as the
case may be) would be required to file if it were subject to Section 13 or 15(d)
of the Exchange Act.
(b) Provided always that the Parent complies fully with its filing obligations
pursuant to Section 1009(a) above, the Company shall be entitled in its sole
discretion to rely on any applicable law, rule, regulation or SEC approval
(together "Relevant Saving"), whether in force at the date hereof or
subsequently promulgated, to limit the scope of or cease to comply with its
filing obligations pursuant to Section 1009(a) to the maximum extent permitted
by such Relevant Saving.
(c) The Parent shall also be required (i) to file with the Trustee, and provide
to each Holder of Notes, without cost to such Holder, copies of such reports and
documents within 15 days after the date on which the Parent files such reports
and documents with the Commission or the date on which the Parent would be
required to file such reports and documents if the Parent were so required, and
(ii) if filing such reports and documents with the Commission is not accepted by
the Commission or is prohibited under the Exchange Act, to supply at the
Parent's cost copies of such reports and documents to any prospective holder
promptly upon request. Delivery of such reports, information and documents to
the Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Parent's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 120. AMENDMENT TO SECTION 1010. Section 1010 of the Indenture is hereby
amended by deleting the existing Section 1010 in its entirety and replacing it
with the following:
SECTION 1010. PURCHASE OF NOTES UPON CHANGE OF CONTROL.
----------------------------------------
(a) Upon the occurrence of a Change of Control at any time and subject to the
compliance by the Company or the Parent (as the case may be) with the
requirements of paragraph (b) of this Section 1010, each Holder shall have the
right to require that the Company repurchase all of such Holder's Notes, in
whole or in part in integral multiples of $1,000, at a purchase price (the
"Change of Control Purchase Price") in cash in an amount equal to 101% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of purchase, in accordance with the procedures set forth in paragraphs (b) and
(c) of this Section 1010 (the "Change of Control Offer").
(b) Within 15 days following any Change of Control, the Company (if the Change
of Control relates to the Company) or the Parent (if the Change of Control
relates to the Parent) shall notify the Trustee thereof and give to each Holder
of the Notes in the manner provided in Section 105 a notice stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Company to repurchase such Holder's Notes at the
Change of Control Purchase Price;
(2) the circumstances and relevant facts regarding such Change of Control
(including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of
Control);
(3) the Change of Control Purchase Price and a purchase date (the "Change
of Control Purchase Date") which shall be a Business Day no earlier
than 30 days nor later than 60 days from the date such notice is
mailed, or such later date as is necessary to comply with requirements
under the Exchange Act or any applicable securities laws or
regulations;
(4) that any Note not tendered will continue to accrue interest;
(5) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer will cease to accrue interest on and after the
Change of Control Purchase Date; and
(6) the instructions a Holder must follow in order to have its Notes
repurchased in accordance with paragraph (c) of this Section.
(c) Holders electing to have Notes purchased shall be required to surrender such
Notes to the Company at the address specified in the notice at least five
Business Days prior to the Change of Control Purchase Date. Holders shall be
entitled to withdraw their election if the Company receives, not later than
three Business Days prior to the Change of Control Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Notes delivered for purchase by the Holder as to which his
election is to be withdrawn and a statement that such Holder is withdrawing his
election to have such Notes purchased. Holders whose Notes are purchased only in
part shall be issued new Notes and Guarantees equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion shall be
equal to $1,000 in principal amount or integral multiples thereof.
SECTION 121. AMENDMENT TO SECTION 1011. Section 1011 of the Indenture is hereby
amended by deleting the existing Section 1011 in its entirety and replacing it
with the following:
SECTION 1011. LIMITATION ON INDEBTEDNESS.
--------------------------
Neither the Company nor the Parent shall , and neither shall
they permit any Restricted Subsidiary to, incur any Indebtedness (including any
Acquired Indebtedness) other than Permitted Indebtedness; PROVIDED that the
Company or the Parent (as the case may be) may Incur Indebtedness if, at the
time of such incurrence, the Consolidated Indebtedness to Consolidated Operating
Cash Flow Ratio of the Company or the Parent, as the case may be, would have
been less than or equal to (i) 6.0 to 1.0 but greater than zero, for
Indebtedness incurred on or prior to December 31, 2001, or (ii) 5.0 to 1.0 but
greater than zero, for Indebtedness incurred thereafter. For the purposes of
determining compliance with this Section 1011, in the event that an item of
Indebtedness or any portion thereof meets the criteria of more than one of the
type of Indebtedness that any Restricted Entity is permitted to Incur, the
Parent will have the right, in its sole discretion, to classify such item of
Indebtedness or portion thereof at the time of its incurrence and the Company or
the Parent, as the case may be, will only be required to include the amount and
type of such Indebtedness or portion thereof under the clause permitting the
Indebtedness as so classified.
SECTION 122. AMENDMENT TO SECTION 1012. Section 1012 of the Indenture is hereby
amended by deleting the existing Section 1012 in its entirety and replacing it
with the following:
SECTION 1012. LIMITATION ON RESTRICTED PAYMENTS.
---------------------------------
The Parent shall not, and shall not permit any Restricted
Subsidiary or, in the case of paragraphs (3) and (4) below, the Company to take,
directly or indirectly, any of the following actions:
(a) (1) declare or pay any dividend on, or make any distribution
to holders of, any shares of the Capital Stock of the Parent
(other than dividends or distributions payable solely in
shares of its Qualified Capital Stock or in options, warrants
or other rights to acquire such shares of Qualified Capital
Stock);
(2) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock of the
Parent or any Capital Stock of any of its Affiliates (other
than Capital Stock of the Company or any Wholly Owned
Restricted Subsidiary) or any options, warrants or other
rights to acquire such shares of Capital Stock;
(3) make any principal payment on, or repurchase, redeem, defease
or otherwise acquire or retire for value, prior to the Stated
Maturity of any principal payment or any sinking fund payment,
any Indebtedness of the Parent or of the Company that is
expressly subordinated in right of payment to the Notes or to
the Guarantees, as the case may be; or
(4) make any Investment (other than any Permitted Investment) in
any Person;
(such payments or other actions described in (but not excluded from) clauses (1)
through (4) are collectively referred to as "Restricted Payments"); unless at
the time of, and immediately after giving effect to, the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than cash, as
determined by the Board of Directors of the Parent, whose determination shall be
conclusive and evidenced by a Board Resolution), (A) no Default or Event of
Default shall have occurred and be continuing, (B) the Parent could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 1011 and (C) the aggregate amount of all Restricted Payments
declared or made after the Issue Date shall not exceed the sum of:
(i) 100% of Consolidated Operating Cash Flow of the Parent less
1.5 times Consolidated Interest Expense of the Parent or (ii)
if Consolidated Operating Cash Flow of the Parent is a
negative, minus 100% of such negative amount, in each case on
a cumulative basis for the period beginning on the first day
of the Parent's first fiscal quarter after the Issue Date and
ending on the last day of the Parent's last fiscal quarter
ending prior to the date of such proposed Restricted Payment;
plus
(ii) the aggregate Net Cash Proceeds and the Fair Market Value of
Telecommunications Assets or Voting Stock of a Person that
becomes a Restricted Subsidiary, the assets of which consist
primarily of Telecommunications Assets, received by the Parent
after the Issue Date as capital contributions or from the
issuance or sale (other than to any Subsidiary) of shares of
Qualified Capital Stock of the Parent (including upon the
exercise of options, warrants or rights) or warrants, options
or rights to purchase shares of Qualified Capital Stock of the
Parent; plus
(iii) the aggregate Net Cash Proceeds and the Fair Market Value of
Telecommunications Assets or Voting Stock of a Person that
becomes a Restricted Subsidiary, the assets of which consist
primarily of Telecommunications Assets, received by the Parent
after the Issue Date from the issuance or sale (other than to
any Subsidiary) of debt securities or Redeemable Capital Stock
that have been converted into or exchanged for Qualified
Capital Stock of the Parent, together with the aggregate Net
Cash Proceeds and the Fair Market Value of Telecommunications
Assets or Voting Stock of a Person that becomes a Restricted
Subsidiary, the assets of which consist primarily of
Telecommunications Assets, received by the Parent at the time
of such conversion or exchange; plus
(iv) to the extent not otherwise included in Consolidated Operating
Cash Flow of the Parent, an amount equal to the sum of (a) the
net reduction in Investments (other than Permitted
Investments) in any Person (other than a Restricted
Subsidiary) resulting from the payment in cash of dividends,
repayments of loans or advances or other transfers of assets,
in each case to the Parent or any Restricted Subsidiary after
the Issue Date from such Person and (b) the amount of any net
reduction in Investments resulting from the redesignation of
an Unrestricted Subsidiary as a Restricted Subsidiary (valued
as provided in the definition of "Investment") at the time of
such redesignation; PROVIDED that, in the case of (a) or (b)
above, the foregoing sum shall not exceed the total amount of
Investments (other than Permitted Investments) previously made
in such Person or Unrestricted Subsidiary by the Parent and
its Restricted Subsidiaries.
(b) Notwithstanding paragraph (a) above, the Parent and any Restricted
Subsidiary may take the following actions so long as (with respect to clauses
(2) through (6) below) no Default or Event of Default shall have occurred and be
continuing:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration the payment of such
dividend would have complied with the provisions of paragraph (a) above
and such payment will be deemed to have been paid on such date of
declaration for purposes of the calculation required by paragraph (a)
above;
(2) the purchase, redemption or other acquisition or retirement for value
of any shares of Capital Stock of the Parent (x) in exchange for, or
out of the Net Cash Proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
of the Parent; or (y) that are held by former officers, employees or
directors (or their estates or beneficiaries under their estates) of
the Parent or any of its Subsidiaries; PROVIDED that the aggregate
amount of such purchase, redemption or other acquisition or retirement
for value under this clause (y) will not exceed $250,000 (or the
equivalent thereof in one or more foreign currencies) in any given
fiscal year;
(3) the purchase, redemption, defeasance or other acquisition or retirement
for value of any Indebtedness of the Parent that is expressly
subordinated in right of payment to the Notes in exchange for, or out
of the Net Cash Proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
of the Parent;
(4) the purchase of any Indebtedness of the Company that is expressly
subordinated in right of payment to the Notes or the purchase of any
Indebtedness of the Parent that is expressly subordinated in right of
payment to the Guarantees, in each case at a purchase price not greater
than 101% of the principal amount thereof in the event of a Change of
Control in accordance with provisions similar to Section 1010; PROVIDED
that prior to such purchase the Company has made the Change of Control
Offer as provided in such covenant with respect to the Notes and has
purchased all Notes validly tendered for payment in connection with
such Change of Control Offer;
(5) the purchase, redemption, defeasance or other acquisition or retirement
for value of Indebtedness (other than Redeemable Capital Stock) of the
Parent that is expressly subordinated in right of payment to the Notes
in exchange for, or out of the Net Cash Proceeds of a substantially
concurrent incurrence (other than to a Subsidiary) of, new Indebtedness
of the Parent that is expressly subordinated in right of payment to the
Notes, so long as (A) the principal amount of such new Indebtedness
does not exceed the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Indebtedness being so purchased, redeemed, defeased, acquired or
retired, plus the lesser of (x) the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of
the Indebtedness being refinanced or (y) the amount of any premium
reasonably determined by the Parent as necessary to accomplish such
refinancing, plus, in either case, the amount of expenses of the Parent
incurred in connection with such refinancing; (B) such new Indebtedness
is subordinated to the Notes to the same extent as such Indebtedness so
purchased, redeemed, defeased, acquired or retired; and (C) such new
Indebtedness has an Average Life longer than the Average Life of the
Indebtedness being refinanced and a final Stated Maturity of principal
later than the final Stated Maturity of the Indebtedness being
refinanced; and
(6) the payment of cash in lieu of fractional shares of Common Stock
pursuant to the Warrant Agreement.
The actions described in clauses (1) through (4) and (6) of this paragraph (b)
shall be Restricted Payments that shall be permitted in accordance with this
paragraph (b) but shall reduce the amount that would otherwise be available for
Restricted Payments under clause (C) of paragraph (a) above. The actions
described in clause (5) of this paragraph (b) shall be Restricted Payments that
shall be permitted in accordance with this paragraph (b) and shall not reduce
the amount that would otherwise be available for Restricted Payments under
clause (C) of paragraph (a).
SECTION 123. AMENDMENT TO SECTION 1013. Section 1013 of the Indenture is hereby
amended by deleting the existing Section 1013 in its entirety and replacing it
with the following:
SECTION 1013. LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF THE
-------------------------------------------------------
COMPANY AND RESTRICTED SUBSIDIARIES.
-----------------------------------
Neither the Company nor the Parent shall , and neither shall
they permit any Restricted Subsidiary to, issue or sell any Capital Stock of the
Company or of a Restricted Subsidiary (other than to a Restricted Entity );
PROVIDED, that this covenant shall not prohibit (i) issuances or sales of
Capital Stock of the Company or a Restricted Subsidiary if, immediately after
giving effect to such issuance or sale, the Company would no longer be Wholly
Owned by the Parent or such Restricted Subsidiary would no longer be a
Restricted Subsidiary and any Investment in such Person remaining after giving
effect to such issuance or sale would have been permitted to be made under
Section 1012 if made on the date of such issuance and sale, (ii) the ownership
by directors of directors' qualifying shares or the ownership by foreign
nationals of Capital Stock of the Company or of any Restricted Subsidiary, to
the extent mandated by applicable law, (iii) the issuance and sale of Capital
Stock of the Company or any Restricted Subsidiary owned by any Restricted Entity
in compliance with Section 1017; PROVIDED that such Restricted Subsidiary would
remain a Restricted Subsidiary after such transaction or (iv) the issuance and
sale of Capital Stock of the Company or any Restricted Subsidiary to any Person
that transfers, leases, licenses or grants a right to use Telecommunications
Assets to the Parent or the Company (as the case may be) pursuant to an
Incumbent Agreement; PROVIDED that, after such issuance and sale, such
subsidiary remains a Restricted Subsidiary and, in the good faith determination
of the Board of Directors of the Parent, the Fair Market Value of any such
transfer, lease, license or grant is not less than the Fair Market Value of the
Capital Stock of such Restricted Subsidiary issued and sold in respect thereof.
SECTION 124. AMENDMENT TO SECTION 1014. Section 1014 of the Indenture is hereby
amended by deleting the existing Section 1014 in its entirety and replacing it
with the following:
SECTION 1014. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
------------------------------------------
Neither the Company nor the Parent shall, and neither shall
they permit any Restricted Subsidiary to, enter into or suffer to exist,
directly or indirectly, any transaction or series of related transactions
(including, the sale, purchase, exchange or lease of assets, property or
services) with, or for the benefit of, any Affiliate of the Parent, the Company
or any Restricted Subsidiary (other than a Restricted Entity so long as no
Affiliate of the Parent (other than a Restricted Entity) shall beneficially own
Capital Stock in such Restricted Entity) unless (i) such transaction or series
of related transactions are on terms, taken as a whole, that are no less
favorable to the Company, the Parent, or such Restricted Subsidiary, as the case
may be, than those that could have been obtained in an arm's length transaction
with unrelated third parties that are not Affiliates; (ii) with respect to any
transaction or series of related transactions involving aggregate consideration
equal to or greater than $5,000,000 (or the equivalent thereof in one or more
foreign currencies), the Parent will deliver an Officers' Certificate to the
Trustee certifying that such transaction or series of related transactions
complies with clause (i) above; and (iii) with respect to any transaction or
series of related transactions involving aggregate consideration in excess of
$10,000,000 (or the equivalent thereof in one or more foreign currencies), the
Parent will deliver the Officers' Certificates described in clause (ii) above,
which will also certify that such transaction or series of related transaction
has been approved by a majority of the Disinterested Directors of the Board of
Directors of the Parent, or that the Parent has obtained a written opinion from
an independent financial expert certifying that the financial terms of such
transaction or series of related transactions, taken as a whole, are fair to the
Company, the Parent, or the Restricted Subsidiary, as the case may be, from a
financial point of view: PROVIDED, that this covenant shall not restrict (1) any
transaction or series of related transactions between the Company and the
Parent, (2) any transaction or series of related transactions between either the
Company or the Parent (as the case may be) and one or more of the Restricted
Subsidiaries or between the Restricted Subsidiaries, (3) the Company or the
Parent from paying reasonable and customary regular compensation and fees to
directors of any Restricted Entity who are not employees of any Restricted
Entity, (4) the performance of the Parent's obligations under the Stockholders'
Agreement, dated as of March 30, 2000, among the Parent and the Investors named
therein, as amended and supplemented from time to time or (5) the performance of
the Company's obligations under the Investment and Stockholders' Agreement,
dated as of October 31, 1997, among the Company, David Schaeffer and the
Investors named therein, as amended; the Investment and Stockholders' Agreement,
dated as of August 28, 1995, by and among the Company and the Investors named
therein; the Non-Qualified Stock Option Agreement, dated August 4, 1997, between
the Company and Richard Jalkut; and the Employment Agreement, dated August 4,
1997, between the Company and Richard Jalkut, in each case as amended through
the Issue Date; PROVIDED that any amendments or modifications to the terms of
transactions described in this clause (5) will be (x) no less favorable to the
Parent or the Company, as the case may be, than those that could have been
obtained in an arm's length transaction with unrelated third parties who are not
Affiliates and (y) approved by the Board of Directors of the Parent or the
Company, as the case may be, (including a majority of the Disinterested
Directors of the relevant Board of Directors) (6) the making of any Restricted
Payment not prohibited by Section 1012 and (7) loans or advances made to
directors, officers or employees of any Restricted Entity, or guarantees in
respect thereof or otherwise made on their behalf, in respect of expenses
incurred in the ordinary course of business, in an aggregate principal amount
not to exceed $500,000 (or the equivalent thereof in one or more foreign
currencies in any calendar year.)
SECTION 125. AMENDMENT TO SECTION 1015. Section 1015 of the Indenture is hereby
amended by deleting the existing Section 1015 in its entirety and replacing it
with the following:
SECTION 1015. LIMITATION ON LIENS.
-------------------
Neither the Company nor the Parent shall, and neither shall
they permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or suffer to exist any Lien (other than Permitted Liens) on or with
respect to any of its property or assets (including any shares of Capital Stock
or Indebtedness of the Company or any Restricted Subsidiary) whether owned at
the Issue Date (in the case of the Company) or the Amendment Date (in the case
of the Parent) or thereafter acquired, or any income, profits or proceeds
therefrom, or assign or otherwise convey any right to receive income thereon,
unless (x) in the case of any Lien securing Indebtedness of the Company or the
Parent (as the case may be) that is expressly subordinated in right of payment
to the Notes, the Notes are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Lien and (y) in the case of any
other Lien, the Notes are secured by a Lien on such property, assets or proceeds
that is senior in priority to, or equally and ratably secured with, the
obligation or liability secured by such Lien.
SECTION 126. AMENDMENT TO SECTION 1016. Section 1016 of the Indenture is hereby
amended by deleting the existing Section 1016 in its entirety and replacing it
with the following:
SECTION 1016. LIMITATIONS ON ISSUANCE OF CERTAIN GUARANTEES
---------------------------------------------
AND DEBT SECURITIES.
--------------------
Neither the Company nor the Parent shall permit any Restricted
Subsidiary to (i) directly or indirectly guarantee, assume or in any other
manner become liable with respect to any Debt Securities ("Guaranteed
Indebtedness") or (ii) issue any Debt Securities, unless, in either such case,
such Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture providing for the guarantee (a "Subsidiary Guarantee") of payment of
the Notes. If the Guaranteed Indebtedness (A) ranks equally in right of payment
with the Notes, then the guarantee of such Guaranteed Indebtedness will rank
equally in right of payment with, or be subordinated in right of payment to, the
Subsidiary Guarantee or (B) is subordinated in right of payment to the Notes,
then the guarantee of such Guaranteed Indebtedness will be subordinated in right
of payment to the Subsidiary Guarantee at least to the extent that the
Guaranteed Indebtedness is subordinated in right of payment to the Notes. The
obligations of each Restricted Subsidiary under a Subsidiary Guarantee will be
limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Restricted Subsidiary, result in the
obligations of such Restricted Subsidiary under the Subsidiary Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under applicable
law.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) the sale or
other disposition, by way of merger or otherwise, to any Person not an Affiliate
of the Parent, of all of the Restricted Entities' Capital Stock in such
Restricted Subsidiary, (ii) the merger or consolidation of the applicable
Restricted Subsidiary with and into another Restricted Entity that has
guaranteed the Notes and that is the surviving Person in such merger or
consolidation and (iii) the release by all of the holders of Debt Securities of
the Company or of the Parent (as the case may be) of such Restricted
Subsidiary's obligations under all of its Guarantees in respect thereof and the
release by all of the holders of Debt Securities of such Restricted Subsidiary
of its obligations thereunder.
SECTION 127. AMENDMENT TO SECTION 1017. Section 1017 of the Indenture is hereby
amended by deleting the existing Section 1017 in its entirety and replacing it
with the following:
SECTION 1017. LIMITATION ON SALE OF ASSETS.
----------------------------
(A)LIMITATION ON ASSET SALES BY THE COMPANY AND RESTRICTED COMPANY SUBSIDIARIEs.
----------------------------------------------------------------------------
(i) The Company shall not, and shall not permit any Restricted Company
Subsidiary to, directly or indirectly, engage in any Asset Sale unless
(A) the consideration received by the Company or such Restricted
Company Subsidiary for such Asset Sale is not less than the Fair Market
Value of the shares or other assets sold (as determined by the Board of
Directors of the Company, whose determination shall be conclusive and
evidenced by a resolution thereof) and (B) the consideration received
by the Company or the relevant Restricted Company Subsidiary in respect
of such Asset Sale consists of at least 75% cash or Cash Equivalents;
PROVIDED, that for purposes of this Section 1017(a) "Cash Equivalents"
shall include (X) the amount of any liabilities (other than liabilities
that are by their terms subordinated to the Notes) of the Company or
such Restricted Company Subsidiary (as shown on the Company's or such
Restricted Company Subsidiary's most recent balance sheet or in the
notes thereto) that are assumed by the transferee of any such assets or
other property in such Asset Sale or are no longer a liability of the
Company or any Restricted Company Subsidiary (and excluding any
liabilities that are incurred in connection with or in anticipation of
such Asset Sale), but only to the extent that such assumption is
effected on a basis under which there is no further recourse to the
Company or any of its Restricted Company Subsidiaries with respect to
such liabilities and (Y) any securities, notes or other obligations
received by the Company or any such Restricted Company Subsidiary in
connection with such Asset Sale that are converted by the Company or
such Restricted Company Subsidiary into cash within 60 days of receipt.
(ii) If the Company or any Restricted Company Subsidiary engages in an Asset
Sale, the Company may use the Net Cash Proceeds thereof, within 12
months after such Asset Sale, to (A) permanently repay or prepay the
Notes or any then outstanding Indebtedness of the Company that ranks
equally with the Notes or Indebtedness of any Restricted Company
Subsidiary or permanently reduce (without making any prepayment) any
Indebtedness of the Company ranking equally with the Notes or any
Indebtedness of a Restricted Company Subsidiary or (B) invest (or enter
into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset
Sale or in properties and assets that are or will be used in the
Telecommunications Business of the Company or a Restricted Company
Subsidiary, as the case may be. If any such legally binding agreement
to invest such Net Cash Proceeds is terminated, then the Company may,
within 60 days of such termination or within 12 months of such Asset
Sale, whichever is later, apply or invest such Net Cash Proceeds as
provided in clause (A) or (B) (without regard to the parenthetical
contained in such clause (B) above. The amount of such Net Cash
Proceeds not so used as set forth above in this paragraph (ii)
constitutes "Company Excess Proceeds."
(iii) When the aggregate amount of Company Excess Proceeds exceeds
$10,000,000 (or the equivalent thereof in one or more foreign
currencies after deducting fees that would be incurred in converting
such funds to US dollars), the Company shall, within 15 Business Days,
make an offer to purchase (a "Company Excess Proceeds Offer"), on a
proportional basis, the Notes and Indebtedness described in the second
succeeding sentence, in accordance with the procedures set forth below,
the maximum principal amount of Notes (expressed as a multiple of
$1,000) and such other Indebtedness that may be purchased with the
Company Excess Proceeds. Any Company Excess Proceeds Offer shall
include a pro rata offer under similar circumstances to purchase all
other Indebtedness of the Company ranking equally with the Notes which
Indebtedness contains similar provisions requiring the Company to
purchase such Indebtedness. The offer price as to each Note (the
"Company Excess Proceeds Offer Price") will be payable in cash in an
amount equal to 100% of the principal amount of such Note, plus accrued
and unpaid interest, if any, thereon to the date of purchase. To the
extent that the aggregate principal amount of Notes validly tendered
and not withdrawn by holders thereof pursuant to a Company Excess
Proceeds Offer is less than the Company Excess Proceeds, the Company
may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes validly tendered and not withdrawn
by holders thereof pursuant to a Company Excess Proceeds Offer exceeds
the Excess Proceeds, Notes to be purchased will be selected on a
proportional basis. Upon completion of such Company Exceeds Proceeds
Offer, the amount of Company Excess Proceeds shall be reset to zero.
(B) LIMITATION ON ASSET SALES BY PARENT AND RESTRICTED PARENT SUBSIDIARIES.
(i) The Parent shall not, and shall not permit any Restricted Parent
Subsidiary to, directly or indirectly, engage in any Asset Sale unless
(A) the consideration received by the Parent or such Restricted Parent
Subsidiary for such Asset Sale is not less than the Fair Market Value
of the shares or other assets sold (as determined by the Board of
Directors of the Parent, whose determination shall be conclusive and
evidenced by a resolution thereof) and (B) the consideration received
by the Parent or the relevant Restricted Parent Subsidiary in respect
of such Asset Sale consists of at least 75% cash or Cash Equivalents;
PROVIDED, that for purposes of this Section 1017(b), "Cash Equivalents"
shall include (X) the amount of any liabilities (other than liabilities
that are by their terms subordinated to the Notes) of the Parent or
such Restricted Parent Subsidiary (as shown on the Parent's or such
Restricted Parent Subsidiary's most recent balance sheet or in the
notes thereto) that are assumed by the transferee of any such assets or
other property in such Asset Sale or are no longer a liability of the
Parent or any Restricted Parent Subsidiary (and excluding any
liabilities that are incurred in connection with or in anticipation of
such Asset Sale), but only to the extent that such assumption is
effected on a basis under which there is no further recourse to the
Parent or any of the Restricted Parent Subsidiaries with respect to
such liabilities and (Y) and securities, notes or other obligations
received by the Parent or any of its Restricted Parent Subsidiaries in
connection with such Asset Sale that are converted by the Parent or
such Restricted Parent Subsidiary into cash within 60 days of receipt.
(ii) If the Parent or any Restricted Parent Subsidiary engages in an Asset
Sale, the Parent may use the Net Cash Proceeds thereof, within 12
months after such Asset Sale, to (A) commence an offer to purchase the
Notes or any then outstanding Indebtedness of the Parent that ranks
equally with the Notes or Indebtedness of any Restricted Parent
Subsidiary or permanently reduce (without making any prepayment) any
Indebtedness of the Parent ranking equally with the Guarantee or any
Indebtedness of a Restricted Parent Subsidiary, (B) cause the Company
to repay or prepay the Notes or any then outstanding Indebtedness of
the Company that ranks equally with the Notes or Indebtedness of any
Restricted Company Subsidiary or permanently reduce (without making any
prepayment) any Indebtedness of the Company ranking equally with the
Notes or Indebtedness of any Restricted Company Subsidiary, or (C)
invest (or enter into a legally binding agreement to invest) in
properties and assets to replace the properties and assets that were
the subject of the Asset Sale or in properties and assets that are or
will be used in the Telecommunications Business. If any such legally
binding agreement to invest such Net Cash Proceeds is terminated, then
the Parent may, within 60 days of such termination or within 12 months
of such Asset Sale, whichever is later, apply or invest such Net Cash
Proceeds as provided in clause (A), or (B) or (C) (without regard to
the parenthetical contained in such clause (C)) above. The amount of
such Net Cash Proceeds not so used as set forth above in this paragraph
(c) constitutes "Parent Excess Proceeds."
(iii) When the aggregate amount of Parent Excess Proceeds exceeds
$10,000,000, the Parent shall, within 15 business days, make an offer
to purchase (a "Parent Proceeds Offer"), on a proportional basis, the
Notes and Indebtedness described in the second succeeding sentence, in
accordance with the procedures set forth below, the maximum principal
amount of Notes (expressed as a multiple of $1,000) and such other
Indebtedness that may be purchased with the Parent Excess Proceeds. Any
Parent Excess Proceeds Offer made by the Parent shall include a pro
rata offer under similar circumstances to purchase all other
Indebtedness of the Parent ranking equally with the Notes which
Indebtedness contains similar provisions requiring the Parent to
purchase such Indebtedness. The offer price as to each Note (the
"Parent Excess Proceeds Offer Price") will be payable in cash in an
amount equal to 100% of the principal amount of such Note, plus accrued
and unpaid interest, if any, thereon to the date of purchase. To the
extent that the aggregate principal amount of Notes validly tendered
and not withdrawn by holders thereof pursuant to an Parent Excess
Proceeds Offer is less than the Parent Excess Proceeds, the Parent may
use such deficiency for general corporate purposes. If the aggregate
principal amount of Notes validly tendered and not withdrawn by holders
thereof pursuant to a Parent Excess Proceeds Offer exceeds the Parent
Excess Proceeds, Notes to be purchased will be selected on a
proportional basis. Upon completion of such Parent Excess Proceeds
Offer, the amount of Excess Proceeds shall be reset to zero.
SECTION 128. AMENDMENT TO SECTION 1018. Section 1018 of the Indenture is hereby
amended by deleting the existing Section 1018 in its entirety and replacing it
with the following:
SECTION 1018. LIMITATIONS ON DIVIDEND RESTRICTIONS.
------------------------------------
Neither the Company nor the Parent shall, and neither shall
they permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction of any kind on the ability of the Company or any Restricted
Subsidiary to (a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of any Capital Stock of the Company or such
Restricted Subsidiary owned by any Restricted Entity, (b) pay any Indebtedness
owed to any Restricted Entity, (c) make Investments in any Restricted Entity,
(d) transfer any of its property or assets to any Restricted Entity or (e)
guarantee any indebtedness of any Restricted Entity, except for such
encumbrances or restrictions existing under or by reason of (i) any agreement in
effect on the Issue Date, (ii) applicable law, (iii) customary non-assignment
provisions in leases entered into in the ordinary course of business and other
agreements of any Restricted Entity, (iv) any agreement or other instrument of a
Person acquired by the any Restricted Entity in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, (v) customary restrictions on transfers of property contained in any
security agreement (including a capital lease obligation) securing Indebtedness
of a Restricted Entity otherwise permitted hereunder, (vi) any encumbrance or
restriction with respect to a Restricted Subsidiary entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary permitted under Section 1017), (vii) any agreement or
instrument governing or relating to Indebtedness under any senior financing
facility permitted to be incurred under clause (g), (j) or (m) of the definition
of "Permitted Indebtedness" if such encumbrance or restriction applies only (A)
to amounts which at any point in time (other than during such periods as are
described in the following clause (B)) (1) exceed scheduled amounts due and
payable (or which are to become due and payable within 30 days) in respect of
the Notes or this Indenture for interest, premium and principal less the amount
of cash that is otherwise available to the Company or the Parent (as the case
may be) at such time for the payment of interest, premium and principal due and
payable in respect of the Notes or this Indenture or (2) if paid, would result
in an event described in the following clause (B) of this sentence, or (B)
during the pendency of any event that causes, permits or, after notice or lapse
of time, would cause or permit the holder or holders of such Indebtedness to
declare such Indebtedness to be immediately due and payable or to require cash
collateralization or cash cover for such Indebtedness for so long as such cash
collateralization or cash cover has not been provided; (viii) any encumbrance or
restriction under the Vendor Credit Facility; (ix) any encumbrance or
restriction relating to transfer of property or assets comprising an Initial
System pursuant to an Incumbent Agreement, and (x) any encumbrance or
restriction under any agreement that extends, renews, refinances or replaces
agreements containing the encumbrances or restrictions in the foregoing clauses
(i) through (vi) and (viii), so long as the Board of Directors of the Parent
determines in good faith that the terms and conditions of any such encumbrances
or restrictions, taken as a whole, are no less favorable to any Restricted
Entity and the holders of the Notes than those so extended, renewed, refinanced
or replaced."
AMENDMENTS TO "SECURITY"
SECTION 129. AMENDMENTS TO ARTICLE 12. Article 12 of the Indenture is
- - ---------------------------------------------
hereby amended by deleting the existing Article 12 in its entirety and replacing
it with the followin `g:
SECTION 1201. SECURITY
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(a) On the date hereof, the Company shall purchase the New Pledged
Securities, and at all times, subject to the Amended and Restated Pledge
Agreement, pledge to the Trustee the Pledged Securities as security for the
benefit of the Holders. The Pledged Securities must be in such amount as will be
sufficient upon receipt of scheduled interest on and principal payments of such
Pledged Securities, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company, to provide for payment
in full of the fourth and fifth scheduled interest payments due on the
Outstanding Notes. The Pledged Securities shall be pledged by the Company to the
Trustee for the benefit of the Holders pursuant to the Amended and Restated
Pledge Agreement and shall be held by the Trustee in the Escrow Account pending
disposition pursuant to the Amended and Restated Pledge Agreement.
(b) Each Holder, by its continued acceptance of a Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms, and authorizes and directs the Trustee to enter into the Amended and
Restated Pledge Agreement and to perform its respective obligations and exercise
its respective rights thereunder in accordance therewith. The Company shall do
or cause to be done all such acts and things as may be reasonably necessary or
proper, or as may be required by the provisions of the Amended and Restated
Pledge Agreement, to assure and confirm to the Trustee the security interest in
the Pledged Securities contemplated hereby, by the Amended and Restated Pledge
Agreement or any part thereof, as from time to time constituted, so as to render
the same available for the security and benefit of this Indenture and of the
Notes secured hereby, according to the intent and purposes herein expressed. The
Company shall take, or shall cause to be taken, any and all actions reasonably
required (and any action reasonably requested by the Trustee) to cause the
Amended and Restated Pledge Agreement to create and maintain, as security for
the obligations of the Company under this Indenture and the Notes, valid and
enforceable first priority liens in and on all the Pledged Securities, in favor
of the Trustee, superior to and prior to the rights of the third Persons and
subject to no other Liens.
(c) The release of any Pledged Securities pursuant to the Amended and
Restated Pledge Agreement will not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Pledged Securities are released pursuant to this Indenture and the Amended and
Restated Pledge Agreement. To the extent applicable, the Company shall cause TIA
Section 314(d), relating to the release of property or securities from the Lien
and security interest of the Amended and Restated Pledge Agreement and relating
to the substitution therefor of any property or securities to be subjected to
the Lien and security interest of the Amended and Restated Pledge Agreement, to
be complied with. Any certificate or opinion required by TIA Section 314(d) may
be made by an officer of the Company, except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent appraiser or other expert selected or
approved by the Company in the exercise of reasonable care
(d) The Company shall cause TIA Section 314(b), relating to opinions of
counsel regarding the Lien under the Amended and Restated Pledge Agreement, to
be complied with. The Trustee may, to the extent permitted by Section 602
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such instruments.
(e) The Trustee, in its sole discretion and without the consent of the
Holders, may, and at the request of the Holders of at least 25% in aggregate
principal amount of Notes then Outstanding shall, on behalf of the Holders, take
all actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Amended and Restated Pledge Agreement and (ii) collect and receive
any an all amounts payable in respect of the obligations of the Company
thereunder. The Trustee shall have power to institute and to maintain such suits
and proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders in the Pledged Securities (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or other governmental enactment, rule or
order that may be unconstitutional or otherwise invalid if the enforcement of,
or compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interest of the Holders of the
Trustee).
AMENDMENTS TO "DEFEASANCE AND COVENANT DEFEASANCE"
SECTION 130. AMENDMENTS TO ARTICLE 13. Article 13 of the Indenture is hereby
amended by deleting the existing Article 13 in its entirety and replacing it
with the following:
SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
-------------------------------------------------------------
The Company may, at its option by Board Resolution, at any
time, with respect to the Notes, elect to have either Section 1302 or Section
1303 be applied to all Outstanding Notes upon compliance with the conditions set
forth below in this Article Thirteen.
SECTION 1302. DEFEASANCE AND DISCHARGE.
-------------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1302, each of the Company and the Parent shall be
deemed to have been discharged from its obligations with respect to all
Outstanding Notes on the date the conditions set forth in Section 1304 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Notes, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 1305 and the other
Sections of this Indenture referred to in (A) and (B) below, and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Notes to receive, solely
from the trust fund described in Section 1304 and as more fully set forth in
such Section, payments in respect of the principal of (and premium, if any, on)
and interest and Liquidated Damages, if any, on such Notes when such payments
are due, (B) the Company's and the Parent's obligations with respect to such
Notes under Sections 304, 305, 306, 1002 and 1003, (C) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (D) this Article
Thirteen. Subject to compliance with this Article Thirteen, the Company may
exercise its option under this Section 1302 notwithstanding the prior exercise
of its option under Section 1303 with respect to the Notes. Forthwith upon
exercise by the Company of its option under this Section 1302 the Guarantees
shall cease to be of further force and effect.
SECTION 1303. COVENANT DEFEASANCE.
--------------------
Upon the Company's exercise under Section 1301 of the option
applicable to this Section 1303, the Company and the Parent shall be released
from their respective obligations under any covenant contained in Section 801(2)
and (3) and Section 803 and in Sections 1007 through 1018 with respect to the
Outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "covenant defeasance"), and the Notes shall thereafter
be deemed not to be "Outstanding" for the purposes of any direction, waiver,
consent or declaration or Act of Holders (and the consequences of any thereof)
in connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Outstanding Notes, the Company and the Parent
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 501(4), but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby.
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
------------------------------------------------
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Notes:
(1) The Company or the Parent shall have deposited or caused
to be deposited irrevocably with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the provisions of
this Article Thirteen applicable to it) as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Notes, (A) cash in
United States dollars, (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
and discharge, and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge, (i) the principal of (and premium, if any) and
interest and Liquidated Damages, if any, on, Outstanding Notes on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and premium, if
any) or installment of interest and Liquidated Damages, if any, and (ii) any
payments applicable to the Outstanding Notes on the day on which such payments
are due and payable in accordance with the terms of this Indenture and of such
Notes; provided that the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government Obligations to said payments
with respect to the Notes. Before such a deposit, the Company may give to the
Trustee, in accordance with Section 1103 hereof, a notice of its election to
redeem all of the Outstanding Notes at a future date in accordance with Article
Eleven hereof, which notice shall be irrevocable. Such irrevocable redemption
notice, if given, shall be given effect in applying the foregoing. For this
purpose, "U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to
any such U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
(2) No Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit or, insofar as
paragraphs (6) and (7) of Section 501 hereof are concerned, at any time during
the period ending on the 123rd day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or the Parent is a
party or by which it is bound.
(4) In the case of an election under Section 1302, the Company shall have
delivered to the Trustee an Opinion of Counsel stating that (x) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling, or (y) since April 1, 1998, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the Outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred.
(5) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such covenant defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such covenant
defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 1302 or the covenant defeasance under Section 1303 (as the case may be)
have been complied with.
SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
-------------------------------------------------------------
TRUST; OTHER MISCELLANEOUS PROVISIONS.
- - --------------------------------------
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in
respect of the Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal
(and premium, if any) and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Governmental
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Notes.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the or the Parent, as the
case may be, from time to time upon Company Request or Parent Request, as
applicable any money or U.S. Government Obligations held by it as provided in
Section 1304 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
SECTION 1306. REINSTATEMENT.
--------------
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's and the Parent's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 1302 or 1303, as the case may be, until such time
as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 1305; provided, however, that if the Company or the
Parent makes any payment of principal of (or premium, if any) or interest on any
Note following the reinstatement of its obligations, the Company or the Parent,
as applicable, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
PARENT GUARANTEE
SECTION 131. GUARANTEE. Parent agrees that forthwith upon execution of this
Supplemental Indenture it will enter into a guarantee of the Company's
obligations under the Notes in the form attached hereto as Exhibit 1.
MISCELLANEOUS
SECTION 132. WAIVER. Without limitation to Section 1019 of the Indenture, the
Parent may omit in any particular instance to comply with any term provision or
condition set forth in Section 803 or Sections 1005 through 1018, inclusive, if
before or after the time for such compliance the Holders of at least a majority
in aggregate principal amount of the Outstanding Notes, by Act of such Holders,
waive such compliance in such instance with such term, provision or condition
except to the extent so expressly waived, and, until such waivers shall become
effective, the obligations of the Parent and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect.
SECTION 133. ACTS OF HOLDERS.
---------------
(a) Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Supplemental Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Parent and/or
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Supplemental Indenture and conclusive in favor of the Trustee,
the Parent and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgements of deeds, certifying that the individual signing such
instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by any Person, and the
date of holding the same, shall be proved by the Note Register.
(d) If the Parent and/or the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company or the Parent (as the case may be) may, at its option, by or
pursuant to a Board Resolution, fix in advance a record date for the
determination of Holders entitled to give such request, demand, authorization,
direction, notice, consent, waiver or other Act, but neither the Company nor the
Parent shall have no obligation to do so. Notwithstanding TIA Section 316(c),
such record date shall be the record date specified in or pursuant to such Board
Resolution, which shall be a date not earlier than the date 30 days prior to the
first solicitation of Holders generally in connection therewith and not later
than the date such solicitation is completed. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the Outstanding Notes shall be computed as of such record
date; PROVIDED that no such authorization, agreement or consent by the Holders
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Note shall bind every future Holder of the same
Note and the Holder of every Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee, the Parent or the Company in
reliance thereon, whether or not notation of such action is made upon such Note.
SECTION 134. NOTICE OF HOLDERS; WAIVER.
-------------------------
Where this Supplemental Indenture provides for notice of any
event to Holders by the Parent or the Trustee, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at its
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular mail
service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.SECTION 135. COUNTERPARTS. This
Supplemental Indenture may be signed in any number of counterparts each of which
so executed shall be deemed to be an original, but all such counterparts
together constitute but one and the same Supplemental Indenture.
SECTION 136. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
-------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
SECTION 137. SEPARABILITY CLAUSE.In case any provision in this Supplemental
-------------------
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 138. HEADINGS. The various headings of this Supplemental Indenture
--------
are inserted for convenience only and shall not affect the meaning or
interpretation of this Supplemental Indenture or any provisions hereof or
thereof.
SECTION 139. EFFECT OF SUPPLEMENTAL INDENTURE. Pursuant to Section 902 of the
Indenture, upon the execution of this Supplemental Indenture, the Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties and liabilities and immunities under the Indenture
of the Trustee shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of this Supplemental Indenture shall be and be deemed to be part
of the terms and conditions of the Indenture for any and all purposes.
SECTION 140. INDENTURE IN FULL FORCE AND EFFECT AS SUPPLEMENTED. Except as
specifically stated herein, all of the terms and conditions of the Indenture
shall remain in full force and effect. All references to the Indenture in any
other document or instrument shall be deemed to mean the Indenture, as
supplemented by this Supplemental Indenture. This Supplemental Indenture shall
not constitute a novation of the Indenture, but shall constitute an amendment
thereto. The parties hereby agree to be bound by the terms and obligations of
the Indenture, as supplemented by this Supplemental Indenture, as though the
terms and obligations of the Indenture were set forth herein.
[Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
PATHNET, INC.
By: /s/ William. R. Smedberg V
-----------------------------------------
Name: William R. Smedberg, V
Title: Executive Vice President, Corporate
Development
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ William. R. Smedberg V
-----------------------------------------
Name: William R. Smedberg, V
Title: Executive Vice President, Corporate
Development
THE BANK OF NEW YORK, TRUSTEE
By: /s/ Terence Rawlins
-----------------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
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 101 Barclay Street, Floor 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 101 Barclay Street, New York, New York 10286,
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
-----------------------------------
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 101 Barclay Street, Floor 21 West, New York, New York
10286, 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.
-------------
(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
------------------------------
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
---------
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.
1015 31st Street, N.W.
Washington, D.C. 20007
Telecopier: (202) 625-7369
Attention: General Counsel
WITH A COPY TO:
--------------
Bruce Wilson, Esq.
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington D.C. 20004
Telecopier: (202) 662-6291
IF TO THE TRUSTEE:
-----------------
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Telecopier: (212) 815-5915
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]
<PAGE>
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/ William. R. Smedberg V
-----------------------------------
Name: William R. Smedberg, V
Title: Executive Vice President, Corporate
Development
Trustee:
THE BANK OF NEW YORK, Trustee
By: /s/ Terence Rawlins
-----------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
THE BANK OF NEW YORK,
as Pathnet Securities Intermediary
By: /s/ Terence Rawlins
-----------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE>
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:
<PAGE>
PLEDGED SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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ORIGINAL PRINCIPAL
DESCRIPTION OF DEBT CUSIP NO(S) FINAL MATURITY AMOUNT COST OF CLOSING
------------------- ----------- -------------- ------ ---------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
- - -------------------------- ---------------- ------------------ ---------------------- -----------------------
</TABLE>
<PAGE>
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
<PAGE>
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.
<PAGE>
<TABLE>
Coupon Interest Total Available Interest Payment Net Cash Flow
SECURITY COUPON RATE MATURITY DATE PAR AMOUNT (1) CASH FLOW (2) (3) (4)
-------- ----------- ------------- ---------- --- --------- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
(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.
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 4.7
PATHNET TELECOMMUNICATIONS, INC.
GUARANTEE
1. GUARANTEE OF PAYMENT AND PERFORMANCE OF OBLIGATIONS.
----------------------------------------------------
(a) For value received, Pathnet Telecommunications, Inc. (the "Parent")
unconditionally guarantees to the holder of any
Outstanding Note or Notes (a "Holder") the full and
punctual payment and performance of the Obligations
(as defined in subsection (b) below). This Guarantee
is an absolute, unconditional and continuing
guarantee of the full and punctual payment and
performance by the Company of each of the
Obligations, and not of collectability only, and is
no way conditioned upon any requirement that any
Holder first attempt to seek payment or performance
from the Company or any other guarantor or surety or
resort to any security or other means of obtaining
payment of all or any of the Obligations or upon any
other contingency. Upon any default by the Company in
the full and punctual payment or performance of any
of the Obligations, if such default remains uncured
after the giving of any required notice and after any
applicable period of cure, the liabilities and
obligations of the Parent hereunder shall at the
option of any Holder become forthwith effective,
matured, due and payable without further demand or
notice of any nature, all such demands and notices
being expressly waived by the Parent.
(b) As used herein, the term "Obligations" means all obligations,covenants,
liabilities, undertakings and agreements of any kind
of the Company to all or any of the Holders contained
in the Indenture, to be performed after the date
hereof, howsoever, incurred, arising or evidenced,
whether now or hereafter existing, due or to become
due or of payment or performance and including,
without limitation: (i) the prompt payment in full,
in United States currency, when due (whether at
stated maturity, by acceleration, by mandatory or
optional prepayment or otherwise) of the principal of
and interest on the Notes (including interest on any
overdue principal, and, to the extent permitted by
applicable law, on any overdue interest) and all
other amounts from time to time owing by the Company
under the Indenture and under the Notes (including
costs, expenses and taxes); and (ii) the prompt
performance and observance by the Company of all
covenants, agreements and conditions on its part to
be performed and observed under the Indenture, in
each case strictly in accordance with the terms
thereof (such payments and other obligations being
herein collectively referred to as the
"Obligations").
2. GUARANTEE CONTINUING AND LIABILITY UNAFFECTED.
(a) Subject to Section 2 (c), this is a continuing guarantee and shall
be binding upon the Parent regardless of how long
before or after the date hereof any part of the
Obligations was or is incurred by the Company.
Subject to Section 2 (c), this Guarantee may be
enforced by any or all of the Holders from time to
time and as often as occasion for such enforcement
may arise.
(b) If after receipt of any payment from the Parent made hereunder the
Holders, or any of them, are compelled to surrender
or voluntarily surrender such payment or proceeds to
any person because such payment or application of
proceeds is or may be avoided, invalidated,
recaptured, or set aside as a preference, fraudulent
conveyance, impermissible setoff or for any other
reason, whether or not such surrender is the result
of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over the
Holders, or (ii) any settlement or compromise by the
Holders of any claim as to any of the foregoing with
any person (including the Company), then the
Obligations or part thereof affected shall be
reinstated and continue and this Guarantee shall be
reinstated and continue in full force as to such
Obligations or part thereof as if such payment or
proceeds had not been received. The provisions of
this Section 2(b) shall survive the termination of
this Guarantee and any satisfaction and discharge of
the Company by virtue of any payment, court order or
any federal or state law.
(c) The Parent shall be subrogated to all rights of the Holders in respect
of any amounts paid by the Parent pursuant to the
provisions of this Guarantee; provided, however, that
Parent shall be entitled to enforce, or to receive
any payments arising out of or based upon, such right
of subrogation with respect to any Obligation only
after the payment of all amounts owed by the Company
to the Holders with respect to all of the Obligations
have been paid in full.
(d) This Guarantee shall terminate and be of no further force and effect
as to any Note upon full payment of the Redemption
Price with respect to such Note, PROVIDED, however,
that this Guarantee shall continue to be effective or
shall be reinstated, as the case may be, if at any
time the Company must restore payment of any sums
paid under such Note or under this Guarantee for any
reason whatsoever.
3. UNCONDITIONAL NATURE OF PARENT'S OBLIGATIONS AND LIABILITIES.
The obligations and liabilities of the Parent hereunder shall be
absolute and unconditional, and shall not be subject to any
counterclaim, set-off, deduction or defense based upon any claim the
Parent may have against the Company or any other person or entity. Such
obligations and liabilities shall remain in full force and effect for
the period set forth in Section 2 above without regard to any event,
circumstance or condition (whether or not the Parent shall have
knowledge or notice thereof) which but for the provisions of this
Section might constitute a legal or equitable defense or discharge of a
guarantor or surety or which might in any way limit recourse against
the Parent, including:
(a) any amendment or modification or supplement to the
terms of the Indenture, this Guarantee or any of the
Notes, including the renewal or extension of the time
for payment of the Notes or the granting of time in
respect of the payment thereof;
(b) any waiver, consent, extension, granting of time,
forbearance, indulgence or other action or inaction
under or in respect of the Indenture or the Notes, or
any exercise or non-exercise of any right, remedy or
power in respect thereof;
(c) the invalidity or unenforceability, in whole or in
part of the Indenture or this Guarantee resulting
from the Company's or the Parent's lack of authority
to enter into the Indenture and/or to incur any or
all of the Obligations, by any person acting for the
Company or the Parent without or in excess of
authority;
(d) any actual, purported or attempted sale, assignment
or other transfer by any or all of the Holders or by
the Company or the Parent of the Indenture or the
Notes or of any of their rights, interests or
obligations thereunder;
(e) the addition of any party as a guarantor or surety of
all or any part of the Obligations or any limitation
of the liability of any additional guarantor or
surety of all or any part of the Obligations under
any other agreement;
(f) any merger or consolidation of the Company or of the
Parent into or with any other entity, or any sale,
lease, transfer or other disposition of any or all of
any Company's or the Parent's assets or any sale,
transfer or other disposition of any or all of the
economic interests in the Company or the Parent to
any other person or entity;
(g) the recovery of any judgment against the Company or
any action to enforce the same; or
(h) any change in the financial condition of the Company
or the Company's entry into an assignment for the
benefit of creditors, an arrangement or any other
agreement or procedure for the restructuring of its
liabilities, or the Company's insolvency, bankruptcy,
reorganization, dissolution, liquidation or any
similar action by or occurrence with respect to the
Company.
4. PARENT'S WAIVER. The Parent unconditionally waives, to the
---------------
fullest extent permitted by law:
(a) fullest extent permitted by law: notice of any of the matters referred
to in Section 3 hereof;
(b) diligence, presentment, demand of payment and filing of claims with a
court in the event of bankruptcy or insolvency of the Company;
(c) any right to the enforcement, assertion or exercise by any or all of
the Holders of any of their rights, powers or remedies under, against
or with respect to the Company (i) any other guarantor or surety, or
(ii) any security for all or any part of the Obligations;
(d) any requirement that the Parent be joined as a party in any action or
proceeding against the Company to enforce any of the provisions of the
Indenture;
(e) acceptance of this Guarantee by any Holder;
and covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in this Guarantee.
5. REPRESENTATIONS AND WARRANTIES. The Parent represents and
------------------------------
warrants that:
(a) the Parent is a corporation duly organized and
validly existing in good standing under the laws of
the State of Delaware and has the full power,
authority and legal right to enter into and perform
its obligations under this Guarantee;
(b) this Guarantee has been duly authorized, executed and
delivered by the Parent and constitutes the legal,
valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its
terms, except for the effect of bankruptcy,
insolvency, reorganization, moratorium, receivership
or similar laws affecting the enforcement of
creditors' rights generally;
(c) the execution, delivery and performance by the Parent
of this Guarantee do not and will not contravene any
applicable law, rule, regulation, judgment or order
and do not and will not contravene the provisions of,
constitute a breach of or default under, or result in
the creation of any security interest, lien or
encumbrance on any of the property of the Parent
pursuant to, the Parent's articles of incorporation
or by-laws or any indenture, mortgage, license or
other contract, agreement or instrument to which the
Parent is a party or by which it is bound.
6. ATTORNEY'S COSTS. The Parent agrees to pay all reasonable
-----------------
attorney's fees and disbursements and all other reasonable and actual costs and
expenses which may be incurred by the Holders in the enforcement of this
Guarantee.
7. SUCCESSORS AND ASSIGNS. This Guarantee shall be binding
------------------------
upon the Parent and its respective successors and assigns, and shall inure to
the benefit of and be enforceable by the Holders and their respective successors
and assigns.
8. GOVERNING LAW. This Guarantee shall be governed by and
--------------
construed in accordance with the laws of the State of New York.
9. SEVERABILITY. Wherever possible, each provision of this
Guarantee shall be construed in such manner as to be valid and enforceable
against the Parent under applicable law, but if any provision hereof shall be
deemed invalid or unenforceable to any extent against the Parent in any
jurisdiction, such provision shall be ineffective only to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remainder of such provision or any of the other provisions hereof, and any
such invalidity or unenforceability against the Parent in one jurisdiction shall
not render such provision ineffective in any other jurisdiction.
10. NOTICES.
-------
Any notice, request or other communication required or
permitted to be given hereunder to the Holders shall be given by the Parent in
the same manner as set forth in Section 106 of the Indenture.
11. TRANSFERABILITY. This Guarantee is solely for the benefit of
---------------
the Holders and is not separately transferable from the Notes.
12. HEADINGS. Section headings appearing in this Guarantee are
--------
for convenience of reference only and shall not define, limit, amplify or
otherwise modify any provision hereof. Capitalized terms used herein have the
meanings given to them in the Indenture.
This Guarantee shall not be valid or obligatory to any purpose until
the certificate of authentication on the Note on which this Guarantee has been
endorsed shall have been executed by the Trustee under the Indenture by the
signature of one of its authorized officers.
IN WITNESS WHEREOF, the Parent has caused this Guarantee to be executed
on its behalf by an officer or other person thereunto duly authorized as of
March 30, 2000.
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ W.R. Smedberg V
-----------------------------------
William R. Smedberg, V
Executive Vice President, Corporate Development
EXHIBIT 4.10
WARRANT AGREEMENT AMENDMENT AND WAIVER
This AMENDMENT TO WARRANT AGREEMENT AND WAIVER is dated as of
March 30, 2000 ("AGREEMENT"), by and between PATHNET, INC. (the "Company"), a
Delaware corporation, and THE BANK OF NEW YORK, warrant agent (with any
successor warrant agent, the "WARRANT AGENT").
WHEREAS, the Company proposes to enter into a reorganization
involving the Company, Pathnet Telecommunications, Inc. ("Pathnet Telecom"), the
existing shareholders of Company, and certain proposed new shareholders of
Pathnet Telecom (the "Reorganization").
WHEREAS, in conjunction with the Reorganization, the Company
and the Warrant Agent desire to amend the Warrant Agreement (the "Warrant
Agreement") dated as April 8, 1998 by and between the Company and the Warrant
Agent pursuant to the terms of this Agreement.
WHEREAS, in conjunction with the Reorganization, the Company
and the Warrant Agent desire to waive certain provisions of the Warrant
Agreement as set out in this Agreement.
WHEREAS, Section 7.01 of the Warrant Agreement provides that
the Company and the Warrant Agent may amend the terms of the Warrant Agreement
and the Warrants, and waivers to departures from the terms of the Warrant
Agreement and Warrants may be given, with the consent of the Requisite Warrant
Holders (as defined in the Warrant Agreement).
WHEREAS, the Requisite Warrant Holders have consented to the
proposed amendments to and waivers of the Warrant Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Capitalized terms used herein and not defined
herein shall have the meanings ascribed to such terms in the Warrant Agreement.
ARTICLE II
AMENDMENTS
SECTION 2.01. Effective as of the date hereof, Section 5.01(d)
of the Warrant Agreement shall be amended by inserting, immediately after the
phrase, "(a "Fundamental Transaction")," in the sixth line, the following words:
"(it being understood that a single transaction or series of related
transactions pursuant to which not less than ninety-five percent of the
outstanding shares of capital stock of the Company are exchanged for shares in a
single Affiliate (or any Person who, pursuant to such transaction, will become
such an Affiliate) shall be deemed to be a Fundamental Transaction, and the
Affiliate acquiring such shares shall, for purposes of this clause, be deemed to
be the Surviving Person (as defined below)),".
SECTION 2.02. Subject to, and effective as of, the
consummation of the Reorganization, the date "April 8, 2000" shall be deleted
where it appears in the definition of "Exercise Event" in Section 2.01 of the
Warrant Agreement, and from the two places where it appears in Exhibit A (Form
of Warrant Certificate) to the Warrant Agreement and in each place where such
date is deleted the date "April 30, 2001" shall be inserted.
ARTICLE III
WAIVERS
......... SECTION 3.01. The Company and the Warrant Agent hereby waive
the provisions of Section 2.02(a) of the Warrant Agreement such that the
consummation of the Reorganization will not be deemed to constitute a Change of
Control nor an Exercise Event for the purposes of the Warrant Agreement.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. This Agreement shall be governed by and
construed in accordance with the laws of the state of New York.
SECTION 4.02. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
SECTION 4.03. A copy of this Agreement shall be available
during regular business hours at the principal corporate trust office of the
Warrant Agent, for inspection by the holder of any Warrant Certificate. The
Warrant Agent may require such holder to submit his Warrant Certificate for
inspection by it.
SECTION 4.04. Except as expressly amended or waived by this
Agreement, the Warrant Agreement shall continue unchanged and in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the day and year first above written.
PATHNET, INC.
By:/s/ W.R. Smedberg V
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
Warrant Agent
By: /s/ Terence Rawlins
---------------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
EXHIBIT 4.11
WARRANT REGISTRATION RIGHTS AGREEMENT WAIVER
This WAIVER is dated as of March 30, 2000 ("WAIVER"), and is
made by PATHNET, INC. (the "Company"), a Delaware corporation, with the consent
of Spectrum Equity Investors, L.P., New Enterprise Associates VI, Limited
Partnership, Onset Enterprise Associates II, L.P., FBR Technology Venture
Partners, L.P., Toronto Dominion Capital (USA) Inc., Grotech Partners IV, L.P.,
Richard A. Jalkut and David Schaeffer (the "Permitted Holders").
WHEREAS, the holders of the warrants expiring April 15, 2008
(the "Warrants") of the Company are entitled to the benefits of a Warrant
Registration Rights Agreement (the "Registration Rights Agreement") dated as of
April 8, 1998 between the Company, the Permitted Holders and the Initial
Purchasers (as defined therein).
WHEREAS, the Company proposes to enter into a reorganization
involving the Company, Pathnet Telecommunications, Inc. ("Pathnet Telecom"), the
existing shareholders of Company, and certain proposed new shareholders of
Pathnet Telecom (the "Regoranization").
WHEREAS, in conjunction with the Reorganization, the Company
desires to waive certain provisions of the Registration Rights Agreement, as set
out in this Waiver.
WHEREAS, Section 6(d) of the Registration Rights Agreement
provides that waivers or consents to departures from the provisions thereof may
be made with the prior written consent of (i) the holders of not less than a
majority of the outstanding Warrants, and (ii) with respect to Sections
affecting the rights or obligations of the Permitted Holders, the Permitted
Holders who hold not less than a majority of shares of the capital stock held by
the Permitted Holders.
WHEREAS, the holders of a majority of the outstanding Warrants
have consented to the proposed waiver of the provisions of the Registration
Rights Agreement as set out in this Waiver.
WHEREAS, by signing this Waiver or any copy hereof, the
Permitted Holders have provided their written consent to the waiver of the
provisions of the Registration Rights Agreement as set out in this Waiver.
WAIVER
The Company hereby waives the provisions of Section 3.2 of the
Registration Rights Agreement such that the consummation of the Reorganization
shall not be deemed to constitute a Change of Control and shall not give rise to
any Tag-Along Right (as each such term in defined in Section 3.2 of the
Registration Rights Agreement).
PATHNET, INC.
By: /s/ W. R. Smedberg V
------------------------------------
Name:
Title:
We hereby consent to the waiver of the provisions of Section 3.2 of the
Registration Rights Agreement as set out above:
SPECTRUM EQUITY INVESTORS, L.P.,
In its Capacity as a Permitted Holder
By:/s/ Chris J. Maroni
------------------------------------------
Name: K. J. Maroni
Title: illegible
NEW ENTERPRISE ASSOCIATES VI, Limited
Partnership,
In its Capacity as a Permitted Holder
By: /s/ illegible
------------------------------------------
Name:
Title:
ONSET ENTERPRISE ASSOCIATES II, L.P.,
In its Capacity as a Permitted Holder
By:
By: /s/ R Kuhling
------------------------------------------
Name:
Title: illegible
OEA II Management
The General Partner of
Onset Enterprise Associates II, L.P.,
FBR TECHNOLOGY VENTURE PARTNERS, L.P.,
In its Capacity as a Permitted Holder
By: /s/ illegible
------------------------------------------
Name:
Title:
TORONTO DOMINION CAPITAL (USA) INC.,
In its Capacity as a Permitted Holder
By: /s/ illegible
------------------------------------------
Name: Stephen A. Reistedter
Title: Vice President and Director
GROTECH PARTNERS IV, L.P.,
In its Capacity as a Permitted Holder
By: /s/ Patrick J. Kerins
------------------------------------------
Name: Patrick J. Kerins
Title: Managing Director
/s/ Richard A. Jalkut
------------------------------------------
Richard A. Jalkut
------------------------------------------
David Schaeffer
EXHIBIT 4.12
------------------------------------------------------------------------------
SUPPLEMENTAL WARRANT AGREEMENT
Dated as of March 30, 2000
By and Between
PATHNET TELECOMMUNICATIONS, INC.
and
The Bank of New York,
Warrant Agent
--------------------
Warrants to Purchase Common Stock
Par Value $0.01 Per Share
=====================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
<S> <C> <C>
SECTION 1.01. Issuance of Warrants..............................................................................2
SECTION 1.02. Form of Warrant Certificates......................................................................2
SECTION 1.03. Execution of Warrant Certificates.................................................................2
SECTION 1.04. Authentication and Delivery.......................................................................3
SECTION 1.05. [Intentionally Omitted]...........................................................................4
SECTION 1.06. Separation of Warrants and Notes..................................................................4
SECTION 1.07. Registration......................................................................................4
SECTION 1.08. Registration of Transfers or Exchanges............................................................4
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant Certificates................................9
SECTION 1.10. Offices for Exercise, etc........................................................................10
ARTICLE II
DURATION, EXERCISE OF WARRANTS; EXERCISE PRICE
AND REPURCHASE OF WARRANTS
SECTION 2.01. Duration of Warrants.............................................................................10
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery................................................10
SECTION 2.03. Cancellation of Warrant Certificates.............................................................13
SECTION 2.04. Notice of an Exercise Event......................................................................14
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights............................................................................14
SECTION 3.02. Obtaining Stock Exchange Listings................................................................14
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes.................................................................................14
SECTION 4.02. Rules 144 and 144A...............................................................................15
SECTION 4.03. Form of Initial Public Equity Offering...........................................................15
SECTION 4.04. Securities Act and Applicable State Securities Laws..............................................15
SECTION 4.05. Resolution of Preemptive Rights, If Any..........................................................15
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Rate; Notices.............................................................16
SECTION 5.02. Fractional Shares................................................................................23
SECTION 5.03. Certain Distributions............................................................................23
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent....................................................................................23
SECTION 6.02. Conditions of Warrant Agent's Obligations........................................................24
SECTION 6.03. Resignation and Appointment of Successor.........................................................27
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment........................................................................................29
SECTION 7.02. Notices and Demands to the Company and Warrant Agent.............................................29
SECTION 7.03. Addresses for Notices to Parties and for Transmission of Documents...............................30
SECTION 7.04. Notices to Holders...............................................................................30
SECTION 7.05. Applicable Law...................................................................................30
SECTION 7.06. Persons Having Rights Under Agreement............................................................30
SECTION 7.07. Headings.........................................................................................31
SECTION 7.08. Counterparts.....................................................................................31
SECTION 7.09. Inspection of Agreement..........................................................................31
SECTION 7.10. Availability of Equitable Remedies...............................................................31
SECTION 7.11. Obtaining of Governmental Approvals..............................................................31
EXHIBIT A - Form of Warrant Certificate EXHIBIT B - Form of Legend for Global Warrant
EXHIBIT C - Certificate To Be Delivered upon Exchange or Registration of Transfer of Warrants
EXHIBIT D - Form of Certificate to be Delivered in Connection with Regulation S Transfers
</TABLE>
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
DEFINED TERM...................................................................................................PAGE
- - ------------ ----
Affiliate........................................................................................................18
Agreement..................................................................................................Preamble
Business Day.....................................................................................................10
Capital Stock....................................................................................................21
Cashless Exercise................................................................................................12
Cashless Exercise Ratio..........................................................................................12
CEO...............................................................................................................3
Common Stock......................................................................................................2
Company....................................................................................................Preamble
Convertible Preferred Stock......................................................................................21
Current Market Value.............................................................................................21
Definitive Warrants...............................................................................................2
Depositary .......................................................................................................2
Distribution.....................................................................................................23
Distribution Rights..............................................................................................23
Election to Exercise.............................................................................................11
Exercisability Date..............................................................................................11
Exercise Date....................................................................................................12
Exercise Event...................................................................................................11
Exercise Price...................................................................................................11
Exercise Rate....................................................................................................11
Expiration Date..................................................................................................10
Fair Market Value................................................................................................22
Fundamental Transaction..........................................................................................19
Global Shares....................................................................................................13
Global Warrants...................................................................................................2
Indenture..................................................................................................Recitals
Independent Financial Expert.....................................................................................22
Initial Public Equity Offering...................................................................................11
Initial Purchasers.........................................................................................Recitals
Notes......................................................................................................Recitals
Officers' Certificate.............................................................................................7
Pathnet....................................................................................................Recitals
Pathnet Warrant............................................................................................Recitals
Pathnet Warrant Agreement..................................................................................Recitals
Pathnet Warrant Registration Rights Agreement..............................................................Recitals
Person...........................................................................................................11
Private Placement Legend..........................................................................................8
Purchase Agreement.........................................................................................Recitals
QIB.............................................................................................................. 5
Registrar.........................................................................................................4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DEFINED TERM...................................................................................................PAGE
- - ------------ ----
Regulation S......................................................................................................5
Related Parties..................................................................................................24
Reorganization.............................................................................................Recitals
Requisite Warrant Holders........................................................................................29
Resale Restriction Termination Date...............................................................................5
Securities Act....................................................................................................5
Subject Class....................................................................................................15
Surviving Person.................................................................................................19
Time of Determination............................................................................................22
Triggering Date..................................................................................................11
Trustee....................................................................................................Recitals
Units......................................................................................................Recitals
Warrant....................................................................................................Recitals
Warrant Agent..............................................................................................Recitals
Warrant Agent Office.............................................................................................10
Warrant Certificates.......................................................................................Recitals
Warrant Exercise Office..........................................................................................11
Warrant Register..................................................................................................4
Warrant Registration Rights Agreement......................................................................Recitals
Warrant Shares.......................................................................................Recitals and 2
</TABLE>
<PAGE>
SUPPLEMENTAL WARRANT AGREEMENT
SUPPLEMENTAL WARRANT AGREEMENT dated as of March 30, 2000
("AGREEMENT"), by and between PATHNET TELECOMMUNICATIONS, INC. (the "COMPANY"),
a Delaware corporation, and THE BANK OF NEW YORK, warrant agent (with any
successor warrant agent, the "WARRANT AGENT").
WHEREAS, Pathnet, Inc. ("PATHNET") entered into a purchase
agreement (the "PURCHASE AGREEMENT") dated April 1, 1998, with, among others,
Merrill Lynch & Co., in which Pathnet agreed to sell to the Initial Purchasers
(as defined in the Purchase Agreement) an aggregate of 350,000 units (the
"UNITS"), each consisting of (i) $1,000 principal amount of 12-1/4% Senior Notes
due 2008 (the "NOTES") of Pathnet to be issued under an indenture dated as of
April 8, 1998, as amended (the "INDENTURE"), between Pathnet and The Bank of New
York, trustee (the "TRUSTEE") and (ii) one warrant (a "PATHNET WARRANT"),
initially entitling the holder thereof to purchase 1.1 shares of common stock of
Pathnet; and
WHEREAS, the holders of the Pathnet Warrants were entitled to
the benefits of a Warrant Agreement dated as of April 8, 1998 (the "PATHNET
WARRANT AGREEMENT") between Pathnet and the Trustee and a Warrant Registration
Rights Agreement dated as of April 8, 1998 (the "PATHNET WARRANT REGISTRATION
RIGHTS AGREEMENT"), among Pathnet, the Permitted Holders (as defined therein)
and the Initial Purchasers; and
WHEREAS, in conjunction with a reorganization (the
"REORGANIZATION") involving, among others, the Company, Pathnet, three new
investors, Pathnet's shareholders and holders of the Notes, Pathnet sought and
received the consent of the Requisite Warrant Holders (as defined herein) to
certain amendments to the Pathnet Warrant Agreement and Pathnet Warrant
Registration Rights Agreement (as so amended, the "WARRANT REGISTRATION RIGHTS
AGREEMENT"); and
WHEREAS, the Reorganization constituted a Fundamental
Transaction (as defined in the Pathnet Warrant Agreement, as amended)
culminating in the substitution of this Supplemental Warrant Agreement in lieu
of the Pathnet Warrant Agreement (which, as of such substitution, shall be
terminated) and the conversion of each Pathnet Warrant into a warrant issued by
the Company (a "WARRANT") which, as of the date hereof, entitles the holder
thereof to purchase 3.19 shares (the "WARRANT SHARES") of Company Common Stock
(as defined herein), subject to adjustments as provided herein and in the
Warrant. Upon such conversion, each of the Pathnet Warrants shall cease to be
outstanding, and any certificate evidencing a Pathnet Warrant shall evidence the
right to secure certificates evidencing Warrants. The certificates evidencing
the Warrants are herein referred to collectively as the "WARRANT CERTIFICATES";
and
WHEREAS, the Company desires the Warrant Agent to assist the
Company in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among other
things, the terms and conditions on which the Warrants may be issued, exchanged,
cancelled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. ISSUANCE OF WARRANTS. The Company hereby issues
Warrants to holders of Pathnet Warrants in exchange for such Pathnet Warrants at
the rate of one Warrant for each Pathnet Warrant.
Each Warrant Certificate shall evidence the number of Warrants
specified therein. Each Warrant evidenced by a Warrant Certificate, when it
becomes exercisable as provided herein and therein, shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to the holder of such Warrant)
3.19 fully paid, registered and non-assessable Warrant Shares at an exercise
price of $0.01 per share. The number of Warrant Shares issuable upon exercise of
a Warrant is subject to adjustment as provided herein and in the Warrant. The
number of shares of the Company's common stock, par value $0.01 per share, and
any other class or series of common equity equivalent shares of the Company into
which such common stock may be reclassified and sold to the Public in an Initial
Public Equity Offering (the "COMMON STOCK") issuable upon exercise of a Warrant
is subject to adjustment as provided herein and in the Warrant. Unless the
context otherwise requires, the term "WARRANT SHARES" shall also include any
other securities or property issuable and deliverable upon exercise of a Warrant
as provided in Article V, subject to adjustment as provided herein and in the
Warrant.
From and after the date hereof, any certificate that
previously evidenced a Pathnet Warrant shall evidence only the right to receive
a Warrant Certificate evidencing a Warrant and to secure the rights, benefits
and obligations of such Warrant and of this Warrant Agreement.
SECTION 1.02. FORM OF WARRANT CERTIFICATES. The Warrant
Certificates will initially be issued either in global form (the "GLOBAL
WARRANTS") or in registered form as definitive Warrant Certificates (the
"DEFINITIVE WARRANTS"), in either case substantially in the form of EXHIBIT A
attached hereto. Any Global Warrants to be delivered pursuant to this Agreement
shall bear the legend set forth in EXHIBIT B attached hereto. Such Global
Warrants shall represent such of the outstanding Warrants as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Warrants from time to time endorsed thereon and that the aggregate
amount of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate. Any endorsement of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Warrants represented thereby shall be made by the Warrant Agent and the
Depositary (as defined below) in accordance with instructions given by the
holder thereof. The Depository Trust Company shall act as the depositary (with
any successor depositary, the "DEPOSITARY") with respect to the Global Warrants
until a successor shall be appointed by the Company and the Warrant Agent. Under
the circumstances set forth in Section 1.08 hereof, a holder of Warrants may
receive from the Warrant Agent or the Depository Definitive Warrants upon
written request.
SECTION 1.03. EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by the Chairman of its
Board of Directors, its Chief Executive Officer ("CEO"), its President, its
Chief Financial Officer or any executive vice president or vice president and
attested by its Secretary or any Assistant Secretary. Such signatures may be the
manual or facsimile signatures of the present or any future such officers. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be authenticated and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the Company. Any
Warrant Certificate may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such person was not such an officer.
SECTION 1.04. AUTHENTICATION AND DELIVERY. Subject to the
immediately following paragraph, Warrant Certificates shall be authenticated by
manual signature and dated the date of authentication by the Warrant Agent and
shall not be valid for any purpose unless so authenticated and dated. The
Warrant Certificates shall be numbered and shall be registered in the Warrant
Register (as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of
the Company, which order shall be signed by the Chairman of its Board of
Directors, its President, its CEO, its Chief Financial Officer or any executive
vice president or vice president and attested by its Secretary or any Assistant
Secretary, and shall specify the amount of Warrants to be authenticated, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof, to authenticate
the Warrant Certificates and deliver them upon the Company's request. Such
authentication shall be by a duly authorized signatory of the Warrant Agent
(although it shall not be necessary for the same signatory to sign all Warrant
Certificates).
In case any authorized signatory of the Warrant Agent who
shall have authenticated any of the Warrant Certificates shall cease to be an
authorized signatory before the Warrant Certificate shall be disposed of by the
Company or the Warrant Agent, such Warrant Certificate nevertheless may be
delivered or disposed of as though the person who authenticated an Warrant
Certificate had not ceased to be an authorized signatory of the Warrant Agent.
Any Warrant Certificate may be authenticated on behalf of the Warrant Agent by
such persons as, at the actual time of authentication of such Warrant
Certificates, shall be the duly authorized signatories of the Warrant Agent,
although at the time of the execution and delivery of this Agreement any such
person is not an authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates
shall be in substantially the form set forth in EXHIBIT A hereto.
SECTION 1.05. [Intentionally omitted].
SECTION 1.06. SEPARATION OF WARRANTS AND NOTES. The Notes and
--------------------------------
the Warrants to which they initially related now are separately transferable.
SECTION 1.07. REGISTRATION. The Company will keep, at the
office or agency maintained by the Company for such purpose, a register or
registers in which, subject to such reasonable regulations as it may prescribe,
the Company shall provide for the registration of, and registration of transfer
and exchange of, Warrants as provided in this Article. Each person designated by
the Company from time to time as a person authorized to register the transfer
and exchange of the Warrants is hereinafter called, individually and
collectively, the "REGISTRAR." The Company hereby initially appoints the Warrant
Agent as Registrar. Upon written notice to the Warrant Agent and any acting
Registrar, the Company may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may be
the Company and who need not be a Registrar) to act as repository of a master
list of names and addresses of the holders of Warrants (the "WARRANT REGISTER").
The Warrant Agent will act as such repository unless and until some other person
is, by written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each Registrar
to furnish to such repository, on a current basis, such information as to all
registrations of transfer and exchanges effected by such Registrar, as may be
necessary to enable such repository to maintain the Warrant Register on as
current a basis as is practicable.
SECTION 1.08. REGISTRATION OF TRANSFERS OR EXCHANGES.
--------------------------------------
(a) TRANSFER OR EXCHANGE OF DEFINITIVE WARRANTS. When
-------------------------------------------
Definitive Warrants are presented to the Warrant Agent with a request from the
holder:
(i) to register the transfer of the Definitive Warrants;
or
(ii) to exchange such Definitive Warrants for an equal
number of Definitive Warrants of other authorized
denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements for such transactions set forth in this Section 1.08 are
met; provided, however, that the Definitive Warrants presented or surrendered by
a holder for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written instruction
of transfer or exchange in form satisfactory to the Company
and the Warrant Agent, duly executed by such holder or by his
attorney, duly authorized in writing; and
(y) in the case of Warrants the offer and sale of which have not
been registered under the Securities Act and are presented for
transfer or exchange prior to (1) the date which is two years
(or such shorter period as may be permitted by Rule 144(k)
under the Securities Act (or any successor provision thereto))
after the later of the date of original issuance of the
Warrants and the last date on which the Company or any
affiliate of the Company (or any predecessor thereto) was the
owner of such Warrants, or (2) such later date, if any, as may
be required by any applicable law (the "RESALE RESTRICTION
TERMINATION DATE"), such Warrants shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Warrants are being delivered to the Warrant
Agent by a holder for registration in the name of
such holder, without transfer, a certification from
such holder to that effect (in substantially the form
of EXHIBIT C hereto); or
(B) if such Warrants are being transferred to a qualified
institutional buyer (as defined in Rule 144A under
the Securities Act), (a "QIB") in accordance with
Rule 144A under the Securities Act, a certification
from the transferor to that effect (in substantially
the form of EXHIBIT C hereto);
(C) if such Warrants are being transferred in reliance on
Regulation S ("REGULATION S") under the Securities
Act of 1933, as amended (the "SECURITIES ACT"),
delivery by the transferor of a certification to that
effect (in substantially the form of EXHIBIT C
hereto), and a Certificate for Regulation S Transfers
in the form of EXHIBIT D hereto; or
(D) if such Warrants are being transferred in reliance on
Rule 144 under the Securities Act, delivery by the
transferor of (i) a certification from the transferor
to that effect (in substantially the form of EXHIBIT
C hereto), and (ii) an opinion of counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such Warrants are being transferred in reliance on
another exemption from the registration requirements
of the Securities Act, a certification from the
transferor to that effect (in substantially the form
of EXHIBIT C hereto) and an opinion of counsel
reasonably satisfactory to the Company to the effect
that such transfer is in compliance with the
Securities Act; PROVIDED that the Company may, based
upon the views of its own counsel, instruct the
Warrant Agent not to register such transfer in any
case where the proposed transferee is not a QIB or
Non-U.S. Person.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE WARRANT FOR A
BENEFICIAL INTEREST IN A GLOBAL WARRANT. A Definitive Warrant may not be
transferred by a holder for a beneficial interest in a Global Warrant except
upon satisfaction of the requirements set forth below. Upon receipt by the
Warrant Agent of a Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Warrant Agent,
together with
(A) certification from such holder (in substantially the
form of EXHIBIT C hereto) that such Definitive
Warrant is being transferred to a QIB in accordance
with Rule 144A under the Securities Act; and
(B) written instructions directing the Warrant Agent to
make, or to direct the Depositary to make, an
endorsement on the Global Warrant to reflect an
increase in the aggregate amount of the Warrants
represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue, and the Warrant
Agent upon written instructions from the Company shall authenticate a new Global
Warrant in the appropriate amount.
(c) TRANSFER OR EXCHANGE OF GLOBAL WARRANTS. The transfer or
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Section 1.08, the Private
Placement Legend (as defined herein), this Agreement (including the restrictions
on transfer set forth herein) and the procedures of the Depositary therefor.
(d) TRANSFER OR EXCHANGE OF A BENEFICIAL INTEREST IN A
--------------------------------------------------
GLOBAL WARRANT FOR A DEFINITIVE WARRANT.
- - ----------------------------------------
(i) Any person having a beneficial interest in a Global Warrant
may transfer or exchange such beneficial interest for a
Definitive Warrant upon receipt by the Warrant Agent of
written instructions or such other form of instructions as is
customary for the Depositary from the Depositary or its
nominee on behalf of any person having a beneficial interest
in a Global Warrant, including a written order containing
registration instructions and, in the case of any such
transfer or exchange prior to the Resale Restriction
Termination Date, the following additional information and
documents:
(A) if such beneficial interest is being transferred to
the person designated by the Depositary as being the
beneficial owner, a certification from such person to
that effect (in substantially the form of EXHIBIT C
hereto); or
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities
Act, a certification from the transferor to that
effect (in substantially the form of EXHIBIT C
hereto); or
(C) if such beneficial interest is being transferred in
reliance on Regulation S under the Securities Act,
delivery by the transferor if (i) a certification to
that effect (in substantially in the form of EXHIBIT
C hereto), and (ii) a Certificate for Regulation S
Transfers (in substantially the form of EXHIBIT D
hereto); or
(D) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery by the transferor of (i) a certification to
that effect (in substantially the form of EXHIBIT C
hereto) and (ii) an opinion of counsel reasonably
satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
from the transferor to that effect (in substantially
the form of EXHIBIT C hereto) and an opinion of
counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the
Securities Act; provided that the Company may
instruct the Warrant Agent not to register such
transfer in any case where the proposed transferee is
not a QIB or Non-U.S. Person, then the Warrant Agent
will cause, in accordance with the standing
instructions and procedures existing between the
Depositary and the Warrant Agent, the aggregate
amount of the Global Warrant to be reduced and,
following such reduction, the Company will execute
and, upon receipt of an authentication order in the
form of an officers' certificate (a certificate
signed by two officers of such company, one of whom
must be the principal executive officer, principal
financial officer or principal accounting officer)
(an "OFFICERS' Certificate"), the Warrant Agent will
authenticate and deliver to the transferee a
Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section 1.08(d)
shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from
its direct or indirect participants or otherwise, shall
instruct the Warrant Agent in writing. The Warrant Agent shall
deliver such Definitive Warrants to the persons in whose names
such Warrants are so registered and adjust the Global Warrant
pursuant to paragraph (h) of this Section 1.08.
(e) RESTRICTIONS ON TRANSFER OR EXCHANGE OF GLOBAL WARRANTS.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred or exchanged as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) AUTHENTICATION OF DEFINITIVE WARRANTS IN ABSENCE OF
---------------------------------------------------
DEPOSITARY. If at any time:
- - ----------
(i) the Depositary for the Global Warrants notifies the Company
that the Depositary is unwilling or unable to continue as
Depositary for the Global Warrant and a successor Depositary
for the Global Warrant is not appointed by the Company within
90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants for all Global Warrants under this
Agreement,
then the Company will execute, and the Warrant Agent will, upon receipt of an
Officers' Certificate requesting the authentication and delivery of Definitive
Warrants, authenticate and deliver Definitive Warrants, in an aggregate number
equal to the aggregate number of warrants represented by the Global Warrant, in
exchange for such Global Warrant.
(g) PRIVATE PLACEMENT LEGEND. Upon the transfer or exchange of
Warrant Certificates not bearing the legend set forth on EXHIBIT A attached
hereto (the "PRIVATE PLACEMENT LEGEND"), the Warrant Agent shall deliver Warrant
Certificates that do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Warrant Certificates bearing the Private Placement
Legend, the Warrant Agent shall deliver Warrant Certificates that bear the
Private Placement Legend unless, and the Warrant Agent is hereby authorized to
deliver Warrant Certificates without the Private Placement Legend if, (i) there
is delivered to the Warrant Agent an opinion of counsel reasonably satisfactory
to the Company and the Warrant Agent to the effect that neither such legend nor
the related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act or (ii) the Warrants to be
transferred or exchanged represented by such Warrant Certificates are being
transferred or exchanged pursuant to an effective registration statement under
the Securities Act.
(h) CANCELLATION OR ADJUSTMENT OF A GLOBAL WARRANT. At such
time as all beneficial interests in a Global Warrant have either been exchanged
for Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to the Company or, upon written order to the Warrant Agent in
the form of an Officers' Certificate from the Company, retained and canceled by
the Warrant Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Warrant is exchanged for Definitive Warrants, redeemed,
repurchased or canceled, the number of Warrants represented by such Global
Warrant shall be reduced and an endorsement shall be made on such Global Warrant
by the Warrant Agent to reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS OR EXCHANGES OF
-----------------------------------------------------
DEFINITIVE WARRANTS.
-------------------
(i) To permit registrations of transfers or exchanges, the Company
shall execute, and the Warrant Agent shall authenticate,
Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or
Global Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Warrant Agreement as
the Definitive Warrants or Global Warrants surrendered upon
the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat
the person in whose name any Warrant is registered as the
absolute owner of such Warrant, and neither the Warrant Agent
nor the Company shall be affected by notice to the contrary.
SECTION 1.09. LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED
WARRANT CERTIFICATES. Upon receipt by the Company and the Warrant Agent (or any
agent of the Company or the Warrant Agent, if requested by the Company) of
evidence satisfactory to them of the loss, theft, destruction, defacement, or
mutilation of any Warrant Certificate and of indemnity satisfactory to them and,
in the case of mutilation or defacement, upon surrender of such Warrant
Certificate to the Warrant Agent for cancellation, then, in the absence of
notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a BONA FIDE purchaser or holder in due course, the Company
shall execute, and an authorized signatory of the Warrant Agent shall manually
authenticate and deliver, in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate
representing a like number of Warrants, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Warrant
Certificate under this Section in a name other than the prior registered holder
of the lost, stolen, destroyed, defaced or mutilated Warrant Certificate, the
Company may require the payment from the holder of such Warrant Certificate of a
sum sufficient to cover any tax, stamp tax or other governmental charges that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Warrant Agent and the Registrar) in connection therewith.
Every substitute Warrant Certificate executed and delivered
pursuant to this Section in lieu of any lost, stolen or destroyed Warrant
Certificate shall constitute an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Warrant Certificate shall
be at any time enforceable by anyone, and shall be entitled to the benefits of
(but shall be subject to all the limitations of rights set forth in) this
Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 1.09 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to authenticate in
accordance with the provisions of this Agreement, and deliver the new Warrant
Certificates required pursuant to the provisions of this Section.
SECTION 1.10. OFFICES FOR EXERCISE, ETC. So long as any of the
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York: (a) an office or agency where the
Warrant Certificates may be presented for exercise, (b) an office or agency
where the Warrant Certificates may be presented for registration of transfer and
for exchange, and (c) an office or agency where notices and demands to or upon
the Company in respect of the Warrants or of this Agreement may be served. The
Company may from time to time change or rescind such designation, as it may deem
desirable or expedient; provided, however, that an office or agency shall at all
times be maintained in the Borough of Manhattan, The City of New York, as
provided in the first sentence of this Section. In addition to such office or
offices or agency or agencies, the Company may from time to time designate and
maintain one or more additional offices or agencies within or outside The City
of New York, where Warrant Certificates may be presented for exercise or for
registration of transfer or for exchange, and the Company may from time to time
change or rescind such designation, as it may deem desirable or expedient. The
Company will give to the Warrant Agent written notice of the location of any
such office or agency and of any change of location thereof. The Company hereby
designates the Warrant Agent at its principal corporate trust office identified
in Section 7.03 in the Borough of Manhattan, The City of New York (the "WARRANT
AGENT OFFICE"), as the initial agency maintained for each such purpose. In case
the Company shall fail to maintain any such office or agency or shall fail to
give such notice of the location or of any change in the location thereof,
presentations and demands may be made and notice may be served at the Warrant
Agent Office and the Company appoints the Warrant Agent as its agent to receive
all such presentations, surrenders, notices and demands.
ARTICLE II
DURATION, EXERCISE OF WARRANTS; EXERCISE PRICE
AND REPURCHASE OF WARRANTS
SECTION 2.01. DURATION OF WARRANTS. Subject to the terms and
conditions established herein, the Warrants shall expire at 5:00 p.m., New York
City time, on April 15, 2008. The applicable date of expiration of a particular
Warrant is referred to herein as the "EXPIRATION DATE" of such Warrant. Each
Warrant may be exercised on any Business Day (as defined below) on or after the
Exercisability Date (as defined in Section 2.02) and on or prior to the close of
business on the Expiration Date.
Any Warrant not exercised before the close of business on the
Expiration Date shall become void, and all rights of the holder under the
Warrant Certificate evidencing such Warrant and under this Agreement shall
cease.
"BUSINESS DAY" shall mean any day on which (i) banks in The
City of New York, (ii) the principal U.S. securities exchange or market, if any,
on which any Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Warrants are
listed or admitted to trading are open for business.
SECTION 2.02. EXERCISE, EXERCISE PRICE, SETTLEMENT AND
DELIVERY. (a) Subject to the provisions of this Agreement, each holder of a
Warrant shall have the right to purchase from the Company on or after the
Exercisability Date and on or prior to the close of business on the Expiration
Date the number of fully paid, registered and non-assessable Warrant Shares (and
any other securities or property purchasable or deliverable upon exercise of
such Warrant as provided in Article V) which the holder may at the time be
entitled to receive on exercise of such Warrant, subject to adjustment in
accordance with Article V hereof, at the purchase price of $0.01 for each
Warrant Share purchased (the "EXERCISE PRICE"). The number and amount of Warrant
Shares for which a particular Warrant may be exercised (the "EXERCISE RATE")
shall be subject to adjustment from time to time as set forth in Article V
hereof.
"EXERCISABILITY DATE" means the first day on or after the date
hereof on which there will have occurred an Exercise Event.
"EXERCISE EVENT" means the date of the occurrence of the
earliest of: (i) the time immediately prior to the occurrence of a Change of
Control (as defined in the Indenture), (ii) (a) the 180th day (or such earlier
date as determined by the Company in its sole discretion) following the closing
of an Initial Public Equity Offering (as defined herein) or (b) upon the closing
of an Initial Public Equity Offering but only in respect of Warrants, if any,
required to be exercised to permit the holders thereof to sell Warrant Shares
pursuant to their respective registration rights, (iii) the time when a class of
equity securities of the Company is listed on a national securities exchange or
authorized for quotation on the Nasdaq National Market or is otherwise subject
to registration under the Exchange Act, or (iv) April 30, 2001.
"INITIAL PUBLIC EQUITY OFFERING" means a primary public
offering (whether or not underwritten, but excluding any offering pursuant to
Form S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of shares of Common
Stock or securities exercisable therefor under any benefit plan, employee
compensation plan, or employee or director stock purchase plan) of Common Stock
pursuant to an effective registration statement under the Securities Act.
"PERSON" means any individual, corporation, partnership,
limited liability company, partnership, joint venture, association, joint-stock
company, trust, business trust, unincorporated organization, government or any
agency or political subdivision thereof or any other entity, including any
predecessor of any such entity.
"TRIGGERING DATE" means the date of the consummation of a bona
fide underwritten public offering of Common Stock, as a result of which at least
20% of the outstanding shares of Common Stock are listed on a United States
national securities exchange or the Nasdaq National Market.
(b) Warrants may be exercised on or after the date they are
exercisable hereunder by (i) surrendering at any office or agency maintained for
that purpose by the Company pursuant to Section 1.10 (each a "WARRANT EXERCISE
OFFICE") the Warrant Certificate evidencing such Warrants with the form of
election to purchase Warrant Shares set forth on the reverse side of the Warrant
Certificate (the "ELECTION TO EXERCISE") duly completed and signed by the
registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney, and in the case of a
transfer, such signature shall be guaranteed by an eligible guarantor
institution, and (ii) paying in full the Exercise Price for each such Warrant
exercised. Each Warrant may be exercised only in whole.
(c) Simultaneously with the exercise of each Warrant, payment
in full of the aggregate Exercise Price may be made, at the option of the
holder, (i) in cash in United States dollars or by certified or official bank
check, (ii) by a Cashless Exercise (as defined below) or (iii) by any
combination of (i) and (ii), to the Warrant Exercise Office where the Warrant
Certificate is being surrendered. A "CASHLESS EXERCISE" shall mean an exercise
of a Warrant in accordance with the immediately following two sentences. To
effect a Cashless Exercise, the holder may exercise a Warrant or Warrants
without payment of the Exercise Price in cash by surrendering such Warrant or
Warrants (represented by one or more Warrant Certificates ) and, in exchange
therefor, receiving such number of shares of Common Stock equal to the product
of (1) that number of shares of Common Stock for which such Warrant are
exercisable and which would be issuable in the event of an exercise with payment
in cash of the Exercise Price and (2) the Cashless Exercise Ratio (as defined
below). The "CASHLESS EXERCISE RATIO" shall equal a fraction, the numerator of
which is the excess of the Current Market Value (calculated as set forth in this
Agreement) per share of Common Stock on the date of exercise over the Exercise
Price per share of Common Stock as of the date of exercise and the denominator
of which is the Current Market Value per share of Common Stock on the date of
exercise. Upon surrender of a Warrant Certificate representing more than one
Warrant in connection with a holder's option to elect a Cashless Exercise, such
holder must specify the number of Warrants for which such Warrant Certificate is
to be exercised (without giving effect to such Cashless Exercise). All
provisions of this Agreement shall be applicable with respect to a Cashless
Exercise of a Warrant Certificate for less than the full number of Warrants
represented thereby. No payment or adjustment shall be made on account of any
distributions of dividends on the Common Stock issued upon exercise of a
Warrant.
If the Company has not effected the registration under the
Securities Act of the offer and sale of the Warrant Shares by the Company to the
holders of the Warrants on or prior to the EXERCISE DATE (as defined herein),
the Company may elect to require that the holders of the Warrants effect the
exercise thereof solely pursuant to the Cashless Exercise option and may amend
the Warrants and this Agreement to eliminate the option to pay the Exercise
Price in cash. The Company shall calculate and transmit to the Warrant Agent,
and the Warrant Agent shall have no obligation under this section to calculate,
the Cashless Exercise Ratio.
(d) Upon surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "EXERCISE DATE" shall be the date when all of the items referred to
in the first sentence of each of paragraphs (b) and (c) of this Section 2.02 are
received by the Warrant Agent at or prior to 11:00 a.m., New York City time, on
a Business Day and the exercise of the Warrants will be effective as of such
Exercise Date. If any items referred to in the first sentence of each of
paragraphs (b) and (c) are received after 11:00 a.m., New York City time, on a
Business Day, the exercise of the Warrants to which such item relates will be
effective on the next succeeding Business Day. Notwithstanding the foregoing, in
the case of an exercise of Warrants on the Expiration Date, if all of the items
referred to in the first sentence of each of paragraphs (b) and (c) are received
by the Warrant Agent at or prior to 5:00 p.m., New York City time, on the
Expiration Date, the exercise of the Warrants to which such items relate will be
effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the
terms hereof, the receipt of a Warrant Certificate and payment of the Exercise
Price (or election of the Cashless Exercise option), the Warrant Agent shall:
(i) except to the extent exercise of the Warrant has been effected through
Cashless Exercise, cause an amount equal to the aggregate Exercise Price to be
paid to the Company by crediting the same to the account designated by the
Company in writing to the Warrant Agent for that purpose; (ii) advise the
Company promptly by telephone of the amount so deposited to the Company's
account and promptly confirm such telephonic advice in writing; and (iii) as
soon as practicable, advise the Company in writing of the number of Warrants
exercised in accordance with the terms and conditions of this Agreement and the
Warrant Certificates, the instructions of each exercising holder of the Warrant
Certificates with respect to delivery of the Warrant Shares to which such holder
is entitled upon such exercise, and such other information as the Company shall
reasonably request.
(f) Subject to Section 5.02 hereof, as soon as practicable
after the exercise of any Warrant or Warrants in accordance with the terms
hereof, the Company shall issue or cause to be issued to, or upon the written
order of, the registered holder of the Warrant Certificate evidencing such
exercised Warrant or Warrants, a certificate or certificates evidencing the
Warrant Shares to which such holder is entitled, in fully registered form,
registered in such name or names as may be directed by such holder pursuant to
the Election to Exercise, as set forth on the reverse of the Warrant
Certificate. Such certificate or certificates evidencing the Warrant Shares
shall be deemed to have been issued and any persons who are designated to be
named herein shall be deemed to have become the holder of record of such Warrant
Shares as of the close of business on the Exercise Date, the Warrant Shares may
initially be issued in global form (the "GLOBAL SHARES"). Such Global Shares
shall represent such of the outstanding Warrant Shares as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Warrant Shares from time to time endorsed thereon and that the
aggregate amount of outstanding Warrant Shares represented thereby may from time
to time be reduced or increased, as appropriate. Any endorsement of a Global
Share to reflect the amount of any increase or decrease in the amount of
outstanding Shares represented thereby shall be made by the registrar for the
Warrant Shares and the Depositary in accordance with instructions given by the
holder thereof. The Depository Trust Company (or its nominee) shall (if
possible) act as the Depositary with respect to the Global Shares until a
successor shall be appointed by the Company and the registrar for the Warrant
Shares. After such exercise of any Warrant or Warrant Shares, the Company shall
also issue or cause to be issued to or upon the written order of the registered
holder of such Warrant Certificate, a new Warrant Certificate, countersigned by
the Warrant Agent pursuant to written instruction, evidencing the number of
Warrants, if any, remaining unexercised unless such Warrants shall have expired.
SECTION 2.03. CANCELLATION OF WARRANT CERTIFICATES. In the
event the Company shall purchase or otherwise acquire Warrants, the Warrant
Certificates evidencing such Warrants may thereupon be delivered to the Warrant
Agent, and if so delivered, shall at the Company's written instruction be
canceled by it and retired. The Warrant Agent shall cancel all Warrant
Certificates properly surrendered for exchange, substitution, transfer or
exercise. Upon the Company's written request, the Warrant Agent shall deliver
such canceled Warrant Certificates to the Company.
SECTION 2.04. NOTICE OF AN EXERCISE EVENT. As soon as
practicable after the occurrence of an Exercise Event, the Company shall send or
cause to be sent to each holder of Warrants with respect to which such Exercise
Event has occurred, to the extent that the Warrants are held of record by a
depositary or other agent (with a copy to the Warrant Agent), by first-class
mail, at the addresses appearing on the Warrant Register, a notice prepared by
the Company advising such holder of the Exercise Event which has occurred, which
notice shall describe the type of Exercise Event and the date of the occurrence
thereof, as applicable, and, in either case, the date of expiration of the right
to exercise the Warrants prominently set forth in the face of such notice.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. ENFORCEMENT OF RIGHTS. (a) Notwithstanding any
of the provisions of this Agreement, any holder of any Warrant Certificate,
without the consent of the Warrant Agent, the holder of any Warrant Shares or
the holder of any other Warrant Certificate, may, in and for his own behalf,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, his right to exercise the Warrant or Warrants
evidenced by his Warrant Certificate in the manner provided in such Warrant
Certificate and in this Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall
entitle the holders thereof to any of the rights of a holder of shares of Common
Stock, including, without limitation, the right to vote or to receive any
dividends or other payments or to consent or to receive notice as stockholders
in respect of the meetings of stockholders or for the election of directors of
the Company or any other matter, or any rights whatsoever as a holder of shares
of Common Stock, except as expressly provided herein (including Section 5.03
hereof).
SECTION 3.02. OBTAINING STOCK EXCHANGE LISTINGS. The Company
will from time to time take all action which may be necessary so that the
Warrant Shares, immediately upon their issuance upon the exercise of Warrants,
will be listed on the principal securities exchanges and markets within the
United States or Canada (including the Nasdaq National Market), if any, on which
other shares of Common Stock are then listed or quoted.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. PAYMENT OF TAXES. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrants and of
the Warrant Shares upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or other governmental charge which
may be payable in respect of any transfer or exchange of any Warrant
Certificates or any certificates for Warrant Shares in a name other than the
registered holder of a Warrant Certificate surrendered upon the exercise of a
Warrant. In any such case, no transfer or exchange shall be made unless or until
the person or persons requesting issuance thereof shall have paid to the Company
the amount of such tax or other governmental charge or shall have established to
the satisfaction of the Company that such tax or other governmental charge has
been paid or an exemption is available therefrom.
SECTION 4.02. RULES 144 AND 144A. While any Warrants remain
outstanding, the Company covenants that it shall file the reports required to be
filed by it under the Exchange Act, and the rules and regulations adopted by the
Securities and Exchange Commission thereunder, in a timely manner in accordance
with the requirements of the Exchange Act. If at any time the Company is not
required to file such reports, it will distribute to each holder or beneficial
owner of Warrants that are "restricted securities" within the meaning of Rule
144 and are not saleable in full under paragraph (k) of Rule 144, such
information as is necessary to permit sales pursuant to Rule 144A under the
Securities Act.
SECTION 4.03. FORM OF INITIAL PUBLIC EQUITY OFFERING. The
Company agrees that it shall not make an Initial Public Equity Offering of any
class of its Capital Stock (other than the class of Capital Stock into which the
Warrants are exercisable) without adopting such amendments to the terms of the
Company's Articles of Incorporation as may be necessary to provide that the
Warrant Shares are convertible into the class of Capital Stock subject to the
Initial Public Equity Offering (the "SUBJECT CLASS") on a share-for-share or
other equitable basis; PROVIDED that the rights, conditions and privileges
attaching to the Subject Class as compared to the rights, conditions and
privileges attaching to the Common Stock into which such Warrants would be
convertible on the date hereof (if the Warrants were immediately exercisable)
would not adversely affect holders of the Warrant Shares; it being understood
that the Capital Stock into which the Warrants shall be convertible (a) shall
represent the same economic interests, but may not have the same voting rights,
in the Company as the Common Stock outstanding on the date hereof and (b) shall
be identical to the class of Capital Stock issued and sold by the Company in the
Initial Public Equity Offering, if any.
SECTION 4.04. SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. The Company shall comply with all applicable laws, including the
Securities Act and any applicable state securities laws, in connection with the
offer and sale of Common Stock (and other securities and property deliverable )
upon exercise of the Warrants.
SECTION 4.05. RESOLUTION OF PREEMPTIVE RIGHTS, IF ANY.
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Neither the Warrants or the Warrant Shares shall be subject to any preemptive or
similar rights.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. ADJUSTMENT OF EXERCISE RATE; NOTICES. The
------------------------------------
Exercise Rate is subject to adjustment from time to time as provided in this
Section.
(a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If,after the
--------------------------------------
date hereof, the Company:
(i) pays a dividend or makes a distribution on shares of
Common Stock in shares of Common Stock (other than any such dividend to
the extent covered by Section 5.03);
(ii) subdivides any of its outstanding shares of Common Stock
into a greater number of shares;
(iii) combines any of its outstanding shares of Common Stock
into a smaller number of shares;
(iv) pays a dividend or makes a distribution on shares of
Common Stock in shares of Capital Stock (as defined below) (other than
Common Stock or rights, warrants, or options for its Common Stock to
the extent such issuance or distribution is covered by Section 5.03);
or
(v) issues by reclassification of any of its Common Stock or
any shares of any of its Capital Stock;
then the Company shall adjust the Exercise Rate in effect immediately prior to
such action for each Warrant then outstanding so that the holder of a Warrant
thereafter exercised may receive the number of shares of Capital Stock of the
Company which such holder would have owned immediately following such action if
such holder had exercised the Warrant immediately prior to such action or
immediately prior to the record date applicable thereto, if any (regardless of
whether the Warrants then outstanding are then exercisable and without giving
effect to the Cashless Exercise option). If there are no outstanding shares of
Common Stock that are of the same class as the Warrant Shares at the time of any
such action and such action has therefore been taken only in respect of Common
Stock, the adjustment shall relate to the Warrant Shares in their same form (and
not in the form of Common Shares) if it would not frustrate the intent and
purposes of this Section 5.01.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification. In
the event that such dividend or distribution is not so paid or made or such
subdivision, combination or reclassification is not effected, the Exercise Rate
shall again be adjusted to be the Exercise Rate which would then be in effect if
such record date or effective date had not been so fixed.
If after an adjustment a holder of a Warrant upon exercise of
such Warrant may receive shares of two or more classes of Capital Stock of the
Company, the Exercise Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article V with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article V.
Nothing in this Section 5.01(a) shall require any adjustment
in the Exercise Rate upon (i) the issuance, conversion, exchange or exercise of
options to acquire shares of Common Stock by, or the issuance of restricted
stock or other similar equity-based payments to, officers, directors or
employees of the Company; provided that the exercise price of such options or
the purchase price of such restricted stock, as the case may be, at the time of
issuance thereof, is at least equal to the then Current Market Value of the
Common Stock underlying such options or restricted stock or (ii) the
reclassification of the Company's Common Stock into two or more series of common
stock with different voting powers but otherwise representing the same economic
interests; PROVIDED that such series of common stock will automatically convert
into shares of Common Stock when the holder sells, exchanges or otherwise
transfers such shares to any person other than an affiliate of the holder.
(b) ADJUSTMENT FOR SALE OF COMMON STOCK BELOW CURRENT
-------------------------------------------------
MARKET VALUE.
- - -------------
If, after the date hereof, the Company grants or sells to an Affiliate of the
Company (other than a wholly-owned subsidiary) any shares of Common Stock or of
securities convertible into or exchangeable or exercisable for any shares of
Common Stock at a price below the then Current Market Value (other than (1)
pursuant to the exercise of the Warrants, (2) upon the conversion, exchange or
exercise of any security convertible, exchangeable or exercisable for, shares of
Common Stock outstanding on the date hereof, (3) upon conversion, exchange or
exercise of convertible, exchangeable or exercisable security as to which, upon
the issuance thereof, has previously been the subject of any required adjustment
pursuant to this Section 5 or (4) upon the conversion, exchange or exercise of
convertible, exchangeable or exercisable securities of the Company outstanding
on the date hereof (to the extent permitted by the terms of such securities as
in effect on the date of this Agreement)) (calculated as set forth in Section
5.01(l) hereof), the Exercise Rate for each Warrant then outstanding shall be
adjusted in accordance with the formula:
E1 = E (O + N)____
----------------------
(O + (N x P/M))
where:
E1 =........the adjusted Exercise Rate for each Warrant then outstanding;
E =........the then current Exercise Rate for each Warrant then
outstanding;
O = the number of shares of Common Stock outstanding immediately
prior to the sale of Common Stock or issuance of securities
convertible, exchangeable or exercisable for Common Stock;
N = the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the proceeds per share of Common Stock received by the
Company, which (i) in the case of shares of Common Stock is
the amount received by the Company in consideration for the
sale and issuance of such shares; and (ii) in the case of
securities convertible into or exchangeable or exercisable for
shares of Common Stock is the amount received by the Company
in consideration for the sale and issuance of such convertible
or exchangeable or exercisable securities, plus the minimum
aggregate amount of additional consideration, other than the
surrender of such convertible or exchangeable securities,
payable to the Company upon exercise, conversion or exchange
thereof; and
M = the Current Market Value as of the Time of Determination or
at the time of sale, as the case may be (calculated as set
forth in Section 5.01(l) hereof).
The adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, warrants or options to which this paragraph (b) applies or upon
consummation of the sale of Common Stock, as the case may be. To the extent that
shares of Common Stock are not delivered after the expiration of such rights or
warrants, the Exercise Rate for each Warrant then outstanding shall be
readjusted to the Exercise Rate which would otherwise be in effect had the
adjustment made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Exercise Rate for each Warrant then outstanding shall again be adjusted to be
the Exercise Rate which would then be in effect if such date fixed for
determination of stockholders entitled to receive such rights or warrants had
not been so fixed.
No adjustment shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E1 that is lower than the value of E.
No adjustment shall be made under this paragraph (b) for any
adjustment which is the subject of paragraph (c), (d) or (e) of this Section
5.01.
"AFFILIATE" means, with respect to any specified Person, (i)
any other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person or (ii) any other
Person that owns, directly or indirectly, 10% or more of such specified Person's
Voting Stock or any executive officer or director of any such specified Person
or other Person or, with respect to any natural Person, any other Person in such
Person's immediate family. For the purposes of this definition, "control," when
used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a Person solely by reason of (a) such Person being a party to an Incumbent
Agreement (as defined in the Indenture) or (b) such Person owning an interest in
a Restricted Subsidiary (as defined in the Indenture) pursuant to, or as a
result of, an Incumbent Agreement (as defined in the Indenture).
(c) NOTICE OF ADJUSTMENT. Whenever the Exercise Rate is
adjusted, the Company shall promptly mail to holders of Warrants then
outstanding at the addresses appearing on the Warrant Register a notice of the
adjustment. The Company shall file with the Warrant Agent and any other
Registrar such notice and a certificate from the Company's independent public
accountants briefly stating the facts requiring the adjustment and the manner of
computing it. The certificate shall be conclusive evidence that the adjustment
is correct. Neither the Warrant Agent nor any such Registrar shall be under any
duty or responsibility with respect to any such certificate except to exhibit
the same during normal business hours to any holder desiring inspection thereof.
(d) REORGANIZATION OF COMPANY; SPECIAL DISTRIBUTIONS. (i) If
the Company, in a single transaction or through a series of related
transactions, consolidates with or merges with or into any other person or
sells, assigns, transfers, leases, conveys or otherwise disposes of all or
substantially all of its properties and assets to another person or group of
affiliated persons or is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Common Stock (a "FUNDAMENTAL
TRANSACTION"), (it being understood that a single transaction or series of
related transactions pursuant to which not less than ninety-five percent of the
outstanding shares of capital stock of the Company are exchanged for shares in a
single Affiliate (or any Person who, pursuant to such transaction, will become
such an Affiliate) shall be deemed to be a Fundamental Transaction, and the
Affiliate acquiring such shares shall, for purposes of this clause, be deemed to
be the Surviving Person (as defined below)), as a condition to consummating any
such transaction the person formed by or surviving any such consolidation or
merger if other than the Company or the person to whom such transfer has been
made (the "SURVIVING PERSON") shall enter into a supplemental warrant agreement.
The supplemental warrant agreement shall provide (a) that the holder of a
Warrant then outstanding may exercise it for the kind and amount of securities,
cash or other assets which such holder would have received immediately after the
Fundamental Transaction if such holder had exercised the Warrant immediately
before the effective date of the transaction (whether or not the Warrants were
then exercisable and without giving effect to the Cashless Exercise option) (it
being understood that the Warrants will remain exercisable only in accordance
with their terms and that conditions to exercise, such as payment of Exercise
Price, will remain applicable), assuming (to the extent applicable) that such
holder (i) was not a constituent person or an affiliate of a constituent person
to such transaction, (ii) made no election with respect thereto, and (iii) was
treated alike with the plurality of non-electing holders, and (b) that the
Surviving Person shall succeed to and be substituted to every right and
obligation of the Company in respect of this Agreement and the Warrants. The
supplemental warrant agreement shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article V. The Surviving Person shall mail to holders of Warrants at the
addresses appearing on the Warrant Register a notice briefly describing the
supplemental warrant agreement. If the issuer of securities deliverable upon
exercise of Warrants is an affiliate of the Surviving Person, that issuer shall
join in the supplemental warrant agreement.
(ii) Notwithstanding the foregoing, if the Company enters into
a Fundamental Transaction with another Person (other than a subsidiary of the
Company) and consideration is payable to holders of the shares of Capital Stock
(or other securities or property) issuable or deliverable upon exercise of the
Warrants in exchange for such shares of Capital Stock in connection with such
Fundamental Transaction which consists solely of cash, then the holders of
Warrants shall be entitled to receive distributions on the date of such event on
an equal basis with holders of such shares of Capital Stock (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less the aggregate Exercise Price. Upon receipt
of such payment, if any, the rights of a holder of a Warrant shall terminate and
cease and such holder's Warrants shall expire.
(iii) If this paragraph (d) applies, it shall supersede the
application of paragraph (a) of this Section 5.01.
(e) COMPANY DETERMINATION FINAL. Any determination that the
---------------------------
Company or the board of directors of the Company must make pursuant to this
Article V is conclusive.
(f) WARRANT AGENT'S ADJUSTMENT DISCLAIMER. The Warrant Agent
shall have no duty to determine when an adjustment under this Article V should
be made, how it should be made or what it should be. The Warrant Agent shall
have no duty to determine whether a supplemental warrant agreement under
paragraph (d) need be entered into or whether any provisions of any supplemental
warrant agreement are correct. The Warrant Agent shall not be accountable for
and makes no representation as to the validity or value of any securities or
assets issued upon exercise of Warrants. The Warrant Agent shall not be
responsible for the Company's failure to comply with this Article V.
(g) ADJUSTMENT FOR TAX PURPOSES. In the event of a taxable
distribution to holders of shares of Common Stock which results in an adjustment
to the number of shares of Common Stock or other consideration for which a
Warrant may be exercised, the holders of the Warrants may, in certain
circumstances, be deemed to have received a distribution subject to United
States federal income tax as a dividend. The Company may make such increases in
the Exercise Rate, in addition to those otherwise required by this Section, as
it considers to be advisable in order that any event treated for federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to the
recipients.
(h) UNDERLYING SHARES. The Company shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued Common Stock or Common Stock held in the treasury of the Company, for
the purpose of effecting the exercise of Warrants, the full number of Warrant
Shares then deliverable upon the exercise of all Warrants then outstanding and
payment of the exercise price, and the shares so deliverable shall be fully paid
and nonassessable and free from all liens and security interests.
(i) SPECIFICITY OF ADJUSTMENT. Regardless of any adjustments
in the number or kind of shares purchasable upon the exercise of the Warrants,
Warrant Certificates theretofore or thereafter issued may continue to express
the same number and kind of Shares per Warrant as are stated on the Warrant
Certificates initially issuable pursuant to this Agreement.
(j) VOLUNTARY ADJUSTMENT. The Company from time to time may
increase the Exercise Rate by any number and for any period of time (provided
that such period shall not be less than 20 Business Days). Whenever the Exercise
Rate is so increased, the Company shall mail to holders at the addresses
appearing on the Warrant Register and file with the Warrant Agent a notice of
the increase. The Company shall give the notice at least 15 days before the date
the increased Exercise Rate takes effect. The notice shall state the increased
Exercise Rate and the period it will be in effect. A voluntary increase in the
Exercise Rate does not change or adjust the Exercise Rate otherwise in effect as
determined by this Section 5.01.
(k) MULTIPLE ADJUSTMENTS. After an adjustment to the Exercise
Rate for outstanding Warrants under this Article V, any subsequent event
requiring an adjustment under this Article V shall cause an adjustment to the
Exercise Rate for outstanding Warrants as so adjusted.
(l) DEFINITIONS.
-----------
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or other
equivalents (however designated and whether voting or non-voting) of, such
Person's capital stock, and any rights (other than debt securities convertible
into Capital Stock), warrants or options exchangeable for or convertible into
such capital stock, whether outstanding on the date hereof or issued hereafter.
"CONVERTIBLE PREFERRED STOCK" means any securities convertible
or exercisable or exchangeable into Common Stock, whether outstanding on the
date hereof or hereafter issued.
"CURRENT MARKET VALUE" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
board of directors of the Company and certified in a board resolution, based on
the most recently completed arm's-length transaction between the Company and a
person other than an Affiliate of the Company and the closing of which occurs on
such date or shall have occurred within the six-month period preceding such
date, or (b) if no such transaction shall have occurred on such date or within
such six-month period or if the board of directors of the Company otherwise
elects, the Fair Market Value of the security as determined by a nationally or
regionally recognized independent financial expert (provided that, in the case
of the calculation of Current Market Value for determining the cash value of
fractional shares, any such determination within six months that is, in the good
faith judgment of the board or directors of the Company, a reasonable
determination of value, may be utilized) or (ii) (a) if the security is
registered under the Exchange Act, the average of the daily closing sales prices
of the securities for the 20 consecutive trading days immediately preceding such
date, or (b) if the security has been registered under the Exchange Act for less
than 20 consecutive trading days before such date, then the average daily
closing sales prices for all of the trading days before such date for which
closing sales prices are available, in the case of each of (ii) (a) and (ii)
(b), as certified to the Warrant Agent by the President or any vice president or
the Chief Financial Officer of the Company. The closing sales price for each
such trading day shall be: (A) in the case of a security listed or admitted to
trading on any United States national securities exchange or quotation system,
the closing sales price, regular way, on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day, (B) in
the case of a security not then listed or admitted to trading on any national
securities exchange or quotation system, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source designated
by the Company, (C) in the case of a security not then listed or admitted to
trading on any national securities exchange or quotation system and as to which
no such reported sale price or bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, The City and State of New York, customarily published on
each business day, designated by the Company, or, if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are not bid
and asked prices reported during the 30 days prior to the date in question, the
Current Market Value shall be determined as if the securities were not
registered under the Exchange Act.
"FAIR MARKET VALUE" means, with respect to any asset or
property, the sale value that would be obtained in an arm's length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy. Unless otherwise
specified in this Agreement, Fair Market Value shall be determined by the board
of directors of the Company acting in good faith and as of the date on which
such determination is made.
"INDEPENDENT FINANCIAL EXPERT" means a nationally or
regionally recognized investment banking or public accounting firm in the United
States or, if the Company believes that an investment banking or public
accounting firm is generally not qualified to give such an opinion, a nationally
recognized appraisal firm, in any case (i) which does not, and whose directors,
officers and employees or Affiliates do not, have a direct or indirect material
financial interest for its proprietary account in the Company or any of its
Affiliates and (ii) which, in the judgment of the Board of Directors of the
Company, is otherwise independent with respect to the Company and its Affiliates
and qualified to perform the task for which it is to be engaged.
"TIME OF DETERMINATION" means, (i) in the case of any
distribution of securities or other property to existing stockholders to which
paragraph (b) applies, the time and date of the determination of stockholders
entitled to receive such securities or property or (ii) in the case of any other
issuance and sale to which paragraph (b) applies, the time and date of such
issuance or sale.
(m) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED. No adjustment
in the Exercise Rate need be made unless the adjustment would require an
increase of at least 1% in the Exercise Rate. Any adjustments that are not made
shall be carried forward and taken into account in any subsequent adjustments.
All calculations under this Section 5 shall be made to the nearest 1/1000th of a
share, as the case may be.
SECTION 5.02. FRACTIONAL SHARES. The Company will not be
required to issue fractional Warrant Shares upon exercise of the Warrants or
distribute Warrant Share certificates that evidence fractional Warrant Shares.
In the event a holder is required by Section 2.02(c) to make a Cashless
Exercise, the number of Warrant Shares issuable shall be rounded up to the
nearest whole number. In addition, in no event shall any holder of Warrants be
required to make any payment of a fractional cent. In lieu of fractional Warrant
Shares, there shall be paid to the registered holders of Warrant Certificates at
the time Warrants evidenced thereby are exercised as herein provided an amount
in cash equal to the same fraction of the Current Market Value, as defined in
paragraph (l) of Section 5.01 of this Agreement per Warrant Share on the
Business Day preceding the date the Warrant Certificates evidencing such
Warrants are surrendered for exercise. Such payments will be made by check or by
transfer to an account maintained by such registered holder with a bank in The
City of New York. If any holder surrenders for exercise more than one Warrant
Certificate, the number of Warrant Shares deliverable to such holder may, at the
option of the Company, be computed on the basis of the aggregate amount of all
the Warrants exercised by such holder.
SECTION 5.03. CERTAIN DISTRIBUTIONS. If at any time after the
Exercisability Date, the Company grants, issues or sells options, convertible
securities, or rights to purchase Capital Stock, warrants or other securities
pro rata to the record holders of any Common Stock ("DISTRIBUTION RIGHTS") or,
without duplication, makes any dividend or otherwise makes any distribution,
including (subject to applicable law) pursuant to any plan of liquidation (each,
a "DISTRIBUTION"), on the Common Stock (whether in cash, property, evidences of
indebtedness or otherwise), then the Company shall grant, issue, sell or make to
each registered holder of Warrants then outstanding the aggregate Distribution
Rights or Distribution, as the case may be, which such holder would have
acquired if such holder had held the maximum number of shares of Common Stock
acquirable upon complete exercise of such holder's Warrants (regardless of
whether the exercise of the Warrants is then suspended and without giving effect
to the Cashless Exercise option) immediately before the record date for the
grant, issuance or sale of such Distribution Rights or Distribution, as the case
may be, or, if there is no such record date, the date as of which the record
holders of Common Stock are to be determined for the grant, issue or sale of
such Distribution Rights or Distribution, as the case may be.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. WARRANT AGENT. The Company hereby appoints The
Bank of New York as Warrant Agent of the Company in respect of the Warrants and
the Warrant Certificates upon the terms and subject to the conditions set forth
herein and in the Warrant Certificates; and The Bank of New York hereby accepts
such appointment. The Warrant Agent shall have the powers and authority
specifically granted to and conferred upon it in the Warrant Certificates and
hereby and such further powers and authority to act on behalf of the Company as
the Company may hereafter grant to or confer upon it and it shall accept in
writing. All of the terms and provisions with respect to such powers and
authority contained in the Warrant Certificates are subject to and governed by
the terms and provisions hereof. The Warrant Agent may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care.
SECTION 6.02. CONDITIONS OF WARRANT AGENT'S OBLIGATIONS. The
Warrant Agent accepts its obligations set forth herein upon the terms and
conditions hereof and in the Warrant Certificates, including the following, to
all of which the Company agrees and to all of which the rights hereunder of the
holders from time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be
agreed upon with the Company in writing for all services rendered by it
and the Company agrees promptly to pay such compensation and to
reimburse the Warrant Agent for its reasonable out-of-pocket expenses
(including reasonable fees and expenses of counsel) incurred without
gross negligence or willful misconduct on its part in connection with
the services rendered by it hereunder. The Company also agrees to
indemnify the Warrant Agent and any predecessor Warrant Agent, their
directors, officers, affiliates, agents and employees for, and to hold
them and their directors, officers, affiliates, agents and employees
harmless against, any loss, liability or expense of any nature
whatsoever (including, without limitation, reasonable fees and expenses
of counsel) incurred without gross negligence or willful misconduct on
the part of the Warrant Agent, arising out of or in connection with its
acting as such Warrant Agent hereunder and its exercise of its rights
and performance of its obligations hereunder. The obligations of the
Company under this Section 6.02 shall survive the exercise and the
expiration of the Warrant Certificates and the resignation and removal
of the Warrant Agent.
(b) In acting under this Agreement and in connection with the
Warrant Certificates, the Warrant Agent is acting solely as agent of
the Company and does not assume any obligation or relationship of
agency or trust for or with any of the owners or holders of the Warrant
Certificates.
(c) The Warrant Agent may consult with counsel of its
selection and any advice or written opinion of such 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
accordance with such advice or opinion.
(d) The Warrant Agent shall be fully protected and shall incur
no liability for or in respect of any action taken or omitted to be
taken or thing suffered by it in reliance upon any Warrant Certificate,
notice, direction, consent, certificate, affidavit, opinion of counsel,
instruction, statement or other paper or document reasonably believed
by it to be genuine and to have been presented or signed by the proper
parties.
(e) The Warrant Agent, and its officers, directors, affiliates
and employees ("RELATED PARTIES"), may become the owners of, or acquire
any Interest in, Warrant certificates, shares or other obligations of
the Company with the same rights that it or they would have if it were
not the Warrant Agent hereunder and, to the extent permitted by
applicable law, it or they may engage or be interested in any financial
or other transaction with the Company and may act on, or as depositary,
trustee or agent for, any committee or body of holders of shares or
other obligations of the Company as freely as if it were not the
Warrant Agent hereunder. Nothing in this Agreement shall be deemed to
prevent the Warrant Agent or such Related Parties from acting in any
other capacity for the Company.
(f) The Warrant Agent shall not be under any liability for
interest on, and shall not be required to invest, any monies at any
time received by it pursuant to any of the provisions of this Agreement
or of the Warrant Certificates.
(g) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement (or any term or provision
hereof) or the execution and delivery hereof (except the due execution
and delivery hereof by the Warrant Agent) or in respect of the validity
or execution of any Warrant Certificate (except its authentication
thereof).
(h) The recitals and other statements contained herein and in
the Warrant Certificates (except as to the Warrant Agent's
authentication thereon) shall be taken as the statements of the Company
and the Warrant Agent assumes no responsibility for the correctness of
the same. The Warrant Agent does not make any representation as to the
validity or sufficiency of this Agreement or the Warrant Certificates,
except for its due execution and delivery of this Agreement; provided,
however, that the Warrant Agent shall not be relieved of its duty to
authenticate the Warrant Certificates as authorized by this Agreement.
The Warrant Agent shall not be accountable for the use or application
by the Company of the Proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Supplemental Warrant
Agreement, it may require:
(1) an Officers' Certificate (as defined in the Indenture) stating
on behalf of the Company that, in the opinion of the signers,
all conditions precedent, if any, provided for in this
Supplemental Warrant Agreement relating to the proposed action
have been complied with; and
(2) if reasonably necessary in the sole judgment of
the Warrant Agent, an opinion of counsel for the Company
stating that, in the opinion of such counsel, all such
conditions precedent have been complied with provided that
such matter is one customarily opined on by counsel.
Each Officers' Certificate or, if requested, an opinion of
counsel with respect to compliance with a condition or covenant provided for in
this Supplemental Warrant Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform such
duties as are specifically set forth herein and in the Warrant Certificates, and
no implied duties or obligations shall be read into this Agreement or the
Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or be under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and delivered
by it to the Company pursuant to this Agreement. The Warrant Agent shall have no
duty or responsibility in case of any default by the Company in the performance
of its covenants or agreements contained in the Warrant Certificates or in the
case of the receipt of any written demand from a holder of a Warrant Certificate
with respect to such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to initiate any
proceedings at law or otherwise or, except as provided in Section 7.02 hereof,
to make any demand upon the Company.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the board of directors, its president, its treasurer,
its controller or any vice president or its secretary or any assistant
secretary.
(l) The Warrant Agent shall have no responsibility in respect
of any adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute,
acknowledge and deliver, or cause to be performed, executed, acknowledged and
delivered, all such further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
by the Warrant Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to
accept written instructions with respect to the performance of its duties
hereunder from any one of the chairman of the board of directors, the president,
the treasurer, the controller, any vice president or the secretary or assistant
secretary of the Company or any other officer or official of the Company
reasonably believed to be authorized to give such instructions and to apply to
such officers or officials for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions with respect to any matter
arising in connection with the Warrant Agent's duties and obligations arising
under this Agreement. Such application by the Warrant Agent for written
instructions from the Company may, at the option of the Warrant Agent, set forth
in writing any action proposed to be taken or omitted by the Warrant Agent with
respect to its duties or obligations under this Agreement and the date on or
after which such action shall be taken and the Warrant Agent shall not be liable
for any action taken or omitted in accordance with a proposal included in any
such application on or after the date specified therein (which date shall be not
less than 10 Business Days after the Company receives such application unless
the Company consents to a shorter period), provided that (i) such application
includes a statement to the effect that it is being made pursuant to this
paragraph (n) and that unless objected to prior to such date specified in the
application, the Warrant Agent will not be liable for any such action or
omission to the extent set forth in this paragraph (n) and (ii) prior to taking
or omitting any such action, the Warrant Agent has not received written
instructions objecting to such proposed action or omission.
(o) Whenever in the performance of its duties under this
Agreement the Warrant Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed on behalf of the Company by any
one of the chairman of the board of directors, CEO, the president, the
treasurer, the controller, any executive vice president, any vice president or
the secretary or any assistant secretary of the Company or any other officer or
official of the Company reasonably believed to be authorized to give such
instructions and delivered to the Warrant Agent; and such certificate shall be
full authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(p) The Warrant Agent shall not be required to risk or expend
its own funds in the performance of its obligations and duties
hereunder.
SECTION 6.03. RESIGNATION AND APPOINTMENT OF SUCCESSOR.
----------------------------------------
(a) The Company agrees, for the benefit of the holders from
time to time of the Warrant Certificates, that there shall at all times be a
Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent
by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall be at least 60 days after the date on
which such notice is given unless the Company agrees to accept less notice. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor Warrant Agent, qualified as provided in Section 6.03(d) hereof, by
written instrument in duplicate signed on behalf of the Company, one copy of
which shall be delivered to the resigning Warrant Agent and one copy to the
successor Warrant Agent. As provided in Section 6.03(d) hereof, such resignation
shall become effective upon the earlier of (x) the acceptance of the appointment
by the successor Warrant Agent or (y) 60 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for any reason, and
shall, upon any event set forth in the next succeeding sentence, remove the
Warrant Agent and appoint a successor Warrant Agent by written instrument in
duplicate, specifying such removal and the date on which it is intended to
become effective, signed on behalf of the Company, one copy of which shall be
delivered to the Warrant Agent being removed and one copy to the successor
Warrant Agent. The Warrant Agent shall be removed as aforesaid if it shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation. Any removal of
the Warrant Agent and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant Agent as
provided in Section 6.03(d). As soon as practicable after appointment of the
successor Warrant Agent, the Company shall cause written notice of the change in
the Warrant Agent to be given to each of the registered holders of the Warrants
in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the
Company shall fail to appoint a successor Warrant Agent within a period of 60
days after receipt of such notice of resignation or removal, then the holder of
any Warrant Certificate or the retiring Warrant Agent may apply to a court of
competent jurisdiction for the appointment of a successor to the Warrant Agent.
Pending appointment of a successor to the Warrant Agent, either by the Company
or by such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the
Company or by a court, shall be a bank or trust company in good standing,
incorporated under the laws of the United States of America or any State thereof
and having, at the time of its appointment, a combined capital surplus of at
least $50 million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i) transfer and
deliver, and such successor Warrant Agent shall be entitled to receive, all
securities, records or other property on deposit with or held by such
predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then
due it pursuant to Section 6.02(a) hereof, pay over, and such successor Warrant
Agent shall be entitled to receive, all monies deposited with or held by any
predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent
hereunder may be merged or converted, or any corporation or bank with which the
Warrant Agent may be consolidated, or any corporation or bank resulting from any
merger, conversion or consolidation to which the Warrant Agent shall be a party,
or any corporation or bank to which the Warrant Agent shall sell or otherwise
transfer all or substantially all of its corporate trust business, shall be the
successor to the Warrant Agent under this Agreement (provided that such
corporation or bank shall be qualified as aforesaid) without the execution or
filing of any document or any further act on the part of any of the parties
hereto.
(f) No Warrant Agent under this Supplemental Warrant Agreement
shall be personally liable for any action or omission of any successor Warrant
Agent.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. AMENDMENT. This Agreement and the terms of the
Warrants may be amended by the Company and the Warrant Agent, without the
consent of the holder of any Warrant Certificate, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained herein or therein, or to effect any assumptions
of the Company's obligations hereunder and thereunder by a successor corporation
under the circumstances described in Section 5.01(d) hereof or in any other
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may amend, modify or
supplement this Agreement and the terms of the Warrants, and waivers to
departures from the terms hereof and thereof may be given, with the consent of
the Requisite Warrant Holders (as defined below) for the purpose of adding any
provision to or changing in any manner or eliminating any of the provisions of
this Agreement or modifying in any manner the rights of the holders of the
outstanding Warrants. "REQUISITE WARRANT HOLDERS" means (i) in the case of any
amendment, modification, supplement or waiver affecting only Warrant Holders as
such, holders of a majority in number of the outstanding Warrants, voting
separately as a class, or (ii) in the case of any amendment, modification,
supplement or waiver affecting Warrant Holders, a majority in number of Warrant
Shares represented by the Warrants that would be issuable assuming exercise
thereof at the time such amendment, modification, supplement or waiver is voted
upon. Notwithstanding any other provision of this Agreement, the Warrant Agent's
consent must be obtained regarding any supplement or amendment which alters the
Warrant Agent's rights or duties (it being expressly understood that the
foregoing shall not be in derogation of the right of the Company to remove the
Warrant Agent in accordance with Section 6.03 hereof). For purposes of any
amendment, modification or waiver hereunder, Warrants held by the Company or any
of its Affiliates shall be disregarded.
Any modification or amendment made in accordance with this
Agreement will be conclusive and binding on all present and future holders of
Warrant Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. NOTICES AND DEMANDS TO THE COMPANY AND WARRANT
AGENT. If the Warrant Agent shall receive any notice or demand addressed to the
Company by the holder of a Warrant Certificate pursuant to the provisions hereof
or of the Warrant Certificates, the Warrant Agent shall promptly forward such
notice or demand to the Company.
SECTION 7.03. ADDRESSES FOR NOTICES TO PARTIES AND FOR
TRANSMISSION OF DOCUMENTS. All notices hereunder to the parties hereto shall be
deemed to have been given when sent by certified or registered mail, postage
prepaid, or by facsimile transmission, confirmed by first class mail, postage
prepaid, addressed to any party hereto as follows:
To the Company:
Pathnet Telecommunications, Inc.
1015 31st Street, N.W.
Washington, D.C. 20007
Facsimile: (202) 625-7369
Attention: General Counsel
with copies to:
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Facsimile: 202-662-6291
Attention: Bruce S. Wilson
To the Warrant Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. NOTICES TO HOLDERS. Notices to holders of
Warrants shall be mailed to such holders at the addresses of such holders as
they appear in the Warrant Register. Any such notice shall be sufficiently given
if sent by first-class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THIS AGREEMENT AND EACH WARRANT
--------------
CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.06. PERSONS HAVING RIGHTS UNDER AGREEMENT. Nothing
in this Agreement expressed or implied and nothing that may be inferred from any
of the provisions hereof is intended, or shall be construed, to confer upon, or
give to, any person or corporation other than the Company, the Warrant Agent,
the holders of the Warrant Certificates and, with respect to Sections 4.03, 4.04
and 4.05, the holders of Warrant Shares issued pursuant to Warrants, any right,
remedy or claim under or by reason of this Agreement or of any covenant,
condition, stipulation, promise or agreement hereof; and all covenants (except
for Section 4.03 which shall be for the benefit of all holders of Warrant Shares
issued pursuant to Warrants), conditions, stipulations, promises and agreements
in this Agreement contained shall be for the sole and exclusive benefit of the
Company and the Warrant Agent and their successors and of the holders of the
Warrant Certificates.
SECTION 7.07. HEADINGS. The descriptive headings of the
--------
several Articles and Sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
SECTION 7.08. COUNTERPARTS. This Agreement may be executed in
------------
any number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.09. INSPECTION OF AGREEMENT. A copy of this
Agreement shall be available during regular business hours at the principal
corporate trust office of the Warrant Agent, for inspection by the holder of any
Warrant Certificate. The Warrant Agent may require such holder to submit his
Warrant Certificate for inspection by it.
SECTION 7.10. AVAILABILITY OF EQUITABLE REMEDIES. Since a
breach of the provisions of this Agreement could not adequately be compensated
by money damages, holders of Warrants shall be entitled, in addition to any
other right or remedy available to them, to an injunction restraining such
breach or a threatened breach and to specific performance of any such provision
of this Agreement, and in either case no bond or other security shall be
required in connection therewith, and the parties hereby consent to such
injunction and to the ordering of specific performance.
SECTION 7.11. OBTAINING OF GOVERNMENTAL APPROVALS. The Company
will from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under United States Federal and state laws, if applicable, and the rules and
regulations of all stock exchanges on which the Warrants are listed which may be
or become requisite in connection with (i) the issuance, sale, transfer, and
delivery to the Company of the Warrant Certificates, (ii) the exercise of the
Warrants or (iii) the issuance, sale, transfer and delivery by the Company of
the Warrant Shares issued to the holders of the Warrants, each upon the exercise
of the Warrants by the holders of Warrants.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the day and year first above written.
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ W. R. Smedberg V
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
Warrant Agent
By:/s/ Terence Rawlins
-------------------------------------
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE>
A-12
A-1
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS
SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
"OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR A SHORTER
PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) (OR ANY SUCCESSOR PROVISION THEREOF)
UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR
OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH PATHNET
TELECOMMUNICATIONS, INC. OR ANY OF ITS AFFILIATES WAS THE OWNER OF THIS SECURITY
OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO PATHNET
TELECOMMUNICATIONS, INC. OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF
REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND THE WARRANT AGENT SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (E)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. IN CONNECTION WITH ANY TRANSFER OF
THESE SECURITIES WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WARRANT AGENT. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
<PAGE>
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
PATHNET TELECOMMUNICATIONS, INC.
This Warrant Certificate certifies that [ ], or registered
assigns, is the registered holder of [ ] Warrants (the "WARRANTS") to purchase
shares of Common Stock, par value $0.01 per share, issuable upon exercise of the
Warrants (the "WARRANT SHARES") of PATHNET TELECOMMUNICATIONS, INC., a Delaware
corporation (the "COMPANY," which term includes its successors and assigns).
Each Warrant entitles the holder to purchase from the Company at any time from
9:00 a.m. New York City time on or after the Exercisability Date until 5:00
p.m., New York City time, on April 15, 2008 (the "EXPIRATION DATE"), 3.19 fully
paid, registered and non-assessable Warrant Shares, subject to adjustment as
provided in Article V of the Supplemental Warrant Agreement, at an exercise
price of $0.01 for each share purchased (the "EXERCISE PRICE"); upon surrender
of this Warrant Certificate and payment of the Exercise Price (i) in cash or by
certified or official bank check, (ii) by a Cashless Exercise or (iii) by any
combination of (i) and (ii), at any office or agency maintained for that purpose
by the Company (the "WARRANT EXERCISE OFFICE"), subject to the conditions set
forth herein and in the Supplemental Warrant Agreement. For purposes of this
Warrant, a "CASHLESS EXERCISE" shall mean an exercise of a Warrant in accordance
with the immediately following two sentences. To effect a Cashless Exercise, the
holder may exercise a Warrant or Warrants without payment of the Exercise Price
in cash by surrendering such Warrant or Warrants (represented by one or more
Warrant Certificates) and in exchange therefor, receiving such number of shares
of Common Stock equal to the product of (1) that number of shares of Common
Stock for which such Warrant or Warrants are exercisable and which would be
issuable in the event of an exercise with payment of the Exercise Price and (2)
the Cashless Exercise Ratio. The "CASHLESS EXERCISE RATIO" shall equal a
fraction, the numerator of which is the excess of the Current Market Value
(calculated as set forth in this Warrant) per share of Common Stock on the date
of exercise over the Exercise Price per share of Common Stock as of the date of
exercise and the denominator of which is the Current Market Value per share of
Common Stock on the date of exercise. Upon surrender of a Warrant Certificate
representing more than one Warrant in connection with the holder's option to
elect a Cashless Exercise, the holder must specify the number of Warrants for
which such Warrant Certificate is to be exercised (without giving effect to the
Cashless Exercise). All provisions of the Supplemental Warrant Agreement shall
be applicable with respect to a Cashless Exercise of a Warrant Certificate for
less than the full number of Warrants represented thereby. Capitalized terms
used herein without being defined herein shall have the definitions ascribed to
such terms in the Supplemental Warrant Agreement.
"CURRENT MARKET VALUE" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
board of directors of the Company and certified in a board resolution, based on
the most recently completed arm's-length transaction between the Company and a
person other than an Affiliate of the Company and the closing of which occurs on
such date or shall have occurred within the six-month period preceding such
date, or (b) if no such transaction shall have occurred on such date or within
such six-month period or if the board of directors of the Company otherwise
elects, the Fair Market Value of the security as determined by a nationally or
regionally recognized Independent Financial Expert (as defined herein) (PROVIDED
that, in the case of the calculation of Current Market Value for determining the
cash value of fractional shares, any such determination within six months that
is, in the good faith judgment of the board of directors of the Company, a
reasonable determination of value, may be utilized) or (ii) (a) if the security
is registered under the Exchange Act, the average of the daily closing sales
prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average daily closing sales prices for all of the trading days before such
date for which closing sales prices are available, in the case of each of (ii)
(a) and (ii) (b), as certified to the Warrant Agent by the President or any vice
president or the Chief Financial Officer of the Company. The closing sales price
for each such trading day shall be: (A) in the case of a security listed or
admitted to trading on any United States national securities exchange or
quotation system, the closing sales price, regular way, on such day, or if no
sale takes place on such day, the average of the closing bid and asked prices on
such day, (B) in the case of a security not then listed or admitted to trading
on any national securities exchange or quotation system, the last reported sale
price on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (C) in the case of a security not then listed
or admitted to trading on any national securities exchange or quotation system
and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on such
day, as reported by a reputable quotation service, or a newspaper of general
circulation in the Borough of Manhattan, The City and State of New York,
customarily published on each Business Day, designated by the Company, or, if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than 30
days prior to the date in question) for which prices have been so reported and
(D) if there are not bid and asked prices reported during the 30 days prior to
the date in question, the Current Market Value shall be determined as if the
securities were not registered under the Exchange Act.
"EXERCISE EVENT" means, with respect to each Warrant, the date
of the occurrence of the earliest of: (i) the time immediately prior to a Change
of Control (as such term is defined in the Indenture); (ii)(a) the 180th day (or
such earlier date as determined by the Company in its sole discretion) following
the closing of an Initial Public Equity Offering (as defined herein) or (b) upon
the closing of an Initial Public Equity Offering, but only in respect of
Warrants, if any, required to be exercised to permit the holders thereof to sell
Warrant Shares pursuant to their respective registration rights, (iii) the time
when a class of equity securities of the Company is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market or
is otherwise subject to registration under the Exchange Act, or (iv) April 30,
2001.
"INDEPENDENT FINANCIAL EXPERT" means a nationally or
regionally recognized investment banking or public accounting firm in the United
States or, if the Company believes that an investment banking or public
accounting firm is generally not qualified to give such an opinion, a nationally
recognized appraisal firm, in any case (i) which does not, and whose directors,
officers and employees or Affiliates do not, have a direct or indirect material
financial interest for its proprietary account in the Company or any of its
Affiliates and (ii) which, in the judgment of the Board of Directors of the
Company, is otherwise independent with respect to the Company and its Affiliates
and qualified to perform the task for which it is to be engaged.
The Company has initially designated the principal corporate
trust office of the Warrant Agent in the Borough of Manhattan, The City of New
York, as the initial Warrant Agent Office. The number of shares of Common Stock
issuable upon exercise of the Warrants ("Exercise Rate") is subject to
adjustment upon the occurrence of certain events set forth in the Supplemental
Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York
City time, on April 15, 2008 shall thereafter be void.
If the Company, in a single transaction or through a series of
related transactions, consolidates with or merges with or into, or sells all or
substantially all of its property and assets to, another Person (other than a
subsidiary of the Company) solely for cash, the holders of Warrants which are
then exercisable shall be entitled to receive distributions on the date of such
event on an equal basis with holders of shares of Capital Stock (or other
securities issuable upon exercise of the Warrants) as if the Warrants had been
exercised immediately prior to such event less the aggregate Exercise Price
therefor.
Reference is hereby made to the further provisions on the
reverse hereof which provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Warrant Certificate shall not be valid unless
authenticated by the Warrant Agent, as such term is used in the Supplemental
Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
WITNESS the facsimile seal of the Company and facsimile
signatures of its duly authorized officers.
PATHNET TELECOMMUNICATIONS, INC.
By:_________________________________
Name:
Title:
Attest:
By:_________________________________
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Supplemental Warrant Agreement:
Dated:
THE BANK OF NEW YORK,
Warrant Agent
By:__________________________________
Authorized Signatory
<PAGE>
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
PATHNET TELECOMMUNICATIONS, INC.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring at 5:00 p.m., New York City time,
on April 15, 2008 (the "EXPIRATION DATE"), each of which represents the right to
purchase at any time on or after the Exercisability Date (as defined in the
Supplemental Warrant Agreement) and on or prior to the Expiration Date 3.19
Shares, subject to adjustment as set forth in the Supplemental Warrant
Agreement. The Warrants are issued pursuant to a Supplemental Warrant Agreement
dated as of March 30, 2000 (the "SUPPLEMENTAL WARRANT AGREEMENT"), duly executed
and delivered by the Company to The Bank of New York, Warrant Agent (the
"WARRANT AGENT"), which Supplemental Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "HOLDERS" or "HOLDER" meaning the registered holders or registered holder)
of the Warrants.
Warrants may be exercised by (i) surrendering at any Warrant
Agent Office this Warrant Certificate with the form of Election to Exercise set
forth hereon duly completed and executed and (ii) to the extent such exercise is
not being effected through a Cashless Exercise by paying in full the Warrant
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to the Supplemental Warrant Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 11:00 a.m.,
New York City time, on a Business Day, the exercise of the Warrant to which such
items relate will be effective on such Business Day. If any items referred to in
the last sentence of the preceding paragraph are received after 11:00 a.m., New
York City time, on a Business Day, the exercise of the Warrants to which such
item relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on April
15, 2008, if all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 5:00 p.m., New York
City time, on such Expiration Date, the exercise of the Warrants to which such
items relate will be effective on the Expiration Date.
As soon as practicable after the exercise of any Warrant or
Warrants, the Company shall issue or cause to be issued to or upon the written
order of the registered holder of this Warrant Certificate, a certificate or
certificates evidencing the Warrant Share or Warrant Shares to which such holder
is entitled, in fully registered form, registered in such name or names as may
be directed by such holder pursuant to the Election to Exercise, as set forth on
the face of this Warrant Certificate. Such certificate or certificates
evidencing the Warrant Share or Warrant Shares shall be deemed to have been
issued and any persons who are designated to be named therein shall be deemed to
have become the holder of record of such Warrant Share or Warrant Shares as of
the close of business on the date upon which the exercise of this Warrant was
deemed to be effective as provided in the preceding paragraph.
The Company will not be required to issue fractional Shares
upon exercise of the Warrants or distribute Warrant Certificates that evidence
fractional Warrant Shares. In lieu of fractional Warrant Shares, there shall be
paid to the registered Holder of this Warrant Certificate at the time such
Warrant Certificate is exercised an amount in cash equal to the same fraction of
the Current Market Value per share of Common Stock on the Business Day preceding
the date this Warrant Certificate is surrendered for exercise.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant Certificates evidencing
in the aggregate a like number of Warrants, in the manner and subject to the
limitations provided in the Supplemental Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this
Warrant Certificate at any office or agency maintained by the Company for that
purpose, a new Warrant Certificate evidencing in the aggregate a like number of
Warrants shall be issued to the transferee in exchange for this Warrant
Certificate, subject to the limitations provided in the Supplemental Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone) for the purpose of any exercise hereof and for all other purposes, and
neither the Company nor the Warrant Agent shall be affected by any notice to the
contrary.
The term "BUSINESS DAY" shall mean any day on which (i) banks
in The City of New York, (ii) the principal U.S. securities exchange or market,
if any, on which the Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Warrants are
listed or admitted to trading are open for business.
The Warrants, Warrant Shares and Registrable Securities (as
defined in the Warrant Registration Rights Agreement) are entitled to the
benefits of a registration rights agreement relating to the Warrants and the
Warrant Shares (the "WARRANT REGISTRATION RIGHTS AGREEMENT"), pursuant to which
the holders representing not less than 50% of Warrant Shares and Registrable
Securities have, at any time and from time to time after (A) the occurrence of
the earliest of (i) the time immediately prior to a Change of Control (as such
term is defined in the Indenture); (ii)(a) the180th day (or such earlier date as
determined by the Company in its sole discretion) following the consummation of
an Initial Public Equity Offering (as defined herein) or (b) upon the
consummation of an Initial Public Equity Offering, but only in respect of
Warrants, if any, required to be exercised to permit the holders thereof to sell
Warrant Shares pursuant to their respective registration rights, (iii) the time
when a class of equity securities of the Company is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market or
is otherwise subject to registration under the Exchange Act, or (iv) April 30,
2001, and (B) the completion of an Initial Public Equity Offering, the right to
require the Company to effect one demand registration of the Warrant Shares and
Registrable Securities. The Warrant Registration Rights Agreement also provides
the holders of Registrable Securities with the right, subject to the conditions
and limitations contained therein, to include the Registrable Securities in
certain registration statements filed by the Company for its account or for the
account of any of its securityholders.
<PAGE>
[FORM OF ELECTION TO EXERCISE]
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of
the Warrants represented by this Warrant Certificate and purchase the whole
number of Shares issuable upon the exercise of such Warrants and herewith
tenders payment for such Shares as follows:
$[ ] in cash or by certified or official bank check; or by
surrender of Warrants pursuant to a Cashless Exercise (as defined in the
Supplemental Warrant Agreement) for [ ] shares of Stock at the current Cashless
Exercise Ratio.
The undersigned requests that a certificate representing such
Shares be registered in the name of _______________ whose address is
________________ and that such shares be delivered to _____________________
whose address is ________________. Any cash payments to be paid in lieu of a
fractional Share should be delivered to _________ whose address is
________________ and the check representing payment thereof should be delivered
to _____________ whose address is _____________________.
Dated ___________, ____
Name of holder of
Warrant Certificate:_______________________________________________
(Please Print)
Tax Identification or
Social Security Number:_____________________________________________
Address: _________________________________________________________
---------------------------------------------------------
Signature:_________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever and if the certificate
representing the Shares or any Warrant Certificate
representing Warrants not exercised is to be
registered in a name other than that in which this
Warrant Certificate is registered, or if any cash
payment to be paid in lieu of a fractional share is
to be made to a person other than the registered
holder of this Warrant Certificate, the signature of
the holder hereof must be guaranteed as provided in
the Supplemental Warrant Agreement.
Dated ______________, ____
Signature:_________________________________________________________
Note: The above signature must correspond with the
name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
Signature Guaranteed:________________________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
[FORM OF ASSIGNMENT]
For value received __________________________ hereby sells,
assigns and transfers unto _____________________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated ________________, ____
Signature:_________________________________________________________
Note: The above signature must correspond with the
name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
Signature Guaranteed:________________________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS*
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of Warrants
Amount of decrease Amount of increase in of this Global
in Number of Number of Warrants of Warrant following Signature of
Warrants of this this GLOBAL WARRANT such decrease (or authorized officer
Date of EXCHANGE GLOBAL WARRANT INCREASE) of WARRANT AGENT
-------- -------------- ------------------- ---------------------- -------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
B-1
B-1
EXHIBIT B
FORM OF LEGEND FOR GLOBAL WARRANT
Any Global Warrant authenticated and delivered hereunder shall
bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL WARRANT WITHIN THE MEANING OF THE
SUPPLEMENTAL WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE
NAME OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
SUPPLEMENTAL WARRANT AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE SUPPLEMENTAL WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
C-1
C-1
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of PATHNET
TELECOMMUNICATIONS, INC.
This Certificate relates to ____ Warrants held in* ___
book-entry or* _______ certificated form by ______ (the "Transferor").
The Transferor:*
_____ has requested the Warrant Agent by written order to deliver in exchange
for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of
authorized denominations and an aggregate number equal to its
beneficial interest in such Global Warrant (or the portion thereof
indicated above); or
_____ has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such
Warrant, the transferor does hereby certify that the Transferor is familiar with
the Supplemental Warrant Agreement, dated as of March 30, 2000, relating to the
above captioned Warrants and the restrictions on transfers thereof as provided
in Section 1.08 of such Supplemental Warrant Agreement, and that the transfer of
this Warrant does not require registration under the Securities Act of 1933, as
amended (the "Act") because:
_____ Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.08 (a)(y)(A) or Section
1.08 (d)(i)(A) of the Supplemental Warrant Agreement).
____ Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A.
____ Such Warrant is being transferred in reliance on Regulation S under the
Act.
____ Such Warrant is being transferred in accordance with Rule 144 under the
Act.
____ Such Warrant is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Act.
------------------------------------------
[INSERT NAME OF TRANSFEROR]
By: ______________________________________
Date:__________________
*Check applicable box.
Signature
Guaranteed:__________________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
<PAGE>
D-2
D-1
EXHIBIT D
Form of Certificate to be
Delivered in Connection
WITH REGULATION S TRANSFERS
------------, ----
================
- - ----------------
Attention: __________________
Ladies and Gentlemen:
In connection with our proposed sale of Warrants of Pathnet
Telecommunications, Inc (the "Company"), we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent
that:
(1) the offer of the Warrants was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act;
(5) if the circumstances set forth in Rule 904(c) under the
Securities Act are applicable, we have complied with the additional conditions
therein, including (if applicable) sending a confirmation or other notice
stating that the Warrants may be offered and sold during the restricted period
specified in Rule 903(c)(2) or (3), as applicable, in accordance with the
provisions of Regulation S; pursuant to registration of the Warrants under the
Securities Act; or pursuant to an available exemption from the registration
requirements under the Act.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S under the
Securities Act.
Very truly yours,
[Name of Transferor]
By:______________________________
Authorized Signature]
Upon transfer the Warrants would be registered in the name of
the new beneficial owner as
follows:
Name:_____________________________
Address:____________________________
Taxpayer ID Number:__________________
- - --------
* This is to be included only if the Warrant is in global form.
EXHIBIT 4.13
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS
SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
"OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR A SHORTER
PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) (OR ANY SUCCESSOR PROVISION THEREOF)
UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR
OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH PATHNET
TELECOMMUNICATIONS, INC. OR ANY OF ITS AFFILIATES WAS THE OWNER OF THIS SECURITY
OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO PATHNET
TELECOMMUNICATIONS, INC. OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF
REGULATION S, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND THE WARRANT AGENT SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (E)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. IN CONNECTION WITH ANY TRANSFER OF
THESE SECURITIES WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WARRANT AGENT. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
THIS SECURITY IS A GLOBAL WARRANT WITHIN THE MEANING OF THE SUPPLEMENTAL WARRANT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE SUPPLEMENTAL WARRANT
AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE SUPPLEMENTAL WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
CUSIP # ________
No. _____ _________Warrants
FORM OF WARRANT CERTIFICATE
PATHNET TELECOMMUNICATIONS, INC.
This Warrant Certificate certifies that CEDE & CO., or
registered assigns, is the registered holder of 200,000 Warrants (the
"WARRANTS") to purchase shares of Common Stock, par value $0.01 per share,
issuable upon exercise of the Warrants (the "WARRANT SHARES") of PATHNET
TELECOMMUNICATIONS, INC., a Delaware corporation (the "COMPANY," which term
includes its successors and assigns). Each Warrant entitles the holder to
purchase from the Company at any time from 9:00 a.m. New York City time on or
after the Exercisability Date until 5:00 p.m., New York City time, on April 15,
2008 (the "EXPIRATION DATE"), 3.19 fully paid, registered and non-assessable
Warrant Shares, subject to adjustment as provided in Article V of the
Supplemental Warrant Agreement, at an exercise price of $0.01 for each share
purchased (the "EXERCISE PRICE"); upon surrender of this Warrant Certificate and
payment of the Exercise Price (i) in cash or by certified or official bank
check, (ii) by a Cashless Exercise or (iii) by any combination of (i) and (ii),
at any office or agency maintained for that purpose by the Company (the "WARRANT
EXERCISE OFFICE"), subject to the conditions set forth herein and in the
Supplemental Warrant Agreement. For purposes of this Warrant, a "CASHLESS
EXERCISE" shall mean an exercise of a Warrant in accordance with the immediately
following two sentences. To effect a Cashless Exercise, the holder may exercise
a Warrant or Warrants without payment of the Exercise Price in cash by
surrendering such Warrant or Warrants (represented by one or more Warrant
Certificates) and in exchange therefor, receiving such number of shares of
Common Stock equal to the product of (1) that number of shares of Common Stock
for which such Warrant or Warrants are exercisable and which would be issuable
in the event of an exercise with payment of the Exercise Price and (2) the
Cashless Exercise Ratio. The "CASHLESS EXERCISE RATIO" shall equal a fraction,
the numerator of which is the excess of the Current Market Value (calculated as
set forth in this Warrant) per share of Common Stock on the date of exercise
over the Exercise Price per share of Common Stock as of the date of exercise and
the denominator of which is the Current Market Value per share of Common Stock
on the date of exercise. Upon surrender of a Warrant Certificate representing
more than one Warrant in connection with the holder's option to elect a Cashless
Exercise, the holder must specify the number of Warrants for which such Warrant
Certificate is to be exercised (without giving effect to the Cashless Exercise).
All provisions of the Supplemental Warrant Agreement shall be applicable with
respect to a Cashless Exercise of a Warrant Certificate for less than the full
number of Warrants represented thereby. Capitalized terms used herein without
being defined herein shall have the definitions ascribed to such terms in the
Supplemental Warrant Agreement.
"CURRENT MARKET VALUE" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
board of directors of the Company and certified in a board resolution, based on
the most recently completed arm's-length transaction between the Company and a
person other than an Affiliate of the Company and the closing of which occurs on
such date or shall have occurred within the six-month period preceding such
date, or (b) if no such transaction shall have occurred on such date or within
such six-month period or if the board of directors of the Company otherwise
elects, the Fair Market Value of the security as determined by a nationally or
regionally recognized Independent Financial Expert (as defined herein) (PROVIDED
that, in the case of the calculation of Current Market Value for determining the
cash value of fractional shares, any such determination within six months that
is, in the good faith judgment of the board of directors of the Company, a
reasonable determination of value, may be utilized) or (ii) (a) if the security
is registered under the Exchange Act, the average of the daily closing sales
prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average daily closing sales prices for all of the trading days before such
date for which closing sales prices are available, in the case of each of (ii)
(a) and (ii) (b), as certified to the Warrant Agent by the President or any vice
president or the Chief Financial Officer of the Company. The closing sales price
for each such trading day shall be: (A) in the case of a security listed or
admitted to trading on any United States national securities exchange or
quotation system, the closing sales price, regular way, on such day, or if no
sale takes place on such day, the average of the closing bid and asked prices on
such day, (B) in the case of a security not then listed or admitted to trading
on any national securities exchange or quotation system, the last reported sale
price on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (C) in the case of a security not then listed
or admitted to trading on any national securities exchange or quotation system
and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on such
day, as reported by a reputable quotation service, or a newspaper of general
circulation in the Borough of Manhattan, The City and State of New York,
customarily published on each Business Day, designated by the Company, or, if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than 30
days prior to the date in question) for which prices have been so reported and
(D) if there are not bid and asked prices reported during the 30 days prior to
the date in question, the Current Market Value shall be determined as if the
securities were not registered under the Exchange Act.
"EXERCISE EVENT" means, with respect to each Warrant, the date
of the occurrence of the earliest of: (i) the time immediately prior to a Change
of Control (as such term is defined in the Indenture); (ii)(a) the 180th day (or
such earlier date as determined by the Company in its sole discretion) following
the closing of an Initial Public Equity Offering (as defined herein) or (b) upon
the closing of an Initial Public Equity Offering, but only in respect of
Warrants, if any, required to be exercised to permit the holders thereof to sell
Warrant Shares pursuant to their respective registration rights, (iii) the time
when a class of equity securities of the Company is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market or
is otherwise subject to registration under the Exchange Act, or (iv) April 30,
2001.
"INDEPENDENT FINANCIAL EXPERT" means a nationally or
regionally recognized investment banking or public accounting firm in the United
States or, if the Company believes that an investment banking or public
accounting firm is generally not qualified to give such an opinion, a nationally
recognized appraisal firm, in any case (i) which does not, and whose directors,
officers and employees or Affiliates do not, have a direct or indirect material
financial interest for its proprietary account in the Company or any of its
Affiliates and (ii) which, in the judgment of the Board of Directors of the
Company, is otherwise independent with respect to the Company and its Affiliates
and qualified to perform the task for which it is to be engaged.
The Company has initially designated the principal corporate
trust office of the Warrant Agent in the Borough of Manhattan, The City of New
York, as the initial Warrant Agent Office. The number of shares of Common Stock
issuable upon exercise of the Warrants ("Exercise Rate") is subject to
adjustment upon the occurrence of certain events set forth in the Supplemental
Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York
City time, on April 15, 2008 shall thereafter be void.
If the Company, in a single transaction or through a series of
related transactions, consolidates with or merges with or into, or sells all or
substantially all of its property and assets to, another Person (other than a
subsidiary of the Company) solely for cash, the holders of Warrants which are
then exercisable shall be entitled to receive distributions on the date of such
event on an equal basis with holders of shares of Capital Stock (or other
securities issuable upon exercise of the Warrants) as if the Warrants had been
exercised immediately prior to such event less the aggregate Exercise Price
therefor.
Reference is hereby made to the further provisions on the
reverse hereof which provisions shall for all purposes have the same effect as
though fully set forth at this place.
This Warrant Certificate shall not be valid unless
authenticated by the Warrant Agent, as such term is used in the Supplemental
Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
WITNESS the signatures of the duly authorized officers of the
Company.
PATHNET TELECOMMUNICATIONS, INC.
By:_______________________________________
Name:
Title:
Attest:
By:_________________________________
Name: Mary McDermott
Title: Secretary
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Supplemental Warrant Agreement:
Dated:
THE BANK OF NEW YORK,
Warrant Agent
By:__________________________________
Authorized Signatory
<PAGE>
PATHNET TELECOMMUNICATIONS, INC.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring at 5:00 p.m., New York City time,
on April 15, 2008 (the "EXPIRATION DATE"), each of which represents the right to
purchase at any time on or after the Exercisability Date (as defined in the
Supplemental Warrant Agreement) and on or prior to the Expiration Date 3.19
Shares, subject to adjustment as set forth in the Supplemental Warrant
Agreement. The Warrants are issued pursuant to a Supplemental Warrant Agreement
dated as of March 30, 2000 (the "SUPPLEMENTAL WARRANT AGREEMENT"), duly executed
and delivered by the Company to The Bank of New York, Warrant Agent (the
"WARRANT AGENT"), which Supplemental Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "HOLDERS" or "HOLDER" meaning the registered holders or registered holder)
of the Warrants.
Warrants may be exercised by (i) surrendering at any Warrant
Agent Office this Warrant Certificate with the form of Election to Exercise set
forth hereon duly completed and executed and (ii) to the extent such exercise is
not being effected through a Cashless Exercise by paying in full the Warrant
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to the Supplemental Warrant Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 11:00 a.m.,
New York City time, on a Business Day, the exercise of the Warrant to which such
items relate will be effective on such Business Day. If any items referred to in
the last sentence of the preceding paragraph are received after 11:00 a.m., New
York City time, on a Business Day, the exercise of the Warrants to which such
item relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on April
15, 2008, if all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 5:00 p.m., New York
City time, on such Expiration Date, the exercise of the Warrants to which such
items relate will be effective on the Expiration Date.
As soon as practicable after the exercise of any Warrant or
Warrants, the Company shall issue or cause to be issued to or upon the written
order of the registered holder of this Warrant Certificate, a certificate or
certificates evidencing the Warrant Share or Warrant Shares to which such holder
is entitled, in fully registered form, registered in such name or names as may
be directed by such holder pursuant to the Election to Exercise, as set forth on
the face of this Warrant Certificate. Such certificate or certificates
evidencing the Warrant Share or Warrant Shares shall be deemed to have been
issued and any persons who are designated to be named therein shall be deemed to
have become the holder of record of such Warrant Share or Warrant Shares as of
the close of business on the date upon which the exercise of this Warrant was
deemed to be effective as provided in the preceding paragraph.
The Company will not be required to issue fractional Shares
upon exercise of the Warrants or distribute Warrant Certificates that evidence
fractional Warrant Shares. In lieu of fractional Warrant Shares, there shall be
paid to the registered Holder of this Warrant Certificate at the time such
Warrant Certificate is exercised an amount in cash equal to the same fraction of
the Current Market Value per share of Common Stock on the Business Day preceding
the date this Warrant Certificate is surrendered for exercise.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant Certificates evidencing
in the aggregate a like number of Warrants, in the manner and subject to the
limitations provided in the Supplemental Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this
Warrant Certificate at any office or agency maintained by the Company for that
purpose, a new Warrant Certificate evidencing in the aggregate a like number of
Warrants shall be issued to the transferee in exchange for this Warrant
Certificate, subject to the limitations provided in the Supplemental Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone) for the purpose of any exercise hereof and for all other purposes, and
neither the Company nor the Warrant Agent shall be affected by any notice to the
contrary.
The term "BUSINESS DAY" shall mean any day on which (i) banks
in The City of New York, (ii) the principal U.S. securities exchange or market,
if any, on which the Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Warrants are
listed or admitted to trading are open for business.
The Warrants, Warrant Shares and Registrable Securities (as
defined in the Warrant Registration Rights Agreement) are entitled to the
benefits of a registration rights agreement relating to the Warrants and the
Warrant Shares (the "WARRANT REGISTRATION RIGHTS AGREEMENT"), pursuant to which
the holders representing not less than 50% of Warrant Shares and Registrable
Securities have, at any time and from time to time after (A) the occurrence of
the earliest of (i) the time immediately prior to a Change of Control (as such
term is defined in the Indenture); (ii)(a) the180th day (or such earlier date as
determined by the Company in its sole discretion) following the consummation of
an Initial Public Equity Offering (as defined herein) or (b) upon the
consummation of an Initial Public Equity Offering, but only in respect of
Warrants, if any, required to be exercised to permit the holders thereof to sell
Warrant Shares pursuant to their respective registration rights, (iii) the time
when a class of equity securities of the Company is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market or
is otherwise subject to registration under the Exchange Act, or (iv) April 30,
2001, and (B) the completion of an Initial Public Equity Offering, the right to
require the Company to effect one demand registration of the Warrant Shares and
Registrable Securities. The Warrant Registration Rights Agreement also provides
the holders of Registrable Securities with the right, subject to the conditions
and limitations contained therein, to include the Registrable Securities in
certain registration statements filed by the Company for its account or for the
account of any of its securityholders.
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants on the Exercise
Date)
The undersigned hereby irrevocably elects to exercise [ ] of
the Warrants represented by this Warrant Certificate and purchase the whole
number of Shares issuable upon the exercise of such Warrants and herewith
tenders payment for such Shares as follows:
$[ ] in cash or by certified or official bank check; or by
surrender of Warrants pursuant to a Cashless Exercise (as defined in the
Supplemental Warrant Agreement) for [ ] shares of Stock at the current Cashless
Exercise Ratio.
The undersigned requests that a certificate representing such
Shares be registered in the name of _______________ whose address is
________________ and that such shares be delivered to _____________________
whose address is ________________. Any cash payments to be paid in lieu of a
fractional Share should be delivered to _________ whose address is
________________ and the check representing payment thereof should be delivered
to _____________ whose address is _____________________.
Dated ___________, ____
Name of holder of
Warrant Certificate:_________________________________________
(Please Print)
Tax Identification or
Social Security Number:______________________________________
Address: ___________________________________________________
---------------------------------------------------------
Signature:___________________________________________________
Note: The above signature must correspond with the
name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever and if the certificate
representing the Shares or any Warrant
Certificate representing Warrants not
exercised is to be registered in a name
other than that in which this Warrant
Certificate is registered, or if any cash
payment to be paid in lieu of a fractional
share is to be made to a person other than
the registered holder of this Warrant
Certificate, the signature of the holder
hereof must be guaranteed as provided in the
Supplemental Warrant Agreement.
Dated ______________, ____
Signature:___________________________________________________
Note: The above signature must correspond with the
name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
Signature Guaranteed:________________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
ASSIGNMENT
For value received __________________________ hereby sells,
assigns and transfers unto _____________________________ the within Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated ________________, ____
Signature:___________________________________________________
Note: The above signature must correspond with the
name as written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever.
Signature Guaranteed:________________________________________
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
<PAGE>
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
<TABLE>
<CAPTION>
Number of Warrants
Amount of decrease Amount of increase in of this Global
in Number of Number of Warrants of Warrant following Signature of
Warrants of this this GLOBAL WARRANT such decrease (or authorized officer
Date of EXCHANGE GLOBAL WARRANT INCREASE) of WARRANT AGENT
-------- -------------- ------------------- ---------------------- -------------
<S> <C> <C> <C>
</TABLE>
EXHIBIT 4.14
AMENDED AND RESTATED WARRANT
REGISTRATION RIGHTS AGREEMENT
Dated as of March 30, 2000
Between
PATHNET TELECOMMUNICATIONS, INC.,
and
SPECTRUM EQUITY INVESTORS, L.P.,
NEW ENTERPRISE ASSOCIATES VI, LIMITED PARTNERSHIP,
ONSET ENTERPRISE ASSOCIATES II, L.P.,
FBR TECHNOLOGY VENTURE PARTNERS, L.P.,
TORONTO DOMINION CAPITAL (USA) INC.,
GROTECH PARTNERS IV, L.P. and
RICHARD A. JALKUT
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Section 1. Definitions.....................................................................................1
Section 2. Registration Rights.............................................................................6
2.1 (a) Demand Registration......................................................................6
(b) Effective Registration...................................................................7
(c) Selection of Underwriter.................................................................7
(d) Expenses.................................................................................8
2.2 (a) Piggy-Back Registration..................................................................8
(b) Priority in Piggy-Back Registration......................................................9
2.3 Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants..........................................................................9
2.4 Restrictions on Sale by the Company and Others.................................................10
2.5 Rule 144 and Rule 144A.........................................................................11
2.6 Underwritten Registration......................................................................11
Section 3. Transfers......................................................................................12
3.1 Generally......................................................................................12
3.2 Tag-Along Rights...............................................................................12
3.3 Drag-Along Rights..............................................................................14
Section 4. Registration Procedures........................................................................14
Section 5. Indemnification and Contribution...............................................................20
Section 6. Miscellaneous..................................................................................23
(a) Remedies.......................................................................................23
(b) No Inconsistent Agreements.....................................................................24
(c) No Piggy-Back on Demand Registrations..........................................................24
(d) Amendments and Waivers.........................................................................24
(e) Notices........................................................................................24
(f) Successors and Assigns.........................................................................24
(g) Counterparts...................................................................................25
(h) GOVERNING LAW..................................................................................25
(i) Severability...................................................................................25
(j) Headings.......................................................................................25
(k) Entire Agreement...............................................................................25
(l) Securities Held by the Company or Its Affiliates...............................................25
</TABLE>
<PAGE>
AMENDED AND RESTATED WARRANT
REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED WARRANT REGISTRATION RIGHTS
AGREEMENT (this "AGREEMENT") is made and entered into as of March 30, 2000,
between PATHNET TELECOMMUNICATIONS, INC. (the "COMPANY"), a Delaware
corporation, and SPECTRUM EQUITY INVESTORS, L.P., NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP, ONSET ENTERPRISE ASSOCIATES II, L.P., FBR TECHNOLOGY
VENTURE PARTNERS, L.P., TORONTO DOMINION CAPITAL (USA) INC., GROTECH PARTNERS
IV, L.P., and RICHARD A. JALKUT (the "PERMITTED HOLDERS").
The predecessor to this Agreement was originally executed
pursuant to the Purchase Agreement dated as of April 8, 1998, among Pathnet, Inc
("PATHNET") and the Initial Purchasers, with respect to the issue and sale by
Pathnet and the purchase by the Initial Purchasers, severally, of the respective
number of Pathnet's Units, each Unit consisting of $1,000 principal amount of
the Company's 12.25% Senior Notes due 2008 (the "Notes") and one warrant (each,
a "PATHNET WARRANT"), each initially entitling the holder thereof to purchase
1.1 shares of common stock, par value $0.01 per share, of Pathnet, set forth
opposite such Initial Purchaser's name on Schedule I to the Purchase Agreement.
This Agreement, which amends and restates the original agreement, reflects the
substitution of the Company as a party to this Agreement in lieu of Pathnet and
the conversion of each Pathnet Warrant into a warrant (each, a "WARRANT") which,
as of the date hereof, entitles the holder thereof to purchase 3.19 shares of
common stock, par value $0.01 per share, of the Company ("COMMON STOCK").
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. DEFINITIONS. As used in this Agreement, the
-----------
following defined terms shall have the following meanings:
"ADVICE" shall have the meaning ascribed to such term in
Section 4 hereof.
"AFFILIATE" shall have the meaning ascribed to such term in
the Indenture.
"AGREEMENT" shall have the meaning ascribed to such term in
the preamble hereto.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"CAPITAL STOCK" shall mean, with respect to any Person, any
and all shares, interests, partnership interests, participations, rights in or
other equivalents (however designated and whether voting or non-voting) of, such
Person's capital stock, and any rights (other than debt securities convertible
into capital stock), warrants or options exchangeable for or convertible into
such capital stock whether outstanding on the Issue Date or thereafter issued.
"CHANGE OF CONTROL" shall have the meaning ascribed to such
term in the Indenture.
"COMPANY" shall have the meaning ascribed to such term in the
preamble of this Agreement and shall also include the Company's permitted
successors and assigns.
"COMMON STOCK" shall have the meaning ascribed to such term in
the preamble of this Agreement and any other class or series of common equity
equivalent shares of the Company into which such Common Stock may be
reclassified and sold to the public in an Initial Public Equity Offering.
"CONVERTIBLE PREFERRED STOCK" shall mean the Series Preferred
Stock (as defined in the Indenture) of the Company and any other series of
preferred stock convertible or exchangeable into Common Stock, whether
outstanding on the date hereof or thereafter issued.
"CURRENT MARKET VALUE" shall have the meaning ascribed to such
term in the Warrant Agreement.
"DEMAND REGISTRATION" shall have the meaning ascribed to such
term in Section 2.1(a) hereof.
"DRAG-ALONG RIGHT" shall have the meaning ascribed to such
term in Section 3.3 hereof.
"DTC" shall have the meaning ascribed to such term in Section
4(i) hereof.
"EFFECTIVENESS PERIOD" shall have the meaning ascribed to such
term in Section 2.1(a) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"FAIR MARKET VALUE" shall mean the value of any securities as
determined (without any discount for lack of liquidity, the amount of such
securities proposed to be sold or the fact that such securities held by any
Holder of such security may represent a minority interest in a private company)
by a nationally or regionally recognized independent financial expert selected
by the Company for the determination of such value.
"HOLDER" shall mean each holder of any Warrants, Warrant
Shares or Registrable Securities, and each of their successors, assigns and
direct and indirect transferees who become registered owners of such Warrants,
Warrant Shares or Registrable Securities for so long as such Person continues to
hold such Warrants, Warrant Shares or Registrable Securities.
"INCLUDED SECURITIES" shall have the meaning ascribed to such
term in Section 2.1(a) hereof.
"INDENTURE" shall mean the Indenture, dated as of April 8,
2000 between Pathnet and The Bank of New York, Trustee, pursuant to which the
Notes were issued, as amended as of March 30, 2000, and as further amended or
supplemented from time to time in accordance with the terms thereof.
"INDEPENDENT FINANCIAL EXPERT " shall have the meaning
ascribed to such term in the Indenture.
"INITIAL PUBLIC EQUITY OFFERING" shall mean a primary public
offering (whether or not underwritten, but excluding any offering pursuant to
Form S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan) of Common Stock pursuant to
an effective registration statement under the Securities Act.
"INITIAL PURCHASERS" shall mean Merrill Lynch & Co., Merrill
------------------
Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., TD
Securities (USA) Inc., and Salomon Brothers Inc.
"INSPECTORS" shall have the meaning ascribed to such term in
Section 4(m) hereof.
"ISSUE DATE" shall mean the date hereof.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on
which (i) banking institutions in The City of New York are required or
authorized by law or other government action to be closed and (ii) the principal
U.S. securities exchange or market, if any, on which any Common Stock is listed
or admitted to trading and the principal U.S. securities exchange or market, if
any, on which the Warrants are listed or admitted to trading are closed for
business.
"NOTES" shall have the meaning ascribed to such term in the
preamble hereof.
"PARTICIPATING HOLDER" shall have the meaning ascribed to such
term in Section 3.2(c).
"PERMITTED HOLDER" shall have the meaning ascribed to such
term in the preamble hereof.
"PATHNET" shall have the meaning ascribed to such term in the
preamble hereof.
"PATHNET WARRANT" shall have meaning ascribed to such term in
the preamble hereof "PERSON" shall mean any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, business trust, unincorporated organization or government or any agency
or political subdivision thereof, including any entity that is a predecessor of
any such entity.
"PIGGY-BACK REGISTRATION" shall have the meaning ascribed to
such term in Section 2.2(a) hereof.
"PROPOSED PURCHASER" shall have the meaning ascribed to such
term in Section 3.2(a) hereof.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" shall mean any of (i) the Common
Stock issued and issuable upon exercise of the Warrants and (ii) any other
securities issued or issuable with respect to the Warrants or Warrant Shares by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (a) a Registration Statement with
respect to the offering of such securities by the holder thereof shall have been
declared effective under the Securities Act and such securities shall have been
disposed of by such holder pursuant to such Registration Statement, (b) such
securities have been sold to the public pursuant to, or are eligible (or would
have been eligible if the holder of Warrants had elected cashless exercise of
the Warrant or Warrants) for sale to the public without volume or manner of sale
restrictions under, Rule 144(k) (or any similar provision then in force, but not
Rule 144A) promulgated under the Securities Act, (c) such securities shall have
been otherwise transferred and new certificates for such securities not bearing
a legend restricting further transfer shall have been delivered by the Company
or its transfer agent and subsequent disposition of such securities shall not
require registration or qualification under the Securities Act or any similar
state law then in force or (d) such securities shall have ceased to be
outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to
the Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees and
expenses of compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the underwriters
and the Holders in connection with blue sky qualifications of the Registrable
Securities, such counsel fees not to exceed $5,000 per registration), rating
agency fees, printing expenses, messenger, telephone and delivery expenses, fees
and disbursements of counsel for the Company and all independent certified
public accountants and fees and disbursements of underwriters customarily paid
by issuers or sellers of securities (but not including underwriting discounts or
commissions, fees of counsel to the Holders or transfer taxes, if any,
attributable to the sale of Subject Equity by Holders of such Subject Equity).
"REGISTRATION STATEMENT" shall mean any appropriate
registration statement of the Company filed with the SEC pursuant to the
Securities Act which covers any of the Subject Equity pursuant to the provisions
of this Agreement and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all materials
incorporated by reference therein.
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing
for offers and sales of securities made in compliance therewith resulting in
offers and sales by subsequent holders that are not affiliates of an issuer of
such securities being free of the registration and prospectus delivery
requirements of the Securities Act.
"RULE 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule (other than Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
"SELLING HOLDER" shall mean a Holder who is selling Subject
Equity or Registrable Securities in accordance with the provisions of Section
2.1 or 2.2, respectively.
"SUBJECT EQUITY" shall have the meaning ascribed to such term
in Section 2.1(a) hereof. "SUSPENSION PERIOD" shall have the
meaning ascribed to such term in Section 2.3(a).
"TAG-ALONG NOTICE" shall have the meaning ascribed to such
term in Section 3.2(c) hereof.
"TAG-ALONG RIGHT" shall have the meaning ascribed to such term
in Section 3.2(a) hereof.
"TRANSFER" shall have the meaning ascribed to such term in
Section 3.2(a) hereof.
"TRANSFER NOTICE" shall have the meaning ascribed to such term
in Section 3.2(c) hereof.
"TRIGGERING DATE" shall mean the date of the consummation of a
bona fide underwritten public offering of Common Stock, as a result of which at
least 20% of the outstanding shares of Common Stock are listed on a U.S.
national securities exchange or the Nasdaq National Market.
"WARRANT AGENT" shall mean The Bank of New York and any
successor warrant agent for the Warrants pursuant to the Warrant Agreement.
"WARRANT AGREEMENT" shall mean the Supplemental Warrant
Agreement dated as of the date hereof, between the Company and the Warrant
Agent, as amended or supplemented from time to time in accordance with the terms
thereof.
"WARRANT SHARES" shall mean shares of Common Stock issued or
issuable upon exercise of the Warrants at an exercise price of $0.01 per share
or any other securities issued or issuable with respect to the Warrants by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"WARRANTS" shall have the meaning ascribed to such term in the
preamble hereof.
Section 2. REGISTRATION RIGHTS.
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2.1 (a) DEMAND REGISTRATION. After the occurrence of an
Exercise Event (as such term is defined in the Warrant Agreement) and the
completion of an Initial Public Equity Offering, the holders of a number of
Warrants, Warrant Shares and Registrable Securities (collectively, the "SUBJECT
EQUITY") equivalent to at least a majority of the Warrant Shares subject to the
Warrants originally issued on the Issue Date, from time to time, may make a
written request to the Company to effect one registration (the "DEMAND
REGISTRATION") under the Securities Act of the Subject Equity. Any such request
will specify the number of shares of Subject Equity proposed to be sold and will
also specify the intended method of disposition thereof. Within 10 days after
the receipt of such written request for a Demand Registration, the Company shall
notify the Holders of all Subject Equity that a Demand Registration has been
requested. Within 45 days after receipt by any Holder of Subject Equity of such
notice from the Company, such Holder may request in writing that such Holder's
Subject Equity be included in such Registration Statement and the Company shall
include in such Registration Statement the Subject Equity of such Holder
requested to be so included (the "INCLUDED SECURITIES"). Each such request by
such other Holders shall specify the number of Included Securities proposed to
be sold and the intended method of disposition thereof. Furthermore, the Company
shall prepare, file with the SEC and use its best efforts to cause to become
effective under the Securities Act within 150 days of such demand a Registration
Statement in respect of all of the Subject Equity which the Holders request and
keep such Registration Statement continuously effective until the earlier to
occur of (i) the date that is 180 days after such effectiveness (the
"EFFECTIVENESS PERIOD"), (ii) such period of time as all of the Subject Equity
included in such Registration Statement shall have been sold thereunder and
(iii) the Subject Equity included in such registration becomes fully saleable
under paragraph (k) of Rule 144.
If a Demand Registration occurs during the "lock up" or "black
out" period (not to exceed 180 days) imposed on the Company pursuant to or in
connection with any underwriting or purchase agreement relating to an
underwritten Rule 144A or registered public offering of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock, the
Company shall not be required to so notify Holders of Subject Equity and file
such Registration Statement with respect to the Subject Equity which the Holders
request prior to the end of such "lock up" or "black out" period, in which event
the Company will use its best efforts to cause such Registration Statement to
become effective no later than the later of (i) 150 days after such demand or
(ii) 30 days after the end of such "lock up" or "black out" period. In the event
of any "lock up" or "black out" period or any underwriting or other purchase
agreement, the Company shall so notify the holders of Registrable Securities.
Notwithstanding the foregoing, in lieu of filing and causing
to become effective the Demand Registration, the Company may satisfy its
obligation with respect thereto by making and consummating (or having its
designee make and consummate) an offer to purchase all Subject Equity at a price
at least equal to Current Market Value (as defined in the Warrant Agreement, but
without the inclusion of clause (i)(a) thereof), less any applicable Exercise
Price.
(b) EFFECTIVE REGISTRATION. A Registration Statement shall not
be deemed to have been effected as a Demand Registration unless it shall have
been declared effective by the SEC, and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto, no
later than the later of (i) 150 days after the request for a Demand Registration
or (ii) 30 days after the end of any "lock up" or "black out" period described
in Section 2.1(a) hereof; PROVIDED, HOWEVER, that if, after such Registration
Statement has become effective, the offering of Subject Equity pursuant to such
Registration Statement is or becomes the subject of any stop order, injunction
or other order or requirement of the SEC or any similar governmental, judicial
or administrative order or requirement that prevents, restrains or otherwise
limits the sale of Subject Equity pursuant to such Registration Statement, and
such Registration Statement has not become effective within a reasonable time
period thereafter, such Registration Statement shall be deemed not to have been
effected. If (i) the registration requested pursuant to this Section 2.1 shall
be deemed not to have been effected or (ii) the Demand Registration does not
remain effective under the Securities Act until at least the earlier of (A) the
end of the Effectiveness Period or (B) the consummation of the distribution by
the Holders of all of the Subject Equity covered thereby, then such Demand
Registration shall not count towards determining if the Company has satisfied
its obligation to effect a Demand Registration pursuant to this Section 2.1. The
Holders of Subject Equity shall be permitted to withdraw all or any part of the
Registrable Securities from the Demand Registration. Notwithstanding any such
withdrawal by a Holder of Subject Equity, if the Company has complied with all
of its obligations hereunder and has effected a Demand Registration within 150
days after the request for such Demand Registration, such withdrawal shall not
require the Company to effect an additional Demand Registration.
(c) SELECTION OF UNDERWRITER. If the Holders so elect, the
offering of such Subject Equity pursuant to such Demand Registration shall be in
the form of an underwritten offering. The Holders making such Demand
Registration shall select one or more nationally recognized firms of investment
bankers, who shall be reasonably acceptable to the Company, to act as the
managing underwriter or underwriters in connection with such offering and shall
select any additional investment bankers and managers to be used in connection
with the offering.
(d) EXPENSES. The Company will pay all Registration Expenses
in connection with the registrations requested pursuant to Section 2.1(a)
hereof. Each Holder of Subject Equity shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Subject Equity pursuant to a Registration Statement requested
pursuant to this Section 2.1.
2.2 (a) PIGGY-BACK REGISTRATION. If at any time the Company
proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any of
its securityholders of any class of its common equity securities (other than (i)
a registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC) or any other publicly registered offering pursuant to the
Securities Act pertaining to the issuance of shares of Capital Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan, (ii) a registration statement
filed in connection with an offer of securities solely to the Company's existing
securityholders or (iii) a Demand Registration), then the Company shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request in writing
within 12 days (or eight days if the Company is subject to filing reports under
the Exchange Act and able to use Form S-3 under the Securities Act) after
receipt of such written notice from the Company (which request shall specify the
Registrable Securities intended to be disposed of by such Selling Holder and the
intended method of distribution thereof) (a "PIGGY-BACK REGISTRATION"). In such
case where the intended method of distribution thereof is on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, the Company shall use its best efforts to
keep such Piggy-Back Registration continuously effective under the Securities
Act in the qualifying jurisdictions until at least the earlier of (A) 60 days
after the effective date thereof or (B) the consummation of the distribution by
the Holders of all of the Registrable Securities covered thereby. The Company
shall use its reasonable efforts to cause the managing underwriter or
underwriters, if any, of such proposed offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company or any
other securityholder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective or the Company
may elect to delay the registration; PROVIDED, HOWEVER, that the Company shall
give prompt written notice thereof to participating Selling Holders.
The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.2, and each Holder of Registrable Securities shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to a
Registration Statement effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve the
Company of its obligation to effect a registration upon the request of Holders
of Registrable Securities pursuant to Section 2.1 hereof, and no failure to
effect a registration under this Section 2.2 and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Agreement.
(b) PRIORITY IN PIGGY-BACK REGISTRATION. In a registration
pursuant to Section 2.2 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering shall have
informed the Company and the Selling Holders requesting inclusion in such
offering, in writing, that in such underwriter's or underwriters' reasonable
opinion the total number or type of Registrable Securities which the Company,
the Selling Holders and any other persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, including the price at which such
securities can be sold, then the Company shall be required to include in such
registration only the amount of securities which it is so advised should be
included in such registration. In such event, securities shall be registered in
such offering in the following order of priority: (i) first, the securities
which the Company proposes to register (a) in the Initial Public Equity Offering
or (b) pursuant to an exercise of "demand" registration rights pursuant to a
contractual commitment of the Company and (ii) second, provided that no
securities sought to be included by the Company or any such Person under the
immediately preceding clause (i) have been excluded from such registration,
securities which have been requested to be included in such registration by the
Company (other than those covered by clause (i)) and by the Holders of
Registrable Securities pursuant to this Agreement, and the securities of other
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Company (pro rata based on the amount of
securities sought to be registered by the Company and such Persons).
If, as a result of the provisions of this Section 2.2(b), any
Selling Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
2.3 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS
UNDER REGISTRATION COVENANTS. The obligations of the Company set forth in
Sections 2.1 and 2.2 hereof are subject to each of the following limitations,
conditions and qualifications:
(a) The Company may postpone the filing of, or suspend the
effectiveness of, any Registration Statement or amendment thereto,
suspend the use of any Prospectus and shall not be required to amend or
supplement the Registration Statement, any related Prospectus or any
document incorporated therein by reference (other than an effective
Registration Statement being used for an underwritten offering) in the
event that, and for a period (a "SUSPENSION PERIOD") not to exceed an
aggregate of 60 days. A Suspension period used in respect of Sections
2.1 and 2.2 may be effected only if (i) an event or circumstance occurs
and is continuing as a result of which the Registration Statement, any
related Prospectus or any document incorporated therein by reference as
then amended or supplemented or proposed to be filed would, in the
Company's good faith judgement, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (ii) (A) the Company
determines in its good faith judgement that the disclosure of such an
event at such time would have a material adverse effect on the
business, operations or prospects of the Company or (B) the disclosure
otherwise relates to a material business transaction which has not yet
been publicly disclosed; PROVIDED that the Effectiveness Period shall
be extended by the number of days in any Suspension Period; PROVIDED
FURTHER that the Company shall not be entitled to the postponement or
suspension more than once in any 12-month period; PROVIDED FURTHER that
the Company may suspend the effectiveness for a period not in excess of
five Business Days to allow for the updating of the financial
statements included in a Registration Statement to the extent required
by law, not to exceed 45 days in the aggregate in any 12-month period.
If the Company shall so postpone the filing of a Registration Statement
it shall, as promptly as possible, deliver a certificate signed by the
chief executive officer of the Company to the Selling Holders as to
such determination, and the Selling Holders shall (1) have the right,
in the case of a postponement of the filing or effectiveness of a
Registration Statement, upon the affirmative vote of the Holders of not
less than a majority of the Subject Equity to be included in such
Registration Statement, to withdraw the request for registration by
giving written notice to the Company within 10 days after receipt of
such notice or (2) in the case of a suspension of the right to make
sales, receive an extension of the registration period equal to the
number of days of the suspension. Any Demand Registration as to which
the withdrawal election referred to in the preceding sentence has been
effected shall not be counted for purposes of the Demand Registration
the Company is required to effect pursuant to Section 2.1 hereof.
(b) The Company's obligations under this Agreement shall be
subject to the obligations of the Selling Holders, which the Selling
Holders acknowledge, to furnish all information and materials and to
take any and all actions as may be required under applicable federal
and state securities laws and regulations to permit the Company to
comply with such laws and regulations and all applicable requirements
of the SEC and to obtain any acceleration of the effective date of such
Registration Statement.
2.4 RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The
Company covenants and agrees that (i) it shall not, and that it shall not cause
or permit any of its subsidiaries to, effect any public sale or public
distribution of any securities of the same class as any of the Warrants or
Registrable Securities or any securities convertible into or exchangeable or
exercisable for such securities (or any option or other right for such
securities) during the 30-day period prior to, and during the 180-day period
beginning on, the commencement of any underwritten offering of Warrants or
Registrable Securities pursuant to a Demand Registration which has been
requested pursuant to this Agreement, or a Piggy-Back Registration which has
been scheduled, prior to the Company or any of its subsidiaries publicly
announcing its intention to effect any such public sale or public distribution;
(ii) the Company will not, and the Company will not cause or permit any
subsidiary of the Company to, after the date hereof, enter into any agreement or
contract that conflicts with or limits or prohibits the full and timely exercise
by the Holders of Warrants or Registrable Securities of the rights herein to
request a Demand Registration or to join in any Piggy-Back Registration subject
to the other terms and provisions hereof; and (iii) upon request of the Holders
of not less than a majority of the Warrants or Registrable Securities to be
included in such Registration Statement or any underwriter, it shall use its
reasonable best efforts to secure the written agreement of each of its officers
and directors to not effect any public sale or public distribution of any
securities of the same class as the Warrants or Registrable Securities (or any
securities convertible into or exchangeable or exercisable for such securities)
or any option or other right for such securities during the period described in
clause (i) of this Section 2.4.
2.5 RULE 144 AND RULE 144A. While any Warrants or Registrable
Securities remain outstanding, the Company covenants that it shall file the
reports required to be filed by it under the Exchange Act and the rules,
regulations and policies adopted by the SEC thereunder in a timely manner and in
accordance with the requirements of the Exchange Act. If at any time the Company
is not required to file such reports, it will distribute to each Holder or
beneficial owner of Warrants that are "restricted securities" within the meaning
of Rule 144 and are not saleable in full under paragraph (k) of Rule 144 or
Registrable Securities such information as is necessary to permit sales pursuant
to Rule 144A under the Securities Act. The Company further covenants that it
will take such further action as any Holder of Warrants or Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Warrants or Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any Holder of Warrants or
Registrable Securities, the Company will in a timely manner deliver to such
Holder a written statement as to whether it has complied with such information
requirements.
2.6 UNDERWRITTEN REGISTRATIONS. No Holder of Registrable
Securities may participate in any underwritten registration pursuant to a
Registration Statement filed under this Agreement unless such Holder (a) agrees
to (i) sell such Holder's Registrable Securities on the basis provided in and in
compliance with any underwriting arrangements approved by the Holders of not
less than a majority of the Registrable Securities to be sold thereunder and
(ii) comply with Rules 101, 102 and 104 of Regulation M under the Exchange Act
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
Each Holder of Warrants and Registrable Securities whose
Warrants and Registrable Securities are covered by a Registration Statement
filed pursuant to Sections 2.1 and 2.2 and are to be sold thereunder agrees, if
and to the extent reasonably requested by the managing underwriter or
underwriters with respect to an underwritten public offering (including any
underwritten public offering with respect to which registration rights are not
available to holders of the Warrants), not to effect any public sale or
distribution of Warrants and Registrable Securities or of securities of the
Company of the same class as any securities included in such Registration
Statement, including a sale pursuant to Rule 144 (except as part of such
underwritten offering), during the 30-day period prior to, and during the
180-day period beginning on, the closing date of each underwritten offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by the Company or such managing underwriter or underwriters.
The provisions of the foregoing paragraph shall not apply to
any Holders of Warrants and Registrable Securities if such Holder is prevented
by applicable statute or regulation from entering into any such agreement;
provided, however, that any such Holder shall undertake, in its request to
participate in any such underwritten offering, not to effect any public sale or
distribution of any Warrants and Registrable Securities commencing on the date
of sale of such Warrants and Registrable Securities unless it has provided 45
days' prior written notice of such sale or distribution to the managing
underwriter or underwriters.
Section 3. TRANSFERS.
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3.1 GENERALLY. All Subject Equity at any time and from time to
time outstanding shall be held subject to the conditions and restrictions set
forth in this Section 3. All shares of Capital Stock now or hereafter held by
the Permitted Holders shall be held subject to the conditions and restrictions
set forth in this Section 3. Each Holder of Subject Equity and the Permitted
Holders by executing this Agreement or by accepting a certificate representing
Capital Stock or other indicia of ownership therefor from the Company agree with
the Company and with each other stockholder to such conditions and restrictions.
3.2 TAG-ALONG RIGHTS. (a) Prior to the Triggering Date, each
of the Holders of Subject Equity shall have the right (the "TAG-ALONG RIGHT") to
require the Proposed Purchaser (as defined below) to purchase from each of them
all Subject Equity owned by such Holder in the event of any proposed direct or
indirect sale or other disposition (collectively, a "TRANSFER") of Common Stock
or Convertible Preferred Stock (whether now or hereafter issued) to any Person
or Persons (such other Person or Persons being hereinafter referred to as the
"PROPOSED PURCHASER") by any Permitted Holder or Permitted Holders or any of
their Affiliates in any transaction or a series of related transactions
resulting in a Change of Control; provided that no such Tag-Along Right shall
exist as a result of sales pursuant to one or more underwritten offerings
registered under the Securities Act which result in a Change of Control.
(b) Any Subject Equity purchased from the Participating
Holders pursuant to this Section 3.2 shall be paid for in the same type of
consideration and at the same price per share of Common Stock and upon the same
terms and conditions of such proposed Transfer of Common Stock by any Permitted
Holder or any of its Affiliates; provided that the price per Warrant to be paid
by the Proposed Purchaser shall be less the aggregate Exercise Price of such
Warrant. If the Subject Equity to be purchased from the Permitted Holders or the
Participating Holders includes securities or property other than Common Stock,
the price to be paid for such securities or property shall be the same price per
share or other denomination paid by the Proposed Purchaser for like securities
purchased from any Permitted Holder or any of its Affiliates or, if like
securities are not purchased from any Permitted Holder or any of its Affiliates,
the Fair Market Value of such securities determined by an independent financial
expert selected by the Company.
(c) Each Permitted Holder shall notify, or cause to be
notified, each Holder of Subject Equity in writing (a "TRANSFER NOTICE") of each
such proposed Transfer at least 30 days prior to the date thereof. Such notice
shall set forth: (a) the name and address of the Proposed Purchaser and the
number of shares of Common Stock and other securities, if any, proposed to be
transferred, (b) the proposed amount of consideration and terms and conditions
of payment offered by such Proposed Purchaser (if the proposed consideration is
not cash, the Transfer Notice shall describe the terms of the proposed
consideration) and (c) that either the Proposed Purchaser has been informed of
the "TAG-ALONG RIGHT" and has agreed to purchase Subject Equity in accordance
with the terms hereof or that the Permitted Holder or any of its Affiliates
shall make such purchase. The Tag-Along Right may be exercised by any Holder of
Subject Equity (a "PARTICIPATING HOLDER") by delivery of a written notice to the
Company and the Permitted Holder that gave the Transfer Notice ("TAG-ALONG
NOTICE"), within 10 days following such Holder's receipt of the Transfer Notice,
indicating its election to exercise the Tag-Along Right. The Tag-Along Notice
shall state the amount of Subject Equity that such Holder proposes to include in
such Transfer to the Proposed Purchaser. Failure by any Holder to provide a
Tag-Along Notice within the 10-day notice period shall be deemed to constitute
an election by such Holder not to exercise its Tag-Along Right. The closing with
respect to any sale to a Proposed Purchaser pursuant to this Section shall be
held at the time and place specified in the Transfer Notice but in any event
within 60 days of the date such Transfer Notice is given; provided that if
through the exercise of reasonable efforts the Company is unable to cause such
transaction to close within 60 days, such period may be extended for such
reasonable period of time as may be necessary to close such transaction.
Consummation of the sale of Common Stock or Convertible Preferred Stock by any
Permitted Holder or any of its Affiliates to a Proposed Purchaser shall be
conditioned upon consummation of the sale by each participating Holder to such
Proposed Purchaser (or the Permitted Holder) of the Subject Equity entitled to
be transferred as described above, if any.
(d) [RESERVED]
(e) If the Proposed Purchaser does not purchase the Subject
Equity entitled to be transferred as described in this Section 3.2 on the same
terms and conditions as purchased from the Permitted Holders or any of their
Affiliates, then the Permitted Holders or their Affiliates shall purchase such
Subject Equity if the Transfer occurs. If any Subject Equity shall be sold by a
Holder pursuant to this Section 3.2 upon the occurrence of a Change of Control
triggered by the sale of Common Stock by a Permitted Holder, then the other
Permitted Holders shall have the right to purchase up to 50% of such Subject
Equity.
(f) If at the end of 60 days following the date on which a
Transfer Notice was given, or as otherwise extended pursuant to the provisions
of Section 3.2(a), the sale of Common Stock by the Permitted Holders or their
Affiliates and the sale of the Subject Equity entitled to be transferred as
provided above have not been completed in accordance with the terms of the
Proposed Purchaser's offer, all certificates representing such Subject Equity
shall be returned to the Participating Holders, and all the restrictions on
Transfer contained in this Agreement with respect to Common Stock owned by the
Permitted Holders and their Affiliates shall remain in effect.
3.3 DRAG-ALONG RIGHTS. If at any time prior to the Triggering
Date, one or more Permitted Holders or any of their respective Affiliates
determines to sell all of the Capital Stock of the Company owned by them to a
Person other than a Permitted Holder or its Affiliate in a transaction resulting
in a Change of Control, the transferring Permitted Holder or Permitted Holders
(whether directly or through an Affiliate) shall have the right (the "DRAG-ALONG
RIGHT") to require the Holders of Subject Equity to sell such Subject Equity to
such transferee; PROVIDED THAT (i) the consideration to be received by the
Holders of Subject Equity shall be the same type of consideration received by
the Permitted Holders and their Affiliates and, in any event, shall be cash or
freely transferable marketable securities, and (ii) after giving effect to such
transaction, the Permitted Holder or Permitted Holders making the transfers and
their Affiliates shall not own, directly or indirectly, any Capital Stock or
rights to purchase Capital Stock of the Company (excluding successors for
purposes of this section 3.3). Any Warrants or Registrable Securities, or both,
purchased from the Holders thereof pursuant to this Section 3.3 shall be paid
for at the same price per share of Common Stock and upon the same terms and
conditions as such proposed transfer of Common Stock by the Permitted Holders
and their Affiliates. The price per Warrant to be paid by the Proposed Purchaser
shall be less the aggregate Exercise Price of such Warrant per share. If the
Subject Equity to be purchased includes securities other than Common Stock, the
price to be paid for such securities shall be the same price per share or other
denomination paid by the proposed purchaser for like securities purchased from
the Permitted Holders and their Affiliates or, if like securities are not
purchased from the Permitted Holders and their Affiliates, the Fair Market Value
of such securities determined by an independent financial expert selected by the
Company.
Section 4. REGISTRATION PROCEDURES. In connection with the
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1 and 2.2 hereof, the Company shall, except as otherwise provided:
(a) A reasonable period of time prior to the initial filing of
a Registration Statement or Prospectus and a reasonable period of time
prior to the filing of any amendment or supplement thereto (including
any document that would be incorporated or deemed to be incorporated
therein by reference), furnish to the Holders and the managing
underwriters, if any, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) shall be subject to the review of such
Holders, and such underwriters, if any, and cause the officers and
directors of the Company, counsel to the Company and independent
certified public accountants to the Company to respond to such
reasonable inquiries as shall be necessary, in the opinion of counsel
to such underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act; PROVIDED THAT the foregoing inspection
and information gathering shall be coordinated on behalf of the Holders
by a nationally recognized underwriting firm to be designated by the
Company. The Company shall not file any such Registration Statement or
related Prospectus or any amendments or supplements thereto which the
Holders of a majority of the Registrable Securities included in such
Registration Statement shall reasonably object to a timely basis.
(b) Subject to Section 2.3, prepare and file with the SEC such
amendments, including post-effective amendments, to each Registration
Statement as may be necessary to keep such Registration Statement
continuously effective for the applicable time period required
hereunder; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act with respect to the disposition
of all securities covered by such Registration Statement during such
period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement as so amended
or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and the managing underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment is
proposed to be filed, and (B) with respect to a Registration Statement
or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of
the issuance by the SEC, any state securities commission, any other
governmental agency or any court of any stop order suspending the
effectiveness of such Registration Statement or of any order or
injunction suspending or enjoining the use of a Prospectus or the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any event, the
existence of any information becoming known that makes any statement
made in a Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue
in any material respect or omit to state any material fact required to
be stated therein or necessary to make the statements therein, not
misleading, and that in the case of the Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) Use its reasonable efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending the
effectiveness of the Registration Statement or the use of a Prospectus
or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction described in Section 4(h) at the
earliest practicable moment.
(e) If requested by the managing underwriters, if any, or if
none, by the Holders of a majority of the Registrable Securities being
sold pursuant to such Registration Statement, (i) promptly incorporate
in a Prospectus supplement or post-effective amendment such information
as the managing underwriters, if any, or if none, such Holders
reasonably believe, upon advice of counsel, which need not be in
writing should be included therein, and (ii) subject to Section 2.3,
make all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as
practicable after the Company has received notification of the matters
to be incorporated in such Prospectus supplement or post-effective
amendment; PROVIDED, HOWEVER, that the Company shall not be required to
take any action pursuant to this Section 4(e) that would, in the
opinion of counsel for the Company, violate applicable law.
(f) Upon written request to the Company, furnish to each
Holder of Registrable Securities to be sold pursuant to a Registration
Statement and each managing underwriter, if any, without charge, at
least one conformed copy of the Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent reasonably requested
(including those previously furnished or incorporated by reference) as
soon as practicable after the filing of such documents with the SEC.
(g) Deliver to each Holder of Registrable Securities to be
sold pursuant to a Registration Statement and each managing
underwriter, if any, without charge, as many copies of each Prospectus
(including each form of Prospectus) and each amendment or supplement
thereto as such. Persons may reasonably request; and the Company hereby
consents to use of such Prospectus and each amendment or supplement
thereto and each document supplemental thereto by each of the selling
Holders of Registrable Securities and the underwriters or agents, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto.
(h) Prior to any offering of Registrable Securities, use its
reasonable efforts to register or qualify or cooperate with the Holders
of Registrable Securities to be sold, the managing underwriter or
underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any such
Holder or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during
the period such Registration Statement is required to be kept effective
hereunder and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to
(i) qualify generally to do business in any jurisdiction where it is
not then so qualified or (ii) take any action that would subject it to
general service of process in any such jurisdiction where it is not
then so subject or to taxation in any jurisdiction where it is not so
subject.
(i) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being
Registrable Securities, cooperate with the Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear
any restrictive legends whatsoever and shall be in a form eligible for
deposit with The Depository Trust Company ("DTC"); and to enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or such
Holders may reasonably request at least two business days prior to any
sale of Registrable Securities.
(j) Subject to Section 2.3, upon the occurrence of any event
contemplated by Section 4(c)(v) above, as promptly as practicable
prepare a supplement or amendment, including if appropriate a
post-effective amendment to each Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required document
so that, as thereafter delivered, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(k) Prior to the effective date of a Registration Statement,
(i) provide the registrar for the Registrable Securities with
certificates for such securities in a form eligible for deposit with
DTC and (ii) provide a CUSIP number for such securities.
(l) Enter into such agreement (including an underwriting
agreement in such form, scope and substance as is customary in
underwritten offerings) and take all such other reasonable actions in
connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate
the disposition of such Registrable Securities, and, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such
representations and warranties to the Holders of such Registrable
Securities and the underwriter or underwriters, if any, with respect to
the business of the Company and the subsidiaries of the Company
(including with respect to businesses or assets acquired or to be
acquired by any of them), and the Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope a are
customarily made by issuers to underwriters in underwritten offerings,
and confirm the same if any when requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, addressed to each selling Holder of
Registrable Securities and each of the underwriters, if any), covering
the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (iii) use their reasonable efforts to obtain customary
"cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in
the Registration Statement), addressed (where reasonably possible) to
each Selling Holder of Registrable Securities and each of the
underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain customary
indemnification provisions and procedures no less favorable to the
Selling Holder and the underwriters, if any, than those set forth in
Section 5 hereof (or such other provisions and procedures acceptable to
Holders of a majority of Registrable Securities covered by such
Registration Statement and the managing underwriter, if any); and (v)
deliver such documents and certificates as may be reasonably requested
by the Holders of a majority of the Registrable Securities being sold
and the managing underwriters or underwriters to evidence the continued
validity of the representations and warranties made pursuant to clause
(i) above and evidence compliance with any customary conditions
contained in the underwriting agreement or other agreements entered
into by the Company. The above shall be done at each closing under such
underwriting agreement or other agreements, or as and to the extent
required thereunder.
(m) Make available for inspection by a representative of the
selling Holders of Registrable Securities, any underwriter
participating in any such disposition of Registrable Securities, if
any, and any attorney, consultant or accountant retained by such
representative of the selling Holders of Registrable Securities or
underwriter (collectively, the "INSPECTORS"), at the offices where
normally kept, during the reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the
Company and the subsidiaries of the Company (including with respect to
businesses and assets acquired or to be acquired to the extent that
such information is available to the Company), and cause the officers,
directors, agents and employees of the Company and its subsidiaries of
the Company (including with respect to businesses and assets acquired
or to be acquired to the extent that such information is available to
the Company) to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement; provided, however, that such persons shall first agree in
writing with the Company that any information that is reasonably and in
good faith designated by the Company in writing as confidential at the
time of delivery of such information shall be kept confidential by such
Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of
regulatory authorities, (ii) disclosure of such information is required
by law (including any disclosure requirements pursuant to U.S.
securities laws in connection with the filing of the Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a
disclosure or failure to safeguard such information by such person or
(iv) such information becomes available to such person from a source
other than the Company and its subsidiaries and such source is not
bound by a confidentiality agreement; AND PROVIDED FURTHER that the
foregoing investigation shall be coordinated on behalf of the selling
Holders of Registrable Securities by a nationally recognized
underwriting firm to be designated by the Company.
(n) Comply with all applicable rules, regulations and policies
of the SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 60 days after the end of any
12-month period (or 135 days after the end of any 12-month period if
such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to an underwriter or
to underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to an underwriter or to underwriters in
such an offering, commencing on the first day of the first fiscal
quarter of the Company after the effective date of the relevant
Registration Statement, which statements shall cover such period,
consistent with the requirements of Rule 158 under the Securities Act.
(o) Use its reasonable efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the
Company are then listed.
(p) Cooperate with each seller of Registrable Securities to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any
restrictive legends and registered in such names as the Selling Holders
may reasonably request at least two business days prior to the closing
of any sale of Registrable Securities.
(q) Cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and its
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to
be included in a Registration Statement to furnish to the Company such
information regarding (i) the intended method of distribution of such
Registrable Securities (ii) such Holder and (iii) the Registrable Securities
held by such Holder as is required by law to be disclosed in such Registrable
Statement and the Company may exclude from such Registration Statement the
Registrable Securities of any Holder who fails to furnish such information
within a reasonable time after receiving such request.
If any such Registration Statement refers to any Holder by
name or otherwise as the Holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act, the deletion of the reference to such Holder in
such amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of
such Subject Equity that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv) or
4(c)(v) hereof, such Holder will forthwith discontinue disposition of such
Subject Equity covered by the Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(j) hereof, or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and in either case has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Subject Equity covered by such Registration Statement
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 4(j) hereof or (y) the Advice, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus.
Holders of the Subject Equity shall be obligated to keep
confidential the existence of a Suspension Period or any confidential
information communicated by the Company to the Holder with respect thereto.
Section 5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company
shall indemnify and hold harmless, each Selling Holder (in its capacity as
Selling Holder), each underwriter, if any, who participates in an offering of
Registrable Securities, their respective affiliates, and their respective
directors, officers, employees, agents and each Person, if any, who controls any
of such parties within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the 1933 Act, including
all documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever, in each case, based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 5(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including fees and disbursements of counsel chosen by any indemnified
party), reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section
5(a);
PROVIDED, HOWEVER, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent (i) arising out of an untrue
statement or omission or alleged untrue statement or omission (A) made in or
omitted from a preliminary Prospectus or Registration Statement and corrected or
included in a subsequent Prospectus or Registration Statement or any amendment
or supplement thereto made in reliance upon and in conformity with written
information furnished to the Company by the Selling Holders of Registrable
Securities, any Holder, or any underwriter expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) or (B) resulting from the use of the Prospectus during a
period when the use of the Prospectus has been suspended or is otherwise
unavailable for sales thereunder in accordance with Sections 2.1(b), 2.1(c),
2.2(a), 2.3(a), 2.4, 2.6 or 4(c) hereof, PROVIDED, in each case, that Holders
received prior notice of such suspension or other unavailability. The foregoing
indemnity with respect to any untrue statement contained in or any omission from
a Prospectus shall not inure to the benefit of any Selling Holder (in its
capacity as Selling Holder), or any person who controls such party within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act from whom
the person asserting any such loss, liability, claim, damage or expense
purchased any of the Registrable Securities that are the subject thereof, was
not sent or given a copy of such Prospectus (as amended or supplemented) by such
Selling Holder (in its capacity as Selling Holder) to the extent such Selling
Holder (in its capacity as Selling Holder) was required by law to deliver such
Prospectus as amended or supplemented, at or prior to the written confirmation
of the sale of such Registrable Securities and the untrue statement contained in
or the omission from such Prospectus was corrected in such amended or
supplemented Prospectus, unless such failure resulted from noncompliance by the
Company with its obligations hereunder to furnish such Selling Holder (in its
capacity as Selling Holder), with copies of such Prospectus as amended or
supplemented.
(b) In the case of any registration of Registrable Securities,
each Selling Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, each Initial Purchaser, each underwriter, if any, who
participates in an offering of Registrable Securities and the other Selling
Holders and each of their respective directors and officers (including each
officer of the Company who signed the Registration Statement) and each Person,
if any, who controls the Company, any Initial Purchaser, any underwriter or any
other Selling Holder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act, against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section 5(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in the Registration Statement (or any
amendment thereto), or the Prospectus (or any amendment or supplement thereto);
PROVIDED, HOWEVER, that no such Holder shall be liable for any claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Registrable Securities pursuant to such Registration Statement.
(c) In case any action shall be commenced involving any Person
in respect of which indemnity may be sought pursuant to either paragraph (a) or
(b) above, such Person (the "indemnified party") shall give notice as promptly
as reasonably practicable to each Person against whom such indemnity may be
sought (the "indemnifying party"), but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 5(a) above, counsel for such indemnified parties shall be chosen by
such indemnified parties, and, in the case of parties indemnified pursuant to
Section 5(b) above, counsel to such indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the defense
of such action; PROVIDED, HOWEVER, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 5 (whether or not the indemnified parties are actual or
potential parties thereof), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 5(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any reason unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by such indemnifying party or parties on the one hand, and
such indemnified party or parties on the other and from the offering of the
Registrable Securities included in such offering; or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of such indemnifying party or parties on
the one hand, and such indemnified party or parties on the other hand, in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party or
parties on the one hand, and such indemnified party or parties on the other hand
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
party or parties and such indemnified party or parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 5 were determined by PRO RATA allocation (even if the
Selling Holders of Registrable Securities were treated as one entity, and the
Holders were treated as one entity, for such purpose) or by another method of
allocation which does not take account of the equitable considerations referred
to above in Section 5. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and referred to above in
this Section 5 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by a governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1993 Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. For purposes of this Section 5,
each Person, if any, who controls a Holder within the meaning of this Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Holder, and each director of the Company, each officer of
the Company who signed the Registration Statement, and each Person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
Section 6. MISCELLANEOUS.
-------------
(a) REMEDIES. In the event of a breach by the Company of any
of its obligations under this Agreement, each Holder and Permitted Holders, in
addition to being entitled to exercise all rights provided herein, or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further agrees that in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at large would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company and the Permitted
Holders will not enter into any agreement which is inconsistent with the rights
granted to the Holders of Warrants and Registrable Securities in this Agreement
or otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities, if any, under any such agreements.
