-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QhStESv2C1EZR9IkORLSVK2fnNdWoZQNf+JTmOLNcLdaFynq1tEo/hC0zFOeBbSf Wl4VQwVeVEj2KRS1mFpFOg== /in/edgar/work/0000950135-00-004909/0000950135-00-004909.txt : 20001110 0000950135-00-004909.hdr.sgml : 20001110 ACCESSION NUMBER: 0000950135-00-004909 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK PLUS CORP CENTRAL INDEX KEY: 0001065633 STANDARD INDUSTRIAL CLASSIFICATION: [4813 ] IRS NUMBER: 043430576 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26313 FILM NUMBER: 757521 BUSINESS ADDRESS: STREET 1: 234 COPELAND ST CITY: QUINCY STATE: MA ZIP: 02169 BUSINESS PHONE: 6177864000 MAIL ADDRESS: STREET 1: 234 COPELAND ST CITY: QUINCY STATE: MA ZIP: 02169 FORMER COMPANY: FORMER CONFORMED NAME: NETWORK PLUS INC DATE OF NAME CHANGE: 19980709 10-Q 1 b37246npe10-q.txt NETWORK PLUS, INC. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 SEPTEMBER 30, 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 NUMBER 000-26313 ------------------------ NETWORK PLUS CORP. (Exact name of registrant as specified in its charter) ------------------------ DELAWARE 04-3430576 (State or other jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 234 COPELAND STREET, QUINCY, MASSACHUSETTS 02169 (Address of principal executive officer) (Zip Code)
(617) 786-4000 (Registrant's telephone number, including area code) N/A (Former name, former address and formal 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 [X] No [ ] ------------------------ The number of shares of the registrant's Common Stock, par value $0.01 per share, outstanding on November 3, 2000 was 61,819,726. ================================================================================ 2 FORM 10-Q INDEX
PAGE NUMBER ------ PART I -- FINANCIAL INFORMATION Item 1. Financial Statements Network Plus Corp. Unaudited Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999.............. 2 Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2000 and 1999........................... 3 Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999.................................................. 4 Notes to Unaudited Condensed Consolidated Financial Statements............................................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................... 14 PART II -- OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds........... 15 Item 6. Exhibits and Reports on Form 8-K.................... 15 Signatures.................................................. 16
1 3 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS NETWORK PLUS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ ASSETS CURRENT ASSETS Cash and cash equivalents.............................. $ 71,759 $ 43,031 Accounts receivable, net of allowance for doubtful accounts of $1,955 and $2,624, respectively........... 52,359 31,814 Prepaid expenses....................................... 1,324 489 Other current assets................................... 2,450 958 -------- -------- Total current assets.............................. 127,892 76,292 Property and equipment, net................................. 256,065 101,944 Other assets................................................ 18,348 1,117 Investment.................................................. 1,233 3,333 Intangible assets, net...................................... 1,513 3,286 -------- -------- Total assets...................................... $405,051 $185,972 ======== ======== LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable....................................... $ 52,977 $ 48,704 Accrued liabilities.................................... 14,017 6,370 Current portion of capital lease obligations........... 15,483 11,346 -------- -------- Total current liabilities......................... 82,477 66,420 Long-term debt and capital lease obligations................ 30,578 28,188 Long-term note payable to stockholder....................... 1,875 1,875 Other long-term liabilities................................. 355 208 COMMITMENTS Redeemable 7 1/2% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share, 500 shares authorized: 250 and no shares issued and outstanding, respectively; aggregate liquidation preference of $127,467 on September 30, 2000........................ 122,422 -- STOCKHOLDERS' EQUITY Common stock, $0.01 par value, 150,000 shares authorized, 61,474 and 54,795 shares, respectively, issued and outstanding................................ 614 548 Additional paid-in capital.................................. 268,419 138,767 Stock subscription receivable............................... -- (155) Warrants.................................................... 11,553 4,405 Other comprehensive income (loss)........................... (1,267) 833 Accumulated deficit......................................... (111,975) (55,117) -------- -------- Total stockholders' equity........................ 289,766 89,281 -------- -------- Total liabilities, preferred stock and stockholders' equity............................ $405,051 $185,972 ======== ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 2 4 NETWORK PLUS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30 ------------------- ------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues.............................................. $ 62,158 $ 39,381 $166,844 $109,275 Operating expenses Costs of services................................ 48,528 31,851 130,944 88,168 Selling, general and administrative expenses..... 27,443 12,983 74,986 36,103 Depreciation and amortization.................... 7,780 2,386 19,089 5,214 -------- -------- -------- -------- 83,751 47,220 225,019 129,485 -------- -------- -------- -------- Operating loss........................................ (21,593) (7,839) (58,175) (20,210) Other income (expense) Interest income.................................. 1,992 929 5,034 1,091 Interest expense................................. (947) (987) (3,559) (2,302) Other income (expense)........................... (176) 162 (158) 201 -------- -------- -------- -------- 869 104 1,317 (1,010) -------- -------- -------- -------- Net loss before income taxes.......................... (20,724) (7,735) (56,858) (21,220) Provision for income taxes............................ -- 2,770 -- 961 -------- -------- -------- -------- Net loss.............................................. (20,724) (10,505) (56,858) (22,181) Preferred stock dividends and accretion of offering expenses and discount................. 2,576 7,569 4,838 10,725 -------- -------- -------- -------- Net loss applicable to common stockholders............ $(23,300) $(18,074) $(61,696) $(32,906) ======== ======== ======== ======== Net loss per share applicable to common stockholders Basic and diluted................................... $ (0.39) $ (0.33) $ (1.06) $ (0.68) ======== ======== ======== ======== Weighted average shares outstanding Basic and diluted............................................. 60,428 54,440 58,287 48,369 ======== ======== ======== ======== Comprehensive loss Net loss......................................... $(20,724) $(10,505) $(56,858) $(22,181) Unrealized gain (loss) on investment securities, net of tax..................................... (321) (1,408) (2,100) 69 -------- -------- -------- -------- Comprehensive loss.................................... $(21,045) $(11,913) $(58,958) $(22,112) ======== ======== ======== ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 3 5 NETWORK PLUS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 2000 1999 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss............................................... $ (56,858) $(22,181) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization........................ 19,089 5,214 Loss on disposal of fixed assets..................... 94 18 Interest payable on note payable to stockholder...... 147 115 Compensation charge on stock options................. 101 -- Changes in assets and liabilities: Accounts receivable............................... (20,545) (15,081) Prepaid expenses.................................. (835) -- Deferred taxes.................................... -- 961 Other current assets.............................. (1,492) 108 Other assets...................................... (292) (120) Accounts payable.................................. 4,273 12,698 Accrued liabilities............................... 7,647 3,338 Other liabilities................................. 1,079 -- --------- -------- Net cash used for operating activities....... (47,592) (14,930) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures................................... (156,678) (25,453) Purchase of investment................................. -- (2,500) Proceeds from sale and leaseback of fixed assets....... -- 4,516 --------- -------- Net cash used for investing activities....... (156,678) (23,437) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations........ (9,405) (4,891) Costs incurred in connection with debt facility........ (5,998) Net proceeds from the issuance of common stock....... 128,651 136,896 Net proceeds from the issuance (redemption) of preferred stock..................................... 119,750 (45,871) Distribution to stockholders........................... -- (3) --------- -------- Net cash provided by financing activities.... 232,998 86,131 Net increase in cash........................................ 28,728 47,764 Cash at beginning of period................................. 43,031 12,197 --------- -------- Cash at end of period....................................... $ 71,759 $ 59,961 ========= ======== NONCASH INVESTING AND FINANCING ACTIVITIES: Fixed assets acquired under capital leases............. $ 14,853 $ 39,973 ========= ======== Redeemable preferred stock dividends, paid and accrued in common shares...................................... $ 4,838 $ -- ========= ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 4 6 NETWORK PLUS CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements of the Company are unaudited. In the opinion of management, the accompanying consolidated financial statements contain all adjustments necessary for a fair presentation of the Company's financial position, results of operations and cash flows at the dates and for the periods indicated, which adjustments, consist only of adjustments of a normal, recurring nature. The balance sheet data as of December 31, 1999 has been derived from the Company's audited financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1999 which are contained in the Company's annual report on Form 10-K, as amended, for such year end, as well as the registration statements on Form S-3, as amended (File Nos. 333-32040 and 333-32042), effective April 6, 2000. The results of operations for the three and nine months ended September 30, 2000 are not necessarily indicative of the results to be expected for the entire year ended December 31, 2000 or any future period. Certain amounts in the financial statements for the prior year have been reclassified to conform with the current year presentation. Such reclassifications had no effect on previously reported results of operations. 2. REVOLVING CREDIT AGREEMENTS On September 27, 2000, the Company entered into a credit and guaranty agreement with Goldman Sachs Credit Partners L.P., Fleet Securities, Inc., DLJ Bridge Finance, Inc. and Fleet National Bank for a $225,000 revolving credit facility (the "New Senior Credit Facility"). The New Senior Credit Facility matures in June 2002. Under the New Senior Credit Facility, up to $225,000 is available based upon a percentage of eligible accounts receivable and eligible net property. Interest is payable quarterly in arrears on the last day of the quarter at six and one-half percent above the LIBOR rate for the first four quarters increasing .75% each quarter for the remaining term of the loan. A commitment fee of 0.5% is charged on the undrawn portion of the facility. The New Senior Credit Facility requires the Company, among other things, to meet minimum levels of revenues and earnings before interest, taxes, depreciation and amortization, debt to revenue ratios, performance levels, and places the Company in default in the event of a material adverse change in the Company's business and restricts the Company's ability to pay dividends. The New Senior Credit Facility is collateralized by substantially all of the assets of the Company. There were no amounts outstanding under the New Senior Credit Facility on September 30, 2000. In connection with the New Senior Credit Facility, the Company issued warrants entitling the holders to purchase in aggregate 3,854 shares of the Company's Common Stock at an exercise price of $7.01 per share. Upon issuance of the warrants, 72.73% of the warrants were exercisable, with 13.64% exercisable on a pro rata basis with each amount drawn by the Company on the first $100,000 of loans under the New Senior Credit Facility, and the remaining 13.63% exercisable at any time on or after the date the amount drawn by the Company under the credit agreement exceeds $100,000. The cost of the currently exercisable warrants valued at $10,941, using the Black Sholes option pricing model, is included in other long term assets and is amortized over the term of the loan. The cost of the currently unexercisable warrants will be determined using the variable costing method when the warrants become exercisable. 5 7 3. PROPERTY AND EQUIPMENT
ESTIMATE SEPTEMBER 30, DECEMBER 31, USEFUL LIFE 2000 1999 ------------- ------------- ------------ Network infrastructure and equipment.............. 5 and 10 $114,449 $ 50,276 years Computer equipment................................ 3-5 years 11,442 5,228 Office furniture and equipment.................... 7 years 3,435 1,975 Software.......................................... 3 years 11,034 6,325 Motor vehicles.................................... 5 years 584 256 Leasehold improvements............................ Term of Lease 17,412 7,959 Construction in progress.......................... 125,452 40,355 -------- -------- 283,808 112,374 Less accumulated depreciation and amortization.... (27,743) (10,430) -------- -------- $256,065 $101,944 ======== ========
4. DEBT AND CAPITAL LEASE OBLIGATIONS Debt and capital lease obligations consist of the following:
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------- Note payable................................... $ 50 $ 200 Capital lease obligations...................... 46,011 39,334 Less current portion........................... (15,483) (11,346) -------- -------- $ 30,578 $ 28,188 ======== ========
Property and equipment under capital leases are as follows:
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------- Network infrastructure and equipment........... $ 45,167 $ 34,770 Computer equipment............................. 3,697 2,062 Motor vehicles................................. 630 99 Construction in progress....................... 11,986 9,696 -------- -------- 61,480 46,627 Less accumulated depreciation.................. (10,333) (4,004) -------- -------- $ 51,147 $ 42,623 ======== ========
5. PREFERRED STOCK On April 12, 2000, the Company sold 2,500 depositary shares, each representing 1/10 of a share of 7 1/2% series A cumulative convertible preferred stock for aggregate net proceeds to the Company of $119,750. Each depositary share is initially convertible into 1.4368 shares of common stock. During the three months ended September 30, 2000, the Company issued 145 shares of common stock in payment of $2,262 of dividends accrued at June 30, 2000. Accrued dividends of $2,576 were included in preferred stock at September 30, 2000, subsequent to September 30, 2000, 346 shares of common stock were issued as payment of such dividends. 6 8 6. NET LOSS PER SHARE The following table sets forth the computation of basic and diluted loss per share:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Net loss applicable to Network Plus Corp. ............ $(23,300) $(18,074) $(61,696) $(32,906) common stock -- basic and diluted................... 60,428 54,440 58,287 48,369 Net loss per share applicable to common stockholders -- basic and diluted................... $ (0.39) $ (0.33) $ (1.06) $ (0.68) ======== ======== ======== ========
Warrants for the purchase of 4,041 and 1,428 shares and stock options for the purchase of 5,122 and 3,930 shares of common stock were not included in the computation of net loss per share for the three months and nine months ended September 30, 2000 and 1999, respectively, because inclusion of such shares would have an anti-dilutive effect. In addition, preferred stock convertible to 3,592 shares was not included in the computation of net loss per share for the three and nine months ended September 30, 2000, because inclusion of such shares would have an anti-dilutive effect. 7. SEGMENT INFORMATION The Company has two reportable segments which management operates as distinct sales organizations: these two segments are segregated by type of customer base to whom services are provided. The two customer base types are: retail telecommunications and data services, and wholesale telecommunications. The Company measures and evaluates its two reportable segments based on revenues and costs of services. The retail telecommunications and data services segment provides local and long distance services including voice and data transport, and enhanced and custom calling features. This segment focuses on selling these services to end user customers, such as businesses and residences. The wholesale telecommunications segment provides transport and termination services. This segment focuses on selling these services to large communication carriers, who utilize the Company's excess capacity to provide telecommunications services to their customers.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Revenues: Retail telecommunications and data services........... $38,837 $22,317 $ 99,790 $ 67,039 Wholesale telecommunications.......................... 23,321 17,064 67,054 42,236 ------- ------- -------- -------- Total revenues.......................................... $62,158 $39,381 $166,844 $109,275 ======= ======= ======== ======== Costs of services: Retail telecommunications and data services........... $26,405 $16,342 $ 69,361 $ 49,506 Wholesale telecommunications.......................... 22,123 15,509 61,583 38,662 ------- ------- -------- -------- Total costs of services................................. $48,528 $31,851 $130,944 $ 88,168 ======= ======= ======== ========
8. NEW ACCOUNTING PRONOUNCEMENTS In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accountants Bulletin No. 101, "Revenue Recognition in Financial Statements" subsequently updated by SAB 101A and SAB 101B ("SAB 101"). SAB 101 summarizes certain of the SEC's view in applying generally accepted accounting principles to revenue recognition in financial statements. The Company is required to adopt SAB 101 no later than the fourth quarter of fiscal 2000. The Company does not believe SAB 101 will have a material impact on its results of operations and financial position. In March 2000, the Financial Accounting Standard Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies 7 9 the following: the definition of an employee for purposes of applying APB Opinion No. 25, the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of previously fixed stock options or awards, and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after with December 15, 1998 or January 12, 2000. The Company does not believe FIN 44 will have a material impact on its results of operations and financial position. In August 2000, the Emerging Issues Task Force issued LITF Issue No. 00-13, "Determining whether equipment is "Integral Equipment" subject to FABB statements No. 66, "Accounting for Sales of Real Estate" and No. 98, "Accounting for Leases" ("LITF 00-13"). LITF 00-13 clarifies the definition of "integral equipment" with regard to the Company's transactions with customers for the sale of dark fiber-optic capacity. LITF 00-13 results in the Company recording such transactions as either operating or sales-type leases. When title in the dark fiber-optic cables transfer to the customer at completion of the lease term, the Company accounts for such transactions as sales-type leases. All other such transactions are recorded as operating leases. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes of Network Plus Corp. (the "Company") included herein as well as the consolidated financial statements and notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's annual report on Form 10-K as amended, for the fiscal year ended December 31, 1999 (the "1999 10-K") as well as the registration statements on Form S-3, as amended (File Nos. 333-32040 and 333-32042), effective April 6, 2000 (the "S-3 Registration Statements"). In addition to historical information, the following discussion and other information in this report contains forward-looking information that involves risks and uncertainties. For this purpose, any statement that is not a statement of historical fact is forward-looking information, including without limitation statements concerning the Company's future capital requirements, sufficiency of available capital and availability of additional financing. Without limiting the generality of the foregoing, words such as "believes," "anticipates," "expects" and similar expressions identify forward-looking statements. The Company's actual results could differ materially from those anticipated by such forward-looking information due to competitive factors, risk associated with the Company's expansion plans and other factors discussed in the 1999 10-K and the S-3 Registration Statements and below under "Certain Factors That May Affect Future Operating Results." OVERVIEW The Company, founded in 1990, is a network-based communications provider offering a comprehensive suite of broadband data, telecommunications and e.Commerce hosting services. The Company's services include local and long distance voice, high-speed data, Internet and web and managed server hosting. The Company currently utilizes digital subscriber line, or DSL, technology to provide high-speed data and Internet access and provides local and long distance services using traditional switched access, ATM, voice over digital subscriber line, or VoDSL, and other technologies. The Company currently serves small and medium-sized business customers in the northeastern and southeastern regions of the United States. 8 10 RESULTS OF OPERATIONS The following table sets forth for the periods indicated certain financial data as a percentage of revenues:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------ ------------------ 2000 1999 2000 1999 ------- ------- ------- ------- Revenues.............................................. 100.0% 100.0% 100.0% 100.0% Costs of services..................................... 78.1 80.9 78.5 80.7 Selling, general and administrative................... 44.2 33.0 44.9 33.0 Depreciation and amortization......................... 12.5 6.1 11.4 4.8 Operating loss........................................ (34.7) (19.9) (34.9) (18.5) Other income (expense)................................ 1.4 .3 .8 (.9) Net loss before income taxes.......................... (33.3)% (19.6)% (34.1)% (19.4)%
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999. Revenues Revenues increased $22.8 million, or 58%, to $62.2 million for the three months ended September 30, 2000 from $39.4 million for the same period in the prior year. The sale of local service contributed 28% of quarter-to-date revenues compared to 10% of quarter-to-date revenues for the same period in the prior year. Revenues generated from international wholesale traffic which results from utilizing excess capacity on our long distance switches represent 36% of revenues for the three month period ended September 30, 2000 as compared to 42% of revenues for the same period in the prior year. Revenues generated from data services, which included colocation, DSL, Internet services and leasing of fiber-optic capacity, totaled $6.8 million for the period, representing 11% of the total quarter-to-date revenues. Retail long distance revenues represent 25% of year-to-date revenue compared to 48% for the same period in the prior year. For the nine month period ended September 30, 2000, revenues increased $57.5 million, or 53%, to $166.8 million from $109.3 for the same period in the prior year. Local service revenues represents 23% of year-to-date revenues compared to 8% in the same period in the prior year. Local lines in service at September 30, 2000 increased 204% to 149,700 from 49,200 lines in service at September 30, 1999. Data service revenues represent 8% of year-to-date revenues at September 30, 2000. We expect revenues from data services to continue to represent an increasing percentage of total revenues. International wholesale revenues represents 38% of year-to-date revenues at September 30, 2000 which is consistent with the same period in the prior year. Retail long distance revenues represent 30% of year-to-date revenues compared to 53% for the same period in the prior year. We operate in a competitive market for long distance service, which has experienced price erosion of the average rate per minute from the prior year. We expect this price trend to continue in the future. Costs of Services Costs of services increased $16.6 million, or 52%, to $48.5 million for the three months ended September 30, 2000 from $31.9 million for the same period in the prior year. Costs of services increased $42.7 million, or 48%, to $130.9 million for the nine months ended September 30, 2000 from $88.2 million for the same period in the prior year. As a percent of revenue, cost of services decreased to 78% for the three month and nine month period ended September 30, 2000 from 81% for the three month and nine month period ended September 30, 1999. The increase in costs of services of 52% and 48% for the three month and nine month periods ended September 30, 2000 compared to the same periods in the prior year are due primarily to the increase in total revenues of 58% and 53% for the same three month and nine month periods. The decrease in costs of services as a percent of revenues is due to the change in the mix of services provided as revenues from local services and data services increased as a percent of total revenues. As the deployment of our local network continues 9 11 and the facilities become operational, the costs associated with the colocation facilities, including rent and access charges, are reflected in cost of services. These