(c) NO PIGGY-BACK ON DEMAND REGISTRATIONS. The Company shall
not grant to any of its securityholders (other than the Holders in such
capacity) the right to include any of their securities in any Registration
Statement filed pursuant to a Demand Registration.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Holders
and Permitted Holders of not less than a majority of the then outstanding
Warrants and each class and series of Registrable Securities and with respect to
Sections affecting the rights or obligations of the Permitted Holders hereunder,
the Permitted Holders who hold not less than a majority of shares of the capital
stock held by the Permitted Holders; PROVIDED, HOWEVER, that, for the purposes
of this Agreement, Warrants and Registrable Securities that are owned, directly
or indirectly, by the Company or any of their Affiliates are not deemed to be
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of one or more Holders and Permitted Holders and that does not directly
or indirectly affect the rights of other Holders and other Permitted Holders may
be given by a majority of the Holders and Permitted Holders so affected;
PROVIDED, HOWEVER, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence. Notwithstanding the foregoing, no amendment,
modification, supplement, waiver or consent with respect to Section 5 shall be
made or given otherwise than the prior written consent of each Person affected
thereby.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder or a Permitted Holder, at the most current address of such Holder
or such Permitted Holder as set forth in the register for the Warrants or the
Registrable Securities or the securities owned by the Permitted Holders, and
(ii) if to the Company, as provided in the Warrant Agreement.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. If any transferee of
any Holder shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Warrants, Warrants Shares or securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement
and such Person shall be entitled to receive the benefits hereof. The Company
may not assign any of its rights or obligations hereunder without the prior
written consent of each Holder of Registrable Securities and each indemnified
party under Section 5(a). Notwithstanding the foregoing, no successor or
assignee of the Company shall have any rights granted under the Agreement until
such person shall acknowledge its rights and obligations hereunder by a signed
written statement of such person's acceptance of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(i) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
(k) ENTIRE AGREEMENT. This Agreement, together with the
Warrant Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. This Agreement and the Warrant Agreement
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
(l) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required hereunder, Registrable Securities or Warrants
held by the Company or by any of its affiliates (as such term is defined in Rule
405 under the Securities Act) shall not be counted (in either the numerator or
the denominator) in determining whether such consent or approval was given by
the Holders of such required percentage.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ W. R. Smedberg V
------------------------------------
Name:
Title:
SPECTRUM EQUITY INVESTORS, L.P.,
In its Capacity as a Permitted Holder
By:/s/ Chris J Maroni
------------------------------------
Name: K. J. Maroni
Title: illegible
NEW ENTERPRISE ASSOCIATES VI,Limited
Partnership,
In its Capacity as a Permitted Holder
By: /s/ illegible
------------------------------------
Name:
Title:
ONSET ENTERPRISE ASSOCIATES II, L.P.,
In its Capacity as a Permitted Holder
By:
By: /s/ R Kuhling
------------------------------------
Name: Robert F. Kuhling
Title: General Partner
The General Partner of
ONSET Enterprise Associates II
L.P.
FBR TECHNOLOGY VENTURE PARTNERS,L.P.,
In its Capacity as a Permitted Holder
By: /s/ illegible
------------------------------------
Name: Gene Riechers
Managing Director
FBR Technology Venture
Partners, L.P.
<PAGE>
TORONTO DOMINION CAPITAL (USA) INC.,
In its Capacity as a Permitted Holder
By:/s/ Martha L. Gariepy
------------------------------------
Name: Martha L. Gariepy
Secretary/Treasurur
GROTECH PARTNERS IV, L.P.,
In its Capacity as a Permitted Holder
By:/s/ Patrick J. Kerins
------------------------------------
Name: Patrick J. Kerins
Title: Managing Director
/s/ Richard Jalkut
------------------------------------
Richard A. Jalkut
Portions of this exhibit have been omitted and filed separately with
the Securities and Exchange Commission. These portions are
designated "[ * * * ]."
Exhibit 10.3
FIBER OPTIC ACCESS AGREEMENT
BETWEEN
PATHNET TELECOMMUNICATIONS, INC.
AND
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY
This fiber optic access agreement ("Agreement") is entered into as
of this 30th day of March, 2000 between Pathnet Telecommunications, Inc., a
Delaware corporation ("Pathnet") and The Burlington Northern and Santa Fe
Railway Company, a Delaware corporation ("BNSF").
WHEREAS, BNSF has certain ownership interests in certain of its rail
corridors covering the western United States, BNSF's rail network consisting of
over 30,000 route miles in 28 states and two Canadian provinces;
WHEREAS, Pathnet desires to obtain from BNSF the right to lease from
BNSF, on specified terms and conditions, strips of land constituting
approximately [ * * * ] route miles, in the aggregate, within any rail corridor
in BNSF's existing rail corridor network (or within the Auburn-Yakima-Pasco,
Washington rail corridor, or the Ortonville, Minnesota-Terry, Montana rail
corridor)(collectively, "Rail Corridors" and any one individually, "Rail
Corridor"), to the extent of BNSF's ownership rights, so that Pathnet can
construct, install, operate, maintain, replace, reconstruct, remove and/or
relocate (collectively, "Construct and Operate") a fiber optic
telecommunications transmission system and certain appurtenant equipment and
structures (collectively, "Fiber Optic Facilities");
WHEREAS, Pathnet intends to construct and operate a network of Fiber
Optic Facilities over many BNSF Rail Corridors, and to construct or acquire, and
then operate, a network of Fiber Optic Facilities over many corridors throughout
the eastern United States;
WHEREAS, Pathnet and BNSF have entered into a Contribution
Agreement, dated November 2, 1999, by which BNSF has agreed to contribute
certain property interests into Pathnet and to execute and deliver this
Agreement and, subject to the terms, conditions and obligations set forth in
this Agreement, perform the duties set forth herein; and
WHEREAS, BNSF is willing, on the terms and conditions set forth in
this Agreement, to enter into various specific leases with Pathnet, in the form
of the Lease attached hereto as Exhibit A, with respect to approximately [ * * *
] route miles of Rail Corridors of BNSF's existing Rail Corridor network, as
specified by Pathnet and as shown on Exhibits B and C attached hereto, each
Lease to grant to Pathnet the right to Construct and Operate Fiber Optic
Facilities on a specific BNSF Rail Corridor, to the extent of BNSF's ownership
rights therein;
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<PAGE>
NOW, THEREFORE, Pathnet and BNSF agree as follows:
1. Condition Precedent to Commencement of Pathnet's Rights.
Pathnet and BNSF have closed the transaction described and
governed by the Contribution Agreement, on the terms set forth in the
Contribution Agreement.
2. Right to Lease.
For a period of 15 years following the date of this Agreement,
on each rail corridor within BNSF's existing Rail Corridor network, subject to
the limitations of BNSF's ownership interest in each Rail Corridor, as set forth
in Section 11 hereof, and to the restrictions set forth in Section 3 hereof
concerning BNSF's overriding rail operations, safety concerns and property
marketing rights, Pathnet shall have the right to enter into a fiber optic lease
with BNSF on the terms set forth in the form of Fiber Optic Lease attached
hereto as Exhibit A and made a part hereof (hereinafter, "Lease"). (Where, with
respect to a particular Rail Corridor BNSF is subject to a limitation on its
ability to grant a Lease, but has a right to grant a fiber optic easement
instead, BNSF shall grant to Pathnet such a fiber optic easement on terms
otherwise identical to the Lease, and any such easement also shall be included
in references hereinafter to the term "Lease.") Pathnet acknowledges that,
subject only to certain restrictions set forth in Section 4 hereof, BNSF will
continue to convey to other parties, or may abandon, various Rail Corridors, or
portions thereof, throughout the term of this Agreement, and that such actions
will affect the Rail Corridor network subject to leasing to Pathnet at any
particular time. Each Lease shall permit Pathnet to Construct and Operate Fiber
Optic Facilities on the specific Rail Corridor premises to which each Lease
applies, subject to the procedures and terms of each Lease. Each Lease shall be
for a term of 35 years unless the Lease is terminated earlier in accordance with
the terms of each Lease.
3. Procedure to Obtain a Lease.
Pathnet may request a Lease in the form of Exhibit A, to the
extent of BNSF's ownership interest in the Rail Corridor, by providing to BNSF
prior written notice of its desire to enter into a Lease, which notice shall
specify the end points of the particular BNSF Rail Corridor where Pathnet
desires a Lease. BNSF shall grant such request, and BNSF and Pathnet shall
execute a Lease in the form of Exhibit A, as soon as practicable but no later
than thirty (30) days after the date BNSF receives such notice from Pathnet,
unless BNSF cannot allow a Lease in the Rail Corridor because either: (i) the
Construction and Operation of Fiber Optic Facilities under the Lease in BNSF's
judgment would materially interfere with, or create a safety hazard to BNSF with
respect to, BNSF's existing or then reasonably foreseeable future rail
operations on a segment of the Rail Corridor, as determined by a BNSF operating
or engineering Vice President or Assistant Vice President; or (ii) the
Construction and Operation of Fiber Optic Facilities under the Lease in BNSF's
judgment would materially interfere with BNSF's existing or then reasonably
foreseeable future plans to market or develop a particular parcel of land for
the benefit of a rail customer or as a real estate development (but not as a
fiber optic venture) on a
-2-
<PAGE>
segment of the Rail Corridor, as reasonably determined by a BNSF property
management Vice President or Assistant Vice President. Where BNSF cannot allow a
Lease in the Rail Corridor for one of the reasons just set forth, BNSF shall
cooperate with Pathnet in good faith to seek a solution that will enable Pathnet
to install its Fiber Optic Facilities on the requested portion of the Rail
Corridor and, if BNSF is unable to do so, to allow Pathnet to Construct and
Operate its Fiber Optic Facilities over as much of the Rail Corridor as
possible, consistent with the terms of (i) and (ii) above, and, if Pathnet so
desires, BNSF shall execute a Lease with Pathnet over those portions of the Rail
Corridor where the Lease would not violate the terms of (i) or (ii) above.
4. Restrictions on BNSF's Right to Grant Future Fiber Optic
Rights Along Certain Corridors.
Pathnet acknowledges that the rights to Construct and Operate
Fiber Optic Facilities to be granted to Pathnet in the Lease are nonexclusive,
except to the extent set forth in this Section 4, and that other parties have
rights under their existing agreements with, and/or conveyances from, BNSF to
Construct and Operate Fiber Optic Facilities on various BNSF rail corridors.
Subject to the existing rights of other parties under existing fiber optic
agreements, BNSF agrees as follows:
(a) Immediate Exclusivity Rights: Commencing on the date of
this Agreement, and continuing until December 31, 2004, for all of the Rail
Corridors set forth on Exhibit B attached hereto and made a part hereof,
constituting an aggregate of no more than approximately 4,052 miles ("Exclusive
Corridors"), BNSF shall not grant any rights to any other party to Construct and
Operate any Fiber Optic Facilities on any Exclusive Corridor, except where: (i)
such Fiber Optic Facilities only cross the Exclusive Corridor, and (ii) the
construction and operation of such Fiber Optic Facilities does not materially
disrupt Pathnet's ability to utilize the Fiber Optic Facilities covered by a
Lease. This exclusivity period shall terminate earlier on all routes where
Commencement of Construction (as defined herein) has not occurred, on either:
(x) the dates specified in Section 7 hereof if on such date Pathnet has not met
the applicable fiber optic network development milestone specified in Section 7
with respect to such date; or (y) on one of the dates specified below if:
(I) As of April 30, 2001, Pathnet has not completed
construction, which in this Section 4(a) shall mean
installation of a conduit and at least [* * *] fiber optic
fibers in the conduit, of at least 800 miles of Fiber Optic
Facilities along the Exclusive Corridors;
(II) As of [* * *], a Liquidity Event (as hereinafter
defined) has not occurred;
(III) As of April 30, 2002, Pathnet has not completed
construction of at least 1,600 miles of Fiber Optic Facilities
along the Exclusive Corridors;
-3-
<PAGE>
(IV) As of April 30, 2003, Pathnet has not completed
construction of at least 2,400 miles of Fiber Optic Facilities
along the Exclusive Corridors;
(V) As of April 30, 2004, Pathnet has not completed
construction of at least 3,200 miles of Fiber Optic Facilities
along the Exclusive Corridors; or
(VI) As of April 30, 2005, Pathnet has not completed
construction of at least 4,000 miles of Fiber Optic Facilities
along the Exclusive Corridors.
Termination of Pathnet's exclusivity rights on all routes
where Commencement of Construction has not then occurred will be the sole
consequence of Pathnet's failure to reach any milestone set forth in this
Section 4(a). In this Agreement, a "Liquidity Event" shall mean the earliest of:
(aa) a Qualified IPO, as defined in the Stockholders' Agreement, dated on or
about the date hereof, among Pathnet, the current holders of Pathnet's Preferred
Stock, BNSF, CSX Railway Company and Colonial Pipeline Company; or (bb) the date
on which the common stock or any successor security of Pathnet either is listed
for trading on a national securities exchange registered under the Exchange Act
of 1934, as amended ("Exchange Act"), or is traded in an over-the- counter
market and quoted in an automated quotation system of the National Association
of Securities Dealers, Inc.; or (cc) there has been a transaction in which all
stockholders of Pathnet have received ownership interests which are listed for
trading on a national securities exchange registered under the Exchange Act, or
is traded in an over-the-counter market and quoted in an automated quotation
system of the National Association of Securities Dealers, Inc.
(b) Exclusive Right to Negotiate after Commencement of
Construction:
(1) Definitions. In this Agreement, the term "Commencement
of Construction" shall mean the date of award of the primary
construction contract for any segment of a Rail Corridor. In
this Agreement, the term "Restricted Corridors" shall mean
those Rail Corridors set forth on Exhibit C, which is made a
part hereof, the initial version of which is attached
hereto, which Exhibit C may be modified by Pathnet from time
to time by Pathnet delivering notice of such modification to
BNSF; provided that the aggregate route miles of the
Exclusive Corridors plus the Restricted Corridors during the
term of this Agreement shall not exceed approximately [ * *
*] route miles. In the event that Pathnet revises Exhibit C
to include all or any portion of the Auburn-Yakiman-Pasko,
Washington Rail Corridor or the Ortonville, Minnesota-Terry,
Montana Rail Corridor, BNSF, within 30 days following its
receipt of notice of such revision, shall acquire from its
affiliate now owning certain property rights in each Rail
Corridor that affiliate's rights in the Rail Corridor land
(possibly exclusive of a rail service easement in the case
of the Auburn-Yakima-Pasko rail corridor).
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<PAGE>
(2) Exclusive Right to Negotiate. Until Commencement of
Construction occurs on a Rail Corridor, Pathnet shall have
no exclusive right to negotiate and execute a fiber optic
agreement on such Rail Corridor with any third party.
Beginning on the date of Commencement of Construction, and
continuing for up to five years thereafter for each
Exclusive Corridor to the extent Pathnet no longer has
exclusive rights under 4(a) on such Rail Corridor, and for
up to three years thereafter for each Restricted Corridor,
but in no event beyond the termination of the Lease related
to such Exclusive Corridor or Restricted Corridor, Pathnet
shall have an exclusive right to negotiate and execute any
fiber optic agreement on such Rail Corridor, except for any
agreement related to Fiber Optic Facilities which only cross
the Restricted Corridor or Exclusive Corridor, where the
construction and operation of such Fiber Optic Facilities
does not materially disrupt Pathnet's ability to utilize the
Fiber Optic Facilities covered by a Lease; provided that
this exclusive right to negotiate and execute any fiber
optic agreement with respect to any particular party shall
continue for a period of [* * *] (and BNSF thereafter may
negotiate a fiber optic agreement with such party if by the
end of such [* * *] Pathnet does not have an executed fiber
optic agreement with such party). The periods for exclusive
rights to negotiate as specified in this Section 4(b) shall
terminate earlier, as to all Rail Corridors and Rail
Corridor segments on which Pathnet has not yet reached the
stage Commencement of Construction if Pathnet either: (i)
does not meet the applicable development milestone specified
in Section 7 hereof, (ii) as of [* * *], a Liquidity Event
has not occurred, or (iii) has not met the schedule for
constructing Fiber Optic Facilities along Exclusive
Corridors, as set forth in Section 4(a) hereof . In
addition, Pathnet's exclusive right to negotiate and execute
any fiber optic agreement shall terminate on any Rail
Corridor on the date that Pathnet's Lease on such Rail
Corridor is terminated pursuant to the terms of such Lease.
In addition, at any time prior to the end of the period in
which Pathnet has an exclusive right to negotiate and
execute any fiber optic agreement on any Restricted
Corridor, BNSF may not enter into any fiber optic agreement
with another party with respect to such Restricted Corridor
except where such agreement requires such other party to
reach Commencement of Construction on such Restricted
Corridor within one year following the effective date of
such agreement.
5. Limitation on Pathnet's Right to Lease.
If Pathnet enters into a Lease with BNSF, and such Lease
subsequently is terminated for any reason specified in such Lease, for a period
of three (3) years following the date of any such termination, Pathnet shall
have no right to enter into a Lease on any portion of the BNSF Rail Corridor
that was subject to such Lease.
-5-
<PAGE>
6. Contribution to Pathnet.
This Agreement is being contributed by BNSF to Pathnet
pursuant to the terms of the Contribution Agreement.
7. Fiber Optic Network Development Schedule.
Pathnet shall develop a Fiber Optic Facilities network
throughout the United States, utilizing BNSF's rail corridors and longitudinal
corridors of one or more other parties in the United States, in accordance with
the following schedule of fiber optic network development milestones:
(a) By June 30, 2001, Pathnet must have completed
construction of, or have acquired, Fiber Optic
Facilities over at least 3,000 Route Miles, in the
aggregate. As used in this Section, each "Route Mile"
shall consist of either one mile of at least [* * *], or
one mile of [* * *] plus [* * *]
(b) By June 30, 2002, Pathnet must have completed
construction of, or have acquired, Fiber Optic
Facilities over at least 6,000 Route Miles, in the
aggregate.
(c) By June 30, 2003, Pathnet must have completed
construction of, or have acquired, Fiber Optic
Facilities over at least 9,500 Route Miles, in the
aggregate.
(d) By June 30, 2004, Pathnet must have completed
construction of, or have acquired, Fiber Optic
Facilities over at least 12,000 Route Miles, in the
aggregate.
(e) By June 30, 2005, Pathnet must have completed
construction of, or have acquired, Fiber Optic
Facilities over at least 12,500 Route Miles, in the
aggregate.
Termination of Pathnet's exclusivity rights on all routes where Commencement of
Construction has not then occurred will be the sole consequence of Pathnet's
failure to reach any milestone set forth in this Section 7.
-6-
<PAGE>
8. Reporting Relative to Fiber Optic Network Development
Schedule.
Forty days before each deadline specified in Section 7 hereof,
Pathnet shall deliver to BNSF a report reasonably satisfactory to BNSF showing
Pathnet's progress, as of the date of the report, toward meeting each
appropriate level of development specified in Section 7, and its plans to meet
or exceed each such level by the appropriate deadline. Seven (7) days after each
deadline specified in Section 7, Pathnet shall deliver to BNSF a certified
report showing whether Pathnet has met or exceeded each appropriate level of
development specified in that Section. BNSF shall have the right to audit
Pathnet's records in order to verify the contents of each report required by
this Section 8.
9. Time is of the Essence; Post-Termination Liability.
Time is of the essence in performing this Agreement. No
termination of this Agreement shall release Pathnet from any liability or
obligation of Pathnet under the terms of this Agreement, resulting from events
happening prior to the date of termination.
10. Compliance with Laws.
In exercising any and all of its right under this Agreement,
Pathnet shall comply with all applicable laws, regulations, ordinances, rules,
decisions and orders of any court or governmental body with jurisdiction, and
shall have the sole responsibility for all costs associated with such
compliance. Pathnet, at its sole cost, shall secure and maintain in effect all
federal, state and local permits licenses and/or zoning approvals required to
Construct and Operate the Fiber Optic Facilities, and shall satisfy any and all
conditions that must be met in order to obtain any required permit, license or
zoning approval.
11. Limitations on BNSF's Ownership Rights.
Pathnet acknowledges that one or more other parties,
including, but not limited to, various native American nations, may have, or may
claim to have, ownership rights in certain segments of certain of BNSF's rail
corridors, and may claim that Pathnet also must obtain rights from it (or them)
in order to occupy, or access, the Premises, as defined in each Lease, and that,
in some cases, such claims may be valid. Pathnet acknowledges that BNSF's
ownership interest in many of its Rail Corridors is a determinable fee, a
railroad right of way or a rail service easement, which shall terminate when
BNSF either: (i) ceases to use those Rail Corridors for railroad purposes; or
(ii) uses such Rail Corridors for purposes found to be inconsistent with use of
the corridors for railroad purposes, and that in such circumstances, Pathnet's
right to Lease any such Rail Corridor, or its rights under any Lease of any such
Rail Corridor, may be subject to termination as of the date the circumstances
set forth in either (i) or (ii), above, first arise (unless Pathnet improves the
quality of title to the Lease property by obtaining a patent or deed from the
federal government, if appropriate, or acquiring additional property interests
from third parties). Pathnet also acknowledges that BNSF's ownership rights may
terminate for other reasons, such
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as termination of franchise rights, and that certain segments of BNSF's Rail
Corridors consist only of a trackage rights license to BNSF to enable BNSF to
provide rail service, or shared ownership with other railroads, and that BNSF
may not have rights to include those segments in any Lease to Pathnet. Pathnet
further acknowledges that Pathnet's rights to enter into a Lease on any BNSF
Rail Corridor, and its rights under any Lease of any BNSF Rail Corridor, are
subject and subordinate to all outstanding and/or future rights and encumbrances
on BNSF's Rail Corridors (including liens, security interests and mortgages),
and any and all easements, other leases, licenses, permits or agreements which
now or in the future relate to BNSF's Rail Corridors, except BNSF in the future
shall not place any encumbrance upon any BNSF Rail Corridor then subject to a
Lease to Pathnet, or enter into any easement, lease, license, permit or
agreement, which would materially disrupt Pathnet's ability to exercise its
rights under this Agreement or to utilize the Fiber Optic Facilities covered by
a Lease (and Pathnet acknowledges that its ability to exercise its rights under
this Agreement or to utilize such Fiber Optic Facilities would not be materially
disrupted if either: (x) Pathnet is relocated to another location within the
applicable BNSF Rail Corridor in accordance with the terms of Section 14 of the
applicable Lease, or could be located elsewhere in the Rail Corridor; or (y)
BNSF preserves fiber optic rights and makes those rights available to Pathnet at
no charge payable by Pathnet to the holder of the land interest where such
rights are located and changes following any conveyance by BNSF of its ownership
interest in such a parcel have not caused a significant physical limitation on
constructing Fiber Optic Facilities through such parcel (and Pathnet agrees that
any cost of enforcing such rights shall be the responsibility of Pathnet). BNSF
therefore conveys to Pathnet no more right, title or interest in any Rail
Corridor than BNSF holds in such Rail Corridor at the time of conveyance, and
Pathnet hereby releases BNSF from any and all liability, cost, loss, damage or
expense in connection with any claims that BNSF lacked sufficient legal title to
convey the rights described herein. Pathnet shall have the right, at its sole
cost and expense, to acquire or attempt to acquire from other parties such
rights in BNSF Rail Corridors that Pathnet deems necessary or appropriate.
12. Confidentiality.
The parties hereto shall keep confidential all terms of this
Agreement, except to the extent that disclosure thereof is required by law or
agreed by the parties in writing. In the event either party hereto is required
to disclose any terms of this agreement pursuant to applicable law, at least
three days prior to disclosing the same (or such shorter period permitted by
law), such party shall notify the other party hereto in writing and provide
copies of the terms that the party intends to disclose. The language of the
press release announcing this deal shall be mutually agreed upon between the
parties hereto.
13. No Assignment.
Neither this Agreement, nor any of the rights to lease that
are granted to Pathnet by the terms of this Agreement, shall be assigned by
Pathnet without BNSF's prior written consent, which may be granted or withheld
in BNSF's sole discretion. BNSF acknowledges that Pathnet, without consent of
BNSF may sublease to one or more parties the right to use other
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Fiber Optic Facilities under a Lease, may sell to one or more other parties a
partial ownership in such Fiber Optic Facilities, may sublease or assign this
Agreement or any Lease to a subsidiary, affiliate or parent company controlled
by, under common control with, or controlling, either indirectly or directly,
Pathnet, but only where, and to the extent, that such transaction does not
violate the terms of the Contribution Agreement, or, for financing purposes
only, Pathnet may assign this Agreement to Lucent Technologies, Inc. and/or
Nortel Networks, Inc., or an affiliate of either company, or to some other third
party following the written concurrence of BNSF which shall not be unreasonably
withheld or delayed, or may assign any Lease to a third party, provided that in
any such case Pathnet shall remain fully responsible to BNSF for compliance with
all terms of this Agreement and the Lease. (In the foregoing sentence the terms
"control", "controlled", and "controlling" shall mean ownership of more than 50
percent of the equity interest in a company.) Nothing herein shall prohibit
Pathnet: (i) from involving contractors, or strategic or co-development
partners, in Construction and Operation of the Fiber Optic Facilities, on such
terms as Pathnet may determine in its sole discretion, provided that all such
activities are conducted in accordance with the terms of this Lease, and that
Pathnet remains fully liable for all obligations hereunder; and (ii) from
granting liens or other security interests in the Fiber Optic Facilities or
Pathnet's rights under this Lease in connection with financing or investments
made available to Pathnet, which agreements may permit Pathnet's lenders to take
possession, sell, assign or otherwise transfer the Fiber Optic Facilities,
including the right to operate, or permit a third-party to operate, the Fiber
Optic Facilities, provided that any party taking possession of the Fiber Optic
Facilities shall be subject to all terms of the Lease, and that continued
operation of the Fiber Optic Facilities shall be subject to all terms of the
Lease.
14. Limitation on Damages for Breach of this Agreement.
Damages that may be recovered for breach of this Agreement
shall not include any indirect, consequential, special or punitive damages, or
lost profits, or the cost of Pathnet building Fiber Optic Facilities on any
alternative route.
15. Taxes and Other Charges.
(a) Pathnet shall pay, and shall indemnify BNSF against
the liability for, any and all taxes, levies,
excises, charges and assessments (including any
penalties and interest related thereto)
(collectively, "Taxes") attributable to the
execution, delivery, recording or filing of this
Agreement, including without limitation any ad
valorem taxes assessed against the properties of BNSF
to the extent such ad valorem taxes are attributable
to Pathnet's rights hereunder, but only to the extent
that the ad valorem taxes attributable to the value
of Pathnet's rights have increased due to assessments
levied after the date hereof.
(b) In the case of amounts described in Section 15(a) to
be paid by Pathnet, BNSF shall determine the amount
of such Taxes to be paid by Pathnet by reference to
information provided by the relevant taxing authority
that demonstrates or establishes the increase in such
Taxes after the date hereof. If the information
provided by the relevant taxing authority
demonstrates or establishes that Taxes are
attributable to fiber optic development value, but
the information does not demonstrate or establish the
amount of the Taxes that are so
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(c)
attributable, such amount shall be determined by reference to
a formula that is consistently applied and that allocates any
such Taxes among all of BNSF's Rail Corridors (including
similar agreements) subject to such Taxes in a manner that
reasonably reflects both the basis upon which the Taxes are
imposed and the relative proportion of such Rail Corridors in
respect of which Pathnet has been granted rights hereunder.
The amount of Taxes attributable to fiber optic development
value shall be fairly allocated between Pathnet and BNSF based
upon the relative value of Pathnet's rights and the rights of
others to whom BNSF has granted, or in the future may grant,
fiber optic rights with respect to the same property. In all
cases, BNSF promptly shall provide to Pathnet information that
establishes the manner in which any such Taxes were allocated
and the basis for establishing that such amounts are
attributable to the execution of this Agreement. The parties
shall resolve any dispute regarding the liability for payment
of Taxes hereunder pursuant to the dispute resolution and
arbitration procedures set forth in Section 21 of the Lease.
(d) Notwithstanding the foregoing, Pathnet shall not be
responsible for any Taxes for which it would not be
responsible pursuant to the provisions of Section 24(d)
or (e) of the form of Lease attached hereto or for any
Taxes on Rail Corridors for periods in respect of which
Pathnet no longer has rights hereunder.
(e) BNSF agrees to reasonably cooperate with Pathnet in the
refund, rebate, reduction, abatement, mitigation and
contest of any Taxes for which Pathnet is obligated to
pay hereunder.
16. Notices.
Unless otherwise provided herein, all notices and other
communications required by or concerning this Agreement shall be in writing and
shall be deemed to have been duly given when delivered in person, or on the next
business day when sent by a nationally recognized overnight courier, or on the
second succeeding business day when sent by registered or certified United
States Mail (postage prepaid, return receipt requested), or, if postal claim
notice is given , on the date of its return marked "unclaimed" (provided,
however, that upon receipt of a returned notice marked "unclaimed", the sending
party hereto shall make reasonable effort to contact and notify the other party
hereto by telephone) and each respective party hereto at the following addresses
(or at such other address for a party hereto as shall be specified by like
notice):
(1) if to Pathnet:
Pathnet, Inc.
11720 Sunrise Valley Drive
Reston, Virginia 20191
Attn: General Counsel
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(2) if to BNSF:
Assistant Vice President, Telecommunications
The Burlington Northern and Santa Fe Railway Company
2600 Lou Menk Drive
Forth Worth, Texas 76131-2830
and to:
Vice President - Law
The Burlington Northern and Santa Fe Railway Company
2500 Lou Menk Drive, AOB-3
Fort Worth, Texas 76131-2830
18. Brokers and Agents.
BNSF and Pathnet represent and warrant to each other that
neither has employed any broker, agent or finder in connection with this
Agreement or the Purchase Agreement, and each indemnifies and agrees to hold
harmless the other from and against any commission or fee claimed by any broker,
agent or finder in connection with this transaction.
19. Force Majeure.
Except as may be elsewhere specifically provided in this
Agreement, any failure or delay in the performance by a party hereto of its
obligations hereunder shall not constitute a breach of this Agreement if such
failure or delay results from causes beyond that party's control, including but
not limited to acts of God, governmental action (whether in its sovereign or
contractual capacity), fire, flood, or other catastrophe, national emergency,
insurrection, riot, and war. The phrase "beyond that party's control" shall not
include any failure to reach agreement with a party with whom Pathnet is
negotiating pursuant to the exclusive right to negotiate provided in Section
4(b).
20. Severability.
If any provision of this Agreement or the application thereof,
shall be held invalid, illegal or unenforceable in whole or in part, the
remainder of this Agreement and the application thereof shall not be affected,
and shall be enforceable to the full extent permitted by law, and the portion
hereof found to be invalid shall be enforced to the fullest extent permitted by
law, and, if possible, shall be reformed to carry out as much as possible the
intent of the parties as expressed herein.
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21. Amendment.
This Agreement may be amended only by a written instrument
executed by both parties hereto. No failure to exercise and no delay in
exercising, on the part of a party hereto, any right, power or privilege
hereunder shall operate as a waiver of any other provision of this Agreement, or
as a waiver of that right, power or privilege either before, or after, the
period of waiver.
22. Entire Agreement.
This Agreement and all Exhibits attached hereto, constitutes
the entire agreement of the parties hereto with respect to the subject matters
hereof, and supersede any and all prior negotiations, understandings and
agreements, whether oral or written, with respect hereto.
23. Applicable Law.
This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Texas. Venue for any legal action to interpret or
enforce this Agreement shall lie exclusively in the United States District Court
for the Northern District of Texas, or if jurisdiction cannot be obtained in
federal court, then venue shall be in a Texas state court in Tarrant County,
Texas.
24. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, authorized representatives of BNSF and Pathnet
have executed this Agreement as of the date first set forth herein.
THE BURLINGTON NORTHERN AND PATHNET TELECOMMUNICATIONS,
SANTA FE RAILWAY COMPANY INC.
By: /s/ illegible By: /s/ W.R. Smedberg V
------------------------------ --------------------------
Name: Name:
------------------------ --------------------
Title: Title:
--------------------------- --------------------------
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EXHIBIT A
FORM OF LEASE
Portions of this exhibit have been omitted and filed separately with
the Securities and Exchange Commission. Those portions are
designated "[ * * * ]."
EXHIBIT B
FORM OF FIBER OPTIC LEASE
THIS FIBER OPTIC LEASE ("Lease") is made as of this ____ day of
______________, 200__ between Pathnet Telecommunications, Inc., a Delaware
corporation ("Pathnet") and The Burlington Northern and Santa Fe Railway
Company, a Delaware corporation ("BNSF"). This Lease is being entered into
pursuant to the terms of that certain fiber optic access agreement between BNSF
and Pathnet dated November __, 1999 ("Fiber Optic Access Agreement"), which sets
forth the terms upon which BNSF granted to Pathnet the right to enter into fiber
optic leases, on the terms of this Lease, on specified rail corridors in the
BNSF rail transportation network and subject to all limitations on the ownership
interest of BNSF, to Construct and Operate Fiber Optic Facilities (as defined
below).
WHEREAS, BNSF has certain ownership interests in a rail corridor
consisting of ___ route miles between ___________________ and
______________________ ("Rail Corridor");
WHEREAS, Pathnet desires to lease from BNSF, on the terms and
conditions set forth herein, a portion of the Rail Corridor, in order for
Pathnet to construct, install, operate, maintain, replace, reconstruct, remove
and/or relocate (collectively, "Construct and Operate") a fiber optic
telecommunications transmission system and certain appurtenant equipment and
structures (collectively, "Fiber Optic Facilities"); and
WHEREAS, BNSF is willing, on the terms and conditions set forth in
this Lease, to lease a portion of the Rail Corridor to Pathnet, for the sole
purpose of allowing Pathnet, subject to all limitations on the ownership
interest of BNSF, to Construct and Operate Fiber Optic Facilities on the Rail
Corridor.
NOW THEREFORE, Pathnet and BNSF agree as follows:
1. Lease Rights. Pursuant to the terms of this Lease and the Fiber
Optic Access Agreement, Pathnet shall have the right to enter upon a portion of
the Rail Corridor, which portion generally shall be a three foot wide strip of
land, or such larger portion required to Construct and Operate the Fiber Optic
Facilities, as specified in the Final Construction Plans (as defined later
herein) but at each repeater station or other required Fiber Optic Facilities
structure occupying more land, the portion shall extend one foot beyond the
perimeter of the structure or equipment, or, where a perimeter fence is built
around the structure or equipment, one foot beyond the perimeter fence, the
specific portion of the Rail Corridor leased ("Premises") being identified in
Exhibit A attached hereto and made a part hereof. All structures may be fenced
by Pathnet, at its sole cost and expense, and may be multiple stories to the
extent approved by BNSF, provided that the height and other dimensions of any
such structure do not interfere with railroad operations or clearance, or create
a safety hazard. Any such structures may exceed 3,500
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square feet only: (i) subject to space availability; (ii) following prior
written approval of BNSF, not to be unreasonably withheld; and (iii) where such
structures are not buildings where people regularly report to work. Pathnet's
right to enter the Premises shall commence on the ___ day of ________________,
200__, and shall be for the sole purpose of allowing Pathnet, or any of its
permitted assignees, sublessees of capacity, agents, contractors, strategic or
co-development partners, customers or invitees, or any of their employees
(collectively, "Pathnet Parties") to Construct and Operate Fiber Optic
Facilities on the Premises, subject to BNSF's rights as set forth herein and all
contract and/or property rights of others in the Premises. Pathnet, and any of
the Pathnet Parties, also shall have the right to cross other property in which
BNSF has a sufficient ownership interest as required to access the Premises,
subject to BNSF's rights as set forth herein and all contract and/or property
rights of others in the Premises, so long as such access shall not cross any
active railroad track, or come within 25 feet of such track, without BNSF's
prior written consent, which will not be unreasonably withheld or delayed. Any
of the Pathnet Parties entering onto the Rail Corridor must first execute an
agreement with BNSF in the form of Exhibit "C-1" attached hereto and made a part
hereof, by which such party agrees to comply with BNSF's Contractor Requirements
set forth as Exhibit "C" attached hereto and made a part hereof (and Pathnet
acknowledges that any such Pathnet Party's execution of the Exhibit "C-1"
agreement shall not relieve Pathnet of its full responsibility hereunder for any
actions, omissions or the presence of such Pathnet Party on or near the Rail
Corridor). Pathnet may install as much fiber optic capacity (which term shall
include conduits, whether installed empty or with fiber) on the Premises as it
determines to be appropriate, and may add further fiber optic capacity during
the term of this Lease. Pathnet's rights under this Lease are granted without
covenant of title or quiet enjoyment and Pathnet acknowledges that one or more
other parties may have, or may claim to have, ownership rights in the Rail
Corridor, and may claim that Pathnet also must obtain rights from it (or them)
in order to occupy or access the Premises, and that, in some cases, such claims
may be valid. Pathnet acknowledges that segments of the Rail Corridor may
consist only of a trackage rights licensed to BNSF to enable BNSF to provide
rail service, or shared ownership with other railroads, and that BNSF may not
have rights to include these segments in any Lease to Pathnet. BNSF will use
reasonable efforts to make available to Pathnet all documents reasonably
requested by Pathnet that could be located in a reasonable search (and, at
BNSF's option, BNSF can require that Pathnet or Pathnet's agent conduct the
search, at Pathnet's cost), which documents concern BNSF's rights, and the
rights of others, which in BNSF's judgment affects the Premises and Pathnet's
rights under this Lease or which Pathnet may identify which reasonably relates
to its rights under this Lease. Pathnet acknowledges that BNSF shall not be
liable for any nondisclosure of any document other than nondisclosure resulting
from gross negligence or wilfull misconduct of BNSF. Pathnet shall keep
confidential all confidential and proprietary data contained in these documents
and shall not use it for any purposes other than as set forth herein. BNSF shall
have the right, without causing undue delay, to review documents prior to
permitting Pathnet or its agent to review those documents, and to redact
confidential and proprietary information contained therein. Where
confidentiality provisions apply to contracts requested by Pathnet under this
Section 1, BNSF shall describe for Pathnet the restrictions and interference
with Pathnet's rights that such contracts permit, and or the fiber optic
capacity that such contracts permit to be built in the Rail Corridor, to the
extent that BNSF determines that it can do so consistent with the terms of each
applicable confidentiality provision. If Pathnet determines that BNSF's
description in such
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circumstances is insufficient, Pathnet shall so inform BNSF and BNSF shall use
good faith efforts to obtain promptly from the other party to the contract at
issue a waiver of the confidentiality provision. Pathnet's rights are subject
and subordinate to all outstanding rights and encumbrances on the Rail Corridor
(including, but not limited to, BNSF's mortgages) which BNSF has placed, or in
the future will place, on the Rail Corridor, and any and all easements, other
leases, licenses, permits or agreements which now or in the future relate to the
Rail Corridor, except that BNSF in the future shall not place any encumbrance
upon the Premises, or enter into any easement, lease, license, permit or
agreement covering any portion of the Premises, which would materially disrupt
Pathnet's ability to utilize the Fiber Optic Facilities under this Lease (and
Pathnet acknowledges that its ability to utilize such Fiber Optic Facilities
would not be materially disrupted if Pathnet is relocated to another location
within the Rail Corridor in accordance with the terms of Section 14 hereof, or
BNSF makes available to Pathnet the fiber optic rights that BNSF has reserved at
no charge payable by Pathnet to the holder of the land interest where such
rights are located (and Pathnet agrees that any cost of enforcing such rights
shall be the responsibility of Pathnet). Pathnet accepts the condition of the
Premises "AS IS, WHERE IS" and "WITH ALL FAULTS". BNSF DISCLAIMS ANY AND ALL
WARRANTIES, EXPRESS OR IMPLIED, THAT ARE NOT SPECIFICALLY SET FORTH HEREIN IN
SECTION 22 HEREOF.
2. Limitations on Lease Rights. Pathnet's rights under this Lease
also shall be subject and subordinate to the prior and continuing rights: (i) of
BNSF (and/or any other party with rights from BNSF) to use and maintain all or
any portion of its Rail Corridor in operating, maintaining, reconstructing or
relocating railroad tracks, signals, communications, electric lines or any other
improvements, equipment or facilities related to providing rail service
(collectively, "Rail Facilities"); (ii) of BNSF to use, and to allow others to
use, all and any portion of the Rail Corridor for any purpose (subject to the
terms of Section 4 of the Fiber Optic Access Agreement), which would not
materially disrupt Pathnet's ability to utilize the Fiber Optic Facilities under
this Lease; (iii) of BNSF to market and/or develop all or any portion of the
Rail Corridor or other BNSF property to rail transportation customers,
utilities, municipalities and other third parties except as restricted by
Section 4 of the Fiber Optic Access Agreement; and (iv) of BNSF to convey to any
party all or any portion of the Rail Corridor, any improvements owned by BNSF on
its Rail Corridor, and any air rights above, or subsurface rights below, the
surface of the Rail Corridor, except that any such conveyance by BNSF after the
date of this Lease shall be subject to this Lease, to the extent permitted by
applicable laws and agreements entered into prior to the date of this Lease. The
provisions of this paragraph shall be subject to the provisions of the Fiber
Optic Access Agreement.
3. Railroad Control. BNSF (and/or any other party with rights from
BNSF) shall have full control at all times over the operation of its railroad
and all Rail Facilities in the Rail Corridor. Pathnet's rights under this Lease
do not authorize Pathnet, or any of the Pathnet Parties, to interfere in any way
with any aspect of BNSF's (and/or such other party's) rail operations, or with
any Rail Facilities, on or near the Rail Corridor, or BNSF's (and/or such other
party) ability to maintain, reconstruct or relocate any Rail Facilities on or
near the Rail Corridor. Pathnet understands that various activities of BNSF, or
parties with rights through BNSF, could have the potential of interrupting
service provided by Pathnet's Fiber Optic Facilities. BNSF
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understands that uninterrupted service via Pathnet's Fiber Optic Facilities is
of critical importance to Pathnet. Where BNSF knows about future activities
which, in BNSF's opinion, would have a reasonable potential of interrupting
service via Pathnet's Fiber Optic Facilities or otherwise materially interfering
with the Construction and Operation of the Fiber Optic Facilities, BNSF shall
provide notice thereof to Pathnet as far in advance as is practical under the
circumstances, and shall cooperate with Pathnet to attempt to avoid any such
service interruption. Any failure by BNSF to provide such notice or cooperation
shall not subject BNSF to any liability, costs, expenses, damages, losses or
claims to Pathnet or any of the Pathnet Parties, except where the failure is due
to the gross negligence or willful misconduct of BNSF.
4. Fiber Optics Rights are Nonexclusive. The fiber optics rights
granted to Pathnet are nonexclusive, except to the extent set forth in Section 4
of the Fiber Optic Access Agreement.
5. Term of Lease. The term of this Lease shall be for 35 years years
from the date set forth in Section 1, except this Lease shall be terminated
earlier, if any of the following circumstances occur, on the specific date
related to those circumstances, as follows:
(a) If Pathnet fails to deliver Proposed Construction Plans
(as defined herein) within one hundred twenty (120) days
after the date of this Lease, or such longer period as
may be reasonably necessary to cure such failure,
provided that Pathnet already has begun to cure such
failure, and continues diligently to cure until
completion;
(b) If Pathnet fails to reach Commencement of Construction
(which is defined herein as the date of award of the
primary construction contract for the segment of the
Rail Corridor covered by the Proposed Construction
Plans), within either: (i) sixty (60) days from the date
that the Proposed Construction Plans become Final
Construction Plans for that segment of the Rail
Corridor, or such longer period as may be reasonably
necessary to cure such failure, provided that Pathnet
already has begun to cure such failure, and continues
diligently to cure until completion; or (ii) thirty (30)
days from a later date agreed to in writing by BNSF;
(c) Upon Pathnet's submission of the Proposed Construction
Plans, Pathnet also will submit to BNSF a construction
schedule ("Construction Schedule") for BNSF's approval,
such approval not to be unreasonably withheld. Pathnet
acknowledges that BNSF desires that construction be
completed as promptly as possible and will take this
into account in preparing the Construction Schedule. The
Construction Schedule shall contemplate completion of
construction of Fiber Optic Facilities on the segment of
the Rail Corridor covered by the Proposed Construction
Plans as promptly after BNSF's final approval of the
Proposed Construction Plans as is commercially feasible,
taking into account issues of weather and season, and
time to complete title due diligence or respond as
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reasonably required to any title problems that likely
would materially affect Pathnet's ability to Construct
and Operate the Fiber Optic Facilities, and to acquire
any necessary construction and operating permits. Upon
approval of the Proposed Construction Plans and
Construction Schedule, Pathnet will construct the Fiber
Optic Facilities in accordance with the Construction
Schedule and otherwise with all promptness and due
diligence, it being understood that modifications in the
Construction Schedule may be required due to issues
arising during construction. If at any time BNSF
believes that Pathnet has failed to construct the Fiber
Optic Facilities as promptly as commercially feasibly,
subject to Pathnet's right to suspend construction as
provided in this Subsection, BNSF may provide Pathnet
with written notice of this fact. If Pathnet does not
cure such failure within thirty (30) days after
receiving such written notice, then upon written notice
to Pathnet, BNSF may terminate the Lease, effective
immediately. Notwithstanding the foregoing, Pathnet may
suspend construction for up to two (2) years, upon
receiving BNSF's written approval, not to be
unreasonably withheld, if market considerations or
financial issues warrant such a suspension. During any
such suspension, Pathnet's exclusive right to negotiate
fiber optic agreements with respect to the Rail
Corridor, as set forth in Section 4(b)(2) of the Fiber
Optic Access Agreement, also shall be suspended.
(d) If Pathnet fails to provide the capacity required by
Section 8 hereof, and such failure continues for a
period of thirty (30) days after Pathnet receives
written notice of such failure, or such longer time as
may be reasonably necessary, provided that Pathnet
commences a cure within thirty (30) days and continues
diligently to cure until such cure is completed.
(e) If BNSF has required that Pathnet suspend construction
activities on the Premises for Pathnet's failure to
comply with any BNSF safety requirements, or on account
of Pathnet's interference with BNSF's rail operations or
maintenance activities, and within twenty four (24)
hours after written notice requiring suspension, Pathnet
has not suspended such activities.
6. Effect of Termination of Lease. Immediately upon termination of
this Lease, or if Pathnet abandons any Fiber Optic Facilities under this Lease
for a period of three years (which term shall mean the failure either to have in
use or to dedicate commercially reasonable marketing efforts to sell conduit,
dark fibers or capacity on the Premises), Pathnet shall relinquish to BNSF
possession of the Premises, provided that, for one hundred eighty (180) days
following such date Pathnet shall have the obligation to, and may continue to
enter the Premises for, the sole purposes of: (i) removing all above ground
Fiber Optic Facilities, (ii) removing below ground fiber Optic Facilities as
desired by Pathnet or to the extent reasonably requested by BNSF, and (iii)
restoring the Premises substantially to their condition on the date of this
Lease, reasonable wear and tear and casualty excepted, or as approved by BNSF.
Failure by Pathnet to
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comply with the foregoing sentence by one hundred eighty (180) days following
the date of termination shall entitle BNSF to treat all remaining Fiber Optic
Facilities as abandoned, and as the property of BNSF.
7. BNSF's Right to Suspend Pathnet Construction and Operating
Activities. In the event that Pathnet or a Pathnet Party fails to comply with
BNSF safety or operational regulations, or interferes or is reasonably likely to
interfere with BNSF rail operations, BNSF may require that Pathnet immediately
suspend all construction and/or operating activities on the Rail Corridor. In
such event, BNSF shall make a good faith effort to make available by
teleconference to discuss with Pathnet, within four (4) hours after suspension,
an individual with sufficient authority to resolve the issue, who shall be
prepared to discuss the reason(s) for such suspension and to attempt to resolve
the issue. If the parties are unable to resolve the issue in such discussion,
then BNSF and Pathnet will escalate the issue to the next higher level of
management, and shall attempt to meet, at a mutually agreeable location, or,
failing that, will have a telephonic meeting, within twenty four (24) hours of
the work suspension, with the goal of resolving the issue at that meeting. The
parties will negotiate in good faith to resolve the issue, and to prevent the
occurrence of similar situations in the future.
8. Fiber Optic Capacity for BNSF.
(a) BNSF has retained the right to use the Premises leased
hereunder to the extent of retaining the right to use fiber optic capacity as
described in this Section 8, either as located on the Rail Corridor or, at
BNSF's option, on an alternative portion of Pathnet's fiber optic network, to
the extent that BNSF's desired point of termination on Pathnet's network is
within [***] miles of BNSF's current rail network (which in this sentence shall
include the two rail corridors included as "Rail Corridors" in the Fiber Optic
Access Agreement and the rail corridors where rail service operating rights were
sold to shortline railroads by BNSF or one of its predecessors and BNSF retained
fiber optic rights in the shortline rail corridor, as such current rail network
is shown on the map identified on Exhibit B). A map generally depicting BNSF's
current rail network is attached as Exhibit B. Accordingly, Pathnet shall make
available to BNSF, on an annual basis each year during the term of this Lease,
at BNSF's request and at no charge to BNSF (except as set forth in Section 8(e)
or (g)), commencing on the later of: (i) the date of completion of the Initial
Construction, or (ii) the date when capacity becomes available at the desired
location, and continuing for the entire term of this Lease, the following fiber
optic capacity, either over the entire length of the Premises, or over any other
Fiber Optic Facilities that are part of Pathnet's fiber optic network within the
area described in this Section 8(a), as specified by BNSF, whether or not they
are located on any of BNSF's Rail Corridors:
(1) Each year during the first [***] years following
completion of Initial Construction (and each anniversary of the date of
completion of Initial Construction shall be referenced herein as "Anniversary
Date"), [***], or its equivalent, of digital transmission capacity for each
route mile of Pathnet's Fiber Optic Facilities constructed under this Lease;
(2) Each year, commencing on the [***] Anniversary Date,
until the [***] Anniversary Date, [***], or its equivalent, of digital
transmission capacity for each route mile of Pathnet's Fiber Optic Facilities
constructed under this Lease;
(3) Each year, commencing on the [***] Anniversary Date,
until the [***] Anniversary Date, [***], or its equivalent, of digital
transmission capacity for each route mile of Pathnet's Fiber Optic Facilities
constructed under this Lease;
(4) Each year, commencing on the [***] Anniversary Date,
until the [***] Anniversary Date, [***], or its equivalent, of digital
transmission capacity for each route mile of Pathnet's Fiber Optic Facilities
constructed under this Lease;
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(5) Each year, commencing on the [***] Anniversary Date,
until the [***] Anniversary Date, [***], or its equivalent, of digital
transmission capacity for each route mile of Pathnet's Fiber Optic Facilities
constructed under this Lease;
(6) Each year, commencing on the [***] Anniversary Date,
until the [***] Anniversary Date, [***], or its equivalent, of digital
transmission capacity for each route mile of Pathnet's Fiber Optic Facilities
constructed under this Lease; and
(7) Each year, commencing on the [***] Anniversary Date,
until the [***] Anniversary Date, [***], or its equivalent, of digital
transmission capacity for each route mile of Pathnet's Fiber Optic Facilities
constructed under this Lease; and
(8) Each year, commencing on the [***] Anniversary Date,
until the [***] Anniversary Date, [***] miles, or its equivalent, of digital
transmission capacity for each route mile of Pathnet's Fiber Optic Facilities
constructed under this Lease.
(b) The fiber optic capacity described in this Section 8 may be
specified by BNSF in any format then being provided by Pathnet on the Fiber
Optic Facilities on which BNSF requests fiber optic capacity. BNSF shall not be
entitled to the increases in capacity as set forth in Section 8(a) until, and
only to the extent that, the fiber optic capacity increases are required for
BNSF's uses, either on the Premises or on some other route in Pathnet's fiber
optic network within the area described in the first sentence of this Section
8(a). In addition, the miles of digital transmission capacity to which BNSF is
entitled may be specified by BNSF in its equivalent capacity, so that, for
example, if BNSF were entitled to [***] over a 2,000 mile route, this could be
[***] over [***] miles [***] each over [***], [***] over [***], or any
combination of the above totaling the capacity to which BNSF is entitled,
provided that the maximum cross-section at any point shall not exceed the lesser
of [***] of the then-available capacity on the Fiber Optic Facilities at that
location; or (ii) (I) prior to the [***] Anniversary Date, the equivalent of
[***]; (II) after the [***] Anniversary Date, and prior to the [***] Anniversary
Date, the equivalent of [***]; (III) after the [***] Anniversary Date, and prior
to the [***] Anniversary Date, the equivalent of [***]; (IV) after the [***]
[***] Anniversary Date, and prior to the [***] Anniversary Date, the equivalent
[***], and after the [***] Anniversary Date, and prior to the [***] Anniversary
Date, the equivalent of [***]. Pathnet shall have no obligation to install or
upgrade any of its digital telecommunications transmission facilities to provide
to BNSF any fiber optic capacity which at that time is not available on
Pathnet's Fiber Optic Facilities network. Pathnet shall have no obligation to
provide capacity at any multiplexed level below [***]. Pathnet will be
responsible for all costs associated with the creating, maintaining and
transporting the fiber optic capacity to be provided, including all optical
amplification and regeneration, and terminating the capacity at the multiplexor
or other optronic equipment at which the capacity is to be terminated, including
the cost of such terminating equipment. BNSF shall be responsible for all costs
of transport of the fiber optic capacity from the point of termination in the
shelter used by Pathnet to BNSF's desired point of termination.
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(c) The fiber optic capacity described in this Section 8 (including use of
the fibers addressed in Section 8(e)) may be utilized by BNSF and its Affiliates
(excluding any such Affiliate that competes in the telecommunications business)
for their respective internal communications only. The capacity made available
to BNSF by the terms of this Section 8 may not be sold, assigned, leased,
licensed, or otherwise made available to third-parties, or used in connection
with any telecommunications business. Notwithstanding the foregoing, BNSF is
discussing an agreement with a cellular telecommunications carrier that gathers
BNSF operational data, aggregates the BNSF operational data with its own
commercial cellular traffic, and delivers the BNSF operational data to BNSF
facilities. BNSF may allow the cellular telecommunications carrier or
partnership to use a portion of BNSF's retained fiber optic capacity as
described in this Section 8 in connection with the foregoing agreement. In
addition, BNSF may permit this one or other cellular telecommunications carriers
or partnerships to use any amount of additional fiber optic capacity as
described in this Section 8 for similar arrangements in the future. Any cellular
telecommunications carrier or partnership who utilizes BNSF's retained fiber
optic capacity in this way shall pay to Pathnet a charge equal to [***] of the
charge that Pathnet then is offering for sales of like capacity in like
markets."
(c) In the event that Pathnet permanently discontinues telecommunications
services or capacity of which BNSF is using a portion, Pathnet will provide
sixty (60) days prior written notice to BNSF to permit BNSF to try to obtain
replacement capacity.
(e)(1) Subject to the conditions set forth in this Section 8(e), BNSF may
require, in addition to the fiber optic capacity detailed in Section 8(b)
through 8(d), by notice in writing delivered to Pathnet no later than forty-five
(45) days after Pathnet's submission of Proposed Construction Plans respecting
any portion of the Fiber Optic Facilities, that Pathnet install [***] fibers in
those Fiber Optic Facilities, at Pathnet's sole cost, which [***] fibers shall
be an improvement to property of BNSF, from the Pathnet node site to a point
along the route of the Fiber Optic Facilities closest to BNSF's
telecommunications facility (hereinafter referenced as an "End Link"). These
[***] fibers shall be the same fiber type as that then being installed in those
Fiber Optic Facilities for Pathnet's own use, or to lease or sell capacity to
others, and, at Pathnet's sole discretion, may be contained within the same
cable sheath as Pathnet's fibers or within a separate cable sheath. Pathnet
shall be responsible for the maintenance of, and repair of these fibers for the
term of this Lease, so long as some fibers on the Premises, other than these
[***] fibers, are being maintained. Each End Link shall include a separate BNSF
handhole or manhole to be provided to BNSF, at Pathnet's sole cost, which shall
be an improvement to property of BNSF, to terminate and/or provide connection to
BNSF's telecommunications facility. Pathnet shall not be obligated to provide
fibers to BNSF in any End Link that is longer than [***] miles, nor shall
Pathnet be obligated to alter the planned route of the Fiber Optic Facilities,
except where BNSF has agreed in writing in advance to pay Pathnet's incremental
costs, including overhead, of extending any fibers more than [***] miles or
altering the planned route of
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the Fiber Optic Facilities. If BNSF first required Pathnet to extend an End Link
after Commencement of Construction on the Rail Corridor segment where the End
Link is located, BNSF shall reimburse Pathnet for all such incremental costs,
including overhead. Pathnet shall perform such installation unless, in Pathnet's
reasonable judgment, performance thereof would materially adversely affect the
Fiber Optic Facilities or Pathnet's schedule for completion of Initial
Construction.
(e)(2) Where BNSF requests an End Link on any corridor in BNSF's current
rail network, as defined in Section 8(a), Pathnet shall provide two 23-inch
racks, and space therefore, and adequate supporting electrical service, in
equipment shelters at terminal and junction sites on any BNSF Rail Corridor.
Where BNSF requests fiber optic capacity off of a corridor in BNSF's current
rail network, as defined in Section 8(a), Pathnet will make the requested
capacity available to BNSF at no charge, and BNSF shall be responsible to pay
the local exchange company to obtain the space, equipment and connection service
that BNSF requires.
(f) In addition to the capacity to which BNSF is entitled under the terms
of this Section 8, BNSF shall have the right to purchase capacity on any portion
of Pathnet's network on terms no less favorable than Pathnet is then offering
for sales of like capacity and product over like distances in like markets.
9. Construction and Operation of Fiber Optic Facilities.
(a) (1) BNSF shall make available for inspection and
copying by Pathnet, at Pathnet's sole cost: (i) maps of BNSF's
Rail Corridor, and lists and/or center diagrams indicating the
approximate location and nature of all bridges and
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locations of all tunnels, overpasses and other significant
railroad structures located on the Rail Corridor; (ii)
available engineering documents in BNSF's possession
(including profiles, lengths, internal diameter, etc.), that
relate to bridges, overpasses or tunnels on the Rail Corridor,
which Pathnet reasonably requests in connection with its
activities to Construct and Operate the Fiber Optic
Facilities; and (iii) maps, agreements (redacted to remove
confidential business terms) or other documents showing the
identity, location, rights and nature of other known users or
owners of portions of the Rail Corridor whose use, rights or
ownership Pathnet and BNSF reasonably determine would cause
title, possession or operational problems or cost to Pathnet
(including, without limitation, reversion rights of underlying
fee owners and, exclusivity rights of third parties); and (iv)
other such documentation or information reasonably requested
by Pathnet to assist Pathnet in its activities to Construct
and Operate the Fiber Optic Facilities and which, in the
opinion of BNSF, relates to or impacts upon the development of
Fiber Optic Facilities; all to the extent that (i) through
(iv) are readily and available from the records of BNSF or its
outside contractors charged with retaining such records, can
be located by BNSF in a reasonable search, and are not
confidential and proprietary to BNSF or third parties, and if
they are made available to Pathnet without determining what is
confidential or proprietary to BNSF, Pathnet shall keep such
information confidential and proprietary and shall not use it
for any purpose other than as set forth herein. The
availability of all such maps or documents shall not be
considered a guarantee or warranty that such maps or documents
are accurate or complete. The absence of markers, monuments or
maps indicating the present of subterranean facilities,
whether belonging to BNSF or otherwise, shall not constitute a
warranty or representation by BNSF that none exist. Pathnet
accepts this Lease with full cognizance of the potential
presence of the various claims, restrictions and physical
conditions described herein, acknowledging that Pathnet's
costs to Construct and Operate the Fiber Optic Facilities may
increase by reason thereof. Any failure by BNSF to provide
such documents shall not subject BNSF to any liability, costs,
expenses, damages, losses, or claims to Pathnet or any of the
Pathnet Parties, except to the extent of failures due to gross
negligence or willful misconduct.
(2) Pathnet recognizes that any BNSF documents supplied by
BNSF were not prepared for use as real estate title maps. BNSF
does not represent or suggest that the property lines and Rail
Corridor boundary lines shown on such documents are accurate
or that any other information contained on such documents is
correct.
(b) Prior to commencing construction of the Fiber Optic
Facilities, Pathnet, at its sole cost and risk, shall submit
to BNSF four sets of prints showing in detail the proposed
initial construction of all Fiber Optic Facilities on the
Premises, including every proposed element, item of equipment
and improvement included therein that Pathnet plans to locate
on the Premises, which prints shall be referenced herein as
"Proposed Construction Plans". Where Fiber Optic Facilities
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extend over a route longer than 150 miles, Pathnet shall
submit Proposed Construction Plans to BNSF for each 150 mile
segment, as and when they are ready, and shall use its best
efforts to avoid any single submission of such Proposed
Construction Plans for a segment longer than 150 miles.
(c) (1) BNSF shall review the Proposed Construction Plans,
and may disapprove them, or propose changes, but any
disapproval or proposed change must be made in writing and
delivered to Pathnet within thirty (30) days of the date BNSF
receives such plans. Pathnet acknowledges that if BNSF does
not disapprove the Proposed Construction Plans, or propose any
changes to them, this does not constitute a determination by
BNSF that there are no design defects in such plans or that
Fiber Optic Facilities built in accordance with such plans
could be built or operated safely. If BNSF disapproves the
Proposed Construction Plans because it determines that
construction and/or maintenance of the Fiber Optic Facilities
likely would interfere with BNSF's rail operations or create a
safety hazard and that the Fiber Optic Facilities cannot be
located within BNSF's Rail Corridor for a specified distance,
and Pathnet then determines that the cost of locating its
Fiber Optic Facilities off of BNSF's Rail Corridors would be
significantly higher for Pathnet and so notifies BNSF, then
BNSF shall make reasonable efforts to work with Pathnet to
determine if there is a way to locate the Fiber Optic
Facilities somewhere on BNSF's Rail Corridor without
interfering with BNSF's rail operations or creating a safety
hazard. If BNSF disapproves all or any part of the Proposed
Construction Plans, BNSF, at the time of such disapproval,
shall provide to Pathnet a written explanation of the reasons
for disapproval and suggested cures, if any. Pathnet then
shall submit revised Proposed Construction Plans, which shall
be subject to the same review procedures just described. Once
the thirty (30) day period described above has expired and
BNSF has not disapproved the Proposed Plans (or the revised
Proposed Plans, if applicable), the same shall be the "Final
Construction Plans" which term shall also include any
subsequent modifications to the Plans as provided herein.
Pathnet shall not commence construction of the Fiber Optic
Facilities along any portion of the Rail Corridor in each
instance until it has received written notice from BNSF that
BNSF does not disapprove the Final Construction Plans.
(2) If at any time Pathnet desires to amend the Proposed
Construction Plans or the Final Construction Plans, Pathnet
must submit four sets of prints showing such amendment to BNSF
in the same manner described for submission of the Proposed
Construction Plans. If such amendment is not modified or
disapproved by BNSF in the manner specified for modification
or disapproval of Proposed Construction Plans, the Final
Construction Plans will be deemed as of such time to
incorporate such amendment
(d) In constructing the Fiber Optic Facilities, and with
respect to all entries onto the Rail Corridor by Pathnet and
the Pathnet Parties to Construct and
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Operate the Fiber Optic Facilities, or for any other purpose,
Pathnet shall coordinate with BNSF, with the understanding
that BNSF's presence and activities on the Rail Corridor for
any purpose, except as limited by the Fiber Optic Access
Agreement, shall have priority over Pathnet's activities under
this Lease.
(e) The Construction Schedule shall be used by Pathnet
and BNSF to coordinate personnel, activities and train
movements. Pathnet shall amend the Construction Schedule, as
required, to reflect any and all schedule changes and shall
furnish promptly to BNSF any amended Construction Schedule.
BNSF may rely on the Construction Schedule to schedule flagmen
and other BNSF personnel whose duties require them to
accompany personnel constructing the Fiber Optic Facilities.
(f) If, at any time it appears to BNSF that BNSF's
tracks may be "Fouled" (defined in this Lease to mean the
presence of equipment and/or personnel of Pathnet or any of
the Pathnet Parties on a railroad track or within twenty-five
(25) feet of the centerline of any railroad track) in
connection with the exercise of Pathnet's rights under this
Lease, BNSF personnel may be provided, at BNSF's option, to
accompany Pathnet and/or any of the Pathnet Parties who may
Foul BNSF's tracks. Pathnet shall bear the entire cost
associated with such BNSF personnel, regardless of whether
such personnel are actually utilized in a particular case, and
Pathnet agrees promptly to pay all invoices for such personnel
that are submitted to it by BNSF. The failure of BNSF to
furnish such personnel shall not relieve Pathnet, or any of
the Pathnet Parties, of any obligations or liabilities it or
they otherwise have assumed hereunder.
(g) Pathnet, and all Pathnet Parties, who are or will be
involved in any activities or presence permitted under this
Lease on or near the Rail Corridor, shall comply with all
applicable BNSF safety rules and regulations, as set forth in
Exhibits "C" and "C-1" attached hereto. BNSF shall pay for any
such materials or safety training personnel (but Pathnet shall
pay any BNSF safety contractor's cost, including the cost of
any instructors); Pathnet shall pay salaries, any travel
expenses or other costs for Pathnet, and any and all such
Pathnet Parties, to receive such safety training.
(h) As promptly as possible, but in no event later than
six months after each segment of the Fiber Optic Facilities is
installed, Pathnet shall furnish to BNSF "As Built" Fiber
Optic Facilities drawings.
(i) During and in furtherance of completion of Initial
Construction, Pathnet and the Pathnet Parties, subject to
BNSF's prior written approval, may use, as required, and at no
additional charge, available portions of the Rail Corridor, as
identified by local BNSF personnel, for the purpose of
allowing Pathnet, or any of the Pathnet Parties, to erect, at
its sole cost and risk, temporary
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structures and fences to protect Pathnet's material or
equipment necessary for the construction of the Fiber Optic
Facilities, including staging of construction activities and
storage of materials, provided that such structures and
fences: (i) shall not interfere with, or disrupt in any way,
other than in a manner approved in advance by BNSF, any
operations conducted by BNSF, or any activities of third
parties, on the Rail Corridor; and (ii) to the extent
reasonably feasible, shall be as shown and described in the
Final Construction Plans. Pathnet shall restore any land used
for such structures and fences substantially to its previous
condition before Initial Construction is complete, reasonable
wear and tear and casualty excepted, and shall remove all such
structures, fences, equipment and material placed thereon by
Pathnet, or any of the Pathnet Parties, before Initial
Construction is complete. In the event Pathnet does not comply
with the foregoing sentence, BNSF, following reasonable
advance notice to Pathnet, may take the actions specified in
that sentence, and Pathnet shall reimburse to BNSF all cost
incurred by BNSF in taking such actions.
(j) Subject to BNSF's approval and execution by the
applicable utility company of a BNSF standard form right of
entry permit, Pathnet may bring electrical power and other
utilities to the Fiber Optic Facilities. Pathnet shall make
its own arrangements, at its sole cost and risk, to obtain all
electrical power and other utilities or services necessary to
Construct and Operate the Fiber Optic Facilities, and Pathnet
shall indemnify, defend and hold BNSF harmless against any
liability to any utility or service company arising out of
utilities or services ordered or used by or on behalf of
Pathnet, except to the extent caused by the gross negligence
or willful misconduct of BNSF or its agents or contractors, or
any of their employees. Utilities and services needed by
Pathnet at each junction or repeater site shall be as shown
and described in the Final Construction Plans and shall be
part of Fiber Optic Facilities for purposes of this Lease. If
the location of such utilities or services serving the Fiber
Optic Facilities must be changed because of its interference
to BNSF railroad purposes or industrial development related to
railroad purposes, BNSF shall notify Pathnet and Pathnet
promptly shall relocate the affected Fiber Optic Facilities,
at Pathnet's sole cost, in a manner satisfactory to BNSF.
Power sources installed by Pathnet shall be part of the
Initial Construction.
(k) Pathnet, at its sole cost and risk, shall furnish
all materials, supervision, labor, parts, components,
equipment and structures necessary to Construct and Operate
the Fiber Optic Facilities, or any part thereof, in accordance
with this Lease. Any and all work by Pathnet and/or a Pathnet
Party under the authority of this Lease shall be done in a
good and workmanlike manner, in conformity with the Final
Construction Plans, and shall comply with all applicable
engineering, safety, and other statutes, laws, ordinance,
regulations, rules, codes, orders or specifications of any
public body or authority having jurisdiction over the Fiber
Optic Facilities or BNSF's rail operations, including,
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but not limited to, the Federal Communications Commission and
the Federal Railroad Administration.
(l) All installations by Pathnet and/or a Pathnet Party
under the authority of this Lease must meet or exceed
applicable specifications of the public authority of the state
in which the installation is located and must be in compliance
with all existing federal, state or local laws, ordinances,
and regulations. In no case shall any part of the Fiber Optic
Facilities be located in a manner that will interfere with the
presence or activities of BNSF, or any third parties acting
within their rights on the Rail Corridor as they exist on the
date of this Lease. The manner of, and the equipment and
devices to be used for, any installation, relocation or
removal of the Fiber Optic Facilities, shall be reviewed in
advance by BNSF, as set forth herein.
(m) Fiber Optic Facilities may be installed by Pathnet,
at its sole cost and risk, on bridges or other water crossings
on the Rail Corridor by attachment to BNSF's fixed or movable
bridges or crossing structures, as available, as agreed by
BNSF and Pathnet, as shown in the Final Construction Plans.
(n) Installation of Fiber Optic Facilities under public
roadways shall be at Pathnet's sole cost and risk, at a
location and depth as agreed to by BNSF, as shown on the Final
Construction Plans.
(o) Installation of Fiber Optic Facilities crossing over
or under other existing facilities in the Rail Corridor shall
be located and installed, at Pathnet's sole cost and risk, in
accordance with conditions set forth in this Section 9, and
applicable requirements of the owner of each such facility.
If, in the course of any activity that Pathnet is authorized
to undertake under the terms of this Lease, any changes in any
pipelines, sewers, conduits, fences, power, signal or
communication lines or other utility, facility or Railroad
Facilities is necessary (either temporary or permanent), such
change shall require prior review by BNSF, and a letter from
BNSF indicating that it does not disapprove such change, and
all other necessary approvals from third parties. Pathnet
shall indemnify, defend and hold BNSF harmless against all
claims from any third party relating to any such activity.
(p) All cranes, lifts, drilling equipment, or other
machinery that is to be operated in the vicinity of any Rail
Facilities, electric transmission lines or other facilities in
connection with Initial Construction or any other activity
that Pathnet is authorized to undertake under the terms of
this Lease, shall be electrically grounded in a manner
reviewed by, and not disapproved by, BNSF. Pathnet
acknowledges that if BNSF does not disapprove such plans this
does not constitute a determination by BNSF that such plans or
activities are safe. All personnel of Pathnet and any of the
Pathnet Parties that are operating such cranes, lifts,
drilling equipment, or other machinery shall have appropriate
and sufficient
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experience in operating of the machinery being used, and
Pathnet shall be prepared to certify the extent of this
experience upon request by BNSF.
(q) If Pathnet, or any of the Pathnet Parties, acting
under the authority granted by this Lease, discovers any
scientific or historic artifacts, Pathnet immediately shall
notify BNSF of such discovery and shall protect such artifacts
until they are identified and removed by the appropriate
authorities.
(r) BNSF shall have the right to verify by inspection,
at the sole cost of Pathnet, that the location of the work and
the materials constituting the Initial Construction, or used
operation of the Fiber Optic Facilities, are in compliance
with the Final Construction Plans. BNSF shall give Pathnet
reasonable notice of such inspections, and Pathnet, at its
option, may designate a representative to accompany BNSF's
representative on such inspections. If, following an
inspection, BNSF reasonably determines that Pathnet is
conducting activities that do not comply with the approved
Final Construction Plans, the parties hereto shall meet
promptly to discuss the situation and determine a remedy
satisfactory to BNSF. If BNSF is not satisfied with the remedy
selected at such meeting, and its subsequent implementation,
Pathnet's rights to Construct and Operate Fiber Optic
Facilities shall be suspended entirely until the parties have
settled on a remedy that is satisfactory to BNSF. The
provisions of Section 7 shall apply to any suspension of work
pursuant to this Section.
(s) BNSF's expenses for any work performed for or at the
expense of Pathnet pursuant to the terms of this Lease shall
be paid by Pathnet promptly upon Pathnet's receipt of each
itemized bill therefor. Expenses so billed by BNSF shall be
only those attributable to the work performed and shall
include, without limitation, cost of labor (whether performed
by BNSF or a contractor of BNSF) and supervision, necessary
travel or transportation expenses, lodging, meals, equipment
rental, materials, and any freight and handling charges on
materials used, plus standard additives A list of standard
additives then in effect will be provided to Pathnet with any
billing containing such activities.
(t) Pathnet, at its sole cost and risk: (i) shall secure
and maintain in effect all federal, state, and local permits,
licenses, platting, subdivisions, and/or zoning approvals or
any other land use requirement that is required to Construct
and Operate the Fiber Optic Facilities, including, without
limitation, crossing, zoning, building, health, environmental,
and communication permits and licenses, and Pathnet, at its
sole cost and risk, shall satisfy any and all conditions
required to obtain, maintain and comply with any required
permit, license or zoning approval or any other land use
requirement; and (ii) shall indemnify, defend and hold
harmless BNSF from and against payment of the cost therefor,
and against any fines or penalties that may be levied for
failure to procure, maintain or to comply with any such
permits, licenses and/or zoning, or any other land use
requirement as well as any remedial costs incurred by BNSF in
curing any such
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failure. BNSF shall cooperate with Pathnet in securing and
maintaining any such permits or licenses, and Pathnet shall
reimburse any reasonable out-of-pocket costs of BNSF in
providing such cooperation..
(u) Any environmental impact statements required by any
governmental agency in connection with any activity of Pathnet
to Construct and Operate the Fiber Optic Facilities shall be
prepared by Pathnet at Pathnet's sole cost and risk, and
Pathnet, at its sole cost and risk, shall comply with any
conditions required by any applicable government authority in
connection with, or following from, any environmental impact
statement.
(v) BNSF shall cooperate with Pathnet, as requested by
Pathnet, at no out-of-pocket cost to BNSF, in Pathnet's
efforts to obtain and maintain any permits, licenses or
approvals of government agencies or authorities, or any
approvals of any necessary third parties, for the use of any
structures or facilities (including streets, roads or utility
poles) along portions of the Rail Corridor. The provisions of
this paragraph will not be deemed to require BNSF to expend
significant internal resources.
10. Entry Notice.
(a) During progress of the Initial Construction, Pathnet
shall give BNSF at least five days' written notice before
initial entry by Pathnet, or any of the Pathnet Parties, upon
any portion of the Rail Corridor.
(b) After completion of Initial Construction, any entry
by Pathnet or any Pathnet Party onto the Rail Corridor that
does not constitute Routine Maintenance and Operation (defined
later herein) of the Fiber Optic Facilities, or is not related
to an Emergency (defined later herein) shall require: (i)
advance written notice from Pathnet to BNSF not less than ten
days prior to such planned entry, such notice to specify the
purpose of the entry; (ii) if entry involves any new
construction, reconstruction, or removal of Fiber Optic
Facilities, four (4) sets of prints showing in detail such
proposed new construction, reconstruction, or removal; and
(iii) approval by BNSF, which approval shall not be
unreasonably withheld or delayed, taking in account the nature
of the proposed entry. As used herein, "Routine Maintenance
and Operation" shall mean maintenance and operation by Pathnet
and/or a Pathnet Party of the Fiber Optic Facilities that does
not require any: (i) excavation of soil that could alter or
disturb, or threaten the support of, or ability to use, any
Rail Facility; (ii) use of heavy machinery within 50 feet of
any railroad track; or (iii) an activity or presence which
results in a Fouled railroad track. As used herein,
"Emergency" shall mean that service on the Fiber Optic
Facilities has been interrupted or significantly disrupted or
such interruption is reasonably likely, or that there is a
material adverse threat to the integrity of Pathnet's fiber
optic network, in circumstances that make it
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impractical for Pathnet or any Pathnet Party to give BNSF
normal advance written notice of entry onto BNSF's Rail
Corridor.
(c) During Routine Maintenance and Operation, Pathnet
and/or any Pathnet Party may enter the Rail Corridor without
notice to BNSF, for the sole purpose of Routine Maintenance
and Operation; provided, however, that: (i) if any entry for
such purpose is likely to result in a Fouled railroad track,
Pathnet shall give BNSF written notice of the places where and
the manner in which entry is required not less than two (2)
days, and not more than seven (7) days, prior to such entry;
and (ii) without BNSF's prior consent, which shall not be
unreasonably withheld, neither Pathnet nor any Pathnet Party
shall enter the Rail Corridor at any place where BNSF
previously has disapproved entry.
(d) In the event of an Emergency, Pathnet and/or any
Pathnet Party may enter the Rail Corridor without notice to
BNSF, for the sole purpose of dealing with the Emergency;
provided, however, that: (i) if any entry for such purpose is
likely to result in a Fouled railroad track, Pathnet shall
obtain verbal or written approval from BNSF prior to such
entry, promptly followed by written confirmation of such
approval, which may be provided within 24 hours after Pathnet
has addressed the Emergency; (ii) if any entry for such
purpose is likely to require the excavation of soil that could
alter or disturb, or threaten the support of or ability to
use, any Rail Facility, or would involve the use of heavy
machinery within 50 feet of any railroad track, Pathnet shall
give BNSF verbal or telephonic notice of the places where, and
the manner in which, entry is required prior to such entry,
promptly followed by written confirmation which shall be
obtained within 24 hours after Pathnet has addressed the
Emergency. and (iii) without BNSF's prior consent, which shall
not be unreasonably withheld, neither Pathnet nor any Pathnet
Party shall enter the Rail Corridor at any place where BNSF
previously has disapproved entry. Both parties acknowledge
that an Emergency involving a derailment or other similar
situation could cause significant damage to both parties, and
that both parties will need to respond promptly and
effectively to the situation. Subject to (i), (ii) and (iii)
above, in the event of an Emergency involving a derailment or
other similar situation, BNSF agrees that it will not prohibit
Pathnet from responding to the situation as appropriate to
repair or protect the Fiber Optic Facilities, provided that
Pathnet does not interfere with BNSF's rail operations or
related activities. The parties will cooperate with one
another to enable each party to take appropriate response
action as promptly and effectively as possible.
11. Maintenance of Premises and Fiber Optic Facilities. BNSF shall
not be responsible for maintenance of any Fiber Optic Facilities, or for
clearing or removal of trees, shrubs, plants, ice, snow or debris from the
Premises. Pathnet shall be responsible to remove from the Rail Corridor any
debris resulting from any of the activities of Pathnet or any of the Pathnet
Parties acting under the authority of this Lease.
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12. Track Support: Materials Storage.
(a) During any work by Pathnet or any of the Pathnet Parties
pursuant to this Lease, Pathnet shall ensure that all tracks,
supporting structures and roadbed of BNSF is supported in such
manner as is necessary for the safe operation of BNSF without any
slower speed or other train operating restrictions and, upon
completion of such work, Pathnet shall ensure that all such tracks,
supporting structures, and the roadbed are returned to their
pre-existing condition, all at Pathnet's sole cost.
(b) Except as expressly set forth in the Final Construction
Plans, Pathnet shall not store or temporarily place any goods,
materials, or equipment on the Rail Corridor: (i) near a highway or
private grade crossing in such a manner as to interfere with the
sight distance of anyone approaching such crossing; (ii) within
fifteen feet of the end of any tie in any railroad track; or (iii)
within such greater distance as required by an applicable government
authority. Notwithstanding any other provision in this Lease,
Pathnet shall not store or temporarily place fuel or any Hazardous
Substance (as defined later herein) on the Rail Corridor, other than
as may be approved in writing in advance by BNSF. If Pathnet
knowingly discovers any Hazardous Substances on the Premises,
Pathnet will promptly notify BNSF, suspend or relocate activities
that would disturb the Hazardous Substance, and permit BNSF to take
appropriate actions. BNSF will respond promptly to any such
situation.
13. Facility Location Signs. Pathnet, at its sole cost and risk,
shall furnish, erect, and thereafter maintain signs showing the location of all
underground Fiber Optic Facilities. The size, form, color, text, location, and
spacing of such signs shall be subject to advance review by BNSF, and such signs
shall be in conformance with standard industry practices and shall be considered
part of the Fiber Optic Facilities.
14. Relocations.
(a) If BNSF determines that the location of any of the Fiber
Optic Facilities must be changed due to either: (i) relocation or
placement of any Rail Facilities; (ii) rail operating improvements
for BNSF (or for any other party offering rail service in the Rail
Corridor via rights granted or conveyed by BNSF); (iii) locating or
modifying a rail customer's facilities, buildings or other
improvements along BNSF's rail route, or locating or modifying any
facilities, buildings or other improvements for railroad purposes or
industrial development related to railroad purposes; or (iv) any
reason beyond the control of BNSF, BNSF shall notify Pathnet of such
plans and shall use reasonable efforts to secure an alternative
location for the Fiber Optic Facilities within the Rail Corridor, in
light of BNSF's business assets, plans and activities and the rights
of third parties in the Rail Corridor, or to provide Pathnet with an
opportunity to protect its Fiber Optic Facilities if Pathnet may do
so without interference with the situation requiring relocation;
provided however, BNSF shall not be obligated to spend any money, or
incur any
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liabilities, to secure such an alternative location. If such
alternative location is found on the Rail Corridor, Pathnet shall
move the affected Fiber Optic Facilities to such alternative
location, at Pathnet's sole cost and risk, as soon as practicable.
If a location for Fiber Optic Facilities cannot be found on the Rail
Corridor, Pathnet shall move the affected Fiber Optic Facilities off
of the Rail Corridor as soon as practicable, at Pathnet's sole cost
and risk.
(b) In the event BNSF desires that Pathnet also move certain
Rail Facilities (excluding tracks and track structures)
simultaneously with moving its Fiber Optic Facilities, BNSF shall so
notify Pathnet in writing, and Pathnet shall move such Rail
Facilities and shall invoice BNSF for the reasonable, actual
incremental costs, including reasonable overhead costs, that are
incurred by Pathnet in moving such Rail Facilities.
(c) If BNSF desires to relocate any of the Fiber Optic
Facilities in order to accommodate a third party (other than as set
forth in Section 14(a)), BNSF shall so notify Pathnet, and Pathnet
promptly thereafter shall submit to BNSF a reasonable, detailed,
itemized estimate, including reasonable contingencies ("Estimate")
of its anticipated reasonable actual costs to relocate such Fiber
Optic Facilities (including reasonable overhead costs not to exceed
ten percent (10%) of actual costs). Upon receiving from BNSF fifty
percent of the amount of the Estimate, Pathnet shall proceed, as
expeditiously as feasible under the circumstances, to relocate those
Fiber Optic Facilities at a cost not to exceed one hundred ten
percent (110%) of the Estimate. Upon completion of such relocation,
and submission to BNSF of invoices documenting all costs thereof,
BNSF promptly shall pay the balance of such costs to Pathnet.
(d) Pathnet acknowledges that BNSF's ownership rights in all
or certain portions of the Rail Corridor may terminate, or revert,
if BNSF ceases to use the Rail Corridor for rail transportation
purposes, or, in some cases if BNSF uses the Rail Corridor for a
purpose inconsistent with rail transportation purposes, or for other
reasons, such as termination of franchise rights, and that if this
occurs, Pathnet might be required either to relocate its Fiber Optic
Facilities or acquire from the appropriate party the right to
continue to use the Fiber Optic Facilities. BNSF shall have no
obligation not to abandon rail service over all or any portion of
the Rail Corridor, no obligation not to use the Rail Corridor for a
purpose inconsistent with rail transportation purposes, and no
obligation to extend the term of BNSF's franchise rights or
ownership rights in the Rail Corridor.
15. Condemnation. In the event that any portion of the Premises
becomes the subject of condemnation proceedings, BNSF shall make reasonable
efforts to notify Pathnet promptly. Pathnet's interest in the personal property,
improvements, and facilities comprising the Fiber Optic Facilities shall be
valued separately from BNSF's ownership interest in the Fiber Optic Facilities
and the Premises, and BNSF and Pathnet shall seek to have any condemnation
award, or sale in lieu of condemnation, apportioned between Pathnet and BNSF
based on the relative value of their specific ownership interests in the Fiber
Optic Facilities and the Premises.
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16. Conveyance of Rail Corridor. In the event BNSF conveys all or
any portion of the Rail Corridor, in circumstances not covered by Section 14 or
Section 15 of this Lease, such conveyance shall be subject to any existing
rights of Pathnet under this Lease and the Fiber Optic Access Agreement, to the
extent permitted by applicable laws and agreements entered into prior to the
date of this Lease.
17. Compliance with Laws. Pathnet, in exercising any and all rights
under this Lease, shall comply with all applicable laws, regulations, ordinance,
rules, decisions and orders ("Laws") applicable to Pathnet and/or the Fiber
Optic Facilities, or resulting from the exercise of Pathnet's rights, and shall
have the sole responsibility for all costs and risks associated with such
compliance. Pathnet shall indemnify, defend and hold harmless BNSF against any
claims, damages, costs, fines or penalties arising in any way from Pathnet's
breach of this Section 17.
18. Liability: Indemnification. PATHNET HEREBY RELEASES BNSF FROM,
AND AGREES TO INDEMNIFY, DEFEND, PROTECT, AND HOLD BNSF HARMLESS AGAINST, ANY
AND ALL CLAIMS, SUITS, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR RELATED TO:
(1) ANY LOSS OF AND/OR DAMAGE TO THE REAL OR PERSONAL PROPERTY OF
BNSF, PATHNET OR THIRD PARTIES AND ANY LOSS AND/OR DAMAGE ON ACCOUNT OF INJURY
TO, OR DEATH OF, ANYONE, CAUSED BY OR GROWING OUT OF PATHNET'S, OR ANY PATHNET
PARTY'S PRESENCE OR ACTIVITIES ON OR NEAR THE RAIL CORRIDOR, REGARDLESS OF ANY
NEGLIGENCE OF BNSF OR ANY PARTY THEN PERFORMING AS A CONTRACTOR OR AGENT OF
BNSF, EXCEPT TO THE EXTENT (AND ONLY TO THE EXTENT) THAT SUCH LOSS OR DAMAGE IS
PROXIMATELY CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BNSF OR SUCH
CONTRACTOR OR AGENT OF BNSF;
(2) (i) EXCEPT IN CONNECTION WITH THE FIBERS AND CAPACITY TO BE
PROVIDED TO BNSF, SERVICE INTERRUPTION, CESSATION, OR UNRELIABILITY OF THE FIBER
OPTIC FACILITIES CAUSED BY ANY PERSON, REGARDLESS OF ANY NEGLIGENCE OF BNSF OR
ANY PARTY THEN PERFORMING AS A CONTRACTOR OR AGENT OF BNSF, EXCEPT TO THE EXTENT
(AND ONLY TO THE EXTENT) THAT SUCH SERVICE INTERRUPTION, CESSATION OR
UNRELIABILITY WAS CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BNSF
OR SUCH CONTRACTOR OR AGENT OF BNSF, OR (ii) EXCEPT IN CONNECTION WITH THE
FIBERS AND CAPACITY TO BE PROVIDED TO BNSF, LIBEL, SLANDER, INFRINGEMENT OR
COPYRIGHT, OR UNAUTHORIZED USE OF ANY TRADEMARK, TRADE NAME, OR SERVICE MARK,
ARISING OUT OF THE MATERIAL, DATA, INFORMATION OR OTHER CONTENT TRANSMITTED OR
RECEIVED OVER THE FIBER OPTIC FACILITIES, IN EACH CASE REGARDLESS OF WHETHER
SUCH CLAIMS, SUITS, JUDGMENTS, OR LIABILITIES ARISE FROM NEGLIGENCE, ACTIONS, OR
INACTION OF BNSF, OR ANY PARTY USING THE RAIL CORRIDOR WITH PERMISSION OF BNSF;
AND
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(3) ANY BREACH OF THE TERMS OF THIS LEASE BY PATHNET OR ANY OF THE
PATHNET PARTIES.
WITHOUT LIMITATION OF ANY OF THE FOREGOING, PATHNET HEREBY AGREES TO
INDEMNIFY, DEFEND, PROTECT AND HOLD BNSF HARMLESS FROM AND AGAINST ANY AND ALL
LOSS, DAMAGE, COST AND EXPENSE SUSTAINED, SUFFERED, OR INCURRED BY BNSF AS A
RESULT OF THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE WITHIN THE RAIL CORRIDOR TO
THE EXTENT CAUSED BY, CONTRIBUTED TO, EXPOSED BY OR AGGRAVATED BY PATHNET OR ANY
PATHNET PARTY. HAZARDOUS SUBSTANCE AS USED HEREIN SHALL MEAN MATERIAL OR
CONTAMINATION IN VIOLATION OF ANY APPLICABLE ENVIRONMENTAL LAW, ORDER, DECISION
OR REGULATION.
19. Insurance.
(a) Pathnet, prior to entering onto the Rail Corridor shall
procure the following insurance, covering all of the work and
services to be performed hereunder by Pathnet, which shall remain in
effect for so long as such party has any personnel, property or
facilities on, or having a right to be on, the Rail Corridor, at
their sole cost:
(1) Workers' Compensation and Employers Liability
Insurance in an amount of at least $1,000,000, covering the
entire liability of Pathnet, as determined by the compensation
laws of the State in which the work is performed, but if
optional under State law the insurance must cover all
employees anyway, or the federal workmen's compensation laws
as applicable. THE CERTIFICATE MUST CONTAIN A SPECIFIC WAIVER
OF THE INSURANCE COMPANY'S SUBROGATION RIGHTS AGAINST THE
BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY.
(2) Commercial General Liability insurance and umbrella
liability insurance covering liability, including but not
limited to Public Liability, Personal Injury, Property Damage,
and Contractual Liability with combined coverage of at least
$21,000,000 per occurrence and a general aggregate of at least
$21,000,000. Where explosion, collapse, or underground hazards
are involved, the X, C and U exclusions must be removed from
the policy;
(3) Automobile Liability insurance, including bodily
injury and property damage, with coverage of at least
$1,000,000 combined single limit or the equivalent covering
any and all vehicles owned, used or hired by Pathnet;
(4) All Risk Property Damage insurance covering all of the
property of Pathnet on a replacement cost basis including
property in their care, custody or control and first party
pollution clean up. The first party pollution clean up shall
include, at a minimum, debris removal and cost of clean up on
a named perils
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basis. Such insurance shall contain a waiver of subrogation in
favor The Burlington Northern and Santa Fe Railway Company.
(5) Pollution Liability coverage in an amount of not less
than $2,000,000 per occurrence and in the aggregate and shall
include coverage for: (a) bodily injury, sickness, disease,
mental anguish or shock sustained by any person, including
death; (b) property damage including physical injury to or
destruction of tangible property including the resulting loss
of use thereof, clean up costs, and the loss of use of
tangible property that has not been physically injured or
destroyed; and (c) defense including loss adjustment costs,
charges and expenses incurred in the investigation adjustment
or defense of claims for such compensatory damages.
(6) If Pathnet requires disposal of any hazardous or
non-hazardous materials off of their property, Pathnet shall
utilize only a fully licensed and qualified disposal company.
(7) Railroad Protective Liability insurance naming The
Burlington Northern and Santa Fe Railway Company as the Named
Insured with coverage of at least $5,000,000 per occurrence
and $10,000,000 in the aggregate. Coverage shall be issued on
a standard ISO for CG 00 35 01 96 and endorsed to include ISO
for CG 28 31 10 93 and the Limited Seepage and Pollution
Endorsement.
All insurance shall be placed with insurance companies licensed to
do business in the States in which the work is to be performed, and
with a Best's Insurance Guide Rating of A- and Class VII, or better.
If any work is to be performed within 50 feet of railroad property,
then the insurance must provide for coverage of incidents occurring
within fifty (50) feet of railroad property, and any provision to
the contrary (including any limitation regarding the definition of
an insured contract) in the insurance policy must be specifically
deleted.
To the extent obtainable, with respect to any incident on or along
the Rail Corridor, in all cases except for Workers' Compensation,
the certificate must specifically state that "THE BURLINGTON
NORTHERN AND SANTA FE RAILWAY COMPANY IS AN ADDITIONAL INSURED." The
Additional Insured endorsement shall, at a minimum, include coverage
for the general supervision performed by BNSF.
Any coverage afforded BNSF, the Certificate Holder, as an Additional
Insured shall apply as primary and not excess to any insurance
issued in the name of BNSF.
(b) Before commencing any work hereunder, Pathnet shall
furnish to BNSF, Certificate of Insurance on the form prescribed by
BNSF, evidencing the issuance to Pathnet of the policies of
insurance providing the types of insurance and limits of liability
prescribed above, and amending the cancellation clause to certify
that BNSF shall be
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given not less than 30 days' written notice prior to any material
change, substitution or cancellation prior to normal expiration
dates. Cancellation or expiration of any of said policies of
insurance shall not preclude BNSF from recovery thereunder for any
liability arising under this Agreement.
If any coverage is purchased on a "claims made" basis, Pathnet
hereby agrees to maintain coverage in force for a minimum of three
years after expiration, cancellation or termination of this
contract. Pathnet shall provide evidence annually of such coverage
as required hereunder.
(c) Pathnet Parties shall procure and maintain insurance as
outlined in Exhibit C-1.
(d) It is mutually understood and agreed that the purchase of
insurance as herein provided shall not in any way limit the
liability of the Pathnet or Pathnet Parties to BNSF, as herein set
forth.
20. Liens.
(a) In the event that any BNSF property becomes subject to any
mechanics' or materialmen's lien, or other construction or
supplier's lien or encumbrance chargeable to or through Pathnet or
any of the Pathnet Parties as a result of a failure to pay. Pathnet
promptly, and in any event within ten days, shall cause such lien or
encumbrance to be discharged or released of record (by payment,
posting of bond, court deposit or other means), without cost to
BNSF, and shall indemnify and hold harmless BNSF against all costs
(including reasonable attorneys' fees) incurred in connection with
such lien or encumbrance. If any such lien or encumbrance is not so
discharged and released, BNSF may pay or secure the release or
discharge thereof, at the expense of Pathnet, after first giving
five days' advance notice of its intention to do so. Pathnet
acknowledges that: (i) all or portions of the Rail Corridor are
subject to the liens of one or more of BNSF's various mortgages;(ii)
BNSF from time to time may place other liens or mortgages on the
Rail Corridor and (iii) the discharge or release of record of the
current or future liens and mortgages from the Rail Corridor is not
required by this Section, provided however, that any such future
liens or mortgages shall be subject to Pathnet's rights under this
Lease.
(b) Nothing herein shall preclude either Pathnet or BNSF from
contesting of any lien or other encumbrance.
21. Liaison, Dispute Resolution and Arbitration.
(a) Not later than thirty days after the date of this Lease,
BNSF and Pathnet each shall send a letter to the other, pursuant to
Section 28 hereof, designating individuals as points of contact at
the following levels: corporate officer for overall decision-making,
corporate officer for dispute resolution; contact person for
day-to-day corporate contact and liaison; contact person for
engineering and project management; contact person for
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field construction; contact person for daily operations and
maintenance; and contact person for disaster operations on a
twenty-four (24) hour basis. The same individual may be designated
for one or more of the foregoing positions, and either BNSF or
Pathnet may change the name of any designated officer or contact
person at any time by so informing the other in writing.
(b) It is the intent of the parties hereto that any dispute
which may arise between them be resolved as quickly and as
informally as possible. When quick and informal resolution of any
dispute is not possible, the issues in dispute shall be referred to
the two corporate officers designated for dispute resolution
pursuant to this Section 21, who shall make a reasonable attempt to
settle the dispute.
(c) The parties hereto agree to waive any rights that either
may have to a remedy in a court of law or in a court of equity
arising out of this Lease, and to submit any dispute arising under
the Lease, and not settled pursuant to Section 21(b) hereof, to
binding arbitration in accordance with this Section 21.
Notwithstanding the foregoing, either party shall have the right to
pursue preliminary equitable relief in connection with this Lease,
or to pursue appropriate legal or equitable remedies in support of a
decision rendered in arbitration.
(d) The parties hereto agree that one of the remedies
available to the arbitrator(s) for any substantial breach of this
Agreement shall be specific performance, and that an award of
specific performance by an arbitrator or arbitrators may be enforced
in a court of law or equity.
(e) Any arbitration under this Agreement shall be conducted in
accordance with the Commercial Rules of the American Arbitration
Association and shall be conducted by an arbitrator, and said
arbitration shall be conducted by a panel of three (3) arbitrators,
one to be selected by BNSF, one to be selected by Pathnet, and one
to be selected by the two designated arbitrators. Discovery shall be
conducted in accordance with the Federal Rules of Civil Procedure
(f) All costs, fees and expense charged by the arbitrator(s)
and other neutral third parties retained by mutual agreement of
Pathnet and BNSF in any arbitration conducted pursuant to this
Section 21 shall be shared equally by Pathnet and BNSF, unless
apportioned otherwise by the arbitrators.
22. Representations and Warranties.
(a) By executing this Lease, BNSF represents and warrants the
following facts:
(1) BNSF has the full right and authority to enter into
and perform this Lease, and by entering into and performing
this Lease, BNSF is not in violation of its charter or
by-laws, or any Laws or agreement by which it is bound or to
which it is subject; it being understood, however, that this
warranty does not
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constitute a warranty, express or implied, that BNSF has
sufficient rights in the Rail Corridor to permit Pathnet to
Construct and Operate the Fiber Optic Facilities; and
(2) The execution, delivery and performance of this
Lease by BNSF has been duly authorized by all requisite
corporate action, that the signatory for BNSF hereto is
authorized to sign this Lease and bind BNSF to its terms.
(b) By executing this Lease, Pathnet represents and
warrants:
(1) Pathnet has the full right and authority to enter
into and perform this Lease and by entering into and
performing this Lease, Pathnet is not in violation of its
charter or by-laws, or any Laws or agreement by which it is
bound or to which it is bound or to which it is subject;
(2) The execution, delivery and performance of this
Lease by Pathnet has been duly authorized by all requisite
corporate action, that the signatory for Pathnet hereto is
authorized to sign this Lease and bind Pathnet to its terms;
and
(3) Pathnet has the financial capability to fulfill
all of its obligations under this Lease.
23. Limitation on Damages for Breach of this Lease. Damages that may
be recovered for breach of this Lease shall not include any indirect,
consequential, special or punitive damages, or lost profits, or the cost of
Pathnet building Fiber Optic Facilities at a different location than it
originally planned.
24. Recordings, Taxes and Other Charges.
(a) Except as provided in this Section 24, Pathnet shall pay:
(i) all transfer taxes, documentary stamps, recording costs or fees,
or any similar expense in connection with this Lease and/or the
recording or filing of a Memorandum of Lease for this Lease (which
memorandum shall be in a form mutually agreeable between the parties
and the recording of a Memorandum of Lease shall occur only by
mutual agreement by the parties); and (ii) any and all taxes
(including but not limited to transfer, sales, use, and property
taxes), levies, excises, assessments and charges (collectively,
"Taxes"), including any penalties and/or interest thereon, levied or
assessed with respect to the Fiber Optic Facilities or Pathnet's
leasehold interest. Pathnet shall indemnify, defend and hold BNSF
harmless against the payment of any Taxes referenced in this Section
24(a).
(b) BNSF may pay any Taxes, plus any penalty and/or interest
thereon, imposed upon BNSF for which Pathnet is obligated pursuant
to this Lease, if Pathnet
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does not pay such Taxes when due, and Pathnet shall promptly
reimburse BNSF for any such payment it makes.
(c) In the case of amounts described in Section 24(a)(ii),
where Taxes with respect to Fiber Optic Facilities or Pathnet's
leasehold interest are not separately assessed, BNSF shall determine
the amount of Taxes attributable to the Fiber Optic Facilities and
Pathnet's leasehold interest by reference to information provided by
the relevant taxing authority that demonstrates or establishes that
such Taxes are attributable to the Fiber Optic Facilities or
Pathnet's leasehold interest. If the information provided by the
relevant taxing authority demonstrates or establishes that Taxes are
attributable to the fiber optic value of a Rail Corridor in respect
of which Pathnet has been granted rights hereunder, but does not
demonstrate or establish the value attributable to the Fiber Optic
Facilities or Pathnet's leasehold interest, the amount so
attributable shall be determined by reference to a formula. Such
formula shall be consistently applied, shall reasonably allocate any
Taxes among all of BNSF's rail corridors and fiber optic values with
a further allocation of the Taxes attributable to the fiber optic
value between the Fiber Optic Facilities, Pathnet's leasehold
interest and fiber optic value attributable to fiber optic rights
granted by BNSF to others. In all cases, BNSF promptly shall provide
to Pathnet information that establishes the manner in which any such
Taxes were allocated and the basis for establishing that such
amounts are attributable to the Fiber Optic Facilities or Pathnet's
leasehold interest. The parties shall resolve any dispute regarding
the liability of Taxes hereunder pursuant to the dispute resolution
and arbitration procedures set forth in Section 21 of this Lease.
(d) Notwithstanding anything to the contrary contained in this
Lease, BNSF shall pay (i) any Taxes attributable to rights in the
Fiber Optic Facilities and other assets and services provided to
BNSF pursuant to Section 8 of this Lease; and (ii) property,
franchise or similar taxes that are attributable to a Rail Corridor
that are not attributable to the existence or use of the Fiber Optic
Facilities or Pathnet's leasehold interest. BNSF shall indemnify,
defend and hold Pathnet harmless against the payment of any Taxes
referenced in this Section 24(d). Pathnet may pay any Taxes imposed
on Pathnet for which BNSF is obligated to indemnify Pathnet pursuant
to this Section 24(d), if BNSF does not pay such amounts when due
and BNSF shall promptly reimburse Pathnet for any such payment it
makes. The provision of Section 24(c) shall apply to amounts claimed
by Pathnet, mutatis mutandis.
(e) Neither BNSF nor Pathnet will be responsible for the
income or corporate franchise tax of the other.
(f) Both BNSF and Pathnet agree to reasonably cooperate with
each other in the refund, rebate, reduction, abatement, mitigation
or contest of any Taxes for which either is obligated to pay
hereunder.
25. Independent Contractor Status; No Joint Venture. BNSF reserves
no control whatsoever over the employment, discharge or compensation of
Pathnet's employees or contractors. It is the intention of the parties hereto
that Pathnet shall be and remain an independent contractor, and nothing in this
Lease shall be construed as inconsistent with
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Pathnet's independent contractor status or creating or implying any partnership
or joint venture between Pathnet and BNSF.
26. Confidentiality.
(a) The terms of this Lease shall be confidential.
Either party hereto may designate as confidential certain materials,
maps, documents and other information exchanged in fulfilling the
terms and intent of this Lease. In addition, in connection with the
provision of material and/or services to BNSF by Pathnet, or to
BNSF, BNSF and/or Pathnet may discover or otherwise come into
contact with specifications, drawings, computer programs, and/or
technical or business information which BNSF or Pathnet has clearly
identified as confidential. All construction plans, drawings and
specifications, including, without limitation, all proposed
Construction Drawings, Final Construction drawings and as-built
plans and all information about the location of the Fiber Optic
Facilities, will constitute confidential information.
(b) Unless confidential information was previously known
free of any obligation to keep it confidential, or has been or is
subsequently made public, it shall be handled in confidence by BNSF
and Pathnet and shall be disclosed only upon a need to know basis,
such terms and conditions as may be mutually agreed upon in writing
by the parties hereto, or as required by law. BNSF and Pathnet shall
advise those employees, agents, and contractors who may have contact
with such information, of the obligation to keep such information
confidential, and will use their best efforts to avoid unauthorized
disclosure of such information. Notwithstanding the foregoing,
either party may disclose confidential information to the extent
required by applicable law or regulations, provided that the
disclosing party has notified the other party of the disclosing
party's obligation to disclose, and provided that the non-disclosing
party has had an opportunity to contest such disclosure.
(c) In the event of an actual or threatened disclosure
of such information by either party hereto which might cause
irreparable harm to the other party hereto, it is agreed that
monetary remedies available at law may be inadequate and, therefore,
the aggrieved or threatened party hereto shall be entitled to
receive injunctive relief as an equitable remedy.
(d) Notwithstanding anything else herein, the
obligations of the parties hereto under this Section 26 shall
survive termination of this Lease for a period of three years.
27. Assignment.
(a) This Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted
successors or assignees. Pathnet shall not assign any of the rights
granted to Pathnet under this Lease, without the prior written
consent of BNSF, which may be withheld or conditioned in BNSF's sole
27
<PAGE>
discretion. Any assignment made in violation of this Section 27
shall be null and void, shall confer no rights upon any party as
against BNSF, and shall give BNSF the right to terminate this Lease
effective immediately, or take any other lesser action with respect
thereto. The above requirement for consent shall not apply to (i)
any disposition of all or substantially all of Pathnet's stock or
assets; (ii) any corporate merger, consolidation or reorganization,
whether voluntary or involuntary, involving Pathnet; or (iii) a
sublease or assignment of the Lease (in whole or in part) by Pathnet
to a subsidiary, affiliate, or parent company, controlled, under
common control with, or controlling, either indirectly or directly,
Pathnet, but only where, and to the extent, such transaction does
not violate the terms of the Contribution Agreement; provided that
no assignment not consented to by BNSF shall relieve Pathnet of any
of its obligations or liabilities under this Lease. Nothing herein
shall prohibit Pathnet (i) from involving contractors, or strategic
or co-development partners in Construction and Operation of the
Fiber Optic Facilities, on such terms as Pathnet may determine in
its sole discretion, provided all such activities are conducted in
accordance with the terms of this Lease, and that Pathnet remains
fully liable for all obligations hereunder; and (ii) from granting
liens or other security interests in the Fiber Optic Facilities or
Pathnet's rights under this Lease in connection with financing or
investments made available to Pathnet.
(b) Upon request by Pathnet, BNSF shall execute
reasonable documentation to be provided by Pathnet acknowledging the
rights of Pathnet's lender(s) ("Lender") to obtain ownership of the
Fiber Optic Facilities if this Lease is still in effect and Pathnet
is in material default under the terms of Pathnet's loan to Lender,
provided, however, that in such case Lender shall become an assignee
to this Lease and shall become subject to all rights and obligations
of Pathnet under the terms of this Lease (and Pathnet also shall
remain subject to all obligations of Pathnet under this Lease). In
order to obtain the rights specified in this Lease, Lender must
execute an amendment to this Lease agreeing to be bound by the
terms, conditions and obligations contained in this Lease. The
execution of such an amendment by Lender shall not relieve Pathnet
from any obligations or liabilities contained in this Lease.
Further, before Lender or any other assignee or transferee of
Pathnet's interest in this Agreement may obtain any of Pathnet's
rights hereunder, such Lender, assignee, or transferee must cure any
and all outstanding defaults by Pathnet hereunder. In addition to
the rights granted to Pathnet hereunder, Pathnet's Lender shall have
the additional right to take possession, sell, assign or otherwise
transfer the Fiber Optic Facilities, including the right to operate,
or permit a third-party to operate, the Fiber Optic Facilities,
provided such operation shall be subject to all terms and conditions
of this Lease.