costs are generally fixed and will result in fluctuations in margin in the future as a result of costs incurred for capacity, which are not immediately utilized in these colocations. Selling, General and Administrative Selling, general and administrative expenses increased $14.4 million, or 111%, to $27.4 million for the three months ended September 30, 2000 from $13.0 million for the same period in the prior year. As a percentage of revenues, selling, general and administrative expenses increased to 44% for the three months ended September 30, 2000 from 33% for the same period in the prior year. Selling, general and administrative expenses increased $38.9 million, or 108%, to $75.0 million for the nine month period ended September 30, 2000 from $36.1 million for the same period in the prior year. As a percentage of revenues, selling, general and administrative expenses increased to 45% for the nine months ended September 30, 2000 from 33% for the same period in the prior year. We employed 855 people at September 30, 2000, compared with 454 at September 30, 1999, resulting in a increase in payroll and related expenses of 134% quarter-to-date and 108% year-to-date. The sales organization increased by 145 people as compared to the prior period, and we added 170 people to support the build-out of our local network. We expect selling, general and administrative expenses to continue to increase as we add employees to support our anticipated growth. Other selling, general and administrative expenses increased as a result of our growth in revenues and the expansion of the infrastructure to support future growth. Costs associated with the colocation facilities including rent, access and leased line charges for facilities which are not fully deployed are included in selling, general and administrative expenses. We expect these charges to increase until the colocation facilities become operational at which time, the related costs are reclassified to costs of services. Depreciation and Amortization Depreciation and amortization increased $5.4 million, or 226%, to $7.8 million for three months ended September 30, 2000 from $2.4 million for the same period in the prior year. Depreciation and amortization increased $13.9 million, or 267%, to $19.1 million for nine months ended September 30, 2000 from $5.2 million for the nine months ended September 30, 1999. The increase is primarily due to additional local network facilities, fiber, computer and other telecommunications and data services equipment to support our network expansion. In particular the Florida local switch and colocation equipment, which were put into service and began depreciating during the first nine months of 2000. We expect depreciation and amortization expense to increase as we bring additional local network facilities on-line, including the Atlanta, Georgia switch facility and southeast fiber rings, and as we make additional investments in our network and operational infrastructure. Interest Interest income net of interest expense increased to $1.1 million for the three months ended September 30, 2000 from a net interest expense of $58,000 for the same period in the prior year. Interest income net of interest expense increased $2.7 million to $1.5 for the nine months ended September 30, 2000 from a net interest expense of $1.2 million for the same period in the prior year. The increase in net interest income is primarily due to the investment of capital obtained from the common and preferred stock offerings in April 2000. Interest expense is expected to dramatically increase as the costs associated with the new $225 million new senior secured credit facility are expensed and as the capital raised from the common and preferred offerings are used in the continued buildout of the local network and to fund operating activities. Net Loss and Net Loss Applicable to Common Stockholders As a result of the increase in revenues, operating expenses, depreciation and amortization, and net interest income noted above, we incurred a net loss of $20.7 million and $56.9 million for the three and nine months ended September 30, 2000, respectively compared to $10.5 million and $22.2 million for the same periods in the prior year. 10 12 The effect of the net loss combined with the preferred stock dividends and accretion of offering expenses of $2.6 million for the three months ended September 30, 2000 and $7.6 million for the three months ended September 30, 1999 resulted in net losses applicable to common stockholders of $23.3 million for the period ended September 30, 2000 and $18.1 million for the same period in the prior year. The Company accrued dividends and accretion of offering expenses of $4.8 million and $10.7 million for the nine months ended September 30, 2000 and September 30, 1999, respectively, resulting in net losses applicable to common shareholders of $61.7 million and $32.9 million, respectively. Dividends payable on the convertible preferred stock sold by us in our April 12, 2000 offering and our anticipated increase in net losses will result in increased net loss applicable to common stockholders in the future. EBITDA. EBITDA was negative $14.0 million for the three months ended September 30, 2000 compared to negative $5.3 for the three months ended September 30, 1999. EBITDA for the nine months ended September 30, 2000 was negative $39.2 million compared to negative $14.8 million for the same period in the prior year. This decline was due to the changes in revenues, network development, operations and selling, general and administrative expenses due to the rapid implementation of our local network and infrastructure to support future growth. LIQUIDITY AND CAPITAL RESOURCES Total assets were $405.0 million at September 30, 2000 compared to $186.0 million at December 31, 1999. Cash and cash equivalents were $71.8 million at September 30, 2000 compared to $43.0 million at December 31, 1999. Net cash used for operating activities was $47.6 million during the nine months ended September 30, 2000 as compared to net cash used in operating activities of $14.9 million during the nine months ended September 30, 1999. Capital expenditures were $171.5 million for the nine months ended September 30, 2000. On September 27, 2000 we entered into a new senior credit facility agreement with Goldman Sachs Credit Partners, Fleet Securities, DLJ Bridge Finance and Fleet National Bank. This facility provides up to $225 million in total principal based on eligible receivables and eligible net property as defined by the agreement. This facility replaced the $60 million senior credit facility, which we allowed to expire in June, 2000. The proceeds from the new $225 million credit facility will be used for the purchase and acquisition of telecommunications assets and to finance working capital. All borrowings under this facility are collateralized by substantially all of the Company's assets. The new senior credit facility agreement imposes operating and financial restrictions on us. These restrictions affect, and in many cases limit, among other things, our ability to: - pay dividends or make distributions in respect to our capital stock - incur additional indebtedness - make investments or other restricted payments - sell or dispose of assets On April 12, 2000, we sold in concurrent underwritten public offerings (i) 5,000,000 shares of common stock for aggregate net proceeds of $122.9 million to us and $13.4 million to certain selling stockholders and (ii) 2,500,000 depositary shares, each representing 1/10 of a share of redeemable 7 1/2% Series A Cumulative Convertible Preferred Stock, for aggregate net proceeds to us of $119.8 million. Each depositary share is initially convertible into 1.4368 shares of our common stock. Our strategic initiatives include the deployment of additional local and long distance switches, the colocation of network equipment, the offering of new services such as local exchange and data services, the expansion of our sales force and other personnel, and significant investment in our information technology systems. These initiatives will require a substantial amount of capital for the installation of network switches and related equipment, fiber, personnel additions and funding of operating losses and working capital. 11 13 Our ability to meet our projected growth will require substantial cash resources. We estimate that the anticipated expansion of our network infrastructure, including the addition of colocations, switches, e.Commerce data centers and other network elements and our anticipated funding of negative cash flow from operating activities, will require significant capital. We expect the proceeds of our common stock and convertible preferred stock offerings in April 2000, the new senior credit facility and cash flow from operations to provide sufficient capital to fully fund our business plan. If we acquire other businesses, fail to generate anticipated revenues, or incur operating costs that are higher than anticipated, we may require additional financing. RECENTLY ISSUED ACCOUNTING STANDARDS In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" subsequently updated by SAB 101A and SAB 101B ("SAB 101"). SAB 101 summarizes certain of the SEC's view in applying generally accepted accounting principles to revenue recognition in financial statements. The Company is required to adopt SAB 101 no later than the fourth quarter of fiscal 2000. The Company does not anticipate the implementation of SAB 101 to have a material impact on the results of operations and financial position. In March 2000, the Financial Accounting Standard Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25, the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of previously fixed stock options or awards, and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not anticipate the implementation of FIN 44 to have a material impact on the Company's financial position or results of operations. In August 2000, the Emerging Issues Task Force issued LITF Issue No. 00-13, "Determining whether equipment is "Integral Equipment" subject to FASB statements No. 66, "Accounting for Sales of Real Estate" and No. 98, "Accounting for Leases" ("LITF 00-13"). LITF 00-13 clarifies the definition of "integral equipment" with regard to the Company's transactions with customers for the sale of dark fiber-optic capacity. LITF 00-13 results in the Company recording such transactions as either operating or sales-type leases. When title in the dark fiber-optic cables transfer to the customer at completion of the lease term, the Company accounts for such transactions as sales-type leases. All other such transactions are recorded as operating leases. CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS The Company had operating losses for the three and nine months ended September 30, 2000 and in each of the last five years and negative cash flow from operations for the three and nine months ended September 30, 2000 and in the year ended December 31, 1999. The Company expects to incur significant expenditures in connection with the acquisition, development and expansion of its network infrastructure, product offerings, information technology systems and employee base. As a result, the Company expects to incur significant future operating losses and negative cash flow. If its revenues do not increase significantly or the increase in its expenses is greater than expected, the Company may not achieve or sustain profitability or generate positive cash flow in the future. The Company has a significant amount of indebtedness outstanding and, as a result of its growth strategy, expects to incur significant additional indebtedness in the future including indebtedness incurred pursuant to its $225 million new senior credit facility. The Company's ability to make cash payments with respect to its outstanding indebtedness and to repay its obligations on such indebtedness at maturity or failure will depend on its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond the Company's control. In addition, the terms of the 12 14 indebtedness impose operating restrictions on the Company, which limit its flexibility and create a risk that it could default on its obligations. In the event of any such default of other limitations on the Company's ability to borrow under its credit facility, the Company would be required to seek alternative sources of funding or modify its growth strategy. The Company's future performance will depend, in large part, upon its ability to implement and manage its growth effectively, including growth through acquisitions. The Company's rapid growth has placed, and in the future will continue to place, a significant strain on its administrative, operational and financial resources. Failure to retain and attract additional qualified sales and other personnel, including management personnel who can manage the Company's growth effectively, and failure to successfully integrate such personnel, could have a material adverse effect on the Company. To manage its growth successfully, the Company will also have to continue to improve and upgrade operational, financial, accounting and information systems, controls and infrastructure as well as expand, train and manage its employee base. In the event the Company is unable to upgrade its financial