28. Notices. Unless otherwise provided herein, all notices and other
communications required by or concerning this Lease shall be in writing and
shall be deemed to have been duly given when delivered in person or on the next
business day when sent by a nationally recognized overnight courier, or on the
second succeeding business day when sent by registered or certified
28
<PAGE>
United States Mail (postage prepaid, return receipt requested), or, if postal
claim notice is given, on the date of its return marked "unclaimed" (provided,
however, that upon receipt of a returned notice marked "unclaimed", the sending
party hereto shall make reasonable effort to contact and notify the other party
hereto by telephone) and each respective party hereto at the following addresses
(or at such other address for a party hereto as shall be specified by like
notice):
(1) if to Pathnet:
Pathnet, Inc.
1015 31st St., N.W.
Washington, DC 20007
Attn: General Counsel
and to:
Pathnet, Inc.
1661 Gateway Boulevard
Richardson, TX 75080
Attn: Senior Vice President, Engineering
(2) if to BNSF:
Assistant Vice President, Telecommunications
The Burlington Northern and Santa Fe Railway Company
2600 Lou Menk Drive
Forth Worth, Texas 76131
and to:
Vice President -Law
The Burlington Northern and Santa Fe Railway Company
2500 Lou Menk Drive, AOB-3
Fort Worth, Texas 76131-2830
29. Brokers and Agents. BNSF and Pathnet represent and warrant to
each other than neither has employed any broker, agent or finder in connection
with this Lease, and each indemnifies and agrees to hold harmless the other from
and against any commission or fee claimed by any broker, agent or finder in
connection with this transaction.
30. Force Majeure. Except as may be elsewhere specifically provided
in this Lease, any failure or delay in the performance by a party hereto of its
obligations hereunder, including, without limitation, Pathnet's obligations
pursuant to Section 5 hereof, shall not be a breach of this Lease if such
failure or delay results from causes beyond that party's control, including but
not limited to acts of God, governmental action or inaction (whether in its
sovereign or contractual capacity), fire, flood, or other catastrophe, national
emergency, insurrection, riot, and
29
<PAGE>
war. The phrase "beyond that party's control" shall not include any failure to
reach agreement with a party with whom Pathnet is negotiating pursuant to the
exclusive right to negotiate provided in Section 4(b) of the Fiber Optic Access
Agreement.
31. Costs. Except as specifically provided in this Lease, each
party hereto shall be responsible for its own costs (including legal fees)
incurred in connection with the preparation, execution and performance of this
Lease.
32. Severability. If any provision of this Lease or the application
thereof, shall be held invalid, illegal or unenforceable in whole or in part,
the remainder of this Lease and the application thereof shall not be affected,
and shall be enforceable to the fullest extent permitted by law, and the portion
hereof found to be invalid shall be enforced to the fullest extend permitted by
law, and, if possible, shall be reformed to carry out as much as possible the
intent of the parties as expressed herein.
33. Amendment, Waiver. This Lease may be amended only by a written
instrument executed by both parties hereto. No failure to exercise and no delay
in exercising, on the part of a party hereto, any right, power or privilege
hereunder shall operate as a waiver of any other provision of this Lease, or as
a waiver of that right, power or privilege either before, or after, the period
of waiver.
34. Entire Agreement. This Lease and all Exhibits attached hereto,
together with the Fiber Optic Access Agreement and the Contribution Agreement
between the parties hereto dated as of __________ __, 1999, constitute the
entire agreement of the parties hereto with respect to the subject matters
hereof, and supersede any and all prior negotiations, understandings and
agreements, whether oral or written, with respect hereto.
35. Interpretation; Construction.
(a) Section headings contained in this Lease are solely for
purpose of reference and shall not be construed with the substance
of the Section they caption or in any way affect the meaning or
interpretation of this Lease.
(b) Wherever used in this Lease: (i) any pronoun or pronouns
shall be deemed to include both the plural and the singular and to
cover all genders, and (ii) "or" is used in the inclusive sense, in
all cases where such meanings would be appropriate.
36. Legal Forum. This Lease shall be interpreted, construed and
enforced in accordance with the laws of the State of Texas.
37. Counterparts. This Lease may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
30
<PAGE>
IN WITNESS WHEREOF, authorized representatives of BNSF and Pathnet have executed
this Lease as of the date first set forth herein.
PATHNET TELECOMMUNICATIONS, INC. THE BURLINGTON NORTHERN AND
SANTA FE RAILWAY COMPANY
By: By:
----------------------------- ---------------------------
Name: Name:
----------------------------- ---------------------------
Title: Title:
----------------------------- ---------------------------
31
<PAGE>
EXHIBIT A
[to be agreed to by the parties]
<PAGE>
EXHIBIT B
Map of BNSF Railway Network
[to be agreed to by the parties]
<PAGE>
EXHIBIT C
Additional Construction Specifications
--------------------------------------
[to be agreed to by the parties]
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<PAGE>
EXHIBIT B
EXCLUSIVE CORRIDORS
Approx.
Corridor Route
Description Miles
[* * *] [* * *]
Total: 4,052
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<PAGE>
EXHIBIT C
RESTRICTED CORRIDORS
Approx.
Corridor Route
Description Miles
[* * *]
Total: [* * *]
- - ------ -----
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Exhibit 10.5
MASTER RIGHT-OF-WAY LEASE AGREEMENT
BETWEEN
COLONIAL PIPELINE COMPANY,
A DELAWARE CORPORATION
AND
PATHNET TELECOMMUNICATIONS, INC.,
A DELAWARE CORPORATION
DATED: March 30, 2000
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<PAGE>
TABLE OF CONTENTS
ARTICLE I. AGREEMENT TO LICENSE.......................................... 2
1.1 LEASEHOLD INTERESTS............................................... 2
1.2 PERMITS; SEGMENT LEASES........................................... 2
1.3 TERM.............................................................. 4
1.4 REVERSION TO COLONIAL............................................. 4
1.5 USE............................................................... 5
ARTICLE II. CONSIDERATION; RENEWAL PAYMENTS; OTHER FEES AND EXPENSES...... 5
2.1 CONSIDERATION..................................................... 5
2.2 RENEWAL PAYMENT................................................... 5
2.3 EXPENSES.......................................................... 7
2.4 PAYMENTS.......................................................... 8
2.5 DEFAULT INTEREST.................................................. 8
ARTICLE III. INSTALLATION OF TELECOMMUNICATIONS NETWORK.................... 8
3.1 PERFECTION; PRE-INSTALLATION DETERMINATIONS....................... 8
3.2 REQUIREMENTS FOR INSTALLATION OF THE TELECOMMUNICATIONS
NETWORK AND THE PTI WORK.......................................... 10
3.3 SERVICES AGREEMENT WITH COLONIAL.................................. 12
3.4 COMPLETION OF PTI WORK............................................ 13
3.5 UNAUTHORIZED WORK................................................. 13
ARTICLE IV. OPERATION, MAINTENANCE AND REPAIR............................. 14
4.1 PTI OPERATION, MAINTENANCE AND REPAIR............................. 14
4.2 WARRANTIES........................................................ 14
4.3 SUBCONTRACTORS.................................................... 14
4.4 COLONIAL INSPECTIONS.............................................. 14
ARTICLE V. PIPELINE MAINTENANCE AND REPAIR............................... 15
5.1 PIPELINE MAINTENANCE AND REPAIR................................... 15
ARTICLE VI. INSURANCE..................................................... 15
6.1 ACQUISITION OF INSURANCE POLICIES................................. 15
6.2 TYPES OF REQUIRED INSURANCE FOR PTI............................... 15
6.3 TYPES OF REQUIRED INSURANCE FOR COLONIAL.......................... 16
6.4 TERMS OF INSURANCE................................................ 16
6.5 FAILURE TO MAINTAIN INSURANCE..................................... 17
6.6 BLANKET POLICIES; SELF-INSURANCE.................................. 17
ARTICLE VII. INTENTIONALLY OMITTED......................................... 18
ARTICLE VIII. CONDEMNATION.................................................. 18
8.1 MATERIAL TAKING................................................... 18
8.2 CONTINUATION OF AGREEMENT......................................... 18
8.3 APPORTIONMENT OF AWARD(S)......................................... 18
ARTICLE IX. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PTI.............. 19
9.1 PTI'S REPRESENTATIONS, WARRANTIES AND COVENANTS................... 19
ARTICLE X. REPRESENTATIONS, WARRANTIES AND COVENANTS OF COLONIAL......... 21
10.1 COLONIAL'S REPRESENTATIONS, WARRANTIES AND COVENANTS.............. 21
<PAGE>
ARTICLE XI. INDEMNIFICATION; LIMITATION OF LIABILITY...................... 22
11.1 INDEMNIFICATION BY PTI............................................ 22
11.2 INDEMNIFICATION BY COLONIAL....................................... 22
11.3 LIMITATION OF LIABILITY........................................... 23
11.4 NO CONSEQUENTIAL OR SPECIAL DAMAGES............................... 23
11.5 LEGAL PROCEEDINGS................................................. 23
ARTICLE XII. DEFAULT....................................................... 24
12.1 EVENT OF DEFAULT BY PTI........................................... 24
12.2 EFFECT OF ARBITRATION............................................. 25
12.3 REMEDIES OF COLONIAL.............................................. 25
12.4 EFFECT OF TERMINATION............................................. 25
12.5 EVENT OF DEFAULT BY COLONIAL...................................... 26
12.6 NO WAIVERS........................................................ 26
12.7 NO REMEDY EXCLUSIVE............................................... 27
12.8 FORCE MAJEURE..................................................... 27
12.9 NO PERSONAL LIABILITY............................................. 27
ARTICLE XIII. VOLUNTARY REMOVAL OF TELECOMMUNICATIONS NETWORK............... 27
13.1 REMOVAL OF TELECOMMUNICATIONS NETWORK BY PTI...................... 27
ARTICLE XIV. ARBITRATION................................................... 28
14.1 ARBITRATION....................................................... 28
14.2 SELECTION OF ARBITRATORS.......................................... 28
14.3 QUALIFIED ARBITRATORS............................................. 28
14.4 ARBITRATION HEARING; DISCOVERY VENUE.............................. 28
14.5 DECISION.......................................................... 29
14.6 NON-BINDING IN CERTAIN EVENTS..................................... 29
ARTICLE XV. ASSIGNMENT.................................................... 29
15.1 ASSIGNMENT BY PTI................................................. 29
15.2 ASSIGNMENT BY COLONIAL............................................ 30
15.3 BINDING UPON SUCCESSORS AND ASSIGNS............................... 30
ARTICLE XVI. CONFIDENTIALITY............................................... 30
16.1 CONFIDENTIALITY................................................... 30
ARTICLE XVII. MISCELLANEOUS................................................. 30
17.1 NOTICES.......................................................... 30
17.2 NO PARTNERSHIP................................................... 31
17.3 TIME OF THE ESSENCE.............................................. 31
17.4 ENTIRE AGREEMENT................................................. 31
17.5 CAPTIONS......................................................... 32
17.6 MEANING OF TERMS................................................. 32
17.7 AGREEMENT CONSTRUED AS A WHOLE................................... 32
17.8 SEVERABILITY..................................................... 32
17.9 SURVIVAL......................................................... 32
17.10 AMENDMENT.................................................... 32
17.11 ATTORNEYS' FEES.............................................. 32
17.12 INTEREST..................................................... 32
17.13 GOVERNING LAW................................................ 33
17.14 BUSINESS DAYS................................................ 33
17.15 REFERENCE DATE OF AGREEMENT.................................. 33
17.16 COUNTERPARTS................................................. 33
17.17 EXHIBITS..................................................... 33
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<PAGE>
LIST OF EXHIBITS:
Exhibit A System Map
Exhibit B Form of Right-of-Way Permit
Exhibit C Form of Segment Lease
Exhibit D Currently Perfected Segments
Exhibit E General Colonial Construction Standards
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<PAGE>
LIST OF DEFINED TERMS:
- - - ----------------------
Agreement Recitals
Applicable Laws Subsection 3.2(b)
Colonial Recitals
Colonial Conduit Defined in the Fiber Optic
Access and Purchase Agreement
Colonial Construction Standards Subsection 3.2(c) Colonial Engineering Notice
Subsection 3.1(c) Colonial Indemnified Parties Section 11.1 Colonial Parties
Subsection 10.1(f) Colonial Pipeline Recitals Colonial Rights-of-Way Recitals
Colonial System Recitals Colonial System Map Recitals Conduit(s) Section 1.5
Construction Management Work Subsection 3.1(b) Currently Perfected Segments
Subsection 2.3(b) Default Rate Section 17.12 Designation Notice Subsection
1.2(a) Event of Default Section 12.1 Fiber Optic Access and Purchase Agreement
Subsection 1.1(a) Governmental Authorities Subsection 2.3(a) Impositions
Subsection 9.1(l) Initial Term Section 1.3 Insurance Requirements Subsection
3.2(e) Landowners Subsection 2.3(a) Leasehold Interest Subsection 1.1(a)
Material Taking Section 8.1 Notice of Arbitration Section 14.1 Perfection and
Construction Management Contractor Subsection 3.1(a) Perfection and Construction
Management Work Subsection 3.1(a) Perfection Expenses Subsection 2.3(a)
Perfection Process Subsection 1.2(b) Perfection Rights Subsection 1.2(b)
Permit(s) Subsection 1.2(c) PTI Recitals PTI Indemnified Parties Section 11.2
PTI Operation and Maintenance Services Section 4.1 PTI Parties Subsection 9.1(i)
PTI Stock Section 2.1 PTI Work Section 3.2 Related Facility(ies) Recitals Regen
Facilities Subsection 1.2(a) Renewal Payment Subsection 2.2(a) Renewal Term
Section 1.3 Required Permits Subsection 9.1(f) Rerouted Portion Subsection
3.1(f) Reversion Date Subsection 1.4(a) Revised Designation Notice Subsection
1.2(c) Right-of-Way Agents Subsection 2.3(a) Route Engineering Work Subsection
3.1(b)
<PAGE>
Segment(s) Subsection 1.2(a)
Segment Lease Subsection 1.2(c)
Services Agreement Section 3.3
Sub-Segment(s) Subsection 1.2(a)
Sub-Segment Lease Subsection 1.2(c)
Taking Section 8.1
Telecommunications Network Section 1.5
Telecommunications Network Contractors Subsection 3.2(f)
Term Section 1.3
Trade Standards Subsection 3.2(e)
Undeployed Segments and Stations Subsection 1.4(b)
<PAGE>
MASTER RIGHT-OF-WAY LEASE AGREEMENT
THIS MASTER RIGHT-OF-WAY LEASE AGREEMENT (the "Agreement"), made and
entered into as of this 30th_ day of March, 2000, 1999, by and between COLONIAL
PIPELINE COMPANY, a Delaware corporation ("Colonial") and PATHNET
TELECOMMUNICATIONS, INC., a Delaware corporation ("PTI").
W I T N E S S E T H:
WHEREAS, Colonial transports refined liquid petroleum products in
interstate commerce as a common carrier and maintains a system of pipelines and
related facilities across fourteen states and the District of Columbia for such
purposes (the "Colonial System");
WHEREAS, the Colonial System consists of (a) pipelines (collectively,
the "Colonial Pipeline") located on certain interests in land (e.g.,
rights-of-way, easements, licenses, permits, leases, etc. [collectively, the
"Colonial Rights-of-Way"]), and (b) injection stations, booster stations, tank
farms, delivery locations and terminals (collectively, the "Related Facilities")
located on certain other tracts of land owned in fee or leased by Colonial, all
of which Colonial Rights-of-Way and Related Facilities are located approximately
as shown on that certain system map of the Colonial System, attached hereto as
Exhibit A and made a part hereof (the "Colonial System Map");
WHEREAS, PTI desires the right to use designated portions of the currently
existing Colonial System for the purpose of installing and operating
communications facilities, including, but not limited to, fiber optic conduits,
regeneration stations and related machinery and equipment for the operation of a
telecommunications network;
WHEREAS, Colonial desires to lease to PTI designated portions of the
Colonial Rights-of-Way and Related Facilities to use for the aforesaid purposes,
subject to applicable title restrictions and encumbrances, and upon the terms
and conditions hereinafter set forth; and
WHEREAS, Colonial and PTI desire to enter into this Agreement in order to
set forth the terms and conditions of the foregoing.
NOW, THEREFORE, for and in consideration of the premises hereof, the
covenants contained herein, the sum of Ten and No/100 Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Colonial and PTI hereby agree as follows:
<PAGE>
ARTICLE I
AGREEMENT TO LEASE
1.1 Leasehold Interests.
(a) Subject to all of the terms and conditions of this Agreement, and
that certain Fiber Optic Access and Purchase Agreement entered into by Colonial
and PTI contemporaneously herewith (the "Fiber Optic Access and Purchase
Agreement"), Colonial agrees to lease to PTI the right to use portions of the
currently existing Colonial Rights-of-Way and Related Facilities for the uses
and purposes described herein (each such portion leased to PTI pursuant to the
terms hereof being a "Leasehold Interest"). The Leasehold Interests to be
granted hereby include the non-exclusive use of a strip of land five (5) feet on
either side of the centerline of the telecommunication conduits and
appurtenances to be installed hereunder within the designated Colonial
Rights-of-Way, or such larger area as may be reasonably necessary for the
construction and operation of the "Telecommunications Network" (as defined in
Section 1.5 hereof), as approved by Colonial in accordance with Article III
hereof; provided that, if necessary along a particular "Segment" (as hereinafter
defined), PTI may request that Colonial attempt to acquire additional
right-of-way at PTI's expense, to be included as part of the Colonial
Rights-of-Way for the purposes hereof.
(b) In the event that Colonial expands the Colonial System beyond its
current boundaries as of the date hereof, and should PTI desire to utilize such
expansion, then Colonial and PTI will negotiate in good faith to extend the
Leasehold Interests to be granted hereunder to include the additional Colonial
Rights-of-Way applicable to such extensions of the Colonial System and to
determine the compensation to be received by Colonial therefor.
(c) PTI's rights in the Colonial Rights-of-Way and Related Facilities
hereunder consist solely of Leasehold Interests subject to the terms of this
Agreement and PTI does not acquire hereby any other or additional rights in or
to any portion of the Colonial Rights-of-Way or any Related Facilities. PTI
further acknowledges that Colonial hereby reserves such access and other rights
as are necessary to enable Colonial to reasonably commercialize the "Colonial
Conduit" (as defined in the Fiber Optic Access and Purchase Agreement),
including, without limitation, full rights of access with respect to any portion
of the Colonial Rights-of-Way otherwise leased to PTI in order to allow Colonial
(or its assignee(s) or licensee(s) to maintain, operate, repair, replace and
upgrade the Colonial Conduit as necessary or appropriate.
1.2 Permits; Segment Leases.
(a) From time to time, PTI shall designate, by written notice to
Colonial (each, a "Designation Notice"), specified segments of the Colonial
System with respect to which PTI desires to acquire Leasehold Interests. Each
such Designation Notice shall identify or describe, as applicable: (i) a segment
or segments of the Colonial Rights-of-Way within the Colonial System (the
"Segment(s)"), using Colonial's location number references as beginning points
and ending points, and shall describe the approximate distance of the applicable
Segment(s); (ii) one or more of the Related Facilities along the Colonial
System; (iii) the types of
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<PAGE>
facilities PTI intends to install (i.e., regeneration facilities ("Regen
Facilities"), junctions, terminals, etc.); and (iv) the number of conduits PTI
plans to install within the Segment(s).
(b) Subject to Section 3.3 below, within thirty (30) days after
receipt of a Designation Notice, Colonial shall prepare, execute and deliver to
PTI a segment lease for the applicable Segment or Related Facility in
substantially the form set forth on Exhibit B attached hereto and made a part
hereof (each, a "Segment Lease"). Upon the execution by Colonial of a Segment
Lease, Colonial also shall notify PTI of the exact number of Conduits that
Colonial determines, in its reasonable discretion, may be installed along the
applicable Segment in question without material interference with the use,
operation and maintenance of the Colonial Pipeline in the applicable portion of
the Colonial Rights-of-Way and/or without compromising the safety of the
Colonial Pipeline. If Colonial does not own the applicable Segment or Related
Facility in fee, each such Segment Lease shall have attached as an exhibit
thereto a description of the applicable leases, easements, licenses or other
similar agreements (together with all amendments or modifications thereto),
pursuant to which Colonial has the right to use such portion of the Colonial
Rights-of-Way or Related Facility. Colonial also shall provide or otherwise make
available to PTI such documents, agreements and information pertaining to the
Colonial System, the Colonial Rights-of-Way and or Related Facilities as PTI may
reasonably request. Upon execution and delivery of a completed Segment Lease by
Colonial and PTI, the terms of such Segment Lease will be incorporated into this
Agreement and become subject to its terms and conditions, subject, however, to
modification in accordance with the terms of applicable "Permits" (as described
in Subsection 1.2(c) below issued hereunder). A Segment Lease shall signify
Colonial's authority for PTI to proceed with the modification of such existing
leases, easements, licenses and other agreements to which Colonial is a party in
order to obtain the rights (the "Perfection Rights") for PTI to install, operate
and maintain the Telecommunications Network and the Colonial Conduit through the
designated Segments of the Colonial Rights-of-Way (collectively, the "Perfection
Process"). Each such Segment Lease shall confirm, however, that PTI shall not
have the right to commence any "PTI Work" (as defined in Section 3.2 hereof)
until compliance by PTI with the applicable provisions of Sections 3.1 and 3.2
hereof.
(c) PTI shall notify Colonial in writing upon completion of the
Perfection Process with respect to a particular Segment or Related Facility,
such Perfection Process to be performed in accordance with the terms of Section
3.1 below. After completion of the pre-installation determinations described in
Subsections 3.1(b)-(d) hereof, Colonial shall prepare, execute and deliver to
PTI a Permit for the applicable Segment Lease, in substantially the form set
forth on Exhibit C attached hereto and made a part hereof (each, a "Permit").
PTI's right to use the Leasehold Interests described herein for the installation
and operation of the "Telecommunications Network" (as described in Section 1.5
hereof) shall become effective with respect to a particular Segment and/or a
particular Related Facility only upon the execution and delivery of the
applicable Permit for such Segment or Related Facility; provided, however, that
PTI may request that a Segment Lease be divided into sub-segments for "mini
construction spreads" (hereinafter defined as "Sub-Segment(s)") of no less than
fifteen (15) miles in length. In such event, PTI shall establish the applicable
Sub-Segment by delivering to Colonial a modification to a previously delivered
Designation Notice (a "Revised Designation Notice").
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<PAGE>
Receipt of same by Colonial shall authorize Colonial, upon completion of the
Perfection Process with respect to such Sub-Segment, to deliver to PTI a
"Sub-Segment Lease" for the applicable Sub-Segment that conforms to the Revised
Designation Notice.
(d) The books and records of Colonial shall be prima facie evidence of
the location and legal description of any applicable portion of the Colonial
Rights-of-Way or Related Facility in any dispute between Colonial and PTI
relating to this Agreement.
1.3 Term. The initial term of this Agreement shall be for a period of
thirty (30) years from and after the date hereof (the "Initial Term"). Provided
that PTI is not in default hereunder, PTI shall have the right to renew the
Initial Term for one (1) ten (10) year period (the "Renewal Term"), by giving
written notice to Colonial of the exercise of such right not later than twelve
(12) months prior to the expiration of the Initial Term and by paying to
Colonial, upon the termination of the Initial Term, the renewal payment
described in Article II hereof. PTI's use of its rights hereunder during the
Renewal Term shall be on the same terms and conditions as provided in this
Agreement. Whenever the word "Term" is used in this Agreement, it shall be
deemed to mean the Initial Term together with, if applicable, the Renewal Term.
1.4 Reversion to Colonial.
(a) In the event that, as of the fifth (5th) anniversary of the date
of this Agreement (the "Reversion Date"), PTI has not installed its
Telecommunications Network with respect to at least 2,200 miles of Colonial
Rights-of-Way throughout the Colonial System, then PTI shall have the right to
issue a Designation Notice, within ten (10) days after said Reversion Date,
designating additional Segments of the Colonial Rights-of-Way (and Related
Facilities) which, when added to the Segments for which Permits previously have
been granted to PTI, will equal 2,200 miles or less. In such event, upon the
execution and delivery of appropriate Segment Leases for such additional
designated portions of the Colonial Rights-of-Way and Related Facilities, then
PTI shall have the right to use such Segments and Related Facilities in
accordance with the terms of this Agreement.
(b) All other portions of the Colonial Rights-of-Way or Related
Facilities (i) in which PTI has not then installed its Telecommunications
Network; and (ii) that are not then the subject of Designation Notices as
described in Subsection 1.4(a) above will revert to Colonial as of the thirtieth
(30th) day after the Reversion Date. If any such reversion occurs, (aa) PTI will
have no further rights with respect to such portions of the Colonial
Rights-of-Way or Related Facilities (collectively, the "Undeployed Segments and
Stations") and (bb) the Undeployed Segments and Stations will no longer be
subject to the terms and conditions of this Agreement or the Fiber Optic Access
and Purchase Agreement. Additionally, at the end of the second (2nd) year after
the Reversion Date, any Segment of the Colonial Rights-of-Way or Related
Facilities that is the subject of Designation Notices as described in Subsection
1.4(a) above will be released from the exclusivity restrictions set forth in
Section 3 of the Fiber Optic Access and Purchase Agreement from and after such
date unless (x) PTI has then installed its Telecommunications Network within
such Segment, or (y) PTI is then proceeding with such installation process in
good faith and with diligent efforts. Upon the release of any such
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Segments or Related Facilities from said exclusivity restrictions as described
in the immediately preceding sentence, PTI shall continue to have the right to
install its Telecommunications Network within the applicable Segments and/or at
such Related Facilities; provided that PTI's rights under this Agreement with
respect to such Segments or Related Facilities then shall be subject to the
rights of other parties, if any, claiming by, through or under Colonial;
provided, however, that although Colonial acknowledges that it shall not grant
"exclusive rights" to any such other parties, PTI acknowledges that there are
space limitations within the Colonial Rights-of-Way and that any granting by
Colonial of rights to other parties for the last remaining available space
within a Segment or portion thereof shall not constitute the granting of
"exclusive rights" for the purposes hereof.
1.5 Use. PTI acknowledges and agrees that the property to be leased to PTI
hereunder may be used only for the purpose of installing, constructing, using,
operating, maintaining, repairing and replacing a fiber optic telecommunications
network consisting of not more than ten (10) telecommunications conduits (the
"Conduit(s)") within a given Segment (together with appurtenant and necessarily
related Regen Facilities and other telecommunications machinery and equipment
(collectively, the "Telecommunications Network")), the exact number and location
of Conduits to be located within a given Segment to be determined in accordance
with the terms and conditions of Subsection 1.2(b) and Article III hereof.
ARTICLE II
CONSIDERATION; RENEWAL PAYMENT; OTHER FEES AND EXPENSES
2.1 Consideration. The parties hereto acknowledge that, pursuant to that
certain Contribution Agreement, by and between Colonial and PTI, dated as of
November 2, 1999, Colonial and PTI have agreed that, in consideration of
Colonial's permission to allow PTI to use designated portions of the Colonial
Rights-of-Way as described herein for the Initial Term, Colonial has received,
simultaneously with the execution of this Agreement ONE MILLION SIX HUNDRED
EIGHTY FOUR THOUSAND ONE HUNDRED FIFTEEN (1,684,115) shares of Series D
convertible preferred stock of PTI (collectively, the "PTI Stock").
2.2 Renewal Payment.
(a) In the event that PTI exercises its right to extend the Term of
this Agreement for the Renewal Term, PTI shall pay to Colonial, on or before the
expiration of the Initial Term, a renewal payment equal to the then-current
"fair market value" of the Leasehold Interests to be granted herein (the
"Renewal Payment").
(b) Within the thirty (30) day period commencing upon Colonial's
receipt of PTI's written notice of renewal as described in Section 1.3 above,
Colonial and PTI shall negotiate in good faith in order to determine a mutually
satisfactory amount for the Renewal Payment. If Colonial and PTI fail to agree
upon the amount of such Renewal Payment within such thirty (30) day period, then
the renewal payment will be determined by the following third party independent
appraisal procedure:
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(i) The parties shall attempt to agree upon a single appraiser;
however, if the parties are unable to agree upon an appraiser within
fifteen (15) days after the expiration of the thirty (30) day negotiation
period described in the first sentence of this Subsection 2.2(b), then each
party shall appoint an appraiser within five (5) days after the expiration
of the initial fifteen (15) day period. Upon the appointment of the two (2)
appraisers, said appraisers, within five (5) Business Days after the
appointment of the second appraiser, and before exchanging views as to the
question at issue, shall appoint in writing a third appraiser and give
written notice of such appointment to the parties. If any appraiser shall
not be appointed or agreed upon within the time herein provided, then
either of the parties may apply to the United States District Court for the
Northern District of Georgia for such appointment. The appraisers shall
have thirty (30) days from the date of the appointment of the last
appraiser to provide a determination under this Section 2.2.
(ii) Any appraiser appointed hereunder shall be a member of the
MAI and shall have no less than five (5) years experience in the appraisal
of comparable assets or rights.
(iii) In the event any appraiser appointed as aforesaid
thereafter shall die or become unable or unwilling to act, such appraiser's
successor shall be appointed in the same manner provided in this Section
2.2 for the appointment of the appraiser so dying or becoming unable or
unwilling to act.
(iv) The question to be determined by the appraisers shall be:
"What is the then fair market value of the renewal of the rights leased
under the Segment Leases?"
(v) For the purposes of this Section 2.2, the term "fair market
value" shall mean the highest price for cash that the rights leased under
the Segment Leases would bring in a competitive and open market under all
conditions requisite to a fair transaction with the lessor and lessee each
acting prudently and knowledgeably, and subtracting therefrom the costs and
expenses of such a transaction, including, without limitation, commissions
and legal fees and assuming further that (aa) such price is not affected by
undue stimulus; (bb) lessor and lessee are typically motivated; (cc) both
parties are well-informed or well-advised and are each acting in what it
considers its own best interest; (dd) a reasonable time is allowed for
exposure on the open market; (ee) payment is made in cash or its
equivalent; and (ff) to the extent applicable, that the Telecommunications
Facilities to be installed and operated on the Colonial Rights-of-Way in
connection with such renewal already have been installed.
(vi) As applicable, the determination of (aa) the single
agreed-upon appraiser, or (bb) the concurring determination of any two of
the three appraisers shall be binding upon Colonial and PTI; provided that,
in the event no two of the appraisers shall render a concurring
determination, then the average of the two appraised values that are
closest in amount shall be binding upon Colonial and PTI.
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(vii) The fees and expenses of the appraiser(s) shall be divided
equally between the two parties to the transaction.
(viii) Wherever the determination of "fair market value" of the
rights licensed hereunder is at issue, the procedure established in this
Section 2.2 shall be binding upon Colonial and PTI and shall be a condition
precedent to the filing of any action at law or in equity by any party
hereto.
(c) PTI will not be entitled to any return or refund of all or any
portion of either the PTI Stock or any Renewal Payment in the event of any
termination of this Agreement "for cause" by Colonial or in the event that
PTI elects not to use or is prohibited from using any portion of the
Colonial Rights-of-Way or Related Facilities for the purposes described
herein, including, without limitation, any portions of the Colonial
Rights-of-Way that become Undeployed Segments and Stations pursuant to
Section 1.4 hereof.
2.3 Expenses.
(a) Except to the extent that Colonial is obligated for same pursuant
to the "Services Agreement" described in Section 3.3 hereof, PTI will be solely
responsible for all costs and expenses of any nature whatsoever in connection
with:
(i) all aspects of the Perfection Process (including, without
limitation, any payments to the fee owners, ground lessors or lessees of
applicable land (collectively, the "Landowners") or to contractors,
right-of-way agents and other brokers, agents, consultants or other third
parties (collectively, "Right-of-Way Agents") for the purposes of assisting
in such Perfection Process (all of the foregoing being collectively
referred to as the "Perfection Expenses");
(ii) the construction, installation, use, operation, maintenance,
repair, replacement and/or removal of the Telecommunications Network or any
portion thereof in accordance with the requirements of Articles III, IV and
IX hereof; and
(iii) any construction, grading or other work of any nature
whatsoever required by any state, county, municipal and/or tribal
governments, and/or the appropriate agencies, offices, departments, boards,
bureaus, authorities or commissions thereof with jurisdiction over the
matter in question (collectively, the "Governmental Authorities") in order
to allow the use of applicable portions of the Colonial Rights-of-Way
and/or Related Facilities for the deployment of the Telecommunications
Network;
(b) PTI acknowledges that, as of the date hereof, Colonial has not
completed the Perfection Process with respect to the Colonial Rights-of-Way, but
has substantially completed the Perfection Process with respect to certain
segments of the Colonial Rights-of-Way described on Exhibit D attached hereto
and made a part hereof (collectively, the "Currently Perfected Segments"). Upon
the issuance of a Designation Notice by PTI with respect to a Currently
Perfected Segment, PTI will reimburse Colonial for all actual and reasonable
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Perfection Expenses for such Currently Perfected Segments, such reimbursement to
be made within thirty (30) days of receipt of an invoice from Colonial, and to
be calculated in accordance with the methods and procedures described in the
Services Agreement.
2.4 Payments. All rentals, license fees, Renewal Payments, expenses and
other payments or reimbursements to be paid by PTI to Colonial hereunder shall
be payable in lawful money of the United States of America. All payments shall
be made by PTI to Colonial without notice or demand, deduction or offset at the
address provided in Section 17.1 hereof.
2.5 Default Interest. In the event that any payment or reimbursement is not
paid within ten (10) days after written notice of such nonpayment is given
pursuant to Section 12.1 hereof, then interest shall accrue on such unpaid
payment or reimbursement at the "Default Rate" described in Section 17.12 hereof
from the date such payment or reimbursement was due until finally paid.
ARTICLE III
INSTALLATION OF TELECOMMUNICATIONS NETWORK
3.1 Perfection; Pre-Installation Determinations.
(a) The parties hereto agree that PTI shall be obligated to complete
the Perfection Process for the right to install the Telecommunications Network
and the Colonial Conduit within any discrete portion of a Segment before
commencing any "PTI Work" (as defined in Section 3.2 hereof) within such
portion, unless PTI receives Colonial's express written permission not to do so,
which permission will be based, among other matters, upon PTI's agreement to
indemnify Colonial for any liabilities described in Subsection 11.1(c) hereof.
PTI will use good faith efforts to obtain Perfection Rights in a manner that
provides authority generally to install and operate telecommunications
facilities along the Colonial Rights-of-Way, such good faith efforts to be as
follows: Prior to and during the Perfection Process, Colonial and PTI will work
together to create and modify Perfection Process methodologies that balance (i)
Colonial's interest in maximizing "broad form" perfection and (ii) PTI's
interest in controlling perfection costs and minimizing delays. If it is
determined that there is an incremental cost difference between (aa) broad form
perfection and (bb) the minimum Perfection Rights that are necessary in order to
install PTI's Telecommunications Network and the Colonial Conduit along the
applicable property, then Colonial shall have the option of paying such
difference.
(b) Within thirty (30) days after PTI's designation of a Segment or
Related Facility pursuant to Section 1.2 hereof, Colonial, at its own cost and
expense, (along with any other potential contractor that PTI may consider for
such work) shall prepare a proposal for completion of the Perfection Process,
route engineering that may be necessary prior to the installation of the
Telecommunications Network ("Route Engineering Work") and the performance of
construction management services in connection with installation of the
Telecommunications Network ("Construction Management Work"; the Perfection
Process, Route Engineering Work and Construction Management Work sometimes
collectively referred to as "Perfection and Construction Management Work").
Colonial acknowledges that PTI shall
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have no obligation to select Colonial for the performance of such Perfection and
Construction Management Work; provided, however, that in the event Colonial is
not selected to perform such Perfection and Construction Management Work,
Colonial nevertheless shall have the right to approve the contractor that will
perform such Perfection and Construction Management Work (the "Perfection and
Construction Management Contractor") in accordance with the provisions of
Subsection 3.2(f) hereof. Colonial also shall have the right to review,
supervise and approve, jointly with PTI, the performance of all such Perfection
and Construction Management Work and to receive periodic progress reports from
the Perfection and Construction Management Contractor (if not Colonial) during
the course of performance of the Perfection and Construction Management Work.
(c) PTI shall notify Colonial in writing upon completion of the
Perfection Process as to a Segment of the Colonial Rights-of-Way or a discrete
portion of such Segment. Within thirty (30) days after receipt of such notice,
Colonial shall notify PTI in writing (the "Colonial Engineering Notice") of:
(i) the exact location in which PTI may install the Conduits
within such Segment of the Colonial Rights-of-Way or the applicable portion
thereof (such location to be, whenever possible, running along a centerline
located not less than five (5) feet from an outer right-of-way boundary of
the Segment in question, but no closer than ten (10) feet from the closest
pipeline within the Segment in question); and
(ii) any special conditions regarding any construction,
installation, use or operation that must be conducted within such Segment
or the applicable portion thereof or Related Facility and not otherwise
generally described herein (including, without limitation, the timing
deadlines for the completion of the applicable work on any given
Landowner's property) that are necessary, in Colonial's reasonable
determination, to prevent or limit material interference with the use,
operation and maintenance of Colonial's Pipeline in the applicable portion
of the Colonial Rights-of-Way, to prevent any compromising of the safety of
the Colonial Pipeline and/or, in the case of construction schedules, to
maintain good relations with Landowners on the Colonial Rights-of-Way.
Colonial will attempt to develop general guidelines for such determinations to
the extent reasonably feasible in order to provide PTI with appropriate
flexibility so long as development is consistent with such guidelines. If PTI's
concerns cannot be resolved without re-routing or obtaining additional
Perfection Rights, the cost of same shall be borne by PTI.
(d) If PTI objects to any of the determinations made by Colonial pursuant
to Subsection 3.1(c) above or to the determination of the exact number of
Conduits to be allowed, as described in the second sentence of Subsection 1.2(b)
above, then, upon PTI's written request to Colonial within fifteen (15) days
after receipt of the Colonial Engineering Notice (or other notice provided
pursuant to Subsection 1.2(b), as applicable), representatives of each party's
appropriate departments will meet to discuss the concerns of both parties and
possible resolutions. If the parties are not able to resolve the dispute within
ten (10) days after the first
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meeting, then either party may elect to escalate the issue to the senior vice
president level and/or any comparable executive-level officer of each party for
good faith discussions to resolve the matter. It is the intent of such
discussions to find a resolution that protects the safety and integrity of the
Colonial System, while minimizing to the extent reasonably possible the harm to
PTI that may result from a limitation on the permitted number of Conduits to be
developed or other restrictions imposed by Colonial. If, after such discussions,
the parties are unable to reach agreement, then the decision of Colonial's
applicable executive-level officer shall be final as to the matter in question.
(e) As referenced in Subsection 1.2(b), Permits shall be prepared and
executed upon completion of the Perfection Process and the other
pre-installation determinations described in Subsections 3.1(b)-(d) above. Among
other matters, said Permits shall have the effect of modifying the applicable
Segment Leases by limiting the areas leased to PTI within the Colonial
Rights-of-Way to the areas specifically described in the Permits.
(f) In circumstances in which PTI elects not to install its facilities
within a portion of the Colonial Rights-of-Way and instead installs its
facilities on land that is adjacent to or within five (5) miles of such portion
(the "Rerouted Portion"), PTI agrees (i) to comply with the Perfection Process
and other requirements of this Section 3.1 with respect to all parcels of land
which are within the Rerouted Portion and which are not owned by, or subject to
leases, easements or other right-of-way grants in favor of, utilities or
government authorities (including, without limitation, railroad, power
companies, pipeline companies, and federal, state or local governments or
agencies) and (ii) to provide contemporaneous written notice to Colonial of such
reroute, identifying the Rerouted Portion in reasonable detail.
3.2 Requirements for Installation of the Telecommunications Network and the
PTI Work. All work to be performed by or on behalf of PTI in connection with the
development, construction, installation, operation, maintenance and repair of
PTI's Telecommunications Network within any applicable Segments of Colonial
Rights-of-Way or at any Related Facility (collectively, "PTI Work") shall be
subject in all events to the following terms and conditions, the satisfaction of
which shall be at the sole cost and expense of PTI:
(a) The plans and specifications for all PTI Work and any
modifications thereto must be approved in advance by Colonial and no PTI
Work may commence until receipt of such approval, which approval will not
be unreasonably withheld. PTI shall deliver to Colonial, for its approval,
complete detailed engineering and design plans and specifications for the
performance of the PTI Work on the applicable Segment or at the applicable
Related Facility, including, without limitation, all construction methods
and staging areas to be used in connection with the same. Colonial shall
approve, or propose modifications, within thirty (30) days of its receipt
of such plans and specifications or revised plans and specifications, as
applicable. In the event of any dispute between Colonial and PTI regarding
such approval, the matter shall be referred to the Head Engineer of each of
PTI and Colonial for resolution.
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(b) All PTI Work shall be performed in a good and workmanlike manner,
free and clear of all mechanics' and materialmen's liens and encumbrances
related thereto and in accordance with all applicable present and future
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
concessions, franchises and similar items of or from all applicable
Governmental Authorities with jurisdiction over the applicable portions of
the Colonial Rights-of-Way and/or the Related Facilities and the use and
operation thereof (including, without limitation, any rules or regulations
issued by the Department of Transportation or the Occupational Safety and
Health Administration, and all applicable judicial, administrative and
regulatory decrees, judgments and orders relating thereto (collectively,
"Applicable Laws").
(c) All PTI Work shall be performed in accordance with the general
construction requirements and specifications for work within the Colonial
Rights-of-Way or at the applicable Related Facility attached hereto as
Exhibit E and made a part hereof (the "Colonial Construction Standards").
(d) All PTI Work with respect to the initial development, construction
and installation of any portion of the Telecommunications Network within
any applicable Segments of Colonial Rights-of-Way or at any Related
Facilities must be performed in accordance with all general or special
conditions or requirements noted on the applicable Permits.
(e) All PTI Work shall be performed in accordance with all standards
or requirements, whether now or hereafter in force, issued by (i) any
insurer or insurance carrier, board of fire underwriters or any other
company, bureau, organization or entity performing the same or similar
functions applicable to the Telecommunications Network, the Colonial
Pipeline and/or the Related Facilities (collectively, the "Insurance
Requirements"); and (ii) the American Society of Mechanical Engineers, the
American Petroleum Institute, the National Electrical Safety Code, and the
National Association of Corrosion Engineers (collectively, the "Trade
Standards").
(f) All contractors, materialmen, mechanics and any other parties who
may perform work in, on or about the Colonial Rights-of-Way or at the
applicable Related Facilities for the benefit of the Telecommunications
Network pursuant to agreements with PTI (collectively, "Telecommunications
Network Contractors") (i) must be approved in advance by Colonial; (ii)
must submit for review and approval by Colonial satisfactory evidence of
contractor's liability and worker's compensation insurance; and (iii) must
acknowledge receipt and review of the Colonial Construction Standards and
the potential liability arising out of any breach of the integrity of the
adjacent Colonial Pipeline. Colonial and PTI will establish a list of
pre-approved contractors and suppliers, and a mechanism to provide for
approval by Colonial of parties performing work on the Colonial
Rights-of-Way or at the applicable Related Facility in a manner that does
not materially delay or interfere with work to be performed on the Colonial
Rights-of-Way or at the applicable Related Facility.
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(g) During all phases of the construction and installation of any
portion of the Telecommunications Network within any applicable Segments of
Colonial Rights-of-Way or at the applicable Related Facility, Colonial
shall assign one or more inspectors to work with each PTI construction crew
in order to provide construction inspection services with respect to such
PTI Work. PTI shall reimburse Colonial for the costs of such inspections
within thirty (30) days of receipt of an invoice from Colonial, such
reimbursement payment to be calculated in accordance with the methods and
procedures described in the Services Agreement. In connection with such
inspections, PTI will make available to Colonial and its inspectors, upon
Colonial's reasonable request, the PTI personnel and all Telecommunications
Network contractors and other agents working for or on behalf of PTI in the
performance of the PTI Work.
(h) All PTI Work must be done in such a manner as will not interfere
with in any way whatsoever the use, maintenance, operation, repair and
replacement of the adjacent Colonial Pipeline.
(i) PTI shall provide monthly engineering progress reports and weekly
construction progress reports advising Colonial of the status and progress
of all PTI Work and any issues of concern arising therefrom.
(j) PTI shall perform a complete locations survey of the applicable
Segment or Related Facility in question, including the staking and marking
of the existing Colonial Pipeline and the route of the Telecommunications
Network and any applicable Regen Facilities that are a part hereof) in
accordance with the Colonial Construction Standards and standard
telecommunications industry practices.
(k) PTI shall prepare field alignment maps showing the route along the
Segment in question as well as the property ownership, terrain description,
materials and other pertinent information.
(l) PTI shall prepare railroad, highway, waterway or wetlands crossing
permit drawings sufficient for approval by the applicable Governmental
Authorities or railroads and obtain any and all other permits necessary for
such crossings.
(m) All PTI Work shall be performed at such a standard of care that
equals the Colonial Construction Standards or that which is normal and
customary in the telecommunications industry, whichever standard is higher.
(n) In the event that PTI fails to comply with Colonial safety or
operational regulations, and such failure interferes or is likely to
interfere with Colonial's operations, Colonial may require that PTI
immediately suspend all affected operations on the applicable Segment.
Promptly after such suspension, and if such suspension materially and
adversely affects PTI's Telecommunications network, within two (2) hours
after such suspension, Colonial and PTI each will make available by
telephone a representative of upper management, as designated on the
escalation list agreed to by the parties, to discuss
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prompt resolution of the situation. If the parties are unable to resolve
the issue by telephone, then Colonial and PTI will escalate the issue to
the next higher individual on the escalation list for a face to face
meeting at a mutually agreeable location within twenty-four (24) hours of
the suspension. The parties thereafter will negotiate in good faith to
resolve the issue and prevent the occurrence of similar situations in the
future.
3.3 Services Agreement with Colonial. Notwithstanding the other provisions
of this Article III or of Subsection 1.2(b) or Section 4.1 below, the parties
hereto acknowledge that Colonial shall not be obligated to execute and deliver
to PTI any Segment Lease hereunder prior to the execution by Colonial and PTI of
that certain Master Services Agreement (the "Services Agreement"). Such Services
Agreement shall set forth, among other matters, the designation by Colonial of
specified employees to work within PTI's organization, Perfection Process
methodologies, the scope of work for Colonial's performance, if any, of any
Perfection and Construction Management Work and inspections with respect to the
Colonial Rights-of-Way and Related Facilities (or portions thereof) to be
deployed by PTI hereunder and the compensation to be paid to Colonial for such
services; however, PTI shall continue to have sole responsibility for all PTI
Work hereunder for any applicable Segment to the extent that Colonial has not
expressly assumed such responsibility within such Segment pursuant to the terms
of the Services Agreement.
3.4 Completion of PTI Work. Upon the completion of any PTI Work within a
designated Segment or Related Facility, PTI shall do the following:
(a) Perform an as-built survey of the Segment or Related Facility in
question and cause any applicable system maps and drawings of Colonial for
such particular Segment or Related Facility to be revised and updated as
appropriate so that each of PTI and Colonial have at least one full set of
revised and updated maps and drawings.
(b) Deliver to Colonial complete technical specifications for the
Telecommunications Network, including all Regen Facilities and any other
machinery or equipment placed within the Colonial Rights-of-Way or at a
Related Facility, as the case may be.
(c) Deliver to Colonial equipment manuals for the proper use,
operation, maintenance and repair of any portion of the Telecommunications
Network, including all Regen Facilities and any other machinery or
equipment that is to be or may be maintained by Colonial.
(d) Deliver to Colonial a certificate from PTI's general
contractor(s), certifying that all PTI Work within the applicable Segment
or Related Facility has been completed in accordance with the plans and
specifications previously approved by Colonial, that all such PTI Work has
been paid for, that all Telecommunications Network Contractors have been
paid and that no party has any lien rights or claims of lien with respect
to any portion of the completed PTI Work for such Segment or Related
Facility.
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(e) Obtain any certificates, permits, licenses or approvals required
to be obtained by any applicable Governmental Authorities under any
Applicable Laws or Trade Standards upon completion of the PTI Work in
question including, without limitation, such of the foregoing as may be
required for the operation of the Telecommunications Network.
3.5 Unauthorized Work. In the event that PTI performs any PTI Work along
any portion of the Colonial Rights-of-Way or at a Related Facility without
obtaining Colonial's approval therefor or completing the Perfection Process with
respect to the applicable Segment, or if Colonial determines that any such PTI
Work or portion thereof is prohibited by applicable Governmental Authorities or
Applicable Laws, then Colonial may require PTI to remove the PTI Work (including
any Conduits, Regen Facilities or other improvements installed therein)
immediately and to restore the subject property to its original condition, wear
and tear and casualty excepted, provided that Colonial will not require such
removal for so long as PTI is in good faith contesting or otherwise attempting
to resolve such prohibitions. In the event that PTI fails to do so, then
Colonial may perform such removal and restoration at PTI's sole cost and
expense, without any liability to Colonial.
ARTICLE IV
OPERATION, MAINTENANCE AND REPAIR
4.1 PTI Operation, Maintenance and Repair. Upon completion of any
applicable portion of the Telecommunications Network, and during the Term hereof
PTI shall be responsible, at its sole expense, for all costs and expenses of the
operation of the Telecommunications Network (except only as expressly described
in the Fiber Optic Access and Purchase Agreement), and all ordinary and
extraordinary maintenance and repair (including, without limitation, the
performance of continual monitoring and routine or special inspections) of all
aspects of the Telecommunications Network (including, without limitation, any
fibers, conduits, Regen Facilities or junctions, line amplifiers and other
equipment and machinery that are a part thereof) (collectively, the "PTI
Operation and Maintenance Services"), all pursuant to and in accordance with the
provisions of Section 3.2 and in compliance with the plans and specifications
for the Telecommunications Network approved by Colonial as provided in Section
3.2. PTI shall have no responsibility for, or authorization to perform
maintenance or repairs on any portion of the Colonial Pipeline or any other
Colonial equipment or machinery located along the Colonial Rights-of-Way or at
the Related Facilities.
4.2 Warranties. In the event any maintenance or repairs to the
Telecommunications Network are required as a result of any breach of any
warranty made by any of PTI's manufacturers, contractors or vendors, PTI shall
pursue any remedies it may have against such manufacturers, contractors or
vendors, and PTI shall reimburse Colonial for any expenses that Colonial has
incurred as a result of any such breach of warranty.
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4.3 Subcontractors. PTI may subcontract its obligations under this Article
IV; however, in any such event, PTI shall require the subcontractors to meet
operations, maintenance and repair standards for the Telecommunications Network
that are at least as high as those standards set forth in Section 3.2 of this
Agreement. The use of any such subcontractor shall not relieve PTI of any of its
obligations hereunder.
4.4 Colonial Inspections . In addition to the matters described in the
Services Agreement, after installation of the Telecommunications Network within
any Segment, Colonial shall have the right, but not the obligation, to inspect
all or any portion of the PTI Work, including, without limitation, the
Telecommunications Network, as Colonial may deem appropriate, such additional
inspections to be performed at Colonial's expense. Notwithstanding the
foregoing, in the event that Colonial considers special, non-periodic
inspections of the PTI Work to be reasonably necessary because of perceived
interference with or threats to the use and operation of the adjacent Colonial
Pipeline and/or the safety and integrity of such Colonial Pipeline, PTI will pay
Colonial for the cost of such special inspections in accordance with the
provisions of the Services Agreement.
ARTICLE V
PIPELINE MAINTENANCE AND REPAIR
5.1 Pipeline Maintenance and Repair. Colonial will perform, at its sole
expense, all emergency, routine and necessary maintenance, replacements and
repair on the Colonial Pipeline and other Colonial equipment located along the
Colonial Rights-of-Way and at the Related Facilities, excluding, however, any
portion of the Telecommunications Network located at any Related Facility.
ARTICLE VI
INSURANCE
6.1 Acquisition of Insurance Policies. During the entire Term, Colonial and
PTI shall procure and maintain the insurance described in this Article VI (or
its then available equivalent). Policy limits shall be reviewed annually and may
be adjusted if prudent, considering levels of inflation, risk of loss, premium
expenses and other relevant factors.
6.2 Types of Required Insurance for PTI. PTI shall procure and maintain
the following:
(a) commercial general public liability insurance covering loss or
damage resulting from accidents or occurrences on, about or arising out of
or in connection with the Telecommunications Network (or the attempted
installation thereof) and/or the Segments that may be leased to PTI
hereunder, with personal injury, death and property damage combined single
limit liability of not less than One Million Dollars ($1,000,000.00)] for
each accident or occurrence and in the aggregate. Coverage under
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such policies shall be broad form and shall include, but shall not be
limited to, operations, contractual, owner's and contractor's protective,
products and completed operations, environmental pollution, and the use of
all owned, non-owned and hired vehicles;
(b) umbrella liability insurance in an amount not less than
Thirty-Five Million Dollars ($35,000,000.00);
(c) "all risk" or "special" physical damage insurance covering all
risks of physical loss or damage to all portions of the Telecommunications
Network installed by or on behalf of PTI, with liability limits of not less
than one hundred percent (100%) of the then full replacement cost of all
such property;
(d) contractor's liability and builder's risk insurance during
performance of all PTI Work and during any subsequent maintenance, repair,
modification, or replacement thereof;
(e) worker's compensation and employer's liability insurance as
required by Applicable Laws; and
(f) such other insurance in amounts from time to time reasonably
required by Colonial against other insurable risks if, at the time, such
coverage is available at commercially reasonable rates and is commonly
obtained with respect to similar improvements or systems.
6.3 Types of Required Insurance for Colonial. Colonial shall procure and
maintain the following:
(a) commercial general public liability insurance covering loss or
damage resulting from accidents or occurrences on or about or arising out
of or in connection with the Colonial Pipeline and/or the portions of the
Colonial Rights-of-Way not leased to PTI hereunder with personal injury,
death and property damage combined single limit liability of not less than
One Million Dollars ($1,000,000.00) for each occurrence and in the
aggregate. Coverage under such policies shall be broad form and shall
include, but shall not be limited to, operations, contractual, owner's and
contractor's protective, products and completed operations, environmental
pollution, and the use of all owned, non-owned and hired vehicles;
(b) umbrella liability insurance in an amount not less than
Thirty-Five Million Dollars ($35,000,000.00); and
(c) worker's compensation and employer's liability insurance as
required by Applicable Laws.
6.4 Terms of Insurance. The policies required under Sections 6.2 and 6.3
shall name Colonial or PTI, as applicable, as additional insured(s). Each party
shall provide to the other
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party certificates of insurance and copies of policies obtained by the insuring
party hereunder promptly upon the request of the other party. All policies of
insurance obtained by a party pursuant to Sections 6.2 or 6.3, as applicable,
also:
(a) shall be written by responsible insurance companies reasonably
acceptable to the other party having a Best's rating of "A-VIII" or better;
(b) shall be written as primary policies with respect to losses
arising out of the acts or omissions of the named insured not contributing
with and not in excess of any coverage that the other party may carry;
(c) shall contain an endorsement providing that the amount of coverage
will not be reduced with respect to any party except after thirty (30)
days' prior written notice from the insurance company to the other party
and such coverage may not be cancelled with respect to any party
(including, without limitation, for non-payment of premium) except after
thirty (30) days' prior written notice from the insurance company to the
other party;
(d) shall contain, if obtainable, a statement that the insurance shall
not be invalidated should any insured waive in writing prior to a loss any
or all right of recovery against any party for loss accruing to the
property described in the insurance policy; and
(e) shall contain, if obtainable, a provision that no act or omission
of the party procuring such insurance shall affect or limit the obligation
of the insurance carrier to pay the amount of any loss sustained.
6.5 Failure to Maintain Insurance. If either party at any time during the
Term fails to procure or maintain any insurance required hereunder or to pay the
premiums therefor, the other party shall have the right to procure the same on
behalf of the defaulting party and to pay any and all premiums thereon. In such
event, any amounts paid by such other party in connection with the acquisition
of such insurance shall be immediately due and payable by the defaulting party
and interest on the amount so paid shall accrue at the Default Rate.
6.6 Blanket Policies; Self-Insurance.
(a) Any insurance required to be carried pursuant to this Article VI
may be carried under a "blanket" policy or policies covering other liabilities
and locations of Colonial or PTI, as applicable; provided, however, that such
policy or policies: (i) shall apply to the property required to be insured by
this Article VI and in an amount not less than the amount of insurance required
to be carried by Colonial or PTI with respect thereto; and (ii) shall provide
that no payment of insurance proceeds under any such policy with respect to any
location other than the Telecommunications Network (with respect to PTI) or
other than the Colonial Rights-of-Way and/or Related Facilities (with respect to
Colonial), shall reduce the amount of insurance available with respect to the
Telecommunications Network or to the Colonial Rights-of-Way
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and/or Related Facilities, as applicable, to an amount below the limits of
liability required to be maintained herein.
(b) The insurance requirements described in this Article VI may be
satisfied with respect to the initial One Million Dollars ($1,000,000.00) of
liability by any plan of self-insurance from time to time maintained by Colonial
or PTI on condition that: (i) the party so self-insuring has and maintains an
aggregate net worth of One Million Dollars ($1,000,000.00) or more; and (ii) any
party so self-insuring shall furnish to the other party, upon request, evidence
of the adequacy of its net worth. The annual report of such party that is
audited by an independent certified public accountant shall be sufficient
evidence of its net worth. If either Colonial or PTI elects to self-insure
pursuant to the provisions set forth herein, or thereafter elects to terminate
such self-insurance program, it shall give at least ten (10) days' prior written
notice thereof to the other party.
ARTICLE VII
INTENTIONALLY OMITTED
ARTICLE VIII
CONDEMNATION
8.1 Material Taking. If (a) all or any portion of a Segment (or a Related
Facility, as applicable) shall be acquired for any public or quasi-public use
through taking by condemnation, eminent domain or any similar proceeding, or
purchase in lieu thereof (each, a "Taking"); and (b) PTI and Colonial reasonably
determine, as applicable, that (i) the Segment or portion thereof cannot, at
reasonable cost, continue to be operated for both the existing Pipeline and the
operation of the Telecommunications Network, or (ii) the Related Facility or
portion thereof cannot, at reasonable cost, continue to be operated for both the
existing Colonial Related Facility and the operation of PTI's Regen Facilities
thereon (in either such case, a "Material Taking"), then any Permits or Segment
Leases applicable to the portion of the Colonial Rights-of-Way or Related
Facility so taken shall cease and terminate as of the date the condemning
authority takes title or possession, whichever first occurs and only to the
extent that such Permits or Segment Leases apply to the property so taken.
8.2 Continuation of Agreement. If there is a Taking that is not a Material
Taking and this Agreement is not partially terminated as provided in Section
8.1, this Agreement shall remain in full force and effect and any award(s)
received thereby shall be apportioned pursuant to Section 8.3 hereof.
8.3 Apportionment of Award(s) .
(a) If there is a Taking, whether a Material Taking or otherwise,
Colonial and PTI shall be entitled to receive and retain such separate awards
and portions of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings, or as may be otherwise agreed, taking
into consideration the nature of the respective interests of Colonial and PTI in
the subject property, as subject to this Agreement.
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(b) If the condemning authority does not make separate awards and the
parties are unable to agree as to amounts that are to be allocated to the
respective interests of Colonial and PTI, the award shall be allocated as
follows: (i) first, if the Taking is not a Material Taking and Colonial and/or
PTI elect(s) to restore the property and improvements so taken, then to such
party(ies) in the amount(s) equal to the costs and expenses incurred by Colonial
and/or PTI in performing any such restoration; (ii) second, to Colonial and PTI
in proportional amounts reflecting the respective unamortized cost of any
portion of the Colonial Pipeline, Related Facilities and/or Telecommunications
Network so taken; and (iii) the balance, if any, shall be distributed in
proportion to the amounts of the award allocated to Colonial and PTI pursuant to
clause (ii) above.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PTI
9.1 PTI's Representations, Warranties and Covenants. PTI represents,
warrants and covenants that:
(a) PTI is a corporation existing and in good standing under the laws
of the State of Delaware,
(b) PTI has the power and authority to enter into this Agreement and
to consummate the transactions provided for herein. This Agreement and all of
the documents executed and delivered by PTI constitute the legal, valid, binding
and enforceable obligations of PTI and there are no claims or defenses, personal
or otherwise, or offsets whatsoever to the enforceability or validity of this
Agreement.
(c) The execution, delivery and performance by PTI of its obligations
under this Agreement will not conflict with or result in a breach of any
Applicable Law by which PTI is bound or by any of the provisions of any contract
to which PTI is a party or by which PTI is bound, or PTI's articles of
incorporation or by-laws. There is no action, suit, proceeding or investigation
pending or, to PTI's knowledge, threatened, before any agency, court or other
Governmental Authority that relates to PTI, this Agreement or the installation
of the Telecommunications Network contemplated herein that would materially
interfere with PTI's ability to perform its rights and obligations hereunder.
(d) PTI has not made a general assignment for the benefit of
creditors, filed any voluntary petition of bankruptcy or suffered the filing of
an involuntary petition by its creditors, suffered the appointment of a receiver
to take possession of substantially all of its assets, suffered the attachment
or other judicial seizure of substantially all of its assets, admitted its
inability to pay its debts as they come due, or made an offer of settlement,
extension or compromise to its creditors generally.
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(e) PTI warrants and covenants that the installation, use and
operation of the Telecommunications Network (and any related maintenance, repair
or replacement thereof) shall comply with all Applicable Laws.
(f) PTI shall obtain (and cause to remain effective for the Term of
this Agreement) all rights, licenses, authorizations, permits, consents and
other agreements or approvals required by Governmental Authorities
(collectively, the "Required Permits") necessary for the installation, use and
operation of the Telecommunications Network (including, without limitation, all
Conduits, Regen Facilities, cables, fibers or other physical plant facilities or
machinery or equipment related thereto). Colonial shall have the right to review
and approve all documents evidencing or reflecting the Required Permits.
(g) PTI will comply with all requirements, conditions and stipulations
set forth in any of the Required Permits and in any easements, licenses or other
agreements evidencing the rights of Colonial in and to the Colonial
Rights-of-Way that have been disclosed to PTI.
(h) PTI shall notify promptly Colonial of any matters pertaining to
any damage or threatened damage to or loss of any portion of the
Telecommunications Network, the Colonial Pipeline or any Related Facilities of
which it becomes aware.
(i) PTI shall respect Colonial's right to use the Colonial Pipeline
and the Related Facilities. PTI shall not use the Telecommunications Network in
a manner that interferes in any way with or adversely affects the Colonial
Pipeline or any Related Facility, and PTI shall take all reasonable precautions
against, and shall assume liability for, subject to the terms herein, any damage
to the Colonial Pipeline or any Related Facility caused by PTI or any of PTI's
employees, officers, directors, contractors, agents, licensees and/or
concessionaires, as applicable (collectively, the "PTI Parties").
(j) PTI agrees to cooperate with and support Colonial in connection
with the compliance with any government requirements issued by any Governmental
Authority applicable to the Telecommunications Network.
(k) PTI shall pay when due all charges for public or private utility
services to or for any portion of the Telecommunications Network during the
Term, including, without limitation, all charges for electricity, water, sewer,
storm water drainage, gas, telephone and/or garbage collection.
(l) PTI shall pay when due the following, as they arise during the
Term (collectively, the "Impositions"): (i) all real property taxes,
assessments, fees or payments in lieu thereof due with respect to the
Telecommunications Network, or any portion thereof, or any personal property or
intangibles located in or used in connection with the Telecommunications
Network; (ii) any and all sales, use, income, gross receipts or other taxes
assessed on the basis of revenues received or accrued by PTI arising out of its
use of the Telecommunications Network; and (iii) all other taxes, assessments,
excises, levies, license fees, permit fees, franchise fees,
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inspection fees and similar charges assessed, levied, or imposed on any
occupancy, use or possession of the Telecommunications Network, including those
based upon the physical location of the Telecommunications Network and/or the
construction thereof in, on or along any public road, highways, waterways or
rights-of-way, or any part thereof. Notwithstanding the foregoing, PTI shall
have no responsibility for (x) any tax based in whole or in part on Colonial's
income from this Agreement or the Fiber Optic Access and Purchase Agreement; (y)
any taxes that are the responsibility of Colonial pursuant to Subsection 7(g) of
the Fiber Optic Access and Purchase Agreement; or (z) any other real property
taxes or assessments with respect to the Colonial Rights-of-Way other than those
set out in clause (i) of this Subsection 9.1(l) above. PTI shall have the right
to make a claim, and Colonial shall cooperate reasonably with PTI, for refund,
rebate, reduction or abatement of any such Impositions.
ARTICLE X
REPRESENTATIONS, WARRANTIES AND COVENANTS OF COLONIAL
10.1 Colonial's Representations, Warranties and Covenants. Colonial
represents, warrants and covenants that:
(a) Colonial is a corporation existing and in good standing under the
laws of the State of Delaware,
(b) Colonial has the power and authority to enter into this Agreement
and to consummate the transactions provided for herein. This Agreement and all
of the documents executed and delivered by Colonial constitute the legal, valid,
binding and enforceable obligations of Colonial and there are no claims or
defenses, personal or otherwise, or offsets whatsoever to the enforceability or
validity of this Agreement.
(c) The execution, delivery and performance by Colonial of its
obligations under this Agreement will not conflict with or result in a breach of
any Applicable Law by which Colonial is bound or by any of the provisions of any
contract to which Colonial is a party or by which Colonial is bound, or
Colonial's articles of incorporation or by-laws. There is no action, suit,
proceeding or investigation pending or, to Colonial's knowledge, threatened,
before any agency, court or other Governmental Authority that relates to
Colonial, this Agreement, the Colonial Pipeline or any Related Facility.
(d) Colonial has not made a general assignment for the benefit of
creditors, filed any voluntary petition of bankruptcy or suffered the filing of
an involuntary petition by its creditors, suffered the appointment of a receiver
to take possession of substantially all of its assets, suffered the attachment
or other judicial seizure of substantially all of its assets, admitted its
inability to pay its debts as they come due, or made an offer of settlement,
extension or compromise to its creditors generally.
(e) Colonial shall promptly notify PTI of any matters pertaining to
any damage or threatened damage to or loss of any part of the Telecommunications
Network of which Colonial becomes aware.
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(f) Colonial shall respect PTI's right to use the Telecommunications
Network. Colonial shall take all reasonable precautions against, and shall
assume liability for, subject to the terms herein, any damage to the
Telecommunications Network caused by Colonial or any of Colonial's employees,
officers, directors, contractors, agents, licensees and/or concessionaires, as
applicable (collectively, the "Colonial Parties").
(g) Colonial agrees to cooperate with and support PTI in connection
with the compliance with any government requirements issued by any Governmental
Authority and applicable to the Telecommunications Network.
(h) Except as expressly stated in Subsections 10.1(a)-(g) above,
Colonial makes no warranty to PTI or any other person or entity, whether
express, implied or statutory, as to the description, quality, merchantability,
completeness or fitness for any purpose of the Colonial Rights-of-Way
(including, without limitation, for the purposes for which PTI may use the
Colonial Rights-of-Way hereunder), or as to any other matter, all of which
warranties are hereby excluded and disclaimed.
ARTICLE XI
INDEMNIFICATION; LIMITATION OF LIABILITY
11.1 Indemnification by PTI. PTI hereby indemnifies and holds harmless
Colonial, the Colonial Parties and Colonial's affiliates and shareholders and
their respective employees, officers, directors, contractors, agents, licensees
and concessionaires (collectively, the "Colonial Indemnified Parties") from and
against any liability, loss, damage, claim or cause of action of any kind or
nature (including damage to property and injury to or death of persons) whether
actual or alleged, or payments to any person in compromise of settlement
thereof, whether or not liability has been shown or can be known, and any costs
or expenses in connection therewith (including, without limitation, reasonable
court costs, costs of litigation and attorneys' fees and expenses incurred in
enforcing same) arising out of or in connection with PTI's use of the leasehold
rights granted herein (but only to the extent such claims do not arise from the
negligence, gross negligence or willful misconduct of a Colonial Indemnified
Party), including, without limitation:
(a) third party claims, or any death or personal injury to, or loss or
damage to any property of, a Colonial Indemnified Party, to the extent any
of the foregoing is caused in whole or in part by the presence of the
Telecommunications Network on any portion of the Colonial Rights-of-Way or
at any Related Facility or the performance of any PTI Work or PTI Operation
and Maintenance Services by PTI or any PTI Parties on or along the Colonial
Rights-of-Way or at any Related Facility;
(b) penalties, fines or forfeitures imposed by any Governmental
Authority arising out of any failure or refusal by any PTI Party to comply
with Applicable Laws applicable to the installation, operation, use,
maintenance or repair of the
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Telecommunications Network (including, without limitation, any inadvertent
effect the same may have on the Colonial Pipeline or any Related Facility);
and
(c) any other liability arising out of or resulting from the acts or
omissions, negligent or otherwise, of any PTI Party or in connection with a
breach by PTI of any of its obligations under this Agreement, including,
without limitation, liabilities arising out of PTI's failure to obtain
easement, license, lease or other Perfection Rights from any Landowner so
as to allow PTI to install, operate and maintain the Telecommunications
Network through designated Segments of the Colonial Rights-of-Way, it being
acknowledged, however, that nothing in this Subsection 11.1(c) shall limit
or restrict in any manner the obligations and restrictions contained in
Subsection 3.1(a) hereof.
11.2 Indemnification by Colonial. Colonial hereby indemnifies and holds
harmless PTI, the PTI Parties and PTI's affiliates and shareholders and their
respective employees, officers, directors, contractors, agents, licensees and
concessionaires (collectively, the "PTI Indemnified Parties") from and against
any liability, loss, damage, claim or cause of action of any kind or nature
(including damage to property and injury to or death of persons) whether actual
or alleged, or payments to any person in compromise of settlement thereof,
whether or not liability has been shown or can be known, and any costs or
expenses in connection therewith (including, without limitation, reasonable
court costs, costs of litigation and attorneys' fees and expenses incurred in
enforcing same) arising out of or in connection with Colonial's operation of the
Colonial Pipeline and the Related Facilities (but only to the extent such claims
do not arise from the negligence, gross negligence or willful misconduct of a
PTI Indemnified Party, including, without limitation:
(a) third party claims, or any death or personal injury to, or loss or
damage to any property of, a PTI Indemnified Party, to the extent any of
the foregoing is caused in whole or in part by the presence of the Colonial
Pipeline or the Related Facilities;
(b) penalties, fines or forfeitures imposed by any Governmental
Authority arising out of any failure or refusal by any PTI Party to comply
with Applicable Laws applicable to the installation, operation, use,
maintenance or repair of the Colonial Pipeline or any Related Facility
(including, without limitation, any inadvertent effect the same may have on
the Telecommunications Network; and
(c) any other liability arising out of or resulting from the acts or
omissions, negligent or otherwise, of any Colonial Party or in connection
with a breach by Colonial of any of its obligations under this Agreement.
11.3 Limitation of Liability. In no event will Colonial be liable to PTI
for any interruption of or interference with the Telecommunications Network
arising out of any cause whatsoever, except to the extent caused by Colonial's
gross negligence or willful misconduct.
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11.4 No Consequential or Special Damages. Neither party hereto will be
liable to the other for any incidental, punitive, indirect, consequential or
special damages suffered by the other, including lost profits, lost savings or
loss of use.
11.5 Legal Proceedings. If any action, suit or proceeding is brought
against a party to which any indemnity is described in Sections 11.1 or 11.2,
the indemnifying party, upon the request of the indemnified party, and at the
indemnifying party's expense, shall resist and defend such action, suit or
proceeding, or cause the same to be resisted and defended by counsel designated
by the indemnifying party and approved by the indemnified party. The obligations
of the indemnifying party under this Section 11.5 relating to any matter subject
to indemnification under this Agreement that occurs, arises, or accrues during
the Term shall survive the expiration or earlier termination of this Agreement.
The indemnified party, at its sole expense, also shall be entitled to appear,
defend or otherwise take part in the matter involved, at its election, by
separate counsel of its own choosing. The indemnifying party will not settle any
claim without the prior written approval of the indemnified party, which
approval shall not be unreasonably withheld or delayed. The indemnified party
will be entitled to settle any claim on terms it deems appropriate. The parties
will treat any settlement of any claim and the terms of the settlement as
confidential information.
ARTICLE XII
DEFAULT
12.1 Event of Default by PTI. Subject to the other provisions of this
Article XII, the occurrence of any of the following shall constitute an "Event
of Default" by PTI hereunder:
(a) Failure by PTI to make any payment owed to Colonial hereunder
within ten (10) days after written notice thereof is given to PTI by
Colonial;
(b) Failure by PTI to maintain any of the insurance coverage required
hereunder, or to pay any of the premiums to be paid with respect thereto,
and such failure continues for a period of fifteen (15) days after written
notice thereof is given to PTI by Colonial;
(c) PTI breaches or fails to perform, comply with or observe any other
term, covenant, warranty, condition, agreement or undertaking contained in
or arising under this Agreement other than those referred to in Subsections
12.1(a) and (b) above, and such occurrence or failure continues for a
period of thirty (30) days after written notice thereof is given by
Colonial to PTI; provided, however, that if such default is a non-monetary
default and is not susceptible of being cured within said thirty (30) day
period, then no Event of Default shall occur hereunder if PTI commences
commercially reasonable efforts to cure such default within such thirty
(30) day period and diligently pursues the same to completion within a
reasonable time thereafter, not to exceed a total of one hundred fifty
(150) days;
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(d) The subjection of any right or interest of PTI under this
Agreement to attachment, execution or other levy, or to seizure under legal
process, if not released within sixty (60) days;
(e) PTI shall make an assignment for the benefit of creditors, file a
petition in bankruptcy, petition or apply to any tribunal for the
appointment of a custodian, receiver or any trustee for it or a substantial
part of its assets, or commence any proceedings under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or if there shall have been filed against PTI any such petition or
application, or any such proceeding shall have been commenced against it,
in which an order for relief is entered or which remains undismissed for a
period of ninety (90) days of more; or PTI, by any act or omission,
indicates its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee for it or any substantial part of any of
its properties, or suffers any such custodianship, receivership or
trusteeship to continue undischarged for a period of ninety (90) days or
more; or
(f) PTI generally is unable to pay its debts as such debts become
due.
12.2 Effect of Arbitration. Notwithstanding the provisions of Section 12.1
hereof, if the Event of Default or the asserted default giving rise to same is
subject to arbitration pursuant hereto, and the existence of such Event of
Default or asserted default is being contested by the party assertedly in
default, then, if and so long as such party is cooperating and acting in good
faith to complete the arbitration proceeding with respect thereto as
expeditiously as possible, the time for curing such asserted default shall
commence upon the rendering of the arbitration decision with respect thereto, or
other resolution thereof, whichever occurs first.
12.3 Remedies of Colonial.
(a) In addition to all of the rights and remedies available to
Colonial by law or equity (other than termination of this Agreement which shall
be available as a remedy for an Event of Default only as provided in this
Section 12.3), at any time after the occurrence of any Event of Default on the
part of PTI:
(i) in the event that such Event of Default is a recurring and/or
flagrant breach of this Agreement and materially and adversely affects the
safety or operation of the Colonial Pipeline, Colonial shall have the right
to terminate this Agreement immediately upon written notice to PTI; and
(ii) in the event that such Event of Default is not of the type
and nature described in clause (i) of this Subsection 12.3(a), but
constitutes a material breach of a material covenant of PTI under this
Agreement, Colonial shall have the right, upon written notice to PTI, to
suspend immediately all then pending and future installation, construction
and/or deployment of the Telecommunications Network on or about any
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Segment or applicable portion thereof with respect to which the Event of
Default has occurred until such time as the applicable Event of Default is
cured or PTI demonstrates to Colonial's reasonable satisfaction that PTI
has taken such steps and/or implemented such procedures so that the
particular Event of Default in question will not recur.
(b) In the event of any failure on the part of PTI to pay any sum of
money, or to do any act or to satisfy any of the obligations or covenants that
it is required to pay, do or perform under the provisions of this Agreement,
Colonial, at its option, after notice to PTI, may pay any or all of such sums,
or perform any or all of such acts, obligations or covenants or incur any other
expense whatsoever in order to remedy such failure on the part of PTI. In such
event, PTI shall reimburse Colonial for all costs and expenses of any nature
whatsoever incurred by Colonial in connection therewith, together with interest
at the Default Rate provided in Section 17.12 hereof, such interest to be
calculated from and after the date payment is made by Colonial or the expense is
incurred.
12.4 Effect of Termination. At the expiration of the Term or any earlier
termination of this Agreement, whether pursuant to this Article XII or
otherwise, all rights and privileges of PTI and all duties and obligations of
Colonial hereunder shall terminate. Within one hundred eighty (180) days
thereafter, PTI shall remove all above-ground facilities of the
Telecommunications Network and only such underground facilities that Colonial
reasonably requests be removed so as to avoid future interference with Colonial
pipeline operations; provided, however, that PTI may remove fiber optic cables
from within any Conduits (but not the actual Conduits) if such removal of fiber
optic cables may be performed without the use of heavy machinery in and about
the Colonial Rights-of-Way and without the need to dig or excavate within any
portion of the Colonial Rights-of-Way. Any facilities not removed within the
foregoing time period shall become the sole property of Colonial, free and clear
of any and all claims of PTI, without the payment of compensation or
consideration of any kind to PTI. Immediately upon such termination of the
Agreement, and without further notice to any other party, Colonial shall have
the right to assert, perfect, establish or confirm all rights reverting to
Colonial by reason of such termination by any means permitted by law. Subject
only to the rights and obligations of PTI to remove certain facilities as
described in the second sentence of this Section 12,4, and the continuing rights
of any bona fide third party purchasers or assignees who have complied with the
provisions of Subsections 15.1(c) or (d) hereof, as applicable, such rights
shall include, without limitation, the right to take possession of the property
leased to PTI hereunder, together with all improvements thereto, fixtures
therein and any other alterations or improvements that may have been made to the
property leased hereunder (including, without limitation, the Telecommunications
Network), with or without process of law, and to remove, at the option of
Colonial, any such items from the property licensed to PTI hereby, thereby
wholly terminating any right, title, interest or claim of or through PTI as to
such property. If Colonial exercises any such rights, it shall not incur any
liability to PTI for any damage caused or sustained by reason of such entry or
removal, except for damage resulting from Colonial's gross negligence or willful
misconduct in effecting such removal.
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12.5 Event of Default by Colonial.
(a) Subject to the other provisions of this Article XII, it shall be
an Event of Default by Colonial hereunder if Colonial shall be in breach of, or
Colonial shall fail to perform, comply with or observe any term, covenant,
warranty, condition, agreement or undertaking contained in or arising under this
Agreement and such failure continues for a period of thirty (30) days after
written notice thereof is given by PTI to Colonial; provided, however, if such
default is a non-monetary default and is not susceptible of being cured within
thirty (30) days, no Event of Default shall have occurred hereunder by Colonial
if it commences commercially reasonable efforts to cure such default within such
thirty (30) day period and diligently pursues the same to completion within a
reasonable time thereafter, not to exceed a total of one hundred fifty (150)
days.
(b) At any time after the occurrence of an Event of Default on the
part of Colonial, PTI may exercise any and all rights or remedies available to
PTI at law or in equity, subject only to any limitations expressly set forth in
this Agreement.
12.6 No Waivers. No failure by any party hereto to insist upon the strict
performance of any provisions of this Agreement or to exercise any right, power
or remedy consequent to any breach thereof, and no waiver of any such breach,
during the continuance thereof, shall constitute a waiver of any such breach or
of any such provision or otherwise be deemed to affect or alter this Agreement.
In any such event, this Agreement shall continue in full force and effect, and
the rights of any party hereto with respect to any other then-existing breach or
subsequent breach shall remain unaffected thereby.
12.7 No Remedy Exclusive. Except as expressly provided in this Article 12,
no remedy herein conferred or reserved to Colonial or PTI is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative, and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by
statute. The exercise of any right or remedy should not be construed as an
election of remedies and shall not preclude the right to exercise any other
right or remedy. No delay or failure to exercise any right or power accruing
upon any default or Event of Default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In order to
entitle Colonial or PTI to exercise any remedy reserved to Colonial or PTI in
this Article XII, it shall not be necessary to give any notice, other than such
notice as is herein expressly required by this Agreement.
12.8 Force Majeure. Neither party shall be in default under this Agreement
with respect to any delay in such party's performance, and all time periods
shall be deemed suspended, to the extent resulting from any of the following
conditions: act of God, fire, flood, material shortage or unavailability, lack
of transportation, compliance with Applicable Laws, war or civil disorder, or
any other cause beyond the reasonable control of such party, provided that the
party claiming relief under this Section 12.8 shall notify the other party
promptly in writing of the existence of the event upon which such relief is
claimed and further as to the cessation or
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termination of said event. The party claiming relief under this Section 12.8
shall exercise reasonable efforts to minimize the time for any such delay.
12.9 No Personal Liability. Each action or claim against any party arising
under or relating to this Agreement shall be made only against such party as a
corporation, and any liability relating thereto shall be enforceable only
against the corporate assets of such party. No party shall seek to pierce the
corporate veil or otherwise seek to impose any liability relating to, or arising
from, this Agreement against any shareholder, employee, officer or director of
the other party. Each of such persons is an intended beneficiary of the mutual
promises set forth in this Article XII and shall be entitled to enforce the
obligations of this Article XII.
ARTICLE XIII
VOLUNTARY REMOVAL OF TELECOMMUNICATIONS NETWORK
13.1 Removal of Telecommunications Network by PTI. Provided that an Event
of Default by PTI is not continuing to be in effect at such time, PTI may remove
any portion of the Telecommunications Network from any Segment (except for the
Colonial Conduit and any Regen Facility or other Related Facility that PTI has
made available for use by Colonial in connection with the Colonial Conduit, all
of which must remain in place and intact in all events) (it being acknowledged
herein that PTI has no obligation hereunder to provide any such Regen Facility
or Related Facility for Colonial's use), provided that as to underground
facilities, PTI will provide Colonial with written notice of its intention so to
remove, given (a) at least thirty (30) days prior to the date of such removal,
and (b) not less than one (1) year prior to the expiration of the Term. Such
notice also will state whether PTI intends to replace the underground portion of
the Telecommunications Network so removed. Upon the occurrence of an Event of
Default, PTI's rights of removal hereunder shall be suspended until such time as
such Event of Default has been cured.
ARTICLE XIV
ARBITRATION
14.1 Arbitration. In the event any dispute or disagreement arising between
Colonial and PTI in connection with this Agreement or the Fiber Optic Access and
Purchase Agreement is not settled to the mutual satisfaction of Colonial and PTI
within thirty (30) days from the date that either party informs the other in
writing that such dispute or disagreement exists, then either party may demand
arbitration by notifying the other party in writing (a "Notice of Arbitration")
in accordance with the notice provisions of Section 17.1. The Notice of
Arbitration shall describe the reasons for such demand, the amount involved, if
any, and the particular remedy sought.
14.2 Selection of Arbitrators. The parties shall attempt to agree upon a
single arbitrator; however, if the parties are unable to agree upon a single
arbitrator within fifteen (15) days after the Notice of Arbitration, then each
party shall select an arbitrator within five (5) Business Days of the expiration
of the initial fifteen (15) day period. Upon the appointment of the two
arbitrators, and before exchanging views as to the question at issue, said two
arbitrators
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so selected shall appoint in writing a third arbitrator within ten (10) days of
the selection of both of the first two arbitrators and shall give written notice
of such appointment to the parties. If the two arbitrators fail to appoint a
third arbitrator in a timely manner, then either party may apply to the United
States District Court for the Northern District of Georgia for the appointment
of such third arbitrator.
14.3 Qualified Arbitrator. Any arbitrator selected in accordance with
Section 14.2 shall be a natural person not employed by either of the parties or
any parent or affiliated partnership, corporation or other enterprise thereof
and shall be knowledgeable and experienced in the matters sought to be
arbitrated. In the event that the matter to be arbitrated deals with
construction or engineering issues, the arbitrator so appointed shall be
experienced and knowledgeable in the construction and engineering industry as it
relates to the nature of the structure to which such arbitration applies. In the
event any arbitrator selected as aforesaid thereafter shall die or become unable
or unwilling to act, such arbitrator's successor shall be selected in the same
manner provided in Section 14.2.
14.4 Arbitration Hearing; Discovery; Venue. The arbitration hearing shall
commence within thirty (30) calendar days of appointment of the single or third
arbitrator, as applicable, as described in Section 14.2. There shall be no
dispositive motion practice (such as motions for summary judgment or to dismiss
or the like) except as may be permitted by the arbitrators. All arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association, except that discovery shall be permitted in accordance with the
Federal Rules of Civil Procedure. Venue of any arbitration hearing pursuant to
this Article XIV shall be in the metropolitan Atlanta, Georgia area. Each party
shall bear the cost of preparing and executing its own case.
14.5 Decision. The arbitrators' decision shall be made in no event later
than thirty (30) calendar days after the conclusion of the arbitration hearing
described in Section 14.4. The award shall be final and binding upon the parties
and shall include written findings of law and fact, and judgment may be entered
thereon by either party in any court having competent jurisdiction thereof. The
arbitrators may award specific performance of this Agreement. The arbitrators
may also require remedial measures as part of any award. The cost of the
arbitration, including the fees and expenses of the arbitrator(s), shall be
shared equally by the parties hereto unless the award otherwise provides.
14.6 Non-Binding in Certain Events. Notwithstanding any provision to the
contrary in this Article XIV, the obligation herein to arbitrate shall not be
binding upon any party with respect to requests for preliminary injunctions,
temporary restraining orders or other procedures in a court of competent
jurisdiction to obtain interim relief when deemed necessary by such court to
preserve the status quo or to prevent irreparable injury pending resolution by
arbitration of the actual dispute.
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ARTICLE XV
ASSIGNMENT
15.1 Assignment by PTI.
(a) Except as expressly provided in this Section 15.1 below, PTI shall
not assign or otherwise transfer this Agreement or its rights, covenants,
liabilities or obligations hereunder, in whole or in part, to any other party
without the prior written consent of Colonial. Nothing herein shall prohibit PTI
from involving strategic or co-development partners or customers in connection
with its performance hereunder, on such terms as PTI may determine in its sole
discretion, provided (i) all such activities are conducted in accordance with
the terms of this Agreement; (ii) PTI shall not be released from, and shall
remain fully liable to Colonial for all of its covenants, liabilities and
obligations hereunder and the acts or omissions of all parties claiming by,
through or under PTI; (iii) PTI remains the sole point of contact with Colonial;
and (iv) all activities of parties claiming by, through or under PTI on Colonial
Rights-of-Way are conducted under PTI's supervision.
(b) PTI shall have the right, without Colonial's consent, to assign or
otherwise transfer this Agreement (i) to any entity that, indirectly or
directly, is controlled by, controls or is under common control with PTI, or to
any entity into which PTI may be merged or consolidated or which purchases all
or substantially all of the assets of PTI; or (ii) as collateral in connection
with any financings by any lender; provided, however, that (x) any such
assignment or transfer described in this Subsection 15.1(b) shall be subject and
subordinate in all respects to this Agreement and to Colonial's rights as the
owner of the Colonial Rights-of-Way; (y) any such assignee or transferee
described in clause (i) above shall continue to perform PTI's obligations to
Colonial under the terms and conditions of this Agreement; and (z) any lender
described in clause (ii) above shall have the right to assume all (but not part)
of PTI's rights and obligations under this Agreement. In the event of any
permitted partial assignment of any rights hereunder or in any portion of the
Telecommunications Network, PTI shall remain the sole point of contact with
Colonial.
15.2 Assignment by Colonial. Colonial shall have the right to assign,
license or otherwise transfer this Agreement and/or its rights or obligations
hereunder as it pertains to a particular Segment (or discrete portion thereof)
of the Colonial Rights-of-Way, in connection with a sale or other transfer of
Colonial's rights within such Segment (or discrete portion thereof), to any
third party; provided, however, that any such assignment or transfer shall be
made subject to the terms and conditions of this Agreement and any such assignee
or transferee shall continue to perform Colonial's obligations to PTI under the
terms and conditions of this Agreement. Colonial also shall have the right,
without PTI's consent, to assign or otherwise transfer this Agreement and/or its
rights or obligations hereunder: (i) to any entity that, indirectly or directly,
is controlled by, controls or is under common control with Colonial, or to any
entity into which Colonial may be merged or consolidated or which purchases all
or substantially all of the assets of Colonial; or (ii) as collateral in
connection with any financings by any lender.
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15.3 Binding Upon Successors and Assigns. This Agreement and each of the
parties' respective rights and obligations under this Agreement, shall be
binding upon and shall inure to the benefit of the parties hereto and each of
their respective permitted successors and assigns.
ARTICLE XVI
CONFIDENTIALITY
16.1 Confidentiality. If either party provides confidential information to
the other in writing and it is identified as such, the receiving party shall
protect the confidential information from disclosure to third parties with the
same degree of care accorded its own confidential and proprietary information.
Neither party shall be required to hold confidential any information that (a)
becomes publicly available other than through the recipient; (b) is required to
be disclosed by a Governmental Authority or Applicable Law; provided, however,
that the information disclosed is limited to the existence and general nature of
the relationship between the parties, including, as required, the scope,
approximate revenues, purposes and expectations related to such relationship and
a description of any disputes relating thereto; (c) is independently developed
by the disclosing party; or (d) becomes available to the disclosing party
without restriction from a third party. These obligations shall survive any
expiration or termination of this Agreement.
ARTICLE XVII
MISCELLANEOUS
17.1 Notices. All notices, demands, requests, or other writings delivered
pursuant to this Agreement shall be in writing and may be given personally or
may be delivered by depositing the same in the United States mail, certified,
registered or equivalent, return receipt requested, postage prepaid, properly
addressed, and sent to the following addresses:
If to Colonial: Colonial Pipeline Company
945 E. Paces Ferry Rd., N.E.
Atlanta, GA 30326-0855
Attention: General Counsel
Fax: 404-841-2315
with a copy to: Arnall Golden & Gregory, LLP
1201 West Peachtree Street, Suite 2800
Atlanta, Georgia 30309-2450
Attention: Donald I. Hackney, Jr., Esquire
Fax: 404-873-8639
If to PTI: Pathnet Telecommunications, Inc.
1661 Gateway Boulevard
Richardson, Texas 75080
Attention: Senior Vice President, Engineering
Fax: 972-231-9728
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with a copy to: Pathnet Telecommunications, Inc.
11720 Sunrise Valley Drive
Reston, Virginia 20191
Attention: General Counsel
Fax: 703-390-2800
or to such other address as either party may from time to time designate by
written notice to the other party. Notices given by mail as aforesaid shall be
deemed received and effective as of the first Business Day following such
dispatch; provided, however, that if any such notice or other communication also
shall be sent by telecopy or fax machine, such notice shall be deemed given at
the time and on the date of machine transmittal if the sending party receives a
written send verification on its machines and forwards a copy thereof with its
mailed or courier delivered notice or communication.
17.2 No Partnership. Nothing contained herein or in any instrument relating
hereto shall be construed as creating a partnership or joint venture between
Colonial and PTI or between Colonial and any other party, or cause Colonial to
be responsible in any way for the debts or obligations of PTI or any other
party.
17.3 Time of the Essence. Time is hereby expressly declared to be of the
essence of this Agreement and of each and every term, covenant, agreement,
condition and provision hereof.
17.4 Entire Agreement. Except for the Services Agreement and the Fiber
Optic Access and Purchase Agreement, this Agreement constitutes the entire and
final agreement and understanding between the parties with respect to the
subject matter hereof and supersedes all prior agreements relating to the
subject matter hereof, which are of no further force or effect. The Exhibits
referred to herein are integral parts hereof and are hereby made a part of this
Agreement.
17.5 Captions. The captions of this Agreement and the table of contents
preceding this Agreement are for convenience and reference only, and are not a
part of this Agreement, and in no way amplify, define, limit or describe the
scope or intent of this Agreement, nor in any way affect this Agreement.
17.6 Meaning of Terms. Words of any gender in this Agreement shall be held
to include any other gender and words in the singular number shall be held to
include the plural when the sense requires.
17.7 Agreement Construed as a Whole. The language throughout this Agreement
shall be construed as a whole according to its fair meaning and neither strictly
for nor against Colonial or PTI.
17.8 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to
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which it is invalid or unenforceable, shall not be affected thereby, and each
provision of this Agreement shall be valid and shall be enforced to the fullest
extent permitted by law.
17.9 Survival. Each provision of this Agreement that may require the
payment of money by, to or on behalf of Colonial or PTI or third parties after
the expiration of the Term hereof or its earlier termination shall survive such
expiration or earlier termination.
17.10 Amendment. This Agreement may be modified or amended only in writing,
signed by a duly authorized officer of both Colonial and PTI.
17.11 Attorneys' Fees. In any proceeding or controversy associated with or
arising out of this Agreement or a claimed or actual breach thereof, or in any
proceeding to recover the possession of the property leased hereunder, the
prevailing party shall be entitled to recover from the other party as a part of
the prevailing party's costs, reasonable attorney's fees, the amount of which
may be fixed by the court and may be made a part of any judgment rendered. For
the purposes of this Agreement, the term "reasonable attorneys' fees" shall mean
legal fees actually incurred by a party at the normal and customary hourly rates
of attorneys experienced in the area of law in dispute and shall not be based
upon a percentage of any amount of any judgment, notwithstanding any statutory
or other presumption to the contrary.
17.12 Interest. Except as otherwise specifically provided herein, any
amounts due from one party to the other pursuant to the terms of this Agreement,
including amounts to be reimbursed one to the other, shall bear interest from
the due date or the date the right to reimbursement accrues at (a) the rate
published or publicly announced most recently prior to such date as the lowest
rate charged by Citibank, N.A., or its successor, for commercial, short-term
unsecured loans, plus (b) two percent (2%) (such sum being referred to herein as
the "Default Rate"); provided, however, that such Default Rate shall not exceed,
in any event, the highest rate of interest which may be charged under Applicable
Law without the creation of liability for penalties or rights of offset or
creation of defenses. For purposes of interest calculations unless otherwise
provided herein, the due date of any amount or the date from which a right to
reimbursement accrues shall be deemed to be the date from which interest
accrues.
17.13 Governing Law. This Agreement shall be construed according to and
governed by the laws of the State of Georgia.
17.14 Business Days. For the purposes of this Agreement, a "Business Day"
shall mean a day on which banks are required to open for the conduct of banking
business at their principal offices under the laws of the State of Georgia. If
this Agreement provides for the performance of any obligation or the expiration
of any time period on or no later than a day that is not a Business Day, then
the applicable day of performance or expiration of the time period shall be
extended until the next succeeding Business Day.
17.15. Reference Date of Agreement. For reference purposes, the date of
this Agreement shall be the date on the first page hereof, irrespective of the
date Colonial or PTI actually executes this Agreement.
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17.16 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, and all such counterparts
together shall constitute one and the same agreement.
17.17 Exhibits. The Exhibits to this Agreement are:
EXHIBIT DESCRIPTION
------- -----------
Exhibit A System Map
Exhibit B Form of Segment Lease
Exhibit C Form of Right-of-Way Permit
Exhibit D Currently Perfected Segments
Exhibit E General Colonial Construction Standards
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IN WITNESS WHEREOF, Colonial and PTI have executed this Agreement as of the
day and year first above written.
COLONIAL:
COLONIAL PIPELINE COMPANY,
a Delaware corporation
By:/s/ D.L. Lemmon
----------------------------------
Name: D.L. Lemmon
----------------------------
Its: President and Chief Executive
Officer
----------------------------
[CORPORATE SEAL]
PTI:
PATHNET TELECOMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Richard Jalkut
----------------------------------
Name: Richard Jalkut
----------------------------
Its: CEO
----------------------------
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EXHIBIT A
SYSTEM MAP
(Map of Colonial System)
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<PAGE>
EXHIBIT B
FORM OF SEGMENT LEASE
- - - ------------------------------------------------------------------------------
SEGMENT LEASE
THIS SEGMENT LEASE (the "Segment Lease"), made this ____ day of
____________, ____, between COLONIAL PIPELINE COMPANY ("Lessor") and PATHNET
TELECOMMUNICATIONS, INC. ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee heretofore have entered into that certain
Master Right-of-Way Lease Agreement (the "Master Lease Agreement"), dated as of
March 30, 2000;
WHEREAS, pursuant to the Master Lease Agreement, Lessee has executed
and delivered to Lessor a "Designation Notice", conforming in form and substance
to the requirements of said Master Lease Agreement;
WHEREAS, said Designation Notice describes a "Segment" of the "Colonial
Rights-of-Way", which Segment is more particularly described on Exhibit A
attached hereto and incorporated herein; and
WHEREAS, Lessor and Lessee desire to enter into this Segment Lease
Agreement, in accordance with the terms of the Master Lease Agreement, in order
to evidence the leasing of the Segment to Lessee, subject to all of the terms
and conditions hereof and in the Master Lease Agreement.
NOW, THEREFORE, for and in consideration of the covenants contained
herein, the sum of Ten and No/100 Dollars ($10.00), and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lessor and Lessee hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined herein
shall have the same meaning as ascribed to such terms in the Master Lease
Agreement.
2. Subject to Section 4 hereof, Lessor hereby leases to Lessee the
Segment on the terms and conditions contained herein and in the Master Lease
Agreement.
3. The term of this Segment Lease shall commence on the date hereof
and, if not otherwise terminated in accordance herewith or in accordance with
the Master Lease Agreement, shall terminate at the expiration of the "Term".
<PAGE>
4. The parties hereto acknowledge that, after completion of the
"Perfection Process" with respect to the Segment, Lessor shall execute and
deliver to Lessee a "Permit" for the Segment, in substantially the form set
forth on Exhibit C to the Master Lease Agreement. Notwithstanding any other
provision herein to the contrary, the parties hereto further acknowledge and
agree that, upon the issuance of such Permit with respect to the Segment
described herein, this Segment Lease shall terminate automatically, without the
requirement of any additional action or documentation on the part of either
party, with respect to all portions of the Segment for which Lessee is not
granted specific rights to use under the terms of the applicable Permit.
5. The Master Lease Agreement shall govern and control the use of the
Segment and, upon the issuance of the Permit, the applicable portion of the
Segment described therein. Lessor and Lessee shall comply with all obligations
contained in the Master Lease Agreement that apply to the Segment or the
applicable portion thereof and Lessor and Lessee shall have all rights and
remedies contained in the Master Lease Agreement with respect thereto. Without
limiting in any way the foregoing, Lessee shall not have the right to commence
any "PTI Work" until compliance by Lessee with the applicable provisions of
Sections 3.1 and 3.2 of the Master Lease Agreement.
6. In the event of any inconsistency between any of the terms hereof
and any of the terms of the Master Lease Agreement, the applicable terms of the
Master Lease Agreement shall govern and control.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
this ___ day of _______________, _______________.
LESSOR:
COLONIAL PIPELINE COMPANY
By: __________________________________
Its: __________________________________
[CORPORATE SEAL]
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<PAGE>
LESSEE:
PATHNET TELECOMMUNICATIONS, INC.
By: __________________________________
Its: __________________________________
[CORPORATE SEAL]
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<PAGE>
EXHIBIT A TO FORM OF SEGMENT LEASE
Description of Segment
[to be agreed to by the Parties]
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<PAGE>
EXHIBIT C
FORM OF RIGHT-OF-WAY PERMIT
LEGAL DESCRIPTION OF RIGHT-OF-WAY
Colonial right-of-way of ________________ (INSERT ACCURATE LEGAL DESCRIPTION)
referenced in Segment Lease dated __________ (the "Segment Lease"). Beginning
approximately at Colonial Location No. ___________ and ending approximately at
Colonial Location No. ___________ for a total distance of approximately ______
miles and as further described on attached as-built survey drawings provided by
PTI.
SPECIAL CONDITIONS ON USE OF RIGHT-OF-WAY
Notwithstanding the terms of the Segment Lease, PTI shall have the right to use
only such portions of the Segment that are the subject of the Segment Lease as
are specifically described hereinbelow. PTI telecommunication lines, cables,
conduits and other similar equipment and facilities shall be installed in
conformity with the plans mutually approved by the parties prior to
construction. In general, the specifications anticipate a minimum separation of
ten feet (10') between the telecommunications lines and the nearest Colonial
pipeline. Where the existing right-of-way provides more than fifteen feet (15')
between the Colonial right-of-way boundary and the nearest Colonial pipeline,
the telecommunication lines shall be built five feet (5') from the edge of the
Colonial right-of-way. Said routing is preliminarily depicted as shown on
attached construction drawings and as-built survey drawings provided by PTI. It
is understood that PTI will need as workspace a strip of land approximately ____
feet (____') in width in which to perform construction work and that, upon
completion of such work, PTI will restore the right-of-way in accordance with
the agreements between Colonial and the Landowners and in accordance with the
Colonial post-construction grassing specifications, but under no circumstances
shall restoration result in the condition of the subject land being less
favorable to the underlying Landowner than the condition existing prior to such
work. Depth of installation, which shall be at least thirty-six inches (36"),
and the determination as to the side of the Colonial right-of-way on which
installation shall occur must be addressed and PTI must give advance notice to
Colonial of the time and place of any construction. Colonial shall have the
right to observe and inspect all construction within any Colonial right-of-way.
All construction work shall be completed within _________ (____) days of the
date hereof and shall be performed lien free and upon completion of construction
PTI shall deliver a final affidavit and lien waivers from all contractors,
subcontractors and other persons performing work or supplying material or
equipment.
<PAGE>
ACKNOWLEDGMENT
Colonial and PTI acknowledge that they intend for this Permit to be incorporated
into the Master Right-of-Way Lease Agreement between the parties dated
March 30, 2000 and that this Permit hereby modifies the aforesaid Segment Lease
by limiting the description of the right-of-way leased thereby to the specific
property described herein. The effective date of this Permit is the last date on
which this Permit was signed by either party, as indicated below.
COLONIAL PIPELINE COMPANY, PATHNET TELECOMMUNICATIONS,
a Delaware corporation INC., a Delaware corporation
By: By:
------------------------- -------------------------
Its: Its:
------------------------ ------------------------
Date: Date:
----------------------- -----------------------
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EXHIBIT D
Currently Perfected Segments
Listed below are the segments of Colonial's right of way that have been
perfected(1) for telecommunications purposes:
1. Americus Delivery Facility to Bainbridge Deliver Facility (common name)
more particularily described as that segment of the Colonial System
referenced as Location Locations 0515:001 to 0515:098 in Sumter and
Dougherty Counties, Georgia, and Locations 0516:001 to 0516:114 in
Dougherty, Mitchell, Baker and Decatur County, Georgia.
2. Dorsey Junction to:
(a) South Baltimore Delivery Facility - Location 1007:001 to 1007:176;
Location 1008:001 to 1008:069; and Location 1010:070 to 1010:176,
Carroll, Howard, Anne Arundel and Baltimore Counties, Maryland;
(b) Curtis Bay Delivery Facility - Location 1007:001 to 1007:171, Carroll,
Howard and Anne Arundel Counties;
(c) Baltimore-Washington Airport Delivery Facility - Location 1008:001 to
1008:069 and Location 1012:001 to 1012:011, Carroll, Howard and
Anne Arundel Counties;
(d) Washington Delivery Facility - Location 1009:001 to 1009:026 and
Locations 1501:026A to 1501:163, Carroll, Howard, Montgomery and
Prince George's Counties, Maryland and in the District of Columbia;
and
(e) Finksburg Delivery Facility - Location 1009:001 to 1009:052, Howard
and Carroll Counties, Maryland.
3. Atlanta Junction to Chattanoogo Delivery Facility - l=Locations 504, 505,
506, 507 & 508. Project was halted 2 1/2 weeks after start of perfection
acquisition. During this 2 1/2 period, 21 easement perfections were
acquired (16 in Cobb County, Georgia - Location 504; and 5 in Pauling
County, Georgia - Location 505).
- - - -----------------
(1) The "perfected segments" in segment 1 above are substantially perfected. In
some cases, parcels were omitted because of unreasonable difficulties that
suggested alternate routing within road rights-of-way that were left unpermitted
until construction was scheduled. In segment 2, 140 out of 257 parcels contained
telecommunications provisions.
<PAGE>
EXHIBIT E
GENERAL COLONIAL CONSTRUCTION STANDARDS
A. GENERAL DESCRIPTION OF PROJECT - PROTECTION OF UNDERGROUND PIPELINES
FROM FIBER OPTICS INSTALLATION
This project consists of the protection of underground petroleum pipelines from
a third party's installation of fiber optics cables and related facilities
within the pipeline right of way. These specifications govern all such
installations regardless of their location, rural or urban, regardless of the
width of the right of way, the depth or size of the pipelines, or the size of
the proposed fiber optic conduits.
These specifications are designed to be made a part of any agreement between
Colonial and the fiber optic party encroaching on the pipeline right of way, its
construction contractor and any entity contracted to perform utility location or
inspection services for the benefit of either party (collectively, the
"Company").
B. THE PARTIES ARE CAUTIONED AS FOLLOWS
B.1. The underground pipeline which is the subject of the protective
measures described herein is a carrier of a hazardous and highly volatile liquid
under high pressure. Damage to the pipeline must be avoided in all circumstances
and at any cost. Personal injury and loss of life are not unlikely if fiber
optic construction equipment comes in contact with the pipeline. Serious damage
to property and the environment in the magnitude of the highest order are a
certainty if a leak results from damage to the pipeline. Damage to the pipelines
from such third party installation might result in an immediate rupture or are
likely to weaken the pipeline to the extent that a leak is inevitable. In either
event the resulting damage to the property and the environment is usually
catastrophic.
B.2. The Company, its contractors, agents and subcontractors shall
indemnify, defend and hold Colonial harmless for all injury to all persons or
property, loss and damage resulting from a leak caused directly or indirectly
from installation of the fiber optic facilities contemplated hereunder, and any
direct or indirect consequences therefrom, whether such injury to the pipeline
was caused by negligence, recklessness, or willful misconduct or by a failure to
protect the pipeline as described in these specifications.
B.3. The herein obligations of the Company shall continue for so long
as a pipeline remains within the right of way easement, and shall not be
extinguished upon the sale, assignment or removal of the fiber optic facilities,
and such obligations shall be binding upon up the successors and assigns of the
Company
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C. PRE-CONSTRUCTION REQUIREMENTS
C.1. Subsequent to Colonial providing data regarding its easements,
title, pipeline location and survey, the Company shall coordinate with
Colonial's Right of Way and Engineering departments throughout its title
confirmation, route survey and rights acquisition activities.
C.2. Upon completion of work in C.1, the Company shall prepare
alignment sheets, ownership and construction line lists, and work plans
necessary to prosecute the work described below.
C.3. Among other things, the line lists shall include landowner names,
tenants, special construction provisions, and Colonial shall preview all
instrument forms used to perfect the rights required to install the fiber optic
facilities.
C.4. Among other things, the alignment sheets shall include: the width
of Colonial's easement, the location of Colonial's pipelines, the proposed
location of the Company's facilities and the proposed construction work space
limits and distances of separation of same with pipelines and easement
boundaries.
C.5. Among other things, the work plans shall include a detailed list
of construction procedures, contractors and equipment. Colonial shall be given
the opportunity to preview the Company's proposed construction contracts,
provide comments and recommendations, whereupon the Company shall cooperate with
Colonial to remove all items denoted as "in conflict" with the safety of
Colonial's pipelines, as determined in Colonial's sole and absolute discretion.
Colonial shall inspect and approve all final installations, specifications and
route maps prior to commencing fiber optic installation within its right of way
easements.
C.7. Prior to commencement of construction activities, the Company
shall provide Colonial with a list of all successful bidders contracted to
perform any and all work in prosecution of its construction, as well as the
names of employees and personnel in supervisory positions assigned to such
activity.
C.8. Upon approval of the specifications, Colonial shall furnish a copy
of its detailed encroachment requirements for all phases of fiber optic line
co-location within Colonial's easements. These requirements shall include but
not be limited to: ditching; placement of backfill, replacement of backfill;
tamping and compaction; rock excavation; blasting; road, railroad or water
crossings by trenching, boring, jacking and/or directional drilling; soil
erosion and sedimentation control; equipment traffic paralleling and crossing
the pipeline(s), including requirements for earthen padding, when and how much
is needed; notification; inter-Company communication and landowner relations. A
guided boring head shall be used when boring, jacking or directional drilling is
performed.
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C.9. Colonial and the Company shall compare operating and maintenance
manuals, and revisions shall be made to include the presence of each other's
facilities and what measures shall be taken to protect the other's facilities,
including emergency response procedures and notification instructions.
C.10. All inspectors used to ensure that the installation is performed
to Colonial's standards as expressed herein shall be chosen and trained by
Colonial. Colonial shall provide the Company with a list of its inspection
personnel, and the Company shall submit any objections or suggestions about the
deployment of such personnel and their roles as described below.
D. COMPANY EQUIPMENT EMPLOYED TO INSTALL THE FIBER OPTIC FACILITIES
D.1. The Company shall list and describe all equipment and machinery
which shall be used to construct and install the fiber optic facilities.
D.2. Colonial shall be given the opportunity to review the impact of
the proposed equipment and machinery and amend these specifications to account
for any equipment not anticipated at the time of this Agreement.
D.3. The Company shall make its best efforts to comply with any
Colonial suggestions regarding the use of said equipment and suggested safety
procedures, and cooperate with Colonial to resolve any conflicts ensuing
therefrom.
E. LANDOWNER RELATIONS
E.1. The Company shall include the following landowner relations
activities in prosecution of its construction activities:
(a) Provide personnel to conduct courtesy notifications
to landowners of impending construction activities;
(b) Make arrangements to protect and contain livestock
and other landowner animals and pets;
(c) Take down fences and replace same, repairing any
damage resulting therefrom;
(d) Conduct post construction cleanup activities,
including the reseeding of the construction work
space area with ground cover and erosion control
devices;
(e) Settlement of all off right of way damages, and the
payment of all construction damages not paid in
advance of construction.
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F. SURVEYS AND MAPPING
F.1. The Company shall provide as-built survey personnel during
construction to document actual placement of all underground and above-ground
facilities.
F.2. Alignment sheets of the proposed routing shall be updated monthly
during construction and distributed to designated Colonial offices.
G. APPROVAL OF INSPECTOR
G.1. No fiber optic installation will be allowed to commence in any
Colonial right of way easement without the presence of a Colonial inspector and
such inspector's approval to proceed. Daily work permits shall be obtained from
Colonial for all crews performing excavation or installation within the
easement.
G.2. The inspector is charged with the responsibility of protecting the
pipelines, and any construction activity observed in violation of this Agreement
shall be communicated to the offending equipment operator or other person acting
in violation of this Agreement, whereupon the person performing the offending
activity shall immediately refrain from such activity.
G.3. Failure to refrain from the activity in violation of the terms of
this Agreement shall result in an immediate shut down of such activity until the
Company provides adequate reassurances that corrections have been made to avoid
further occurrence of said activity.
G.4. Failure to observe a shut down order by an inspector shall result
in a breach of this Agreement and subject the Company to the penalties
described in this Agreement under Article XII.
H. LOCATING AND FLAGGING THE FACILITIES, AND MARKING THE CONSTRUCTION
LIMITS
No fiber optic installation will be allowed to commence in any Colonial right of
way easement without the marking of the centerlines of all of Colonial's
existing pipelines and appurtenances, as well as the flagging of the route of
the fiber optics lines and the limits of the construction work space.
H.1. Locating the pipelines shall be accomplished by utilizing a
Metrotech model 810 inductive type finders or equivalent, in the conductive
mode, supported by metal rods probing at the placement of every stake, and then
confirming the location by finding the top of the pipe with a probe rod. Probing
shall only be performed by Colonial personnel, unless approved and inspected by
Colonial's inspector.
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H.2. Flagging stakes on the centerline of the nearest pipeline shall be
made of three-foot (3') wood lathing with red ribbon flagging and shall be
placed at intervals not exceeding fifty feet (50') separation and at all
pipeline P.I. all fence crossing, road and railroad right of way limits and at
all waterway high water marks, along with spray painting of the ground where the
stake enters the earth's surface. Pipeline centerline stakes and fiber optic
line stakes shall be labeled with station numbers at foreign line crossings,
property lines, and the limits of all crossing easements and flagged with a
contrasting color from interval stakes. If pipeline station numbers do not
correspond with Colonial alignment sheets, the route surveyor shall notify
Colonial's inspector and make note of discrepancies on a set of Colonial
alignment sheets designated for changes in surface observations. The pipeline
right of way shall be clear cut or mowed to allow visibility of staking.
Replacement of all stakes is mandatory should they disappear prior to fiber
optic installation.
H.3. The boundary of the work space closest to the pipelines shall be
staked with optic yellow, continuous police-type ribbon draped from stake to
stake, each stake exceeding three feet (3') above ground.
H.4. The centerline of the fiber optic lines shall be staked at
intervals not exceeding fifty feet (50') separation and shall be marked with
optic orange flagging.
H.5. All pipelines must be located to ensure that the pipeline closest
to the proposed installation is identified, however, the Company is required to
flag only the closest pipeline.
I. CONSTRUCTION AND SAFETY
I.1. Placement - All linear fiber optic lines shall be installed near
the outer limits of Colonial's easements, and under no circumstances will
Colonial approve the installation of linear fiber optic lines within ten feet
(10') of the centerline of any of its pipelines.
I.2. If the existing width of Colonial's easement is insufficient to
provide a 10-foot separation, then an easement modification or an new easement
must be acquired.
I.3. Copies of any easement modification or new easements shall be
provided to Colonial prior to commencing installation of the fiber optic lines.
I.4. Machinery and equipment shall only be allowed to cross or travel
across Colonial's pipelines within designated crossing lanes that have been
built up with extra earth padding and/or other protection as approved by
Colonial's inspector. No other work shall be permitted on top of or above
Colonial's pipelines without a written work variance authorization executed by
Colonial's chief engineer, and accompanied by a written description of the work
to be performed.
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I.5. No longitudinal vehicle and equipment traffic over Colonial's
pipelines will be permitted.
I.6. Colonial does not require the installation of fiber optic lines be
at a certain depth, provided, however, that where a crossover is necessary (a
crossover meaning the need to move the fiber optic lines from one side of
Colonial's easement to the other) the fiber optic lines shall be encased in
steel the entire distance of the crossover, and they shall always cross below
Colonial's lines at a minimum clearance of 24 inches. When crossing any Colonial
pipeline, the pipeline crossing location shall be excavated to the extent that
the crossing can be observed without obstruction, and all excavation within five
feet (5') of the outer wall of a pipeline shall be performed by hand tools,
unless authorized by the Colonial inspector. All crossovers shall be made as
near as practical to the perpendicular (90 degrees). The number of crossovers
shall be held to an absolute minimum.
I.7. Any surface altering equipment necessary for the installation of
the communication facilities will only be permitted subsequent to the approval
of individual site plans. All installations within Colonial facility property
shall be permitted subsequent to locating all underground pipeline facilities by
Metrotech pipe finders, probing and hand digging to visually spot the
facilities. Any clearing and grading within the easement area shall only be
performed in the presence of a Colonial inspector.
I.8. The installation of cables, conduits, fibers, equipment,
appurtenances and all other facilities, whether above or below ground, shall be
located no less than ten feet (10') from the centerline of any Colonial pipeline
in its right of way, which shall be extended to a minimum distance of no less
than twenty feet (20') at all road and water crossings or in any other
circumstance where installation requires boring or drilling or where soil
conditions dictate.
I.9. No installation shall proceed without the presence of a Colonial
inspector on site and in a position to observe the installation activity.
I.10. No installation shall proceed without the presence of staking
and flagging as described in Section H above.
J. POST-CONSTRUCTION DELIVERABLES
J.1. Within six months of completion of the installation contemplated
herein the Company shall provide Colonial:
(a) "as built" alignment sheets and survey, indicating the
location of fiber optic installations, the depth of the fiber optic facilities
were buried, the distances to the nearest Colonial pipelines, Colonial
stationing and reference to Colonial's alignment sheets; and
(b) updated title information and line lists.
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Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission. These portions are designated "[ * * * ]".
Exhibit 10.6
FIBER OPTIC ACCESS AND PURCHASE AGREEMENT
This FIBER OPTIC ACCESS AND PURCHASE AGREEMENT ("Agreement") is entered
into as of this 30th day of March, 2000 between PATHNET TELECOMMUNICATIONS,
INC., a Delaware corporation ("PTI") and COLONIAL PIPELINE COMPANY, a Delaware
and Virginia corporation ("Colonial").
WHEREAS, Colonial and PTI have entered into that certain Contribution
Agreement dated November 2, 1999 (the "Contribution Agreement"), pursuant to
which, among other things, Colonial has agreed to contribute certain assets to
PTI and PTI has agreed to issue certain shares of stock to Colonial, as more
particularly described therein;
WHEREAS, contemporaneous herewith, Colonial and PTI have entered into the
Lease pursuant to which, subject to the terms and conditions of such Lease and
this Agreement, Colonial has leased to PTI specified portions of the Colonial
Rights-of-Way to be designated, from time to time, in order to permit PTI to
construct, install, operate, maintain, replace, reconstruct, remove and/or
relocate (collectively, "Construct or Operate") a Telecommunications Network (as
hereinafter defined);
WHEREAS, Colonial and PTI have entered into the Lease on the condition that
PTI and Colonial agree to certain additional terms regarding PTI's
Telecommunications Network as described herein; and
WHEREAS, Colonial also desires to purchase from PTI, and PTI also desires
to sell to Colonial, a Conduit within PTI's Telecommunications Network, on the
terms and conditions described herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and promises of the parties and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. Definitions.
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
(a) "Affiliate" shall mean an entity that, directly or indirectly, is
controlled, under common control with, or controls another entity, or
the successor to an entity by merger or purchase of all or
substantially all of such entity's stock or assets.
(b) "Colonial Conduit" shall be defined as provided in Section 7 hereof.
(c) "Colonial Rights-of-Way" shall have the meaning ascribed to such term
in the Lease.
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(d) "Colonial System" shall have the meaning ascribed to such term in the
Lease.
(e) "Conduits" shall have the meaning ascribed to such term in the Lease.
(f) "Designated Affiliate" shall mean the entities named in Exhibit B,
attached hereto and incorporated by reference herein.
(g) "Disposition" in reference to the Colonial Conduit or to any
telecommunications capacity shall mean the sale, assignment, barter,
swap, lease, license, sub-license, making available to, or other
transfer or grant of rights therein or in respect thereof, and the
terms "Dispose" and "Disposed" shall be interpreted accordingly.
(h) "Landowner" shall have the meaning ascribed to such term in the Lease.
(i) "Lease" shall mean that certain Master Right-of-Way Lease Agreement
entered into by Colonial and PTI in substantially the form attached as
Exhibit A hereto.
(j) "Lease Date" shall mean the date on which the Lease is executed and
becomes binding and effective on the parties thereto.
(k) "Restriction Release Date" shall mean the earlier of the date (i)
which is five (5) years following the Lease Date; or (ii) on which PTI
makes an assignment for the benefit of creditors, files a voluntary
petition in bankruptcy, or an involuntary petition in bankruptcy is
filed against PTI (unless such petition is dismissed or stayed within
ninety (90) days).
(l) "Segment" shall have the meaning ascribed to such term in the Lease.
(m) "Telecommunications Network" shall mean a network or other
communications system capable of transmitting voice, data, images or
other information over strands of optical fiber, copper wire, radio
waves, or other transmission media.
2. Right to Lease. Upon the closing of the transaction contemplated by
the Contribution Agreement, PTI and Colonial shall enter into the Lease and all
other documentation reasonably necessary to more fully effectuate the terms
thereof.
3. Limited Exclusivity. Except with respect to the Colonial Conduit
(which can be commercialized or used in accordance with the provisions of
Section 7 below) and as otherwise contemplated hereunder and in the Lease, for a
period of ten (10) years following the Lease Date:
(a) Colonial shall not, directly or indirectly, lease to, license to,
make available to, or otherwise permit the use of by any other party,
including, without limitation, any Affiliates of Colonial, any portion of
the Colonial Rights-of-Way for the Construction or Operation of a
Telecommunications Network; and
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(b) Colonial shall not, directly or indirectly, use or permit the use
of any portion of the Colonial Rights-of-Way for the Construction or
Operation of a Telecommunications Network.
The foregoing restrictions shall not apply to any portion of the Colonial
Rights-of-Way that reverts to Colonial pursuant to Section 1.4 of the Lease.
4. Provision of Telecommunications Capacity to Colonial. Subject to
availability, as determined by PTI from time to time in its reasonable
discretion and taking into account the reasonably anticipated level of traffic
on PTI's Telecommunications Network, Colonial shall have the right to purchase
telecommunications capacity on PTI's Telecommunications Network at the best
price and terms that such capacity has been or is being offered by PTI to its
preferred customers. The foregoing telecommunications capacity may not be used
in any manner that competes with PTI or its Affiliates, including, without
limitation, used for any purpose other than for the internal communications
purposes of Colonial and its Affiliates, and may not be Disposed of or used in
connection with any other Telecommunications Network or any other
telecommunications venture or business.
5. Compensation for Similar Transactions. If, at any time from the date of
this Agreement until [ * * * ], PTI and/or one of its affiliates or successors
shall enter into an agreement or other contractual relationship with any
Designated Affiliate pursuant to which PTI and/or one of its Affiliates or
successors shall have the right or license to use, lease or occupy all or
portions of the right-of-way of one or more of the Designated Affiliates for
development of a Telecommunications Network, PTI shall pay to Colonial a fee
equal to [ * * * ] per mile of right-of-way which is covered by each such
agreement or relationship. The payment of such fee shall be made within ten (10)
business days of the execution of such agreement or other contractual
relationship.
6. [INTENTIONALLY DELETED]
7. Purchase and Sale of Colonial Conduit.
(a) In addition to the transactions contemplated by the Contribution
Agreement, but simultaneously with the closing of such transactions, Colonial
shall pay to PTI the sum of Four Million Dollars ($4,000,000.00). In
consideration thereof, PTI agrees that along: (i) any Segment of the Colonial
Rights-of-Way in which PTI installs Conduits and in which Colonial's engineers
have determined that PTI can install eight (8) or more Conduits within such
Segment or applicable portion thereof; (ii) any Segment of the Colonial
Rights-of-Way in which PTI notifies Colonial that it desires to commercialize
and deploy less than all of the available Conduits permitted by Colonial within
such Segment (even if Colonial's engineers have determined that the installation
by PTI of at least eight (8) Conduits within such Segment or applicable portion
thereof is not commercially feasible because of pipeline integrity, pipeline
safety, engineering or construction reasons; and (iii) any other rights-of-way
acquired by PTI along the market corridor of the Colonial System that are
necessary as substitutions for or supplements to portions of the Colonial
Rights-of-Way in which PTI installs Conduits, PTI will
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convey one such Conduit installed by PTI within any such Segment or substituted
area to Colonial for the exclusive use, ownership or control by Colonial, its
successors and assigns (as applicable, the "Colonial Conduit"); provided,
however, that Colonial shall be entitled to only 2200 miles of Colonial Conduit
in the aggregate.
(b) Colonial shall own and have full title to such Colonial Conduit
from and after the installation thereof within any such Segment or substituted
area, and PTI promptly thereafter shall execute such documents as shall be
reasonably required to evidence the title thereto vested in Colonial. PTI
covenants and agrees not to assign, mortgage, hypothecate, pledge, encumber,
permit a lien to be placed on, or otherwise transfer all or any portion of the
Colonial Conduit.
(c) Notwithstanding the foregoing Subsection 7(a), the parties hereto
agree and acknowledge that:
(i) (aa) in the event that Colonial's engineers have determined
that the installation by PTI of at least eight (8) Conduits within a
particular Segment or applicable portion thereof is not commercially
feasible because of pipeline integrity, pipeline safety, engineering or
construction reasons, and (bb) if PTI desires to commercialize and deploy
all of the available Conduits permitted by Colonial within such Segment,
then there will not be a Colonial Conduit available for the exclusive use
by Colonial within that Segment or the applicable portion thereof; and
(ii) as of the fifth (5th) anniversary of the Lease Date, PTI may
not have installed its Telecommunications Network (and, thus, the Colonial
Conduit) within Segments aggregating at least 2,200 miles of the Colonial
System.
In either of the circumstances described in clauses (i) and (ii) above, the
parties will negotiate in good faith to make available to Colonial, at no
charge, a suitable alternative to such Colonial Conduit, which alternative may
include the right to use fiber within a conduit, the right to an undivided
percentage interest in a conduit, and/or the right to use fibers or conduit on
other portions of PTI's network, in each case such alternative having a fair
market value comparable to such of the Colonial Conduit as shall have not been
provided. Within (x) six (6) months (if during the first year of this
Agreement), or (y) two (2) months (if after the first year of this Agreement)
after Colonial has knowledge that there will not be a Colonial Conduit available
in a particular Segment or portion of the Colonial System, Colonial may deliver
written notice to PTI (the "Equivalency Request Notice"), designating the nature
and type of equivalency that Colonial requests to receive from and after the
Restriction Release Date. If Colonial and PTI have not agreed on the nature and
type of such equivalency within thirty (30) days after PTI's receipt of the
Equivalency Request Notice, then either party may institute arbitration
proceedings in accordance with Section 14 of the Lease.
(d) Until the Restriction Release Date:
(i) the Colonial Conduit may not be used in any manner that
competes or facilitates competition with PTI or its Affiliates;
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(ii) the Colonial Conduit may be used only for the internal
communications purposes of Colonial and its Affiliates; provided that,
although Colonial may be reimbursed by any such Affiliates for applicable
costs and expenses, Colonial may not earn a profit on such operations for
internal communications purposes; and
(iii) neither the Colonial Conduit, nor any optical fibers or
other communications media installed therein, nor any capacity on such
media, may be Disposed of or otherwise made available to third parties, or
(other than as set forth in item (ii) above) used in connection with any
Telecommunications Network or any other telecommunications venture or
business.
(e) From and after the Restriction Release Date, Colonial shall be
free to sell, assign, license or transfer the Colonial Conduit or any portion
thereof to any third party whatsoever, subject, however, to the provisions of
Section 8 below.
(f) Prior to the Restriction Release Date, PTI will maintain the
Colonial Conduit in the same manner as applies to PTI's maintenance activities
on the Colonial Rights-of-Way under the terms of the Lease so that such Colonial
Conduit is equal to or better in quality and capacity as the conduit in all
other portions of the PTI Telecommunications Network. After the Restriction
Release Date, PTI shall have no responsibility in connection with the
maintenance of the Colonial Conduit.
(g) From and after the date hereof, Colonial will be responsible for
all expenses (other than those described in Subsection 7(f) above) of operating
the Colonial Conduit for the purposes described Subsections 7(d)(ii) and 7(e)
above, as applicable. Furthermore, PTI shall not be responsible for any taxes
that are attributable to the existence and use of the Colonial Conduit by
Colonial; provided, however, that nothing herein shall be deemed to acknowledge
or imply that any taxes necessarily will be imposed upon or attributable to the
existence and use of the Colonial Conduit by Colonial.
8. Disposition of the Colonial Conduit.
(a) Subject to Subsection 8(d) below, PTI and its Affiliates shall
have a right of first refusal as to the Colonial Conduit as described in this
Subsection 8(a) (the "Right of First Refusal"). During the period beginning on
the Restriction Release Date and ending on the tenth (10th) anniversary of the
Lease Date, in the event that Colonial desires to Dispose of the Colonial
Conduit, in whole or in part, Colonial shall provide written notice to PTI
describing the terms of such Disposition, including the price of the
Disposition, the term of any lease or license, and the identity of the proposed
transferee (the "Notice of Terms"). Within sixty (60) days thereafter, PTI may
elect, upon written notice to Colonial, to accept the Disposition on the terms
described in Colonial's Notice of Terms. In the event that PTI so elects to
accept such Notice of Terms, Colonial shall Dispose of the Colonial Conduit to
PTI on the terms set forth in such Notice of Terms or on such other terms as the
parties may mutually agree. If PTI fails to make such election within such sixty
(60) day period, PTI shall be deemed to have declined the
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opportunity to exercise its Right-of-First Refusal as proposed by Colonial in
the Notice of Terms.
(b) In the event that PTI declines or is deemed to have declined the
opportunity to exercise its Right of First Refusal, Colonial shall be free to
Dispose of the Colonial Conduit to the transferee proposed in the Notice of
Terms on terms not materially different than the terms so described in the
Notice of Terms, provided that if Colonial and the transferee fail to consummate
the Disposition within ninety (90) days of the date PTI declines or is deemed to
have declined the Right of First Refusal, then PTI will again have a Right of
First Refusal as to the portion of the Colonial Conduit described in the Notice
of Terms.
(c) Provided Colonial complies with the foregoing provisions, the
consummation of any Disposition of a portion of the Colonial Conduit will
extinguish PTI's Right of First Refusal as to such portion, unless the
Disposition is for a period that terminates prior to the tenth (10th) of the
Lease Date, in which event, upon expiration of such Disposition, PTI will again
have a Right of First Refusal as to such portion on the terms set forth in
Subsection 8(a) above.
(d) The foregoing Right of First Refusal shall apply only to the
extent that the Colonial Conduit or any applicable portion thereof is still in
the state in which it was received by Colonial (e.g., if fibers were provided to
Colonial in "dark" condition, then the Right of First Refusal will not apply if
such fibers are in a "lit" condition at the time of proposed Disposition; and if
Colonial receives a Conduit and later populates the Conduit with fiber, the
Right of First Refusal will not apply to such fibers).
9. Confidentiality. The parties hereto shall keep confidential all terms of
this Agreement, except to the extent that disclosure thereof is required by law,
agreed by the parties in writing. In the event either party hereto is required
to disclose any terms of this Agreement pursuant to applicable law, at least
three (3) days prior to disclosing the same (or such shorter period permitted by
law), such party shall notify the other party hereto in writing and provide
copies of the terms that the party intends to disclose. The language of the
press release announcing this transaction shall be mutually agreed upon between
the parties hereto. The parties acknowledge that the transaction contemplated
herein is part of a larger transaction in which certain other parties are
contemplating contribution of right of way to PTI in exchange for equity
interests in PTI and that disclosure of certain terms of this Agreement to such
parties may be necessary or appropriate in connection with the larger
transaction. PTI shall be permitted to make such disclosures, provided that PTI
limits such disclosures to the extent reasonably necessary to consummate the
larger transaction.
10. Assignment.
(a) Neither this Agreement, nor any of the rights granted to PTI by
the terms of this Agreement, shall be assigned by PTI without Colonial's prior
written consent, which shall not be unreasonably withheld, except that PTI may,
upon prior notice to Colonial, but without the necessity of obtaining Colonial's
prior consent, assign this Agreement to an Affiliate of PTI. Nothing herein
shall prohibit PTI from involving customers or strategic or co-development
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partners in development of the Telecommunications Systems within the Colonial
Rights-of-Way on such terms as PTI may determine in its sole discretion,
provided that: (i) all such activities are conducted in accordance with the
terms of this Agreement and the Lease, (ii) PTI shall not be released from, and
shall remain fully liable to Colonial for all of its covenants, liabilities and
obligations hereunder and under the Lease and for the acts or omissions of all
parties claiming by, through or under PTI within any Colonial Rights-of-Way;
(iii) PTI shall remain the sole point of contact with Colonial; and (iv) all
activities of parties claiming by, through or under PTI within any Colonial
Rights-of-Way are conducted under PTI's supervision.
(b) Colonial shall have the right to assign, license or otherwise
transfer this Agreement and/or its rights or obligations hereunder as it
pertains to a particular Segment (or discrete portion thereof) of the Colonial
Rights-of-Way in connection with a sale or other transfer of Colonial's rights
within such Segment (or discrete portion thereof) to any third party; provided,
however, that any such assignment or transfer shall be made subject to the terms
and conditions of this Agreement and any such assignee or transferee shall
continue to perform Colonial's obligations to PTI under the terms and conditions
of this Agreement. In addition to Colonial's rights under Subsection 7(c)
hereof, Colonial also shall have the right, without PTI's consent, to assign or
otherwise transfer this Agreement and/or its rights or obligations hereunder:
(i) to any entity that, indirectly or directly, is controlled by, controls or is
under common control with Colonial, or to any entity into which Colonial may be
merged or consolidated or which purchases all or substantially all of the assets
of Colonial; or (ii) as collateral in connection with any financings by any
lender.
11. Notices. All notices, demands, requests, or other writings delivered
pursuant to this Agreement shall be in writing and may be given personally or
may be delivered by depositing the same in the United States mail, certified,
registered or equivalent, return receipt requested, postage prepaid, properly
addressed, and sent to the following addresses:
If to Colonial: Colonial Pipeline Company
945 E. Paces Ferry Rd., N.E.
Atlanta, Georgia 30326-0855
Attention: General Counsel
Fax: 404-841-2315
with a copy to: Arnall Golden & Gregory, LLP
1201 West Peachtree Street, Suite 2800
Atlanta, Georgia 30309-2450
Attention: Donald I. Hackney, Jr., Esquire
Fax: 404-873-8639
If to PTI: Pathnet Telecommunications, Inc.
1661 Gateway Boulevard
Richardson, Texas 75080
Attention: Senior Vice President, Engineering
Fax: 972-231-9728
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<PAGE>
with a copy to: Pathnet Telecommunications, Inc.
11720 Sunrise Valley Drive
Reston, Virginia 20191
Attention: General Counsel
Fax: 703-390-8127
or to such other address as either party may from time to time designate by
written notice to the other party. Notices given by mail as aforesaid shall be
deemed received and effective as of the first Business Day following such
dispatch; provided, however, that if any such notice or other communication also
shall be sent by telecopy or fax machine, such notice shall be deemed given at
the time and on the date of machine transmittal if the sending party receives a
written send verification on its machines and forwards a copy thereof with its
mailed or courier delivered notice or communication.
12. Force Majeure. Any failure or delay in the performance by a party
hereto of its obligations hereunder shall not constitute a breach of this
Agreement, and each party's obligations to complete actions by specific
deadlines shall be delayed, to the extent attributable to causes beyond that
party's control, including, but not limited to, acts of God, governmental action
(whether in its sovereign or contractual capacity), fire, flood, or other
catastrophe, national emergency, insurrection, riot, and war.
13. Severability. If any provision of this Agreement or the application
thereof, shall be held invalid, illegal or unenforceable in whole or in part,
the remainder of this Agreement and the application thereof shall not be
affected, and shall be enforceable to the full extent permitted by law, and the
portion hereof found to be invalid shall be enforced to the fullest extent
permitted by law, and, if possible, shall be reformed to carry out as much as
possible the intent of the parties as expressed herein.
14. Amendment. This Agreement may be amended only by a written instrument
executed by both parties hereto. No failure to exercise and no delay in
exercising, on the part of a party hereto, any right, power or privilege
hereunder shall operate as a waiver of any other provision of this Agreement, or
as a waiver of that right, power or privilege either before, or after, the
period of waiver.
15. Entire Agreement. This Agreement and all Exhibits attached hereto,
constitute the entire agreement of the parties hereto with respect to the
subject matters hereof, and supersede any and all prior negotiations,
understandings and agreements, whether oral or written with respect hereto.
16. Applicable Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Georgia, without regard to the
conflicts of laws provisions thereof.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, authorized representatives of Colonial and PTI have
executed this Agreement as of the date first set forth herein.
COLONIAL PIPELINE COMPANY PATHNET TELECOMMUNICATIONS, INC.
By: /s/ D.L. Lemmon By: /s/ Richard Jalkut
---------------------------- -----------------------------
Name:D.L. Lemmon Name:
Title: President and Title: CEO
Chief Executive Officer
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<PAGE>
EXHIBIT A
FORM OF LEASE
(SEE EXHIBIT 10.7)
<PAGE>
EXHIBIT B
DESIGNATED AFFILIATES
1. Specified Companies.
Capline Pipeline Company
Chicap Pipeline
Cushing-Chicago Pipeline
Dixie Pipeline Company
Explorer Pipeline Company
Inland Corporation
Kaw Pipeline
Olympic Pipeline
West Shore Pipe Line (Including Badger)
West Texas Gulf Pipe Line
Wolverine Pipe Line
Yellowstone Pipe Line
2. Affiliates of Colonial's Owners.
All pipeline companies in which 75% or more of the outstanding voting equity
interests therein are held by one or more entities which are 100% owned,
directly or indirectly, by any one or more of: (i) the following current owners
of Colonial's outstanding common stock (the "Colonial Owners"); (ii) any entity
which is the 100% owner, directly or indirectly, of such Colonial Owners; or
(iii) any entity that is 100% owned, directly or indirectly, by any of the
entities included in clause (ii). For purposes of this paragraph, the Colonial
Owners shall consist of:
Atlantic Richfield Company (ARCO Pipeline) Amoco Pipeline Holding Company (BP
Amoco Pipeline) CITGO Pipeline Investment Company Conoco Pipe Line Company
Koch Petroleum Corporation Marathon Oil Company (Marathon Ashland Pipe Line,
LLC) Mobil Pipe Line Company Phillips Petroleum International Investment
Company
Texaco Trading and Transporation Inc. (Equilon Pipeline Company, LLC)
Union Oil Company of California
EXHIBIT 10.7
OPTION AGREEMENT
This Option Agreement is made as of _______________, 1999, by and
between Pathnet Telecommunications, Inc., a Delaware corporation (the
"Company"), and Colonial Pipeline Company, a Delaware and Virginia corporation
("Colonial").
W I T N E S S E T H:
WHEREAS, on November __, 1999, the parties hereto entered into that
certain Contribution Agreement (the "Contribution Agreement") pursuant to which
Colonial has agreed to contribute to the Company cash and certain property, on
the terms and conditions described therein; and
WHEREAS, in consideration for such contributions, the Company has agreed
to issue to Colonial certain shares of the Company's Series D Convertible
Preferred Stock, par value $0.01 per share ("Series D Preferred Stock") and
certain shares of the Company's Series E Convertible Preferred Stock, par value
$0.01 per share ("Series E Preferred Stock"); and
WHEREAS, pursuant to the Contribution Agreement, the Company has also
agreed to grant (a) an option to purchase additional shares of its Series E
Convertible Preferred Stock, to be exercised by Colonial (with the approval of
the Company if above the level specified herein) or to be assigned by Colonial
to certain Designated Entities (as defined below) and (b) an option to purchase
shares of its common stock (the "Common Stock") to Colonial if the Company
pursues an Initial Public Offering (as defined below), subject to the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Grant of Options.
(a) In consideration of $1,000,000 paid by Colonial by
electronic wire transfer to the Company upon execution of this Agreement, the
Company hereby grants to Colonial the right and option (the "Preferred Stock
Option") to purchase from the Company all or any part of an aggregate of
1,593,082 shares of Series E Preferred Stock, subject to, and in accordance
with, the terms and conditions set forth in this Agreement. Subject to the
provisions of Section 6, Colonial may assign the Preferred Stock Option in whole
or in part to one or more of the entities listed on Exhibit B attached hereto
and incorporated herein (the "Designated Entities" and, to the extent Colonial
so assigns a portion of the Preferred Stock Option to a Designated Entity, such
Designated Entity is sometimes referred to herein as a "Permitted Purchaser") by
providing written notice to the Company of the name and address of the assignee
and the number of shares subject to the Preferred Stock Option assigned to such
assignee (the "Assigned Option Shares"). To the extent the Preferred Stock
Option is exercised by Colonial for more than 455,166 shares of Series E
Preferred Stock, the exercise with respect to shares in excess of that amount
shall
<PAGE>
require the prior written consent of the Company, which may be withheld in the
Company's sole discretion. Any assignment to, or exercise by, a Designated
Entity shall not require the prior written consent of the Company. The grant may
be exercised in whole or in part, but in no event shall the aggregate number of
shares issued to Colonial and the Designated Entities pursuant to the exercise
of the Preferred Stock Option exceed such 1,593,082 shares of Series E Preferred
Stock (subject to adjustment as provided herein).
(b) For value received, the Company hereby grants Colonial the
right and option (the "Common Stock Option") to purchase from the Company up to
a whole number of shares of Common Stock equal to ten percent (10%) of the total
number of shares of Common Stock actually sold in the Company's Initial Public
Offering (excluding any shares issuable upon exercise of any over-allotment
option granted to the underwriters of the Initial Public Offering), subject to,
and in accordance with, the terms and conditions set forth in this Agreement. As
used herein, "Initial Public Offering" means the closing of a firm commitment
underwritten initial public offering for cash pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder from
time to time, covering the offer and sale of the Company's Common Stock to the
public. Any shares of Common Stock acquired by Colonial pursuant to this Section
1(b) shall be subject to the registration rights granted to Colonial pursuant to
the Stockholders Agreement of even date herewith among the Company and certain
of its stockholders (the "Stockholders Agreement").
2. Term of Options.
(a) The Preferred Stock Option shall be exercisable, in whole or
in part, during the term commencing on the date hereof and ending at 5:00 p.m.
on the date (the "Expiration Date") that is the earlier of (i) the date that is
the later to occur of (1) the 120th day after the Agreement Date (as such term
is defined in the Contribution Agreement), and (2) the 15th day after the
Initial Closing Date (as such term is defined in the Contribution Agreement); or
(ii) 15 days after the filing by the Company of a registration statement under
the Securities Act, for an Initial Public Offering; provided, however, that on
and after the date that is the later to occur of (A) the 90th day after the
Agreement Date, and (B) the 15th day after the Initial Closing Date, the
Preferred Stock Option shall be exercisable solely in connection with the
concurrent execution by and between the Company and such of the Permitted
Purchasers as shall seek to exercise such Preferred Stock Option of a mutually
acceptable agreement providing for the purchase, use, lease or other acquisition
by the Company of telecommunications network right-of-way rights from such
Permitted Purchasers, on such terms as the Company and such Permitted Purchaser
or Permitted Purchasers may agree.
(b) Colonial may exercise the Common Stock Option solely in
connection with the Company's Initial Public Offering.
3. Exercise Price.
(a) The price at which the Preferred Stock Option may be
exercised (the "Preferred Exercise Price") shall be $21.97 per share of Series E
Preferred Stock, as adjusted from time to time pursuant to Section 12 hereof.
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<PAGE>
(b) The price at which the Common Stock Option may be exercised
(the "Common Exercise Price") shall be ninety percent (90%) of the initial price
per share to the public of the Common Stock being offered in the Company's
Initial Public Offering, as reflected on the cover page of the final prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b).
4. Exercise of Options.
(a) The purchase rights represented by the Preferred Stock
Option are exercisable solely by Colonial or, upon assignment, one or more
Permitted Purchasers at any time up to the Expiration Date for (i) all or a
portion of the shares of Series E Preferred Stock specified in Section 1(a), if
exercised by Colonial, or (ii) all or a portion of its respective Assigned
Option Shares, if exercised by a Permitted Purchaser; provided, however, that
the prior written consent of the Company, which consent may be withheld in the
Company's sole discretion, shall be required with respect to the exercise by
Colonial in its own name and on its own behalf of options with respect to more
than 455,166 Series E Preferred Shares. To exercise the Preferred Stock Option,
each Permitted Purchaser (or Colonial, as the case may be, with the prior
written consent of the Company in the Company's sole discretion) shall deliver
written notice thereof (the "Exercise Notice") to the Company in the form
attached hereto as Exhibit A duly completed and executed by such Permitted
Purchaser (or Colonial, as the case may be). Colonial or a Permitted Purchaser
that exercises its option as described in this Section 4(a) (and, with respect
to Colonial, receives the prior written consent of the Company) is sometimes
referred to as a "Purchaser."
(b) The purchase rights represented by the Common Stock Option
are exercisable by Colonial, in whole or in part (and Colonial may specify in
such exercise notice, in lieu of or in addition to a percentage of shares, a
maximum aggregate amount of its investment, from which its percentage shall be
derived), in connection with an Initial Public Offering, by written notice by
Colonial delivered to the Company not less than 10 days prior to the filing of a
registration statement by the Company in connection with an Initial Public
Offering setting forth any maximum aggregate investment amount as to which
Colonial is exercising its Common Stock Option, and, subject to any such
maximum, Colonial's desired number of shares in respect of which Colonial is
exercising its Common Stock Option. The Company shall notify Colonial in writing
at least 30 days prior to the filing of a registration statement for an Initial
Public Offering (and shall advise Colonial as promptly as practicable of any
delay in the expected date for filing).
5. Closing of the Purchase.
(a) The closing of any purchase of Series E Preferred Stock
pursuant to exercise of the Preferred Stock Option (the "Preferred Stock
Closing") shall be held at the offices of the Company on a date agreed to by the
Company and the Purchaser, but not later than thirty (30) days following
delivery of the Exercise Notice.
(b) The closing of any purchase of Common Stock pursuant to
exercise of the Common Stock Option (the "Common Stock
Closing") shall be held at the offices of the Company on
or as soon as reasonably practicable following the
closing date of the Initial Public Offering in respect
of which the option was so exercised.
(c) At the Preferred Stock Closing:
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<PAGE>
(i) The Company shall deliver to each Purchaser one or more
certificates representing the shares of Series E Preferred Stock to be purchased
by such Purchaser;
(ii) Each Purchaser shall deliver to the Company a signed
certificate, dated as of the date of the Closing as described in Section 7;
(iii) Each Purchaser and the Company shall execute and deliver a
written agreement, whereby the Purchaser shall agree to become a party to and
bound by the terms of the Stockholders Agreement and the Company shall grant to
such Purchaser the rights and benefits of a "Stockholder" as such term is
defined in the Stockholders Agreement; and
(iv) Payment of the purchase price for the Series E Preferred
Stock shall be made by wire transfer of immediately available funds to an
account designated by the Company in an amount equal to (A) the number of shares
of Series E Preferred Stock specified by the Purchaser in its Exercise Notice,
multiplied by (B) the Preferred Exercise Price.
(d) At the Common Stock Closing:
(i) The Company shall deliver to Colonial one or more
certificates representing the shares of Common Stock to be purchased pursuant to
exercise of the Common Stock Option; and
(ii) Payment of the purchase price for the Common Stock shall be
made by wire transfer of immediately available funds to an account designated by
the Company in an amount equal to (A) the number of shares of Common Stock
specified by Colonial in its notice delivered pursuant to Section 4(b),
multiplied by (B) the Common Exercise Price.
6. Transferability. Colonial shall not assign, hypothecate, donate,
encumber, transfer or otherwise dispose of any interest in the Series E
Preferred Stock or Common Stock of the Company, and shall not assign all or any
portion of the Preferred Stock Option, except in compliance with the provisions
herein, the Stockholders Agreement, and applicable securities laws. Without
limitation of the foregoing, Colonial shall not assign all or any portion of the
Preferred Stock Option except (i) to a Designated Entity that agrees in writing
to be bound by the terms of this Option Agreement in the same manner that
Colonial is bound (including, without limitation, this Section 6, but excluding
the restrictions upon Colonial's direct exercise of the Preferred Stock Option,
which apply only to Colonial and any successor entity thereto), and (ii) on the
condition that Colonial provides to the Company an opinion of counsel, in form
and substance to the reasonable satisfaction of the Company, to the effect that
such assignment and the issuance of any Series E Preferred Stock or Common Stock
upon exercise of the Preferred Stock Option by the assignee will not require
registration of such securities under the Securities Act of 1933 or any
applicable state securities law.
7. Representations and Warranties.
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<PAGE>
(a) At the Preferred Stock Closing, as a condition thereto, each
Purchaser shall deliver to the Company a certificate representing and warranting
the following in connection with the acquisition of Series E Preferred Stock by
such Purchaser pursuant to the exercise of the Preferred Stock Option:
(i) The Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information from the
Company about the Company to reach an informed and knowledgeable decision to
acquire the Series E Preferred Stock. The Purchaser is purchasing the Series E
Preferred Stock for investment for its own account only and not as a nominee for
any party and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act (except as
contemplated by Section 10).
(ii) The Purchaser understands that Series E
Preferred Stock has not been registered under the Securities Act by reason of a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of such Purchaser's investment intent as expressed herein.
(iii) The Purchaser further understands that the
Series E Preferred Stock must be held indefinitely unless it is subsequently
registered under the Securities Act or an exemption from such registration is
available. The Purchaser further acknowledges and understands that the Company
is under no obligation to register the Series E Preferred Stock except as set
forth in the Stockholders Agreement. The Purchaser understands that the
certificate evidencing the Series E Preferred Stock (and any Common Stock
received upon conversion thereof) will be imprinted with the following legend
which prohibits its transfer unless it is registered or such registration is not
required in the opinion of counsel for the Company.
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE TO THE SECRETARY OF
THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
(b) The Company hereby represents and warrants to Colonial and
each Purchaser, as of the date hereof and as of the date of the Preferred Stock
Closing, as follows:
(i) The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to issue and sell the
Series E Preferred Stock and to carry out the provisions of this Agreement.
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<PAGE>
(ii) All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization of this
Agreement, the performance of all obligations of the Company hereunder and
thereunder at the Preferred Stock Closing and the authorization, sale, issuance
and delivery of the Series E Preferred Stock has been taken or will be taken
prior to the Preferred Stock Closing. Upon its execution and delivery, this
Agreement will be a valid and binding obligation of the Company, enforceable in
accordance with its terms.
(iii) When issued in compliance with the provisions of
this Agreement, the Series E Preferred Stock will be validly issued, fully paid
and nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Series E Preferred Stock may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
(c) The Company hereby represents and warrants to Colonial, as
of the date hereof and as of the date of the Common Stock Closing, as follows:
(i) The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to issue and sell the
Common Stock and to carry out the provisions of this Agreement.
(ii) All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization of this
Agreement, the performance of all obligations of the Company hereunder and
thereunder at the Common Stock Closing and the authorization, sale, issuance and
delivery of the Common Stock has been taken or will be taken prior to the Common
Stock Closing. Upon its execution and delivery, this Agreement will be a valid
and binding obligation of the Company, enforceable in accordance with its terms.
(iii) When issued in compliance with the provisions of
this Agreement, the Common Stock will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Common Stock may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
8. Conditions to Obligations of the Company.
(a) The Company's obligation to issue and sell the Series E
Preferred Stock at the Preferred Stock Closing is subject to the satisfaction,
on or prior to such Preferred Stock Closing, of the following conditions:
(i) The representations and warranties in Section
7(a) shall be true and correct in all material respects at the date of the
Preferred Stock Closing.
(ii) The Purchaser shall have performed and complied
with all agreements and conditions required to be performed or complied with by
Purchaser under this Agreement on or before the Preferred Stock Closing.
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<PAGE>
(iii) As of the Preferred Stock Closing, the sale and
issuance of the Series E Preferred Stock shall be legally permitted by all laws
and regulations to which any Purchaser and the Company are subject.
(iv) The Purchaser shall have executed and delivered
the Stockholders Agreement as provided herein.
(b) The Company's obligation to issue and sell the Common Stock
at the Common Stock Closing is subject to the satisfaction, on or prior to such
Common Stock Closing, of the following conditions:
(i) Colonial shall have performed and complied with
all agreements and conditions required to be performed or complied with by
Colonial under this Agreement and the Contribution Agreement on or before the
Common Stock Closing.
(ii) As of the Common Stock Closing, the sale and
issuance of the Common Stock shall be legally permitted by all laws and
regulations to which Colonial and the Company are subject.
(iii) A registration statement relating to the Initial
Public Offering shall have become effective and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings therefor shall
be pending or threatened by the Securities and Exchange Commission.
9. Rights of Stockholders. With respect to the Series E Preferred Stock
and Common Stock subject to option hereunder, neither Colonial nor any Permitted
Purchaser shall be entitled to vote or receive dividends or be deemed the holder
of such Series E Preferred Stock or Common Stock until the Preferred Stock
Option or Common Stock Option shall have been exercised as provided herein. In
addition, nothing contained herein be construed to confer upon Colonial nor any
Permitted Purchaser, by virtue of their ownership of the Preferred Stock Option
or Common Stock Option, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Preferred Stock Option or the Common Stock Option shall have been exercised as
provided herein.
10. Consulting Agreement. Notwithstanding anything contained herein
or in any certificate delivered hereunder or under the
Contribution Agreement or any of the documents, instruments or
agreements executed in connection with such Contribution
Agreement, the Company acknowledges that certain of the
Designated Entities have entered into, or may in the future
enter into, Consulting Agreements with Colonial pursuant to
which Colonial shall be entitled to receive from such Designated
Entities certain consideration, which may include shares of
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the Company's Preferred Stock, upon the conditions specified in
the Consulting Agreements.
11. Reservation of Stock.
(a) The Company covenants that during the term the Preferred
Stock Option is exercisable, the Company will reserve from its
authorized and unissued Series E Preferred Stock a sufficient number of
shares to provide for the issuance of Series E Preferred Stock upon the
exercise of the Preferred Stock Option (and shares of its Common Stock
for issuance on conversion of such Series E Preferred Stock) and, from
time to time, will take all steps necessary to amend its Certificate of
Incorporation to provide sufficient reserves of shares of Series E
Preferred Stock issuable upon exercise of the Preferred Stock Option
(and shares of its Common Stock for issuance on conversion of such
Series E Preferred Stock). The Company further covenants that all shares
that may be issued upon the exercise of rights represented by the
Preferred Stock Option or the Common Stock Option and payment of the
Preferred Exercise Price or Common Exercise Price, all as set forth
herein, will be free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein).
(b) The Company will use its best efforts to direct for sale to
Colonial in the Initial Public Offering as many shares as Colonial may request,
subject to any restrictions imposed by the National Association of Securities
Dealers and subject to the best advice of the underwriters of the Initial Public
Offering.
12. Dilution. In the event that prior to the delivery by the Company of
the shares of Series E Preferred Stock in respect of which the Preferred Stock
Option is granted, the outstanding shares of Series E Preferred Stock, including
any Common Stock into which the Series E Preferred Stock shall be convertible,
shall be changed in number or class or exchanged for a different number or kind
of shares of stock or other securities of the Company, whether by reason of
recapitalization, reclassification, reorganization, combination, stock split or
reverse stock split, or payment of a stock dividend or other similar change in
capitalization, the number and kind of shares of Series E Preferred Stock
subject to the Preferred Stock Option shall be adjusted in a manner set forth in
Section 5.3.4(e) and (f)(ii) of the Certificate of Incorporation so that the
Preferred Stock Option shall thereafter represent the right to acquire such
number and kind of securities as would have been issuable if the Preferred Stock
Option had been exercised immediately prior to such recapitalization,
reclassification, reorganization, combination, stock split or reverse stock
split, or payment of a stock dividend or other similar change in capitalization.
For purposes of the foregoing, the "Certificate of Incorporation" shall mean the
Certificate of Incorporation of the Company as amended and/or restated and
effective immediately prior to the change in terms of the Company's Series E
Preferred Stock.
13. Series D Preferred Stock. The Company and one or more Designated
Entities, may, but are not required to, hereafter enter into agreements for the
issuance of stock of the Company in exchange for a contribution of rights-of-way
rights from such Designated Entities. In the event that the Company and such
Designated Entities enter into such agreement, Colonial and the Company hereby
agree that, between the date of this Option Agreement and the
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<PAGE>
Expiration Date, unless the parties otherwise agree, (a) the type of stock
delivered to such Designated Entity shall be Series D Preferred Stock, (b) the
purchase price per share for such Series D Preferred Stock shall be $21.97, and
(c) the Company and the Designated Entity shall execute and deliver a written
agreement pursuant to which the Designated Entity shall become a party to and
bound by the terms of the Stockholders Agreement such that such Designated
Entity shall have the rights and benefits of a "Stockholder" as such is defined
in the Stockholders Agreement.
14. Miscellaneous.
(a) Transfer and Similar Taxes. All stock, stamp, transfer,
registration or similar taxes or duties, if any, resulting from the purchase of
Series E Preferred Stock or Common Stock pursuant to this Agreement shall be
paid by the Purchaser acquiring such shares.
(b) Authorized Signatories. The persons executing this
Agreement for and on behalf of Colonial and the Company each represent that they
have the requisite authority to bind the entities on whose behalf they are
signing.
(c) Successors and Assigns. Except as provided in Sections 1 and
6, this Agreement may not be assigned, delegated or otherwise transferred by
either party without the written consent of the other party. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto whether
so expressed or not.
(d) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(e) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(f) Descriptive Headings: Interpretation. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a Section of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation. Except as
otherwise provided herein, capitalized terms used herein without definition
shall have the meanings ascribed to them in the Contribution Agreement.
(g) Governing Law. This Agreement shall be governed by the laws
of the State of Delaware, without giving effect to its principles or rules of
conflict of laws to the extent such principles or rules would require or permit
the application of the laws of another jurisdiction.
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(h) Amendment. No change or addition shall be made to this
Agreement except by a written agreement executed by Colonial and the Company.
(i) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the parties hereto at the address indicated
below:
If to Colonial:
Colonial Pipeline Company
945 East Paces Ferry Road, NE
Atlanta, Georgia 30326-1125
Attn: General Counsel
Fax: 404-841-2315
With a copy to (which shall not constitute notice):
Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attn: Donald I. Hackney, Jr., Esq.
Fax: 404-873-8639
If to a Permitted Purchaser:
At the address provided by Colonial pursuant to Section 1(a) above
If to the Company to:
Pathnet Telecommunications, Inc.
1015 31st Street, N.W.
Washington, D.C. 20007
Attn: General Counsel
Fax: 202-625-7369
With a copy to (which shall not constitute notice):
Covington & Burling
1201 Pennsylvania Avenue., N.W.
P.O. Box 7566
Washington, D.C. 20044
Attn: Bruce S. Wilson, Esq.
Fax: 202-662-6291
-10-
<PAGE>
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(j) Complete Agreement. This Agreement represents the entire
agreement between Colonial and the Company covering everything agreed upon or
understood in this transaction and all other prior agreements, written or oral
are merged into this Agreement. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof in effect between the parties.
[SIGNATURE PAGES FOLLOW]
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement on the date first written above.
PATHNET TELECOMMUNICATIONS, INC.
/s/ Richard Jalkut
------------------------------------
By:
---------------------------------
Its: CEO
--------------------------------
COLONIAL PIPELINE COMPANY
------------------------------------
By:/s/ D.L. Lemmon
---------------------------------
Its: D.L. Lemmon, President and
--------------------------------
Chief Executive Officer
-12-
EXHIBIT 10.8
Positions of this exhibit have been
omitted and filed separately with
the Securities and Exchange Commission.
These positions are designated
"[ * * * ]."
FIBER OPTIC ACCESS AND
LICENSE AGREEMENT
dated as of March 30, 2000
between
CSX TRANSPORTATION, INC.
A VIRGINIA CORPORATION, FOR ITSELF AND
AS OPERATOR FOR NEW YORK CENTRAL LINES LLC, A DELAWARE LIMITED LIABILITY
COMPANY AND A WHOLLY-OWNED SUBSIDIARY OF CONSOLIDATED RAIL CORPORATION, A
PENNSYLVANIA CORPORATION
and
PATHNET TELECOMMUNICATIONS, INC.,
a Delaware corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C> <C>
1. Certain Definitions
2. License
3. Term
4. Exclusivity
5. Equity Consideration
6. Title Limits
7. Third Party Joint Facilities and Trackage Rights
8. Conduit (Innerduct); Fiber; and Capacity
9. Disclaimer
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT SUMMARY
<S> <C>
Exhibit 1 Form Build Supplement
Exhibit 2 Description of NYC and CSXT Corridor
Exhibit 3 Depiction of Radii Around Tier Cities
Exhibit 4 Designation of Tier Cities
Exhibit 5 Depiction of [* * *] and [* * *] Builds
Exhibit 6 Initial Designation of NYC Corridor
Exhibit 7 [* * *]
</TABLE>
<PAGE>
FIBER OPTIC ACCESS AND LICENSE AGREEMENT
THIS FIBER OPTIC ACCESS AND LICENSE AGREEMENT (this "License Agreement") is
made as of March 30, 2000 ("Effective Date"), by and between CSX TRANSPORTATION,
INC., a Virginia corporation ("CSXT"), for itself and as operator for New York
Central Lines LLC, a Delaware limited liability company ("NYC Lines") and a
wholly owned subsidiary of Consolidated Rail Corporation, a Pennsylvania
corporation (CSXT and NYC Lines, collectively, the "Railroad"), whose mailing
address is 500 Water Street, Jacksonville, Florida 32202, and PATHNET
TELECOMMUNICATIONS, INC., a Delaware corporation ("Pathnet"), whose mailing
address is 1015 31st Street, N.W., Washington, D.C. 20007.
R E C I T A L S:
A. Railroad is the owner or operator of a continuous right-of way (by fee,
easement, license, operating agreement, joint use agreement or other interest)
within certain real property upon which it operates an interstate rail
transportation system, as shown on Railroad's current System Map (hereinafter
referred to as the "Rail Corridor").
B. Pursuant to the Contribution Agreement and Stockholder Agreement being
executed in connection herewith, Pathnet desires to enter into an agreement with
Railroad to permit Pathnet to install, market, sell and/or maintain a Fiber
Optic Communication System, including Conduit (Innerduct), Cable, Optical Fibers
and related equipment and structures, along, in and on up to [ * * * ] miles of
Rail Corridor, along Segments of the Rail Corridor to be selected in accordance
herewith.
C. Pursuant to the Contribution Agreement and Stockholder Agreement being
executed in connection herewith, Railroad is willing to transfer certain
property interests to Pathnet in exchange for stock in Pathnet, provided that
Pathnet accepts a license to use the selected Segments of the Rail Corridor
subject to all of the terms and conditions of this License Agreements and the
Right of Way Operating Agreement being entered into by and between Railroad and
Pathnet concurrently herewith (hereinafter, the "Operating Agreement" and,
together with this License Agreement, the "Agreements"), which Agreements
provide, among other things, that (i) the license granted thereby shall be
subject to the existing rights and interests of other parties, including,
without limitation, [ * * * ] and [ * * * ], and (ii) Railroad makes no
representation or warranty with respect to its right, title or interest, if any,
in and to any portion of the Rail Corridor or its right to grant any type of
license or other right for any party, including Pathnet, to use or occupy the
same.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Railroad and Pathnet hereby agree as
follows:
2
<PAGE>
1. CERTAIN DEFINITIONS.
1.1 General Interpretive Principles. For purposes of this License Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
(i) the terms defined in this Section have the meanings assigned to them in this
Section and include the plural as well as the singular, and the use of any
gender in this License Agreement shall be deemed to include the other gender;
(ii) the word "including" means "including, but not limited to," and (iii) the
article, section and paragraph headings in this License Agreement are for
convenience only and are not intended to describe, interpret, define or limit
the scope, extent, or intent of any of the provisions of this License Agreement.
1.2 Incorporation of Recitals. The Recitals set forth above are
incorporated herein by this reference.
1.3 Definitions. As used in this License Agreement, the following terms
shall have the following respective meanings (unless otherwise expressly
provided):
"Affiliate" shall mean any Person that, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, another Person. The term "control," for this purpose, shall mean
the ability, whether by the ownership of shares or other equity interest, by
contract or otherwise, to elect a majority of the directors of a corporation,
independently to select the managing partner of a partnership or the managing
member of a limited liability company, or otherwise to have the power
independently to remove and then select a majority of those Persons exercising
governing authority over an entity. Control shall be conclusively presumed in
the case of the direct or indirect ownership of fifty percent (50%) or more of
the equity interests in an entity.
"Agreements" shall be as defined in Recital C.
"Broadform Telecommunications Rights" shall mean, exclusive of the Limited
Telecommunications Rights granted hereunder, the right of owners of and other
parties with interests in the land underlying the Rail Corridor to license
generally, for telecommunications purposes, any and all portions of Rail
Corridor.
"Build Supplement" shall have the meaning set forth in Section 2.6 below
"Cable" shall mean a single cable containing Optical Fiber, and any
support material and protective casing, capable of transmitting data or voice
communications in a Fiber Optic Communication System.
"Conduit (Innerduct)" shall mean a single duct or pipe, not exceeding two
inches (2") inside diameter (or similar cross sectional equivalent), except
where specifically required or approved by Railroad, suitable for housing a
Fiber Optic Cable.
"Construction Exclusivity" shall have the meaning set forth in Section 4.2
below.
"Construction Plans" shall mean the drawings, plans and specifications for
the construction and installation of Pathnet's System and Facilities, showing
the proposed location of all Pathnet's System and Facilities, in sufficient
detail, with distance shown from nearest track, with separate detailed drawings
of all junction, Repeater (Regen) Sites, bridge and tunnel occupancies, showing
depth of installation, details and methods
3
<PAGE>
of the proposed construction, with numbers and size of Conduit(s) (Innerduct(s))
to be placed, including Optical Fiber count and total mileage for each Segment.
Construction Plans shall clearly note Railroad Valuation Map references,
Railroad Survey Station and Milepost references for all beginning and ending
points and all alignment transition points. Each set of Construction Plans for
each Segment shall have an overview map showing all of the required information.
"Construction Schedule" shall have the meaning set forth in Section 2.6
below
"Contribution Agreement" shall mean that certain Contribution Agreement
dated as of _____________, 1999 by and between, among others, Railroad and
Pathnet.
"CSX Conduits" shall have the meaning set forth in Section 8.5 below.
"CSXT Corridor" shall mean, subject to Section 2.1 of this Agreement, all
of the Rail Corridor exclusive of the NYC Corridor, as described in Exhibit 2,
attached hereto and incorporated herein.
"Designated Rail Corridor" shall mean a Segment of the Rail Corridor
selected by Pathnet and approved by Railroad in accordance with the terms of the
Agreements.
"Designation Period" shall have the meaning set forth in Section 2.6
below.
"Exclusivity Period" shall have the meaning set forth in Section 4.2
below.
"Facilities", when applied to property of or installed by Pathnet, shall
mean Conduit (Innerduct), Cable, carrier pipes, Pathnet wires and poles, Optical
Fibers, junctions, Repeaters (Regens), Handholds, terminals, power sources,
fault alarm system(s), emergency equipment storage shelters, attachments, and
all other structures and articles of personal property connected with, necessary
for, appurtenant to, or useful to the installation, operation, maintenance,
repair, re-installation, replacement, relocation or removal of Pathnet's Fiber
Optic Communication System.
"Fiber Optic" or "Optical Fiber" shall mean a strand of optical waveguide
permitting the transmission of communications signals.
"Fiber Optic Communication System" or "System" shall mean the system
utilizing Optical Fiber as the medium for communications and transmission to be
installed by Pathnet in the Designated Rail Corridor, which may contain
Conduit(s) (Innerducts(s)), Cable(s) and Optical Fiber(s). Such terms shall
include all Conduit (Innerduct), Cable, Optical Fiber, Handholds, manholes,
marker tape, signs, coupler, structure attachment, pull rope, other necessary
ancillary hardware, and bridge, tunnel and trestle attachments, and shall also
include such communications technologies as may hereafter evolve from or
relating to Optical Fiber but which utilize Pathnet's Facilities and/or System
as initially installed or as thereafter modified pursuant to the Agreements.
"Handholds" shall include Cable loops, or boxes or vaults placed in or
above ground at junctions, Repeaters (Regens) or at areas of Cable splicing and
connection, for storage of slack Cable.
"Interest Notice" shall have the meaning set forth in Section 4.2 below.
"License" shall have the meaning set forth in Section 2.1 below.
"Limited Telecommunications Rights" shall mean Pathnet's right to
construct, install, operate, repair and maintain the Facilities and System as
more particularly described in, and subject to the terms and conditions of, the
Agreements, including, without limitation, those contained in Article 6 of the
License Agreement.
"Negotiation Exclusivity" shall have the meaning set forth in Section 4.2
below.
"NYC Corridor" shall mean that certain portion of the Rail Corridor
operated by CSXT pursuant to that certain Operating Agreement dated as of June
1, 1999 by and
4
<PAGE>
between NYC Lines, as owner, and CSXT, as operator, as described in Exhibit 2,
attached hereto and incorporated herein.
"Operating Agreement" shall have the meaning set forth in Recital C above.
"Optical Fiber" shall mean Fiber Optic.
"Person" shall mean any individual, association, partnership, limited
liability company, corporation, joint stock company, trust, joint venture,
unincorporated organization or governmental entity or any department, agency or
political subdivision thereof.
"[ * * * ] Obligations" shall mean that Railroad, in accordance with that
certain Agreement, dated as of [ * * * ], between Railroad and [ * * * ], now
known as [ * * * ], shall refer Pathnet's Route Plan on CSXT Corridor to [ * * *
], in writing, and [ * * * ] shall have ten (10) business days from receipt to
confirm its intent to negotiate with Pathnet for the installation of a proposed
portion of the Pathnet System. If [ * * * ] declines to negotiate with Pathnet
or fails to advise Railroad of its intent to negotiate within ten (10) business
days following its receipt of notification, the terms of this Agreement shall
become operative as to the Build Supplement evidenced by the Route Plan, except
in those areas subject to the following exclusivity provisions. In addition, [ *
* * ] has exclusivity on those segments of CSXT Corridor on which [ * * * ] has
commenced installation of its fiber optic communications system. Such
exclusivity does not apply: (i) to any segment in which all conduit or fiber
optic capacity has been sold or utilized; and (ii) to third party installations
of ten (10) miles or less.
"Rail Corridor" shall have the meaning set forth in Recital A above.
"Railroad Duct" shall have the meaning set forth in Section 8.1 below.
"Repeater (Regen)" shall mean a device which regenerates, amplifies or
extends optical signals, used to send the light impulse through Optical Fiber,
and includes attendant equipment, facilities, power source, and technological
changes.
"Repeater (Regen) Sites" shall mean those permitted portions of the Rail
Corridor on which Repeaters (Regens) are located, and shall be limited to an
area of five hundred (500) square feet or less, and located beyond the
Restricted Working Area, unless otherwise specifically permitted in writing by
Railroad.
"Restricted Working Area" shall mean the area parallel to and located
thirty feet (30') (or the top of any ditch slope if that distance is greater
than thirty feet (30')) from the centerline of the outermost track (on each
side) in the Rail Corridor.
"Segment" shall mean either a longitudinal section of Rail Corridor or a
longitudinal section of Conduit (Innerduct) or Cable installed by Pathnet, as
applicable.
"Stockholder Agreement" shall mean that certain Stockholder Agreement
dated on or about the date hereof by and between, among others, Railroad and
Pathnet.
"Substitution Notice" shall have the meaning set forth in Section 4.2
below.
"System" shall mean Fiber Optic Communication System.
"System Map" shall mean Railroad's line map, published periodically,
designating the general location of the Railroad's operating lines.
5
<PAGE>
"Term" shall have the meaning set forth in Section 3.1 below.
"Title Deficient Areas" shall mean those portions of the Rail Corridor, if
any, for which Railroad holds title in less than fee simple absolute and for
which Railroad may not otherwise have the right to grant to Pathnet the license
for use and occupancy as contemplated by this License Agreement.
"Trackage Rights" shall mean the rights arising by agreement of one
railroad to use the tracks or right-of-way of another railroad for the carriage
of rail traffic; said agreement ordinarily imparting no ownership interest in
the burdening carrier relating to the tracks or rights-of-way of the burdened
carrier.
"[* * *] Obligations" shall mean that in CSXT Corridor occupied by a fiber
optic communications system installed by [* * *] (or any predecessor entity)
(collectively "[* * *]") or, in any CSXT Corridor over which [* * *] has
exercised its option to install its system within the preceding [* * *] prior to
the date of the applicable Build Supplement, Pathnet's System shall not be
installed in any length longer than [* * *] contiguous miles and no closer than
[* * *] from any existing [* * *] facility. For the purposes of this limitation
only, any two (2) Segments of Pathnet's Fiber Optic Communications System of
which the respective ends are less than [* * *] apart shall be deemed a single
Segment and the aggregate length of such two (2) Segments (but not the length
between the respective ends of such Segments) shall be considered in determining
contiguous mileage.
2. LICENSE
2.1 Grant of License. (a) Subject to the terms and conditions contained in
the Agreements, including, without limitation, Article 6 of this Agreement,
Railroad hereby grants to Pathnet a license of Limited Telecommunications
Rights, for the Term and upon the conditions, covenants and agreements set forth
in the Agreements, to select up to [* * *] miles of Rail Corridor (including up
to 2,000 miles of NYC Corridor) to be designated (as provided herein and subject
to Railroad's approval rights as set forth in the Agreements) as Designated Rail
Corridor and to use such Designated Rail Corridor for the purpose of
constructing, installing, operating, maintaining, repairing, replacing and
removing (and including rights of access subject to the conditions, covenants
and agreements set forth in the Agreements) a Fiber Optic Communications Systems
containing no more than eight (8) Conduits (Innerducts) and an unlimited number
of Optical Fibers therein, together with necessary appurtenant equipment and
structures (the "License"). Subject to Railroad's prior consent, which may be
withheld in Railroad's sole discretion, Pathnet may install additional Conduits
(Innerducts), if Railroad and Pathnet can reach agreement on how to share in the
revenue resulting from sales of such Conduits (Innerducts) or the Optical Fiber
contained therein.
(b) With respect to CSXT Corridor located within the State of [* *
*], Pathnet acknowledges the pendancy of certain class action litiga- tion
concerning the use of railroad rights of way by telecommunications companies.
During the pendancy of this or any related litigation, Pathnet shall not have
any right under this Agreement to install its System or Facilities upon CSXT
Corridor in the State of [* * *] without the prior written consent of Railroad,
which shall not be unreasonably withheld, provided however, that if the court
rules that telecommunications companies (such as Pathnet), cannot install their
systems and facilities on such rights of way, Pathnet shall have the obligation,
prior to the installation of any portion of its System or Facilities on the CSXT
Corridor in the State of [* * *], to acquire Broad- form Telecommunications
Rights sufficient in Railroad's reasonable discretion to authorize such
installation. Pathnet understands and agrees that any Broadform
Telecommunications Rights acquired by Pathnet are subject to the terms and
conditions of this License Agreement.
2.2 Acknowledgement of Condition of Title. Pathnet understands,
acknowledges and agrees that (a) portions of the Designated Rail Corridor may be
in Title Deficient Areas, and (b) Pathnet accepts the License in any Title
Deficient Areas
6
<PAGE>
subject to the terms and conditions of the Agreements. Subject to the
provisions of this Article 2, with respect to any Segment of the Designated Rail
Corridor in Title Deficient Areas, the License herein granted Pathnet shall
include the additional right in favor of Pathnet to procure all Broadform
Telecommunications Rights from third parties as Pathnet determines are necessary
to enable it to construct, install, operate, maintain, repair, replace and
remove Pathnet's Facilities and System in such Title Deficient Areas provided
that Pathnet shall not acquire exclusive Broadform Telecommunications Rights
(such that the underlying fee owner no longer has the right to grant such rights
to third parties) without the prior written consent of Railroad, which may be
withheld in Railroad's sole discretion. All provisions of the Agreements,
including, but not limited to, Pathnet's obligations for the payment or other
delivery of the consideration described in this License Agreement, shall apply
as between Railroad and Pathnet with respect to any Title Deficient Areas,
notwithstanding that Pathnet's right to occupy the Title Deficient Areas is or
may be derived, in whole or in part, from Broadform Telecommunications Rights
obtained by Pathnet from third parties. The License is made and given subject to
the [* * *] Obligations, the [* * *] Obligations and the rights and interests of
all other third parties, existing as of the Effective Date or the date of any
Build Supplement.
2.3 Operating Agreement. The parties acknowledge and agree that the
License shall be exercised in accordance with the terms and provisions of this
License Agreement and the Operating Agreement, the terms of which are
incorporated herein by this reference. In the event of any conflict between the
Operating Agreement and this License Agreement with respect to any rights or
obligations under this License Agreement, the terms of this License Agreement
shall control. Notwithstanding any contrary provision in the Agreements, the
parties agree that (i) any dispute relating to this License Agreement, except a
dispute arising under Section 8.5 hereof, shall not be subject to Article 25
(Liaison; Coordination and Dispute Resolution) of the Operating Agreement, it
being the specific intention of the parties to litigate any and all disputes
hereunder, without resort to arbitration or mediation, and (ii) the
indemnification provisions contained in this License Agreement shall not be
governed or affected by Article 17 (Liability; Indemnity) of the Operating
Agreement.
2.4 Transfer of Broadform Telecommunications Rights. In the event that
Pathnet obtains Broadform Telecommunications Rights with respect to any Title
Deficient Areas that provide use and occupancy rights in excess of the Limited
Telecommunications Rights granted by Railroad to Pathnet pursuant to the
Agreements, then Pathnet shall immediately offer, by way of assignment, to
convey such Broadform Telecommunications Rights to Railroad. Upon receipt of
Pathnet's offer of assignment, Railroad shall promptly determine, in its sole
and absolute discretion, to accept such assignment or reject the same. In the
event Railroad accepts such assignment, Railroad shall pay to Pathnet, fifty
percent (50%) of the actual direct out of pocket costs (exclusive of Pathnet's
internal overhead) incurred by Pathnet in connection with the acquisition of
such rights together with the actual direct costs including overhead of any
Pathnet field personnel to the extent dedicated to such acquisition.
7
<PAGE>
2.5 Sublicenses. Pathnet may sell, lease, license, or otherwise grant
rights in and to Optical Fibers, telecommunications capacity, Conduit
(Innerduct) or other portions of Pathnet's System on such terms as Pathnet may
determine in its sole discretion. Pathnet may also involve customers or
co-development or strategic partners in the installation of Pathnet's System on
Designated Rail Corridors on such terms as Pathnet determines, in its sole
discretion. Any such arrangements shall be expressly subject and subordinate to
the terms and conditions of the Agreements, Pathnet shall remain fully liable
for its obligations under the Agreements, Pathnet shall remain the sole point of
contact with Railroad in connection with such arrangements, and Pathnet shall be
responsible for and shall supervise any and all activities on or affecting the
Designated Rail Corridor. Pathnet shall have no right to sell, sublicense or
otherwise transfer the right to access any portion of the Designated Rail
Corridor to a third party without the prior written consent of Railroad, which
consent may be withheld in Railroad's sole discretion.
2.6 Selection and Development of Rail Corridor. Pursuant to one or more
supplements to this License Agreement, the form of which is attached hereto as
Exhibit 1 (each a "Build Supplement"), Pathnet shall, except as otherwise
provided herein, designate as Designated Rail Corridor for its System and
Facilities up to the maximum number of miles of Rail Corridor authorized
hereunder. Pathnet may designate such Designated Rail Corridor at any time
during the first [* * *] years after the Effective Date (the "Designation
Period"). Railroad shall approve each Build Supplement within thirty (30) days
of submission thereof unless such approval cannot be granted due to existing
contractual or other legal limitations, safety concerns, operational or
engineering conflicts or interference with existing or foreseeable future
development of the Rail Corridor for railroad purposes. Designation of the Rail
Corridor pursuant to an approved Build Supplement shall remove the designated
mileage from the mileage bank granted under this License Agreement. Together
with each Build Supplement, Pathnet shall also submit a proposed schedule of
construction (the "Construction Schedule") of its System and Facilities over the
Segment designated in the Build Supplement. Railroad shall have the right, to be
exercised in its reasonable discretion within thirty (30) days after submission,
to approve or reject any proposed Construction Schedule (giving the reasons for
any such rejection and leave for Pathnet to resubmit such Construction Schedule
within the Designation Period), provided that Pathnet shall commence physical
installation of Conduit (Innerduct) in the ground no sooner than sixty (60) days
after Railroad's approval of the Build Supplement and Construction Schedule, but
no later than three (3) years of Pathnet's submission of the applicable Build
Supplement, unless otherwise provided herein. If Pathnet fails to timely
commence such physical installation, Pathnet shall be prohibited from installing
any portion of its Facilities or System within such Segment and shall not be
entitled to any refund of the miles deducted (from the mileage bank granted
hereunder) as a result of such Build Supplement, provided that Pathnet may
submit a second Build Supplement and Construction Schedule for such Segment
during the Designation Period (which second submission shall be treated as an
initial submission hereunder).
8
<PAGE>
3. TERM
3.1 Term. Unless sooner terminated in accordance with the provisions of
the Agreements, the License, the Agreements and the rights granted under any
Build Supplement shall be for a term commencing as of the Effective Date and
ending thirty (30) years hence (the "Term").
4. EXCLUSIVITY
4.1 Exclusive Rights. Except as set forth below in this Article 4,
Pathnet's rights and interests under the License and with respect to the
Designated Rail Corridor (including those portions of the Designated Rail
Corridor for which Pathnet obtains Broadform Telecommunication Rights) shall be
non-exclusive.
4.2 NYC Corridor Development. For a period of three (3) years from the
Effective Date hereof (the "Exclusivity Period"), with respect to the Segments
of the NYC Corridor (up to a maximum of 2,000 miles) designated by Pathnet upon
execution of this License Agreement as set forth in Exhibit 6 hereof, Pathnet
shall have the exclusive right to place and operate its System and Facilities
within such Segment(s) (the "Construction Exclusivity"); provided, however, that
the foregoing exclusivity right will not apply to any Segment of less that [* *
*] unless either (i) the Segment connects two cities in which Pathnet
establishes a point of presence; or (ii) the Segment connects Pathnet's network
on property that is not within the NYC Corridor to a city on the NYC Corridor in
which Pathnet establishes a point of presence. Notwithstanding the foregoing,
Pathnet will not have exclusivity rights within the radii around the cities
designated on Exhibits 3 and 4, attached hereto and incorporated herein. For the
four (4) years following the expiration of the Exclusivity Period (although the
foregoing exclusivity shall no longer apply), Railroad shall promptly notify
(the "Interest Notice") Pathnet in writing of any serious inquiries from third
parties who wish access to a Segment of the NYC Corridor which Pathnet and
Railroad have executed a Build Supplement for construction and installation of
Pathnet's System and/or Facilities. Within ten (10) days after its receipt of
the Interest Notice, Pathnet shall notify Railroad if it has a good faith
interest in pursuing negotiations with the interested third party. If Pathnet
fails to notify Railroad that it has an interest within such ten (10) day
period, then Pathnet shall be deemed to have conclusively waived its right to
negotiate with such third party. If Pathnet notifies Railroad that it is
interested in such negotiations within such ten (10) day period, Pathnet shall,
for a period of [* * *] after Pathnet's receipt of such Interest Notice, have
the exclusive right to negotiate with such third party with respect to
9
<PAGE>
such third party's access, construction, installation and/or use of a fiber
optic communications system along such Segment (the foregoing rights,
collectively "Negotiation Exclusivity"). If Pathnet and such third party have
not executed a definitive agreement within such [* * *] period, Railroad shall
be free to negotiate and enter into an agreement with such third party for the
development of the referenced Segments of the NYC Corridor. Upon written notice
to Railroad (the "Substitution Notice"), Pathnet may substitute additional
Segments of NYC Corridor for Segments of NYC Corridor previously designated in
Exhibit 6, provided that (i) any such substitute NYC Corridor shall be subject
to the rights of third parties in such NYC Corridor as of the date of the
Substitution Notice; (ii) the aggregate mileage of Pathnet's designation of NYC
Corridor (after deducting the mileage of the originally designated Segment(s)
and adding the mileage of the substitute Segment(s)) does not exceed 2,000
miles; (iii) the Construction Exclusivity which initially attached to the
originally designated Segment(s) shall no longer apply to such Segment(s) after
the Substitution Notice; (iv) no Construction Exclusivity shall attach to the
substitute Segment(s); and (v) with respect to such substitute Segment(s), the
Negotiation Exclusivity shall commence upon the date of completion of such
substitute Segment(s) and shall continue for a period of four (4) years
following the expiration of the Exclusivity Period (even though the Construction
Exclusivity shall not apply).
4.3 Third Party Non-Exclusive Grants. Except as provided in Section 4.2
above, Railroad may grant development rights for fiber optic and other
communication systems in the Rail Corridor (including the Designated Rail
Corridor) to any third party on a non-exclusive basis.
4.4 Third Party Exclusive Grants. Except as provided in Section 4.2 above,
Railroad may grant development rights for fiber optic and other communication
systems in the Rail Corridor (including the Designated Rail Corridor) to any
third party on an exclusive basis; provided, however, that Pathnet shall not be
subject to such exclusivity provisions.
4.5 Additional Restrictions. In addition to the foregoing restrictions,
Pathnet represents that (i) Pathnet will commence and diligently pursue to
completion the installation of its System and Facilities over five hundred (500)
miles of NYC Corridor in each of the first three (3) years after the Effective
Date hereof; and (ii) in all stages of its development of the NYC Corridor,
seventy five percent (75%) of the Designated Rail Corridor miles completed and
under development (in accordance with the applicable Construction Schedule(s))
will be in contiguous segments of at least two hundred (200) miles each. In the
event Pathnet breaches either of these representations, then as Railroad's sole
and exclusive remedy, Pathnet will automatically lose Construction Exclusivity
as to the entirety of the NYC Corridor except as to those Segments of NYC
Corridor which Pathnet has completed in accordance with this Section 4.5,
provided that Pathnet shall be entitled to Negotiation Exclusivity commencing on
the date of completion of any Segment(s) for which Construction Exclusivity was
lost hereunder and continuing for a period of four (4) years following the
expiration of the Exclusivity Period (even though the Construction Exclusivity
shall not apply).
5. EQUITY CONSIDERATION
5.1 Consideration. As consideration for the License, Railroad shall
receive an equity interest in Pathnet pursuant to the Contribution Agreement.
6. TITLE LIMITS.
6.1 General. Pathnet understands and acknowledges that Railroad occupies,
uses and possesses lands, rights-of-way and rail corridors under all forms and
qualities of ownership rights or facts, from fee simple absolute to bare
occupation. Accordingly, nothing in the Agreements shall act as or be deemed to
act as any warranty, guaranty or
10
<PAGE>
representation of the quality or quantity of Railroad's title in and to any
particular Segment occupied, used or enjoyed in any manner by Pathnet under any
rights created in the Agreements. It is expressly understood that Railroad does
not warrant title to any portion of the Rail Corridor, and Pathnet hereby
accepts the grants and privileges contained herein, subject to all lawful
outstanding existing liens, mortgages and superior rights or interests in and to
the Rail Corridor, and all leases, licenses and easements or other interests
previously granted to or reserved by others therein.
6.2 Limitations of License. The term "License" herein shall mean: (a) with
regard to any portion of Rail Corridor which is owned by Railroad in fee simple
absolute or in which the uses contemplated hereunder are otherwise statutorily
authorized or approved by the state in which such Rail Corridor is located,
merely a "license"; (b) with regard to any portion of Rail Corridor owned,
occupied, used or controlled by Railroad in less than fee simple absolute (e.g.,
fee simple determinable, fee simple conditional, lease or rail easement or other
occupancy right), where the applicable law permits such grants by Railroad to
Pathnet, merely "a right of occupancy" commensurate with the term and extent of
Railroad's ownership, occupancy, etc; and (c)with regard to any portion of Rail
Corridor for which Railroad does not possess the right to license the same to
third parties for telecommunications purposes, the Agreements shall not convey
any rights to Pathnet except that Railroad merely waives its exclusive rights to
occupy, use and/or control the Rail Corridor commensurate with the term and
extent of such Railroad rights.
6.3 Broadform Telecommunications Rights. Pathnet understands and agrees
that the rights conveyed hereunder may not be sufficient to permit installation
of its System and Facilities at all desired locations throughout the Designated
Rail Corridor. Accordingly, except as otherwise provided herein, Pathnet may, as
Pathnet reasonably deems necessary, obtain Broadform Telecommunication Rights in
accordance herewith before commencing construction on any Segment, provided,
however, that Pathnet understands and agrees that any such Broadform
Telecommunications Rights acquired by Pathnet within the Designated Rail
Corridor are subject to the terms and conditions of this License Agreement.
6.4 Waiver of Claims. Pathnet agrees it shall not have and hereby
completely and absolutely waives its right to any claim against Railroad for
damages or any other legal or equitable relief on account of any deficiencies in
title to the Designated Rail Corridor.
6.5 Indemnity. In addition to the indemnities contained in the Operating
Agreement, Pathnet shall indemnify, defend (at Pathnet's sole cost and expense,
with counsel selected and controlled by Railroad, if Railroad so requests) and
hold Railroad and its Affiliates, officers, directors, employees and agents
harmless from and against all claims or litigation for trespass, slander of
title, overburden of easement, or any other claims arising out of or based upon
(i) Pathnet's Conduit (Innerduct), Cable or Optical Fiber placement, or (ii) the
presence of Pathnet's Conduit (Innerduct), Cable or Optical
11
<PAGE>
Fiber or other Facilities in, on or along the Designated Rail Corridor, or (iii)
Pathnet's failure to obtain sufficient Broadform Telecommunications Rights, or
(iv) the presence of Pathnet's purchasers, sublicensees, customers,
co-development or strategic partners, agents, invitees, their respective
employees or any other third party acting for the benefit or at the direction of
Pathnet or any such third party, on the Designated Rail Corridor, or their
individual or collective use of Pathnet's Conduit (Innerduct), Cable or Optical
Fiber or other Facilities in, on or along the Designated Rail Corridor, or (v)
the title related claims of Pathnet's purchasers, sublicensees, customers,
co-development or strategic partners, agents, invitees, their respective
employees or any other third party acting for the benefit or at the direction of
Pathnet or any such third party, including all claims for damages, including,
but not limited to, civil, criminal, compensatory, consequential, direct,
indirect, treble, exemplary, special, punitive and all other damages or
penalties of any kind available at law or in equity.. This indemnity shall
survive the expiration or termination of the Agreements. The foregoing indemnity
shall not be deemed to apply to any of the foregoing claims, liabilities, costs
or expenses to the extent attributable to Railroad's own operations or to
Railroad's grant of rights of way for fiber optic, utility or other uses to any
parties other than Pathnet.
6.6 [* * *] Obligations and [* * *] Obligations. The License and all other
rights and interests granted pursuant to the Agreements and all of the terms and
provisions of the Agreements are made expressly subject to the [* * *]
Obligations and the [* * *] Obligations. The parties acknowledge that the [* *
*] Obligations and the [* * *] Obligations affect all or part of the CSXT
Corridor. The portions of the CSXT Corridor over which [* * *] and [* * *] have
installed conduit are depicted on Exhibit 5, attached hereto and incorporated
herein. Railroad shall promptly give written notice to Pathnet of all future
installations and/or designations of CSXT Corridor by Pathnet and [* * *].
Nothing in this paragraph will be deemed to expand the [* * *] or [* * *]
Obligations beyond the scope of such obligations arising pursuant to the
agreements between Railroad and [* * *] and [* * *], respectively.
7. THIRD PARTY JOINT FACILITIES AND TRACKAGE RIGHTS.
7.1 This Agreement does not pertain to any occupancies over or structures
upon rights-of-way owned jointly by Railroad with another Person which is not an
Affiliate of Railroad or upon any Rail Corridor on which Railroad has only
Trackage Rights. Railroad, however, agrees to reasonably cooperate with and
assist Pathnet in obtaining any approvals of third parties necessary to permit
Pathnet to use any such jointly owned rights-of-way, and agrees not to block
Pathnet's application to use any portion of the Rail Corridor on which Railroad
only has Trackage Rights; provided, however, that Pathnet shall reimburse
Railroad, upon demand, for any costs, including reasonable attorneys' fees,
incurred by Railroad in connection with such cooperation. The portion of the
Rail Corridor over which Railroad possesses only Trackage Rights are depicted on
the Railroad System Map which has been made available to Pathnet.
8. CONDUIT (INNERDUCT); FIBER; AND CAPACITY.
12
<PAGE>
8.1 Railroad Ducts and Signal Cable. Pathnet, at its sole cost and
expense, shall install one (1) two-inch (2.0") SDR-11 or equivalent single duct
or pipe, of not less than one and nine-tenths inches (1.9") inside diameter for
Railroad (the "Railroad Duct"). The Railroad Duct shall be installed by Pathnet
along the entire length of Designated Rail Corridors in which Pathnet installs
the Pathnet System and where installation of such Railroad Duct in addition to
the Conduits (Innerducts) to be installed by Pathnet, is physically feasible,
with such installation to be concurrent with Pathnet's Conduit (Innerduct)
installation. The Railroad Duct shall become the sole property of Railroad upon
installation, and Railroad, its successors and/or assigns, shall have the
exclusive right of use of such Railroad Duct. To the extent assignable, Pathnet
shall assign to Railroad, without charge, any service and product warranties
relating to such Railroad Duct that it obtains from its manufacturer and/or
installation contractor(s). The Railroad Duct may be used only for Railroad's
internal communications needs, and neither the Railroad Duct, nor Optical Fiber
therein, nor telecommunications capacity thereon, may be sold, assigned, leased,
licensed, or otherwise made available to third-parties, or used in connection
with any telecommunications business, until the earlier of (a) five (5) years
after completion of construction of the relevant Segment containing the Railroad
Duct, (b) the sale, option to purchase, or use by Pathnet of all installed
Conduits (Innerducts) or Optical Fibers on such Segment other than those held in
reserve by Pathnet, or (c) ten (10) years from the Effective Date hereof.
8.2 Fiber Optic Capacity.
A. Pathnet will provide up to [* * *] at no charge to Railroad, provided
that the maximum number of [* * *] miles shall not exceed [* * *] miles. Such
mileage shall be calculated in straight line (i.e. airline) miles, not route
miles. Pathnet will make such capacity available to Railroad at Pathnet's points
of presence, including at any central office where Pathnet is co-located, where
Pathnet has equipment in place to offer [* * *] service. Notwithstanding the
foregoing, Pathnet agrees that if and when it offers services in the cities
listed on [* * *] Pathnet will install equipment to offer [* * *] service and
will provide such [* * *] service to Railroad pursuant to this Agreement.
Railroad will be responsible for any costs required to transport such capacity
from Pathnet's point of presence to Railroad's required point of termination,
including costs of interconnection, provisioning, co-location of additional
required equipment, and the cost of any local loop, leased lines, or other means
of transport. At Railroad's request, Pathnet will arrange such transport and
interconnection costs, provided Railroad reimburses Pathnet for all actual and
reasonable costs incurred by Pathnet in connection therewith, including internal
costs, but excluding any overhead, without mark-up for profit. Prior to
incurring any such costs, Pathnet will discuss such arrangements with Railroad
so that the parties may identify the most cost-effective solution.
B. The maximum cross-section of the capacity provided to Railroad pursuant
to this Section at any point shall not exceed [* * *] of the total capacity of
Pathnet's network at such point. In addition, the number of [* * *] terminated
at any point shall not exceed [* * *] of the capacity terminated at such point.
C. The capacity described in this Section may be utilized by Railroad and
its Affiliates for its internal communications only, and may not be sold,
assigned, leased, licensed, or otherwise made available to third-parties.
8.3 Ability to Purchase Telecommunications Capacity. CSX shall also have
the right, subject to availability as determined by Pathnet in its reasonable
discretion, to purchase telecommunications capacity anywhere on Pathnet's entire
fiber optic communications system at prices at least as favorable as Pathnet is
then offering as its best rate to other unrelated parties for like amounts of
telecommunications capacity in like markets. The foregoing capacity may be used
only for Railroad's or any Railroad Affiliate's internal communications needs,
and may not be sold, assigned, leased, licensed, or otherwise
13
<PAGE>
made available to third-parties.
8.4 Last Available Build in Segment. If, in any Segment of Designated Rail
Corridor, Railroad determines that it is likely that Pathnet's construction
will, due to engineering or construction limitations, be the last Conduit
(Innerduct) placed or constructed within such Segment, Railroad may require
Pathnet to build additional Conduits (Innerducts) for Railroad's benefit. In
such event Railroad will pay a sum equal to the ratio of the additional
Conduit(s) (Innerduct(s)) installed in such Segment to the total number of
Conduits (Innerducts) installed therein, multiplied by the total actual direct
out of pocket costs (exclusive of Pathnet's internal overhead) of the entire
installation together with the actual costs (including overhead) of any Pathnet
field personnel to the extent dedicated to such installation. The foregoing
additional Conduits (Innerducts) will be subject to the same restrictions as
apply to the Railroad Duct.
8.5 Boston to Framingham Conduits (Innerducts). On the Effective Date
hereof, Pathnet shall submit a Build Supplement and Construction Schedule for
the development of the Segment of Rail Corridor between Boston and Framingham,
provided that, notwithstanding any provision hereof to the contrary, Pathnet
shall commence physical installation of Conduit (Innerduct) in such Segment
within one (1) year of the Effective Date hereof. In connection with such
installation, Pathnet shall also install, at Pathnet's sole cost and expense,
four (4) two inch (2") Conduits (Innerducts) for Railroad's exclusive use and/or
for sale by Railroad to third parties (the "CSX Conduits"). The CSX Conduits
shall be in lieu of the Railroad Duct to be installed along such Segment by
Pathnet in accordance with Section 8.1. In the event that Pathnet determines
that the Boston to Framingham Segment is not commercially practicable (taking
into consideration Pathnet's obligation to install the CSX Conduits), Pathnet
shall not be obligated to install such Segment, provided that, in recognition of
the value of the CSX Conduits to Railroad, which constituted a material aspect
of the bargain achieved through the Agreements, Pathnet and Railroad shall
negotiate, in good faith, for Pathnet to deliver equivalent value to Railroad
pursuant to a mutually agreed alternative. If the parties are unable to agree
upon such mutually agreed alternative, the dispute shall be subject to Article
25 (Liaison; Coordination and Dispute Resolution) of the Operating Agreement.
9. DISCLAIMER
9.1 Disclaimer Relating to Certain Information. Railroad does not warrant
the accuracy of those maps, descriptions and depictions attached hereto as
Exhibits 2, 3 and 5, nor does it warrant the accuracy of the Railroad Valuation
Maps or the Railroad System Map. Railroad states that such items were prepared
and are utilized in the ordinary course of Railroad's business. With respect to
Exhibit 5 only, Railroad's Assistant Vice President, T. R. Jackson, represents
that such Exhibit accurately depicts the current status of the occupancies of [*
* *] and [* * *] on CSXT Corridor, to the best of his knowledge.
IN WITNESS WHEREOF, the undersigned have executed this License Agreement
as of the Effective Date.
14
<PAGE>
CSX TRANSPORTATION, INC.,
a Virginia corporation, for itself and as Operator
for New York Central Lines, L.L.C.
By: /s/ J Randall Evans
---------------------------------
Title: ___________________________
PATHNET TELECOMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Richard Jalkut
--------------------------------
Title: CEO
--------------------------------
15
<PAGE>
EXHIBIT 1
NYC BUILD SUPPLEMENT NO. -------
Utility Project Name:______________________________________________________
Segment:___________________________________________________________________
Railroad Project Name:_____________________________________________________
THIS BUILD SUPPLEMENT NO._______ ("Build Supplement") is made as of this
_______ day of ____________________, _______ (the "Effective Date"), between CSX
TRANSPORTATION, INC., a Virginia corporation, as Operator for New York Central
Lines LLC, a Delaware limited liability company and a wholly owned subsidiary of
Consolidated Rail Corporation, a Pennsylvania corporation ("Railroad"), and
PATHNET TELECOMMUNICATIONS, INC., a Delaware corporation ("Utility").
RECITALS:
A. Railroad and Utility have previously entered into those certain Fiber
Optic License and Access Agreement and Right of Way Operating
Agreement both dated as of _____ ____________________, as amended and
supplemented from time to time by the parties (collectively, the "Base
Agreement").
B. The Base Agreement grants certain rights to Utility, including the
right to install a Fiber Optic Communications System pursuant to one
or more Build Supplements over certain Segments of Designated Rail
Corridor as more fully defined therein.
C. Utility wishes to expand its current Fiber Optic Communications System
in accordance with the Base Agreement and this Build Supplement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for the sum of Ten and No/100 Dollars ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Railroad and Utility agree as follows:
1. The above Recitals are true and correct and are incorporated herein by
this reference.
2. Unless otherwise specifically defined in this Build Supplement, all
capitalized terms used herein shall have the same meanings defined in the Base
Agreement.
3. In addition to the rights and obligations set forth in the Base
Agreement and any previously executed Build Supplements, and in accordance
therewith and herewith, Utility is hereby granted a non-exclusive License to
install the following additional Segment(s) of its Fiber Optic Communications
System as shown on Exhibit(s) _______________, attached hereto and by this
reference made a part hereof and described as follows:
Segment: from: to:
City, State _______________ _______________,
County _______________ _______________,
Township _______________ _______________,
Valuation Map No. _______________ _______________,
Milepost _______________ _______________,
1
<PAGE>
Railroad Survey Station No. _______________ _______________,
Total distance: ___________________;
Aggregate Optical Fiber Count
(irrespective of number of Conduit/Innerduct or Cable) ___________________;
Number of Conduit/Innerduct ___________________;
Size of Conduit/Innerduct ___________________;
Number of Cable ___________________;
Size of Cable ___________________.
4. The non-exclusive license granted to Utility with respect to the
additional installation pursuant to this Build Supplement shall be for a term
concurrent with the Base Agreement.
5. The parties hereby ratify and affirm the Base Agreement, as supplemented
hereby, which shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Build Supplement as of
the Effective Date.
Witnesses: CSX TRANSPORTATION, INC.,
a Virginia corporation, as Operator for
New York Central Lines LLC,
a Delaware limited liability company
________________________________ By:_______________________________
Print Name:_______________________
________________________________ Print Title:______________________
Witnesses: PATHNET TELECOMMUNICATIONS, INC.,
a Delaware corporation
________________________________ By:_______________________________
Print Name:_______________________
________________________________ Print Title:______________________
2
<PAGE>
EXHIBIT 1
CSXT BUILD SUPPLEMENT NO. -------
Utility Project Name:______________________________________________________
Segment:___________________________________________________________________
Railroad Project Name:_____________________________________________________
THIS BUILD SUPPLEMENT NO._______ ("Build Supplement") is made as of this
day of _____ _______________, _______ (the "Effective Date"), between CSX
TRANSPORTATION, INC., a Virginia corporation ("Railroad"), and PATHNET
TELECOMMUNICATIONS, INC., a Delaware corporation ("Utility").
RECITALS:
A. Railroad and Utility have previously entered into those certain Fiber
Optic License and Access Agreement and Right of Way Operating
Agreement both dated as of _____ _______________, as amended and
supplemented from time to time by the parties (collectively, the "Base
Agreement").
B. The Base Agreement grants certain rights to Utility, including the
right to install a Fiber Optic Communications System pursuant to one
or more Build Supplements over certain Segments of Designated Rail
Corridor as more fully defined therein.
C. Utility wishes to expand its current Fiber Optic Communications System
in accordance with the Base Agreement and this Build Supplement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for the sum of Ten and No/100 Dollars ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Railroad and Utility agree as follows:
1. The above Recitals are true and correct and are incorporated herein by
this reference.
2. Unless otherwise specifically defined in this Build Supplement, all
capitalized terms used herein shall have the same meanings defined in the Base
Agreement.
3. In addition to the rights and obligations set forth in the Base
Agreement and any previously executed Build Supplements, and in accordance
therewith and herewith, Utility is hereby granted a non-exclusive License to
install the following additional Segment(s) of its Fiber Optic Communications
System as shown on Exhibit(s) _______________, attached hereto and by this
reference made a part hereof and described as follows:
Segment: from: to:
City, State _______________ _______________,
County _______________ _______________,
Township _______________ _______________,
Valuation Map No. _______________ _______________,
Milepost _______________ _______________,
Railroad Survey Station No. _______________ _______________,
Total distance: ___________________;
1
<PAGE>
Aggregate Optical Fiber Count
(irrespective of number of Conduit/Innerduct or Cable) ____________________;
Number of Conduit/Innerduct ____________________;
Size of Conduit/Innerduct ____________________;
Number of Cable ____________________;
Size of Cable ____________________.
4. The non-exclusive license granted to Utility with respect to the
additional installation pursuant to this Build Supplement shall be for a term
concurrent with the Base Agreement.
5. The parties hereby ratify and affirm the Base Agreement, as supplemented
hereby, which shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Build Supplement as of
the Effective Date.
Witnesses: CSX TRANSPORTATION, INC.,
a Virginia corporation
_______________________________ By:__________________________________
Print Name:__________________________
_______________________________ Print Title:_________________________
Witnesses: PATHNET TELECOMMUNICATIONS, INC.,
a Delaware corporation
_______________________________ By:__________________________________
Print Name:__________________________
_______________________________ Print Title:_________________________
2
<PAGE>
EXHIBIT 2
CSX System Map
--------------
(Map of CSX Railway System)
<PAGE>
Exhibit 3
Non-exclusivity around specific cities
--------------------------------------
[ * * * ]
<PAGE>
EXHIBIT 4
TIER CITIES
[* * *] [* * *]
[* * *]
<PAGE>
Exhibit 5
Map of [* * *] and [* * *] Builds
[* * *]
<PAGE>
Exhibit 6
Pathnet's Initial Designation of Conrail Build
[Map of Conrail ROW]
<PAGE>
EXHIBIT 7
[ * * * ]
EXHIBIT 10.9
Portions of this exhibit have been omitted and filed separately with
the Securities and Exchange Commission.
These portions are designated "[ * * * ]."
RIGHT OF WAY OPERATING AGREEMENT
dated as of March 30, 2000
between
CSX TRANSPORTATION, INC.
A VIRGINIA CORPORATION, FOR ITSELF AND
AS OPERATOR FOR NEW YORK CENTRAL LINES LLC,
A DELAWARE LIMITED LIABILITY COMPANY
AND A WHOLLY-OWNED SUBSIDIARY OF CONSOLIDATED RAIL CORPORATION,
A PENNSYLVANIA CORPORATION
and
PATHNET TELECOMMUNICATIONS, INC.,
A Delaware corporation
1
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
1. Certain Definitions
2. Grant of License
3. Limitation of Rights; Railroad's Use Rights
4. Planning, Installation and Implementation
5. Permits
6. Fouling Track; Safety Rules
7. Track Use; Clearances; Crossings
8. Flagging; Watchmen
9. Facility Location Signs
10. Maintenance of Rail Corridor, Facilities
11. Railroad Approvals; Admissions
12. Railroad Expenses; Employee Costs
13. Liens and Encumbrances
14. Taxes
15. Sites for Non-Cable Facilities
16. Independent Contractor Status
17. Liability; Indemnity
18. Insurance
19. Notices
20. Relocations; Alterations
21. Line Sales; Abandonment
22. Condemnation
23. Pathnet Discontinuance
24. Railroad's Right to Require Suspension of Activities; Failure to Make
Timely Payment
25. Liaison; Coordination and Disputes Resolution
xiii
<PAGE>
26. Termination; Removal
27. Document Confidentiality
28. General Terms
xiii
<PAGE>
EXHIBIT SUMMARY
EXHIBIT A-1 Route Plan
EXHIBIT A-2 As-Built Drawing(s)
EXHIBIT B Planning, Installation and Implementation of Pathnet's System
EXHIBIT C Standard Lease Form (Form 3014-FO)
EXHIBIT D Sign(s) Design
(copy)
EXHIBIT E Specifications for Underground Cable Crossings Under Tracks and
(copy) Rights of Way
EXHIBIT F Communications Manual Part 1-B-1, Paragraphs A through S and
(copy) Specifications for the Construction of Railroad
Communication Pole Lines
EXHIBIT G Specifications for the Attachment of Cables to Railroad Bridges
EXHIBIT H Emergency and Disaster Responses
EXHIBIT I Specifications for Pole(s), Cable Crossing Installation Over
(copy) Railroad Tracks and Operating Right-of-Way
EXHIBIT J EB-2 Schedule
EXHIBIT K Arbitration or Mediation Resolution Procedures
EXHIBIT L Pathnet's Authorization for Fiber Optic Cable Work (sample)
EXHIBIT M Fiber Optic Installation SOP (Standard Operating Procedure,
(copy) MWI 1905-01, Issued 6/30/98)
14
<PAGE>
RIGHT OF WAY OPERATING AGREEMENT
THIS RIGHT OF WAY OPERATING AGREEMENT (this "Operating Agreement"),
is made as of March 30, 2000 (the "Effective Date"), by and between CSX
TRANSPORTATION, INC., a Virginia corporation ("CSXT"), for itself and as
Operator for New York Central Lines LLC, a Delaware limited liability company
("NYC Lines") and a wholly-owned subsidiary of Consolidated Rail Corporation, a
Pennsylvania corporation (CSXT and NYC Lines, collectively, "Railroad"), whose
mailing address is 500 Water Street, Jacksonville, Florida 32202, and PATHNET
TELECOMMUNICATIONS, INC., a Delaware corporation ("Pathnet"), whose mailing
address is 1015 31st Street, N.W., Washington, D.C. 20007.
R E C I T A L S
A. Railroad is the owner or operator of a continuous right-of way
(by fee, easement, license, operating agreement, joint use agreement or other
interest) within certain real property upon which it operates an interstate rail
transportation system, as shown on Railroad's current System Map (hereinafter
referred to as the "Rail Corridor").
B. Pursuant to the Contribution Agreement and Stockholder Agreement
being executed in connection herewith, Pathnet desires to enter into an
agreement with Railroad to permit Pathnet to install, market, sell and/or
maintain a Fiber Optic Communication System, including Conduit (Innerduct),
Cable, Optical Fibers and related equipment and structures, along, in and on up
to [ * * * ] miles of Rail Corridor, along Segments of the Rail Corridor to be
selected in accordance herewith.
C. Pursuant to the Contribution Agreement and Stockholder Agreement
being executed in connection herewith, Railroad is willing to transfer certain
property interests to Pathnet in exchange for stock in Pathnet, provided that
Pathnet accepts a license to use the selected Segments of the Rail Corridor
subject to all of the terms and conditions of this Operating Agreement and the
Fiber Optic Access and License Agreement being entered into by and between
Railroad and Pathnet concurrently herewith (hereinafter, the "License Agreement"
and, together with this Operating Agreement, the "Agreements"), which Agreements
provide, among other things, that (i) the license granted thereby shall be
subject to the existing rights and interests of other parties, including,
without limitation, [ * * * ] and [ * * * ], and (ii) Railroad makes no
representation or warranty with respect to its right, title or interest, if any,
in and to any portion of the Rail Corridor or its right to grant any type of
license or other right for any party, including Pathnet, to use or occupy the
same.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Railroad and Pathnet hereby agree as
follows:
1
<PAGE>
1. CERTAIN DEFINITIONS.
1.1 General Interpretive Principles. For purposes of this Operating
Agreement, except as otherwise expressly provided or unless the context
otherwise requires, (i) the terms defined in this Section have the meanings
assigned to them in this Section and include the plural as well as the singular,
and the use of any gender in this Operating Agreement shall be deemed to include
the other gender; (ii) the word "including" means "including, but not limited
to," and (iii) the article, section and paragraph headings in this Operating
Agreement are for convenience only and are not intended to describe, interpret,
define or limit the scope, extent, or intent of any of the provisions of this
Operating Agreement.
1.2 Incorporation of Recitals. The Recitals set forth above are
incorporated herein by this reference
1.3 Definitions. As used in this Operating Agreement, the following terms
shall have the following respective meanings (unless otherwise expressly
provided):
"Abandonment", when applied to a Rail Corridor, shall mean the application
to (and approval of) the necessary and applicable governmental body for
permission to cease all public rail transportation over any Segment of Rail
Corridor and the removal of all Railroad property, tracks and ties, excluding
permitted or required rail banking conveyances.
"Affiliate" shall mean any Person that, directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, another Person. The term "control," for this purpose, shall mean
the ability, whether by the ownership of shares or other equity interest, by
contract or otherwise, to elect a majority of the directors of a corporation,
independently to select the managing partner of a partnership or the managing
member of a limited liability company, or otherwise to have the power
independently to remove and then select a majority of those Persons exercising
governing authority over an entity. Control shall be conclusively presumed in
the case of the direct or indirect ownership of fifty percent (50%) or more of
the equity interests in an entity.
"Agreements" shall be as defined in Recital C.
"As-Built Drawing" shall comprise Pathnet's Construction Plans, revised to
reflect all changes made during actual construction, and shall show, without
limitation, the exact location of Pathnet's System and Facilities in relation to
the nearest track, and shall, upon submission to and approval by Railroad, be
attached hereto as Exhibit A-2.
"Broadform Telecommunications Rights" shall mean, exclusive of the Limited
Telecommunications Rights granted hereunder, the right of owners of and other
parties with interests in the land underlying the Rail Corridor to license
generally, for telecommunications purposes, any and all portions of Rail
Corridor.
"Cable" shall mean a single cable containing Optical Fiber, and any
support material and protective casing, capable of transmitting data or voice
communications in a Fiber Optic Communication System.
2
<PAGE>
"Conduit (Innerduct)" shall mean a single duct or pipe, not exceeding two
inches (2") inside diameter, except where specifically required or approved by
Railroad, suitable for housing a Fiber Optic Cable.
"Conduit Right-of-Way" shall mean that portion of the Designated Rail
Corridor on which Pathnet's Fiber Optic Communication System and Facilities
(other than microwave and transmission towers) are located.
"Construction Plans" shall mean the drawings, plans and specifications for
the construction and installation of Pathnet's System and Facilities, showing
the proposed location of all Pathnet's System and Facilities, in sufficient
detail, with distance shown from nearest track, with separate detailed drawings
of all junction, Repeater (Regen) Sites, bridge and tunnel occupancies, showing
depth of installation, details and methods of the proposed construction, with
numbers and size of Conduit(s) (Innerduct(s)) or bare Cable(s) to be placed,
including Optical Fiber count and total mileage for each Segment. Construction
Plans shall clearly note Railroad Valuation Map references, Railroad Survey
Station and Milepost references for all beginning and ending points and all
alignment transition points. Each set of Construction Plans for each Segment
shall have an overview map showing all of the required information.
"Contracted Railroad Personnel" shall mean, for purposes of the
establishment of liability between and among the contracting parties of this
Operating Agreement only, those employees of Railroad utilized in performing or
directly involved in the route designation, inspection, survey, design, plan,
installation, construction, maintenance or operation of Pathnet's Facilities or
System, upon request of Pathnet or as otherwise required or permitted by this
Operating Agreement; and the same shall be considered as sole agents or servants
of Pathnet when performing such activity.
"Contribution Agreement" shall mean that certain Contribution Agreement
dated as of November 2, 1999 by and between, among others, Railroad and
Pathnet.
"CSXT Corridor" shall mean, subject to Section 2.1 of the License
Agreement, all of the Rail Corridor exclusive of the NYC Corridor, as described
in Exhibit 2 attached to the License Agreement.
"CSXT" shall mean CSX Transportation, Inc., any of its predecessor
railroads, and any successor by merger, consolidation or reorganization.