controls and systems adequately to support its anticipated growth, the Company could be materially adversely affected. The Company's success will depend upon its ability to develop and expand its network infrastructure and support services in order to offer local telecommunication services, Internet access and other services. Executing the Company's business strategy will require that the Company enter into agreements, on acceptable terms and conditions, with various providers of infrastructure capacity, in particular, interconnection agreements with ILECs and peering agreements with internet service providers. No assurance can be given that any or all of the requisite agreements can be obtained on satisfactory terms and conditions. The Company has limited experience providing Internet access, broadband data including VODSL and DSL, web and managed server hosting and local services on its own network. There can be no assurance that these services will receive market acceptance in a timely manner, if at all, or that prices and demand for these services will be sufficient to provide profitable operations. The Company relies on other companies to supply certain key components of its network infrastructure, including telecommunications services, DSL services, network capacity and switching and networking equipment, which, in the quantities and quality demanded by the Company, are available only from sole or limited sources. The Company is also dependent upon incumbent local exchange carriers and other carriers to provide telecommunications services and facilities to the Company and its customers and upon third parties for other services. There can be no assurance that the Company will be able to obtain such services or facilities on the scale and within the time frames required by the Company at an affordable cost, or at all. The Company operates in a highly competitive environment and currently does not have a significant market share in any of its markets. Most of its actual and potential competitors have substantially greater financial, technical, marketing and other resources, and brand or corporate name recognition, than the Company. Also, the continuing trend toward business alliances in the telecommunications industry and the absence of substantial barriers to entry in the data and Internet services markets and the announced AT&T restructuring could give rise to significant new competition. In addition, prices for communication services have fallen historically, a trend the Company expects will continue. The Company's success will depend upon its ability to provide high-quality services at prices competitive with those charged by its competitors. Telecommunications services are subject to significant regulation at the Federal, state, local and international levels, affecting the Company and its existing and potential competitors. Delays in receiving required regulatory approvals or the enactment of new and adverse legislation, regulations or regulatory requirements may have a material adverse effect on the Company's financial condition, results of operations and cash flow. In addition, future legislative, judicial and regulatory agency actions could alter competitive conditions in the markets in which the Company is operating or intends to operate in ways that are materially adverse to the Company. The telecommunications industry has been, and is likely to continue to be, characterized by rapid technological change, frequent new service introductions and evolving industry standards. Increases or changes in technological capabilities or efficiencies could create an incentive for more competitors to enter the 13 15 facilities-based local exchange business in which the Company intends to compete. Similarly, such changes could result in lower retail rates for telecommunications services, which could have a material adverse effect on the Company's ability to price its services competitively or profitably. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 14 16 PART II -- OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Issuance of Warrants to Purchase Common Stock On September 27, 2000, the Company issued warrants entitling the holders to purchase in aggregate 3,854,056 shares of Common Stock, par value $0.01 per share, of the Company at a purchase price of $7.01 per share. The exercise price is subject to adjustment for certain dividends, stock splits and dilutive stock issuances. The warrant exercise prices is payable by cash or cancellation of shares otherwise payable to the warrant holder. The Company granted the warrant holders rights to register under the Securities Act of 1933 shares issued upon exercise of the warrants. These warrants we issued in conjunction with, and as partial consideration for, the closing of the new $225 million senior secured credit facility. Upon the closing of the credit facility 72.73% of the warrants were exercisable, with 13.64% exercisable on a pro rata basis with each amount drawn by the Company on the first $100,000 of loans under the New Senior Credit Facility and the remaining 13.63% exercisable at any time on or after the date the amount is drawn by the Company under the credit agreement. These warrants were issued in reliance upon the exemption from regulation provided by Section 4 (2) of the Securities Act of 1933 and/or Regulation D there under. Since December 26, 1999, the Company has issued 1,234,406 shares of Common Stock upon the exercise of warrants that were (i) issued and sold in the Company's September 1998 sale of Units consisting of shares of 13.5% Series A Cumulative Preferred Stock and warrants and (ii) issued to certain lenders in May 31, 1999 in connection with an amendment to the Company's credit facility. All of such warrant exercises were effected through "cashless" exercises that did not involve the payment of additional consideration to the Company. The shares of Common Stock issued pursuant to such warrant exercises were offered and sold in reliance upon exemptions set forth in Sections 3(b) and 4(2) of the Securities Act, or Regulation D promulgated thereunder, relating to sales by an issuer not involving a public offering. No underwriters or placement agents were involved in the issuance of Common Stock pursuant to any exercise of the foregoing warrants. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS The exhibits listed on the Exhibit Index are filed herewith. (b) REPORTS ON FORM 8-K The Company did not file any reports on Form 8-K during the three months ended September 30, 2000. 15 17 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Quincy, State of Massachusetts, on November 9, 2000. NETWORK PLUS CORP. By: /s/ ROBERT COBUZZI ------------------------------------ Robert Cobuzzi Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 16 18 EXHIBIT INDEX
EXHIBIT NUMBER TITLE - ------- ----- 10.1 Separation Agreement and Release dated as of the 12th day of July, 2000 by and between the Company and George C. Alex 10.2* Credit and Guaranty Agreement dated a of September 27, 2000 among the Company, Network Plus, Inc. various lenders, Goldman Sachs Credit Partners L.P., as a Joint Lead Arranger, Book Runner and Syndication Agent, FleetBoston Robertson Stephens Inc., as a Joint Lead Arranger, DLJ Bridge Finance, Inc., as Documentation Agent, and Fleet National Bank, as Collateral Agent and Administrative Agent 10.3 Pledge and Security Agreement dated as of September 27, 2000 between the Company, Network Plus, Inc. and Fleet National Bank, as Collateral Agent for the Secured Parties 10.4 Common Stock Purchase Warrant No. FW-1 of the Company dated September 27, 2000 issued in favor or Goldman, Sachs & Co. 10.5 Common Stock Purchase Warrant No. FW-2 of the Company dated September 27, 2000 issued in favor of FCS Corporation 10.6 Common Stock Purchase Warrant No. FW-3 of the Company dated September 27, 2000 issued in favor of Snoga, Inc. 10.7 Lease between Network Plus, Inc. as Tenant, and Trucks Up LLC, as Landlord
* Confidential treatment has been requested for certain portions of this agreement. 17 EX-10.1 2 b37246npex10-1.txt SEPERATION AGREEMENT AND RELEASE 1 Exhibit 10.1 SEPARATION AGREEMENT AND RELEASE This Separation Agreement and Release (this "Agreement") is made as of the 12th day of July, 2000 by and between Network Plus Corp., a Delaware corporation with its principal offices at 234 Copeland Street, Quincy, Massachusetts 02169 (the "Company"), and George C. Alex, residing at 312 Jerusalem Road, Cohasset, Massachusetts 02025 (the "Employee"). WHEREAS, as of January 15, 1999 the parties entered into an employment agreement (the "Employment Agreement") setting forth the terms and conditions of the Employee's employment with the Company; WHEREAS, the parties wish to resolve amicably the Employee's separation from the Company and terminate certain provisions of the Employment Agreement; NOW, THEREFORE, in consideration of the promises and conditions set forth herein, the sufficiency of which is hereby acknowledged, the Company and the Employee agree as follows: 1. RESIGNATION DATE. The Employee hereby resigns from all of the officer and director positions he now holds with the Company and any of its subsidiaries effective immediately and as an employee of the Company and any of its subsidiaries, if applicable, as of October 10, 2000, or such earlier period as described in Section 2 below (the "Resignation Date"). 2. EMPLOYMENT. The Employee agrees that during the period of employment prior to the Resignation Date the Employee will work up to full time for the Company on an as needed basis as may be reasonably requested by the Company. The Employee shall not be required to work on the Company's premises. The Company agrees that the Employee may devote time during the employment period to seek employment with another employer so long as it does not conflict with the business of the Company. In the event that the Employee commences other employment prior to October 10, 2000 that is inconsistent with his ability to work full time for the Company on an as needed basis as may be reasonably requested by the Company or in the event of his death or "disability" (as defined in the Employment Agreement), his employment will terminate and the Resignation Date will be deemed to be the date which is the earlier of his last day of employment with the Company, death or disability, as applicable. The Employee (or his estate) will continue to receive his salary from the Resignation Date through December 31, 2000 which salary continuation will be considered severance pay. Other than as set forth in the preceding sentence the Employee is not entitled to receive any severance or bonus pay upon his resignation from the Company or otherwise. The Employee acknowledges that he has received all of the paid vacation benefits to which he is entitled. 3. TREATMENT OF OPTIONS. The Company acknowledges that the Option Agreements granted to the Employee dated February 1, 1999 (as restated on July 6, 1999) and on December 27, 1999 are and shall remain in full force and effect in accordance with their respective terms and subject to the limitations set forth therein. As a result of the Employee's resignation arising out of Sections 4.4 and 5.3 of the Employment Agreement, the Company confirms that effective on the Resignation Date all of the Employee's then unvested options to purchase shares of the Company's common stock, par value $.01 per share, shall vest in full and, together with his then outstanding vested options, shall be exercisable at their respective exercise prices for a period of 2 ninety days following the Resignation Date. All of the Employee's unvested and vested options are set forth on EXHIBIT A hereto. 4. BENEFITS. The Employee shall be entitled to participate in all medical, dental and vision benefits programs that Company has established and made available to the Employee until the Resignation Date and thereafter until December 31, 2001 shall only be entitled to participate in the medical benefits program. 5. REIMBURSEMENT. The Company and the Employee acknowledge that the Employee donated $10,000 (the "Donation Amount") to the Marshall Foundation (the "Donation"). The Company will reimburse the Employee the Donation Amount within fifteen (15) days of the date of this Agreement. The Employee agrees not to list the Donation Amount as a deduction on his federal, state or local income tax returns for the tax year in which the Donation was made or any other period. 