"Default Rate" shall mean a rate of interest equal to the lesser of (a)
the Prime Rate plus five percent (5%) per annum, or (b) the highest non-usurious
rate permitted under applicable law.
"Designated Rail Corridor" shall mean a Segment of the Rail Corridor
selected by Pathnet and approved by Railroad in accordance with the terms of the
Agreements.
"Discontinuance," when related to bare Conduit (Innerduct) or dark Optical
Fiber within Pathnet's Fiber Optic Communication System or Segment thereof,
shall mean that Pathnet has ceased dedicating commercially reasonable efforts to
the sale and marketing of telecommunications products and services on the
applicable Segment for a period of six consecutive (6) months and when related
to lit Optical Fiber within Pathnet's Fiber Optic Communication System or
Segment thereof, shall mean, for a period of six (6) consecutive
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months, complete (a) disconnection from power source; (b) disconnection from
terminal; or (c) cessation of transmission of signal through such Segment or
System. Such term shall not include a temporary disconnection or cessation of
transmission during periods of maintenance or repair of the Fiber Optic
Communication System.
"Engineer" shall mean the Chief Engineer of CSXT, or the authorized
representative(s) thereof.
"Facilities", when applied to property of or installed by Pathnet, shall
mean Conduit (Innerduct), Cable, carrier pipes, Pathnet wires and poles, Optical
Fibers, junctions, Repeaters (Regens), Handholds, terminals, power sources,
fault alarm system(s), emergency equipment storage shelters, attachments, and
all other structures and articles of personal property connected with, necessary
for, appurtenant to, or useful to the installation, operation, maintenance,
repair, re-installation, replacement, relocation or removal of Pathnet's Fiber
Optic Communication System.
"Fiber Optic" or "Optical Fiber" shall mean a strand of optical waveguide
permitting the transmission of communications signals.
"Fiber Optic Communication System" or "System" shall mean the system
utilizing Optical Fiber as the medium for communications and transmission to be
installed by Pathnet in the Designated Rail Corridor, which may contain
Conduit(s) (Innerduct(s)), Cable(s) and Optical Fiber(s). Such terms shall
include all Conduit (Innerduct), Cable, Optical Fiber, Handholds, manholes,
marker tape, signs, couplers, structure attachment, pull rope, other necessary
ancillary hardware, and bridge, tunnel and trestle attachments, and shall also
include such communications technologies as may hereafter evolve from or
relating to Optical Fiber but which utilize Pathnet's Facilities and/or System
as initially installed or as thereafter modified pursuant to the Agreements.
"Fouling of Tracks" or "Fouled" shall mean the existence, movement or
placement of equipment and/or personnel on a railroad track or within twelve
feet (12') of the centerline of any track within the Rail Corridor.
"Handholds" shall include Cable loops, or boxes or vaults placed in or
above ground at junctions, Repeaters (Regens) or at areas of Cable splicing and
connection, for storage of slack Cable.
"License Agreement" shall have the meaning set forth in Recital C.
"Limited Telecommunications Rights" shall mean Pathnet's right to
construct, install, operate, repair and maintain Pathnet's Facilities and System
as more particularly described in, and subject to the terms and conditions of,
the Agreements, including, without limitation, those contained in Article 6 of
the License Agreement.
"NYC Corridor" shall mean that certain portion of the Rail Corridor
operated by CSXT pursuant to that certain Operating Agreement dated as of June
1, 1999 by and between New York Central Lines LLC, as owner, and CSXT, as
operator, as described in Exhibit 2 to the License Agreement.
"Optical Fiber" shall mean Fiber Optic.
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"Pathnet" shall mean Pathnet as defined in the introductory paragraph of
this Agreement, any successor by merger, consolidation or reorganization, and
its permitted assignees. For purposes of Pathnet's construction, maintenance,
repair, replacement or removal of Pathnet's System and/or Facilities, "Pathnet"
shall also mean Pathnet's employees, agents, servants, contractors and
subcontractors.
"Person" shall mean any individual, association, partnership, limited
liability company, corporation, joint stock company, trust, joint venture,
unincorporated organization or governmental entity or any department, agency or
political subdivision thereof.
"Prime Rate" shall mean the prime rate of U.S. money center commercial
banks as published in The Wall Street Journal from time to time.
"[ * * * ] Obligations" shall be as defined in the License Agreement.
"Railroad" shall mean Railroad as defined in the introductory paragraph of
this Agreement, any of its predecessor railroads (including Consolidated Rail
Corporation), any successor by merger, consolidation or reorganization, and its
permitted assignees. For the purposes of Article 17 (excluding the
indemnification obligation in Section 17.2 which shall be limited to Railroad as
defined in the introductory paragraph of this Agreement) and Article 18 only,
the term "Railroad" shall also include all Affiliates of CSXT, Affiliates of NYC
Lines and their respective officers, directors, employees and agents.
"Rail Corridor" shall have the meaning set forth in Recital A.
"Relocation", when related to alteration or removal of Railroad's track
from Rail Corridor, shall mean: (a) change in track grade or location in order
to avoid or eliminate curvature problems; (b) creation or deletion of double or
multiple tracks; or (c) installation of additional passing tracks, storage
sidings, spur or industrial lead tracks, and other track movement for operating
or shipping needs or plans of Railroad. The term, however, shall not include
Abandonment or complete removal of any particular tracks in conjunction with
termination or Abandonment of a service route, branch or main line.
"Repeater (Regen)" shall mean a device which regenerates, amplifies or
extends optical signals, used to send the light impulse through Optical Fiber,
and includes attendant equipment, facilities, power source, and technological
changes.
"Repeater (Regen) Sites" shall mean those permitted portions of the Rail
Corridor on which Repeaters (Regens) are located; and shall be limited to an
area of five hundred (500) square feet or less, and located beyond the
Restricted Working Area, unless otherwise specifically permitted in writing by
Railroad
"Restricted Working Area" shall mean the area parallel to and located
thirty feet (30') (or the top of any ditch slope if that distance is greater
than thirty feet (30')) from the centerline of the outermost track (on each
side) in the Rail Corridor.
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"Route Plan" shall mean the plan showing the route of placement of
Pathnet's Facilities and System in, on or over Segments of Railroad's Rail
Corridor, as prepared by Pathnet and approved in writing by Railroad, as shown
on Exhibit A-1 attached hereto.
"Segment" shall mean either a longitudinal section of Rail Corridor or a
longitudinal section of Conduit (Innerduct) or Cable installed by Pathnet, as
applicable.
"Stockholder Agreement" shall mean that certain Stockholder Agreement
dated on or about the date hereof by and between, among others, Railroad and
Pathnet.
"System" shall mean Fiber Optic Communication System.
"Title Deficient Areas" shall mean those portions of the Rail Corridor, if
any, for which Railroad holds title in less than fee simple absolute and for
which Railroad may not otherwise have the right to grant to Pathnet the license
for use and occupancy as contemplated by the License Agreement.
"Trackage Rights" shall mean the rights arising by agreement of one
railroad to use the tracks or right-of-way of another railroad for the carriage
of rail traffic; said agreement ordinarily imparting no ownership interest in
the burdening carrier relating to the tracks or rights-of-way of the burdened
carrier.
"Valuation Maps" shall mean Railroad's Rail Corridor maps, prepared by
Railroad originally in 1913-1919 under 49 U.S. Code Sections 19 and 19a (now
Sections 10781-10783) for the U.S. Surface Transportation Board, successor to
the Interstate Commerce Commission ("S.T.B"), and the S.T.B. regulations, as
updated from time to time.
"[ * * * ] Obligations" shall be as defined in the License Agreement.
2. GRANT OF LICENSE
2.1 Exercise of Rights Under License Agreement. Pursuant to the terms of
the License Agreement, Pathnet has been granted a license to select and utilize
up to [ * * * ] miles of Rail Corridor (including up to 2,000 miles of NYC
Corridor) for the installation and operation of its System and Facilities. The
rights and interests granted under the License Agreement shall be implemented in
accordance with the terms and provisions of this Operating Agreement. The term
of this Operating Agreement shall be concurrent with the term of the License
Agreement.
2.2 Construction of the Facilities. Construction of the System and
Facilities by Pathnet shall occur in accordance with the following:
(a) Access and Construction. All access and construction activities on
the property by Pathnet shall be conducted in strict accordance with the
requirements of this Operating Agreement and the Exhibits hereto. In the event
of any conflict between the terms of the Exhibits and the body of this Operating
Agreement, the provisions of the body of this Operating Agreement shall control.
(b) Right to Audit. Railroad shall have the right, during regular
business hours, upon reasonable notice to Pathnet, and at mutually agreeable
times, to conduct field examinations
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of Pathnet's Facilities and System in the presence of an authorized
representative of Pathnet and to examine and audit such books and records of
Pathnet as are appropriate and necessary, in Railroad's sole discretion, to
determine and verify (i) the number and size of Conduits (Innerducts) installed
by Pathnet in the Designated Rail Corridor pursuant to the Agreements, and (ii)
such other items related to Pathnet's compliance with the terms of the
Agreements, as reasonably determined by Railroad. This audit right shall survive
the expiration or other termination of the Agreements for a period of three (3)
years.
3. LIMITATION OF RIGHTS; RAILROAD'S USE RIGHTS.
3.1 Limitation of Rights. Pathnet, at Pathnet's sole risk, cost and
expense, shall furnish all materials, construct, maintain, use, change or remove
Pathnet's Facilities and System or any part thereof, in accordance with the
design, specifications and plans approved as provided in this Operating
Agreement, in a manner reasonably satisfactory to Railroad, all in a prudent and
workmanlike manner, in conformity with any applicable statutes, orders, rules,
regulations and specifications of any public body having jurisdiction thereof,
and so as not to interfere with or endanger, in the sole judgment of Railroad,
any property, traffic (freight or passenger), operations (direct or via Trackage
Rights), maintenance, employees or patrons of Railroad, or of others occupying
or using the property of Railroad for railroad operational purposes at each
location, including other lessees or licensees of Railroad. Railroad may
prohibit development on any Rail Corridor where development would unreasonably
interfere with Railroad's current or reasonably foreseeable future development
for railroad purposes. Pathnet shall be limited to a single build (one-time
placement) in a single trench on each Segment of the Designated Rail Corridor
unless Railroad approves an additional trench, which approval may be withheld in
its sole discretion.
3.2 Railroad's Use Rights. Subject to the terms and provisions of the
Agreements, the rights of Pathnet hereunder shall not limit nor preclude
Railroad's use of its Rail Corridor for other uses and purposes, including
placement and operation of Railroad's own tracks(s), signal and communication
systems (of whatever nature); nor shall this Agreement bar or limit placement
and operation of any other pipe, conduit, cable, optical fiber or wire line by
Railroad or its licensee(s), which does not unreasonably interfere with
Pathnet's Facilities or Fiber Optic Communication System.
4. PLANNING, INSTALLATION AND IMPLEMENTATION.
The procedures and conditions for planning, installation and
implementation of Pathnet's System and Facilities are defined in Exhibit B,
attached hereto.
5. PERMITS.
5.1 Permit Requirements. Pathnet, at its sole cost and expense, shall
secure and maintain in effect all federal, state and local approvals,
authorizations, permits and licenses required for the construction,
installation, operation, maintenance, repair, replacement and/or removal of
Pathnet's Facilities and System, including zoning, building, health,
environmental and communication service permits and licenses, and shall
indemnify Railroad against claims for payment therefor and against any claims
for fines or penalties that may be levied for failure to procure, or to comply
with, such approvals, authorizations, permits or licenses, and any remedial
costs to cure any violations thereof. Without limiting the foregoing, any
development or
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environmental impact statements required for the Facilities or System shall be
prepared by Pathnet, at Pathnet's sole risk, cost and expense, and all costs for
local zoning, construction and subdivision compliance, approval and permits,
shall be borne solely by Pathnet.
5.2 Railroad Cooperation. Railroad shall not hinder Pathnet's attempts to
secure, and shall cooperate with and assist Pathnet, at Pathnet's cost and
expense, in obtaining, any permits, licenses or approvals of governmental
agencies or authorities, or of any necessary third parties, for use of any
structures or facilities (including streets, roads or utility poles) along the
Designated Rail Corridor not solely owned by Railroad.
6. FOULING TRACK; SAFETY RULES.
6.1 Railroad Safety and Operating Rules. Pathnet employees, agents,
contractors and/or subcontractors seeking to enter or engage in Fouling of
Tracks or any portion of the Rail Corridor (including tunnels and bridges) shall
be trained in the safety and operating rules established by Railroad from time
to time (the "Railroad Safety and Operating Rules"), and shall at all times wear
required identification badges and safety equipment (shoes, hardhat, goggles,
etc.). Pathnet shall bear all travel, lodging, course materials and other
similar costs of its attendees at any program given or administered by Railroad
to train such persons, and Railroad shall bear the costs associated with any
instructors.
6.2 Contracted Railroad Personnel. Railroad shall provide Contracted
Railroad Personnel, as necessary, at Pathnet's sole risk, cost and expense as
provided herein, to accompany Pathnet's employees, agents, contractors or
subcontractors during their presence on the tracks and the Rail Corridor.
6.3 Restriction Right. Notwithstanding any contrary provision contained
herein, Railroad reserves the right, in its sole discretion, to exclude or bar
specifically-named individuals from entrance upon Railroad's tracks and/or Rail
Corridor for demonstrating actions dangerous to themselves or others, or for
refusing to comply with Railroad's safety and operating rules, regulations or
directions, or for any other specific cause deemed sufficient in Railroad's sole
discretion.
7. TRACK USE; CLEARANCES; CROSSINGS.
7.1 Restricted Working Area. No goods, materials, equipment or fuel shall
be placed or stored within the Restricted Working Area.
7.2 No Vehicles. Pathnet shall not use Railroad's tracks for maintenance
or the placement of its vehicles without the prior written approval of such use
by Railroad's Engineer, which approval may be withheld in his or her sole
discretion.
7.3 Pathnet Track Support. During any work of any character at any
location on its System, Pathnet, at its sole risk, cost and expense, shall
support the tracks and roadbed of Railroad to prevent any interference or danger
as necessary in the sole judgment of Railroad's Engineer. Upon the completion of
all work, Pathnet shall restore such tracks, roadbed and other property of
Railroad to the same functional and operational condition as approved by
Railroad's Engineer, which approval may be withheld in his or her sole
discretion.
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7.4 Railroad Track Support. Railroad may perform or contract to have
performed any or all the work of supporting tracks and roadbed and of restoring
the same, at the sole risk, cost and expense of Pathnet, if (a) Pathnet fails to
perform such work timely or satisfactorily, (b) such work is required by
Railroad's labor agreements in existence at the time, or (c) requested by
Pathnet (subject to availability of Railroad's personnel and equipment and
satisfactory security for payment of costs by Pathnet).
7.5 Crossing Specifications. Crossings of Railroad's track and Rail
Corridor necessitated by difficulties in Conduit (Innerduct) or Cable
construction (i.e., locations of manmade or natural structures, waterways,
streets, etc.) shall be coordinated with and approved in writing by Railroad's
Engineer, which approval may be withheld in his or her sole discretion, and
installation of such crossings shall be in accordance with the requirements set
forth in Exhibit I, all at Pathnet's sole risk, cost and expense.
8. FLAGGING; WATCHMEN.
8.1 General. Railroad shall have the right, in its sole discretion and at
any time during any period of construction, maintenance, repair, renewal,
alteration or removal of Pathnet's System or Facilities, to place watchers,
flaggers, inspectors or supervisors, for the protection of the operations of
Railroad (including freight and passenger service) or the property of Railroad
(including Amtrak) or others (including Pathnet) on the Rail Corridor or other
Railroad property, at the sole risk, cost and expense of Pathnet.
Notwithstanding any contrary provision contained herein, watchmen, flagmen,
inspectors or supervisors placed upon the Rail Corridor or other Railroad
property while working on Pathnet's System or Facilities under this Article 8
shall be deemed to be Contracted Railroad Personnel of Pathnet.
8.2 Scheduling. Pathnet recognizes that because of Railroad's labor and
employment agreements: (a) the furnishing of any watchers or flaggers needs to
be requested at least thirty (30) days prior to actual work date for short term
flagmen or forty-five (45) days prior to actual work date for long term flagmen,
or such watchers/flaggers may not be available; (b) once a watcher/flagger is
designated, he/she cannot be pulled from the job less than seven (7) days prior
to work date, or cost thereof may be incurred by Pathnet; (c) once assigned, for
any period of time, such watcher/flagger must be paid for at least an eight (8)
hour shift, regardless of lesser hours worked; and (d) if Pathnet's needs
overlap ordinary shift turns (or tricks), Pathnet may incur flagging costs for
both shifts/tricks.
9. FACILITY LOCATION SIGNS.
9.1 Pathnet, at its sole cost and expense, shall furnish, erect and
thereafter maintain, signs showing the location of all underground Facilities
and Pathnet's contact telephone number. Such signs shall be painted and placed
in conformity with the provisions of Exhibit D attached hereto, or as otherwise
mutually agreed upon in writing by Railroad and Pathnet.
10. MAINTENANCE OF RAIL CORRIDOR, FACILITIES.
10.1 Maintenance of Conduit Right-of-Way. Unless Railroad and Pathnet
otherwise agree in writing, Railroad shall not be responsible for maintenance of
Pathnet's Conduit Right-of-Way, or for clearing or removing of trees, shrubs,
plants, ice, snow or debris therefrom. If
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Railroad agrees, at Pathnet's request, to extend maintenance to cover Pathnet's
Conduit Right-of-Way, Railroad shall cut, mow and/or treat such Conduit
Right-of-Way maintenance only at the same time as Railroad performs its own
track or Rail Corridor maintenance. Railroad shall perform such extended
maintenance at Pathnet's sole risk, cost and expense and Railroad's employees
performing such maintenance shall be deemed to be Contracted Railroad Personnel
of Pathnet. Railroad shall be reimbursed for all costs incurred, including,
without limitation, any and all billable expenses, labor costs (Railroad or
contract), supplies, parts, materials, etc., directly associated with such
extended maintenance program.
10.2 Maintenance of Facilities. Pathnet shall maintain its Facilities, and
all ancillary structures within Conduit Rights-of-Way, at Pathnet's sole risk,
cost and expense.
11. RAILROAD APPROVALS; ADMISSIONS.
11.1 Any approval given or supervision exercised by Railroad hereunder, or
failure of Railroad to object to any work done, material used or method of
construction or maintenance of Pathnet's System or Facilities, shall not be
construed as an admission of responsibility by Railroad or as a waiver of any of
the obligations of Pathnet under this Operating Agreement.
12. RAILROAD EXPENSES; EMPLOYEE COSTS.
12.1 General. Railroad's costs and expenses for work performed for or at
the expense of Pathnet pursuant to this Agreement (including review and approval
of Pathnet plans and designs) shall be paid by Pathnet within thirty (30) days
of Pathnet's receipt of itemized bills therefor irrespective of any billing
disputes. Interest on unpaid billed amounts shall accrue monthly after the first
thirty (30) days at an annual rate equal to the Default Rate. Pathnet shall have
ninety (90) days from payment to notify Railroad, in writing, of any billing
disputes. Billing disputes that are not resolved within sixty (60) days of such
notice shall be resolved in accordance with the provisions of Article 25.
12.2 Invoice Format. Railroad bills for labor or supervision shall
include: Railroad's Project I.D. Number, Pathnet's Project I.D. Number,
Pathnet's Authorization for Fiber Optic Cable Work (substantially in the form of
Exhibit L attached hereto), and the dates, locations, party names, hourly or
salaried billing rates, number of hours, outside expenses and total charge.
12.3 Permitted Costs and Expenses. Documented costs and expenses directly
attributable to work performed for Pathnet shall include only: (a) labor costs,
plus payroll overhead and additives applicable to each Railroad employee's
salary or hourly rate as set forth in Exhibit J and as may be modified or
updated from time to time by Railroad; (b) for contracted labor or consultants,
reasonable market-based amounts as billed to and paid by Railroad; (c) necessary
and reasonable travel and transportation expenses; (d) the reasonable,
market-based total cost of materials used and equipment rentals, plus actual
cost of freight charges and handling; and (e) reasonable rental cost for any
Railroad equipment used by Railroad or Pathnet or their respective employees or
contractors. Costs and expenses for Railroad's own labor and personnel, and
non-contract administrative overhead, shall be limited to the sum of (i) then
current hourly rate plus, (ii) applicable overhead and additives (which shall
include, but not be limited to, vacation, holiday, health and welfare, insurance
and supervision) in accordance with the applicable rates set forth in the then
current EB-2 Schedule in effect at the time the expense is
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incurred, published by Railroad and amended from time to time. The current EB-2
Schedule applicable as of the Effective Date is attached hereto as Exhibit J.
Updated EB-2 Schedules will be available upon Pathnet's written request.
12.4 Consultant. Railroad shall have the right, in its sole discretion, to
place a consultant on any installation site in lieu of Railroad's own
supervisory personnel, at Pathnet's sole cost and expense (provided such
expenses are reasonable, market-based and consistent with the provisions of
Section 12.3 above), to monitor installation and compliance with approved
Construction Plans, to log progress, and to log the time spent by Railroad
employees (including Contracted Railroad Personnel) in accordance with the
Agreements (by name, date and purpose). Such consultant shall advise Railroad
and Pathnet of any deviation from approved Construction Plans requested by
Pathnet or any of Pathnet's contractors.
12.5 Records. Railroad shall keep accurate records of all costs and
expenses attributable to Pathnet pursuant to the Agreements, and Pathnet shall
have the right, at Pathnet's sole cost and expense, to examine and copy the
applicable records of Railroad to verify that such charges accurately reflect
the costs and expenses thereof.
13. LIENS AND ENCUMBRANCES.
13.1 Pathnet shall not permit any mortgage, pledge, security interest,
lien or encumbrance, including, without limitation, tax liens or encumbrances
and liens or encumbrances with respect to work performed or equipment furnished
in connection with the construction, installation, operation, repair,
maintenance, replacement or removal of the System or Facilities or any portion
of the Rail Corridor occupied by Pathnet (collectively, "Liens or
Encumbrances"), to be established or remain against the Rail Corridor or any
other property of Railroad. In the event that any Railroad property becomes
subject to any Lien or Encumbrance, Pathnet agrees to pay, discharge, bond off
or remove the same within thirty (30) days of Pathnet's receipt of notice that
such Lien or Encumbrance has been recorded, filed or docketed against such Rail
Corridor or other Railroad property; provided, however, that if Pathnet provides
a bond or other security acceptable to Railroad for the payment and removal of
such Lien or Encumbrance, Pathnet shall have the right to challenge, at its sole
expense, the validity and/or enforceability of any such Lien or Encumbrance.
Pathnet shall indemnify, defend and hold Railroad harmless against all damages,
costs (including reasonable attorneys' fees) and expenses, arising out of any
lien, the enforcement or removal thereof, or encumbrance caused by the same,
with respect to the Rail Corridor or any portion thereof or any other Railroad
property.
14. TAXES.
14.1 Transfer Taxes. Except as provided in Section 14.4 of this Operating
Agreement, Pathnet shall pay all transfer or recordation taxes, documentary
stamps, and any similar expenses in connection with the transfer or execution of
the License (as defined in the License Agreement), this Operating Agreement, the
Contribution Agreement, the System and/or the Facilities.
14.2 Sales and Use Taxes. Except as provided in Section 14.4 of this
Operating Agreement, if, pursuant to the Agreements or the Contribution
Agreement (i) the sale, acquisition, license, grant, transfer or disposition of
property or rights, or (ii) the payment
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of any fee or compensation or the payment to Railroad for services provided
thereunder, requires the payment of any sales or use tax (including any Canadian
GST or provincial sales tax) under any statute, regulation or rule, Pathnet
shall pay the same, plus any penalty or interest thereon, to Railroad when due
or if allowable, directly to such taxing authority, and shall indemnify and hold
Railroad harmless therefrom.
14.3 Property Taxes. Pathnet shall pay all annual and periodic ad valorem
and other taxes levied or assessed upon Pathnet's Facilities or the System, and
shall indemnify and hold Railroad harmless therefrom.
14.4 Taxes Payable by Railroad. Pathnet shall have no responsibility for
(i) any taxes (including but not limited to transfer, sales, use, income or
property taxes), assessments or other impositions attributable to Conduit
(Innerduct) or other telecommunications assets or services provided to Railroad
pursuant to Article 8 of the License Agreement; (ii) taxes based on Railroad's
income or corporate franchise; or (iii) property or franchise taxes that are
attributable to the Rail Corridor and not to Pathnet's Facilities or System.
Railroad shall reimburse Pathnet for any such taxes, assessments or impositions
within thirty (30) days after written request.
14.5 Mutual Cooperation. Each party shall cooperate with the other party,
at the first party's sole cost and expense, in the prosecution of any claim for
refund, rebate, reduction or abatement of any taxes which are the responsibility
of the first party under the Agreements or the Contribution Agreement, provided
that a reasonable basis exists for such refund, rebate, reduction or abatement.
The first party shall reimburse the second party for all reasonable out of
pocket expenses incurred in connection therewith. Notwithstanding any other
provision of this Section, the first party is not obligated to pay or reimburse
the second party for any tax for which the first party is liable under this
Section if the party first elects to prosecute a claim for reduction or
abatement of such taxes and prepayment thereof is not a condition to prosecuting
the claim. The first party shall pay or reimburse the second party for any such
taxes when the taxes finally are adjudged to be due and owing by the highest
administrative or judicial authority to which an appeal has been taken.
15. SITES FOR NON-CABLE FACILITIES.
15.1 Non-Cable Areas. Railroad, insofar as it has the right and can
reasonably do so, shall make available to Pathnet for Pathnet's sole use, areas
not to exceed five hundred (500) square feet within the Designated Rail Corridor
for use by Pathnet as Repeater (Regen) Sites, or power or auxiliary power
stations, or sites for construction facilities or temporary storage of materials
and fuel for power stations. Railroad shall have no duty to provide such sites
at a requested location if the width, nature or other uses or planned uses of
the Rail Corridor by Railroad at such location or if restrictions on Railroad's
title or interest in the property preclude such use by Pathnet.
15.2 Adjacent Land. If for any reason, Railroad is unable to provide such
site within the Designated Rail Corridor, and Railroad has available adjacent
land suitable for the location of such site, then Railroad shall furnish the use
of a reasonable portion of such adjacent land to Pathnet for such site at a fee
to be negotiated; provided, however, that such use will not interfere with
Railroad's current or reasonably foreseeable future use of such property. Such
adjacent land usage shall be documented by Railroad's standard form lease, the
form of which is attached hereto as Exhibit C.
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15.3 No Obligation as to Third Parties. Notwithstanding the provisions of
Sections 15.1 and 15.2, Railroad shall have no obligation to provide or make
available any portion of any adjacent land or allow the expansion of any
structure of Pathnet located thereon beyond five hundred (500) square feet or
such additional size initially improved by Pathnet with the approval of
Railroad, which approval may be withheld in its sole discretion, for use by
third party purchasers, sublicensees, transferees or permitted assignees. Any
such accommodation shall be at a fee to be negotiated, shall not interfere with
Railroad's current or future use of such property and shall be documented by
Railroad's standard form lease, the form of which is attached hereto as Exhibit
C. This Section 15.3 shall not apply to Pathnet's partners in development of the
Rail Corridor, and shall not restrict Pathnet's ability to make space in
Pathnet's existing Facilities available to third parties on such terms as
Pathnet determines in its sole discretion. Pathnet shall, except to the extent
caused by Railroad's gross negligence or willful misconduct, (i) assume
responsibility for any and all claims, liabilities, damages, costs (including
reasonable attorneys' fees) and expenses arising out of or based upon the acts
or omissions of any such third party in or around such non-cable facilities, the
Rail Corridor or other Railroad property, and (ii) indemnify, defend and hold
Railroad harmless from and against any and all losses and damages suffered by
such third party as a result of the presence of such third party or its
facilities or equipment in or around such non-cable facilities, the Rail
Corridor or other Railroad property.
15.4 Rent. Rents for any land(s) outside of the Designated Rail Corridor,
or for lands within the Designated Rail Corridor in excess of five hundred (500)
square feet or for uses other than those described in Section 15.1, shall be at
a fee to be negotiated.
15.5 Approval of Structure. The location and size of any buildings or
other structures to be placed by Pathnet or any third party within Railroad's
Rail Corridor or on Railroad's other property shall be as approved by Railroad's
Engineer, which approval may be withheld in his or her sole discretion, on plans
submitted in accordance herewith.
16. INDEPENDENT CONTRACTOR STATUS.
16.1 Except with respect to the Contracted Railroad Personnel, Railroad
reserves no control whatsoever over the employment, discharge, compensation of
or services rendered by Pathnet's employees, agents or contractors, and it is
the intention of the parties that Pathnet shall be and remain a licensee and
that nothing herein shall be construed as inconsistent with that status or as
creating or implying any partnership or joint venture relationship between
Pathnet and Railroad.
17. LIABILITY; INDEMNITY.
17.1 Pathnet's Release and Indemnification. Recognizing that Railroad has
owned and/or operated the Rail Corridor for many years prior to the Effective
Date and prior to entry thereupon by employees, agents, contractors or
representatives of Pathnet, and in addition to the indemnities otherwise
provided in the Agreements, Pathnet hereby assumes, releases and shall defend,
indemnify, protect and save Railroad harmless from and against the following:
(a) All claims, liabilities, losses, damages, causes of action,
costs, and expenses (including reasonable attorneys' fees and costs) arising
from: (1) damage to or destruction of Pathnet's Facilities or System except to
the extent attributable to the willful misconduct of
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Railroad, its employees or contractors and (2) loss of service or use of
Pathnet's Facilities or System or loss of revenue or profit therefrom, including
any claim or loss to any client, customer, patron or other purchaser,
transferee, sublicensee or permitted assignee of Pathnet's rights or services
resulting from any damage to or destruction of Pathnet's Facilities or System.
Railroad shall not under any circumstances be liable for interruption of or
damage to the installation, operation, maintenance or repair of Pathnet's
Facilities or System unless attributable to the willful misconduct of Railroad,
its employees (including Contracted Railroad Personnel), agents, contractors, or
other parties performing services for Railroad. In no event shall Railroad be
liable for loss of income, cost of substitute service, or other consequential
damages of any kind;
(b) All claims, liabilities, losses, damages, causes of action,
costs, and expenses (including reasonable attorneys' fees and costs) arising
from injury to or death of any persons on or about Pathnet's Facilities or
System, including, but not limited to, Pathnet's employees, agents, contractors,
subcontractors, invitees, or other such third parties, purchasers, transferees,
permitted assignees, licensees or sublicensees, resulting from the existence,
construction, maintenance, operation, use, repair, change, placement,
replacement, relocation and/or subsequent removal of Pathnet's Facilities or
System, or any part thereof, or the use of the Rail Corridor or other Railroad
Property, regardless of any approvals, reviews, controls or standards imposed by
Railroad or other actions of Railroad, unless such claims, losses, damages,
causes of action, costs, and expenses (including reasonable attorneys' fees and
costs) result from the willful misconduct of Railroad;
(c) All claims, liabilities, losses, damages, causes of action, costs
and expenses (including reasonable attorneys' fees and costs) arising from any
breach of the Agreements by Pathnet, including, but not limited to, any failure
of Pathnet to support track and/or roadbed, as provided herein or any failure of
Pathnet to secure permits or other approvals as provided herein, regardless of
cause, including Railroad's negligence, but excluding Railroad's willful
misconduct;
(d) All claims, liabilities, losses, damages, causes of action,
costs, and expenses (including reasonable attorneys' fees and costs) arising
from any slide, soil disturbance or environmental damage or impairment resulting
from the existence, construction, installation, maintenance, operation, use,
repair, change, placement, relocation and/or subsequent removal of Pathnet's
Facilities or System, regardless of cause, including Railroad's negligence, but
excluding Railroad's willful misconduct;
(e) Any claim (regardless of merit), loss or damages awarded, whether
civil or criminal, under any antitrust laws, or under any federal, state or
local regulatory actions, attributable to issues arising under the Agreements,
it being understood and agreed that this indemnity shall not apply to any
claims, loss or damage arising out of any other agreement between the parties or
the parties' performance thereunder, including the contributions set forth in
the Contribution Agreement; in any such actions, Railroad shall have the right
to designate and/or employ independent counsel, if deemed necessary by Railroad,
to protect its interests, and the expense of such representation shall be paid
or reimbursed by Pathnet;
(f) Reserved.
(g) All claims, liabilities, losses, damages, causes of action,
costs, and expenses (including reasonable attorneys' fees and costs) arising
from any damage or injury to (including
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loss of use or service of or loss of revenue or profit from) any facilities,
cables, wires, pipes, casings, conduits, innerducts or ducts of any other party
or Conduit Right-of-Way operator or user, licensee, sublicensee, transferee,
purchaser or permitted assignee arising out of or related to any act or omission
of Pathnet or Pathnet's employees, agents, contractors, subcontractors,
licensees, sublicensees, customers, partners, the Contracted Railroad Personnel
or others acting at the direction of any of the foregoing, unless caused by the
willful misconduct of Railroad or Contracted Railroad Personnel;
(h) All claims, liabilities, losses, damages, causes of action,
costs, and expenses (including reasonable attorneys' fees and costs) arising
from any act or omission of Pathnet or Pathnet's employees, agents, contractors,
subcontractors, licensees, sublicensees, customers, partners, the Contracted
Railroad Personnel or others acting at the direction of any of the foregoing
which are not expressly assumed by Railroad under Section 17.2.
17.2 Railroad's Indemnification. Railroad hereby assumes responsibility
for, and shall indemnify, defend and hold Pathnet harmless from, claims,
liabilities, losses, damages, causes of actions, costs, and expenses (including
reasonable attorneys' fees and costs) arising from:
(a) Death of or injury to any employee(s) of Railroad or Railroad's
Affiliates, other than Contracted Railroad Personnel;
(b) Destruction of or damages to any Railroad or Railroad Affiliate
facilities or equipment (moving or stationary) or property;
(c) Interruption to or cessation of freight rail service;
(d) The willful misconduct of Railroad's Affiliates or,
notwithstanding anything to the contrary contained herein, Contracted Railroad
Personnel.
UNLESS such claim, liability, loss, damage, cause of action, cost or expense is
caused by, arises from, or results in whole or in part from:
(i) any act or omission of Pathnet (including, but not limited
to, any improper or negligent plan and/or design, construction, installation,
maintenance, placement, operation, repair, relocation use or removal of
Pathnet's System or Facilities);
(ii) any breach of the Agreements by Pathnet;
(iii) any direct rescheduling, delay or diversion costs, as set
forth in Exhibit B; or
(iv) any matter which is the subject of Pathnet's release and
indemnification in Section 17.1.
17.3 Notice of Claims; Indemnification Procedures. Upon receipt of notice
by Railroad or Pathnet, as applicable, (the "Indemnitee"), of any loss, event,
happening or occurrence which would be the basis of a claim by the Indemnitee
under the provisions of this Article 17 (an "Indemnified Claim"), the Indemnitee
shall immediately provide written notice to the other party (the "Indemnitor")
of such Indemnified Claim. So long as the Indemnitor is not in default in the
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performance of its obligations under the Agreements, as between the Indemnitee
and the Indemnitor, the Indemnitor shall retain primary responsibility for the
conducting of any legal and/or administrative action or other proceeding
regarding any such Indemnified Claim (an "Indemnified Claim Proceeding") and the
defense (and any appropriate appeal) thereof. Legal counsel retained with
respect to any Indemnified Claim proceeding shall be selected by the Indemnitor,
but shall be subject to the reasonable prior approval of the Indemnitee. As
between the Indemnitee and the Indemnitor, all costs incurred with respect to
any Indemnified Claim Proceeding (including, but not limited to, reasonable
costs and attorneys' fees) shall be borne by the Indemnitor, and the
Indemnitor's indemnification obligations set forth in this Article 17 shall
extend to all such costs. Nothing contained herein shall in any way limit the
Indemnitee's right to participate and/or retain independent legal counsel, at
the Indemnitee's expense, with respect to any Indemnified Claim proceeding, but
the Indemnitee shall cooperate with the Indemnitor and coordinate Indemnitee's
participation and/or use of such independent counsel in a matter not
inconsistent with Indemnitor's positions and interests in such Indemnified Claim
Proceeding, to the extent reasonably possible and not adverse to the interests
of Indemnitee. Notwithstanding the foregoing, in the event Indemnitee
determines, in Indemnitee's reasonable opinion, that there is a conflict of
interest or other circumstance whereby such Indemnitor's retained legal counsel
cannot adequately represent Indemnitee's interests in any Indemnified Claim
Proceeding, Indemnitee shall have the right to retain independent legal counsel
and Indemnitor's indemnification obligations set forth in this Article 17 shall
extend to all costs incurred with respect to such separate representation. In
the event that an Indemnitor defends an Indemnitee pursuant to the terms hereof,
and the final adjudication determines that the Indemnitee bears some portion of
liability under the Indemnified Claim which is not subject to the Indemnitor's
indemnification obligations hereunder, the costs of such defense will be
apportioned between the Indemnitor and Indemnitee based upon such parties'
ultimate liability after giving effect to the indemnification provisions hereof.
Any settlement of an Indemnified Claim shall be subject to the written approval
of both the Indemnitee and the Indemnitor. Indemnification payment shall be made
within thirty (30) days of such approval.
17.4 Exceptions to Liability. Notwithstanding any contrary provision
contained herein, (a) Railroad shall not have any liability whatsoever for any
death of or injury to persons or damage to or loss of property arising from or
resulting in connection with any train derailment, and Pathnet hereby releases
Railroad and its Affiliates from any and all claims, liabilities, losses,
damages, causes of action, costs and expenses (including reasonable attorneys'
fees and costs) arising from or resulting in connection with any train
operation, accident or derailment, irrespective of the negligence, gross
negligence or willful misconduct of Railroad, and (b) Pathnet shall have no
liability relating to any Conduits (Innerducts) installed for or capacity sold
or made available to Railroad pursuant to the License Agreement; provided,
however, that (x) any such Conduits (Innerducts) shall be of equal or greater
quality as Pathnet's own Conduits (Innerducts), and (y) Pathnet shall grant the
same remedies to Railroad with respect to such capacity as Pathnet grants to its
customers in the ordinary course of its business (e.g., outage credits, it being
understood that Pathnet shall not be obligated to make any monetary payments as
a remedy in connection with such capacity), which Railroad acknowledges may not
provide it with any incremental benefit.
17.5 Survival. The provisions of this Article 17 shall survive the
expiration or earlier termination of the Agreements.
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18. INSURANCE.
18.1 Railroad Protective Liability Insurance. Before any period of
construction of any portion of the System or Facilities (including preliminary
surveys and inspections), Pathnet shall purchase, or cause its contractor(s) to
purchase, and to maintain in full force and effect, Railroad Protective
Liability Insurance ("RPL") naming Railroad as the insured. Said RPL policy
shall be written on the form prescribed in the Federal Aid Highway Program
Manual, Volume 6, Chapter 6, Section 2, Subsection 2, as amended from time to
time, or as superseded by the AAR/AAHSTO form, and shall provide available
limits of not less than $5,000,000 per occurrence, $10,000,000 aggregate for
bodily injury and property damage (unless Pathnet designates a hazardous
material Rail Corridor as a Conduit Right-of-Way, and then $10,000,000 per
occurrence, $20,000,000 aggregate). The original of said RPL policy shall be
furnished to and approved by Railroad, prior to the commencement of any entry or
other operations under the Agreements.
18.2 Liability Insurance. Pathnet shall purchase and maintain, until all
of its obligations under the Agreements have been fully discharged and
performed, the following insurance coverage: (a) Commercial General Liability
Insurance ("CGL"), including any applicable umbrella policy, with contractual
liability covering actions assumed in the Agreements by Pathnet, providing for
available limits of not less than $5,000,000 single limit, bodily injury and/or
property damage combined, for damages arising out of bodily injuries to or death
of all persons in any one occurrence and for damage to or destruction of
property, including the loss of use thereof, in any one occurrence, including
Federal Employers Liability Act claims ("FELA") against the Railroad, or other
liability arising out of or incidental to railroad operations; (b) Workers'
Compensation, Employer's Liability Insurance and Occupational Disease Insurance;
and (c) Business Automobile Liability Insurance. If any motor vehicles are used
in connection with the work to be performed under the Agreements, Pathnet shall
purchase and maintain Business Automobile Liability Insurance with limits of not
less than $2,000,000 single limit, bodily injury and/or property damage
combined, for damages to or destruction of property including the loss of use
thereof, in any one occurrence. If, in Railroad's reasonable opinion, a higher
limit of liability is necessary for any insurance policy required hereunder,
Railroad shall so notify Pathnet and Pathnet shall, within thirty (30) days of
receipt of such notice, provide a copy of the endorsement to the appropriate
policy increasing the liability coverage to the required limit.
18.3 Policy Requirements. All insurance required hereunder shall be
effected by valid and enforceable policies issued by insurer(s) of financial
responsibility and authorized to do business in the states where the System
and/or Facilities are located, all subject to the reasonable prior approval of
Railroad. Except for the RPL policy (on which Railroad shall be the named
insured), Pathnet's liability insurance policies shall name Railroad as an
additional insured and will not have any exclusions for liability relating to
railroad operations by endorsement. The Pathnet's Workers' Compensation and
property insurance policies shall include waivers of subrogation rights
endorsements. All policies shall contain a provision for thirty (30) days'
written notice to Railroad prior to any expiration or termination of, or any
change in, the coverage provided. The insurance company shall be required to
provide Railroad with at least thirty (30) days' written notice prior to such
expiration, termination or change in any insurance coverage. Prior to any entry
upon the Rail Corridor pursuant to the Agreements and upon Railroad's request
thereafter, Pathnet shall provide Railroad with the original RPL policy and with
certificates of insurance for all other coverages showing that the required
coverages are in effect for the term of
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the Agreements. The liability assumed by Pathnet under the Agreements,
including, but not limited to, Pathnet's indemnification obligations, shall not
be limited to the insurance coverage stipulated herein.
19. NOTICES.
19.1 General. Unless otherwise provided herein, all notices,
communications and deliveries required or permitted under the Agreements shall
be in writing and shall be (a) delivered personally, (b) sent by facsimile
transmission with subsequently transmitted confirmation of receipt, (c) sent by
overnight commercial air courier (such as Federal Express), or (d) mailed,
postage prepaid, certified or registered mail, return receipt requested; to the
parties at the addresses or facsimile numbers hereinafter set forth:
Pathnet: Railroad:
- - - --------
Pathnet, Inc. CSX Real Property, Inc.
1015 31st Street, NW 301 West Bay Street, Suite 800 (J915)
Washington, D.C. 20007 Jacksonville, Florida 32202
Attention: President Attention: Assistant Vice President
Network Services
Facsimile No: (202) 625-7369 Real Estate Operations
Facsimile No. (904) 633-4586
With a Copy To: With a Copy To:
- - - --------------
Pathnet, Inc. CSX Transportation, Inc.
1015 31st Street, NW 500 Water Street (J150)
Washington, D.C. 20007 Jacksonville, Florida 32202
Attention: General Counsel Attention: Assistant General Counsel
Facsimile No: (202) 625-7369 Facsimile No. (904) 359-7518
or at such other address(es) or facsimile number(s) as a party shall have duly
notified the other party.
In addition to the foregoing, any notice, communication or delivery required or
permitted under Sections 17 and 18 shall also be sent to:
CSX Corporation
500 Water Street (J907)
Jacksonville, Florida 32202
Attention: Risk Manager
Risk Management Department
Facsimile No. (904) 633-5096
Any such notice, communication or delivery shall be deemed delivered upon the
earliest to occur of: (a) actual delivery; (b) the same day as facsimile
transmission (or the first business day thereafter if faxed on a Saturday,
Sunday or legal holiday); (c) one (1) business day after shipment
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by commercial air courier as aforesaid; or (d) upon receipt if sent by certified
or registered mailing as aforesaid.
19.2 Planning, Design, Installation and Construction Phase Access Notice.
During the Planning and Design and the Installation and Construction Phases,
Pathnet shall, except in the case of emergency, give Railroad's Engineer at
least ten (10) days' written notice before commencing construction or bringing
any vehicle or equipment onto the Rail Corridor or other Railroad property, and
forty-eight (48) hours' notice before any other entry. Any such written notice
shall state the name(s) of Pathnet employee(s) in charge or contractor(s) or
subcontractor(s) performing work or making such entry.
19.3 Maintenance and Operation Phase Access Notice. During the Maintenance
and Operation Phase, in order to secure safety of operated trains, crews,
passengers and cargo of Railroad, and safety of Pathnet employees and/or
contractors, Pathnet shall give CSXT's local Director of Dispatch, (904)
381-2765 and (904) 359-7551, as representative of Engineer, advance telephone or
telegraph notice of entry onto any portion of the Rail Corridor, which entry
shall be subject to consent and approval of Railroad's Engineer as to method and
timing, which approval may be withheld in his or her sole discretion. Any such
notice shall state the name(s) of Pathnet's employee(s) or contractor(s) or
subcontractor(s) performing work or making such entry.
19.4 Emergency Notice. In case of disaster (such as a train derailment or
System failure) or other emergency demanding immediate examination or repairs to
the existing System or Facilities, notice shall be given by either party to the
other in person or by telephone to the Emergency Response Center(s) designated
on Exhibit H attached hereto or as otherwise designated in writing by each party
to the other. Such initial verbal or telephonic notice, however, must be
confirmed in writing within forty-eight (48) hours. Each party will cooperate
with the other to permit restoration of each party's operations as promptly as
feasible after such emergency.
20. RELOCATIONS; ALTERATIONS.
20.1 Relocation to Accommodate Railroad. If Railroad determines that any
Pathnet Facilities or System must be changed, altered or relocated after initial
construction because of Railroad's own track or facility relocations or rail
operational needs or plans (including additions, changes to track(s) to
accommodate freight or passenger customers of Railroad), or any governmental
agency or requirement, Railroad shall promptly give written notice thereof to
Pathnet of such needs, plans or requirements. Within sixty (60) days of receipt
of such notice, Pathnet shall protect or move the Pathnet Facilities and System,
at Pathnet's sole cost and expense, and in a manner satisfactory to Railroad;
provided, however, that Railroad shall reimburse Pathnet for any such costs or
expenses received by Railroad from a governmental entity or other entity in
connection with such relocation.
20.2 Relocation to Accommodate Third Party. In the event of a Railroad
relocation to accommodate any third party other than as provided in Section
20.1, Pathnet shall protect or move its Facilities and System upon receipt from
Railroad of an agreement, in writing, obligating such third party to reimburse
Pathnet for all costs and expenses incurred by Pathnet, including reasonable
administrative and overhead, in connection therewith, or, if Railroad is unable
to obtain such an agreement from such third party, Railroad's agreement to
reimburse Pathnet for the
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foregoing costs (not to include any reimbursement of lost income). Pathnet shall
submit any invoice to Railroad within ninety (90) days after such relocation
work is completed.
20.3 Replacement Land. In the event of any relocation of Pathnet's System
or Facilities under Section 20.1, Railroad shall not be required to purchase for
Pathnet any replacement land or right-of-way or to pay Pathnet the cost to
secure same if there is not available Rail Corridor. However, Railroad agrees to
allow Pathnet to relocate to any other available adjacent or nearby Rail
Corridor or other land owned by Railroad at Pathnet's sole cost; provided,
however, that Railroad shall not be entitled to any additional payment for such
replacement Railroad land or Rail Corridor and the total mileage of such Rail
Corridor or replacement land to which Pathnet relocates shall be deducted from
and the abandoned Rail Corridor shall be added to the total mileage of
Designated Rail Corridor permitted under the License Agreement.
21. LINE SALES; ABANDONMENT.
21.1 In the event of a sale or other transfer of any portion of the
Designated Rail Corridor, such sale shall be made expressly subject to the
Agreements and the rights of Pathnet thereunder. Notwithstanding any provision
herein to the contrary, Railroad shall have the absolute right, in its sole
discretion, to effect an Abandonment of all or any portion of the Rail Corridor.
22. CONDEMNATION.
22.1 Severance of Interests. In the event that any portion of the
Designated Rail Corridor becomes the subject of a condemnation or appropriation
proceeding or offer to acquire, Pathnet's interest (in its Facilities and/or
System and in its occupation of the Segment) shall be severed from Railroad's
interest (both physical and ownership rights) in such proceedings, and the
parties agree to have any such condemnation or appropriation awards specifically
allocated between Pathnet's interest and Railroad's interest.
22.2 Removal of Facilities. Should any Segment of the Designated Rail
Corridor used by Pathnet for a part of Pathnet's Fiber Optic Communications
System or Facilities be condemned, appropriated and/or acquired by any
governmental agency (or other party cloaked with the power of eminent domain)
for public purpose or use, then to the extent required by the condemning
authority, any Facilities or System of Pathnet within such Designated Rail
Corridor not condemned, appropriated and/or acquired by such agency or authority
shall be promptly removed by Pathnet at Pathnet's cost, unless Pathnet makes
other arrangements with the condemning or appropriating agency or authority.
22.3 Notice. Railroad shall promptly notify Pathnet of any condemnation or
appropriation action filed against any portion of the Designated Rail Corridor.
Railroad shall also promptly notify Pathnet of any threatened condemnation or
offer to acquire by any governmental agency (or other party cloaked with the
power of eminent domain) affecting the Designated Rail Corridor (provided the
Railroad employees administering this Agreement have actual knowledge thereof).
Further, any voluntary sale to the condemning or appropriating agency or
authority pursuant to any threatened condemnation or offer to acquire shall be
in accordance with the provisions of Article 21.
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23. PATHNET DISCONTINUANCE.
23.1 In the event of any Discontinuance by Pathnet of its Facilities,
System, Segment or any substantial portion thereof, Railroad shall have the
option, to be exercised in Railroad's sole discretion, to terminate this
Agreement as to the affected Segment(s) upon written notice to Pathnet. Upon
such termination, removal of Pathnet's Facilities and System within such
affected Segment(s) shall be governed by Section 26.2 hereof.
24. RAILROAD'S RIGHT TO TERMINATE OR REQUIRE SUSPENSION OF ACTIVITIES; FAILURE
TO MAKE TIMELY PAYMENT
24.1 Material Breach; Remedy. If Pathnet or Railroad fails to perform,
violates or defaults under any material terms or conditions of the Agreements
("Material Breach"), and fails to remedy any such Material Breach in accordance
herewith, then and in that event, the non-defaulting party shall have the
following rights and remedies:
(i) if the Material Breach (a) adversely affects railroad safety or
operation, or (b) relates to the payment of any fees and expenses due to
Railroad under the Agreements, Railroad shall have the right to terminate
this Agreement upon written notice to Pathnet; and
(ii) if the Material Breach is not of the type and nature described
in Subsection 24.1(i), Railroad shall have the right, upon written notice
to Pathnet, to suspend immediately all then pending and future
installation, construction, maintenance and/or deployment on the entire
Rail Corridor until such time as the applicable Material Breach is cured
and Pathnet demonstrates to Railroad's reasonable satisfaction that
Pathnet has taken such steps and/or implemented such procedures so that
the particular Material Breach in question will not recur.
Upon termination as provided in this Section 24.1, removal of Pathnet's
Facilities and System shall be governed by Section 26.2 hereof. Railroad's right
to terminate this Agreement shall be limited to occurrences of Material Breaches
of the type and nature described in Subsection 24(i) above.
24.2 Examples of Material Breach. For purposes of this Article, any
substantial noncompliance, or any repeated noncompliance, each of which might be
considered minor or singular, may when considered in the aggregate constitute a
Material Breach. In illustration, but without limitation, failure to give
required notices, or failure to give required approvals without cause, or
failure to comply with final decisions under the Dispute Resolution provisions
of Article 25, may constitute a Material Breach.
24.3 Notice and Cure Period. Pathnet and Railroad agree that neither party
shall proceed against the other for any alleged Material Breach before the
offending party has had written notice and reasonable time to respond and cure
such breach; provided, however, that neither party shall be required to give
time to respond and cure if any such delay will cause irreparable harm or
increased risk of liability or injury. Reasonable time to respond and cure shall
for purposes of Subsections 24.1(i)(b) and 24.1(ii) be presumed to be thirty
(30) days, and for purposes of Subsection 24.1(i)(a) be presumed to be
forty-eight (48) hours. If such breach cannot
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reasonably be cured within the applicable cure period, but the party proceeds
promptly to cure the same and prosecutes such cure with due diligence, the time
for curing such breach shall be extended for such reasonable period of time as
may be necessary under the circumstances to complete the cure, but under no
circumstances shall such additional period extend beyond, (i) for purposes of
Subsection 24.1(ii), one hundred eighty (180) days without the specific written
approval of the non-breaching party, which such approval may be withheld in such
party's reasonable discretion, and (ii) for purposes of Subsection 24.1(i)(a)
and (b), thirty (30) days. With respect to any Material Breach (i) which is not
cured by the breaching party within the applicable cure period, or (ii) for
which an opportunity to cure is not required to be given, the non-breaching
party may, at its sole option, cure any such breach in the manner it deems
appropriate. In such event, the breaching party, within thirty (30) days of
written demand and without deduction, set-off or abatement, shall reimburse the
non-breaching party for any and all expenses incurred as a result of the
non-breaching party's curing of such default together with interest at the
Default Rate. Nothing contained herein shall create an obligation on the part of
the non-breaching party to cure any uncured breach existing at any time under
the Agreements.
24.4 No Continuing Waiver. Any waiver by any party at any time of any of
its rights under the Agreements shall not be deemed to be a continuing waiver of
any breach or default or other matter subsequently occurring.
24.5 Waiver of Certain Damages. Except as otherwise provided in Section
6.5 of the License Agreement, neither party shall be liable to the other party
for any consequential, indirect, special, exemplary or punitive damages,
including, but not limited to, damages attributable to or based upon any loss of
present or future profits, any loss of or injury to customer goodwill, or any
lost or foregone investments and opportunities.
25. LIAISON; COORDINATION AND DISPUTES RESOLUTION.
25.1 Specified Disputes. The parties intend that any disputes which may
arise between them relating to access to the Rail Corridor, or the design, plan,
construction, installation, operation, maintenance, repair, replacement, and
removal of Pathnet's Facilities or System or the safe and uninterrupted
operation of the rail system of Railroad (a "Specified Dispute") be resolved as
quickly as possible, which may, in certain instances, involve immediate
decisions. When such quick resolution is not possible, or depending upon the
phase of installation of Pathnet's Facilities and System, the parties agree to
resolve such Specified Disputes as herein provided.
25.2 Field Representatives. Within thirty (30) days after the designation
by Pathnet of the Route Plan as provided in Exhibit B, Railroad and Pathnet
shall each designate in writing the division or field representative(s) as
point(s) of contact for decision making concerning the Specified Disputes.
25.3 Railroad Operations. Questions of Railroad operations or track safety
shall in all instances be referred to Railroad's Engineer, whose decision shall,
for any emergency situation, be made within twenty-four (24) hours, or for any
non-emergency situations, be made as provided in Section 25.7.
25.4 Access. Specified Disputes concerning Pathnet's right of access to
the Rail Corridor during the Planning and Design and Installation and
Construction Phases, including use
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of an on-rail plow installation machine under Exhibit B, or during the
Maintenance and Operation Phase, or access to or copies of Railroad's documents,
shall be referred initially to the designated representative of the Engineer,
who shall render such decision within twenty-four (24) hours. Decisions of the
Engineer's designated representative shall be referable within twenty-four (24)
hours of such decision, by Pathnet to the Engineer of Railroad, whose decision
shall be issued within twenty-four (24) hours of the notice from Pathnet of
dispute with the authorized representative of Engineer.
25.5 Reserved.
25.6 Communications Facilities. Specified Disputes arising out of or in
conjunction with the communications System or Facilities of Pathnet, of
Railroad, or of both, or the capacity and/or installation, maintenance and/or
use of the same, shall be referred initially to Pathnet's system manager (or
other representative designated by Pathnet) for decision, which shall be
rendered, in writing, within thirty (30) days after submission.
25.7 Remaining Specified Disputes. Any other Specified Dispute between the
parties shall be referred initially to the Engineer for decision, which shall be
rendered, in writing, within fifteen (15) days after submission.
25.8 Mediation or Arbitration. Either party may appeal any decision made
pursuant to Sections 25.2 through 25.7 by requesting either arbitration or
mediation within thirty (30) days after the date of receipt of such decision in
writing. Failure to request mediation or arbitration within such thirty (30) day
period shall result in such decision becoming final and conclusive. The selected
arbitration or mediation shall proceed in Jacksonville, Duval County, Florida,
in accordance with the Arbitration or Mediation Resolution Procedures attached
hereto as Exhibit K. Any arbitration decision or mediation agreement, or other
final decision herein, may be enforced by any court having jurisdiction hereof.
25.9 Work Pending Resolution of Specified Dispute. During the period in
which any Specified Dispute is unresolved, any work on the Rail Corridor by or
for Pathnet shall commence or proceed only with maximum security for Railroad
operations, as determined by Railroad's Engineer, and the determination or
allocation of any costs or additional costs therefor shall be resolved
thereafter in accordance with this Article.
26 TERMINATION; REMOVAL.
26.1 Partial Termination. Pathnet may terminate the Agreements with
respect to any individual Segments of the Designated Rail Corridor at any time
during the Term by providing Railroad with six (6) months' prior written notice
of such termination. Such termination shall be only with respect to the
specified Segment(s) of the Designated Rail Corridor identified in the
termination notice and shall not affect the continuation of the Agreements with
respect to the remaining Segments of the Designated Rail Corridor. With such
partial termination, all further obligations (other than obligations which arose
prior to such termination and any provisions hereof which are intended to
survive the expiration or other termination) shall cease only as to affected
Segment(s) and all terms and conditions of the Agreements shall remain unchanged
and in full force and effect as to the remaining Segments within the Designated
Rail Corridor. In the event of any partial termination hereunder, Pathnet shall
not be entitled to any refund, rebate or
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set off relating to the consideration paid or given pursuant to the License
Agreement nor any adjustment to the mileage bank.
26.2 Removal Upon Termination. Within ninety (90) days of the expiration
or earlier or partial termination of the Agreements (or such longer period as
may be reasonably necessary to remove Pathnet's Facilities and System provided
Pathnet begins removal within such ninety (90) day period and continues
diligently to completion), Pathnet, at its own risk, cost and expense, shall
remove all above ground Facilities, System and appurtenances from the Designated
Rail Corridor, all underground Optical Fibers, and such other underground
Facilities, System and appurtenances as Pathnet desires or Railroad reasonably
requests so as to avoid interference with Railroad operations, and restore the
Designated Rail Corridor and other affected property of Railroad to the
functional or operational condition existing prior to the construction or
installation of such Facilities, System and appurtenances. If Pathnet fails to
timely remove the System and Facilities and restore the Designated Rail Corridor
and other affected property as provided in the preceding sentence, Pathnet shall
be deemed to have abandoned such Facilities and System in place, in which event
such Facilities and System shall become the property of Railroad, for purposes
of resale, use or operation by Railroad in any manner and for any purpose
Railroad deems appropriate, in its sole discretion; or Railroad may cause such
removal and restoration to be performed and all costs incurred by Railroad in
such removal and restoration, together with interest thereon at the Default
Rate, shall be due and payable by Pathnet to Railroad upon written demand.
26.3 Continuing Obligations. The expiration or earlier termination of the
Agreements shall not release any party from any liability or obligation incurred
prior to such expiration or termination or terminate any right or obligation
which would have continuing relevance after such expiration or termination of
this Agreement. Without limiting the foregoing, the indemnification obligations
of Pathnet, the rights of Railroad to review Pathnet's books and records, and
such other provisions which are reasonably intended to have continuing validity,
shall survive the expiration or earlier termination of the Agreements.
27. DOCUMENT CONFIDENTIALITY.
27.1 General. Railroad and Pathnet understand and agree that the
Agreements, and all materials, maps, documents and other information that are
referred to therein or attached thereto, exchanged between the parties in
negotiating the Agreements, or utilized in fulfilling the provisions and intent
hereof or thereof, are and shall be confidential, except as may be required by
law or regulation. Any public announcement or press release concerning the
Agreements by either party shall be subject to the prior approval of the other
party, which approval shall not be unreasonably withheld.
27.2 Restricted Distribution. Railroad and Pathnet each agree to respect
such confidentiality, and shall restrict the distribution of the Agreements and
such materials only to those Persons designated to implement the provisions
hereof, and shall not disclose or furnish to any third parties copies of the
Agreements or any materials referred to herein, without the prior written
consent of the other party hereto or, subject to Section 27.3, a Court Order or
Administrative Subpoena requiring same, except as may be required by law or
regulation. The parties agree that in distributing copies or portions of these
materials to Persons necessary to
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implement the same, such copies or materials shall be clearly marked as
confidential, and indicating that the further distribution, copying or
reproduction of the same is expressly prohibited.
27.3 Redacted Copy. The parties shall jointly prepare redacted copies of
the Agreements which may be furnished, as necessary to implement the provisions
hereof, to (a) Arbitration Panel, (b) Court, (c) Administrative Tribunal, (d)
mortgagee(s) or other financial backers of either party, and (e) prospective
users of Pathnet's Conduit (Innerduct), Cable, Optical Fiber or other Facility
authorized in accordance with the Agreements.
27.4 Injunctive Relief. The parties recognize and acknowledge that any
actual or threatened disclosure of such confidential information by either
party, its agents, employees or contractors, will cause irreparable harm to the
other party, such that monetary remedies available at law will not provide
adequate relief, and therefore the aggrieved party shall be entitled to receive
injunctive relief as an equitable remedy.
27.5 No Right to Non-Material Information. Neither party shall have the
right to obtain any information or documents from the other which are not
material to the provisions or implementation of the Agreements.
28. GENERAL TERMS.
28.1 Entire Agreement. The Agreements, and any exhibits or amendments
which may be attached thereto from time to time, constitute the entire agreement
between the parties hereto with respect to the subject matter thereof and may be
modified only by a writing executed by both parties.
28.2 Incorporation by Reference. The Agreements, as amended by the parties
from time to time in accordance therewith, shall be incorporated by reference
into any Build Supplement, separate finance agreement or other document executed
between the parties, and such incorporation shall include all amendments and
exhibits to the Agreements, even if made or attached subsequent to the date of
the Agreements.
28.3 No Third Party Beneficiaries. Except as otherwise provided in the
Agreements, nothing contained therein, in any provision or exhibit thereof, or
in any agreement or provision included by reference, shall operate or be
construed as being for the benefit of any third person.
28.4 Interpretation. Neither the form of the Agreements, nor any provision
therein, shall be interpreted or construed in favor of or against either party
hereto as the sole drafter thereof.
28.5 Force Majeure. The parties agree that a party shall not be liable for
its failure to perform its obligations under the Agreements during any period in
which such performance is delayed by fire, flood, war, embargo, riot, labor
strike or unrest, the intervention of any government authority, train
derailment, or any other event or condition outside the reasonable control of
such party, provided that such party promptly notifies the other party of the
delay and the reason(s) for such delay. The provisions of this paragraph shall
not apply to Pathnet's payment obligations under the License Agreement.
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28.6 Reasonableness. Wherever the term "reasonable" is used in the
Agreements, the term shall mean: for Railroad, application of standard and
established railroad engineering, operating and safety rules, regulations and
procedures; for Pathnet, application of standard and established carrier
engineering and operating rules.
28.7 Approval or Consent. Wherever the term "approval" or "consent" is
used in the Agreements, unless otherwise specifically qualified, the term shall
mean that such "consent" or "approval" shall not be unreasonably withheld,
delayed or conditioned.
28.8 Parties. Wherever used in the Agreements, the terms "Railroad" and
"Pathnet" shall be construed in the singular or plural as the context may
require or admit, and shall include the permitted successors and assigns of such
parties.
28.9 Severability. The Agreements are executed under the current
interpretations of applicable federal, state, county, municipal and local
statutes, ordinances and laws. However, each separate division (section,
paragraph, clause, item, term, condition, covenant or agreement) thereof shall
have independent and severable status for the determination of the legality
thereof. If any separate division is determined to be void or unenforceable for
any reason, such determination shall have no effect upon the validity or
enforceability of each other separate division, or any combination thereof.
28.10 Governing Law; Venue. The Agreements shall be construed and governed
under the laws of the State of Delaware. It is the particular intent of the
parties that the indemnification obligations contained in the Agreements shall
be enforceable and shall not be deemed to be against public policy. The parties
consent to the personal jurisdiction of and to exclusive venue in the United
States District Court in and for the Middle District of Florida, Jacksonville
Division.
28.11 Assignability.
(a) Except as otherwise specifically provided in the Agreements,
Pathnet shall not assign or transfer any right or interest in the Agreements
without the prior written consent of Railroad, which consent may be withheld in
Railroad's sole discretion. The above requirement for consent shall not apply to
(i) any disposition of all or substantially all of Pathnet's stock or assets;
(ii) any corporate merger, consolidation or reorganization, whether voluntary or
involuntary, involving Pathnet; or (iii) a sublease or assignment of the
Agreements (in whole or in part) by Pathnet to a subsidiary, affiliate, or
parent company, controlled by, under common control with, or controlling, either
indirectly or directly, Pathnet, provided that no assignment not consented to by
Railroad shall relieve Pathnet of any of its obligations or liabilities under
the Agreements and, provided further, that such Assignee agrees in writing to be
bound by the terms of the Agreements. Nothing herein shall prohibit Pathnet (i)
from involving contractors, or strategic or co-development partners in
construction and operation of the fiber optic facilities, on such terms as
Pathnet may determine in its sole discretion, provided all such activities are
conducted in accordance with the terms of the Agreements, and that Pathnet
remains fully liable for all obligations thereunder; and (ii) from granting
liens or other security interests in the fiber optic facilities or Pathnet's
rights under the Agreements in connection with financing or investments made
available to Pathnet; provided that all such parties agree that, if and to the
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extent they acquire an ownership interest thereunder, they shall be bound by and
shall comply with the terms of the Agreements.
(b) Upon request by Pathnet, Railroad shall execute reasonable
documentation to be provided by Pathnet acknowledging the rights of Pathnet's
lender(s) ("Lender") to obtain ownership of any fiber optic facilities if the
Agreements are still in effect and Pathnet is in material default under the
terms of Pathnet's loan to Lender, provided, however, that in such case Lender
shall agree in writing that it shall become an assignee to the Agreements and
shall become subject to all rights and obligations of Pathnet under the terms of
the Agreements (and Pathnet also shall remain subject to all obligations of
Pathnet under the Agreements). In addition to the rights granted to Pathnet
under the Agreements, Pathnet's Lender shall have the additional right to take
possession, sell, assign or otherwise transfer any fiber optic facilities,
including the right to operate, or permit a third-party to operate, any fiber
optic facilities, provided such operation shall be subject to all terms and
conditions of the Agreements and provided further that Railroad shall approve
such party, in Railroad's reasonable discretion.
(c) Railroad may assign the Agreements to any Affiliate, any
purchaser(s) of the Designated Rail Corridor to the extent applicable to such
Rail Corridor, or any Person in connection with any merger or consolidation of
Railroad, provided that any such assignment shall be subject to the terms and
conditions of this Agreement.
28.12 Time is of Essence. Time is of the essence in the performance of
each party's obligations under the Agreements.
28.13 Incorporation of Exhibits. All exhibits attached to the Agreements
are incorporated by this reference and made a part of the Agreements for all
purposes.
28.14 Multiple Counterparts. Each of the Agreements may be executed in
several counterparts, each of which shall be deemed an original, and such
counterparts shall constitute one and the same instrument.
28.15 WAIVER OF JURY TRIAL. RAILROAD AND PATHNET HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION
WITH THE AGREEMENTS OR ANY DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
THEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS, RIGHTS OR OBLIGATIONS OF EITHER PARTY ARISING OUT OF OR
RELATED IN ANY MANNER TO THE AGREEMENTS (INCLUDING, WITHOUT LIMITATION, ANY
ACTION TO RESCIND OR CANCEL THE AGREEMENTS OR ANY CLAIMS OR DEFENSES ASSERTING
THAT EITHER OF THE AGREEMENTS WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR
VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO
AND ACCEPT THE AGREEMENTS.
28.16 Authorization. Railroad and Pathnet represent and warrant that each
has obtained all necessary corporate approvals authorizing the execution and
delivery of the Agreements, and
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that the execution and delivery of the Agreements will not violate the articles
of incorporation or by-laws of such corporation, and will not constitute a
material breach of any contract by which such corporation is bound.
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EXECUTED as of the Effective Date.
Witness: CSX TRANSPORTATION, INC.,
For itself and as Operator for New York
Central Lines LLC, a wholly-owned subsidiary
of Consolidated Rail Corporation
/s/ Shawn illegible By: /s/ J. Randall Evans
- - - -------------------- --------------------------------
illegible Name:
- - - -------------------- Title:
Witness: illegible PATHNET TELECOMMUNICATIONS, INC.
Matthew Harris
By: /s/ Richard Jalkut
--------------------------------
Name:
Title: CEO
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EXHIBIT A-1
[To be provided upon designation of the route]
EXHIBIT A-2
[To be provided upon completion of the route]
<PAGE>
EXHIBIT B
1. ROUTE DESIGNATION; DOCUMENTATION; INSPECTION; ACCESS.
1.1 Documentation. Railroad shall furnish to Utility, electronically if
available, at Utility's cost, copies of Valuation Maps with available indices
thereto within thirty (30) days of the date of Utility's written request.
Railroad shall make available to Utility, for reproduction at Utility's cost,
all available Railroad engineering documents relating to bridges, overpasses or
tunnels on or along such Route Plan. Railroad shall also furnish, at Utility's
cost, copies of maps or other documents to assist Utility in determining the
identity and location of other users of those portions of Railroad's Rail
Corridor designated on Utility's Route Plan. The furnishing of maps, documents
or other materials hereunder, however, shall not be a guarantee by Railroad of
the accuracy or completeness of same.
1.2 Inspection. Railroad agrees to participate with Utility in a joint
inspection of those portions of the Railroad Corridor designated on Utility's
Route Plan for the purpose of identifying problem areas and defining final
Conduit Right-of-Way routes or alternatives. Railroad also agrees to participate
in any additional joint inspections that may be required for the purpose of
detailing and developing solutions for problem areas.
1.3 Route Plan. Prior to the preparation of detailed Construction Plans as
contemplated in Section 1.7, Utility shall submit to Railroad a proposed Route
Plan marked on Railroad Valuation Maps. Railroad shall review and, through its
Engineer, approve or reject the proposed Route Plan. If rejected for reasons
other than Railroad's plans to Abandon a Segment of the Railroad Corridor,
Railroad shall cooperate with Utility to locate an alternative mutually
acceptable route along Railroad's Rail Corridor to the extent available. Upon
Railroad's approval of Utility's proposed Route Plan, such approved Route Plan
shall be attached to this Agreement as Exhibit A-1, for the purpose, among other
things, of defining the Designated Railroad Corridor.
1.4 Planning and Design Phase. From and after the date of submission by
Utility to Railroad of Utility's Route Plan, Utility and its designated
employees, agents and representatives shall have the right to enter upon any
portion of Rail Corridor shown on such Route Plan for a period of one hundred
eighty (180) days for the purpose of surveying and inspecting the same, subject
to all applicable notice, approval and other applicable requirements contained
in this Agreement (the "Planning and Design Phase").
1.5 Conditions of Right of Entry. All surveys or route inspections (or any
other entry by Utility hereunder) shall be made upon reasonable advance notice
to and at times satisfactory to Railroad, in a manner so as not to interfere
with operations of Railroad, and shall be at the sole risk, cost and expense of
Utility. Rights of entry shall not be unreasonably withheld or delayed.
1.6 Construction Planning Schedule. Utility shall furnish to Railroad a
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proposed schedule of construction and installation (commencement and completion
dates) on each portion of the Designated Rail Corridor to be utilized for
Utility's System. Said schedule of construction shall be sufficient to allow the
coordination of Railroad, Utility and construction personnel and operating train
movements. Utility shall schedule installation and construction to avoid
disruption of Railroad operations (including operation of freight and passenger
trains. Utility may request Railroad to reschedule or divert trains, where
possible, to minimize disruption of Utility's construction schedule, and, to the
extent possible and practical, as solely determined by Railroad's Engineer,
Railroad shall make such diversion or rescheduling. Utility further recognizes
that regulations of the Federal Railroad Administration (FRA) may require "Slow
Orders" to be issued by Railroad to trains operating in areas of Utility's
construction, and that such "Slow Orders" may cause delays in train movements,
including delays in movement of freight and passenger trains. Additional costs,
expenses or losses to Railroad generated by any "Slow Order", rescheduling,
delay or diversion (including detours or rerouting) resulting from any request
of or actions or omissions of Utility, its employees, agents, contractors or
subcontractors, or which results from any Fouling of Track(s), plus any damage
to or destruction of Railroad's signals, tracks or other facilities resulting
therefrom, shall be reimbursed by Utility.
1.7 Construction Plans. Whenever Utility desires to install or construct
any part or portion of its Facilities or System, including any structural
attachments, within the Designated Rail Corridor, Utility shall submit written
notice (the "Construction Notice") in two (2) signed counterparts, accompanied
by four (4) copies of the relevant Construction Plans, to Railroad's Engineer
for consent and approval of Railroad, which approval shall not be unreasonably
withheld or delayed. Upon approval by Railroad, one (1) signed counterpart of
the Construction Notice shall be returned by Railroad. Upon receipt of the
signed counterpart of the construction Notice by Utility, the Construction
Notice and the Construction Plans so approved shall be considered as being
incorporated into and made a part of this Agreement for all purposes.
1.8 Limited Scope of Approval. Railroad's right of approval of Construction
Plans, and the location of Utility's Facilities and System, and the nature of
Transmission Technology shall apply only to the extent that construction or use
of Facilities, System or Transmission Technology may affect train or signal
operations or the use of Railroad's Rail Corridor.
1.9 Installation and Construction Phase. From and after the date of
Railroad's approval of Utility's Construction Plans, as provided in Section 1.7,
Utility, its employees, agents and/or contractors, shall have the right, for a
period of one hundred eighty (180) days, to enter and construct and install
Utility's Facilities and System on that Segment designated in the Construction
Plans. Utility shall coordinate with, and secure advance written approval from
Railroad's Engineer, for all access to track and Restricted Working Area of Rail
Corridor, understanding that the operation of Railroad trains over any Rail
Corridor shall have priority. Construction and installation shall also be in
accordance with Fiber Optic Installation SOP (Standard Operating Procedure, MWI
1905-01, Issued 6/30/98), a copy of which is attached hereto as Exhibit M.
1.10 As-Built Drawing. Within ninety (90) days after completion of
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construction and installation of each Segment of Utility's System, Utility shall
furnish to Railroad an As-Built Drawing, referencing Railroad stationing,
Valuation Maps and mileposts for such Segment, which, when approved by Railroad
and as amended from time to time, shall be collectively attached hereto as
Exhibit A-2.
1.11 Maintenance and Operation Phase. Only after construction of each
Segment of Utility's System and approval by Railroad's Engineer of the
applicable As-Built Drawing, shall Utility, its employees, agents and/or
contractors, be permitted operational and maintenance access to such Segment, in
accordance with the provisions of this Agreement. With respect to each
independent Segment, the period after the Planning and Design Phase but prior to
the approval of the applicable As-Built Drawing is herein sometimes called the
"Installation and Construction Phase" and the period after the approval of the
As-Built Drawing is herein sometimes called the "Maintenance and Operation
Phase."
1.12 Reinstallation, Replacement and Removal. The provisions of this
Article 1 shall apply to any reinstallation, replacement or removal of any
Facilities by Utility.
2. SURVEYS AND RECORDS; COSTS.
2.1 Railroad Maps and Surveys. Railroad shall, at Utility's cost and upon
Utility's written request, furnish to Utility a copy of its current System Map,
System Diagram Map and Valuation Maps for Segments identified in the Route Plan
as System Segments. Railroad, however, shall not be deemed to have guaranteed
the accuracy of any map, survey or related records made available to Utility.
2.2 Utility Maps, Surveys and Records.
(a) If Utility performs or contracts to perform formal surveys of the
Rail Corridor, or any constructed Conduit Right-of-Way, Utility shall furnish
Railroad, upon request, a copy thereof, at Utility's cost, subject to lawful
limitations of survey contracts and applicable laws. Utility shall not be deemed
to have guaranteed the accuracy of such surveys. If Utility is required or
chooses to secure and/or file any surveys for any of its Facilities, Utility
shall bear the total cost thereof.
(b) Any copies or records made or data compiled by Utility relating to
Railroad's Rail Corridor (including but not limited to: maps; plans; photos;
video tapes; motion pictures; notes; survey data; cassette tapes and other types
of records and measurements) shall become the sole property of Utility. However,
subject to the document confidentiality provisions hereof, Utility shall provide
such data or records to Railroad.
(c) Utility shall, at its expense, furnish Railroad, annually, a map
of Utility's Fiber Optic Communication System ("Fiber Optic System Map")
depicting the location of Utility's Facilities and System on the Designated Rail
Corridor and fiber count by Segment.
(d) Utility shall update its Fiber Optic System Map after each new
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Segment is constructed, and shall include a copy of the relevant portion thereof
with each As-Built Drawing required in Section 1.10.
3. LOCATION OF UTILITY FACILITIES.
3.1 Perimeter Location. Occupation by Utility of the Rail Corridor
(including any portion that shall pass along or through an active operated
Railroad yard, terminal or station) shall be confined where practical to the
outer perimeter of the Rail Corridor, yard, etc. Minimum distance to the
centerline of the nearest track shall be eleven feet (11') unless otherwise
specifically agreed in writing by Railroad. The exact location and depth shall
be determined on a case-by-case basis during the Planning and Design Phase for
the Facilities.
3.2 Railroad Tunnels. The installation of Cable in Railroad tunnels shall
be avoided whenever possible, by the installation of Cable over Railroad tunnels
within Railroad Rail Corridor. Where such installation over the tunnel is not
reasonably possible, and after specific written approval by Railroad's Engineer,
Cable shall be laid or installed within existing conduits or ducts, where
available and in usable condition, or within suitable conduit (nonflammable,
inert material pipe) installed by Utility on the floor level of the tunnel, at a
point farthest away as practical from the nearest operated rail or track.
3.3 Entrance into Tunnel or onto Bridge. Any entrance by Utility or its
employees, agents or contractors into Railroad's tunnel, onto Railroad's bridge,
or on Railroad's property adjacent to a bridge or tunnel for any purposes, shall
be in accordance with the provisions of Article 12 of this Agreement.
4. CONDUIT (INNERDUCT)/CABLE INSTALLATION AND CONSTRUCTION.
4.1 Underground Installation. In all situations where reasonably possible,
Conduit (Innerduct) or Cable shall be installed by Utility, or its
contractor(s), underground, and in accordance with the "Specifications for
Underground Cables Occupying Railroad Rail Corridor" attached hereto as Exhibit
E. Notwithstanding any contrary provisions contained in Exhibit E, the
installation depths and limits of Cable or Conduit (Innerduct) shall be as
follows:
(a) Where Cable crosses underneath tracks, whether mainline, secondary
or industrial, Cable must be installed in Conduit (Innerduct);
(b) Cable to be installed within fifteen linear feet (15') of the
centerline of any tracks, shall be installed in Conduit (Innerduct);
(c) Conduit (Innerduct) installation is not required for Cable to be
installed more than fifteen linear feet (15') from the centerline of any tracks;
(d) The depth of Conduit (Innerduct) under tracks shall be no less
than sixty inches (60") below the bottom of ties, for a length at least two
linear feet (2') beyond the outer end of such ties;
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(e) Where on-rail plowing is authorized, as provided herein, Cable
and/or Conduit (Innerduct) shall be installed at a depth of no less than
forty-two inches (42") below ground surface;
(f) Cable or Conduit (Innerduct) to be installed within twelve linear
feet (12') of the centerline of the nearest track shall be at a depth of no less
than forty-two inches (42") below ground surface;
(g) Cable or Conduit (Innerduct) to be installed twelve linear feet
(12') or more away from the centerline of the nearest track shall be installed
at a depth of no less than thirty-six inches (36") below ground surface.
4.2 On-Rail Plow. Subject to the sole discretion and approval of Railroad's
Engineer for exact location of use, scheduling and utilization of an on-rail
plow machine, Utility shall have the right to utilize such machine for
construction purposes. If such use is approved, Railroad will provide all
necessary work trains and crews at Utility's sole cost and expense to facilitate
use of such machine. When within fifteen feet (15') of any signal wires,
culverts, grade crossings or other Railroad facilities, Utility must cease all
rail plow installation and (a) utilize only hand-trenching, behind (trackside
of) any Railroad facilities or obstructions (signals, signal boxes, relay cases,
etc.) which have wire or Cable connections to any track, and/or (b) place
Utility Conduit (Innerduct) or Cable only to the front (fieldside) thereof.
Utility shall pay for any repairs to signal wires, culverts, grade crossings or
other Railroad facilities damaged by said plowing or trenching.
4.3 Aerial Attachments. In situations where Utility determines that
underground installations are not reasonably practicable, installations shall be
by aerial attachments in accordance with the Association of American Railroads
"Communications Manual Part 1-B-1, Paragraphs A through S" and "Specifications
for the Construction of Railroad Communication Pole Lines, Section K", copies of
which are attached hereto collectively as Exhibit F. Details of each aerial
section of Cable shall be shown where appropriate as a part of the Construction
Plans and As-Built Surveys furnished to Railroad for approval as required under
this Agreement.
4.4 Water Crossings. In the event that Utility elects to perform submarine
Conduit (Innerduct) or Cable installation rather than installation by attachment
to Railroad's existing pole lines or fixed or movable bridges, such submarine
installation shall be performed by Utility or its contractor(s) at Utility's
sole risk, cost and expense.
4.5 Bridge Attachments. Attachment to all Railroad bridges, where
attachment to an adjacent parallel pole line is not desired by Utility, shall be
as prescribed in the "Specifications for the Attachment of Cables to Railroad
Bridges", a copy of which is attached hereto as Exhibit G.
4.6 Public Roadway Crossings. Cable or Conduit (Innerduct) crossing under
public roadways shall be at a location and depth as required by any applicable
federal, state or local laws, regulations or lawful orders. To the extent not
pre-empted by such
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authorities, such installation shall also be in accordance with Exhibit E.
4.7 Public Utility Crossings. Cable or Conduit (Innerduct) crossing over or
under public utilities shall be located and installed in accordance with all
applicable federal, state and local laws, regulations and lawful orders, and
such lawful requirements as may be stipulated by any governmental agency
(including operators of rail passenger services) or public authority. If in the
conduct of any work, any changes or alterations in pipelines, sewers, drains,
conduits, fences, power, signal or communication lines or other utility or
Railroad facilities are necessary (either temporary or permanent) by reason of
the foregoing or the requirements of Railroad, such changes shall be made or
caused to be made solely by Utility at Utility's sole risk, cost and expense;
provided, however, that costs and expenses for any such work, changes or
alterations necessitated by any other third party shall be paid by such third
party.
4.8 Emergency Repair. Emergency Cable installation, maintenance or repair
methods shall be as set forth in Exhibit H attached hereto.
6
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EXHIBIT C
LEASE
THIS LEASE, made as of this ____ day of ______________, ______, between CSX
TRANSPORTATION, INC., a Virginia corporation, [as operator for New York Central
Lines LLC, a Delaware limited liability company] whose address is 500 Water
Street, Jacksonville, Florida 32202 ("Lessor"), and Pathnet Telecommunications,
Inc., a Delaware corporation, whose address is 1015 31st Street N.W.,
Washington, D.C. 20007 ("Lessee"):
RECITALS
A. Lessor and Lessee have entered into those certain Fiber Optic Access
and License Agreement and Right of Way Operating Agreement dated as of
____________________, as amended and supplemented from time to time by
the parties (the "Base Agreement").
B. The Base Agreement contemplates Lessee's use of certain land owned by
Lessor for the placement of non-cable facilities including Repeater
(Regen) Sites, or power or auxiliary power stations, or sites for
construction facilities or temporary storage of materials and fuel for
power stations.
C. In order to implement the provisions of the Base Agreement, Lessor and
Lessee desire to enter into this Lease for the premises described
herein and on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the rental to be paid by Lessee and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee
hereby agree as follows:
1. INCORPORATION OF RECITALS.
The parties represent and acknowledge that the foregoing recitals
are true and correct and are incorporated herein by this reference.
2. DESCRIPTION OF PREMISES.
Lessor does hereby lease unto Lessee that certain parcel of
unimproved land (exclusive of tracks and roadbed) located and more particularly
described or depicted on Exhibit "A" attached hereto and by this reference made
a part hereof (the "Premises").
3. CERTAIN DEFINITIONS.
3.1 General Interpretive Principles. For purposes of this Lease, except as
otherwise expressly provided herein or unless the context otherwise requires:
(i) the terms used herein include the plural as well as the singular, (ii) the
use of any gender herein shall be deemed to include the other gender, (iii) the
word "including" means "including, but not limited to," and (iv) the headings
used herein shall not describe, interpret, define or limit the scope, extent or
intent of any provision hereof.
3.2 Definitions. Except as otherwise expressly defined in this Article 3 or
otherwise herein, the capitalized terms used in this Lease shall have the
meanings set forth in the Base Agreement.
3.2.1 "Lessee" shall mean Lessee as defined in the introductory
paragraph of this Lease, any successor by merger, consolidation or
reorganization, and its permitted assigns.
3.2.2 "Lessor" shall mean Lessor as defined in the introductory
paragraph of this Lease, any of its predecessor railroads, any successor by
merger, consolidation or reorganization, and its permitted assigns.
3.2.3 The term "damages" shall mean any and all damages,
including, but not limited to, civil, criminal, compensatory, consequential,
direct, indirect, treble, punitive, exemplary and special damages and all other
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damages and penalties of any kind available at law and/or in equity.
4. PERMITTED USE.
Lessee shall use and occupy the Premises in accordance with Section 21of
the Base Agreement, and for no other purpose (the "Permitted Use").
5. RENT.
Lessee shall pay to Lessor, as base rent for the Premises, the sum of *
DOLLARS ($*.00) per * payable * in advance from the date hereof for the duration
of the Term ("Base Rent"). Lessee shall pay all real estate taxes levied against
the Premises and the cost of any Lessee improvements placed on the Premises and
all costs of or charges for water, sewage, electricity, heat and any other
utilities furnished to the Premises. If any of the foregoing is paid by Lessor,
Lessee shall reimburse Lessor, as additional rent, within thirty (30) days after
presentation to Lessee of bills therefor ("Additional Rent"). The payment by
Lessee of any sum in advance shall not create an irrevocable lease for the
period for which the same is paid. Lessor reserves the right to periodically
adjust the Base Rent any time after the expiration of twelve (12) months (and to
adjust any adjusted rent thereafter), by giving notice of such adjustment to
Lessee at least sixty (60) days prior to the effective date of such adjustment.
Lessee's continued occupation of the Premises after such effective date shall be
deemed an acceptance of such adjusted Base Rent.
6. APPROVAL OF PLANS, TRACK CLEARANCE.
Lessee, prior to placing any improvement on the Premises, shall submit
plans to, and secure approval in writing of, Lessor, which such approval may be
withheld in Lessor's sole discretion. Lessee shall not erect, place or allow to
be erected or placed on the Premises any buildings, structures, fixtures or
obstructions of any kind, either temporary or permanent, within twenty-five feet
(25') of the centerline of the nearest track, unless Lessee obtains the prior
written consent of Lessor, which may be withheld in Lessor's sole discretion;
provided that the foregoing shall not be construed to permit any track clearance
less than the minimum required by any applicable law, rule, order or regulation.
Any approval by Lessor of any improvement or alteration made by Lessee, or
failure of Lessor to object to any work done or material used, or the method of
construction or installation, shall not be construed as an admission of
responsibility by Lessor or as a waiver of any of Lessor's rights under this
Lease.
7. FIRE PREVENTION.
Lessee shall cooperate with the Risk Management Department of Lessor and
shall promptly comply with fire prevention measures requested by said
Department. Lessee shall make no electrical installations or alterations in and
to the improvements or electrical or other circuits (whether for power, light,
heat or other purposes) now or hereafter located on the Premises, except by a
duly licensed electrician, and shall make no installation of natural gas,
propane, kerosene or other combustion fuel heating or cooling units, except by
licensed heating or cooling contractor. No such alterations or installations
shall be made without prior written approval of Lessor's Risk Management
Department, which may be withheld in its sole discretion.
8. PERMITS, ORDINANCES, REGULATIONS:
8.1 Lessee, at Lessee's sole cost and expense, shall obtain any applicable
permits and shall comply with all applicable permits, ordinances, rules,
regulations, requirements and laws of any Governmental authority having
jurisdiction over the Premises or the Permitted Use thereof or the placement or
use of any improvements thereon, including but not limited to zoning, health,
safety, building or environmental matters. Lessee shall supply Lessor with
copies of all permits and letters or certificates of such authority's consent to
and/or approval of Lessee's use of the Premises.
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8.2 Lessee shall further defend, indemnify and hold Lessor harmless from
all losses, damages, costs of defense (including attorneys' fees) and costs of
compliance relating to any ordinance, rule, regulation, law, citation, order or
notice, any violation thereof, any penalty, levy, fine or assessments therefrom,
including any penalty, levy, fine, assessment, compliance cost or remedial
charge levied during the Term, or after termination of this Lease for events
arising during this Lease.
9. MAINTENANCE, REPAIRS AND COSTS.
Lessee will not create or permit any nuisance in, on or about the Premises,
and Lessee shall repair and maintain, at its sole cost and expense, the Premises
and any improvements thereon, in a neat and clean condition to the reasonable
satisfaction of Lessor.
10. SERVICES, UTILITIES.
Lessor will be under no obligation to furnish the Premises with water, gas,
sewage, electricity, heat, or other services and supplies that may be necessary
or desirable in connection with Lessee's use and occupancy of the Premises.
11. ADJACENT AREAS.
Except as provided in Article 12 hereof, Lessee shall not use any property
of Lessor other than the Premises herein leased without first obtaining Lessor's
prior written consent and complying with all requirements of Lessor applicable
thereto, including payment of such charges, costs or fees as Lessor deems
appropriate, in its sole discretion.
12. INGRESS AND EGRESS.
Lessee shall have the right to use, in common with Lessor and others
authorized by Lessor, existing driveways or other property designated by Lessor
as the means of ingress to and egress from the Premises. Lessor shall be under
no obligation with respect to the condition or maintenance of said driveway(s)
or other property, and Lessee's use of same shall be subject to all of the
covenants, terms and conditions of this Lease.
13. PIPE AND WIRE LINES.
Lessor shall at all times have the right to maintain and/or construct, and
to permit others to maintain and/or construct, overhead and/or underground pipe
and/or wire lines now or hereafter installed upon or across the Premises, and to
use, repair, renew, replace and remove the same.
14. CLAIM OF TITLE.
Lessee shall not at any time claim ownership of or any right, title or
interest in or to the Premises, nor shall the exercise of this Lease for any
length of time give rise to any right, title or interest in or to the Premises,
other than the leasehold herein created.
15. MECHANIC'S LIENS.
Lessee shall promptly pay all debts incurred by, and shall promptly satisfy
all liens of, its contractors, subcontractors, mechanics, laborers and material
men in respect to any construction, alteration, maintenance or repair of, in or
to the Premises, and any improvements thereon, and shall indemnify, defend and
hold Lessor harmless from and against all losses, damages, penalties, fines and
legal costs and charges, including attorneys' fees incurred, in any suit
involving any lien, the enforcement or satisfaction thereof, or encumbrance
caused by the same, with respect to the Premises or any part thereof or any
improvements thereon. Further, Lessee shall have no authority to create any
liens for labor or material on or against Lessor's or Lessee's interest in the
Premises, and shall so specify in all contracts let by Lessee for any
construction, erection, installation, alteration, maintenance or repair of the
Premises or any improvement thereon.
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16. TERM, TERMINATION, BREACH, REMOVAL:
16.1 The initial term of this Lease shall be one (1) year, and shall
thereafter run year-to-year (the "Term"). This Lease may be terminated by either
party for any reason and at any time upon not less than three (3) months'
written notice. Notwithstanding the foregoing, in the event of a breach by
Lessee of any covenant, term or condition of this Lease or of the Base
Agreement, Lessor may, at its sole option, terminate this Lease immediately.
16.2 Upon the expiration or earlier termination of this Lease, Lessee shall
immediately vacate the Premises. Within ninety (90) days of the expiration or
earlier termination of this Lease, Lessee, at its own risk, cost and expense,
shall remove all improvements erected or used by Lessee on the Premises and
shall restore the Premises to the functional and operational condition existing
prior to the execution of this Lease. If within such ninety (90) day period,
Lessee fails to remove such improvements and restore the Premises accordingly,
Lessee shall be deemed to have abandoned its improvements in place, in which
event such improvements shall become the property of Lessor, for purposes of
resale, use or operation by Lessor in any manner and for any purpose Lessor
deems appropriate, in its sole discretion; or Lessor may cause such removal and
restoration to be performed and all costs incurred by Lessor in such removal and
restoration, together with interest thereon at the highest non-usurious interest
rate allowed by law, shall be due and payable by Lessee to Lessor upon written
demand.
16.3 The expiration or earlier termination of this Lease shall not release
either party from any liability or obligation incurred prior to such expiration
or termination nor terminate any right or obligation reasonably intended to have
continuing validity hereunder.
17. RELOCATION.
Lessor shall have the sole and absolute right to require the relocation of
the Premises, including any improvements thereon. The terms and conditions
applicable thereto shall be as stated in the Base Agreement.
18. LIABILITY, INDEMNITY.
18.1 In addition to the indemnification obligations stated elsewhere
herein, Lessee hereby releases Lessor, assumes responsibility for and shall
defend, indemnify and hold Lessor harmless from and against all losses, damages,
claims, fines, costs (including attorneys' fees) and expenses arising from or
relating to:
(a) any breach of this Lease by Lessee,
(b) any violation by Lessee of any law, rule, regulation, order,
notice, ordinance or any other requirement of a public or
governmental authority, including Lessee's failure to obtain any
necessary approval, consent or permit,
(c) any damage (including environmental damage) to the
Premises, improvements or other property,
(d) any bodily injury, including death, of any person, including,
without limitation, the agents, employees, contractors,
licensees, permittees and invitees of Lessor or Lessee and
trespassers, which occurs on the Premises or relates to any
action or omission on the Premises, and
(e) any liability arising from or relating to the condition
of the Premises, or Lessee's use or occupancy thereof or
placement or use of any improvements thereon,
whether caused by the fault, failure or negligence of Lessee, Lessor or
otherwise.
18.2 Lessee agrees it shall not have and hereby completely and absolutely
waives its right to any claim against Lessor for damages or any other legal or
equitable relief on account of any deficiencies in Lessor's title to the
Premises. Lessee shall indemnify and hold Lessor harmless from and against all
claims, litigation and damages for trespass, slander of title, overburden of
easement, or other claims arising out of or based upon Lessee's use or occupancy
of the Premises or any placement or use of any improvements thereon.
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18.3 Nothing contained herein shall amend, alter, modify, abridge or affect
the provisions of the Base Agreement relating to indemnification or the
allocation of liability.
18.4 The provisions of this Article 18 shall survive the expiration or
earlier termination of this Lease.
19. INSURANCE AND LIABILITY.
Each and every policy of insurance required under the Base Agreement
shall, prior to and during Lessee's use or occupancy of the Premises or any
placement or use of any improvements thereon, be amended or modified to provide
such coverage for Lessee's obligations hereunder, Lessee's use and occupancy of
the Premises and Lessee's placement or use of improvements thereon. Lessee shall
provide Lessor's Risk Management Department, 500 Water Street (J-907),
Jacksonville, FL 32202 with certified copies, except that, in the case of the
Railroad Protective Liability ("RPL") Policy, the original, of the insurance
policies amended or modified in accordance herewith. If, in Lessor's sole
opinion, higher limits of insurance coverage are necessary, Lessor shall so
notify Lessee and Lessee shall, within thirty (30) days of receipt of such
notice, provide to Lessor's Risk Management Department a certified copy (or the
original for the RPL Policy) of the endorsement to the appropriate policy
increasing the liability coverage to the required limit. The liability assumed
by Lessee under this Lease, including, but not limited to, Lessee's
indemnification obligations, shall not be limited to the insurance coverage
stipulated herein.
20. CONDEMNATION.
Should the Premises or any part thereof be condemned, appropriated and/or
acquired for public use, then Lessor, at its sole option, may terminate this
Lease. No part of any damages or award shall belong to Lessee, except to the
extent of any specific award from the governmental authority for improvements of
Lessee. The Premises shall be valued as vacant land, without consideration of
this Lease or Lessee's improvements on the Premises as an enhancement or
detriment to said value. Improvements of Lessee not so condemned, appropriated
and/or acquired shall be removed in accordance herewith.
21. SUCCESSORS, ASSIGNS; NO TRANSFER, SUBLEASE OR ASSIGNMENT.
21.1 The terms, covenants and provisions hereof shall inure to the benefit
of and be binding upon the successors and assigns of Lessor and the successors
and permitted assigns of Lessee.
21.2 The foregoing notwithstanding, Lessee shall not transfer, assign,
encumber or sublet this Lease or any part of the Premises or any rights or
privileges herein granted, without the prior written consent of Lessor, which
may be withheld in Lessor's sole discretion. The foregoing covenant shall also
apply whether such sale or transfer is made voluntarily by Lessee or
involuntarily in any proceeding at law or in equity to which Lessee may be a
party whereby any of the rights, duties and obligations of Lessee shall be sold,
transferred, conveyed, encumbered, abrogated or in any manner altered. Any sale,
conveyance, transfer, assignment, sublease, abrogation or encumbrance of this
Lease, all or any portion of the Premises or any of the rights and privileges
hereunder in violation of this Article 21 shall be null and void and Lessor, at
its sole option, may terminate this Lease.
22. BANKRUPTCY RIGHTS.
It is expressly understood and agreed that in the event of any assignment
for the benefit of creditors, or in the event a petition in bankruptcy shall be
filed by Lessee, or if Lessee shall be adjudged bankrupt or insolvent by any
court, or if a trustee in bankruptcy or a receiver of Lessee or Lessee's
property shall be appointed in any suit or proceeding brought by or against
Lessee, and if at such time this Lease is in default by Lessee, then and in such
event Lessor, at its sole option, may (i) immediately terminate this Lease, or
(ii) may request an election of affirmance or rejection of this Lease under
Section 365 of the Bankruptcy Act by giving Lessee or any such assignee,
trustee, or receiver written notice of such demand for election. If Lessee, or
such assignee, trustee or receiver, fails to elect affirmance and fails to
furnish adequate assurances as to the payment of Lessee's existing and future
indebtedness to Lessor and continued performance under the Lease, Lessee shall
be deemed to have rejected the same. If Lessee or such assignee, trustee or
receiver shall
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reject or be deemed to have rejected this Lease, this Lease shall be deemed
immediately terminated. If Lessee or such assignee, trustee or receiver shall
affirm this Lease, it shall thereupon be bound by all terms hereof, including,
without limitation, the obligation to make payment of all sums then or
thereafter due from Lessee hereunder.
23. SEVERABILITY, GOVERNING LAW, WAIVER, NOTICES.
23.1 Each and every separate division (paragraph, clause, item, term,
condition, covenant or agreement) herein contained shall have independent and
severable status from each other separate division, or combination thereof, for
the determination of legality, so that if any separate division herein is
determined to be unconstitutional, illegal, violative of trade or commerce, in
contravention of public policy, void, voidable, invalid or unenforceable for any
reason, that separate division shall be treated as a nullity, but such holding
or determination shall have no effect upon the validity or enforceability of
each and every other separate division herein contained, or any other
combination thereof.
23.2 This Lease shall be governed by the laws of the State in which the
Premises are located. Nothing contained herein shall amend, alter, modify,
abridge or affect the provisions of the Base Agreement relating to the parties'
choice of governing law as to the rights and obligations contained therein.
23.3 No waiver by Lessor of any breach of any covenant, condition or
agreement herein contained shall operate as a permanent waiver of such covenant,
condition, or agreement, or of any subsequent breach thereof. No payment by
Lessee or receipt by Lessor of a lesser amount than the installments of rent or
other sums due hereunder shall be deemed to be an acceptance thereof or a waiver
of any of Lessor's rights hereunder or a discharge of any obligation of Lessee
hereunder. Lessor shall have the right, in its sole discretion, to apply such
payment to any indebtedness owing from Lessee to Lessor. No endorsement or
statement on any payment or letter accompanying such payment shall be deemed an
accord and satisfaction, and Lessor may accept such payment without prejudice to
Lessor's right to recover any outstanding balance or to pursue any other remedy
provided in this Lease. No re-entry by Lessor after a breach or termination
shall be considered an acceptance of a surrender of the Premises unless
specifically agreed to in writing by Lessor.
23.4 All notices and communications required or permitted under or
otherwise concerning this Lease shall be addressed to Lessor or to Lessee, as
appropriate, at their respective addresses set forth herein, or at such other
address as either party may designate in writing to the other party. Copies of
any notices or communications required or permitted under Section 18 or 19 shall
be provided to Lessor's Risk Management Department, 500 Water Street (J-907),
Jacksonville, FL 32202.
24. OTHER PROVISIONS.
None
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IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed, in duplicate, as of the day and year first above written.
"LESSOR"
CSX TRANSPORTATION, INC.
[as operator for New York Central Lines LLC,
a Delaware limited liability company]
Witnesses:
____________________________ By:_________________________________
Name:_______________________________
____________________________ Title:______________________________
"LESSEE"
PATHNET TELECOMMUNICATIONS, INC.
Name:_______________________________
____________________________ Title:______________________________
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EXHIBIT D
---------
[LOGO ART]
When working along the Rail Road Right of Way
Make sure you have all the other RR Tenants notified before digging. Long
Distance Telecommunications Companies use RR ROW to route very small Fiber Optic
Cables which carry huge volumes of Telecommunications traffic including:
Banking, Stock Markets, Point of Sale, 911, FAA and Government. Not to mention
YOUR Family trying to call one another.
LONG DISTANCE PHONE CO.
<TABLE>
<S> <C>
WORLDCOM 1-800-248-0133
AT&T 1-800-252-1133
MCI 1-800-624-9675
SPRINT 1-800-521-0579
QWEST 1-800-283-1237
Interstate FiberNet 1-800-374-2350
</TABLE>
ONE-CALL CENTERS
<TABLE>
<S> <C>
Alabama 1-800-292-8525
Connecticut 1-800-922-4455
DC 1-800-257-7777
Delaware 1-800-282-8555
Florida 1-800-432-4770
Georgia 1-800-282-7411
Illinois (Chicago) 1-312-744-7000
Illinois 1-800-892-0123
Indiana 1-800-382-5544
Kentucky 1-800-752-6007
Louisiana 1-800-272-3020
Massachusetts 1-888-344-7233
Maryland 1-800-257-7777
Maryland 1-800-282-8555
Maine 1-888-344-7233
Michigan 1-800-482-7171
Mississippi 1-800-227-6477
North Carolina 1-800-632-4949
New Hampshire 1-888-344-7233
New Jersey 1-800-272-1000
New York City
(Long Island) 1-800-272-4480
New York 1-800-962-7962
Ohio 1-800-362-2764
Pennsylvania 1-800-242-1776
Rhode Island 1-888-344-7233
South Carolina 1-800-922-0983
Tennessee 1-800-351-1111
Virginia (South) 1-800-552-7001
Virginia (North) 1-800-257-7777
Vermont 1-888-344-7233
West Virginia 1-800-245-4848
</TABLE>
.48
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CSXT EXHIBIT E
SPECIFICATIONS FOR UNDERGROUND COMMUNICATIONS AND POWER CABLE CROSSINGS AND
LONGITUDINAL OCCUPANCY UNDER TRACKS AND RIGHTS OF WAY
A. PURPOSE OF SPECIFICATIONS
The purpose of these specifications is to govern the location and
installation of underground communication and power cables crossing under
the track(s) and/or CSXT right of way in a manner that will not interfere
with present and future CSXT construction operations.
B. GENERAL LOCATION OF UNDERGROUND FACILITIES
1. The cable or duct system of proposed underground crossings shall
be laid as straight and direct as possible between the points
where the underground line enters and leaves the property of CSXT.
2. Manholes, pull and splice boxes, and terminals in the underground
crossings should be located off CSXT's right of way where
possible, or at the outer edge of the right of way when on
Railroad property. If the structures must be located further from
the right of way line, and nearer the track(s), they must be
installed below ground, and marked with identification flush with
the ground.
C. DESIGN CRITERIA FOR UNDERGROUND FACILITIES
1. The tops of conduits and/or ducts and cable system structures of
underground cable crossings shall be located at a depth of not
less than 60 inches below the bottom of the crossties. In
addition, the installations shall be at least 36 inches below the
bottom elevations of ditches or 42 inches below ground level for
parallel installations with the lowest depth governing. Where
rail-plow is authorized, conduit or cable shall be at a depth of
not less than 42 inches below ground level.
When installations are proposed by rail plowing, the minimum
offset from the centerline of the near track shall not be less
than 15 feet. When installations are proposed by tractor plowing,
they shall be located more than 15 feet from the centerline of the
near track. Tractor plowing will not be permitted on railroad
embankments without specific site approval. The proposed conduit
installations shall not be located less than 5 feet from CSXT code
cables. Plowing through
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public or private road crossings will not be permitted. All
drainage structures will be located and marked prior to plowing or
trenching.
Unless otherwise approved, manholes, hand hole/splice boxes shall
be located at least 25 feet from the centerline of the near track
where right of way is available. Unless otherwise approved, bored
conduits shall clear signal control building and appurtenance
foundations by 5 feet vertically. The conduits are to be clear
such facilities horizontally by 5 feet if trenched and 10 feet if
bored.
2. Underground crossings of power supply cables with a maximum
voltage of 750 volts may be installed by pushing or boring a
galvanized steel pipe under the tracks at a depth specified above
to serve as a conduit, provided such pipe extends at least 25 feet
beyond the outside rail on each end of the crossing and the top of
pipe casing is buried at least 60 inches below the bottom of the
crossties and 36 inches below ditch bottoms at all other points on
the property of CSXT. Longitudinal occupancy shall be approved by
the Chief Engineer to ensure that such proposed occupancy does not
impair the normal functioning of Train Control equipment.
Measurements to the ends of the conduits shall be to the head of
the outside rail and made at right angles to the track. Additional
lengths will be required for crossings in fill sections and those
at angles of less than ninety degrees (90 degrees) and for
multi-track crossings. Generally, on fills, two feet beyond the
toes of the slopes or three feet beyond the ditch should be
sufficient, (refer to Attachment No. 1 and No. 2). All ducts
and/or encasement beneath the tracks must be capable of
withstanding E-80 loading and conform to A.R.E.MA. Part 5, Section
5.3. Conduits and/or encasement larger than four (4) inches shall
be governed by the specifications which normally cover pipelines.
Jacking or boring installation is preferred, and no water is to be
used in the installation of the encasement.
3. Underground crossings of communications cables of low voltage
shall conform to number "2" above, except that encasement may, at
the discretion of the Chief Engineer or his authorized
representative, be restricted to 15 feet beyond the outside rail
of spur or sidetracks measured at right angles to the track. As in
number "2" above, additional lengths will be required for
crossings in fill sections, etc. These criteria shall also apply
to paved street sections.
4. Underground crossings of power supply cables operating above 750
volts will be installed at depths specified above. In addition,
between the points where the underground crossings enter or leave
CSXT
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property, the cable is to be enclosed in galvanized steel pipe or
in an approved concrete encased duct for mechanical protection of
the cable. No cable of this potential, which is unprotected, will
be permitted. Longitudinal occupancy shall be approved by the
Chief Engineer to ensure that such proposed occupancy does not
impair the normal function of Train Control equipment. If risk to
inductive interference is perceived, a further examination by a
third party may be required.
5. Owners of the conduits and cables shall designate the locations of
such installations to aid in the prevention of damage to the cable
as a result of use of Railroad's property. Signs or markers shall
be placed and maintained preferably at or near the CSXT right of
way line. The signs/markers shall describe the underground
facility and include a telephone number of the facility owner
clearly visible on each side of the track.
6. In addition to the requirements of these specifications, the
underground crossing is to conform to the requirements of the
National Electrical Safety Code, as published by the National
Standards Institute, Inc., the latest revised edition of same
being controlling. The crossing is also to conform to the
requirements of any local or state laws or regulations of any
local code enforcing authority that may be in effect at the time
of the installation.
7. All applications for underground facilities described in this
document shall be submitted to the appropriate Division Engineer
or Manager, or his or her designated representative(s) having
jurisdiction and must be accompanied by complete location and
construction plans referenced to CSXT's milepost. No work is to be
performed on CSXT property prior to granting of authority from the
Division Engineer or Manager. All work on the property will be
performed under the supervision of the Division Engineer or
Manager. The applicants shall bear any expense incurred by CSXT or
its forces, will execute the appropriate agreement and pay all
fees and rentals as required by established standards or as
negotiated.
8. Conduit shall be so installed as to prevent the formation of a
waterway under the railroad, with an even bearing throughout its
length, and shall slope to one end (except for longitudinal
occupancy).
9. Bored or jacked installation shall have a bored hole with the
diameter essentially the same as the outside diameter of the
conduit plus the thickness of any protective coating. If voids
should develop or if the hole diameter is greater than the outside
diameter of the conduit (including coating) by more than one (1)
inch, remedial measures, as
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approved by the railroad's Chief Engineer, shall be taken. Boring
operations shall not be stopped if such stoppage would be
detrimental to the railroad.
10. Conduits and cables shall be installed by plowing methods where
practical. Directional boring, and trench and back fill techniques
shall be used in those locations where plowing is impractical. In
all cases, the condition of the right of way will be restored,
including vegetation and erosion controls to CSXT's satisfaction,
and in accordance with current CSXT specifications for grading
work.
11. All bridge attachment designs must be approved by CSXT. All
designs are to provide for attachment to the outside of the bridge
structures. Insertions or burial of casing and/or conduit where
the ballast is carried across bridge decks will not be approved
except for aesthetic or historic reasons. Steel pipe casing with
adequate provision for contraction and expansion shall be used to
support the conduit. Core drilling for installation of casing
through bridge back walls, head walls, and wing walls shall be
located not less than one core diameter from the top or outside
face of the wall. Steel sleeves secured by approved grout material
shall be installed in bores through concrete walls prior to the
installation of casing. All FRA and OHSA safety rules for bridge
worker safety shall apply when work is performed on bridges. Care
must be taken to ensure metallic conduit shall not impair or
circumvent Train Control circuitry.
Excavation by blasting methods shall be employed only as a last
resort, must be approved by CSXT in writing in each instance, and
must comply with Sections 1..3..5..9.. of the Manual for Railway
Engineering, refer to Attachment No 3.
12. Point of Presence, Regeneration and Junction Sites are to be
located not less than 25 feet from the centerline of the near
track. Service and access roads are to be located not less than 25
feet from the centerline of the near track. These site
installations shall not interfere with existing drainage
structures and systems, or service roads. Sites involving
buildings or other types of sight obstructions shall be located in
accordance with CSXT crossing sight distance criteria, refer to
Attachment No. 4 and No. 5.
13. The owners of the proposed installations are responsible for
coordination with all existing utilities located on the right of
way during design and construction, and maintaining the proper
clearances. The owners of the proposed installations are
responsible for obtaining all construction and environmental
permits, and compliance with their
4
<PAGE>
requirements. The owners of the proposed installations are
responsible for confirmation of title to right of way through CSX
-- Real Property, Inc.
14. Design Plans - All plans shall be submitted to CSXT for review and
approval. No work is to be initiated without approved plans on
site. Plans shall be drawn to scale showing the relation of the
proposed cable system to railroad tracks, railroad signals and
control facilities, angles of crossings, locations of bores,
manholes, hand holes, railroad survey stations, railroad mile
posts with prefixes, right of way lines and general layout of
tracks and facilities, etc. Also, drawings must show number of
conduits, size and location of cable in the conduit, fiber count
in each cable, and details of bridge attachments. A general
location map together with a legend indicating line and symbol
designations with on/off milepost (nearest 0.1 mile) is to be
included. CSXT reserves the right to require plan modifications
during construction to protect railroad facilities and operations.
D. CONSTRUCTION OPERATIONS
Construction operations shall be planned and organized to minimize
conflicts with railroad operations. All operations are to be conducted in
accordance with CSXT Safe Way policies and procedures, and are subject to
CSXT approval.
1. Pre-construction conferences shall be held prior to beginning work
on the right of way. Additional progress meetings and/or
teleconferences may be required during the course of the work.
Coordination shall be provided as outlined in CSXT MWI 1905.
Complete work schedules will be presented at the pre-construction
conference. The schedules are to be updated monthly at a minimum.
2. All construction operations shall be conducted in compliance with
CSXT MWI 1905 and the CSXT Fiber Optic Program Safety Requirements
approved 09-09-98, refer to Attachment No. 6.
All personnel on the projects shall have received CSXT Safe Way
(including FRA OTS) training prior to entering the right of way.
Proof of training may be required at anytime. Construction
operations shall be conducted in accordance with FRA and OSHA
regulations, and coordinated with and subject to the approval of
the CSXT Chief Engineer for Design and Construction, the CSXT
Service Lane or Business Unit Division Engineer, the CSXT Flagmen
and Signalmen, and the consultant inspection personnel assigned to
the projects by CSXT. Permissions shall be obtained from CSXT to
enter the right of way before beginning operations.
5
<PAGE>
All personnel shall receive safety briefings by a CSXT Flagman or
designated CSXT representative each day before beginning work on
the right of way. Additional briefings may be required when
conditions and/or work sites are changed. Requests for flagmen
deployments and train orders shall be submitted to the lead
flagman or the designated CSXT representative by 3:00 PM each day
for the following workday.
3. The owners of the facilities shall have construction managers in
responsible charge on site at all times and shall provide
production quantities on a daily basis to the CSXT designated
representative or the consultant inspection personnel assigned to
the project.
4. Accurate notes and records shall be maintained during the course
of the work to enable the preparation of complete "as-built plans"
upon completion of the project(s). The "as-built plans" shall
accurately depict and describe the location of all facilities
installed on the right of way. As-built plans shall be submitted
for approval as specified in the contract with CSXT.
5. Unless otherwise approved or directed, all plowing shall be
performed with plow cutting edge perpendicular to the ground
surface. Plow lines are to be backfilled and compacted, as
required, as conduit installation progresses. All plow areas are
to be backfilled before work is suspended for the day. Follow up
restoration work will be required whenever settlement or erosion
is observed.
In the event of equipment breakdowns, severe weather, or railroad
emergencies that preclude completing and closing excavations or
disallow complete removal of equipment or materials, the areas are
to be surrounded with orange construction fence to the
satisfaction of the CSXT representative. Flashing construction
barricades may be required if the sites are in or near walk ways,
switches, signal control cabinets, or services roads used by CSXT
personnel during night time hours.
Excavations shall comply with OSHA requirements and be promptly
backfilled and compacted in accordance with the drawings and
specifications approved by the CSXT Chief Engineer, refer to
Attachment No. 7.
6. Fouling of the track, ties and ballast will not be permitted.
Approved ballast stone shall be available on the project at all
times. Ballast contaminated or disturbed shall be replaced and/or
reshaped immediately.
6
<PAGE>
All obstructions located within 15 feet of the center of the near
track or on or adjacent to the walk areas, switches, and signal
control devices and cabinets are to be removed by the end of each
workday.
Conduit at the end of plow lines, directional bores, and trenches
shall be cut off and buried as the work progresses. In the event
that it becomes necessary to leave exposed ends or sections of
conduit due to emergencies or inclement weather, they are to be
surrounded with orange construction fences until they are
connected or buried. Messages are to be sent to the CSXT
dispatcher advising of potential crew or operational hazards.
Casings and directional bore holes that have failed and are
abandoned shall be sealed to prevent them from becoming conduits
for drainage. Excavations associated with abandoned casings and
bores are to be backfilled and compacted as shown in the
specifications.
The telecom owners are responsible for clearing and grubbing
vegetation that conflicts with the construction and disposal of
the debris off the right of way.
7. Cables and/or wires temporarily installed to monitor or guide
directional boring operations shall be subject to the following:
a) CSXT permission is required if they are to be attached to
railroad structures and the flagmen are to be kept advised of all
installations.
b) Clearances over waterways must be maintained to allow free
unobstructed passage of boat traffic.
c) Wires and supports located on the ground must be clearly marked
and located such that they do not conflict with railroad personnel
and operations. Control wires are not to be installed in advance
of beginning operations and work deferred.
d) When directional bores are monitored by electronic devices that
do not use wire, and the work crosses streets or highways; traffic
control devices, approved by the State DOT, are to be placed when
personnel are on the highway right of way and/or interfere with
traffic.
e) All wires and supports are to be removed from the site promptly
after work is completed.
7
<PAGE>
8. Areas disturbed by construction operations shall be reshaped to
drain, seeded, mulched or surfaced with crushed stone as required
to prevent erosion and ensure CSXT personnel and equipment can
safely use all areas at all times. Restoration of right of way
disturbed by construction operations shall be scheduled to
coincide with the installation of conduit and hand hole/splice
boxes and other appurtenances.
The owners of the facilities shall comply with all applicable
CSXT, Federal, State and local environmental laws and regulations.
The owners shall also prevent construction material and debris
from entering waterways, wetlands, and detention and retention
ponds. Any material that inadvertently escapes during construction
operations shall be recovered and properly disposed of at an
acceptable site. Erosion control materials such as silt fencing,
bale checks and mulch shall be available and installed where
necessary to protect potentially environmentally sensitive areas.
Existing riprap or other erosion control structures disturbed or
damaged during the course of the work shall be promptly repaired
to the satisfaction of CSXT. Completed work shall be re-evaluated
following storms or other construction activities to ensure that
the right of way is maintained in a satisfactory manner during the
course of the work.
9. The right of way shall be restored to a condition equal to or
better than the condition prior to beginning the project before
final acceptance will be approved. Conduit and cable reels, and
other debris are to be removed from the right of way as the work
progresses. Failure to remove such materials and perform
restoration promptly may result in a suspension of work order
until satisfactory progress has been demonstrated.
10. Final inspections of the right of way condition and restoration
will be scheduled at CSXT convenience prior to construction
personnel and equipment leaving the project. Punch lists shall be
responded to prior to issuance of an acceptance memorandum signed
by the Division Engineer or his/her designated representative.
8
<PAGE>
E. COMPLIANCE WITH SPECIFICATIONS
1. All work performed and materials furnished shall be in reasonably
close conformity with the provisions contained in the plans and
specifications approved by CSXT for the project and the provisions
contained in this document. In the event that materials or the
finished work are not in reasonably close conformity with the
plans and specifications, CSXT will determine if the work or
materials shall be removed and replaced or otherwise corrected to
the satisfaction of CSXT.
2. No revisions to existing installations will be required under
these specifications. When necessary to install, relocate or
replace existing facilities, these specifications will govern.
3. These specifications will become effective on the date of
signature below and will remain in effect until revised by the
Office of Chief Engineer CSX Transportation.
Approved: [SIG]
--------------------------------
Chief Engineer
Date: Mar. 16, 1999
------------------------------------
Approved: [SIG]
--------------------------------
Chief Engineer Train Control
Date: 3-18-19
------------------------------------
Prepared by: B.H. Ortgies, P.E., V.P.
Wilbur Smith Associates
Tallahassee, FL
Revised Dec. 28, 1998
9
<PAGE>
ATTACHMENT NO. 1
[LENGTH OF CASING FOR VARIOUS CROSSING ANGLES DIAGRAM]
<PAGE>
ATTACHMENT NO. 2
[FILL DIAGRAM]
<PAGE>
ATTACHMENT NO. 3
MANUAL FOR RAILROAD ENGINEERING, SECTION 1..3..5..9
1..3..5..9 Controlled Blasting of Rock
The contractor shall make all necessary arrangements satisfactorily to the
engineer for controlled blasting in the vicinity of the track and shall provide
all safeguards required by the railway.
Within the entire area of the contract, complete and continuous precaution shall
be taken by the contractor to prevent any damages to persons, vehicles, trains,
power or communication lines, structures, private dwellings or other
installations by reason of concussion, vibration or flying material.
The contractor shall be familiar with and comply with all regulations governing
the transportation, storage, handling and use of explosives at the location of
the work. He shall obtain such permits as are required.
The contractor shall take all necessary precautions against the effects of
induced currents caused by radio transmitters and receivers, power lines,
transformers, cables, radar beams or any other energy or wave force which might
result in premature firing of the blasting circuits.
All blasting shall be done with extreme care by experienced licensed powder men,
in accordance with procedures approved by the engineer in writing.
The contractor shall submit, in advance of drilling, a drilling and loading
pattern for blasting to the engineer. All drill dust shall be blown out of the
holes and holes shall be protected with suitable plugs or covers.
Approved blasting signals shall be used at all times. All blasting shall be
carried out under strict traffic regulations. Each blast shall be subject to
clearance by the contractor from the engineer to avoid any blasting while a
train is nearby.
When necessary to protect property or facilities, all blasts shall be suitably
covered with blasting mats or other approved protective material, weighted and
secured in such a manner as to prevent projection of debris. The contractor is
fully responsible for the method used in blasting rock and carrying out the
approved procedures and for the prompt removal of all debris deposited on the
track. Approval of the engineer shall not relieve the contractor in any degree
whatsoever of full responsibility for damages caused by blasting operations.
<PAGE>
----------------
ATTACHMENT NO. 4
----------------
[ROAD CROSSING SIGHT CLEARANCE DISTANCES DIAGRAM]
<PAGE>
----------------
ATTACHMENT NO. 5
----------------
[ROAD CROSSING SIGHT CLEARANCE DISTANCES DIAGRAM]
<PAGE>
ATTACHMENT NO. 6
CSX TRANSPORTATION
FIBER OPTIC PROGRAM
SAFETY REQUIREMENTS
GENERAL
- - - - All fiber optic workers must receive CSXT SAFETY AWARENESS training and
have a verification card and/or hard hat sticker. CSXT Safety Rules and
Contractor Policies will apply to fiber optic workers, where applicable
to the specific work performed.
- - - - All personnel must wear proper Personal Protection Equipment, which
includes a minimum of a hard a hat, safety glasses, steel toed shoes,
hearing protection, and orange vests with reflective stripes on or around
road crossings. When working beyond 25 feet from the nearest rail of a
main track, hard hats, safety glasses, and laced work boots will be
required.
- - - - All "FRA Bridge Worker Safety" rules will apply to fiber optic workers
performing bridge attachments, including proper fall protecting rules.
- - - - All test holes or pits less than 15 feet from the centerline of main
tracks, will be filled or covered prior to passing of trains. No open
pits or holes will be left over night. All pits and trenches will be
shored according to OSHA requirements.
- - - - No dirt or debris will be allowed to foul the ballast section of the
tracks.
- - - - All excavation or plow trenches will be back filled and compacted
immediately after the work is done.
- - - - All public utilities, CSXT Engineering, and the Railroad Train Control
Office, will be notified prior to any construction.
- - - - Job Briefings will be conducted each morning and throughout the day when
conditions or job scope changes.
WORKING ON OR AROUND TRACKS
- - - - All work in the FRA Red Zone (within 4 feet from outside rail on each
side of the track) will be done only with a CSXT, FRA qualified flagman
or watchman as specified by the local Engineering representative. All
work beyond 4 feet from the outside rails and within 25 feet, must be
done under the supervision of a CSXT qualified inspector or flagman.
- - - - Certain types of work done beyond 25 feet from the outside of the rails,
and with equipment that will not reach beyond this point, may be done
without flagging protection or a watchman, IF APPROVED BY THE LOCAL
ENGINEERING REPRESENTATIVE, AND PROTECTED BY A CONSTRUCTION FENCE, IF
WORK IS STATIONARY (WILL NOT BE USED FOR CAT PLOWING).
- - - - All work must be stopped while trains are passing within the work zone.
- - - - All workers will remain off the tracks. If necessary to perform the
work on track, protection will be provided as stated above.
ALL VIOLATION OF ANY CSXT SAFETY RULES OR POLICY, MAY RESULT IN REMOVAL OF
CONTRACTOR OR PERSONNEL FROM THE RIGHT OF WAY.
CSXT/LLG Rev. 09-02-98 Approved by: Manager Safety 09-09-98
<PAGE>
----------------
ATTACHMENT NO. 7
----------------
[COMPACTION SPECIFICATIONS DIAGRAM]
<PAGE>
EXHIBIT F
-1-
Association of American Railroads
Communication Manual
<TABLE>
<CAPTION>
1989 Part 1-B-1
- - - -------------------------------------------------------------------------------------------------------
Recommended Practices for Communication Lines
Crossing the Tracks of Railroads
Revised 1988 (76 Pages) (DOC. 1-B-1A)
Table of Contents
-----------------
Paragraphs
------------
<S> <C>
Section A -- Purpose................................................................ A-1 to A-2
Section B -- Definitions............................................................ B-1 to B-10
Communication Lines.............................................................. B-1 to B-4
Supply Lines..................................................................... B-5 to B-7
Voltage of a Circuit............................................................. B-8
Minor Tracks..................................................................... B-9
Major Tracks..................................................................... B-10
Section C -- General................................................................ C-1 to C-8
Permits and Notices.............................................................. C-1 and C-2
Marking Poles.................................................................... C-3
Fire Hazard...................................................................... C-4
Protection for Moving Vehicles................................................... C-5
Inspection....................................................................... C-6 to C-8
Part I -- Overhead Crossings
----------------------------
Section D -- General................................................................ D-1 to D-8
Relative Levels of Supply & Communication Wires.................................. D-1 to D-3
Protection of Metals Against Corrosion........................................... D-4
Vertical Pull.................................................................... D-5
Length of Crossing Span.......................................................... D-6 to D-8
Section E -- Clearances............................................................. E-1 to E-7
General.......................................................................... E-1
Side Clearances from Rails....................................................... E-2
Vertical Clearance Above Rails for Fixed Supports................................ E-3 and E-4
Vertical Clearances Between Wires Not on the Same
Supporting Structures......................................................... E-5
Increased Clearances............................................................. E-6
Clearance of Conductor of a Communication Line
From the Supports of Another Line............................................. E-7
Section F -- Loading Assumptions.................................................... F-1 to F-3
Section G -- Poles.................................................................. G-1 to G-10
Material......................................................................... G-1
Sizes............................................................................ G-2
Gains............................................................................ G-3
Setting.......................................................................... G-4 to G-6
Pole Mounts...................................................................... G-7
Spliced Poles.................................................................... G-8
Stub Reinforced Poles............................................................ G-9 and G-10
Section H -- Crossarms and Brackets................................................. H-1 to H-5
Section J -- Crossarm Braces........................................................ J-1 and J-2
Section K -- Pins................................................................... K-1
Section L -- Insulators............................................................. L-1 and L-2
Section M -- Tie Wires.............................................................. M-1
Section N -- Conductors............................................................. N-1 to N-5
Section P -- Sags................................................................... P-1
</TABLE>
<PAGE>
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Association of American Railroads
Communication Manual
<TABLE>
<CAPTION>
Part 1-B-1 1989
- - - -------------------------------------------------------------------------------------------------------
Paragraphs
------------
<S> <C>
Section Q -- Guys................................................................... Q-2 to Q-22
Material......................................................................... Q-1
Side Guys........................................................................ Q-2 and Q-3
Head Guys........................................................................ Q-4 and Q-5
Guying at Corners and Terminals.................................................. Q-6 to Q-8
Omission of Guys................................................................ Q-9 to Q-11
Guying in Special Cases.......................................................... Q-12
Guy Leads........................................................................ Q-13
Methods of Anchoring Guys........................................................ Q-14
Guy Rods......................................................................... Q-15
Anchors.......................................................................... Q-16
Method of Securing Guy Strand.................................................... Q-17
Guards for Guys.................................................................. Q-18
Pole Braces...................................................................... Q-19
Section R -- Suspension Strand...................................................... R-1 to R-8
Material......................................................................... R-1
Sizes............................................................................ R-2 and R-3
Attachment to Poles.............................................................. R-4 to R-7
Sags............................................................................. R-8
Section S -- Cable Attachments to Suspension Strands................................ S-1
Part II -- Underbridge Crossings
--------------------------------
Section T -- General................................................................ T-1 to T-4
Avoidance of Attachments......................................................... T-1
Attachments...................................................................... T-2
Clearance from Abutments......................................................... T-3
Clearance from Bridge Structure.................................................. T-4
Part III -- Underground Crossings
---------------------------------
Section U -- General................................................................ U-1 to U-14
Arrangement for Work............................................................. U-1
Location......................................................................... U-2
Side Clearance from Rail......................................................... U-3
Clearance Below Base of Rail..................................................... U-4 and U-5
Arrangement of Conduit System.................................................... U-6
Protection of Ducts.............................................................. U-7 and U-8
Excavation....................................................................... U-9
Shoring.......................................................................... U-10
Grading and Drainage............................................................. U-11
Backfilling...................................................................... U-12
Removing Surplus Material........................................................ U-13
Concrete......................................................................... U-14
</TABLE>
<PAGE>
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Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
A -- Purpose
------------
A-1 These recommended practices are for construction and maintenance of
communication lines crossing the tracks and associated parallel
communication lines of steam and electrified railroads, except street
railways.
A-2 Where any requirements of this specification do not meet municipal or
state requirements, such municipal or state requirements shall govern.
B -- Definitions
----------------
B-1 Communication Lines: Communication lines as used in this manual part
mean telegraph, telephone and other communication wires and cables and
their supporting or containing structures which are located outside of
buildings and are used for public or private communication service and
which operate at not exceeding 400 volts to ground or 750 volts
between any two points of the circuit, and the transmitted power of
which does not exceed 150 watts. For such communication wires, when
operating at less than 150 volts between wires or to ground, no limit
is placed on the capacity of the system.
B-2 Interlocking, automatic signal and other similar wires (not including
electric light and supply wires), which operate at not exceeding the
voltage and power requirements of communication wires, should be classed
as communication wires.
B-3 Communication circuits used exclusively in the operation of supply lines
should, in general, be considered as supply circuits of the highest
voltage to which they are exposed, and should be constructed in
accordance with Manual Part 7-1 (Recommended Practices for Crossings of
Electrical Supply Lines and Facilities of Railroads), but in no case
need the communication conductors meet the requirements for supply
conductors in excess of 8,700 volts between conductors.
B-4 Where, however, such communication circuits are below the supply
conductors in the operation of which they are used, at all points
throughout their length or throughout the section in which the railroad
crossing occurs, provided such section of the communication circuits is
isolated from the remainder of the system by transformers or other
means,
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
they may be considered as ordinary communication circuits and so
constructed, if either of the following conditions obtain:
(a) Such communication circuits occupy a position below all other
conductors or equipment or other lines at crossings, conflicts, or
on commonly used poles throughout the section to which reference is
made.
(b) Such communication circuits are protected by fuseless lightning
arresters, drainage coils, or other suitable devices to prevent the
communication circuit voltage form normally exceeding 400 volts to
ground.
B-5 Supply Lines: Electrical supply lines mean those conductors and their
necessary supporting or containing structures which are located entirely
outside of buildings and are used for transmitting a supply of electrical
energy.
B-6 Except as specified in Paragraphs B-4 and B-7, communication and railway
signaling wires exceeding the voltage or power limitations specified in
Paragraph B-1, are supply lines within the meaning of this manual part and
should be so constructed.
B-7 Circuits used for supplying power solely to apparatus forming part of a
communication system may be run either in open wire or cable as follows:
(a) Where run in open wire, such circuits should have the strength
of construction, clearances, insulation, etc., prescribed for
communication or supply circuits of the voltage concerned.
(b) Where run in effectively grounded continuous metal sheath cable or
in cable which is attached to effectively grounded suspension strand
by means of metal rings or spirally wound lashing wire, the strength
of construction, clearances, locations, etc., prescribed in this
manual part for communication cables should apply.
B-8 Voltage of a Circuit: Voltage of a circuit means the highest effective
voltage between any two conductors of the circuit concerned, except that in
a grounded multi-wire circuit of 750 volts or less between any two
conductors, it means the highest effective voltage between any wire of the
circuit and that point or conductor of the circuit that is grounded.
<PAGE>
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Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - -------------------------------------------------------------------------------
B-9 Minor Tracks: Minor tracks mean railroad tracks included in the
following:
(a) Spur tracks less than 2,000 ft. long and not exceeding two tracks
in the same crossing span.
(b) Narrow-gauge or other tracks on which standard rolling stock cannot,
for physical reasons, be operated.
(c) Tracks used only temporarily for construction or similar purposes for a
period not exceeding one year.
(d) Tracks not operated as a public utility, such as industrial railways
used in logging, mining, etc.
(e) By agreement between the parties at interest, other similar minor
tracks than those listed under (a), (b), (c) and (d) above.
B-10 Major Tracks: Major tracks mean any tracks not included under the
definition of minor tracks.
C-General
C-1 Permits and Notices: A party planning to erect wires across the tracks of a
railroad shall give to the Superintendent of Communication or other
designated officer of the railroad, written notice at least 30 days in
advance of starting construction. Such notice shall include information
regarding the location and general plan of the crossing, clearances and
other data indicated on Typical Communication Line Crossing Data Sheet,
Appendix L, and on Figures 1B1-1, 1B1-3, 1B1-4 and 1B1-5, and any other
pertinent information in sufficient detail so that it can be determined
whether or not the proposed construction will conform to this
specification.
C-2 In cases where 30 days' notice is impracticable because of service demands
or emergency, the parties concerned should cooperate to avoid unnecessary
delay in the construction of the crossing.
C-3 Marking Poles: Crossing poles should be plainly marked by means of stencils
or metal characters showing the name, initials or trade mark of the owning
company. Where lines are located on railroad right-of-way for at least
three poles adjacent to the crossing and it is the standard practice of the
owning company to so mark at least every fifth pole in the line, the above
requirement should be considered as having been met.
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
C-4 Fire Hazard: Crossing poles or other supporting structures shall be located
as far distant as practicable from inflammable structures and the space
around the poles or other supporting structures kept free from inflammable
material.
C-5 Protection from Moving Vehicles: Supporting structures adjacent to traveled
highways shall be located with a view to reducing, as far as practicable,
the danger of being struck by moving vehicles. Structures which are exposed
to abrasion by moving vehicles or to other damage which would affect their
strength materially, shall be protected by guards.
C-6 Inspection: The construction shall be subject to the inspection of the
railroad company and shall comply with the requirements of this manual
part. Defective material shall be rejected and replaced with acceptable
material.
C-7 All parts of the supporting structures of overhead crossings should be
inspected at such intervals as are necessary to assure adequate
maintenance. All defective parts shall be promptly restored to a safe
condition and, with the exception of wood poles, should be replaced when
they have deteriorated to 50% of their required initial strength. Wood
poles should be replaced when they have deteriorated to two-thirds their
required initial strength. (The ground line circumference of various
classes and species of poles whose strengths have deteriorated to
two-thirds their strength when new is given in Appendix G.) In the
replacement inspection of treated poles where decay is usually internal,
the extent of the decay shall be determined and evaluated in terms of
external decay so that the tables in Appendix G may be applied.
C-B Underground crossings should be properly maintained.
Part I - Overhead Crossings
D-General
D-1 Relative Levels of Supply and Communication Wires: Every reasonable effort
should be made in the construction or reconstruction of a crossing to
arrange or rearrange the lines so that supply wires should be at a higher
level than the communication wires. This does not apply in the case of
trolley contact wires or their associated feeders, which must, of
necessity, occupy a position below all other wires at the crossing.
<PAGE>
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Association of American Railroads
Communication Manual
1989 Part 1-B-1
D-2 Where communication lines cross over tracks and a supply line in the
same span, or where supply wires are carried in the lower position on
the same crossing poles as the communication wires, the construction of
the crossing should be as follows, depending upon the voltage of the
supply circuits:
(a) Where the supply line is open wire and the voltage does not
exceed 750 volts ac or dc to ground, constructions should be in
accordance with this manual part.
(b) Where supply circuits of any voltage are carried in cable
having effectively grounded continuous metal sheath or on
effectively grounded suspension strand, the construction should
be in accordance with this manual part.
(c) Where the supply line is open wire or is in cable not meeting
the requirements of (b) above and the voltage exceeds 750
volts ac to ground but does not exceed 5,000 volts between
conductors (2,900 volts to neutral or ground), the
construction should be in accordance with this manual part,
except that the communication conductors should be not smaller
than No. 6 AWG (0.162 in. in diameter) copper or No. 6 Stl WG
(0.192 in. in diameter) steel, or wires the equivalent
thereof.
(d) Where the supply circuits involved are in excess of the ac
voltage limitations in (c) above, or in excess of 750 volts dc
to ground, the construction should not be made except with the
approval of all parties concerned.
D-3 Supply wires or cables carried on the poles supporting communication
circuits crossing over railroad tracks should be constructed in
accordance with the Manual Part 7-1 (Recommended Practices for
Crossings of Electrical Supply Lines and Facilities of Railroads) For
construction of signal supply circuits not in excess of 550 volts and
3,200 watts, located below communication wires Manual Part l-A-6
(Recommended Practices for Construction of Railroad communication Pole
Lines).
D-4 Protection of Metals Against Corrosion: All pole line hardware should be
of material that will not corrode excessively under the prevailing
conditions. Where galvanizing is used, it should meet the requirements
of the specifications for galvanizing of the American Society for
Testing & Materials.
<PAGE>
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Association of American Railroads
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D-5 Vertical Pull: The vertical distance from the top crossarm of a crossing
pole to a straight line connecting the top crossarm of the next adjacent
poles on either side of this crossing pole should not exceed the values
given in Table D-l.
Table D-l
Recommended Vertical Pull
<TABLE>
<CAPTION>
Average Length of Two Allowable Vertical
Adjacent Spans in Feet Distance in Feet
- - - ---------------------- ----------------
<S> <C>
Less than 100 8
101 to 130 10
131 to 150 12
Over 150 14
</TABLE>
D-6 Length of Crossing Span: The crossing span should, where practicable,
not exceed 100 ft. in the heavy loading district, 125 ft. in the
medium loading district and 150 ft. in the light loading district. Where
practicable, the adjacent spans should not exceed the length of the
crossing span by more than 50%.
D-7 Where practicable, the supports for the crossing and next adjoining
spans should be located in a straight line.
D-8 The crossing and each adjoining span should be kept free from decayed
trees and as far as practicable from overhanging trees, which might fall
into the line.
E-Clearances
E-l General: The conditions under which all clearances are specified are
15.5C(60F) and no wind. Clearances should be measured between the
nearest parts of the objects concerned. The clearances required by this
section should be maintained at not less than the specified values.
E-2 Side Clearances from Rails: Poles or towers supporting the crossing
span should, where practicable, be so located as to provide a minimum
horizontal clearance of 17 ft. from the nearest track rail and a minimum
horizontal clearance of 8 ft. between the nearest track rail and any
crossarm, guy or other attachment. Where it is impracticable or
undesirable to provide these clearances, they may be reduced if the
approval of the railroad concerned is obtained. Where necessary to
provide safe operating conditions, which require uninterrupted view
along the tracks for signals, signs, etc., the parties concerned should
cooperate to provide greater clearances than those specified above.
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E-3 Vertical Clearance Above Rails for Fixed Supports: The vertical
clearance between the lowest wire, guy, or cable and the top of rail
should be not less than given in Table E-l.
Table E-l
Recommended Vertical Clearance Above Rails
<TABLE>
<CAPTION>
Vertical Clearance
in Feet
<S> <C>
For Wires............... 27 (a) (b)
For guys, or cables carried
on suspension strands. 25 (b)
</TABLE>
(a) Where the wires are paralleled on the same street or highway by
a trolley contact conductor at a lower level, this clearance
may be reduced to 25 ft.
(b) Where agreed to by the railroad concerned, in special
situations, less clearance may be provided if safety will not
be decreased thereby.
E-4 The clearances specified in Paragraph E-3 are applicable for crossing
span lengths up to 175 ft. in the heavy loading district, 250 ft. in the
medium loading district, and 350 ft. in the light loading district.
Where crossing span lengths greater than these are involved, the
clearances should be increased in accordance with Paragraph E-6 (a).
E-5 Vertical Clearances Between Wires Not on the Same Supporting Structures:
The vertical clearances between conductors of the crossing span and
conductors of other lines should be not less than the values shown in
Table E-2. These clearances apply under the following conditions:
(a) Where the conductors at the upper level have fixed supports
(pin or strain type insulators) or are supported on suspension
type insulators in a suspended position at both supports, or
are arranged so that they are restrained from displacement
toward the crossing.
(b) Where the length of the span of the conductors in the upper
position is not greater than 175 ft. in the heavy loading
district, 250 ft. in the medium loading district, or 350 ft. in
the light loading district.
<PAGE>
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Association of American Railroads
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Notes for Table E-2
(a) These clearances apply also to inverted levels.
(b) Except where neutral conductors of primary supply circuits are
concerned, a clearance of 2 ft. is permitted where the supply
conductor is above the communication conductor, provided the
crossing is not within 6 ft. of any pole concerned in the
crossing and the voltage to ground of the supply conductor does
not exceed 300 volts.
(c) This clearance should be increased to at least 6 ft. above
trolley contact conductors of more than 750 volts to ground.
This increased clearance should also be provided over
trolley contact conductors of lower voltage, unless the
crossover conductors are beyond reach of a trolley pole leaving
the trolley contact conductor, or are suitably protected
against damage from trolley poles leaving the trolley contact
conductor.
(d) A conductor which is effectively grounded throughout its
length, such as a multi-grounded neutral wire, and is
associated with a circuit of 750 to 15,000 volts between
conductors, may have the clearances specified for open supply
wires of 0 to 750 volts between conductors.
(e) This clearance should be increased to 6 ft. where the supply
wires cross over the communication line within 6 ft.
horizontally of a communication pole.
(f) This clearance should be increased to 4 ft. where communication
cables cross over open supply service wires.
(g) Where the required clearance is 2 ft., and where conditions
are such that the sag in the upper conductor would increase
more than 1.5 ft. at the crossing point, under full load
conditions, the 2 ft. clearance should be increased by the
amount of sag increase less 1.5 ft.
(h) Multi-grounded wye circuits not exceeding 8,700 volts to
ground may have a 4 ft. clearance if the lowest supply wire
at the crossing is not lower than a straight line joining the
points of support of the highest communication conductor,
provided the crossing does not occur within 6 ft. horizontally
of a communication pole.
<PAGE>
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Association of American Railroads
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TABLE E-2
Recommended Minimum Vertical Clearance In Feet Between
Wires Not on the Same Structures
(All voltages are between wires, except where otherwise stated,or for
trolley contact wires where voltages are to ground.)
<TABLE>
<CAPTION>
Nature of Wires at Higher Level (a)
Open supply wires,
0-750 volts; supply Guys,
Communication cables, all voltages Open supply span wires,
Nature of wires, cables having effectively wires and lightning
wires crossed and suspension grounded metal sheath service drops protection
Over (a) strand or suspension strand (d) wires
750 to 8,700 to
Line wires Service 8,700 50,000
and cables drops Volts Volts
<S> <C> <C> <C> <C> <C> <C>
Communication
wires, cables and
suspension strand 2(g) 4(b) (g) 2(g) 4(e) 6(h) 2
Trolley contact 4(c) ----- ----- ------ ------ 4(c)
conductors
Guys and span wires,
lightning protection
wires, supply service
drops of 0 to 750
volts 2(f) 2 2 4 4 2(j)
</TABLE>
(j) Completely insulated sections of guys attached to supporting
structures having no conductor of more than 8,700 volts may
have less than this clearance from each other.
E-6 Increased Clearances: Conductors in the upper position at the
crossing, except guys or cables supported by suspension strand,
should have greater clearances than given in Paragraphs E-3 and
E-5 under the following conditions. The increases in (a), (b)
and (c) below are cumulative. An example illustrating the
method of determining the clearance between power wires and
communication wires where an open wire communication line
crosses over railroad tracks and under an open wire power line
in the same span is given in Appendix K.
<PAGE>
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(a) For crossing spans longer than specified in Paragraphs E-4 and
E-5 (b), clearances should be increased as follows:
(1) The clearances given in Tables E-l and E-2 should be
increased by the following amounts for each 10 ft. by
which the crossing span length exceeds the limits
specified in Paragraphs E-4 and E-5(b):
Table E-3
Recommended Clearance Increase Increments
<TABLE>
<CAPTION>
Amount of Increase per 10 ft.
Loading District Large Conductors Small Conductors*
<S> <C> <C>
Heavy and Medium 0.15 ft. 0.30 ft.
Light 0.10 ft. 0.15 ft.
</TABLE>
* A small conductor is a conductor having an overall diameter of metallic
material equal to or less than the following values:
<TABLE>
<CAPTION>
Outside Diameter of Conductor (Inch)
Material Solid Stranded
<S> <C> <C>
All copper 0.160 0.250
Other than all copper 0.250 0.275
</TABLE>
(2) If the crossing point is located elsewhere than at mid-span of
the conductors in the upper position, the required clearance
may be obtained by multiplying the clearance determined in (1)
above by the appropriate reduction factors specified in Table
E-4. The factors to be used in any case will depend upon the
basic clearance required by Tables E-l and E-2, and in no case
should the clearance, after the reduction factor has been
applied, be less than such basic clearance. In applying these
factors, the point of crossing in the case of a railroad
crossing is the track rail which is farthest from the nearer
support of the crossing span. In other situations, it is the
location under the conductors of any topographical feature
which is the determinant of the clearance.
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
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Table E-4
Recommended Clearance Reduction Factors
<TABLE>
<CAPTION>
Distance from Nearer Support Basic Clearance
of Crossing Span to Point of
Crossing, in Percent of
Crossing 4 Ft. 6 Ft. 27 Ft.
Span Length Reduction Factor
<S> <C> <C> <C>
5 0.35 0.47 0.85
10 0.47 0.58 0.88
15 0.60 0.68 0.91
20 0.71 0.78 0.94
25 0.82 0.85 0.96
30 0.90 0.92 0.98
35 0.96 0.98 0.99
40-50 1.00 1.00 1.00
</TABLE>
Interpolate for intermediate values
(b) For voltages in excess of 50,000 volts between wires,
the vertical clearances given in Table E-2 shou1d
be increased at the rate of 1/2-in. for each 1,000
volts of excess.
(c) Where the conductors of the line in the upper position at a
crossing over a communication line are supported by suspension
type insulators, the clearances should be increased by such an
amount that the values specified in Table E-2 will be
maintained in case of a broken conductor in either adjacent
span, provided such conductor is supported as follows:
(1) At one support by suspension type insulators in a
suspended position and at the other support by
insulators not free to swing (including semistrain-type
insulators).
(2) At one support by strain insulators, and
at the other support by semistrain-type
insulators.
E-7 Clearance of Conductors of a Communication Line from the Supports of
Another Line: Where conductors of a communication line are carried near
a supporting structure of any other line and not attached thereto, they
should have a clearance from any part of such structure not less than
the larger value required by either (a) or (b) below:
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Part 1-B-1 1989
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(a) 3 ft., if practicable.
(b) 6 in. plus 1 in. for each 2 ft. of the distance from the
supporting structure of the line passed to the nearest
supporting structure of the communication line.
F-Loading Assumptions
F-1 Three degrees of severity are recognized for the loading due to weather
conditions and are designated, respectively, as heavy, medium and light
loading. The classification of the United States on the basis of the
districts in which these loadings should be considered to apply is
shown on the loading map, Appendix A. Crossing wires and supporting
structures should be designed for heavy, medium and light loading,
dependent upon the district in which they are located.
F-2 In those states in which detailed local districting of loading areas
has been prescribed by state administrative authority, this districting
should be employed in lieu of that given in Appendix A. Where such
districting has not been prescribed, detailed districting or different
loading assumptions from those given in this specification may be
employed where agreed to by all parties concerned, including such
administrative authority as may have jurisdiction.
F-3 The specific transverse and longitudinal loadings which should be
assumed in determining the size of poles or the strength of guys in
each of the loading districts are indicated below:
(a) Transverse Loading (Poles and Side Guys):
(1) Heavy Loading: A horizontal wind pressure at right
angles to the direction of the line of 4 lb./sq. ft.
upon the projected area of the cylindrical surfaces
of all supported conductors and cables, together with
their supporting suspension strand when covered with
a layer of ice 1/2-in. in radial thickness and on
surfaces of poles without ice covering.
For supporting structures, other than unguyed poles
at crossings over major tracks, carrying more than 10
wires, not including cables supported by suspension
strand, the transverse load due to the open wires
should be calculated on two-thirds of the total
number of such wires, with a minimum of 10 wires.
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1989 Part 1-B-1
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(2) Medium Loading: A horizontal wind pressure at right
angles to the direction of the line of 4 lb./sq. ft.
foot of the projected area of cylindrical surfaces of
all supported conductors and cables, together with
their supporting suspension strand, when covered with
a layer of ice 1/4-in, in radial thickness and on the
surfaces of the poles without ice covering.
For supporting structures, other than unguyed poles
at crossings over major tracks, carrying more than 10
wires, not including cables supported by suspension
strand, the transverse load should be calculated on
2/3 of the total number of such wires, with a minimum
of 10 wires.
(3) Light Loading: A horizontal wind pressure at right
angles to the direction of the line of 9 lb./sq. ft.
upon the projected area of cylindrical surfaces of
all supported conductors and cables, together with
their supporting suspension strand, and poles,
without ice covering.
(b) Longitudinal Loading (Poles and Head Guys): The longitudinal
loading should be assumed equal to a pull in the direction of
the crossing of all open wire conductors supported, the pull
of each conductor being taken as 50% of its ultimate strength
in the heavy loading district, 33-1/3% in the medium loading
district, and 22-1/4% in the light loading district.
G-Poles
G-1 Material: Wood poles should be of suitable and selected timber free
from observable defects that would decrease their strength or
durability. Poles of Northern White Cedar, Western Red Cedar, Chestnut,
Southern Pine, Lodgepole Pine and Douglas Fir shall meet the
requirements of the American National Standards Institute for poles of
these species. For convenience, tables giving the dimensions of various
classes and lengths of these species of poles, ANSI Standard
05.1-1987(Specifications and Dimensions for Wood Poles) are given in
Appendix J. In the absence of specifications covering other species of
poles, they should be considered on the basis of the ANSI standard for
the species of pole having the nearest equivalent ultimate fiber
stress. A table giving the ultimate fiber stresses of the species of
poles in more common use in communication plant is included in Appendix
H. The use of treated poles is recommended where practicable, but is
not required, except in the case of timbers subject to rapid decay.
<PAGE>
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G-2 Sizes: Poles should be of a size not less than the class specified in
Table G-l for the corresponding number of wires carried. If guys are
omitted, poles must be of sufficient strength to meet the requirements
specified in Paragraph Q-9.
<TABLE>
<CAPTION>
Table G-1
---------
Recommended Minimum Class (ANSI Classification)
-----------------------------------------------
10 Wires 11 to 20 21 to 40 Over 40
or less Wires Wires Wires
<S> <C> <C> <C> <C>
Heavy and
Medium
Loading
Districts 7 6 5 4
Light
Loading
District 7 6 6 5
</TABLE>
G-3 Gains: Gains should not be cut to a depth of more than 1/2-in.
G-4 Setting: Table G-2 specifies the minimum depth of setting for unguyed
poles in average soil and in rock.
G-5 Where crossing poles are head and side guyed, the depth of setting of
poles normally employed by a constructing company in the construction
of its lines may, in general, be used. However, in no case should the
depth of setting of a pole at a crossing be more than 1 ft. less than
the depths given in Table G-2, where the pole is set in earth or more
than 1/2-ft. less when set in rock.
G-6 Where soil conditions are such that the above depths of setting will
not develop the strength of the pole, the pole should be set to an
additional depth or other means used to properly secure the pole.
G-7 Pole Mounts: Where a crossing pole is to be set on surface rock, a
concrete bridge abutment, or other masonry or stone structure, approved
pole mounts may be used.
G-8 Spliced Poles: Spliced poles should not be used to support the crossing
span.
G-9 Stub Reinforced Poles: Stub reinforced poles should not be used at
crossings over major tracks. At crossings over minor tracks, the use
of stub reinforcements is permitted, provided:
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
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Table G-2
Recommended Minimum Depth of Setting for Unguyed Poles
<TABLE>
<CAPTION>
Length of Depth in Feet in Average Soil for Different Classes of Poles Depth in Feet
Pole in Rock
in Feet Class 1 And 2 Class 3 And 4 Class 5 And 6 Class 7 All Classes
<S> <C> <C> <C> <C> <C>
16 ----- ----- 4 3-3/4 3
18 ----- ----- 4-1/4 4 3-1/4
20 4-3/4 4-1/2 4-1/4 4 3-1/4
22 5 4-3/4 4-1/2 4-1/4 3-1/2
25 5-1/2 5-1/4 4-3/4 4-1/2 3-3/4
27 5-3/4 5-1/2 5 4-3/4 4
30 6 5-3/4 5-1/4 5 4-1/4
35 6-1/2 6 5-1/2 5-1/4 4-l/2
40 6-3/4 6-1/4 5-3/4 5-1/2 4-3/4
45 7 6-1/2 6 5-3/4 5
50 7-1/4 6-3/4 6-1/4 6 5-1/4
55 7-1/2 7 6-1/2 ----- 5-1/2
60 7-3/4 7-1/4 6-3/4 ----- 5-3/4
65 8 7-1/2 7 ----- 6
70 8-1/2 8 7-1/2 ----- 6
75 9 8-1/2 8 ----- 6
80 9-l/2 9 8-1/2 ----- -----
85 10 9-1/2 9 ----- -----
90 10-1/2 10 9-1/2 ----- -----
</TABLE>
<PAGE>
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(a) The pole above the ground line is in good condition and is of
sufficient size to develop its required strength.
(b) The stub should have a ground line circumference at least as
great as would be required for a new pole in the same location.
(c) The stub should be set to a depth at least as great as that
required for the pole being stubbed. (See Paragraph G-4.)
(d) The stub should be attached to the pole by a method which will
develop at all times the required strength of the pole.
G-10 Stubs should, in general, be set at the side of the pole in a plane
perpendicular to the direction of the line. Where the direction of the
line changes at the pole being stub reinforced, the stub should be at
the side of the pole in a plane bisecting the angle of the corner and
in the direction of the corner pull. Where head guys are omitted, as
permitted in Paragraph Q-9, the stub should be set on the track side of
the pole in line with the crossing span.
H-Crossarms and Brackets
H-1 Wood crossarms supporting the crossing span should be of fir, treated
yellow pine or other suitable timber. They should have a nominal
cross-section of not less than the values given in Table H-1.
Table H-1
Recommended Dimensions of Wood Crossarms
<TABLE>
<CAPTION>
Number Nominal Length Nominal Cross-section
of Wires (Feet) (Inches) (Inches)
<S> <C> <C> <C>
2 1 4-1/2 2-5/16 by 3-5/16
4 3 4-1/2 2-5/16 by 3-5/16
6 6 0 2-3/4 by 3-3/4
10 8 6 2-3/4 by 3-3/4
10 10 0 3 by 4
12* 10 0 3-1/4 by 4-1/4
16** 10 0 3-1/4 by 4-1/4
</TABLE>
* Where crossarms are bored for 1/2-in. steel pins, 3-in. by 4-1/4 in.
crossarms may be used.
** Permitted in medium and light loading districts only.
<PAGE>
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1989 Part 1-B-1
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H-2 Galvanized or painted iron or steel crossarms of strengths equal to
those of the wood crossarms specified in Table H-1 may be used.
H-3 Double crossarms should be provided on crossing poles and shall be
attached to the pole by means of a 5/8-in. crossarm bolt. Double
crossarms longer than two-pin should be equipped with double arming
bolts at a point near each end of the crossarms.
H-4 Wood pole brackets may only be used at crossings over minor tracks and
should be in duplicate so as to afford two points of support for each
conductor.
H-5 Single metal brackets, drive hooks or fixtures may be used to support
distributing wire at railroad crossings provided such bracket, drive
hook or fixture and the attachment of the wire thereto is such as to
withstand the ultimate breaking strength of the wire.
J-Crossarm Braces
J-1 Crossarms and buckarms, except two-pin crossarms, should be so braced
as to safely support the loads to which they may be subjected in use,
including lineman working on them. This strength may be obtained by the
use of one pair of crossarm braces. Steel crossarm braces should have a
cross section of not less than 1/8-in. by 1-1/8 in. and a length not
less than 20 in.
J-2 The braces should be attached to the pole by a drive screw not less
than 1/2-in. by 3 in. and to the crossarm by bolts 3/8-in. in
diameter.
K-Pins
K-1 Insulator pins should have strength sufficient to withstand the loads
to which they may be subjected. Steel or iron pins should have a
diameter of shank not less than 1/2 in. Wood pins shall be sound and
straight grained with a diameter of shank not less than 1-1/4 in.
L-Insulators
L-1 Each insulator should be of such pattern, design and material that,
when mounted on its pin, it will withstand, without injury and without
being pulled off the pin, the ultimate strength of the conductor which
it supports.
L-2 Each conductor (not including paired wire) unless dead-ended, should be
tied to two supporting insulators in such a manner that they will
securely hold the conductor to its supporting insulators at each
crossing pole.
<PAGE>
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M-Tie Wires
M-1 A type of tie should be used which will develop the greatest
practicable holding power without injury to the line conductors.
N-Conductors
N-1 Conductors should be of material or combinations of materials which
will not corrode excessively under the prevailing conditions.
N-2 Conductors of material other than those specified in Table N-1 should
be of such size and so erected as to have a mechanical strength not
less than that of the sizes of copper conductors specified in Table N-1
N-3 The minimum allowable sizes of conductors in a span crossing over a
railroad which does not in the same span also cross over supply
conductors in excess of 750 volts to ground, should be as given in
Table N-1.
Table No. N-1
Recommended Minimum Wire Sizes
<TABLE>
<CAPTION>
Spans Exceeding 125 Ft.
Conductor Spans 125 Ft. or Less up to 150 FT. (Note)
Diameter Diameter
Gage Inches Gage Inches
<S> <C> <C> <C> <C>
Copper,
hard-drawn 10 AWG 0.102 9 AWG 0.114
Steel,
Galvanized:
In general 10 BWG 0.134 8 BWG 0.165
In rural
districts
of arid
regions 12 BWG 0.109 10 BWG 0.134
</TABLE>
Note: If spans in excess of 150 ft. are necessary, the size of conductors
specified above, or the sags of the conductors, should be
correspondingly increased.
N-4 Paired or single distributing wires without a suspension strand should
in no case be used for spans longer than 100 ft. in a heavy loading
district, 125 ft. in the medium loading district, and 150 ft. in the
light loading district. Each wire of a pair not supported by a
suspension strand should have an ultimate strength of not less than 170
lb. Single distributing wires not supported by suspension strand should
have an ultimate strength of not less than 340 lb.
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N-5 Splices should, so far as practicable, be avoided in the crossing and
adjacent spans, unless they are of such a type and so made as to have a
strength substantially equal to that of the conductors in which they are
placed. Taps should be avoided in the crossing span where practicable, but
if required, they should be of a type which will not impair the strength
of the conductors to which they are attached.
P-Sags
P-1 Table P-1 specifies recommended sags for wires shown in Table N-1. Where,
however, the wires in the communication line are strung in accordance with
recognized practices, the stringing tensions employed in the line,
generally will be satisfactory in the crossing span.
Table P-1
Recommended Wire Stringing Sags
Heavy and Medium Loading Districts
<TABLE>
<CAPTION>
Span Length Temperature Deg. F
in Feet 100 80 60 40 20 0 -20
<S> <C> <C> <C> <C> <C> <C> <C>
Sag in inches
70 5-1/2 4-1/2 3-1/2 2-3/4 2-1/4 1-3/4 1-1/2
80 7-1/2 6 4-1/2 3-1/2 2-3/4 2-1/2 2
90 9-1/2 7-1/2 5-1/2 4-1/2 3-1/2 3 2-1/2
100 11-1/2 9 7 5-1/2 4-1/2 3-3/4 3-1/4
110 14 11 8-1/2 6-1/2 5-1/2 4-1/2 4
120 17 13 10 8 6-1/2 5-1/2 4-1/2
130 20 15 12 9-1/2 7-1/2 6-1/2 5-1/2
140 23 18 14 11 8-1/2 7-1/2 6-1/2
150 26 20 16 13 10 8-1/2 7
</TABLE>
<PAGE>
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Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
Table P-1 (Continued)
Recommended Wire Stringing Sags
Light Loading District
<TABLE>
<CAPTION>
Span Length Temperature Deg. F
in Feet 120 100 80 60 40 20 0
<S> <C> <C> <C> <C> <C> <C> <C>
Sag in inches
90 7-1/2 6-1/2 5-1/2 4-1/2 3-1/2 3 1-1/2
100 9-1/2 8 6-1/2 5-1/2 4-1/2 3-3/4 3-1/4
110 11-1/2 9-1/2 8 6-1/2 5-1/2 4-1/2 4
120 14 11-1/2 9 7-1/2 6-1/2 5-1/2 4-1/2
130 16 13 11 9 7-1/2 6-1/2 5-1/2
140 18 15 13 10-1/2 8-1/2 7-1/2 6-1/2
150 21 18 15 12 10 8-1/2 7
</TABLE>
Q-Guys
Q-1 Material: Guys should be of galvanized steel or other material that will
not corrode excessively under the prevailing conditions.
Q-2 Side Guys: Poles supporting the crossing span should be side-guyed with
guys having strengths specified in Appendix B, except as provided in
Paragraphs Q-9 and Q-l0. The strength specified in this appendix may be
obtained by using various combinations of standard guys, which, when taken
together, will give strength at least as great as that specified.
Q-3 For the purpose of side-guying, aerial cables and their suspension strands
should have the wire equivalents given in Table Q-1.
Table Q-1
Recommended Wire Equiva1ents
<TABLE>
<CAPTION>
Equivalent Number of Open Wires
Diameter of Cable Heavy Loading Medium Loading Light Loading
District District District
<S> <C> <C> <C>
Less than 1-1/4 in. 3 4 10
1-1/4 to 2-1/4 in. 4 5 15
Over 2-1/4 in. 5 6 20
</TABLE>
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
- - --------------------------------------------------------------------------------
Q-4 Head Guys: Poles supporting the crossing span should be head-guyed away
from the crossing span with guys having strengths specified in Appendix C,
except as provided in Paragraph Q-9. The strength specified in this
appendix may be obtained by using various combinations of standard guys,
which, when taken together, will give strength at least as great as that
specified. For lines carrying both open wire and aerial cable, head guying
need be provided only for the number of wires in excess of 10 if the cable
is supported by a 6,000-lb. suspension strand or for the number of wires
in excess of 20 if the suspension strand is 10,000-lb. or stronger.
Q-5 Head guys should be installed so as not to increase tension in the
crossing span. In order to facilitate the installation of the head guys, a
section of 6,000-lb. strand may be placed between the crossing poles so as
to provide an additional support for pulling up the head guys.
Q-6 Guying at Corners and Terminals: Where the line terminates or changes
direction or has substantially unbalanced tension at any crossing support,
such additional guying as may be necessary should be provided to take care
of the additional load.
Q-7 Where a line crossing a railroad changes direction more than ten degrees
at either crossing support, the side guy within the angle may be omitted
and the head guy, if required, should be placed in the direction of the
adjacent span unless the angle of turn is greater than 60 degrees. Where
the angle is greater than 60 degrees, the head guy should be placed in a
direction away from the crossing span.
Q-8 Corner guys should conform to standard guying requirements unless the
guying prescribed in Appendix B is greater, in which case the latter
guying shall be provided.
Q-9 Omission of Guys: Guys may be omitted in the following cases:
(a) Side guys may be omitted where the poles when new will not be
stressed to more than 25% of their ultimate strengths, when
subjected to the transverse load specified in Paragraph F-3 (a),
except as otherwise permitted in Paragraph Q-10. The maximum number
of wires which can be carried by poles of various classes to meet
this requirement is given in Appendix D.
(b) Head guys may be omitted where the poles when new will not be
stressed to more than 66-2/3% of their ultimate strengths when
subjected to the longitudinal load
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - -------------------------------------------------------------------------------
specified in Paragraph F-3 (b). The maximum number of wires of various
sizes which can be carried by poles of various classes to meet this
requirement is given in Appendix F.
Q-1O Where a communication line paralleling a railroad track on the
right-of-way of the railroad crosses any of the minor tracks listed
under Subparagraphs (a), (c), (d) and (e) of Paragraph B-9, the side
guys may be omitted, provided the crossing poles when new will not be
stressed to more than 33-1/3% of their ultimate strengths when
subjected to the transverse load specified in Paragraph F-3 (a). The
maximum number of wires which can be carried by poles of various classes
to meet this requirement is given in Appendix E.
Q-11 If, however, under the conditions stated in Paragraph Q-l0, there is an
angle in the line at either crossing pole, corner guys sufficient to
withstand the unbalanced load on such poles should be installed. Head
guys may be omitted unless conductor tensions are not balanced at one or
both poles due to the dead-ending of any of the wires. Where conductors
are dead-ended, guys of strengths specified in Appendix C should be
provided.
Q-12 Guying in Special Cases: Where, on account of physical conditions, it
is impracticable to side guy the crossing poles, as specified in
Paragraph Q-2, or to provide the strength of an unguyed pole specified
in Paragraphs Q-9 and Q-l0, the requirements may be met by head-guying
and side-guying the line as near as practicable to the crossing,
provided the line is approximately straight and the intermediate poles
are not of a class lower than those specified in Paragraph G-2 and that
a strand of strength equivalent to the load in pounds for which
head-guying is required, is run between the two guyed poles. Where such
guying is employed, it should meet the requirements of paragraphs Q-2
to Q-5, inclusive, and should be applied at a distance not exceeding
500 ft. from the nearest crossing pole. The strand should be attached
to the guyed poles close to the point at which the head guys are
attached, and should be securely attached to every pole between the
guyed poled.
Q-13 Guy Leads: Guy anchors should, where practicable, be located so that the
horizontal distance from the ground line of the pole to the guy or guy
rod will be not less than the height above ground of the attachment of
the guy to the poles for head guys, and not less than one-third that
height for side guys. The guys should be attached as near to the center
of the load as practicable. (See Figure 1B1-2 for method of measuring
guy lead and height.)
<PAGE>
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Association of American Railroads
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Q-14 Methods of Anchoring Guys: The anchorage for guys shall in all cases be
adequate to develop the required strength of the guys attached to them.
Guys should preferably be attached to anchors set in earth or secured in
rock. Where this is impracticable, guys may be attached to stubs or
poles which are properly anchor guyed, or to buildings or other secure
structures. Guys should not be attached to trees.
Q-15 Guy Rods: Guy rods not smaller than those specified in Table Q-2 should
be employed. The length of guy rods should be sufficient so that where
the anchor is set to adequate depth, the eye of the rod will not be
below the surface of the ground.
Table 0-2
Recommended Minimum Size of Guy Rods
<TABLE>
<CAPTION>
Size of Guy Diameter of Guy Rod
(Pounds) (Inches)
<S> <C>
2,200 1/2
4,000 1/2
6,000 5/8
10,000 3/4
16,000 7/8
</TABLE>
Q-16 Anchors: Where expandable or screw anchors or screw anchors are used,
manufacturer's specifications must be followed as to depth and size of
anchor.
Q-17 Method of Securing Guy Strand: In securing guys, clamps, strand clamps
or guy-grip dead-ends of suitable strength should be employed. A guy
strand may be attached to the pole either by the wrapping method or by
attachment to suitable eye bolts or approved connector. The size of the
eye bolt or approved connector should be sufficient to develop the
required strength of the guy.
Q-18 Guards for Guys: When anchor guys are located so that persons or
livestock may come into accidental contact with them, they should be
equipped with suitable guards.
Q-19 Pole Braces: Pole braces may be used in the place of guys called for in
Paragraphs Q-2 to Q-8, inclusive, to provide equivalent strength.
R-Suspension Strand
R-1 Material: Suspension strands should be of galvanized steel or other
material that will not corrode excessively under the prevailing
conditions.
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - -------------------------------------------------------------------------------
R-2 Sizes: For spans of 150 ft. or less, Table R-l gives the minimum
sizes of suspension strand to be used for supporting different sizes
of serial cable.
Table R-1
Recommended Minimum Sizes of Suspension Strand
<TABLE>
<CAPTION>
Weights of Cable in Suspension Strand (Nominal
Pounds per Foot Ultimate Strength in Pounds)
<S> <C>
Less than 2.25 6,000
2.25 to 5 10,000
Exceeding 5 and less than 8.5 16,000
</TABLE>
R-3 For spans exceeding 150 ft. or for heavier cables, a proportionately
larger suspension strand or other proportionately stronger means of
support should be used.
R-4 Attachment to Poles: The suspension strand should be attached to the
pole by means of standard cable suspension clamp secured by a bolt not
less than 5/8 in. in diameter extending through the pole. Three-bolt
suspension clamps should be used with 10,000 and 16,000 lb. suspension
strand; single-bolt suspension clamps may be used for 6,000 lb.
suspension strand.
R-5 Where one or both of the crossing poles is a corner pole and the corner
pull is in excess of 5 ft., suspension clamps with flared grooves or
other means that will prevent sharp bends in the suspension strand
should be employed. Where the cable is carried on the inside of the
corner, reinforcing links or other equivalent means should also be used
where the corner pull exceeds the values given in Table R-2.
Table R-2
<TABLE>
<CAPTION>
Size of
Suspension Strand Pull on Corner
<S> <C>
6M 15 ft. or over
lOM 15 ft. or over
16M 10 ft. or over
</TABLE>
R-6 Safety straps, grade clamps, reinforcing bands or other equivalent
devices which will prevent progressive stripping of cable from entering
the crossing span should be placed at each crossing pole for cables
1-1/2 in. in diameter or larger.
R-7 Where the suspension strand is dead-ended on a crossing pole, it may be
attached by the wrapping method or by attaching it to a suitable eye
bolt or approved connector.
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
The size of the eye bolt should be sufficient to develop the required
strength of the suspension strand.
R-8 Sags: Suspension strands for aerial cables should be strung so that when
the cables are in place the sags will be not less than given in Table
R-3.
S-Cable Attachments to Suspension Strands
S-1 Cables should be attached to the suspension strand in the crossing span
by means of suitable metal rings or spirally wound lashing wire which
will resist corrosion. The spacing of rings should not be greater than
indicated in Table S-1. The spirals of lashing wire should be so spaced
that they will safely support the cable and prevent appreciable sagging
between points of support. The metal rings or lashing wire should be so
installed that the protective coating will not be damaged.
Table S-1
Recommended Spacing of Cable Rings
<TABLE>
<CAPTION>
Weight of Cable in Spacing of Cable Rings
Pounds per Foot in Inches
<S> <C>
Less than 5 20
5 to 8.5 15
</TABLE>
Part II - Underbridge Crossings
T-General
T-1 Avoidance of Attachments: The line preferably should be so graded that
it will be unnecessary to make attachment to the bridge structure. If,
for any reason, it is impracticable to grade a cable line to pass under
a bridge and it is undesirable to attach to the bridge, vertical runs
may be made on poles adjacent to the bridge.
T-2 Attachments: Unless approved by the railroad company, attachments to
railroad steel bridges should not be made by devices that require the
drilling or cutting of the bridge structure or the removal of rivets,
and the attachments should be so made that wires, cables and suspension
strand will not be in metallic contact with the bridge structure.
T-2 Clearance from Abutments: The clearance of any conductor from the face
of the abutment, when not attached thereto, should be not less than 3
ft. for steel bridges. Cables or paired wires and their suspension
strand may be attached directly to the face of the abutment if located
not less than 24 in. below the elevation of the bridge seat, and they
should provide suitable clearance for pedestrians, vehicles, etc., as
may be necessary.
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
Table R-3
Recommended Minimum Sags in Aerial Cables
(No Ice or Wind Loading)
<TABLE>
<CAPTION>
Average Weight of Size of Sags in inches for Spans
Cables in Pounds Temp. Strand 90 100 110 120 130 140 150
per Foot F. Ft. Ft. Ft. Ft. Ft. Ft. Ft.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 5 6 7 8 10 11 13
Up to .6 60 6,000 5 7 8 10 11 13 15
100 6 8 10 12 14 16 18
Exceeding .6 but 20 6 7 9 10 12 14 16
not exceeding .8 60 6,000 6 8 10 12 14 16 18
100 8 9 11 13 16 18 21
Exceeding .8 but 20 7 9 11 13 15 17 20
not exceeding 1.1 60 6,000 8 10 12 14 17 19 22
100 9 11 13 15 18 21 24
Exceeding 1.1 but 20 9 11 13 16 19 22 25
not exceeding 1.4 60 6,000 10 12 15 17 20 24 27
100 10 13 16 19 22 25 29
Exceeding 1.4 but 20 10 13 16 19 22 25 29
not exceeding 1.8 60 6,000 11 14 17 20 23 27 31
100 12 15 18 21 25 29 33
Exceeding l.8 but 20 12 14 17 20 24 28 32
not exceeding 2.25 60 6,000 12 15 18 22 26 30 34
100 13 16 20 24 28 32 37
Exceeding 2.25 but 20 8 10 12 15 17 20 23
not exceeding 2.8 60 10,000 9 11 13 16 19 22 25
100 10 12 15 17 20 24 27
Exceeding 2.8 but 20 10 13 16 19 22 25 29
not exceeding 3.9 60 10,000 11 14 17 20 23 27 31
100 12 15 18 21 25 29 33
Exceeding 3.9 but 20 12 14 17 20 24 28 32
not exceeding 4.4 60 10,000 12 15 18 22 26 30 34
100 13 16 19 23 27 31 36
Exceeding 4.4 but 20 13 16 19 23 27 31 36
not exceeding 5.0 60 10,000 14 17 20 24 29 33 38
100 14 18 22 26 30 35 40
</TABLE>
<PAGE>
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Association of American Railroads
Communication Manual
1989 Part 1-B-1
Table R-3 (Continued)
<TABLE>
<CAPTION>
Average Weight of Size of Sags in inches for Spans
Cables in Pounds Temp. Strand 90 100 110 120 130 140 150
per Foot F. Ft. Ft. Ft. Ft. Ft. Ft. Ft.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
20 11 13 16 19 23 26 30
Up to 5.0 but 60 16,000 12 14 17 20 24 28 32
not exceeding 6.3 100 12 15 18 22 26 30 24
Exceeding 6.3 but 20 12 14 17 20 24 28 32
not exceeding 7.2 60 16,000 12 15 18 22 26 30 34
100 13 16 20 24 28 32 37
Exceeding 7.2 but 20 13 16 19 22 26 31 35
not exceeding 8.1 60 16,000 13 16 19 23 27 31 36
100 14 17 20 24 29 33 38
Exceeding 8.1 but 20 13 16 20 24 28 32 37
not exceeding 8.6 60 16,000 14 17 20 24 29 33 38
100 14 18 22 26 30 35 40
</TABLE>
T-4 Clearance from Bridge Structure: The clearance between any conductor
attached to the bridge in open construction, and any portion of the
bridge structure should preferably be not less than 6 in., but in no
case less than 3 in. The clearance between any conductor not attached to
the bridge and any portion of the bridge structure should preferably be
not less than 1 ft., but in no case less than 6 in.
Part III - Underground Crossings
U-General
U-1 Arrangement for Work: The work should be done at such time and in such a
manner as not to interfere with the proper and safe use or operation of
the property and tracks of the railroad company, previous arrangements
having been made with the duly authorized representative of the
railroad company for date and time of commencement. Where iron or mild
steel pipes are used, as permitted in Paragraph U-7(d), consideration
should be given to forcing or driving them under the roadbed instead of
laying in an open trench.
U-2 Location: The underground system on the railroad property should be so
located as to be subject to the least practicable disturbance. Railway
tracks and underground structures, including catch basins, gas pipes,
etc., should be avoided where practicable. The manholes, pull boxes, and
terminals should, where practicable, be located away from the roadbed.
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
U-3 Side Clearance from Rail: Where underground conduit construction
terminates at terminal poles, the side clearance of such poles from the
nearest track rail should be as provided in Paragraph E-2. Where
manholes, handholes, etc., are employed, which project above the surface
of the ground, the side clearance, unless physical conditions prevent,
shall be not less than 17 ft. from the nearest track rail, except that
at sidings, a clearance of 7 ft. may be allowed. At loading sidings,
sufficient space shall be left for a driveway.
U-4 Clearance Below Base of Rail: The top of all conduit protection, except
as specified in Paragraph U-8 should generally be located at a depth of
not less than 48 in. below the base of rail. Where this is
impracticable, or for other reasons, this clearance may be reduced by
agreement between the parties concerned. In no case, however, should the
top of the conduit protection extend higher than the bottom of the
ballast section which is subject to working or cleaning.
U-5 Where unusual conditions exist or where proposed construction would
interfere with existing construction, a greater depth than specified
above may be required.
U-6 Arrangement of Conduit System: The arrangement of ducts in the conduit
system contemplated under this specification should consist of not more
than four ducts of vitrified clay, four impregnated fiber ducts or three
creosoted wood ducts in width. Where other arrangements are
contemplated, additional strength of construction and protection may be
required.
U-7 Protection of Ducts: Ducts extending under the roadbed section of the
right-of-way should be protected under the roadbed section as specified
below and for a distance of at least 6 ft. beyond each outside rail. In
other sections of the right-of-way, concrete, creosoted plank or other
forms of protection should be provided where necessary to prevent injury
to the conduit system.
(a) Vitrified Clay Ducts: The ducts should be laid on at least 4
in. of concrete with at least 3 in. of concrete on the top and
sides.
(b) Impregnated Fiber and Other Tubular Composition Ducts: The
ducts should be completely encased in concrete. The encasement
should be at least 4 in. thick on bottom and at least 3 in.
thick on top and sides.
(c) Creosoted Wood Ducts: The ducts should be protected on the top
and bottom by means of creosoted wood plank not less than 1-1/2
in. in thickness or by 3 in. of concrete.
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
(d) Iron or Mild Steel Pipes: Such pipes should normally be encased
in concrete as provided in (b) above. However, where physical
or chemical conditions will permit, a conduit system consisting
of a group of not more than four iron or mild steel pipes not
more than 4 in. in diameter may be laid beneath the roadbed
without any form of protection.
U-8 Where physical and chemical conditions will permit, a conduit consisting
of not more than two iron pipes, not exceeding 4 in. in diameter, or two
creosoted wood ducts not exceeding 6 in. square, or one or more cables
of a type designed for burying directly in the earth may be laid in the
ground beneath railroad tracks without any form of protection at a
minimum depth of 48 in. below the base of the rail, unless the worked
ballast section of the roadbed exceeds 18 in., in which case the conduit
shall be laid below the ballast section. Cables under main line tracks
should preferably be installed in conduit to prevent disturbance to the
roadbed at times of replacement.
U-9 Excavation: The excavated material shall be so placed as not to
interfere with traffic. Ballast material excavated should be kept
separate and free from earth.
U-10 Shoring: Where necessary to prevent caving, the sides of trench should
be supported with suitable planks and bracing. No bracing shall extend
above the base of the rail or be attached in any way to the rails or
ties.
U-ll Grading and Drainage: The trench should be so graded that it will have a
fall of at least 3 in. in l00 ft. toward the lower manhole or terminal,
or from an intermediate point toward both manholes or terminals, and the
bottom of the trench should be graded evenly. Where conditions require,
a sump or other suitable drainage should be provided for manholes.
U-12 Backfilling: The trench should be backfilled with earth to the subgrade
line and tamped. Track ballast shall be replaced under railroad
supervision.
U-13 Removing Surplus Material: All surplus material remaining after the work
has been finished should be removed, and if disposed of upon railroad
property, it should be under railroad supervision.
U-14 Concrete: All concrete employed should be such that when tested in 6 by
12 inch cylinders after 28 days, it should withstand a compressive test
of not less than 2,000 lb./sq. in. square inch without rupture. Concrete
should be thoroughly tamped.
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
Appendix A: District Loading Map
[DISTRICT LOADING MAP DIAGRAM]
<PAGE>
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Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
Appendix B
Recommended Strength of Side Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 100 Feet or Less
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Heavy Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 4,000
10 2,200 2,200 4,000 4,000
20 4,000 4,000 4,000 6,000
30 4,000 4,000 6,000 10,000
40 4,000 6,000 10,000 10,000
50 6,000 10,000 10,000 12,000
60 6,000 10,000 10,000 16,000
70 10,000 10,000 12,000 16,000
80 10,000 10,000 16,000 20,000
</TABLE>
<PAGE>
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Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Recommended Strength of Side Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 100 Feet or Less
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Medium Loading
--------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 2,200
20 4,000 4,000 4,000 4,000
30 4,000 4,000 4,000 6,000
40 4,000 4,000 4,000 6,000
50 4,000 4,000 6,000 10,000
60 4,000 6,000 6,000 10,000
70 4,000 6,000 10,000 10,000
80 6,000 6,000 10,000 10,000
</TABLE>
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Average of Crossing and Adjacent Spans 100 Feet or Less
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Light Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 2,200
20 4,000 4,000 4,000 4,000
30 4,000 4,000 4,000 6,000
40 4,000 4,000 4,000 6,000
50 4,000 4,000 6,000 6,000
60 4,000 4,000 6,000 10,000
70 4,000 6,000 6,000 10,000
80 4,000 6,000 10,000 10,000
</TABLE>
<PAGE>
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Part 1-B-1 1989
- - - -----------------------------------------------------------------------------
Appendix B (Continued)
Recommended Strength of Side Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 100 to 125 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Heavy Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 4,000
10 2,200 4,000 4,000 6,000
20 4,000 4,000 4,000 6,000
30 4,000 6,000 6,000 10,000
40 6,000 10,000 10,000 12,000
50 6,000 10,000 10,000 16,000
60 10,000 10,000 12,000 16,000
70 10,000 12,000 16,000 20,000
80 10,000 16,000 16,000 26,000
</TABLE>
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
- - - -----------------------------------------------------------------------------
Appendix B (Continued)
Average of Crossing and Adjacent Spans 100 to 125 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Medium Loading
--------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 4,000
20 4,000 4,000 4,000 4,000
30 4,000 4,000 4,000 6,000
40 4,000 4,000 6,000 10,000
50 4,000 6,000 6,000 10,000
60 6,000 6,000 10,000 10,000
70 6,000 10,000 10,000 12,000
80 6,000 10,000 10,000 16,000
</TABLE>
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - -----------------------------------------------------------------------------
Appendix B (Continued)
Recommended Strength of Side Guys Required in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 100 to 125 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Light Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 2,200
20 4,000 4,000 4,000 4,000
30 4,000 4,000 4,000 6,000
40 4,000 4,000 6,000 6,000
50 4,000 6,000 6,000 10,000
60 4,000 6,000 6,000 10,000
70 6,000 6,000 10,000 10,000
80 6,000 6,000 10,000 12,000
</TABLE>
<PAGE>
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Association of American Railroads
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1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Average of Crossing and Adjacent Spans 125 to 150 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Heavy Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 4,000
6 2,200 2,200 4,000 4,000
10 4,000 4,000 4,000 6,000
20 4,000 4,000 6,000 10,000
30 6,000 6,000 10,000 10,000
40 6,000 10,000 10,000 16,000
50 10,000 10,000 12,000 16,000
60 10,000 12,000 16,000 20,000
70 10,000 16,000 16,000 26,000
80 12,000 16,000 20,000 26,000
</TABLE>
<PAGE>
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Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Recommended Strength of Side Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 125 to 150 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Medium Loading
--------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 4,000
20 4,000 4,000 4,000 4,000
30 4,000 4,000 6,000 6,000
40 4,000 4,000 6,000 10,000
50 6,000 6,000 10,000 10,000
60 6,000 10,000 10,000 12,000
70 6,000 10,000 10,000 16,000
80 10,000 10,000 12,000 16,000
</TABLE>
<PAGE>
-41-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Average of Crossing and Adjacent Spans 125 to 150 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Light Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 2,200
20 4,000 4,000 4,000 4,000
30 4,000 4,000 4,000 6,000
40 4,000 4,000 6,000 10,000
50 4,000 6,000 6,000 10,000
60 6,000 6,000 10,000 10,000
70 6,000 10,000 10,000 12,000
80 6,000 10,000 10,000 16,000
</TABLE>
<PAGE>
-42-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Recommended Strength of Side Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 150 to 175 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Heavy Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 4,000
6 2,200 2,200 4,000 4,000
10 4,000 4,000 6,000 6,000
20 4,000 6,000 6,000 10,000
30 6,000 10,000 10,000 12,000
40 10,000 10,000 12,000 16,000
50 10,000 12,000 16,000 20,000
60 10,000 16,000 16,000 26,000
70 12,000 16,000 20,000 30,000
80 16,000 20,000 26,000 30,000
</TABLE>
<PAGE>
-43-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Average of Crossing and Adjacent Spans 150 to 175 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Medium Loading
--------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 4,000
10 2,200 2,200 4,000 4,000
20 4,000 4,000 4,000 6,000
30 4,000 4,000 6,000 10,000
40 4,000 6,000 10,000 10,000
50 6,000 10,000 10,000 12,000
60 6,000 10,000 10,000 16,000
70 10,000 10,000 12,000 16,000
80 10,000 10,000 16,000 20,000
</TABLE>
<PAGE>
-44-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - - ------------------------------------------------------------------------------
Appendix B (Continued)
Recommended Strength of Side Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 150 to 175 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Light Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 4,000
20 4,000 4,000 4,000 4,000
30 4,000 4,000 6,000 6,000
40 4,000 6,000 6,000 10,000
50 6,000 6,000 10,000 10,000
60 6,000 10,000 10,000 12,000
70 6,000 10,000 10,000 16,000
80 10,000 10,000 10,000 16,000
</TABLE>
<PAGE>
-45-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - --------------------------------------------------------------------------------
Appendix B (Continued)
Average of Crossing and Adjacent Spans 175 to 200 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Heavy Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 4,000
6 2,200 4,000 4,000 6,000
10 4,000 4,000 6,000 10,000
20 4,000 6,000 10,000 10,000
30 6,000 10,000 10,000 16,000
40 10,000 10,000 16,000 20,000
50 10,000 16,000 16,000 26,000
60 12,000 16,000 20,000 26,000
70 16,000 20,000 26,000 30,000
80 16,000 20,000 26,000 40,000
</TABLE>
<PAGE>
-46-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix B (Continued)
Recommended Strength of Side Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
Average of Crossing and Adjacent Spans 175 to 200 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Medium Loading
--------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 4,000
10 2,200 2,200 4,000 4,000
20 4,000 4,000 4,000 6,000
30 4,000 6,000 6,000 10,000
40 6,000 6,000 10,000 10,000
50 6,000 10,000 10,000 16,000
60 10,000 10,000 12,000 16,000
70 10,000 10,000 16,000 20,000
80 10,000 12,000 16,000 20,000
</TABLE>
<PAGE>
-47-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - --------------------------------------------------------------------------------
Appendix B (Continued)
Average of Crossing and Adjacent Spans 175 to 200 Feet
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of 1 2/3 1/2 1/3
Wires
Light Loading
-------------
<S> <C> <C> <C> <C>
2 2,200 2,200 2,200 2,200
4 2,200 2,200 2,200 2,200
6 2,200 2,200 2,200 2,200
10 2,200 2,200 2,200 4,000
20 4,000 4,000 4,000 6,000
30 4,000 4,000 6,000 10,000
40 4,000 6,000 6,000 10,000
50 6,000 6,000 10,000 12,000
60 6,000 10,000 10,000 16,000
70 10,000 10,000 10,000 16,000
80 10,000 10,000 12,000 16,000
</TABLE>
<PAGE>
-48-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix C
Recommended Strength of Head Guys Required, in Pounds
(Combinations of Standard Size Guys May Be Used)
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of
Wires 1-1/4 1 3/4 2/3 1/2
Heavy Loading
-------------
<S> <C> <C> <C> <C> <C>
2 4,000 4,000 4,000 4,000 4,000
6 4,000 4,000 4,000 4,000 6,000
10 6,000 6,000 6,000 10,000 10,000
20 10,000 10,000 12,000 16,000 16,000
30 16,000 16,000 20,000 20,000 26,000
40 20,000 20,000 26,000 26,000 32,000
50 20,000 20,000 30,000 32,000 42,000
60 26,000 30,000 36,000 36,000 48,000
70 30,000 30,000 40,000 48,000 60,000
80 36,000 40,000 48,000 60,000 70,000
Medium Loading
--------------
2 4,000 4,000 4,000 4,000 4,000
6 4,000 4,000 4,000 4,000 4,000
10 4,000 4,000 6,000 6,000 6,000
20 6,000 10,000 10,000 10,000 12,000
30 10,000 10,000 12,000 16,000 16,000
40 12,000 16,000 16,000 16,000 20,000
50 16,000 16,000 20,000 20,000 26,000
60 20,000 20,000 26,000 26,000 30,000
70 20,000 20,000 26,000 30,000 36,000
80 26,000 26,000 30,000 32,000 40,000
</TABLE>
<PAGE>
-49-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - --------------------------------------------------------------------------------
Appendix C (Continued)
<TABLE>
<CAPTION>
Number Ratio of Guy Lead to Height Not less than
of
Wires 1-1/4 1 3/4 2/3 1/2
Light Loading
-------------
<S> <C> <C> <C> <C> <C>
2 4,000 4,000 4,000 4,000 4,000
6 4,000 4,000 4,000 4,000 4,000
10 4,000 4,000 4,000 4,000 4,000
20 4,000 6,000 6,000 6,000 10,000
30 6,000 10,000 10,000 10,000 12,000
40 10,000 10,000 10,000 12,000 16,000
50 10,000 10,000 16,000 16,000 20,000
60 12,000 16,000 16,000 16,000 20,000
70 16,000 16,000 20,000 20,000 26,000
80 16,000 20,000 20,000 26,000 30,000
</TABLE>
<PAGE>
-50-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix D
Recommended Maximum Number of Wires Which can be
Supported by Poles of Various Classes Without
Side Guys at Crossings over Railroad Tracks
(For the Special Case Covered By Paragraph Q-10, See Appendix E)
<TABLE>
Class Average of Crossing and Adjacent Spans - Feet
of
Pole 100 125 150 175 200
Heavy Loading District
----------------------
<S> <C> <C> <C> <C> <C>
1 28 22 18 15 13
2 22 18 14 12 11
3 17 14 11 10 8
4 13 11 9 8 7
5 10 8 7 6 5
6 8 6 5 4 4
7 6 5 4 3 3
<CAPTION>
Class Average of Crossing and Adjacent Spans - Feet
of
Pole 100 125 150 175 200
Medium Loading District
-----------------------
<S> <C> <C> <C> <C> <C>
1 53 41 33 28 24
2 41 32 26 22 19
3 32 25 21 17 15
4 24 19 16 14 12
5 18 15 12 10 9
6 14 11 9 8 7
7 10 8 7 6 5
</TABLE>
<PAGE>
-51-
Association of American Railroads
Communications Manual
1989 Part 1-B-1
- - -------------------------------------------------------------------------------
Appendix D (Continued)
(For the Special Case Covered By Paragraph Q-1O, See Appendix E)
<TABLE>
<CAPTION>
Class Average of Crossing and Adjacent Spans - Feet
of
Pole 100 125 150 175 200
Light Loading District
----------------------
<S> <C> <C> <C> <C> <C>
1 -- 82 65 54 46
2 81 61 49 41 35
3 58 45 37 31 27
4 42 33 27 23 20
5 29 23 19 15 14
6 19 15 13 11 9
7 10 10 8 7 6
</TABLE>
<PAGE>
-52-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix E
Recommended Maximum Number of Wires Which can be
Supported by Poles of Various Classes Without
Side Guys at Crossings Over Minor Tracks Under
the Conditions Specified in Paragraph Q-10
<TABLE>
<CAPTION>
Class Average of Crossing and Adjacent Spans - Feet
of
Pole 100 125 150 175 200
Heavy Loading District
----------------------
<S> <C> <C> <C> <C> <C>
1 62 48 39 33 28
2 48 38 31 26 23
3 38 29 24 20 18
4 29 23 19 16 9
5 22 17 9 8 7
6 16 9 8 7 6
7 8 7 6 5 4
</TABLE>
<TABLE>
<CAPTION>
Class Average of Crossing and Adjacent Spans - Feet
of
Pole 100 125 150 175 200
Medium Loading District
-----------------------
<S> <C> <C> <C> <C> <C>
1 -- 90 76 63 54
2 -- 74 59 50 42
3 75 56 45 39 33
4 55 42 35 29 25
5 40 32 26 22 19
6 20 20 20 17 9
7 10 10 10 8 7
</TABLE>
<PAGE>
-53-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - --------------------------------------------------------------------------------
Appendix E (Continued)
<TABLE>
<CAPTION>
Class Average of Crossing and Adjacent Spans - Feet
of
Pole 100 125 150 175 200
Light Loading District
-----------------------
<S> <C> <C> <C> <C> <C>
1 -- -- -- 81 68
2 -- -- 75 61 52
3 -- 70 55 46 39
4 65 50 40 34 30
5 45 35 29 24 21
6 31 25 20 17 15
7 10 10 10 10 10
</TABLE>
<PAGE>
-54-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix F
Recommended Maximum Number of Wires Which can be
Supported by Poles of Various Classes Without Head Guys
<TABLE>
<CAPTION>
Ultimate Class of Pole
Wire Diameter Strength
Gage & Material (Inches) (Pounds) 1 2 3 4 5 6 7
Heavy Loading District
----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 AWG Copper 0.102 530 11 9 7 6 4 3 2
9 AWG Copper 0.114 660 8 7 6 4 3 3 2
8 AWG Copper 0.128 826 7 5 4 4 3 2 1
8 BWG Copper 0.165 1,325 4 3 3 2 2 1 1
10 BWG Steel 0.134 1,200 4 4 3 2 2 1 1
8 BWG Steel 0.165 1,710 3 2 2 2 1 1 0
</TABLE>
<TABLE>
<CAPTION>
Ultimate Class of Pole
Wire Diameter Strength
Gage & Material (Inches) (Pounds) 1 2 3 4 5 6 7
Medium Loading District
-----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 AWG Copper 0.102 530 16 13 11 8 6 5 4
9 AWG Copper 0.114 660 13 11 9 6 5 4 3
8 AWG copper 0.128 826 10 8 7 5 4 3 2
8 BWG Copper 0.165 1,325 5 5 4 3 3 2 1
10 BWG Steel 0.134 1,200 7 6 5 4 4 2 1
8 BWG Steel 0.165 1,700 5 4 3 2 2 2 1
</TABLE>
Where wires of other sizes or having other ultimate strengths, as in the
case of various grades of steel, are used, the number of wires can be determined
by selecting the wire in the table which has the nearest to the same ultimate
strength as the wire under consideration.
<PAGE>
-55-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - --------------------------------------------------------------------------------
Appendix F (Continued)
<TABLE>
<CAPTION>
Ultimate Class of Pole
Wire Diameter Strength
Gage & Material (Inches) (Pounds) 1 2 3 4 5 6 7
Light Loading District
----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 AWG Copper 0.102 530 24 21 16 13 10 8 6
9 AWG Copper 0.114 660 20 16 13 10 8 7 5
8 AWG Copper 0.128 826 16 13 10 8 6 5 4
8 BWG Copper 0.165 1,325 10 8 6 5 4 3 2
10 BWG Steel 0.134 1,200 10 8 7 5 4 3 2
8 BWG Steel 0.165 1,710 7 6 5 4 3 2 2
</TABLE>
Where wires of other sizes or having other ultimate strengths, as in the
case of various grades of steel, are used, the number of wires can be determined
by selecting the wire in the table which has the nearest to the same ultimate
strength as the wire under consideration.
<PAGE>
-56-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix G
Recommended Ground Line Circumference of Poles of Various Classes
and Species which have Deteriorated to
Two-Thirds their Strength when New
Northern White Cedar and Other Species of Poles Having A Fiber Strength of
3,600 Pounds per Square Inch. (See Group No. 1 in Appendix H)
<TABLE>
<CAPTION>
Length Class of Pole
of Pole 1 2 3 4 5 6 7
Feet Ground Line Circumference - Inches
<S> <C> <C> <C> <C> <C> <C> <C>
20 34-1/2 32-1/2 30-1/2 28-1/2 26-1/2 24-1/2 22-1/2
25 38 35-1/2 33-1/2 30-1/2 29 27 25
30 41-1/2 38-1/2 36 33-1/2 31 28-1/2 27
35 44 41 38-1/2 35-1/2 33 30 28
40 46-1/2 43-1/2 40-1/2 37-1/2 35 32-1/2 ------
45 48-1/2 45-1/2 42-1/2 39-1/2 36-1/2 ------ ------
50 50-1/2 47-1/2 44-1/2 41 38 ------ ------
55 52-1/2 49 46 42-1/2 39-1/2 ------ ------
60 54 51 47-1/2 44 40-1/2 ------- ------
</TABLE>
<PAGE>
-57-
Association of American Railroads
Communications Manual
1989 Part 1-B-1
- - -------------------------------------------------------------------------------
Appendix G (Continued)
Western Red Cedar and Other Species of Poles Having a Fiber Strength of
5,600 Pounds per Square Inch. (See Group No. 2 in Appendix H)
<TABLE>
<CAPTION>
Length Class of Pole
of Pole 1 2 3 4 5 6 7
Feet Ground Line Circumference - Inches
<S> <C> <C> <C> <C> <C> <C> <C>
20 30 28 26-1/2 24-1/2 22-1/2 21 19-1/2
25 32-1/2 31 29 26-1/2 25 23 21-1/2
30 35-1/2 33-1/2 31 28-1/2 26-1/2 25 23-1/2
35 37-1/2 35-1/2 33-1/2 30-1/2 28-1/2 26-1/2 24-1/2
40 40 37-1/2 35 32-1/2 30-1/2 27-1/2 ------
45 42 39 37 34 31-1/2 ------ ------
50 43-1/2 41 38-1/2 35 32-1/2 ------ ------
55 45-1/2 42-1/2 39-1/2 37 34 ------ ------
60 46-1/2 43-1/2 41 38 ------- ------- ------
65 48-1/2 45 42 39-1/2 ------- ------- ------
70 50 46-1/2 43-1/2 40-1/2 ------- ------- ------
75 50-1/2 47-1/2 44-1/2 41-1/2 ------- ------- ------
80 52 48-1/2 45-1/2 42 ------- ------- ------
85 53 49-1/2 46-1/2 ------- ------- ------- ------
90 56 52-1/2 47-1/2 ------- ------- ------- ------
</TABLE>
<PAGE>
-58-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix G (Continued)
Recommended Ground Line Circumference of Poles of Various Classes
and Species which have Deteriorated to
Two-Thirds their Strength when New
Chestnut Poles - Fiber Strength, 6,000 Pounds per Square Inch
<TABLE>
<CAPTION>
Length Class of Pole
of Pole 1 2 3 4 5 6 7
Feet Ground Line Circumference - Inches
<S> <C> <C> <C> <C> <C> <C> <C>
20 29 27-1/2 25-1/2 24 22 20-1/2 19-1/2
25 32-1/2 30-1/2 28-1/2 26 24-1/2 22-1/2 21
30 34-1/2 32-1/2 30-1/2 28-1/2 26 24 22-1/2
35 37 34-1/2 32-1/2 30-1/2 28 25-1/2 24-1/2
40 39 36-1/2 34-1/2 31-1/2 29-1/2 27 25-1/2
45 41 38-1/2 36 33-1/2 31 28-1/2 26-1/2
50 42-1/2 40 37-1/2 34-1/2 32-1/2 30 27-1/2
55 44 41-1/2 38-1/2 36 33-1/2 30-1/2 ------
60 45-1/2 43 40 37 ------- ------- ------
65 47 44 41 38-1/2 ------- ------- ------
70 48 45-1/2 ------- ------- ------- ------- ------
</TABLE>
<PAGE>
-59-
Association of American Railroads
Communications Manual
1989 Part 1-B-1
- - -------------------------------------------------------------------------------
Appendix G (Continued)
Lodgepole Pine - Fiber Strength of 6,600 Pounds per Square Inch
<TABLE>
<CAPTION>
Length Class of Pole
of Pole 1 2 3 4 5 6 7
Feet Ground Line Circumference - Inches
<S> <C> <C> <C> <C> <C> <C> <C>
20 28-1/2 26-1/2 25 23 21-1/2 20 19
25 31-1/2 29-1/2 27-1/2 25 24 21-1/2 20-1/2
30 33-1/2 31-1/2 29-1/2 27-1/2 25-1/2 23-1/2 22
35 35-1/2 33-1/2 31-1/2 29-1/2 27 24-1/2 23-1/2
40 38 35-1/2 33-1/2 30-1/2 28-1/2 26-1/2 24-1/2
45 39-1/2 37 35 32-1/2 30 27-1/2 25-1/2
50 41-1/2 38-1/2 36-1/2 33-1/2 31-1/2 29 27
55 42-1/2 40 37-1/2 35 32-1/2 30 ------
60 44 41-1/2 39 36 33 30-1/2 ------
65 45-1/2 42-1/2 40 37 34-1/2 ------- ------
70 47 43-1/2 41 38 35-1/2 ------- ------
75 48 45 42 39 ------- ------- ------
80 49 46 43 40 ------- ------- ------
85 50-1/2 47 44 ------- ------- ------- ------
90 53 49-1/2 45 ------- ------- ------- ------
</TABLE>
<PAGE>
-60-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - --------------------------------------------------------------------------------
Appendix G (Continued)
Recommended Ground Line Circumference of Poles of Various Classes
and Species which have Deteriorated to
Two-Thirds their Strength when New
Southern Pine, Douglas Fir and Other Species of Poles Having a Fiber Strength
of 7,400 Pounds per Square Inch. (See Group No. 5 in Appendix H)
<TABLE>
<CAPTION>
Length Class of Pole
of Pole 1 2 3 4 5 6 7
Feet Ground Line Circumference - Inches
<S> <C> <C> <C> <C> <C> <C> <C>
20 27-1/2 25-1/2 24 22-1/2 20-1/2 19 18
25 30 28 26-1/2 24 23 21 19-1/2
30 32-1/2 30-1/2 28-1/2 26-1/2 24-1/2 22-1/2 21
35 34-1/2 32 30-1/2 28-1/2 26 24-1/2 22-1/2
40 36-1/2 34 32 29-1/2 27-1/2 25-1/2 24
45 38-1/2 35-1/2 33-1/2 31 29 26-1/2 25
50 40 37 35 32-1/2 30 28 26
55 41-1/2 39 36 33-1/2 31 29 ------
60 42-1/2 40 37-1/2 35 32 29-1/2 ------
65 44 41 38-1/2 35-1/2 ------ ------- ------
70 45 42 39-1/2 36-1/2 ------ ------- ------
75 46-1/2 43 40-1/2 ------ ------- ------- ------
80 47 44 41-1/2 ------ ------- ------- ------
85 48 45 ------ ------- ------- ------- ------
90 51 48 ------ ------- ------- ------- ------
</TABLE>
<PAGE>
-61-
Association of American Railroads
Communication Manual
1989 Part 1-B-1
- - --------------------------------------------------------------------------------
Appendix H
Recommended Ultimate Fiber Stress (Modulus of Rupture)
of Various Species of Wood Poles
<TABLE>
<CAPTION>
Group No. 1 (Pounds per Square Inch)
-----------
<S> <C>
*Northern White Cedar 3,600
Eastern White Cedar 3,600
Red Wood 3,600
Group No. 2
-----------
*Western Red Cedar 5,600
Southern Red Cedar 5,600
Washington Cedar 5,600
Idaho Cedar 5,600
Port Oxford Cedar 5,600
Cypress 5,000
Group No. 3
-----------
*Chestnut 6,000
Group No. 4
-----------
*Lodgepole Pine 6,600
Group No. 5
-----------
*Douglas Fir 7,400
*Southern Pine, creosoted 7,400
</TABLE>
*American National Standards Institute (ANSI)
Standard 05.1-1987 (Specifications & Dimensions
of Wood Poles
<PAGE>
-62-
Association of American Railroads
Communication Manual
Part 1-B-1 1989
- - -------------------------------------------------------------------------------
Appendix J
Recommended Dimensions for New Poles of Various Species as Specified
in ANSI Specifications 05.1 to 05.6, inclusive,
of the American National Standards Institute
Northern White Cedar
Fiber Strength, 3,600 Pounds per Square Inch.
From ANSI 05.1-1979
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class of Pole 1 2 3 4 5 6 7
Minimum Top
Circumference (Inches) 27 25 23 21 19 17 15
</TABLE>
<TABLE>
<CAPTION>
Length Ground
of Line Distance Minimum Circumference at Six Feet from Butt
Pole from Butt (inches)
Feet Feet
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16 3-l/2 ---- ---- ---- ---- 26.0 24.0 22.0
18 3-1/2 ---- ---- 32.5 30.0 28.0 25.5 23.5
20 4 39.5 37.0 34.0 31.5 29.0 27.0 25.0
22 4 41.0 38.5 36.0 33.0 30.5 28.0 26.0
25 5 43.5 41.0 38.0 35.5 32.5 30.0 28.0
30 5-1/2 47.5 44.5 41.5 38.5 35.5 33.0 30.5
35 6 50.5 47.5 44.0 41.0 38.0 35.0 32.5
40 6 53.5 50.0 46.5 43.5 40.0 37.0 ----
45 6-1/2 56.0 52.5 49.0 45.5 42.0 ---- ----
50 7 58.5 55.0 51.5 47.5 44.0 ---- ----
55 7-1/2 61.0 57.5 53.5 49.5 46.0 ---- ----
60 8 63.5 59.5 55.5 51.5 ---- ---- ----
</TABLE>
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- - --------------------------------------------------------------------------------
Appendix J (Continued)
Western Red Cedar
Fiber Strength, 5,600 Pounds per Square Inch.
From ANSI 05.1-1979
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Class of Pole 1 2 3 4 5 6 7
Minimum Top
Circumference (Inches) 27 25 23 21 19 17 15
</TABLE>
<TABLE>
<CAPTION>
Length Ground
of Line Distance Minimum Circumference at Six Feet from Butt
Pole from Butt (Inches)
Feet Feet
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16 3-1/2 ---- ---- ---- ---- 23.0 21.5 19.5
18 3-1/2 ---- ---- 28.5 26.5 24.5 22.5 21.0
20 4 34.5 32.0 30.0 28.0 25.5 23.5 22.0
22 4 36.0 33.5 31.5 29.0 27.0 25.0 23.0
25 5 38.0 35.5 33.0 30.5 28.5 26.0 24.5
30 5-1/2 41.0 38.5 35.5 33.0 30.5 28.5 26.5
35 6 43.5 41.0 38.0 35.5 32.5 30.5 28.0
40 6 46.0 43.5 40.5 37.5 34.5 32.0 ----
45 6-1/2 48.5 45.5 42.5 39.5 36.5 ---- ----
50 7 50.5 47.5 44.5 41.0 38.0 ---- ----
55 7-1/2 52.5 49.5 46.0 42.5 39.5 ---- ----
60 8 54.5 51.0 47.5 44.0 ---- ---- ----
65 8-1/2 56.0 52.5 49.0 45.5 ---- ---- ----
70 9 57.5 54.0 50.5 47.0 ---- ---- ----
75 9-1/2 59.5 55.5 52.0 48.5 ---- ---- ----
80 10 61.0 57.0 53.5 49.5 ---- ---- ----
85 10-1/2 62.5 58.5 54.5 ---- ---- ---- ----
90 11 63.5 60.0 56.0 ---- ---- ---- ----
</TABLE>
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Appendix J (Continued)
Recommended Dimensions for New Poles of Various Species as
Specified in ANSI Specifications 05.1 to 05.6. inclusive,
of the American National Standards Institute
Chestnut
Fiber Strength, 6,000 Pounds per Square Inch.
From ANSI 05.1-1979
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Class of Pole 1 2 3 4 5 6 7
Minimum Top
Circumference (inches) 27 25 23 21 19 17 15
</TABLE>
<TABLE>
<CAPTION>
Length Ground
of Line Distance Minimum Circumference at Six Feet from Butt
Pole from Butt (inches)
Feet Feet
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16 3-1/2 ----- ----- ----- ----- 22.5 21.0 19.5
18 3-1/2 ----- ----- 28.0 26 24.0 22.0 20.5
20 4 33.5 31.5 29.5 27.0 25.0 23.0 21.5
22 4 35.0 33.0 30.5 28.5 26.5 24.5 22.5
25 5 37.0 34.5 32.5 30.0 28.0 25.5 24.0
30 5-1/2 40.0 37.5 35.0 32.5 30.0 28.0 26.0
35 6 42.5 40.0 37.5 34.5 32.0 30.0 27.5
40 6 45.0 42.5 39.5 36.5 34.0 31.5 29.5
45 6-1/2 47.5 44.5 41.5 38.5 36.0 33.0 31.0
50 7 49.5 46.5 43.5 40.0 37.5 34.5 32.0
55 7-1/2 51.5 48.5 45.0 42.0 39.0 36.0 -----
60 8 53.5 50.0 46.5 43.5 ----- ----- -----
65 8-1/2 55.0 51.5 48.0 45.0 ----- ----- -----
70 9 56.5 53.0 ----- ----- ----- ----- -----
</TABLE>
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Appendix J (Continued)
Lodgepole Pine
Fiber Strength, 6,600 Pounds per Square Inch
From ANSI 05.1-1979
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Class of Pole 1 2 3 4 5 6 7
Minimum Top
Circumference (Inches) 27 25 23 21 19 17 15
</TABLE>
<TABLE>
<CAPTION>
Length Ground
of Line Distance Minimum Circumference at Six Feet from Butt
Pole from Butt (inches)
Feet Feet
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16 3-1/2 ----- ----- ----- ----- 22.0 20.5 19.0
18 3-1/2 ----- ----- 27.5 25.5 23.5 21.5 20.0
20 4 32.5 30.5 28.5 26.5 24.5 22.5 21.0
22 4 34.0 32.0 30.0 27.5 25.5 23.5 22.0
25 5 36.0 33.5 31.0 29.0 27.0 25.0 23.0
30 5-1/2 39.0 36.5 34.0 31.5 29.0 27.0 25.0
35 6 41.5 38.5 36.0 33.5 31.0 28.5 26.5
40 6 44.0 41.0 38.0 35.5 33.0 30.5 28.0
45 6-1/2 46.0 43.0 40.0 . 37.0 34.5 32.0 29.5
50 7 48.0 45.0 42.0 39.0 36.0 33.5 31.0
55 7-1/2 49.5 46.5 43.5 40.5 37.5 34.5 -----
60 8 51.5 48.0 45.0 42.0 38.5 ----- -----
65 8-1/2 53.0 49.5 46.0 43.0 ----- ----- -----
70 9 54.5 51.0 47.5 ----- ----- ----- -----
75 9-1/2 56.0 52.5 ----- ----- ----- ----- -----
</TABLE>
<PAGE>
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Appendix J (Continued)
Recommended Dimensions for New Poles of Various Species as Specified
in ANSI Specifications 05.1 to 05.6, inclusive,
of the American National Standards Institute
Southern Pine (Creosoted) and Douglas Fir (Creosoted)
Fiber Strength, 7,400 Pounds per Square inch.
From ANSI 05.1-1979
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Class of Pole 1 2 3 4 5 6 7
Minimum Top
Circumference (inches) 27 25 23 21 19 17 15
</TABLE>
<TABLE>
<CAPTION>
Length Ground
of Line Distance Minimum Circumference at Six Feet from Butt
Pole from Butt (inches)
Feet Feet
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16 3-1/2 ----- ----- ------ ----- 21.5 19.5 18.0
18 3-1/2 ----- ----- 26.5 24.5 22.5 21.0 19.0
20 4 31.5 29.5 27.5 25.5 23.5 22.0 20.0
22 4 33.0 31.0 29.0 26.5 24.5 23.0 21.0
25 5 34.5 32.5 30.0 28.0 26.0 24.0 22.0
30 5-1/2 37.5 35.0 32.5 30.0 28.0 26.0 24.0
35 6 40.0 37.5 35.0 32.0 30.0 27.5 25.5
40 6 42.0 39.5 37.0 34.0 31.5 29.0 27.0
45 6-1/2 44.0 41.5 38.5 36.0 33.0 30.5 28.5
50 7 46.0 43.0 40.0 37.5 34.5 32.0 29.5
55 7-1/2 47.5 44.5 41.5 39.0 36.0 33.5 -----
60 8 49.5 46.0 43.0 40.0 37.0 34.5 -----
65 8-1/2 51.0 47.5 44.5 41.5 38.5 ----- -----
70 9 52.5 49.0 46.0 42.5 39.5 ----- -----
75 9-1/2 54.0 50.5 47.0 44.0 ----- ----- -----
80 10 55.0 51.5 48.5 45.0 ----- ----- -----
85 10-1/2 56.5 53.0 49.5 ----- ----- ----- -----
90 11 57.5 54.0 50.5 ----- ----- ----- -----
</TABLE>
<PAGE>
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Appendix K
Here is an example of computation of clearance between power wires and
communication wires where an open-wire communication line crosses over the
tracks of a railroad and under an open-wire power line in the same span.
Assume the case in which the power line carries a single-phase, two-wire circuit
of 6,900 volts between wires, the wires attached to pin-type insulators on wood
crossarms and that each wire consists of two strands of solid copper and one
strand of copper-covered steel, the overall diameter of which is 0.230 in.
Assume also that the crossing is located in the heavy loading district and that
the length of the power line span concerned is 255 ft. The method of determining
the required clearance between the lowest power wire and the highest
communication wire consists of the following steps:
1. Referring to Table E-2; the power line takes the classification of open
supply wires, 750 to 8,700 volts and the basic clearance is, therefore,
4 ft.
2. Referring to Paragraph E-6(a); since the crossing is located in the
heavy loading district, and the power line span exceeds 175 ft. in
length, an increase in clearance is required. Referring to the second
table in Subparagraph (1) of Paragraph E-6(a), the wire used in this
example takes the classification of a "small conductor" since it is
stranded, is other than all-copper and has an overall diameter less than
0.275 in. Referring now to the first table in this same subparagraph, it
will be seen that the amount of clearance increase for a "small
conductor" in the heavy loading district is 0.30 ft. for each 10 ft. by
which the span length exceeds 175 ft. The span length of 255 ft. exceeds
175 ft. by 80 ft., so that the clearance increase is 8 multiplied by
0.30 ft., or 2.4 ft. The total clearance is, therefore, the sum of 4 and
2.4, or 6.4 ft.
3. This clearance is applicable if the communication line crosses under
the power line at or near the middle of the power line span where the
sags of the power wires will be greatest when they are loaded with ice.
Since the increased sag of the power wires caused by ice loading is less
near the power poles than at mid-span, the clearance need not be as
great as 6.4 ft. if the point where the communication line crosses under
the power line (crossing point) is other than at the middle of the power
line span. To take account of this permissible decrease, another step is
necessary.
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4. Referring to Table E-4; assume that the distance from the nearest
power pole to the center line of the communication line is 51 ft. or
20% of the length of the power line span. The corresponding reduction
factor given in the table for a basic clearance of 4 ft. is 0.71.
Multiplying this by 6.4 gives a net clearance of 4.5 ft. which is the
clearance that should be provided under the conditions assumed. If
this clearance had been less than 4 ft., the basic clearance of 4 ft.
should have been provided in accordance with the requirements of
Subparagraph (2) of Paragraph E-6 (a).
5. The above assumes that the supply wires cross over the communication
wires at a distance of more than 6 ft. horizontally from the nearest
communication line pole. In accordance with Note (e) of Table E-2, if
this horizontal distance is less than 6 ft., the basic clearance used
in the above computations should be 6 ft. and the clearance under the
conditions assumed above would be 8.4 ft. at mid-span or 6.6 ft. at
the 20% point.
6. The above takes care of the clearance increase required by Paragraph
E-6 (a). The next step is to determine the further increase required by
the voltage of the power circuit as given in Paragraph E-6 (b). In the
case assumed, since the voltage is less than 50,000 volts, no increase
is required and the clearance as determined in Step (d) or (e) above
would meet the combined requirements of Paragraphs E-6 (a) and E-6(b).
Had the voltage been 69,000 instead of 6,900 volts, the basic clearance
from Table E-2 would have been 6 ft., the clearance due to span length
would have been that determined in Step (e) above to which would be
added 1/2 in. for each 1,000 volts that the voltage exceeds 50,000
volts. This increase would amount to 9-1/2 in., or 0.8 ft., and the
total clearance would have been 9.2 ft. at mid-span, or 7.4 ft. at the
20% point.
7. The final factor which enters into the determination of the clearance
is the method of support of the power conductors as given in Paragraph
E-6(c). The object of this clearance increase is to insure that a total
clearance is provided such that at least the basic clearance called for
in Table E-2 will be maintained in the event that the power conductor
is broken in the span adjacent to the crossing in those situations
where the conductor is more or less rigidly supported at one crossing
structure and at the other crossing structure is supported by
suspension or other type insulators which are free to swing and thereby
permit a large increase in the sag of the power wire in the crossing
span. Where the power conductor is supported by pin-type insulators at
both crossing structures, as assumed
<PAGE>
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in the example in this appendix, this effect is not present and no
increase in clearance is required for this item. The same result would
have obtained had the power conductor been supported by suspension-type
insulators at both crossing structures. This effect is important only
where the method of supporting the power conductor is such as not to
permit the same freedom of movement of the conductor at one crossing
structure as at the other. The determination of the increase in sag
which would result from such dissimilar supporting arrangements is
complicated and since it is a type of construction which will rarely be
encountered where this specification is involved, it will generally be
found preferable to obtain the information from the engineers of the
company owning the power line rather than attempt to compute it.
<PAGE>
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Appendix L
Recommended Typical Communication Line Crossing Data Sheet
A data sheet of the type illustrated below shall be filled out by the party
planning to erect wires across the railroad and forwarded to the Superintendent
of Communications or other designated officer, together with the plan and other
pertinent information, as a part of the notice required by Paragraph C-1.
Name of party desiring crossing...............................................
Location of proposed crossing.................................................
1. Poles - Kind of timber - Treated or untreated.............................
2. Poles - Class and length..................................................
3. Poles - Depth of setting..................................................
4. Poles - Poles - Setting - Kind of earth, i.e., rock, firm
earth or swampy ground....................................................
5. Guys, Side - Number, kind and size........................................
6. Guys, Side - Nominal breaking strength....................................
7. Guys, Head - Number, kind and size........................................
8. Guys, Head - Nominal breaking strength....................................
9. Guy Clamps - Kind and size................................................
10. Guy Clamps - Number at pole end...........................................
11. Guy Clamps - Number at guy rod end........................................
12. Guy Rods - Kind and size..................................................
13. Anchors - Kind and size...................................................
14. Anchors - Depth of setting................................................
15. Crossarms - Number, immediate construction................................
16. Crossarms - Number, future construction...................................
17. Crossarms - Material......................................................
18. Crossarms - Size..........................................................
19. Crossarms - Number of pins per arm........................................
20. Pins - Material...........................................................
21. Pins - Type...............................................................
22. Pins - Size...............................................................
23. Pins - If metal, state if galvanized......................................
24. Insulators - Material.....................................................
25. Insulators - Type.........................................................
26. Wires - Material and number...............................................
27. Wires - Size and gage.....................................................
28. Wires, supply, involved in crossing - Voltage.............................
29. Suspension Strand - Kind and size.........................................
30. Suspension Strand - Nominal breaking strength.............................
31. Suspension Strand Attachment - Kind and size of through
bolt......................................................................
32. Suspension Strand Attachment - Type of suspension clamp...................
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33. Suspension Strand Attachment - Type of safety strap.........................
34. Suspension Strand Attachment - Kind and size of safety
strap bolt..................................................................
35. Suspension Strand Attachment - Type of reinforcing links....................
36. Suspension Strand Attachment - Kind and size of reinforcing
link bolts..................................................................
37. Cable, if any, diameter, inches.............................................
38. Cable, if any, weight, pounds, per foot.....................................
39. Cable Rings - Material......................................................
40. Cable Rings - Type..........................................................
41. Cable Rings - Spacing.......................................................
42. Cable Lashing Wires, Size...................................................
<PAGE>
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- - --------------------------------------------------------------------------------
Figure 1B1-1: Typical Drawing for Communication Lines Crossing over Railroads
[COMMUNICATION LINES CROSSING OVER RAILROADS DIAGRAM]
<PAGE>
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Figure 1B1-2: Guy Lead and Height and their Ratio
[GUY LEAD AND HEIGHT DIAGRAM]
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Figure 1B1-3: Typical Arrangement of Underground Crossing
[ARRANGEMENT OF UNDERGROUND CROSSING DIAGRAM]
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Figure 1B1-4: Typical Drawing for Communication Line Crossing Under Bridges
[COMMUNICATION LINE CROSSING UNDER BRIDGES DIAGRAM]
<PAGE>
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Figure 1B1-5: Typical Arrangement of Conduits for Underground Crossing
[CONDUITS FOR UNDERGROUND CROSSING DIAGRAM]
<PAGE>
EXHIBIT G
SPECIFICATION FOR THE ATTACHMENT
OF CABLES TO RAILROAD BRIDGES
I. AVOIDANCE OF ATTACHMENTS
The cable system preferably should be so graded that it will be unnecessary
to make attachments to railroad bridge structures.
II. ATTACHMENTS TO FIXED BRIDGES
Unless separate written approval of the Railroad's Chief Engineer has been
obtained, cable will be encased in steel conduit, and attachments to steel
bridges shall be made with devices that do not require the drilling or
cutting of the bridge structure or the removal of rivets. Attachments to
each individual bridge shall be in accordance with drawings prepared by or
for Utility and approved by the Railroad. Typical attachment drawings may
be prepared for those types of bridges whose design and construction lend
themselves to repetition of attachment method and detail. However, the
Railroad shall make final determination as to the applicability of any
typical attachment drawings to an individual bridge.
III. ATTACHMENTS TO MOVABLE BRIDGES
All attachments to movable bridges require separate written approval of the
Railroad's Chief Engineer and will be made in accordance with requirements
prescribed for that particular bridge by the Railroad.
IV. TEMPORARY RELOCATION OF ATTACHMENTS
Temporary relocation of cable systems attached to bridges will be made
promptly and without cost to Railroad when necessary for Railroad to
perform bridge maintenance. Notification will not be less than 30 days
prior to date that relocation must be complete, except in case of
emergency. The attachment requirements set forth by the Railroad will
locate the attachment, to the extent possible, such that the occurrence of
such temporary relocations will be minimized.
V. NEW BRIDGES
In the event that new railroad bridges are to be constructed along the
right-of-way occupied by Utility and Utility desires to locate its cable
facility on such bridges, provision for Utility cable will be incorporated
into the bridge design. Costs of design, construction, and materials
attributable solely to Utility's use of the structure, as well as costs of
any temporary relocation of Utility's facilities during bridge
construction, will be paid by Utility.
<PAGE>
EXHIBIT H
EMERGENCY AND DISASTER RESPONSES
In the event of an emergency or disaster which results in actual damage to
Facilities or System or to Railroad's facilities or operations, or creates a
situation wherein it is reasonably possible that such damage may occur,
immediate contact shall be established between Railroad's Operations Center, and
applicable division personnel, and Utility's Operation Center and applicable
Area Representatives. Detailed procedures effectuating the above notification
shall be mutually established.
Railroad and Utility will fully cooperate with each other and coordinate their
efforts to jointly and severally restore operation of their respective rail and
communication systems, with each being solely responsible for all costs incurred
in repairing its own facilities. In the event such cooperation results in one
party incurring costs that are for the benefit of the other (e.g., Railroad
providing railroad equipment to Utility), such costs shall be subsequently fully
reimbursed.
Utility will maintain emergency material and repair kits at various points
throughout its System.
Railroad shall have the right to establish priorities for making repairs which
impact upon rail operations, but shall permit Utility to move forward in making
repairs to Utility's System or Facilities when to do so would not impair rail
operations.
<PAGE>
EXHIBIT I
CSX
TRANSPORTATION
Specifications for crossings of wires or cables of Telegraph, Telephone, Signal,
and other Circuits of Similar character over CSXT Rights of Way,
Tracks, or Lines of wires of the same classes.
1. PURPOSE.
The purpose of these specifications is to describe the general requirements
of construction and maintenance of communication lines crossing the tracks and
associated parallel communication lines of railroads. They are based on National
Electrical Safety Code and A.A.R. communications section. Specification 1 3 1.
For further details, see complete specifications.
Wires covered by these specifications shall not carry more than 400 volts
to ground.
2. DRAWINGS.
Complete drawings shall be furnished in duplicate before construction is
commenced. These drawings shall show the general plan of the right of way,
tracks and wires to be crossed and the construction proposed, including the
locations of the poles supporting the crossing span and the adjoining spans on
either side of the crossing span, the number, kind and size of wires, and the
proposed clearances of the existing tracks and wires.
3. LOCATION OF POLES.
Spans crossing railroad rights of way, preferably should be supported upon
poles placed outside of the right of way.
The crossing span shall, where practicable, not exceed 175 ft. in the heavy
loading district, 250 ft. in the medium loading district, and 350 ft. in the
light loading district. Where practicable, the adjacent spans shall not exceed
the length of the crossing by more than 50%. Wherever practicable, the poles
supporting the crossing span and the adjoining span on each side thereof shall
be in a straight line.
4. CLEARANCES.
General. The condition under which all clearances are specified are
60(degrees)F. and no wind. Clearances shall be measured between the nearest
parts of the objects concerned. The clearances required by this section shall
be maintained at not less than the specified values.
Side Clearance From Rails. Poles or towers supporting the crossing span
shall, where practicable, be so located as to provide a minimum horizontal
clearance of twelve (12) feet from the nearest track rail (except at sidings a
clearance of not less than eight (8) feet may be allowed) and a minimum
horizontal clearance of eight (8) feet between the nearest track rail and any
crossarm, guy, or other attachments. Where it is impracticable or undesirable to
provide these clearances, they may be reduced if the approval of CSXT is
obtained. Where necessary to provide safe operating conditions, which require
uninterrupted view along the tracks for signals, signs, etc., the parties shall
cooperate to provide greater clearances than those specified above.
Vertical Clearance Above Rails for Fixed Supports. The vertical clearance
between the lowest wire, guy, or cable and the top of rail shall not be less
than the Table below:
VERTICAL CLEARANCE ABOVE RAILS
<TABLE>
<CAPTION>
Vertical Clearance
in Feet
------------------
<S> <C>
For wires 27
For guys or cables
carried on suspension
strands 25
</TABLE>
Vertical Clearances Between Wires Not on the Same Supporting Structures.
The vertical clearances between conductors of the crossing span and
conductors of other lines shall be not less than the values shown in the
following Table.
<PAGE>
Minimum Vertical Clearance in Feet Between
Wires not on the same structure
(All voltages are between wires, except where otherwise stated or for
trolley contact wires where voltages are to ground.)
<TABLE>
<CAPTION>
Nature of Wires at High Level
Open supply of wires,
0-750 volts, supply Guys,
Communication cables, all voltages span wires,
Nature of wires, cables having effectively Open supply lightning
wires crossed and suspension grounded metal sheath wires and protection
over strand or suspension strand service drops wires
750 to 8,700 to
Line wires Service 8,700 50,000
and cables drops Volts Volts
<S> <C> <C> <C> <C> <C> <C>
Communication
wires, cables and
suspension strand 2 4 2 4 6 2
Guys and span wires,
lightning protection wires,
supply service drops of
0 to 750 volts 4 2 2 2 4 2
</TABLE>
LOADING ASSUMPTIONS
Three degrees of severity are recognized on the Railroad for the loading
due to weather conditions and are designated, respectively, as Heavy, Medium,
and Light Loading:
(a) Heavy Loading Territory: All lines north of Virginia-North Carolina
State Line.
(b) Medium Loading Territory: All lines south of Virginia-North Carolina
State Line and north of a parallel of latitude passing through
Charleston, S.C., Fairfax, S.C., Woodbury, Ga, and LaGrange, Ga.
(c) Light Loading Territory: All lines south of territory designated in
(b) above.
5. POLES
Material. Wood poles shall be of suitable and selected timber free from
observable defects that would decrease the strength of durability.
Sizes. Creosoted Southern Pine--Poles shall be of a size not less than the
class specified in Table for the corresponding number of wires carried. If guys
are omitted, poles must be of sufficient strength to meet the requirements
specified in paragraph Q-9 of A.A.R. Specification 131.
MINIMUM SIZES
<TABLE>
<CAPTION>
Over 40 wires 21 to 40 wires 11 to 20 wires 10 wires or less
<S> <C> <C> <C> <C>
Medium Loading Territory
Minimum top Cir. (in.) 21 (class 4) 19 (class 5) 17 (class 6) 15 (Class 7)
Light Loading Territory
Minimum Top Cir. (in.) 19 (class 5) 17 (class 6) 17 (class 6) 15 (Class 7)
</TABLE>
Gains. Gains shall not be cut to a depth of more than one-half inch.
Setting. Following Table specifies the minimum depth of setting for
unguyed poles in average soil and in rock.
MINIMUM DEPTH OF SETTING FOR UNGUYED POLES
<TABLE>
<CAPTION>
Length of Depth in feet in average soil for different classes of poles Depth in feet in
pole in Rock For all
feet Class 4 Class 5 and 6 Class 7 classes
<S> <C> <C> <C> <C>
16 -- 4 3 3/4 3
18 -- 4 1/4 4 3 1/4
20 4 1/2 4 1/4 4 3 1/4
22 4 3/4 4 1/2 4 1/4 3 1/2
25 5 1/4 4 3/4 4 1/2 3 3/4
27 5 1/2 5 4 3/4 4
30 5 3/4 5 1/4 5 4 1/4
35 6 5 1/2 5 1/4 4 1/2
40 6 1/4 5 3/4 5 1/2 4 3/4
45 6 1/2 6 5 3/4 5
50 6 3/4 6 1/4 6 5 1/4
55 7 6 1/2 -- 5 1/2
60 7 1/4 6 3/4 -- 5 3/4
</TABLE>
Where soil conditions are such that the above depths of setting will not
develop the strength of the pole, the pole shall be set to an additional depth
or other means used to properly secure the pole.
Spliced Poles. Spliced poles shall not be used to support the crossing
span.
<PAGE>
6. CROSSARMS AND BRACKETS.
Wood crossarms supporting the crossing span shall be of fir, treated yellow
pine or other suitable timber. They shall have a nominal cross-section on not
less than the value given in Table below.
DIMENSIONS OF WOOD CROSSARMS
<TABLE>
<CAPTION>
Number Nominal Length Nominal Cross-Section
of wires (Feet) (Inches) (Inches)
<S> <C> <C> <C>
2 1 4 1/2 2 5/16 by 3 5/16
4 3 4 1/2 2 5/16 by 3 5/16
6 6 0 2 3/4 by 3 3/4
10 8 6 2 3/4 by 3 3/4
10 10 0 3 by 4
12* 10 0 3 1/4 by 4 1/4
16** 10 0 3 1/4 by 4 1/4
</TABLE>
* Where crossarms are bored for 1/2 inch steel pine, 3 inch by 4 1/4 inch
crossarms may be used.
** Permitted in medium and light loading districts only.
Galvanized or painted iron or steel crossarms of strength equal to those of
the wood crossarms specified in above Table may be used.
Double crossarms shall be provided on crossing poles and shall be attached
to the pole by means of a 5/8 inch crossarm bolt. Double crossarms longer than
two-pin shall be equipped with double arming bolts, or spacing blocks and
crossarm bolts, at a point near each end of the crossarms. Each wire shall be
attached to each insulator of its pair upon the double arm.
Wood pole brackets may only be used at crossings over minor tracks and
shall be in duplicate so as to afford two points of support for each conductor.
7. HARDWARE.
All pole line hardware shall be galvanized.
8. PINS.
Insulator pins shall have strength sufficient to withstand the loads to
which they may be subjected. Steel or iron pins shall have a diameter of shank
not less than 1/2 inch. Wood pins shall be sound and straight grained with a
diameter of shank not less than 1 3/4 inches.
9. INSULATORS.
Each insulator shall be of such pattern, design and material that, when
mounted on its pin, it will withstand, without injury, and without being pulled
off the pin, the ultimate strength of the conductor which it supports.
10. CONDUCTORS.
Conductors shall be of material or combination of materials which will not
corrode excessively under the prevailing conditions.
Conductors of material other than those specified in Table below shall be
of such size and so erected as to have mechanical strength not less than that of
the sizes of copper conductors specified.
The minimum allowable sizes of conductors in a span crossing over a
railroad which does not in the same span also cross over supply conductors in
excess of 750 volts to ground, shall be as given in following Table.
MINIMUM WIRE SIZES
<TABLE>
<CAPTION>
Spans exceeding 125 feet up to
Conductor Spans 125 feet or less 150 feet (Note)
Gage Diameter Inches Gage Diameter Inches
<S> <C> <C> <C> <C>
Copper, Hard Drawn 10 AWG 0.102 9 AWG 0.114
Steel Galvanized:
In general 10 BWG 0.134 8 BWG 0.165
In rural districts
or arid regions 12 BWG 0.109 10 BWG 0.134
</TABLE>
NOTE:--If Spans in excess of 150 ft. are necessary, the size of conductors
specified above, or the sags of the conductors, shall be correspondingly
increased.
11. GUYS.
Poles supporting the crossing span shall be side guyed in both directions,
if practicable, and shall be head guyed away from the crossing span when the
construction of the crossing span places undue stress on crossing poles. Guys
shall be of galvanized steel wire or stranded steel cable.
<PAGE>
12. SUSPENSION STRAND.
Material. Suspension strands shall be of galvanized steel or other
material that will not corrode excessively under the prevailing conditions.
Size. For spans of 150 feet or less, the following Table gives the minimum
sizes of suspension strand to be used for supporting different sizes of aerial
cable.
MINIMUM SIZES OF SUSPENSION STRAND
<TABLE>
<CAPTION>
Weights of cable in Suspension Strand (Nominal Ultimate
pounds per foot Strength in Pounds)
<S> <C>
Less than 2.25 6.000
2.25 to 5 10.000
Exceeding 5 and less than 8.5 16.000
</TABLE>
13. INSPECTION.
The construction shall be subject to the inspection of the railroad company
and shall comply with the requirements of these specifications. Defective
material shall be rejected and replaced with acceptable material.
14. MAINTENANCE.
The crossing shall be maintained in safe condition. The poles, crossarms,
insulators, guys, wires, and other parts and materials used in the structure of
the crossing shall be periodically inspected, and all defects shall be promptly
repaired by the owner of the line. The guys and anchors shall be maintained so
that the guys are kept taut and serve the purpose for which they are intended.
The line wires shall be kept to the proper sag. Underbrush, grass, or other
inflammable material shall be kept removed by the crossing owner, from the poles
for a sufficient distance to reduce the fire hazard to the minimum.
<PAGE>
EXHIBIT J
CSX TRANSPORTATION - EB2 PUBLICATION SCHEDULE OF LABOR OVERHEAD RATES USED FOR
BILLING OUTSIDE PARTIES OTHER THAN GOVERNMENT AGENCIES AND RAILROADS
ITEM 1. SUMMARY OF LABOR SURCHARGES TO BE APPLIED TO DIRECT LABOR EFFECTIVE
1/1/97:
<TABLE>
<CAPTION>
NON-
DESCRIPTION MOW SIG M OF E TRANS GOB/SS CONTRACT
- - - ----------- ---- --- ------ ----- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Vacation and other 8.35% 6.42% 7.59% 10.60% 12.82% 5.74%
Holiday 3.97% 3.65% 3.87% 0.69% 3.46% 0.00%
RRUI 27.01% 26.48% 26.48% 24.76% 26.64% 18.46%
Suppl. Annuity Tax 1.86% 1.64% 1.74% 1.60% 1.66% 0.00%
Suppl. Sick Ins. 1.07% 0.88% 1.21% 0.00% 0.00% 0.00%
Health & Welfare 16.13% 15.81% 16.01% 15.99% 16.70% 7.44%
Small tools 2.00% 2.00% 0.00% 0.00% 0.00% 0.00%
Safety/Training 4.00% 4.00% 4.00% 3.00% 0.00% 0.00%
Supervision 67.10% 61.33% 32.23% 31.98% 19.32% 0.00%
Force Acct. Ins. 23.00% 23.00% 23.00% 23.00% 0.00% 0.00%
Funded Pension 0.00% 0.00% 0.00% 0.00% 0.00% 7.36%
Composite Rate 154.49% 145.21% 116.13% 111.62% 80.60% 39.00%
</TABLE>
* Other included sick leave, personal leave, jury duty, bereavement,
compassionate leave.
Note: The rates above do not include the surcharge of 24.6% for Signal Shop
Labor
<PAGE>
EXHIBIT K
ARBITRATION OR MEDIATION RESOLUTION PROCEDURES
A. In the event of any controversy, claim or dispute between Utility and
Railroad referred to arbitration or mediation pursuant to this Agreement
(hereinafter referred to as "Dispute"), the parties agree to use the procedure
herein.
B. The parties agree that the only circumstances in which a Dispute will
not be subject to the provisions of this Exhibit are: (i) where a party makes a
good faith determination that a breach of the terms of the Agreement by the
other party will cause irreparable damage to the complaining party unless such
breach is enjoined by a court of competent jurisdiction; or (ii) where one party
has been made a party to a judicial proceeding, and the other party is an
appropriate additional party to such proceeding. Breach of the Agreement will be
deemed to cause irreparable damage if it is incapable of adequate redress if not
promptly enjoined, so that a temporary or preliminary restraining order or other
immediate injunctive relief is the only adequate remedy. If one party files a
pleading seeking injunctive relief, and such pleading is challenged by the other
party, and the injunctive relief sought is not awarded in substantial part, the
party filing the pleading seeking immediate injunctive relief shall pay all the
costs, attorneys' fees and expenses of the party successfully challenging the
pleading.
1. Notice of Arbitration or Mediation. If the parties have not
succeeded in negotiating a resolution of a Dispute within thirty (30) business
days following the Trigger Notice (which period may be extended by mutual
agreement of the parties), arbitration or mediation shall be conducted as set
forth below. The Trigger Notice shall specify in reasonable detail the nature of
the Dispute and comply with the procedures set forth in Paragraph 2 or Paragraph
3.
2. Arbitration Procedures. Arbitration shall be conducted in
accordance with the then-current CPR Non-Administered Arbitration Rules (the
"Rules"). The provisions of the Agreement shall control if they conflict with
the Rules. Arbitration shall be before three (3) arbitrators. Each party shall
appoint one (1) arbitrator within fifteen (15) business days following the
commencement of the procedure by Trigger Notice above (which period may be
extended by mutual agreement). Within fifteen (15) business days following their
appointment, the two (2) arbitrators so selected shall appoint the third
arbitrator, who shall serve as Chairman of the arbitration panel. The Chairman
shall be an attorney at law admitted to practice in the United States and
experienced in arbitration. The arbitrators shall determine issues of
arbitrability in accordance with federal law, but may not limit, expand or
otherwise modify the terms of the Agreement. Arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the
award may be entered by any court having jurisdiction thereof. In addition, the
following shall apply with respect to any arbitration conducted pursuant to this
Appendix:
(a) Costs/Fees. If either party submits a matter to arbitration,
and provided that one of the parties prevails over the other, the
arbitrators may award such prevailing party an amount equal to its
reasonable attorneys' fees and expenses, experts' fees, and other
reasonable costs and expenses that it has incurred in connection with the
arbitration. Otherwise, each party shall be responsible for its own fees
and expenses.
(b) Remedies. Upon a showing of material breach of the Agreement,
the arbitrators are empowered to award actual or compensatory damages,
unless prohibited by applicable state law or the Agreement. The arbitrators
may not award consequential, punitive or multiple damages; the parties
expressly waiving any entitlement to such relief.
(c) Location of Arbitration. The place of the arbitration shall be
Jacksonville, Florida.
(d) Confidentiality. The parties, their representatives, the
arbitrators and any other participants in the arbitration shall treat all
aspects of the arbitration as confidential, including but not limited to
all documents, testimony, information or other things produced, inspected
or otherwise
1
<PAGE>
made available in connection with the arbitration. Neither the parties nor
the arbitrators may disclose the existence, content or results of the
arbitration, except as necessary to comply with applicable law or
regulatory requirements. Before making any such disclosure, the party
seeking disclosure shall give written notice to the other party, and shall
afford such party a reasonable opportunity to protect its interests. In no
event shall a disclosure necessary to comply with legal or regulatory
requirements be deemed to waive the confidential nature of the disclosed
information.
(e) Discovery. The arbitrators shall permit and facilitate such
discovery in accordance with Federal Rules of Evidence and Federal Rules of
Civil Procedure, as they shall determine is appropriate under the
circumstances, taking into account the needs of the parties, the relevance
of the requested discovery to the matter in controversy and the
desirability of making discovery expeditious and cost-effective. The
parties agree that the following information shall not be subject to
discovery in connection with the arbitration unless it is expressly
authorized by the arbitrators upon a showing of substantial need by the
party seeking discovery: (i) information relating to Railroad's agreements
with any customers; (ii) information relating to Utility's cost structure,
contribution or profits under third party usages allowed under the
Agreement.
3. Mediation Procedures. Mediation is a voluntary process in which a
neutral third party, who lacks authority to impose a solution, helps
participants reach their own agreement for resolving a dispute or transaction.
Utility and Railroad agree to act in good faith negotiation, with the jointly
appointed mediator, to reach an agreement, utilizing the following basic roles
of the mediator in the Dispute resolution:
- urging participants to agree to talk; - helping participants
understand the mediation process; - carrying messages between
parties; - helping participants agree upon an agenda; - setting
an agenda; - providing a suitable environment for negotiation; -
maintaining order; - helping participants understand the
problem(s); - defusing unrealistic expectations; - helping
participants develop their own proposals; - helping participants
negotiate; - persuading participants to accept a particular
solution.
(a) Mediation shall be held in Jacksonville, Florida.
(b) Each party shall be responsible for its own attorney
fees, and costs (including exhibits, witness fees, etc.), and shall each
pay one-half (1/2) of the Mediator's fee(s).
(c) The mediator shall be jointly selected as follows:
(1) Railroad shall designate five (5) members from the listed
panel of the U.S. District Court, Middle District of Florida as
a Potential Mediation Panel;
(2) Utility shall select one (1) of such Panel as the mediator;
(3) If the selected mediator does not accept the mediation
appointment, Utility shall designate an alternative, and
continue until a selected mediator accepts the mediation
appointment;
(4) If none of the Panel accepts the appointment, Utility shall
designate a new Potential Mediation Panel of five (5) from the
list in Paragraph 2.(b)(1), and Railroad shall select one (1)
of such Panel, as in Paragraphs (2) and (3).
(d) The form of the Agreement to Mediate shall be as follows:
2
<PAGE>
AGREEMENT TO MEDIATE
Railroad and Utility, through their respective counsel, stipulate
that:
1. The Dispute embodied in the Agreement stated is hereby submitted to
mediation.
2. The parties have selected _________________________ to be the
mediator in this case.
3. Parties agree to meet with the mediator at _________ on _________,
and continue to engage in the mediation process thereafter, if appropriate,
as agreed to by the parties.
4. The mediator shall be paid an hourly fee of $__________, with said
fee apportioned equally among the parties.
5. The mediation shall be private, unless the parties and the mediator
otherwise agree. No session shall be recorded, and there shall be no
stenographic record maintained.
6. Parties and counsel agree that the mediator's work product, case
file and any communication made in the course of the mediation (other than
the final signed Mediation Agreement) shall be confidential and not subject
to disclosure in any subsequent judicial, administrative or private
proceeding.
7. Parties and counsel agree that any information, writings or
disclosures made during the mediation process are governed by Rule 408 of
the Federal Rules of Evidence, and shall not be admissible in any
subsequent proceedings unless otherwise discoverable.
8. Parties and counsel agree to participate fully in the mediation
process and to do so in good faith.
9. The mediator shall not be liable to any party for any act or
omission in connection with the mediation conducted in this case.
10. If possible, officers of the parties with full authority to settle
the Dispute shall be present at the Mediation. Should officers of the
parties, for whatever reason, not be present, counsel for each party agrees
to attend the mediation and have full and immediate access to the person
authorized to settle during the entire course of the mediation.
11. An agreement shall be executed by the parties if the Dispute is
resolved.
12. The mediation shall commence at the offices of __________________,
on ____________________, at ____________________.
RAILROAD: By:___________________________ Date:___________________________
RAILROAD ATTORNEY:_______________________________________
UTILITY: By:___________________________ Date:___________________________
UTILITY ATTORNEY:________________________________________
Accepted by Mediator:____________________ Date:___________________________
4. Modification. These procedures may be modified by the parties hereto
without necessity of amending the Agreement.
3
<PAGE>
EXHIBIT L
AUTHORIZATION FOR FIBER OPTIC CABLE WORK
FOR __________________________________________________ ("UTILITY")
CSX TRANSPORTATION, INC.
EXPENDITURES BILLING - J686
6735 Southpoint Drive, S
Jacksonville, FL 32216-6177
ATTENTION: GAIL A. LYCETT
(904) 279-6667 - FAX
THIS NOTICE CONFIRMS UTILITY'S AUTHORIZATION FOR FIBER OPTIC CABLE MAINTENANCE
OR EMERGENCY REPAIRS ON CSXT RIGHT-OF-WAY.
CSXT COST COLLECTION NUMBER (OSP):______________________________________________
EFFECTIVE DATE:_________________________________________________________________
LOCATION (S): CITY_____________________________________________ STATE__________
MILEPOST (S):___________________________________________________________________
UTILITY'S PROJECT NUMBER:_______________________________________________________
WORK DESCRIPTION:_______________________________________________________________
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
BEGINNING/ENDING DATES: 1. START________________________________________
2. END ________________________________________
IF YOU HAVE ANY ADDITIONAL QUESTIONS, PLEASE CALL _________________________
Utility Representative's Phone Number)
APPROVED:
--------------------------------- ------------------------------
NAME TITLE
CC: L. L. GALBREATH - CSXT (904)245-1030FAX
<PAGE>
EXHIBIT M
MWI 1905-01
FIBER OPTIC INSTALLATION SOP
[CSX TRANSPORTATION] ISSUED: 6/30/98 INITIAL ISSUE
PAGE 1 OF 9
- - --------------------------------------------------------------------------------
PURPOSE: To provide a Standard Operating Procedure for all fiber
optic installations.
SAFETY: Observe all applicable Safety, and Operating Rules and
Regulations; and Safe Job Procedures. The CSXT Fiber Optic
Safety Program Requirements are included in this MWI.
LOCATION: All CSXT tracks.
ENVIRONMENTAL: Observe all applicable Federal, State and Local
MSDS: environmental rules and regulations.
I. DISCUSSION
There are three previously issued MWIs concerning Fiber Optic projects. This MWI
is intended to supplement and support those MWIs. The previous MWIs are:
- MWI 1902, Fiber Optic Maintenance Projects,
- MWI 1903, Protection and/or Relocation of Fiber Optic Cable for CSXT
Purposes or Installation of Side Tracks Serving CSXT Shippers, and
- MWI 1904, New Installation Projects for Fiber Optic Telecommunications.
II. PROCEDURE
The following procedure is the CSXT Standard Operating Procedure (SOP) for all
fiber optic installations on CSXT properties and will be included in all fiber
optic specifications for construction.
A. Quarterly Oversight Meetings:
The Director - Budget and Contracts will schedule these oversight
meetings once per quarter. Additional meetings may be scheduled, if
required by the volume of activity. The meetings will be attended by
representatives from all concerned Fiber Optic Companies (FOC) and CSXT
Management, Real Property and Engineering. The meetings will review the
scopes of work and schedules of all current and future projects, as well
as planning, pre-bid, pre-construction and construction requirements as
described below.
<PAGE>
MWI 1905-01
6/30/98
Page 2 of 9
B. Plan Review Meeting:
The Director - Budget and Contracts will schedule these Plan Review
meetings as necessary. The meeting will be attended by representatives
from the concerned FOC, CSXT Engineering and the CSXT engineering
consultant for the project. The meeting will review the pre-bid and
scheduling, pre-construction and construction requirements described
below.
C. Pre-Bid and Scheduling Meeting:
The FOC will schedule the Pre-Bid and Scheduling meeting. The meeting
will be attended by representatives from the concerned FOC, Contractors
and CSXT Engineering (and/or CSXT Consultant). This meeting will assign
the Point Of Contact (POC) for the FOC and for the CSXT, as well as
clarify the safety and manpower requirements.
1. Project Points of Contact
a) The POC will be assigned for the CSXT Subdivision on which the
project is located. There will be a single POC for the
Railroad and another designated by the FOC. These two
individual will be the contact points and decision makers for
the project. All calls, questions or problems will be handled
with the assigned POC. This will eliminate many unnecessary
calls.
b) The CSXT POC will be responsible for:
- All contacts within CSXT, including coordination of all
departments involved with the pre-construction and
construction portions of the project.
- All CSXT Transportation, Engineering, and Train Control
decisions during construction.
c) The CSXT POC and the FOC POC will coordinate all aspects of
construction.
2. Requirements for Safety and Manpower:
a) Safety Requirements include:
- Daily job briefing and updates as required.
- All workers on CSXT property must comply with CSXT Safety
Requirements including wear all required safety equipment
(see Safety Requirements, page 5).
- CSXT will train one FOC employee in safety. The FOC is
responsible for ensuring all FOC employees & contractors
on site are properly trained.
<PAGE>
MWI 1905-01
6/30/98
Page 3 of 9
b) Notification for Flagman and Signalman:
- Because of manpower demands and/or labor agreements, a
minimum of 6 weeks notice is preferred, for either
position. Less than six weeks notice may result in job
delays.
- Because of safety concerns and customer obligations, a 10
mile work limit per RR Subdivision is necessary.
3. Emergency Contact Procedures:
- All emergencies will be reported to both POCs.
- In event the POCs cannot be reached, the emergency
information will be reported the CSX Police operator at
1-800-232-0144. The POCs must be notified of existing
situation ASAP.
D. Pre-Construction Meeting:
The FOC will schedule the Pre-Construction meeting. FOC will provide two
(2) weeks written notice prior to Pre-Construction Meeting to CSXT POC,
CSXT Director - Budget and Contracts, CSX Real Property, & CSXT Train
Control (Jacksonville). The meeting will be attended by both POCs,
representatives from Contractors and CSXT Engineering (and/or CSXT
Consultant) and field supervisors, as necessary. The meeting will review
the pre-bid and scheduling requirements described above.
E. Construction Meeting:
The FOC will schedule the Construction meeting. The meeting will be
attended by both POCs, representatives from Contractors and CSXT
Engineering (and/or CSXT Consultant) and field supervisors, as
necessary. The meeting will review the pre-bid and scheduling
requirements, as well as the results of the construction meeting
described above.
1. The project schedule will be reviewed in detail. The CSXT POC,
after consultation with the Division Engineer's office, will advise
the FOC POC of all work times and locations.
2. Track roadbed and ballast protection will be highlighted to the FOC
and its contractors. The FOC and/or its contractors will maintain
(at all times) sufficient ballast rock on the job site for
necessary ballast section repairs and/or backfill, including
appropriate machinery for placement and compaction.
3. All excavation will be shored in accordance with CSXT Safe Way Rule
E-2 and restored as required above.
<PAGE>
MWI 1905-01
6/30/98
Page 4 of 9
4. All construction and site restoration will be performed to the
satisfaction of the Division Engineer and approved by the CSXT POC.
III. REFERENCES
A. The CSX Transportation Fiber Optic Program Safety Requirements are
included for easy reference. It begins on page five.
B. The services provided by the consultants provide by CSXT are identified
in the CSX Transportation Inspection and Supervision of Installation of
Fiber Optic Conduit System. It begins on page six.
<PAGE>
MWI 1905-01
6/30/98
Page 5 of 9
CSX TRANSPORTATION
FIBER OPTIC PROGRAM
SAFETY REQUIREMENTS
GENERAL
- - - - All fiber optic workers must receive CSXT SAFETY AWARENESS training and
have a verification card and/or hard hat sticker. All CSXT Safety Rules and
Contractor Policies will apply to fiber optic workers.
- - - - All personnel must wear CSXT approved Personal Protection Equipment in
accordance with "The CSX Safe Way" book, which includes hard hat, safety
glasses, steel toed shoes, hearing protection, and others as specified, by
work type or local supervision, WHEN WORKING CLOSER THAN 25 FEET FROM THE
NEAREST RAIL OF A MAIN TRACK. When working beyond 25 feet from the nearest
rail of a main track, hard hats, safety glasses, and laced work boots (no
tennis shoes or street shoes) will be required.
- - - - All "FRA Bridge Worker Safety" rules will apply to fiber optic workers
performing bridge attachments, including proper fall protection rules.
- - - - All test holes or pits less than 15 feet from the centerline of main
tracks, will be filled or covered prior to passing of trains. No open pits or
holes will be left over night. All pits and trenches will be shored according
to OSHA requirements.
- - - - No dirt or debris will be allowed to foul the ballast section of the tracks.
- - - - No markings will be made on the rail or ties.
- - - - All excavation or plow trenches will be back filled and compacted
immediately after the work is done.
- - - - All public utilities, CSXT Engineering, and the Railroad Train Control
Office, will be notified prior to any construction.
- - - - Job Briefings will be conducted each morning and throughout the day when
conditions or job scope changes.
WORKING ON OR AROUND TRACKS
- - - - All work in the FRA Red Zone (4 feet from outside rail on each side of the
track) will be done only with a CSXT, FRA qualified flagman or watchman as
specified by the local Engineering representative.
- - - - All work beyond 4 feet from the outside rails, must be done under the
supervision of a CSXT qualified inspector or flagman.
- - - - Certain types of work done beyond 25 feet from the outside of the rails,
and with equipment that will not reach beyond this point, may be done without
flagging protection or a watchman, IF APPROVED BY THE LOCAL ENGINEERING
REPRESENTATIVE, AND PROTECTED BY A CONSTRUCTION FENCE.
- - - - All work must be stopped while trains are passing within the work zone.
- - - - All workers will remain off the tracks. If necessary to perform the work on
track, protection will be provided as stated above.
ANY VIOLATION OF ANY CSXT SAFETY RULES OR POLICY, MAY RESULT IN REMOVAL OF
CONTRACTOR OR PERSONEL FROM THE RIGHT OF WAY.
CSXT/LLG Rev. 06-12-98 Approved by Manager Safety
<PAGE>
MWI 1905-01
6/30/98
Page 6 of 9
CSX TRANSPORTATION
ENGINEERING DEPARTMENT
JACKSONVILLE, FL
INSPECTION AND SUPERVISION OF
INSTALLATION OF FIBER OPTIC CONDUIT SYSTEM
CSXT has retained (consultant) as an engineering consultant to perform
certain professional services, which primarily entail intellectual work and
professional judgment, and may or may not require supervision and
performance of some ancillary tasks or use of equipment such as instruments,
tools, or machinery.
SCOPE OF ENGINEERING SERVICES SUMMARY
GENERAL
The engineering services described herein are intended to protect the
interests of CSXT during the installation of conduit systems by system
owners and their installers on CSXT right-of-way. These engineering services
will be performed by (consultant), Inc., hereinafter called "Consultant".
The fiber conduit system will not be owned nor installed by CSXT (CSXT may
acquire conduits or cables after installation). Plans and specifications for
the installation of the conduit system will be prepared by conduit system
owners or their designated representatives. Plans and specifications will be
subject to the review and approval of CSXT. Installation of the conduit
system will be performed by system owners or their contracted installers.
SAFETY
The Consultant's employees that enter CSXT right-of-way shall be trained in
Railroad Safety Awareness, knowledgeable of "FRA On Track Worker Safety
Rules", and shall at all times wear required safety equipment (steel toe
shoes, hard hat, safety glasses with side shields or goggles, and other
items as specified by CSXT supervisors).
SUMMARY OF SERVICES
Engineering services shall include, but not be limited to, the following:
- PLAN REVIEW SERVICES
Review plans and specifications submitted by Fiber Optic Communication
companies, or their installers, and provide other support as directed by
CSXT. The tasks assigned may include the following:
Perform plan reviews and on-site inspections in accordance with CSXT
Standards, and verify the terms of the installation agreements.
Obtain and coordinate input from other CSXT units such as Design and
Construction, Real Estate Properties, Division Engineering Units, or
their designated representatives.
<PAGE>
MWI 1905-01
6/30/98
Page 7 of 9
Prepare marked up plans together with reports that identify
recommended actions and/or changes.
Communicate with the Fiber Optics Communications companies and/or
their installers with regard to changes, revisions and approvals.
Coordinate with other utility and/or fiber optic companies who already
have facilities and installations in place on CSXT right of way, or
plan future installations.
Coordinate the scheduling of High Rail Inspections of projects during
the planning and design phases.
Obtain final plan approvals from the Division Engineering Units.
- CONSTRUCTION SERVICES
Provide Construction Engineering and Inspection Services as follows:
Promote safety at the work site by verifying that the owners and their
installers comply with instructions of CSXT's flagmen, watchmen, etc.,
and with CSXT Safety and FRA On Track Worker Safety Requirements.
(CSXT will provide a flagman to provide warning and protect the tracks
for the movement of trains, when required).
Provide engineering representation on behalf of CSXT at on-and
off-site meetings, pre-bid meetings, pre-construction meetings,
progress meetings, final inspection, etc.
Represent CSXT in meetings with state and local agencies regarding
entry and disturbance of road crossings and other public facilities by
the owners or installers.
Confirm that the owners or their installers have notified the owners
of underground facilities on CSXT property which may be affected by
the proposed work, and confirm that they have coordinated the proposed
work with them.
For each inspection location, maintain daily communication (or more
frequent if required) with CSXT Division Engineer or designated
representative or D & C Project Manager as may be directed by the
office of the Assistant Chief Engineer D & C via fax and/or e-mail,
and cell phone.
Provide daily on-site observation at all work locations on or
immediately adjacent to CSXT property during installation of the fiber
optic conduit systems.
Verify that the owners and/or their installers are in compliance with
the requirements for Federal, State, Local and CSXT environmental
regulations, permits, etc., and coordinate with the CSXT Environmental
Department.
Monitor the installation of the conduit system for compliance with the
approved plans and specifications. Consultant will have the authority
to act on behalf of CSXT and the Chief Engineer, or his
representative, to insure such compliance.
<PAGE>
MWI 1905-01
6/30/98
Page 8 of 9
Approve minor adjustments or deviations from the plan, provided such
adjustments or deviations are consistent with the criteria furnished
by CSXT and used for Consultant's review of the plans.
Promptly report any disputes, major deviations and other items of
concern to the designated CSXT Division Engineer, CSXT Project Manager
or any environmental concerns to the designated CSXT Environmental
Officer.
Confirm the actual horizontal and vertical location of the fiber optic
cable conform to the plans and specifications by physical measurement
at regular intervals and where otherwise required in Consultant's
judgment. This work shall be coordinated with the owner and/or
installer, and CSXT as required.
Ensure prompt clean up and restoration of CSXT property by the owners
and/or installers following installation of the fiber optic cable
systems, to the satisfaction of the Division/Service Lane/Business
Unit engineering representative.
STAFFING
Upon notice of project authorization, (consultant) will assign, as a
minimum, one Senior Construction Inspector to each project. Additional
inspectors may be assigned to large, urban, or highly complex projects
when specified by CSXT. The inspectors will be equipped with suitable
transportation, cell phones, portable computers and other equipment as
may be required on the project. The inspectors will based near the
site, and be available during the normal hours worked by the owner's
and/or installer's forces.
REPORTS
- - - - PLAN REVIEW SERVICES
Prepare marked up plans and reports documenting recommended actions
and/or proposed changes.
- - - - CONSTRUCTION SERVICES
Maintain a daily diary or log of events including items such as:
supervisory personnel employed by the owners or their installers at
the work site; type, number and condition of the owner's or
installer's equipment; time of arrival and departure of CSXT flagmen,
watchmen, signal inspectors and other personnel; time of arrival and
departure of work trains and other CSXT furnished equipment; "track
time" allowed for work; the owners or their installers production and
progress; and any unusual occurrences.
Provide detailed weekly status reports for all work locations.
Approved: signed by R. K. Beckham
Date: June 5, 1998
CSXT/LLG-Rev. 06-04-98
<PAGE>
MWI 1905-01
6/30/98
Page 9 of 9
Prepared by: L. L. Galbreath
Reviewed: /s/ ILLEGIBLE
-------------------------------------------
Director - Standards & Testing
Approved: /s/ ILLEGIBLE
-------------------------------------------
AVP - Equipment & Track Systems Engineering
Office of the Assistant Vice President - Equipment and Track Systems Engineering
Jacksonville, Florida
MWI 1905-01, June 30, 1998
Exhibit 10.10
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement"),dated as of
March 30, 2000, is by and between Pathnet, Inc., a Delaware corporation (the
"Seller") and Pathnet Telecommunications, Inc., a Delaware corporation (the
"Purchaser").
WITNESSETH:
WHEREAS, Seller currently holds certain assets relating to the fiber
portion of its digital network;
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
such assets, and, as part of such purchase and sale, Seller desires to assign,
and the Purchaser desires to assume, all of the obligations and liabilities
relating to such assets, subject, in each case, to the exemptions, terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties and covenants and agreements hereinafter set forth,
and upon the terms and subject to the conditions hereinafter set forth, Seller
and Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined).
(a) Affiliate: As defined in Section 8.1.
(b) Agreement: As defined in the preamble.
(c) Closing: As defined in Article VII.
(d) Colonial Contribution Agreement: Shall mean that certain
Contribution Agreement, dated as of November 2, 1999, by and among the
Purchaser, the Seller and Colonial Pipeline Company, a Delaware and Virginia
corporation.
(e) Contribution Agreements: Shall mean (i) that certain Contribution
Agreement, dated as of November 2, 1999, by and among the Purchaser, the Seller
and The Burlington Northern Santa Fe Railway Company, a Delaware corporation,
(ii) that certain Contribution Agreement, dated as of November 2, 1999, by and
among the Purchaser, the Seller and CSX Transportation, Inc., a Virginia
corporation, (iii) that certain Contribution Agreement, dated as of November 2,
1999, by and among the Purchaser, the Seller and the preferred stockholders of
the Purchaser, (iv) that certain
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Contribution Agreement, dated as of November 2, 1999, by and among the
Purchaser, the Seller and certain common stockholders of the Purchaser, and (v)
that certain Contribution Agreement, dated November 4, 1999, by and among the
Purchaser, the Seller and David Schaeffer.
(f) Contribution Agreement Closing: As defined in Section 6.1(e).
(e) Fiber Assets: As defined in Section 2.1.
(f) Indemnified Persons: As defined in Section 8.1
(g) Indemnifying Persons: As defined in Section 8.1.
(h) Purchaser: As defined in the preamble.
(i) Purchased Assets: As defined in Section 2.1.
(j) Purchase Price: As defined in Section 4.1.
(k) Seller: As defined in the preamble.
(l) Survival Date: As defined in Section 8.4.
ARTICLE II
ASSETS TO BE ACQUIRED
2.1 Acquisition and Transfer of Assets. At the Closing (as hereinafter
defined), upon the terms and subject to the conditions hereinafter set forth,
Seller shall sell, assign, transfer, convey and deliver to Purchaser, and
Purchaser shall purchase, acquire and accept from Seller all right, title and
interest of Seller in and to the certain assets relating to the fiber portion of
Seller's digital network, including, without limitation, in and to all of the
assets, properties, rights, contracts and claims employed in connection with
such assets, wherever located, whether tangible or intangible, as the same shall
exist as of the Closing. The assets, properties, contracts and claims to be
purchased pursuant to this Agreement are hereinafter collectively referred to as
the "Fiber Assets." The Fiber Assets shall include, without limitation, all
right, title and interest of Seller and its Subsidiaries in and to the assets,
properties, rights, contracts and claims described in the following paragraphs
(a) through (g) but in each case, only to the extent exclusively used in, held
for exclusive use in or exclusively related to the Fiber Assets:
(a) all rights in, to and under all contracts, commitments and other
agreements of Seller set forth below:
(i) Agreement between Pacific Fiber Link, LLC (A/K/A Worldwide
Fiber, Inc.) and Pathnet, Inc., dated March 31, 1999 as
amended by Letter, dated
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June 28, 1999 and the Marketing Agreement between Pacific
Fiber Link, LLC (A/K/A Worldwide Fiber, Inc.) and Pathnet,
dated March 31, 1999.
(ii) Dark Fiber Network Agreement by and between Pathnet, Inc.,
Tri-State Generation and Transmission Association, Inc. and
other Participating Members Systems named therein, dated
August 5, 1999, Letter Agreement between Pathnet, Inc. and
Tri-State Generation and Transmission Association, Inc. dated
December 31, 1999 and Letter Agreement between Pathnet, Inc.
and Tri-State Generation and Transmission Association, Inc.
dated January 17, 2000, including the associated right of way
pursuant to Fiber Optic Cable Construction and Use Agreement
between Public Service Company of New Mexico and Pathnet, Inc.
dated June 9, 1999 and Fiber Optic Cable License Agreement
between Public Service Company of New Mexico and Pathnet, Inc.
dated December 23, 1999.
(iii) Agreement between CapRock Telecommunications Corp and Pathnet,
Inc. dated November 18, 1999 and Joint Marketing Agreement
between Pathnet, Inc. and CapRock Telecommunications, Corp,
dated November 18, 2999 and Letter Agreement between Pathnet,
Inc. and CapRock Telecommunications, Inc., dated January 17,
2000.
(b) all inventories of work-in-progress, raw materials, finished
products, supplies, spare parts and other materials relating to the fiber route
under construction between Chicago, Illinois and Aurora, Colorado;
(c) all rights in and to insurance and indemnity claims relating
to the Fiber Assets;
(d) all prepaid expenses, advances and deposits relating to the
Fiber Assets;
(e) all rights, choses in action and claims, (known or unknown,
matured or unmatured, accrued or contingent) against third parties relating to
the Fiber Assets;
(f) all goodwill and going concern rights associated with the
items listed above; and
(h) a license to the intellectual property of Seller as set forth
in the License of Marks attached hereto as Exhibit A.
For convenience of reference, the assets, properties, interests in properties
and rights that are to be sold, transferred, conveyed and assigned to Purchaser
pursuant to this Section 2.1 are collectively referred to herein as the
"Purchased Assets."
2.2 Instrument of Conveyance and Transfer, Etc. At the Closing, Seller
shall deliver (or cause to be delivered) to Purchaser such deeds, bills of sale,
endorsements, assignments and other instruments of transfer, conveyance and
assignment as shall be
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necessary to transfer, convey and assign the Purchased Assets to the Purchaser.
Simultaneously therewith, Seller shall take all steps as may be required to put
the Purchaser in possession of the Purchased Assets.
2.3 Right of Endorsement, Etc. Effective upon the Closing, Seller
hereby constitutes and appoints Purchaser, its successors and assigns, the true
and lawful attorney of the Seller with full power of substitution, in the name
of Purchaser, or the name of Seller, on behalf of and for the benefit of
Purchaser, to collect all accounts and notes receivable and other items being
transferred, conveyed and assigned to Purchaser as provided herein, to endorse,
without recourse, checks, notes and other instruments in the name of Seller, to
institute and prosecute, in the name of Seller or otherwise, all proceedings
which Purchaser may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Purchased Assets, to defend and
compromise any and all actions, suits or proceedings in respect of any of the
Purchased Assets, and to do all such acts and things in relation thereto as
Purchaser may deem advisable. Seller agrees that the foregoing powers are
coupled with an interest and shall be irrevocable by Seller, directly or
indirectly, whether by the dissolution of Seller or in any manner or for any
reason.
2.4 Further Assurances; Etc. Seller shall pay to Purchaser promptly any
amounts which shall be received by Seller after the Closing which are, or are
received in connection with, Purchased Assets. Seller at any time and from time
to time after the Closing, upon the request of Purchaser and at the expense of
Seller, shall do, execute, acknowledge, deliver and file, or shall cause to be
done, executed, acknowledged, delivered or filed, all such further acts, deeds,
transfers, conveyances, assignments or assurance as may be required for the
better transferring, conveying, assigning and assuring to Purchaser, or for
aiding and assisting in the collection of or reducing to possession by
Purchaser, any of the assets, properties or rights being purchased hereunder.
2.5 Assignment of Contracts, Rights, Etc. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement or attempted agreement to transfer, sublease or assign any
contract, license, lease, sales order, purchase order or other agreement or any
claim or right of any benefit arising thereunder or resulting therefrom or any
permit or operating authority if an attempted transfer, sublease or assignment
thereof, without the consent of any other party thereto, would constitute a
breach thereof or in any way affect the rights of Purchaser thereunder. Seller
and Purchaser shall use their respective best efforts, and shall cooperate with
each other, to obtain the consent of such third party to any of the foregoing to
the assignment or transfer thereof to Purchaser in all cases in which such
consent is required for assignment or transfer. If such consent is not obtained,
Seller shall cooperate with Purchaser in any arrangements necessary or desirable
to provide for Purchaser the benefits thereunder, including, without limitation,
enforcement for the benefit of Purchaser of any and all rights of Seller thereof
against the other party thereto arising out of the cancellation by such other
party or otherwise.
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<PAGE>
ARTICLE III
ASSUMPTION OF LIABILITIES
On the terms and subject to the conditions of this Agreement,
simultaneously with the transfer, conveyance and assignment to Purchaser of the
Purchased Assets, Purchaser shall assume all of the liabilities and obligations
relating to the Purchased Assets as such liabilities and obligations shall exist
immediately prior to the Closing.
ARTICLE IV
PURCHASE PRICE OF PURCHASED
ASSETS; ALLOCATION
4.1 Purchase Price. The aggregate purchase price to be paid for the
Purchased Assets shall be $70,000,000 (the "Purchase Price"). At the Closing,
against delivery to the Purchaser of appropriate instruments of transfer,
conveyance and assignment with respect to the Purchased Assets, the Purchaser
shall deliver to the Seller, a Promissory Note in the form attached hereto as
Exhibit B in the principal amount of $70,000,000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Purchaser as follows:
(a) Organization, Standing and Power. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted; and the Seller has all requisite
corporate power and authority and to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. Seller is duly qualified and in good standing to
do business in every jurisdiction in which such qualification is
necessary.
(b) Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and on the part of
the Seller and this Agreement constitutes a valid and binding
obligation of the Seller enforceable in accordance with its terms.
Neither the execution, delivery and performance of this Agreement nor
the consummation by the Seller of the transactions contemplated hereby
nor compliance by the Seller with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of the Certificate
of Incorporation or Bylaws of the Seller, (ii) cause a default (or give
rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, lease,
mortgage, indenture, license or other instrument or agreement to which
the Seller, or by which the Seller, or any of its properties or assets
is or may be bound or (iii) violate any law,
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statute, rule or regulation or order, writ, judgment, injunction or
decree applicable to the Seller, or any of its properties or assets.
5.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as follows:
(a) Organization, Standing and Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power
and authority to own, lease and operate its properties, to carry on its
business as now being conducted, to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(b) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the
part of the Purchaser and this Agreement constitutes a valid and
binding obligation of the Purchaser, enforceable in accordance with its
terms. Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby
nor compliance by the Purchaser with any of the provisions hereof will
(i) conflict with or result in a breach of any provision of its
Certificate of Incorporation or Bylaws, (ii) cause a default (or give
rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, lease,
mortgage, indenture, license or other instrument or agreement to which
the Purchaser is a party, or by which it or its properties or assets
may be bound, or (iii) violate any law, statute, rule or regulation or
order, writ, injunction or decree applicable to the Purchaser or any of
its properties or assets.
ARTICLE VI
CONDITIONS OF CLOSING
6.1 Conditions of Obligations of the Purchaser. The obligations of the
Purchaser to perform this Agreement are subject to the satisfaction of the
following conditions unless waived by the Purchaser:
(a) Representations and Warranties. The representations and
warranties of the Seller set forth in Section 5.1 hereof shall be true
and correct in all material respects as of the date of this Agreement
and as of the Closing Date (as hereinafter defined) as though made on
and as of the Closing Date.
(b) Authorization. All action necessary to authorized the
execution, delivery and performance of this Agreement by the Seller and
the consummation of the transactions contemplated hereby shall have
been duly and validly taken.
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(c) Instruments of Transfer, Conveyance and Assignment. The
Purchaser shall have received duly executed instruments of transfer,
conveyance and assignment as contemplated by Section 2.2 hereof.
(d) Consents and Approvals. The Purchaser shall have received
duly executed copies of all consents and approvals required for or in
connection with the execution and delivery by the Seller of this
Agreement and the consummation of the transactions contemplated hereby
including the consent of the holders of the Seller's 12 -1/4% Senior
Notes in accordance with the Indenture by and between Pathnet, Inc. and
The Bank of New York, dated April 8, 1998.
(e) Closing under Contribution Agreements. The Closing (as
defined in the Contribution Agreements) and the Initial Closing (as
defined in the Colonial Contribution Agreement) shall have occurred
(together, such occurrences, the "Contribution Agreement Closing").
6.2 Conditions of Obligations of the Seller. The obligations of the
Seller to perform this Agreement are subject to the satisfaction of the
following conditions unless waived by the Seller:
(a) Representations and Warranties. The representations and
warranties of the Purchaser set forth in Section 5.2 hereof shall be
true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date.
(b) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement by the Purchaser
and the consummation of the transactions contemplated hereby shall have
been duly and validly taken by the Board of Directors of the Purchaser.
(c) Closing under Contribution Agreements. The Contribution
Agreement Closing shall have occurred.
ARTICLE VII
CLOSING
The closing (the "Closing") for the consummation of the transactions
contemplated by this Agreement shall take place immediately after the
Contribution Agreement Closing shall have occurred.
ARTICLE VIII
INDEMNIFICATION
8.1 Definitions. As used in this Article VIII, the following terms
shall have the following respective meanings:
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(a) "Affiliate" shall mean a person or entity that directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, any other person or
entity.
(b) "Indemnified Persons" shall mean and include the
Purchaser, all Affiliates of the Purchaser, and the successors and
assigns of the foregoing; and
(c) "Indemnifying Persons" shall mean the Seller and its
successors and assigns.
8.2 Indemnification. The Indemnifying Persons shall, jointly and
severally, indemnify and save the Indemnified Persons, and each of them,
harmless from, against, for and in respect of the following:
(a) any and all liabilities and obligations of the Seller not
assumed by the Purchaser pursuant to this Agreement;
(b) any liabilities and obligations of the Indemnifying
Persons for fees, costs and expenses relating to or arising out of the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including,
without limitation, legal and accounting fees and expenses and taxes
incurred by the Indemnifying Persons;
(c) any damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by the Indemnified
Persons, or any of them, and arising from a breach of any
representation, warranty, covenant or agreement of the Indemnifying
Persons contained in or made pursuant to this Agreement or in any
certificate, instrument or agreement delivered by any of such parties
pursuant hereto or in connection with the transactions contemplated
hereby, or any facts or circumstances constituting such breach;
(d) all damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by the Indemnified
Persons, or any of them, as a result of non-compliance by the Seller
with the provisions of the "bulk sales laws" of any state which may be
applicable to the transactions contemplated hereby;
(e) all damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by the Indemnified
Persons, or any of them, as a result of the failure to obtain any
consent or provide any benefit under any contract, license, lease,
sales order, purchase order or other agreement, claim, right, permit or
operating authority; and
(f) all reasonable costs and expenses (including, without
limitation reasonable attorney's, accountants' and other professional
fees and expenses)
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incurred by the Indemnified Persons, or any of them, in connection with
any action, suit, proceeding, demand, assessment or judgment incident
to any of the matters indemnified against under Section 8.2(a), Section
8.2(b), Section 8.2 (c), Section 8.2 (d) and Section 8.2 (e) hereof.
No claim, demand, suit or cause of action shall be brought against the
Indemnifying Persons under or pursuant to this Section 8.2 unless the
Indemnified Persons, or any of them, at any time prior to the Survival Date (as
defined in Section 8.4 hereof), give the Indemnifying Persons written notice,
with reasonable specificity, of the existence of any such claim, demand, suit or
cause of action under this Agreement. Upon the giving of such written notice as
aforesaid, the Indemnified Persons, or any of them, shall have the right to
commence legal proceedings within one year subsequent to the Survival Date for
the enforcement of its or their rights under this Agreement.
8.3 Third Party Claims. The obligations and liabilities of the
Indemnifying Persons hereunder with respect to claims resulting from the
assertion of liability by third parties shall be subject to the following terms
and conditions:
(a) The Indemnified Persons shall give prompt written notice
to the Indemnifying Persons of any assertion of liability by a third
party which might give rise to a claim by the Indemnified Persons
against the Indemnified Persons based on the indemnity agreements
contained in Section 8.2 hereof, stating the nature and basis of said
assertion and the amount thereof, to the extent known.
(b) In the event any action, suit or proceeding is brought
against the Indemnified Persons, with respect to which the Indemnifying
Persons may have liability under the indemnity agreement contained in
Section 8.2 hereof, the action, suit or proceeding shall, upon the
written agreement of the Indemnifying Persons that they are obligated
to indemnify under the indemnity agreement contained in Section 8.2
hereof, be defended (including all proceedings on appeal or for review
which counsel for the defendant shall deem appropriate) by the
Indemnifying Persons. The Indemnified Persons shall have the right to
employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Persons unless (i) the employment of such counsel shall have been
authorized by the Indemnifying Persons in connection with the defense
of such action, suit or proceeding, (ii) the Indemnifying Persons shall
not have agreed, promptly after the notice to them provided in
subsection (a) above, that they are obligated to indemnify under the
indemnity agreement contained in Section 8.2 hereof or (iii) such
Indemnified Person shall have reasonably concluded that such action,
suit or proceeding involves to a significant extent matters beyond the
scope of the indemnity agreement contained in Section 8.2 hereof, or
that there may be defenses available to it (or them) which are
different from or additional to those available to the Indemnifying
Persons, in any of which events the Indemnifying Persons shall not have
the right to direct the defense of such action, suit or proceeding on
behalf of the Indemnified Persons and that portion of such fees and
expenses reasonably
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related to matters covered by the indemnity agreement contained in
Section 8.2 hereof shall be borne by the Indemnifying Persons. The
Indemnified Persons shall be kept fully informed of such action, suit
or proceeding at all stages thereof whether or not they are so
represented. The Indemnifying Persons shall make available to the
Indemnified Persons and their attorneys and accountants all books and
records of the Indemnifying Persons relating to such proceedings or
litigation and the parties hereto agree to render to each other such
assistance as they may reasonably require of each other in order to
ensure the proper and adequate defense of any such action, suit or
proceeding.
(c) The Indemnifying Persons shall not make any settlement of
any claims without the written consent of the Indemnified Persons.
8.4 Survival. All representations and warranties contained in this
Agreement shall survive the Closing hereunder until the second anniversary (the
"Survival Date") of the date hereof, at which time such representations and
warranties shall expire and be terminated and extinguished.
8.5 Remedies Cumulative. The remedies provided for in this Article VIII
shall be cumulative and shall not preclude assertion by the Indemnified Persons
of any other rights or the seeking of any other remedies against the
Indemnifying Persons.
ARTICLE IX
AMENDMENT, MODIFICATION AND WAIVER
This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by each of the parties hereto,
except that any party to this Agreement may waive any obligation owed to it by
another party under this Agreement. The waiver by any party hereto of a breach
of any provisions of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
ARTICLE X
MISCELLANEOUS
10.1 Bulk Sales Compliance. Subject to Section 8.2(d), the Purchaser
hereby waives compliance by the Seller with the provisions of the "bulk sales
laws" (i.e., Article 6 of the Uniform Commercial Code) of any state which may be
applicable to the transactions contemplated hereby.
10.2 Entire Agreement. This Agreement and the Exhibits and Schedules
attached hereto contain the entire agreement among the Purchaser and the Seller
with respect to the transactions contemplated hereby and supersede all prior
agreements or understandings among the parties with respect thereto.
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10.3 Descriptive Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
10.4 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
10.6 Benefits of Agreements. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Anything contained herein to the
contrary notwithstanding, this Agreement shall not be assignable by any party
hereto without the consent of the other party hereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
PATHNET, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
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EXHIBIT A
LICENSE OF MARKS
WHEREAS, Pathnet, Inc., a Delaware corporation having offices
at 1015 31st Street, N.W., Washington, D.C., 20007 ("Licensor"), has adopted,
used and is using trademarks, service marks, logos and designs including without
limitation the "A NETWORK OF OPPORTUNITIES" and "PATHNET" service marks and the
Pathnet logo (all such trademarks, service marks, logos and designs shall be
collectively referred to herein as the "Marks"); and
WHEREAS, Pathnet Telecommunications, Inc., a Delaware
corporation having offices at 1015 31st Street, N.W., Washington, D.C., 20007
("Licensee"), is desirous of a license to use the Marks;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. License. Licensor does hereby grant to Licensee the perpetual,
non-exclusive right and license to use the Marks on a royalty-free basis in
connection with Licensee's telecommunications business; provided, however, that
Licensee shall retain the right to use the Marks.
2. Ownership of Marks. Licensee acknowledges and agrees that (a)
Licensor is the owner of the entire right, title and interest in and to the
Marks and the Marks, or any form or embodiment thereof (as well as the goodwill
now or hereafter attached to the same) are the property of and all use thereof
shall inure to the benefit of Licensor, and (b) Licensee shall have no rights to
the Marks other than those set forth in this License of Marks.
3. Approvals/Quality Control. Licensee shall, upon request of Licensor,
submit representative samples of Licensee's use of the Marks to Licensor,
without charge to Licensor, and Licensor shall have a period of ten (10) days to
notify Licensee of their acceptance or rejection.
4. Representations, Warranties and Covenants of Licensor. Licensor
represents and warrants that it is the owner of the Marks and the registrant
therefor, that Licensor has the full power and authority to license the right to
use the Marks, that Licensor has not entered into any agreements in conflict
with this License of Marks, and that there are no actions, suits or proceedings
pending or, to Licensor's knowledge, threatened against Licensor with respect to
the Marks. Licensor agrees to take all such further actions, and to execute any
and all such further documents and instruments, as may be necessary or desirable
to confirm the license executed hereby.
5. Assignment. Neither party may assign any or all of its rights or
delegate any of its duties under this Agreement without the consent of the other
party, provided,
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that either party hereto may assign its rights, but not its obligations, to any
Affiliate without the consent of the other party. For the purposes of this
Section 5, an "Affiliate" of a party shall mean a subsidiary of such party or
other entity under common ownership or control.
IN WITNESS WHEREOF, this LICENSE OF MARKS is made and
effective as of the 30th of March, 2000.
PATHNET, INC.
By: ___________________________________
Name:
Title:
PATHNET TELECOMMUNICATIONS, INC.
By: ___________________________________
Name:
Title:
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Exhibit B
FORM OF
PROMISSORY NOTE
$70,000,000.00 March 30, 2000
FOR VALUE RECEIVED, PATHNET TELECOMMUNICATIONS, INC., a corporation
duly organized under the laws of the State of Delaware (the "Purchaser"),
promises to pay to Pathnet, Inc., a Delaware corporation, at 1015 31st Street,
Washington, DC 20007 ("Seller"), or at such other place as the holder of this
Note may from time to time designate in writing, the principal amount of SEVENTY
MILLION AND NO/100 DOLLARS ($70,000,000.00), together with interest on the
unpaid principal amount of this Note computed from the date of Closing as
defined in the Assignment and Acceptance Agreement (the "Assignment and
Acceptance") by and between Purchaser and Seller, dated the date hereof, as
amended from time to time, until the entire indebtedness is paid, at the rate of
twelve and one quarter percent (12-1/4%) per annum. The principal amount of this
Note shall be due and payable on March 31, 2010. Accrued interest calculated on
the outstanding principal amount as described above shall be payable yearly on
the last day of each year commencing with the year ended December 31, 2000. All
payments hereunder shall be made in lawful money of the United States of
America.
The unpaid principal amount of this Note may be prepaid in whole or in
part at any time.
The entire unpaid principal amount of this Note or any extension or
renewal hereof, together with accrued interest and all charges owing under this
Note or the Assignment and Acceptance, shall immediately become due and payable
at the option of the holder of this Note, without demand or notice, upon the
occurrence of any of the following Events of Default:
(a) Purchaser fails to pay the principal amount of this Note when the
same becomes due and payable (whether on the date on which such principal
becomes due or upon acceleration or otherwise); or
(b) Purchaser fails to pay any interest when the same becomes due and
payable hereunder and such failure to pay continues for ten (10) business days
after the date on which such payment of interest was due.
If this Note, after maturity, whether by acceleration or otherwise, is
placed in the hands of an attorney for collection, whether suit is brought on
the same or not, Purchaser shall pay to the holder of this Note all attorneys'
fees as are incurred for the purposes of collection hereof.
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Each Obligor under this Note (which term shall include all makers,
guarantors, endorsers and other persons assuming obligations pursuant to this
Note) hereby waives presentment, protest, demand, notice of dishonor, and all
other notices, and all defenses and pleas on the grounds of any extensions of
the time of payments or the due dates of this Note, in whole or in part, before
or after maturity, with or without notice. No renewal or extension of this Note,
no release or surrender of any collateral given as security for this Note, no
release of any Obligor, and no delay in enforcement of this Note or in
exercising any right or power hereunder, shall affect the liability of any
Obligor.
This Note may not be changed orally, but only by an agreement in
writing which is signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
IN WITNESS WHEREOF, Purchaser has caused this Note to be duly executed
on its behalf as of the date set forth at the beginning of this Note, as the act
and deed of Purchaser.
PATHNET TELECOMMUNICATIONS, INC.
By: ____________________________________
Name:
Title:
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Exhibit 10.11
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement"), dated
March 30, 2000, is by and between Pathnet Fiber Optics, LLC, a Delaware limited
liability corporation (the "Seller") and Pathnet, Inc., a Delaware corporation
(the "Purchaser").
WITNESSETH:
WHEREAS, Seller currently holds certain fiber optic cable assets
purchased pursuant to the Amended and Restated Fiber Optic Cable Purchase
Agreement between Seller and Lucent Technologies, Inc., dated October 14, 1999,
as amended by that certain Amendment No.1, between Seller and Lucent
Technologies, Inc., dated February 24, 2000 (the "Lucent Agreement");
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
such assets, and, as part of such purchase and sale, Seller desires to assign,
and the Purchaser desires to assume, all of the obligations and liabilities
relating to such assets, subject, in each case, to the exemptions, terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties and covenants and agreements hereinafter set forth,
and upon the terms and subject to the conditions hereinafter set forth, Seller
and Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined).
(a) Affiliate: As defined in Section 8.1.
(b) Agreement: As defined in the preamble.
(c) Closing: As defined in Article VII.
(d) Colonial Contribution Agreement: Shall mean that certain
Contribution Agreement, dated as of November 2, 1999, by and among PTI, the
Purchaser and Colonial Pipeline Company, a Delaware and Virginia corporation.
(e) Contribution Agreements: Shall mean (i) that certain Contribution
Agreement, dated as of November 2, 1999, by and among PTI, the Purchaser and The
Burlington Northern Santa Fe Railway Company, a Delaware corporation, (ii) that
certain Contribution Agreement, dated as of November 2, 1999, by and among PTI,
the Purchaser and CSX Transportation, Inc., a Virginia corporation, (iii) that
certain Contribution Agreement, dated as of November 2, 1999, by and among PTI,
the
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Purchaser and the preferred stockholders of the Purchaser, (iv) that certain
Contribution Agreement, dated as of November 2, 1999, by and among PTI, the
Purchaser and certain common stockholders of the Purchaser, and (v) that certain
Contribution Agreement, dated November 4, 1999, by and among PTI, the Purchaser
and David Schaeffer.
(f) Contribution Agreement Closing: As defined in Section 6.1(d).
(g) Fiber Assets: As defined in Section 2.1.
(h) Indemnified Persons: As defined in Section 8.1
(i) Indemnifying Persons: As defined in Section 8.1.
(j) Lucent Agreement: As defined in the preamble.
(k) PTI: Shall mean Pathnet Telecommunications, Inc., a Delaware
corporation.
(l) Purchaser: As defined in the preamble.
(m) Purchase Price: As defined in Section 4.1.
(n) Seller: As defined in the preamble.
(o) Survival Date: As defined in Section 8.4.
ARTICLE II
ASSETS TO BE ACQUIRED
2.1 Acquisition and Transfer of Assets. At the Closing (as hereinafter
defined), upon the terms and subject to the conditions hereinafter set forth,
Seller shall sell, assign, transfer, convey and deliver to Purchaser, and
Purchaser shall purchase, acquire and accept from Seller (i) all right, title
and interest of Seller in and to all the fiber optic cable purchased under the
Lucent Agreement, and (ii) all rights of Seller in, to and under the Lucent
Agreement (collectively referred to herein as the "Fiber Assets").
2.2 Instrument of Conveyance and Transfer, Etc. At the Closing, Seller
shall deliver (or cause to be delivered) to Purchaser such deeds, bills of sale,
endorsements, assignments and other instruments of transfer, conveyance and
assignment as shall be necessary to transfer, convey and assign the Fiber Assets
to the Purchaser. Simultaneously therewith, Seller shall take all steps as may
be required to put the Purchaser in possession of the Fiber Assets.
2.3 Right of Endorsement, Etc. Effective upon the Closing, Seller
hereby constitutes and appoints Purchaser, its successors and assigns, the true
and lawful attorney of the Seller with full power of substitution, in the name
of Purchaser, or the
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name of Seller, on behalf of and for the benefit of Purchaser, to collect all
accounts and notes receivable and other items being transferred, conveyed and
assigned to Purchaser as provided herein, to endorse, without recourse, checks,
notes and other instruments in the name of Seller, to institute and prosecute,
in the name of Seller or otherwise, all proceedings which Purchaser may deem
proper in order to collect, assert or enforce any claim, right or title of any
kind in or to the Fiber Assets, to defend and compromise any and all actions,
suits or proceedings in respect of any of the Fiber Assets, and to do all such
acts and things in relation thereto as Purchaser may deem advisable. Seller
agrees that the foregoing powers are coupled with an interest and shall be
irrevocable by Seller, directly or indirectly, whether by the dissolution of
Seller or in any manner or for any reason.
2.4 Further Assurances; Etc. Seller shall pay to Purchaser promptly any
amounts which shall be received by Seller after the Closing which are, or are
received in connection with, Fiber Assets. Seller at any time and from time to
time after the Closing, upon the request of Purchaser and at the expense of
Seller, shall do, execute, acknowledge, deliver and file, or shall cause to be
done, executed, acknowledged, delivered or filed, all such further acts, deeds,
transfers, conveyances, assignments or assurance as may be required for the
better transferring, conveying, assigning and assuring to Purchaser, or for
aiding and assisting in the collection of or reducing to possession by
Purchaser, any of the assets, properties or rights being purchased hereunder.
2.5 Assignment of Contracts, Rights, Etc. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement shall not constitute
an agreement or attempted agreement to transfer, sublease or assign any
contract, license, lease, sales order, purchase order or other agreement or any
claim or right of any benefit arising thereunder or resulting therefrom or any
permit or operating authority if an attempted transfer, sublease or assignment
thereof, without the consent of any other party thereto, would constitute a
breach thereof or in any way affect the rights of Purchaser thereunder. Seller
and Purchaser shall use their respective best efforts, and shall cooperate with
each other, to obtain the consent of such third party to any of the foregoing to
the assignment or transfer thereof to Purchaser in all cases in which such
consent is required for assignment or transfer. If such consent is not obtained,
Seller shall cooperate with Purchaser in any arrangements necessary or desirable
to provide for Purchaser the benefits thereunder, including without, limitation,
enforcement for the benefit of Purchaser of any and all rights of Seller thereof
against the other party thereto arising out of the cancellation by such other
party or otherwise.
ARTICLE III
ASSUMPTION OF LIABILITIES
On the terms and subject to the conditions of this Agreement,
simultaneously with the transfer, conveyance and assignment to Purchaser of the
Fiber Assets, Purchaser shall assume all of the liabilities and obligations
relating to the Fiber Assets as such liabilities and obligations shall exist
immediately prior to the Closing.
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ARTICLE IV
PURCHASE PRICE OF PURCHASED
ASSETS; ALLOCATION
4.1 Purchase Price. The aggregate purchase price to be paid for the
Fiber Assets shall be equal to all purchase orders submitted to Lucent
Technologies, Inc. under the Lucent One Million Dollars ($1,000,000))(the
"Purchase Price"). At the Closing, against delivery to the Purchaser of
appropriate instruments of transfer, conveyance and assignment with respect to
the Fiber Assets, the Purchaser shall deliver to the Seller, a Promissory Note
in the form attached hereto as Exhibit A in the principal amount of $1,000,000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Purchaser as follows:
(a) Organization, Standing and Power. The Seller is a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted; and the Seller has all
requisite corporate power and authority and to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Seller is duly qualified and in good
standing to do business in every jurisdiction in which such
qualification is necessary.
(b) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action and on
the part of the Seller and this Agreement constitutes a valid and
binding obligation of the Seller enforceable in accordance with its
terms. Neither the execution, delivery and performance of this
Agreement nor the consummation by the Seller of the transactions
contemplated hereby nor compliance by the Seller with any of the
provisions hereof will (i) conflict with or result in a breach of any
provision of the organizational documents of the Seller, (ii) cause a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
note, bond, lease, mortgage, indenture, license or other instrument or
agreement to which the Seller, or by which the Seller, or any of its
properties or assets is or may be bound or (iii) violate any law,
statute, rule or regulation or order, writ, judgment, injunction or
decree applicable to the Seller, or any of its properties or assets.
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5.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as follows:
(a) Organization, Standing and Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power
and authority to own, lease and operate its properties, to carry on its
business as now being conducted, to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(b) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the
part of the Purchaser and this Agreement constitutes a valid and
binding obligation of the Purchaser, enforceable in accordance with its
terms. Neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby
nor compliance by the Purchaser with any of the provisions hereof will
(i) conflict with or result in a breach of any provision of its
Certificate of Incorporation or Bylaws, (ii) cause a default (or give
rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, lease,
mortgage, indenture, license or other instrument or agreement to which
the Purchaser is a party, or by which it or its properties or assets
may be bound, or (iii) violate any law, statute, rule or regulation or
order, writ, injunction or decree applicable to the Purchaser or any of
its properties or assets.
ARTICLE VI
CONDITIONS OF CLOSING
6.1 Conditions of Obligations of the Purchaser. The obligations of the
Purchaser to perform this Agreement are subject to the satisfaction of the
following conditions unless waived by the Purchaser:
(a) Representations and Warranties. The representations and
warranties of the Seller set forth in Section 5.1 hereof shall be true
and correct in all material respects as of the date of this Agreement
and as of the Closing Date (as hereinafter defined) as though made on
and as of the Closing Date.
(b) Authorization. All action necessary to authorized the
execution, delivery and performance of this Agreement by the Seller and
the consummation of the transactions contemplated hereby shall have
been duly and validly taken.
(c) Instruments of Transfer, Conveyance and Assignment.
The Purchaser shall have received duly executed instruments of
transfer, conveyance and assignment as contemplated by Section 2.2
hereof.
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(d) Closing under Contribution Agreements. The Closing (as
defined in the Contribution Agreements) and the Initial Closing (as
defined in the Colonial Contribution Agreement) shall have occurred
(together, such occurrences, the "Contribution Agreement Closing").
6.2 Conditions of Obligations of the Seller. The obligations of the
Seller to perform this Agreement are subject to the satisfaction of the
following conditions unless waived by the Seller:
(a) Representations and Warranties. The representations and
warranties of the Purchaser set forth in Section 5.2 hereof shall be
true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date.
(b) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement by the Purchaser
and the consummation of the transactions contemplated hereby shall have
been duly and validly taken by the Board of Directors of the Purchaser.
(c) Closing under Contribution Agreements. The
Contribution Agreement Closing shall have occurred.
ARTICLE VII
CLOSING
The closing (the "Closing") for the consummation of the transactions
contemplated by this Agreement shall take place immediately after the
Contribution Agreement Closing shall have occurred.
ARTICLE VIII
INDEMNIFICATION
8.1 Definitions. As used in this Article VIII, the following terms
shall have the following respective meanings:
(a) "Affiliate" shall mean a person or entity that directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, any other person or
entity.
(b) "Indemnified Persons" shall mean and include the
Purchaser, all Affiliates of the Purchaser, and the successors and
assigns of the foregoing; and
(c) "Indemnifying Persons" shall mean the Seller and its
successors and assigns.
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8.2 Indemnification. The Indemnifying Persons shall, jointly and
severally, indemnify and save the Indemnified Persons, and each of them,
harmless from, against, for and in respect of the following:
(a) any and all liabilities and obligations of the Seller
not assumed by the Purchaser pursuant to this Agreement;
(b) any liabilities and obligations of the Indemnifying
Persons for fees, costs and expenses relating to or arising out of the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including,
without limitation, legal and accounting fees and expenses and taxes
incurred by the Indemnifying Persons;
(c) any damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by the Indemnified
Persons, or any of them, and arising from a breach of any
representation, warranty, covenant or agreement of the Indemnifying
Persons contained in or made pursuant to this Agreement or in any
certificate, instrument or agreement delivered by any of such parties
pursuant hereto or in connection with the transactions contemplated
hereby, or any facts or circumstances constituting such breach;
(d) all damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by the Indemnified
Persons, or any of them, as a result of non-compliance by the Seller
with the provisions of the "bulk sales laws" of any state which may be
applicable to the transactions contemplated hereby;
(e) all damages, losses, obligations, liabilities, claims,
actions or causes of action sustained or suffered by the Indemnified
Persons, or any of them, as a result of the failure to obtain any
consent or provide any benefit under any contract, license, lease,
sales order, purchase order or other agreement, claim, right, permit or
operating authority; and
(f) all reasonable costs and expenses (including, without
limitation reasonable attorney's, accountants' and other professional
fees and expenses) incurred by the Indemnified Persons, or any of them,
in connection with any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified against under
Section 8.2(a), Section 8.2(b), Section 8.2 (c), Section 8.2 (d) and
Section 8.2 (e) hereof.
No claim, demand, suit or cause of action shall be brought against the
Indemnifying Persons under or pursuant to this Section 8.2 unless the
Indemnified Persons, or any of them, at any time prior to the Survival Date (as
defined in Section 8.4 hereof), give the Indemnifying Persons written notice,
with reasonable specificity, of the existence of any such claim, demand, suit or
cause of action under this Agreement. Upon the giving of such written notice as
aforesaid, the Indemnified Persons, or any of them, shall have the
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right to commence legal proceedings within one year subsequent to the Survival
Date for the enforcement of its or their rights under this Agreement.
8.3 Third Party Claims. The obligations and liabilities of the
Indemnifying Persons hereunder with respect to claims resulting from the
assertion of liability by third parties shall be subject to the following terms
and conditions:
(a) The Indemnified Persons shall give prompt written notice
to the Indemnifying Persons of any assertion of liability by a third
party which might give rise to a claim by the Indemnified Persons
against the Indemnified Persons based on the indemnity agreements
contained in Section 8.2 hereof, stating the nature and basis of said
assertion and the amount thereof, to the extent known.
(b) In the event any action, suit or proceeding is brought
against the Indemnified Persons, with respect to which the Indemnifying
Persons may have liability under the indemnity agreement contained in
Section 8.2 hereof, the action, suit or proceeding shall, upon the
written agreement of the Indemnifying Persons that they are obligated
to indemnify under the indemnity agreement contained in Section 8.2
hereof, be defended (including all proceedings on appeal or for review
which counsel for the defendant shall deem appropriate) by the
Indemnifying Persons. The Indemnified Persons shall have the right to
employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Persons unless (i) the employment of such counsel shall have been
authorized by the Indemnifying Persons in connection with the defense
of such action, suit or proceeding, (ii) the Indemnifying Persons shall
not have agreed, promptly after the notice to them provided in
subsection (a) above, that they are obligated to indemnify under the
indemnity agreement contained in Section 8.2 hereof or (iii) such
Indemnified Person shall have reasonably concluded that such action,
suit or proceeding involves to a significant extent matters beyond the
scope of the indemnity agreement contained in Section 8.2 hereof, or
that there may be defenses available to it (or them) which are
different from or additional to those available to the Indemnifying
Persons, in any of which events the Indemnifying Persons shall not have
the right to direct the defense of such action, suit or proceeding on
behalf of the Indemnified Persons and that portion of such fees and
expenses reasonably related to matters covered by the indemnity
agreement contained in Section 8.2 hereof shall be borne by the
Indemnifying Persons. The Indemnified Persons shall be kept fully
informed of such action, suit or proceeding at all stages thereof
whether or not they are so represented. The Indemnifying Persons shall
make available to the Indemnified Persons and their attorneys and
accountants all books and records of the Indemnifying Persons relating
to such proceedings or litigation and the parties hereto agree to
render to each other such assistance as they may reasonably require of
each other in order to ensure the proper and adequate defense of any
such action, suit or proceeding.
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(c) The Indemnifying Persons shall not make any
settlement of any claims without the written consent of the Indemnified
Persons.
8.4 Survival. All representations and warranties contained in this
Agreement shall survive the Closing hereunder until the second anniversary (the
"Survival Date") of the date hereof, at which time such representations and
warranties shall expire and be terminated and extinguished.
8.5 Remedies Cumulative. The remedies provided for in this Article VIII
shall be cumulative and shall not preclude assertion by the Indemnified Persons
of any other rights or the seeking of any other remedies against the
Indemnifying Persons.
ARTICLE IX
AMENDMENT, MODIFICATION AND WAIVER
This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by each of the parties hereto,
except that any party to this Agreement may waive any obligation owed to it by
another party under this Agreement. The waiver by any party hereto of a breach
of any provisions of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
ARTICLE X
MISCELLANEOUS
10.1 Bulk Sales Compliance. Subject to Section 8.2(d), the Purchaser
hereby waives compliance by the Seller with the provisions of the "bulk sales
laws" (i.e., Article 6 of the Uniform Commercial Code) of any state which may be
applicable to the transactions contemplated hereby.
10.2 Entire Agreement. This Agreement and the Exhibits and Schedules
attached hereto contain the entire agreement among the Purchaser and the Seller
with respect to the transactions contemplated hereby and supersede all prior
agreements or understandings among the parties with respect thereto.
10.3 Descriptive Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
10.4 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
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10.6 Benefits of Agreements. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Anything contained herein to the
contrary notwithstanding, this Agreement shall not be assignable by any party
hereto without the consent of the other party hereto.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
PATHNET, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
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Exhibit A
FORM OF
PROMISSORY NOTE
$1,000,000 March 30, 2000
FOR VALUE RECEIVED, PATHNET, INC., a corporation duly organized under
the laws of the State of Delaware (the "Purchaser"), promises to pay to Pathnet
Fiber Optics, LLC, a Delaware limited liability company, at 1015 31st Street,
Washington, DC 20007 ("Seller"), or at such other place as the holder of this
Note may from time to time designate in writing, the principal amount of ONE
MILLION DOLLARS ($1,000,000), together with interest on the unpaid principal
amount of this Note computed from the date of Closing as defined in the
Assignment and Acceptance Agreement (the "Assignment and Acceptance"), by and
between Purchaser and Seller, dated the date hereof, as amended from time to
time, until the entire indebtedness is paid, at the rate of twelve and one
quarter percent (12-1/4%) per annum. The principal amount of this Note shall be
due and payable on March 31, 2010. Accrued interest calculated on the
outstanding principal amount as described above shall be payable yearly on the
last day of each year commencing with the year ended December 31, 2000. All
payments hereunder shall be made in lawful money of the United States of
America.
The unpaid principal amount of this Note may be prepaid in whole or in
part at any time.
The entire unpaid principal amount of this Note or any extension or
renewal hereof, together with accrued interest and all charges owing under this
Note or the Assignment and Acceptance, shall immediately become due and payable
at the option of the holder of this Note, without demand or notice, upon the
occurrence of any of the following Events of Default:
(a) Purchaser fails to pay the principal amount of this Note when the
same becomes due and payable (whether on the date on which such principal
becomes due or upon acceleration or otherwise); or
(b) Purchaser fails to pay any interest when the same becomes due and
payable hereunder and such failure to pay continues for ten (10) business days
after the date on which such payment of interest was due.
If this Note, after maturity, whether by acceleration or otherwise, is
placed in the hands of an attorney for collection, whether suit is brought on
the same or not, Purchaser shall pay to the holder of this Note all attorneys'
fees as are incurred for the purposes of collection hereof.
Each Obligor under this Note (which term shall include all makers,
guarantors, endorsers and other persons assuming obligations pursuant to this
Note) hereby waives
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presentment, protest, demand, notice of dishonor, and all other notices, and all
defenses and pleas on the grounds of any extensions of the time of payments or
the due dates of this Note, in whole or in part, before or after maturity, with
or without notice. No renewal or extension of this Note, no release or surrender
of any collateral given as security for this Note, no release of any Obligor,
and no delay in enforcement of this Note or in exercising any right or power
hereunder, shall affect the liability of any Obligor.
This Note may not be changed orally, but only by an agreement in
writing which is signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
IN WITNESS WHEREOF, Purchaser has caused this Note to be duly executed
on its behalf as of the date set forth at the beginning of this Note, as the act
and deed of Purchaser.
PATHNET, INC.
By: ______________________________________
Name:
Title:
-13-
Exhibit 10.12
LICENSE OF MARKS
WHEREAS, Pathnet, Inc., a Delaware corporation having offices
at 1015 31st Street, N.W., Washington, D.C., 20007 ("Licensor"), has adopted,
used and is using certain trademarks, service marks, logos and designs including
without limitation the "A NETWORK OF OPPORTUNITIES" and "PATHNET" service marks
and the Pathnet logo (all such trademarks, service marks, logos and designs
shall be collectively referred to herein as the "Marks"); and
WHEREAS, Pathnet Telecommunications, Inc., a Delaware
corporation having offices at 1015 31st Street, N.W., Washington, D.C., 20007
("Licensee"), is desirous of a license to use the Marks;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. LICENSE. Licensor does hereby grant to Licensee the perpetual, non-exclusive
right and license to use the Marks on a royalty-free basis in connection with
Licensee's telecommunications business; PROVIDED, HOWEVER, that Licensor shall
retain the right to use the Marks.
2. OWNERSHIP OF MARKS. Licensee acknowledges and agrees that (a) Licensor is the
owner of the entire right, title and interest in and to the Marks and the Marks,
or any form or embodiment thereof (as well as the goodwill now or hereafter
attached to the same) are the property of and all use thereof shall inure to the
benefit of Licensor, and (b) Licensee shall have no rights to the Marks other
than those set forth in this License of Marks.
3. APPROVALS/QUALITY CONTROL. Licensee shall, upon request of Licensor, submit
representative samples of Licensee's use of the Marks to Licensor, without
charge to Licensor, and Licensor shall have a period of ten (10) days to notify
Licensee of their acceptance or rejection.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR. Licensor represents
and warrants that it is the owner of the Marks and the registrant therefor, that
Licensor has the full power and authority to license the right to use the Marks,
that Licensor has not entered into any agreements in conflict with this License
of Marks, and that there are no actions, suits or proceedings pending or, to
Licensor's knowledge, threatened against Licensor with respect to the Marks.
Licensor agrees to take all such further actions, and to execute any and all
such further documents and instruments, as may be necessary or desirable to
confirm the license executed hereby.
5. ASSIGNMENT. Neither party may assign any or all of its rights or delegate any
of its duties under this Agreement without the consent of the other party,
provided, that either party hereto may assign its rights, but not its
obligations, to any Affiliate without the consent of the other party. For the
purposes of this Section 5, an "Affiliate" of a party shall mean a subsidiary of
such party or other entity under common ownership or control.
IN WITNESS WHEREOF, this LICENSE OF MARKS is made and
effective as of the 30th of March, 2000.
PATHNET, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
Exhibit 10.13
PROMISSORY NOTE
$70,000,000.00 March 30, 2000
FOR VALUE RECEIVED, PATHNET TELECOMMUNICATIONS, INC., a corporation
duly organized under the laws of the State of Delaware (the "Purchaser"),
promises to pay to Pathnet, Inc., a Delaware corporation, at 1015 31st Street,
Washington, DC 20007 ("Seller"), or at such other place as the holder of this
Note may from time to time designate in writing, the principal amount of SEVENTY
MILLION AND NO/100 DOLLARS ($70,000,000.00), together with interest on the
unpaid principal amount of this Note computed from the date of Closing as
defined in the Assignment and Acceptance Agreement (the "Assignment and
Acceptance") by and between Purchaser and Seller, dated the date hereof, as
amended from time to time, until the entire indebtedness is paid, at the rate of
twelve and one quarter percent (12-1/4%) per annum. The principal amount of this
Note shall be due and payable on March 31, 2010. Accrued interest calculated on
the outstanding principal amount as described above shall be payable yearly on
the last day of each year commencing with the year ended December 31, 2000. All
payments hereunder shall be made in lawful money of the United States of
America.
The unpaid principal amount of this Note may be prepaid in whole or in
part at any time.
The entire unpaid principal amount of this Note or any extension or
renewal hereof, together with accrued interest and all charges owing under this
Note or the Assignment and Acceptance, shall immediately become due and payable
at the option of the holder of this Note, without demand or notice, upon the
occurrence of any of the following Events of Default:
(a) Purchaser fails to pay the principal amount of this Note when the
same becomes due and payable (whether on the date on which such principal
becomes due or upon acceleration or otherwise); or
(b) Purchaser fails to pay any interest when the same becomes due and
payable hereunder and such failure to pay continues for ten (10) business days
after the date on which such payment of interest was due.
If this Note, after maturity, whether by acceleration or otherwise, is
placed in the hands of an attorney for collection, whether suit is brought on
the same or not, Purchaser shall pay to the holder of this Note all attorneys'
fees as are incurred for the purposes of collection hereof.
-14-
<PAGE>
Each Obligor under this Note (which term shall include all makers,
guarantors, endorsers and other persons assuming obligations pursuant to this
Note) hereby waives presentment, protest, demand, notice of dishonor, and all
other notices, and all defenses and pleas on the grounds of any extensions of
the time of payments or the due dates of this Note, in whole or in part, before
or after maturity, with or without notice. No renewal or extension of this Note,
no release or surrender of any collateral given as security for this Note, no
release of any Obligor, and no delay in enforcement of this Note or in
exercising any right or power hereunder, shall affect the liability of any
Obligor.
This Note may not be changed orally, but only by an agreement in
writing which is signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
IN WITNESS WHEREOF, Purchaser has caused this Note to be duly executed
on its behalf as of the date set forth at the beginning of this Note, as the act
and deed of Purchaser.
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
-15-
EXHIBIT 10.14
PROMISSORY NOTE
$50,000,000.00 March 30, 2000
FOR VALUE RECEIVED, PATHNET TELECOMMUNICATIONS, INC., a corporation
duly organized under the laws of the State of Delaware (the "Borrower"),
promises to pay to Pathnet, Inc., a Delaware corporation, at 1015 31st Street,
N.W., Washington, DC 20007 (the "Lender"), or at such other place as the holder
of this Note may from time to time designate in writing, the principal amount of
FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00), together with interest on the
unpaid principal amount of this Note computed from the date of Closing as
defined in that certain Assignment and Acceptance Agreement by and between
Borrower and Lender, dated the date hereof, as amended from time to time, until
the entire indebtedness is paid, at the rate of twelve and one quarter percent
(12-1/4%) per annum. The principal amount of this Note shall be due and payable
on March 31, 2010. Accrued interest calculated on the outstanding principal
amount as described above shall be payable yearly on the last day of each year
commencing with the year ended December 31, 2000. All payments hereunder shall
be made in lawful money of the United States of America.
This Note may be prepaid at any time and from time to time, in whole or
in part, without premium or penalty. Any prepayment shall be applied first to
any accrued and unpaid interest and then to principal. In the event of
prepayment of this Note in part only, a new Note for the unpaid portion hereof
shall be issued in the name of the person or entity in whose name this Note is
registered upon the cancellation hereof.
The entire unpaid principal amount of this Note or any extension or
renewal hereof, together with accrued interest and all charges owing under this
Note, shall immediately become due and payable at the option of the holder of
this Note, without demand or notice, upon the occurrence of any of the following
Events of Default:
(a) Borrower fails to pay the principal amount of this Note when the
same becomes due and payable (whether on the date on which such principal
becomes due or upon acceleration or otherwise); or
(b) Borrower fails to pay any interest when the same becomes due and
payable hereunder and such failure to pay continues for ten (10) business days
after the date on which such payment of interest was due.
If this Note, after maturity, whether by acceleration or otherwise, is
placed in the hands of an attorney for collection, whether suit is brought on
the same or not, Borrower shall pay to the holder of this Note all attorneys'
fees as are incurred for the purposes of collection hereof.
Each Obligor under this Note (which term shall include all makers,
guarantors, endorsers and other persons assuming obligations pursuant to this
Note) hereby waives presentment, protest, demand, notice of dishonor, and all
other notices, and all defenses
<PAGE>
and pleas on the grounds of any
extensions of the time of payments or the due dates of this Note, in whole or in
part, before or after maturity, with or without notice. No renewal or extension
of this Note, no release or surrender of any collateral given as security for
this Note, no release of any Obligor, and no delay in enforcement of this Note
or in exercising any right or power hereunder, shall affect the liability of any
Obligor.
This Note may not be changed orally, but only by an agreement in
writing which is signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought. This Note is made under, and shall
be governed by and construed in accordance with, the laws of the State of New
York applicable to contracts made and to be performed entirely within such State
and without giving effect to choice of law principles of such State.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
on its behalf as of the date set forth at the beginning of this Note, as the act
and deed of Borrower.
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ Mary McDermott
-------------------------------------
Name: Mary McDermott
Title: Senior Vice President, General Counsel
and Secretary
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Company's
balance sheet as of March 31, 2000 and the Statements of Operations for the
three months ended March 31, 2000 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0001099231
<NAME> Pathnet Telecommunications, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 118,599
<SECURITIES> 33,768
<RECEIVABLES> 1,611
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,408
<PP&E> 167,872
<DEPRECIATION> 9,507
<TOTAL-ASSETS> 542,674
<CURRENT-LIABILITIES> 40,533
<BONDS> 346,724
37,872
244
<COMMON> 32
<OTHER-SE> 109,279
<TOTAL-LIABILITY-AND-EQUITY> 542,674
<SALES> 1,927
<TOTAL-REVENUES> 1,927
<CGS> 4,269
<TOTAL-COSTS> 4,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,743
<INCOME-PRETAX> (20,231)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,231)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,231)
<EPS-BASIC> (6.59)
<EPS-DILUTED> (6.59)
</TABLE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Becky Haight
Investor Relations
Pathnet
877 227-5600
[email protected]
Patti Kelly
Media Relations
Pathnet
703 390-2868
[email protected]
PATHNET ANNOUNCES FIRST QUARTER RESULTS
RESTON, VA, MAY 9, 2000-- Pathnet Telecommunications, Inc., a `next generation'
carrier's carrier of long-haul transport and competitive local access services
to under-served markets, today announced its financial and operating results for
the quarter ending March 31, 2000.
First quarter revenue doubled to $1.9 million as compared to revenue of $0.8
million in the first quarter of 1999, and was up almost 90% sequentially from
$1.0 million in the prior quarter. As expected, given the expenses relating to
the company's recent reorganization, earnings before interest, taxes,
depreciation and amortization (EBITDA) for the quarter resulted in a loss of
$10.0 million, up from a loss of $4.6 million for the year-ago quarter.
After performing a thorough review and evaluation of the company's proposed
transaction with Colonial Pipeline, BNSF and CSX, Pathnet bondholders provided
the necessary consent to enable the transaction to go forward. This affirmative
action paved the way for the subsequent closing of Pathnet's strategic
investment agreements with these companies valued at $250 million. As part of
these agreements, Pathnet received the right to develop over 12,000 miles of the
investors' right-of-way holdings.
"It was clearly a landmark quarter for us," said president and chief executive
officer Richard Jalkut. "We almost tripled our services backlog to $15 million
during the quarter, bringing our total backlog to $61 million when combined with
our infrastructure and construction sales backlog of $46 million. In addition,
we strengthened ourselves financially with a major equity infusion into the
company and strategically with the addition of three prominent partners."
Pathnet increased its gross plant and equipment by $29 million in the quarter,
bringing total plant and equipment acquired to $168 million at quarter-end. The
company also completed 100 route miles of network and 25 collocations, bringing
its total network to 6,900 route miles and a total of 65 collocations in over 40
cities. The company continues to target 150 collocations in 80 cities by the end
of the year.
"Our network rollout is on track - we have 6,900 miles of network with 1,200
miles under construction. In addition, we recently signed a swap deal that will
extend our network another 1,300 miles," said Bob Rouse, Pathnet chief operating
officer. "With 65 collocations in over 40 cities available for TDM services, we
continue to rollout new collocations every week and expect to have our
collocations xDSL and PRI service-ready within the next several months. Both
these products are part of our unique VPOP Plus Service, which bundles Pathnet's
low cost access and transport into an unprecedented value for its customers."
FIRST QUARTER HIGHLIGHTS AND RECENT DEVELOPMENTS
o Closed transaction for strategic investments valued at over $250 million
o The above transaction added $43 million in cash and $187 million in
intangible ROW to Pathnet's balance sheet and is expected to add an
additional $25 million in the second quarter
o Completed 25 collocations, bringing cumulative total to 65 o Increased
sales backlog to $61 million o Achieved CLEC approval in a total of 16
states o Signed swap agreement with another carrier for 1,300 route miles
of network
o Announced purchase agreement with Nortel Networks and Hekimian for their
OPTera and TestDSLTM products, respectively
Pathnet is a `next generation' carrier's carrier providing competitive local
access services and high capacity, digital transport to under-served and second-
and third-tier U.S. cities. Pathnet provides service to inter-exchange carriers,
local exchange carriers, Internet service providers, Regional Bell Operating
Companies, cellular operators and resellers. Pathnet currently has 6,900 route
miles of completed network and 1,200 route miles of network under construction.
Additional information about Pathnet can be found on the company's web site at:
WWW.PATHNET.NET.
THE STATEMENTS MADE BY PATHNET AND PATHNET TELECOMMUNICATIONS IN THIS PRESS
RELEASE MAY BE FORWARD-LOOKING IN NATURE. NO ASSURANCE CAN BE GIVEN THAT FUTURE
RESULTS WILL BE ACHIEVED; ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
PROJECTED IN FORWARD-LOOKING STATEMENTS. PATHNET AND PATHNET TELECOM BELIEVE
THAT THEIR PRIMARY RISK FACTORS INCLUDE, BUT ARE NOT LIMITED TO: SIGNING
ADDITIONAL AGREEMENTS WITH PRIVATE NETWORK OPERATORS AND OTHERS; OFFERING
SERVICES TO TELECOMMUNICATION SERVICE PROVIDERS; ENTERING INTO PARTNERING
ARRANGEMENTS; BUILDING A DIGITAL NETWORK; MEETING MARKET DEMAND AND CUSTOMER
SERVICE EXPECTATIONS; AND OBTAINING ADDITIONAL FINANCING. ADDITIONAL INFORMATION
CONCERNING THESE AND OTHER POTENTIALLY IMPORTANT FACTORS CAN BE FOUND WITHIN
PATHNET TELECOM'S REGISTRATION STATEMENT AND PATHNET'S PERIODIC REPORTS FILED
WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION UNDER THE FEDERAL SECURITIES
LAWS. STATEMENTS IN THIS RELEASE SHOULD BE EVALUATED IN LIGHT OF THESE IMPORTANT
FACTORS.
<PAGE>
PATHNET TELECOMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
2000 1999
---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenue $ 1,927 $ 826
-------------- ------------
Expenses:
Cost of revenue 4,269 2,651
Selling, general and administrative 6,244 2,795
Contribution & Reorganization expenses 1,408 --
Depreciation 2,558 538
-------------- ------------
Total expenses 14,479 5,984
-------------- ------------
Net operating loss (12,552) (5,158)
Interest expense (9,742) (10,271)
Interest income 2,235 3,815
Other (172) 88
-------------- ------------
Net loss $ (20,231) $ (11,526)
============== ============
Basic and diluted loss per
Common share $ (6.59) $ (3.97)
============== ============
Weighted average number of
Common shares outstanding 3,068 2,903
============== ============
Other Data:
EBITDA (1) $ (9,994) $ (4,620)
============= ============
</TABLE>
<PAGE>
PATHNET TELECOMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT STATISTICAL DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 118,599 $ 90,662
Marketable securities available for sale, at market 11,675 42,652
Other current assets 3,020 2,486
-------------- -------------
Total current assets 133,294 135,800
Property and equipment, net 158,365 131,928
Intangible assets 187,275 --
Restricted cash and marketable securities available for sale, at market 25,817 21,541
Pledged marketable securities held to maturity 21,550 21,265
Other assets 16,373 10,002
-------------- -------------
Total assets $ 542,674 $ 320,536
============== =============
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Total current liabilities 40,533 30,588
Bonds payable, net of unamortized bond discount of $3,276 and $3,378 346,724 346,622
Other non-current liabilities 7,991 3,093
Total mandatorily redeemable preferred stock 37,872 35,970
Total stockholders' equity (deficit) 109,554 (95,737)
-------------- -------------
Total liabilities, mandatorily redeemable preferred stock and
stockholders' equity (deficit) $ 542,674 $ 320,536
============== =============
Selected statistical data:
Route miles complete 6,900 6,800
Route miles under construction 1,200 700
Collocations 65 40
</TABLE>
###