6. RELEASE. (a) The Employee hereby fully, forever, irrevocably and unconditionally releases, remises and discharges the Company, its officers, directors, stockholders, corporate affiliates, agents and employees from any and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities and expenses (including attorneys' fees and costs), of every kind and nature which he ever had or now has against the Company, its officers, directors, stockholders, corporate affiliates, agents and employees, including, but not limited to, all claims arising out of his employment and separation from the Company, including all employment discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Americans With Disabilities Act, 42 U.S.C., ss.12101 et seq., the Age Discrimination in Employment Act, 29 U.S.C. ss.621 et seq., the Massachusetts Fair Employment Practices Act, M.G.L. c.151B, ss.1 ET SEQ., all claims arising out of the Massachusetts Civil Rights Act, M.G.L. c.12 ss.ss.11H and 11I, the Massachusetts Equal Rights Act, c.93,ss.102 and M.G.L. c.214, ss.1C, all damages arising out of all employment discrimination claims, wrongful discharge claims or other common law claims and damages. (b) The Company hereby fully, forever, irrevocably and unconditionally releases, remises and discharges the Employee from any and all claims, charges, complaints, demands, actions, causes of action, suits, rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts, agreements, promises, doings, omissions, damages, executions, obligations, liabilities, and expenses (including attorneys' fees and costs), of every kind and nature which it ever had or now has against the Employee, including, but not limited to, all claims arising out of his employment and separation from the Company; PROVIDED, HOWEVER, that the foregoing release by the Company shall not apply to any and all claims related to acts of fraud or actions which would be considered a felony under applicable law. 7. NO REINSTATEMENT. The Employee understands and agrees that he shall not be entitled to any employment with the Company at any time following the Resignation Date, and that he will not apply for employment with the Company after the Resignation Date. 8. RETURN OF COMPANY PROPERTY. The Employee agrees to return all Company -2- 3 property and equipment in his possession or control, including, but not limited to, all Company files and documents. The Employee further agrees to leave intact all electronic Company documents including those which he developed or helped develop during his employment. 9. NATURE OF AGREEMENT. The Company and the Employee understand and agree that this Agreement is a separation agreement and does not constitute an admission of liability or wrongdoing on the part of the Company or the Employee. 10. AMENDMENT. This Agreement shall be binding upon the parties and may not be abandoned, supplemented, changed or modified in any manner, orally or otherwise, except by an instrument in writing of concurrent or subsequent date signed by a duly authorized representative of the parties hereto. This Agreement is binding upon and shall inure to the benefit of the parties and their respective agents, assigns, heirs, executors, successors and administrators. 11. VALIDITY. Should any provision of this Agreement be declared or be determined by any court of competent jurisdiction to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall not be affected thereby and said illegal and invalid part, term or provision shall be deemed not to be a part of this Agreement. 12. CONFIDENTIALITY. The Employee understands and agrees that the contents of the negotiations and discussions resulting in this Agreement shall be maintained as confidential by the Employee, his agents and representatives, and none of the above shall be disclosed by the Employee except to the extent required by federal or state law or as otherwise agreed to in writing by the Company. The Company and the Employee agree that this Agreement may be filed with the Securities and Exchange Commission and that its contents will be made publicly available. 13. NON-DISPARAGEMENT. The Employee understands and agrees that he shall not make any false, disparaging or derogatory statements in public or private regarding the Company or any of its directors, officers, employees, agents, or representatives or the Company's business affairs and financial condition. The Company understands and agrees that neither it nor any of its directors, officers, employees, agents, or representatives shall make, or cause to be made, any false, disparaging or derogatory statements in public or private regarding the Employee. 14. TERMINATION OF EMPLOYMENT AGREEMENT. The Employment Agreement is hereby terminated; provided, however, that Sections 5.4 and 7 of the Employment Agreement and the provisions of Sections 3.6 and 5.2 of the Employment Agreement that state that the Employee's Options shall vest in full upon a Change in Control Event (as defined in the Company's 1998 Stock Incentive Plan), or upon the death or Disability of the Employee prior to the Resignation Date, shall survive the termination of the Employment Agreement in accordance with their terms. The Company hereby waives any and all rights it may have under Section 6 of the Employment Agreement. As used herein, Options and Plan shall have the meanings ascribed to them in the Employment Agreement, and Change in Control Event shall have the meaning ascribed to it in the Plan. 15. ENTIRE AGREEMENT. This Agreement contains and constitutes the entire understanding and agreement between the parties hereto with respect to the separation of the Company and Employee and cancels all previous oral and written negotiations, agreements, -3- 4 commitments, and writings in connection therewith, including without limitation the Employment Agreement, except as described in Section 14 above. 16. APPLICABLE LAW. This Agreement shall be governed by the laws of the Commonwealth of Massachusetts. 17. ACKNOWLEDGMENTS. The Employee acknowledges that he or she has been given up to twenty-one (21) days to consider this Agreement and that the Company advised him or her to consult with any attorney of his or her own choosing prior to signing this Agreement. The Employee may revoke this Agreement for a period of seven (7) days after the execution of this Agreement, and the Agreement shall not be effective or enforceable until the expiration of this seven (7) day revocation period. 18. VOLUNTARY ASSENT. The Employee affirms that no other promises or agreements of any kind have been made to or with him by any person or entity whatsoever to cause him to sign this Agreement, and that he fully understands the meaning and intent of this Agreement. The Employee states and represents that he has had an opportunity to fully discuss and review the terms of this Agreement with an attorney. The Employee further states and represents that he has carefully read this Agreement, understands the contents herein, freely and voluntarily assents to all of the terms and conditions hereof, and signs his name of his own free act. 19. COUNTERPARTS. This Agreement may be executed in two (2) signature counterparts, each of which shall constitute an original, but all of which taken together shall constitute but one and the same instrument. [Signatures appear on the following page.] IN WITNESS WHEREOF, all parties have set their hand and seal to this Agreement as of the date written above. NETWORK PLUS CORP. By: /s/ Robert T. Hale, Jr. ------------------------------ Name: Robert T. Hale, Jr. Title: CEO -4- 5 /s/ George C. Alex ------------------ George C. Alex -5- 6 ANNEX A Outstanding Stock Options as of July 15, 2000 TOTAL VESTED VESTED UNVESTED EXERCISE SHARES ON 7/15/00 PRICE - ------------------------------------------------------------------------------ 4,533 1,133.3 1,133.3 3,399.8 $ 3.31 240,266 60,066.5 60,066.5 180,199.5 $ 4.41 145,067 36,267 36,267 108,800 $ 6.62 63,466 15,866.5 15,866.5 47,599.5 $11.03 10,000 0 0 10,000 $18.475 - ------------------------------------------------------------------------------ Total 463,332 113,333.3 113,333.3 236,665.4 EX-10.2 3 b37246npex10-2.txt CREDIT AND GUARANTY AGREEMENT 1 Exhibit 10.2 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. EXECUTION CREDIT AND GUARANTY AGREEMENT DATED AS OF SEPTEMBER 27, 2000 AMONG NETWORK PLUS, INC., NETWORK PLUS CORP., VARIOUS LENDERS, GOLDMAN SACHS CREDIT PARTNERS L.P., AS JOINT LEAD ARRANGER, BOOK RUNNER AND SYNDICATION AGENT, FLEET SECURITIES, INC. AS JOINT LEAD ARRANGER, DLJ BRIDGE FINANCE, INC. AS DOCUMENTATION AGENT AND FLEET NATIONAL BANK, AS COLLATERAL AGENT AND ADMINISTRATIVE AGENT, -------------------------------------------------------- $225,000,000 SENIOR SECURED CREDIT FACILITY -------------------------------------------------------- CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A EXECUTION 2 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS AND INTERPRETATION.....................................1 1.1. DEFINITIONS..............................................................1 1.2. ACCOUNTING TERMS........................................................29 1.3. INTERPRETATION, ETC.....................................................29 SECTION 2. LOANS.............................................................29 2.1. LOANS...................................................................29 2.2. PRO RATA SHARES; AVAILABILITY OF FUNDS..................................31 2.3. USE OF PROCEEDS.........................................................31 2.4. EVIDENCE OF DEBT; REGISTER; LENDERS' BOOKS AND RECORDS; NOTES...........31 2.5. INTEREST ON LOANS.......................................................32 2.6. CONVERSION/CONTINUATION.................................................33 2.7. DEFAULT INTEREST........................................................34 2.8. FEES....................................................................34 2.9. PAYMENTS/COMMITMENT REDUCTIONS..........................................35 2.10. VOLUNTARY PREPAYMENTS/COMMITMENT REDUCTIONS............................35 2.11. MANDATORY PREPAYMENTS/COMMITMENT REDUCTIONS............................36 2.12. APPLICATION OF PREPAYMENTS/REDUCTIONS..................................38 2.13. ALLOCATION OF CERTAIN PAYMENTS AND PROCEEDS............................38 2.14. GENERAL PROVISIONS REGARDING PAYMENTS..................................38 2.15. RATABLE SHARING........................................................40 2.16. MAKING OR MAINTAINING EURODOLLAR RATE LOANS............................40 2.17. INCREASED COSTS; CAPITAL ADEQUACY......................................42 2.18. TAXES; WITHHOLDING, ETC................................................43 2.19. OBLIGATION TO MITIGATE.................................................45 2.20. DEFAULTING LENDERS.....................................................46 2.21. REMOVAL OR REPLACEMENT OF A LENDER.....................................46 SECTION 3. CONDITIONS PRECEDENT..............................................47 3.1. CLOSING DATE............................................................47 3.2. CONDITIONS TO EACH CREDIT EXTENSION.....................................50 SECTION 4. REPRESENTATIONS AND WARRANTIES....................................51 4.1. ORGANIZATION; REQUISITE POWER AND AUTHORITY; QUALIFICATION..............51 4.2. CAPITAL STOCK...........................................................52 4.3. DUE AUTHORIZATION.......................................................52 4.4. NO CONFLICT.............................................................52 4.5. GOVERNMENTAL CONSENTS...................................................52 4.6. BINDING OBLIGATION......................................................52 4.7. HISTORICAL FINANCIAL STATEMENTS.........................................53 4.8. PROJECTIONS.............................................................53 4.9. NO MATERIAL ADVERSE CHANGE..............................................53 4.10. NO RESTRICTED JUNIOR PAYMENTS..........................................53 CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A (i) EXECUTION 3 4.11. ADVERSE PROCEEDINGS, ETC...............................................53 4.12. PAYMENT OF TAXES.......................................................53 4.13. PROPERTIES.............................................................54 4.14. ENVIRONMENTAL MATTERS..................................................54 4.15. NO DEFAULTS............................................................55 4.16. MATERIAL CONTRACTS.....................................................55 4.17. GOVERNMENTAL REGULATION................................................55 4.18. MARGIN STOCK...........................................................55 4.19. EMPLOYEE MATTERS.......................................................55 4.20. EMPLOYEE BENEFIT PLANS.................................................56 4.21. CERTAIN FEES...........................................................56 4.22. SOLVENCY...............................................................56 4.23. COMPLIANCE WITH STATUTES, ETC..........................................56 4.24. DISCLOSURE.............................................................56 SECTION 5. AFFIRMATIVE COVENANTS.............................................57 5.1. FINANCIAL STATEMENTS AND OTHER REPORTS..................................57 5.2. EXISTENCE...............................................................61 5.3. PAYMENT OF TAXES AND CLAIMS.............................................61 5.4. MAINTENANCE OF PROPERTIES...............................................62 5.5. INSURANCE...............................................................62 5.6. BOOKS AND RECORDS; INSPECTIONS; LENDERS MEETINGS........................62 5.7. COMPLIANCE WITH LAWS....................................................63 5.8. ENVIRONMENTAL...........................................................63 5.9. SUBSIDIARIES............................................................64 5.10. ADDITIONAL MATERIAL REAL ESTATE ASSETS.................................64 5.11. CERTAIN POST CLOSING OBLIGATIONS.......................................65 5.12. FURTHER ASSURANCES.....................................................65 SECTION 6. NEGATIVE COVENANTS................................................65 6.1. INDEBTEDNESS............................................................65 6.2. LIENS...................................................................66 6.3. EQUITABLE LIEN; NO FURTHER NEGATIVE PLEDGES.............................69 6.4. RESTRICTED PAYMENTS; RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS...........69 6.5. INVESTMENTS.............................................................70 6.6. FINANCIAL COVENANTS.....................................................71 6.7. FUNDAMENTAL CHANGES; DISPOSITION OF ASSETS; ACQUISITIONS................71 6.8. DISPOSAL OF SUBSIDIARY INTERESTS........................................72 6.9. SALES AND LEASE-BACKS...................................................72 6.10. SALE OR DISCOUNT OF RECEIVABLES........................................73 6.11. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES..........................73 6.12. CONDUCT OF BUSINESS....................................................73 6.13. AMENDMENTS OR WAIVERS WITH RESPECT TO RELATED AGREEMENTS...............73 6.14. DISPOSITION OF LICENSES, ETC...........................................73 6.15. FISCAL YEAR............................................................74 CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A (ii) EXECUTION 4 SECTION 7. GUARANTY..........................................................74 7.1. GUARANTY OF THE OBLIGATIONS.............................................74 7.2. CONTRIBUTION BY GUARANTORS..............................................74 7.3. PAYMENT BY GUARANTORS...................................................75 7.4. LIABILITY OF GUARANTORS ABSOLUTE........................................75 7.5. WAIVERS BY GUARANTORS...................................................77 7.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC....................78 7.7. SUBORDINATION OF OTHER OBLIGATIONS......................................78 7.8. CONTINUING GUARANTY.....................................................78 7.9. AUTHORITY OF GUARANTORS OR COMPANY......................................79 7.10. FINANCIAL CONDITION OF COMPANY.........................................79 7.11. BANKRUPTCY, ETC........................................................79 7.12..........................................................................80 DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR..................................80 SECTION 8. EVENTS OF DEFAULT.................................................80 8.1. EVENTS OF DEFAULT.......................................................80 SECTION 9. AGENTS............................................................83 9.1. APPOINTMENT OF AGENTS...................................................83 9.2. POWERS AND DUTIES.......................................................84 9.3. GENERAL IMMUNITY........................................................84 9.4. AGENTS ENTITLED TO ACT AS LENDER........................................85 9.5. LENDERS' REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENT.................85 9.6. RIGHT TO INDEMNITY......................................................86 9.7. SUCCESSOR ADMINISTRATIVE AGENT..........................................86 9.8. COLLATERAL DOCUMENTS AND GUARANTY.......................................87 SECTION 10. MISCELLANEOUS....................................................87 10.1. NOTICES................................................................87 10.2. EXPENSES...............................................................88 10.3. INDEMNITY..............................................................88 10.4. SET-OFF................................................................89 10.5. AMENDMENTS AND WAIVERS.................................................89 10.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS.................................91 10.7. INDEPENDENCE OF COVENANTS..............................................93 10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.................94 10.9. NO WAIVER; REMEDIES CUMULATIVE.........................................94 10.10. MARSHALLING; PAYMENTS SET ASIDE.......................................94 10.11. SEVERABILITY..........................................................94 10.12. ENTIRE AGREEMENT......................................................94 10.13. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS............95 10.14. HEADINGS..............................................................95 10.15. APPLICABLE LAW........................................................95 10.16. CONSENT TO JURISDICTION...............................................95 10.17. WAIVER OF JURY TRIAL..................................................95 CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A (iii) EXECUTION 5 10.18. CONFIDENTIALITY.......................................................96 10.19. USURY SAVINGS CLAUSE..................................................96 10.20. COUNTERPARTS; EFFECTIVENESS...........................................97 CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A (iv) EXECUTION 6 APPENDICES: A Commitments B Notice Addresses SCHEDULES: 1.1 Certain Account Debtors 4.1 Jurisdictions of Organization and Qualification 4.2 Capital Stock and Ownership 4.5 Governmental Consents 4.13 Real Estate Assets 4.16 Material Contracts 5.11 Post Closing Obligations 6.1 Certain Indebtedness 6.2 Certain Liens 6.5 Certain Investments 6.6(a) Minimum Revenues 6.6(b) Minimum Access Lines 6.6(c) Profitability 6.6(f) Maximum Days Sales Outstanding 6.6(g) Maximum Consolidated Capital Expenditures 6.9 Sale and Leaseback Transactions 6.11 Certain Affiliate Transactions EXHIBITS: A-1 Funding Notice A-2 Conversion/Continuation Notice B Note C Compliance Certificate D Opinions of Counsel E Assignment Agreement F Certificate Re Non-Bank Status G-1 Closing Date Certificate G-2 Solvency Certificate H Counterpart Agreement I Pledge and Security Agreement J Mortgage K Landlord Personal Property Collateral Access Agreement L Acknowledgment Letter M Borrowing Base Certificate CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A (v) EXECUTION 7 CREDIT AND GUARANTY AGREEMENT This CREDIT AND GUARANTY AGREEMENT, dated as of September 27, 2000 is entered into by and among NETWORK PLUS, INC., a Massachusetts corporation ("COMPANY"), NETWORK PLUS CORP., a Delaware corporation ("HOLDINGS"), the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as a Joint Lead Arranger (in such capacity, a "JOINT LEAD ARRANGER"), Book Runner (in such capacity, "BOOK RUNNER") and as Syndication Agent (in such capacity, "SYNDICATION AGENT"), FLEET SECURITIES, INC., ("FLEET SECURITIES"), as a Joint Lead Arranger (in such capacity, a "JOINT LEAD ARRANGER"), DLJ BRIDGE FINANCE, INC., as Documentation Agent (in such capacity, "DOCUMENTATION AGENT") and FLEET NATIONAL BANK, as Administrative Agent (together with its permitted successors and assigns in such capacity, "ADMINISTRATIVE AGENT") and as Collateral Agent (together with its permitted successors and assigns in such capacity, "COLLATERAL AGENT"). RECITALS: WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in the foregoing preamble and Section 1.1 hereof; WHEREAS, Lenders have agreed to extend a credit facility to Company, in an aggregate amount equal to $225,000,000, the proceeds of which will be used, (i) to provide purchase money financing for the cost of design, development, acquisition, construction, installation, improvement, transportation or integration of equipment, inventory or network assets, and (ii) for working capital and general corporate and other purposes of Company and its Subsidiaries; WHEREAS, Company has agreed to secure all of its obligations hereunder by granting to Collateral Agent, for the benefit of Secured Parties (as defined in the Pledge and Security Agreement), a First Priority Lien on substantially all of its assets, including a pledge of all of the Capital Stock held by Company of each of its Domestic Subsidiaries and 65% of all the Capital Stock of each of its Foreign Subsidiaries (other than the Australian Subsidiary); and WHEREAS, each Guarantor has agreed to guarantee the obligations of Company hereunder and to secure its Obligations hereunder by granting to Collateral Agent, for the benefit of Secured Parties, a First Priority Lien on substantially all of its assets, including a pledge of all of the Capital Stock of its Domestic Subsidiaries (including Company). NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: 8 SECTION 1. DEFINITIONS AND INTERPRETATION 1.1. DEFINITIONS. The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings: "ACCESS LINES" shall mean the total number of installed on- switch local business lines that provide service to a customer of Company and its Subsidiaries. "ACCOUNTS" means all currently existing and hereafter arising accounts, contract rights, and all other forms of obligations owing to Company arising out of the sale or lease of goods, the sale or lease of General Intangibles relating to the provision of telecommunications services, or the rendition of services by Company, irrespective of whether earned by performance, and any and all credit insurance, guaranties, or security therefor. "ACCOUNT DEBTORS" means any Person who is or who may become obligated under, with respect to, or on account of, an Account, General Intangible, or Negotiable Collateral. "ADJUSTED LIBOR RATE" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (and rounding upward to the next whole multiple of 1/16 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/16 of 1%) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/16 of 1%) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest 1/16 of 1%) equal to the offered quotation rate to first class banks in the London interbank market by Fleet for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of Administrative Agent, in its capacity as a Lender, for which the Adjusted LIBOR Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an amount equal to (a) one MINUS (b) the Applicable Reserve Requirement. "ADMINISTRATIVE AGENT" as defined in the preamble hereto. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 1 9 "ADVERSE PROCEEDING" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of Holdings or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), whether pending or, to the knowledge of Holdings or any of its Subsidiaries, threatened against or affecting Holdings or any of its Subsidiaries or any property of Holdings or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. "AFFECTED LENDER" as defined in Section 2.16(b). "AFFECTED LOANS" as defined in Section 2.16(b). "AFFILIATE" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power (i) to vote 5% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. Neither any Agent nor any Lender shall be deemed Affiliates of any Credit Party, by virtue of the security interests granted under the Pledge and Security Agreement. "AGENT" means each of GSCP (in its capacity as Joint Lead Arranger, Book Runner and Syndication Agent), Administrative Agent, Documentation Agent and Collateral Agent. "AGGREGATE AMOUNTS DUE" as defined in Section 2.15. "AGGREGATE PAYMENTS" as defined in Section 7.2. "AGREEMENT" means this Credit and Guaranty Agreement, dated as of September 27, 2000 as it may be amended, supplemented or otherwise modified from time to time. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 2 10 "APPLICABLE MARGIN" means a percentage per annum, determined by reference to the time periods set forth in the table below:
======================================================================================================== APPLICABLE MARGIN APPLICABLE MARGIN PERIOD FOR EURODOLLAR RATE LOANS FOR BASE RATE LOANS - -------------------------------------------------------------------------------------------------------- Closing Date through June 30, 2001 6.50% 4.00% - -------------------------------------------------------------------------------------------------------- July 1, 2001 through September 30, 7.25% 4.75% 2001 - -------------------------------------------------------------------------------------------------------- October 1, 2001 through December 31, 8.00% 5.50% 2001 - -------------------------------------------------------------------------------------------------------- January 1, 2002 through March 31, 2002 8.75% 6.25% - -------------------------------------------------------------------------------------------------------- April 1, 2002 through the Maturity 9.50% 7.00% Date ========================================================================================================
"APPLICABLE PREMIUM PERCENTAGE" means a percentage in effect from time to time as set forth below:
============================================================================================== PERIOD AFTER APPLICABLE PREMIUM PERCENTAGE APPLICABLE PREMIUM PERCENTAGE FOR THE CLOSING DATE FOR LOAN PREPAYMENTS FOR COMMITMENT REDUCTIONS - ---------------------------------------------------------------------------------------------- 0-6 months 1.00% 2.00% - ---------------------------------------------------------------------------------------------- 6-12 months 0.50% 1.50% - ---------------------------------------------------------------------------------------------- 12-18 months 0.00% 0.75% ==============================================================================================
CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 3 11 "APPLICABLE RESERVE REQUIREMENT" means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against "Eurocurrency liabilities" (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect, to the extent not already included in the foregoing provisions, any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted LIBOR Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement. "ASSET SALE" means a sale, lease or sublease (as lessor or sublessor), sale and leaseback, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person (other than Company or any Guarantor Subsidiary), in one transaction or a series of transactions, of all or any part of Holdings's or any of its Subsidiaries' businesses, assets or properties of any kind, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, including, without limitation, the Capital Stock of any of Holdings' Subsidiaries, other than (i) inventory (or other assets) sold or leased in the ordinary course of business, including fiber capacity sales constituting revenue in accordance with GAAP (other than sales of fiber capacity carrying traffic for the Company's customers), (ii) disposals of obsolete, worn out or surplus property, and (iii) sales of other assets for aggregate consideration of less than $1,000,000 (excluding any sales of the common stock of NorthPoint Communications Group, Inc.) with respect to any transaction or series of related transactions and less than $5,000,000 (including any sales of the common stock of NorthPoint Communications Group, Inc.) in the aggregate during any Fiscal Year. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 4 12 "ASSIGNMENT AGREEMENT" means an Assignment Agreement substantially in the form of EXHIBIT E, with such amendments or modifications as may be approved by Administrative Agent. "AUSTRALIAN SUBSIDIARY" means International Software Developers Australia Pty Ltd., an entity organized under the laws of Australia. "AUTHORIZED OFFICER" means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, chief operating officer, president or one of its vice presidents (or the equivalent thereof), and such Person's chief financial officer or treasurer. "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute. "BASE RATE" means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively, without notice or demand of any kind. "BASE RATE LOAN" means a Loan bearing interest at a rate determined by reference to the Base Rate. "BENEFICIARY" means each Agent, Lender and Lender Counterparty. "BOOK RUNNER" as defined in the preamble hereto. "BORROWING BASE AMOUNT" means, at any date of determination, the sum of (i) 80% of Eligible Accounts Receivable PLUS (ii) 70% of Eligible Unbilled Accounts PLUS(iii) Eligible Net Property, all as reflected on the most recently delivered Borrowing Base Certificate. "BORROWING BASE CERTIFICATE" means a certificate substantially in the form of EXHIBIT M attached hereto, with such modification to form and presentation as Administrative Agent may reasonably request from time to time, delivered by Company pursuant to Sections 3.1(t) and 5.1(e). "BUSINESS DAY" means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted LIBOR Rate or any Eurodollar Rate Loans, the term "BUSINESS DAY" shall mean any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 5 13 "BUSINESS PLAN" means the fully funded business plan for Holdings and its Subsidiaries for the period from Fiscal Year 2000 through and including Fiscal Year 2008 (with Fiscal Years 2000 and 2001 detailed by Fiscal Quarter) delivered to Lenders pursuant to Section 3.1(i). "CALL DATA RECORD" means a computer record evidencing a telephony or internet protocol transaction for which Company is entitled to receive payment from its Account Debtors. "CAPITAL EXPENDITURES" means, for any period, the aggregate of all expenditures of any Person during such period that, in accordance with GAAP, are or should be included in "purchase of property and equipment" or similar items reflected in the statement of cash flows of such Person. Notwithstanding the foregoing, the term "Capital Expenditures" shall not include capital expenditures in respect of the reinvestment of Net Asset Sale Proceeds or Net Insurance/Condemnation Proceeds made in accordance with Sections 2.11(a) and (b). "CAPITAL LEASE" means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. "CAPITAL STOCK" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing. "CASH" means money, currency or a credit balance in any demand or Deposit Account. "CASH EQUIVALENTS" means (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (v) shares of any money market mutual fund that (a) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 6 14 "CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in the form of EXHIBIT F. "CHANGE OF CONTROL" means, at any time, (i) any Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) other than Permitted Holders (a) shall have acquired beneficial ownership of 30% or more on a fully diluted basis of the voting and/or economic interest in the Capital Stock of Holdings or (b) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Holdings; (ii) Holdings shall cease to beneficially own and control 100% on a fully diluted basis of the economic and voting interest in the Capital Stock of Company; (iii) the Permitted Holders shall cease to own and control, directly and of record, more than 50% of the issued and outstanding common stock of Holdings; or (iv) the majority of the seats (other than vacant seats) on the board of directors (or similar governing body) of Company cease to be occupied by Persons who either (a) were members of the board of directors of Company on the Closing Date or (b) were nominated for election by the board of directors of Company, a majority of whom were directors on the Closing Date or whose election or nomination for election was previously approved by a majority of such directors. "CLOSING DATE" means the date on or before September 27, 2000 on which the conditions set forth in Section 3.1 have being satisfied. "CLOSING DATE CERTIFICATE" means a Closing Date Certificate substantially in the form of EXHIBIT G-1. "CLOSING DATE MORTGAGED PROPERTY" as defined in Section 3.1(g). "COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations. "COLLATERAL AGENT" means the institution serving as such under the Pledge and Security Agreement. "COLLATERAL DOCUMENTS" means the Pledge and Security Agreement, the Mortgages, the Landlord Personal Property Collateral Access Agreements and all other instruments, documents and agreements delivered by any Credit Party pursuant to this Agreement or any of the other Credit Documents in order to grant to Collateral Agent, for the benefit of Secured Parties, a Lien on any real, personal or mixed property of that Credit Party as security for the Obligations. "COMDISCO" means Comdisco, Inc. "COMMITMENT" means the commitment of a Lender to make or otherwise fund a Loan to Company and "COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount of each Lender's Commitment, if any is set forth in APPENDIX A or in the applicable Assignment CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 7 15 Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Commitments as of the Closing Date is $225,000,000. "COMMITMENT PERIOD" means the time period commencing on the Closing Date through and including the Commitment Termination Date. "COMMITMENT TERMINATION DATE" means the earlier to occur of (i) the date the Commitments are permanently reduced to zero pursuant to Sections 2.10 or 2.11 and (ii) the date of the termination of the Commitments pursuant to Section 8.1. "COMMUNICATIONS ACT" means the Communications Act of 1934, as amended (including, without limitation, pursuant to the Telecommunications Act of 1996), or any successor statute or statutes thereto, and all regulations thereunder, in each case as from time to time in effect. "COMMUNICATIONS LICENSE" means any license, authorization, certification, waiver or permit required from the FCC, any PUC or any other relevant Governmental Authority acting under applicable law or regulations pertaining to or regulating Holding's, Company's or their Subsidiaries' telecommunications business. "COMPANY" as defined in the preamble hereto. "COMPLIANCE CERTIFICATE" means a Compliance Certificate substantially in the form of EXHIBIT C. "CONSOLIDATED EBITDA" means, for any period, an amount determined for Holdings and its Subsidiaries on a consolidated basis equal to (i) the sum, without duplication, of the amounts for such period of (a) Consolidated Net Income, (b) Consolidated Interest Expense, (c) provisions for taxes based on income, (d) total depreciation expense, and (e) total amortization expense, all of the foregoing as determined in conformity with GAAP. "CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the aggregate of all Capital Expenditures of Holdings and its Subsidiaries during such period determined on a consolidated basis, in accordance with GAAP. "CONSOLIDATED GROSS PP&E" means, as at any date of determination, the total assets of Holdings and its Subsidiaries on a consolidated basis that may properly be classified, in conformity with GAAP, as property, plant, equipment or similar items reflected on the consolidated balance sheet of Holdings and its Subsidiaries. "CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Holdings and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Holdings and its Subsidiaries, including all commissions, discounts and other fees and charges owed CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 8 16 with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements. "CONSOLIDATED NET INCOME" means, for any period, (i) the net income (or loss) of Holdings and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, MINUS, to the extent included in net income under clause (i), (ii) (a) the income (or loss) of any Person (other than a Subsidiary of Holdings) in which any other Person (other than Holdings or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Holdings or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with Holdings or any of its Subsidiaries or that Person's assets are acquired by Holdings or any of its Subsidiaries, (c) the income of any Subsidiary of Holdings to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains or net extraordinary losses. "CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Holdings and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "CONTRACTUAL OBLIGATION" means, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "CONTRIBUTING GUARANTORS" as defined in Section 7.2. "CONVERSION/CONTINUATION DATE" means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice. "CONVERSION/CONTINUATION NOTICE" means a Conversion/Continuation Notice substantially in the form of EXHIBIT A-2. "COUNTERPART AGREEMENT" means a Counterpart Agreement substantially in the form of EXHIBIT H delivered by a Credit Party pursuant to Section 5.9. "CREDIT DATE" means the date of a Credit Extension. "CREDIT DOCUMENT" means any of this Agreement, the Notes, the Collateral Documents and all other documents, instruments or agreements executed and delivered by a Credit Party for the CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 9 17 benefit of Agents or any Lender in connection herewith, including Hedge Agreements with any Lender Counterparty, in each case as may be amended, supplemented or otherwise modified from time to time. "CREDIT EXTENSION" means the making of a Loan. "CREDIT PARTY" means each Person (other than any Agent or any Lender or any other representative thereof) from time to time party to a Credit Document. "CUMULATIVE CONSOLIDATED CAPITAL EXPENDITURES" means, as of the date of determination, the aggregate amount of all Consolidated Capital Expenditures since July 1, 2000. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of which is for the purpose of hedging the foreign currency risk associated with Holdings' and its Subsidiaries' operations and not for speculative purposes. "DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "DEFAULT EXCESS" means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate outstanding principal amount of Revolving Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Revolving Loans of such Defaulting Lender. "DEFAULT PERIOD" as defined in Section 2.20. "DEFAULTING LENDER" as defined in Section 2.20. "DEFAULTED LOAN" as defined in Section 2.20. "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "DOCUMENTATION AGENT" as defined in the preamble hereto. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "DOMESTIC SUBSIDIARY" means with respect to any Person, any Subsidiary of such Person organized under the laws of the United States of America, any State thereof or the District of Columbia. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 10 18 "ELIGIBLE ACCOUNTS RECEIVABLE" means those Accounts created by Company in the ordinary course of business, that arise out of Company's sale of goods, sale of General Intangibles relating to the providing of telecommunication services, or rendition of services, that comply in all material respects with each and all of the representations and warranties respecting Accounts made by Company to Administrative Agent in the Credit Documents. Eligible Accounts Receivable shall not include the following: (a) Accounts with respect to an Account Debtor that has failed to pay within 90 days of invoice date of any such Accounts; (b) Accounts with respect to which the Account Debtor is an Affiliate of Company; (c) Accounts that are not payable in Dollars; (d) Accounts with respect to which the Account Debtor: (i) does not maintain a significant business office in the United States, or (ii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof unless (y) the Account is supported by an irrevocable letter of credit satisfactory to Administrative Agent (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Administrative Agent and is directly drawable by Administrative Agent, or (z) the Account is covered by credit insurance in form and amount, and by an insurer, reasonably satisfactory to Administrative Agent; (e) Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which Company has complied, to the satisfaction of Administrative Agent, with the Assignment of Claims Act, 31 U.S.C. Section 3727), or (ii) any State of the United States (exclusive, however, of Accounts owed by any State that does not have a statutory counterpart to the Assignment of Claims Act); (f) Accounts with respect to which the Account Debtor is a creditor of Company (to whom Company's obligations exceed $25,000), has asserted a right of setoff, has disputed its liability, or has made any claim with respect to the Account, to the extent of such setoff, dispute, or claim; (g) Accounts with respect to an Account Debtor whose total obligations to Company exceed (i) as to those Account Debtors listed on SCHEDULE 1.1, 20% of all Eligible Accounts Receivable, or (ii) as to any other Account Debtor, 10% of all Eligible Accounts Receivable, in each case, to the extent of the obligations owing by such Account Debtor in excess of such percentage; (h) Accounts with respect to which the Account Debtor is or reasonably could be expected to become subject to any insolvency, bankruptcy or similar proceeding or reorganization, or becomes insolvent, or goes out of business; (i) Accounts with respect to which the telecommunications services giving rise to such Account have not been provided to and utilized by the Account Debtor, or any services giving rise to CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 11 19 such Account have not been performed, consumed, or utilized by the Account Debtor, or the Account does not otherwise represent a final sale; (j) Accounts with respect to which the Account Debtor is located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or any other state that requires a creditor to file a "BUSINESS ACTIVITY REPORT" or similar document in order to bring suit or otherwise enforce its remedies against such Account Debtor in the courts or through any judicial process of such state), unless Company has qualified to do business in New Jersey, Minnesota, Indiana, West Virginia, or such other states, or has filed a "NOTICE OF BUSINESS ACTIVITIES REPORT" with the applicable division of taxation, the department of revenue, or with such other state offices, as appropriate, for the then-current year, or is exempt from such filing requirement; (l) Accounts that have not yet been billed to the Account Debtor (provided that such Accounts may qualify as Eligible Unbilled Accounts if they otherwise meet the criteria applicable thereto); (m) Accounts not subject to a valid, enforceable and First Priority perfected Lien in favor of Collateral Agent; (n) Accounts that represent progress payments or other advance billings that are due prior to the completion of performance by Company of the subject contract for goods or services; and (o) Accounts which the Administrative Agent, in the exercise of its reasonable discretion, determines to be ineligible (it being understood that Administrative Agent shall endeavor to use commercially practicable efforts to give prompt notice of any such determination to Company; provided that, should such determination cause a prepayment pursuant to Section 2.11(e), such determination shall not take effect until ten days after the Administrative Agent provides notice of the determination). "ELIGIBLE ASSIGNEE" means (i) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a single Eligible Assignee for all purposes hereof), and (ii) any commercial bank, insurance company, investment or mutual fund or other entity or trust that is an "accredited investor" (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses; PROVIDED, no Affiliate of Holdings shall be an Eligible Assignee. "ELIGIBLE NET PROPERTY" means 50% of the book value (net of accumulated depreciation) of all property, plant and equipment (excluding (i) the book value of leased fiber and (ii) the greater of (A) the book value (net of accumulated depreciation) of all property, plant and equipment subject to Capital Leases or purchase money financing (including without limitation, with respect to Company's equipment financing with Comdisco), other than in connection herewith, and (B) the face amount of Company's Capital Leases and purchase money financing, other than in connection herewith, in each case with accrued interest thereon as of the date of determination) subject to a valid, enforceable and First Priority perfected Lien in favor of Collateral Agent. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 12 20 "ELIGIBLE UNBILLED ACCOUNT" means, as of any date of determination, an Account of Company that (a) resulted from a transaction that occurred prior to the date of determination and with respect to which Company has an existing call transaction record in a format that is capable of being billed by Company to its customer in accordance with Company's usual billing methods for Accounts but that has not yet been billed and invoiced to such customer, (b) does not relate to a Call Data Record received by Company more than 180 days prior to the date of determination, and (c) in all other respects would qualify as an Eligible Accounts Receivable but for the fact that it has not yet been billed and invoiced to Company's customer. Eligible Unbilled Accounts shall be net of contra accounts in accordance with clause (f) of the definition of "Eligible Accounts Receivable." If an Account that, immediately prior to being billed and invoiced, was an Eligible Unbilled Account, then is billed and invoiced, it thereupon shall cease to be an Eligible Unbilled Account, and it shall become an Eligible Accounts Receivable if it then meets the criteria applicable thereto. "EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed by, Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates. "ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "ENVIRONMENTAL LAWS" means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Holdings or any of its Subsidiaries or any Facility. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "ERISA AFFILIATE" means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Holdings or any CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 13 21 of its Subsidiaries shall continue to be considered an ERISA Affiliate of Holdings or any such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Holdings or such Subsidiary and with respect to liabilities arising after such period for which Holdings or such Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. "EURODOLLAR RATE LOAN" means a Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 14 22 "EVENT OF DEFAULT" means each of the conditions or events set forth in Section 8.1. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "FACILITY" means any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by Holdings or any of its Subsidiaries or any of their respective predecessors or Affiliates. "FAIR SHARE CONTRIBUTION AMOUNT" as defined in Section 7.2. "FAIR SHARE" as defined in Section 7.2. "FAIR SHARE SHORTFALL" as defined in Section 7.2. "FAMILY MEMBER" means, with respect to any individual, any other individual having a relationship by blood (to the second degree of consanguinity), marriage, or adoption to such individual. "FAMILY TRUST" means, with respect to any individual, trusts or other estate planning vehicles established for the benefit of Family Members of such individual and in respect of which such individual serves as trustee or in a similar capacity. "FCC" means the Federal Communications Commission. "FEC SECURITY AGREEMENT" means that certain Security Agreement, dated October 21, 1999, by and between the Company and FEC Telecom, Inc., a Delaware corporation, as in effect on the date hereof. "FEDERAL FUNDS EFFECTIVE RATE" means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; PROVIDED, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by Administrative Agent. "FINANCIAL OFFICER CERTIFICATION" means, with respect to the financial statements for which such certification is required, the certification of the chief financial officer of Holdings that such financial statements fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 15 23 periods indicated, subject (in the case of unaudited financial statements) to changes resulting from audit and normal year-end adjustments and the absence of footnotes. "FINANCIAL PLAN" as defined in Section 5.1(k). "FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is the only Lien to which such Collateral is subject, other than Permitted Liens. "FISCAL QUARTER" means a fiscal quarter of any Fiscal Year. "FISCAL YEAR" means the fiscal year of Holdings and its Subsidiaries ending on December 31 of each calendar year. "FLEET" means Fleet National Bank. "FLOOD HAZARD PROPERTY" means any Real Estate Asset subject to a mortgage in favor of Administrative Agent, for the benefit of Lenders, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. "FOREIGN SUBSIDIARY" means, with respect to any Person, any Subsidiary that is not a Domestic Subsidiary. "FUNDING DEFAULT" as defined in Section 2.20. "FUNDING GUARANTORS" as defined in Section 7.2. "FUNDING NOTICE" means a notice substantially in the form of EXHIBIT A-1. "GAAP" means, subject to the limitations on the application thereof set forth in Section 1.2, United States generally accepted accounting principles in effect as of the date of determination thereof. "GENERAL INTANGIBLES" means all of Company's present and future general intangibles and other personal property (including contract rights, rights arising under common law, statutes or regulations, choses or things in action, goodwill, patents, trade names, trademarks, service marks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, computer programs, information contained on computer disks or tapes, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds and any tax refund claims), other than goods, Accounts and Negotiable Collateral. "GOVERNMENTAL ACTS" means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 16 24 "GOVERNMENTAL AUTHORITY" means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any Governmental Authority. "GRANTOR" as defined in the Pledge and Security Agreement. "GUARANTEED OBLIGATIONS" as defined in Section 7.1. "GUARANTOR" means each of Holdings and each Domestic Subsidiary of Holdings (other than Company). "GUARANTOR SUBSIDIARY" means each Guarantor other than Holdings. "GUARANTY" means the guaranty of each Guarantor set forth in Section 7. "HALE SUBORDINATION AGREEMENT" means a subordination agreement, in form and substance satisfactory to each Lender, executed by Robert T. Hale, Jr. and Company to Administrative Agent for the benefit of the Lenders. "HALES" means, individually and collectively, Robert T. Hale, Sr. and Robert T. Hale, Jr. "HAZARDOUS MATERIALS" means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency Agreement entered into with a Lender Counterparty in order to satisfy the requirements of this Agreement or CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 17 25 otherwise in the ordinary course of Holdings' or any of its Subsidiaries' businesses and not for speculative purposes. "HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "HISTORICAL FINANCIAL STATEMENTS" means as of the Closing Date, (i) the audited financial statements of Holdings and its Subsidiaries, for Fiscal Year 1999, consisting of balance sheets and the related consolidated statements of income, stockholders' equity and cash flows for such Fiscal Year, and (ii) the unaudited financial statements of Holdings and its Subsidiaries for the period from December 31, 1999 through the month completed no less than thirty five (35) days prior to the Closing Date, consisting of a balance sheet and the related consolidated statements of income, stockholders' equity and cash flows for the three-, six- or nine-month period, as applicable, ending on such date, and, in the case of clause (ii), certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. "HOLDINGS" as defined in the preamble hereto. "INCREASED-COST LENDERS" as defined in Section 2.21. "INDEBTEDNESS", as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases (including, without limitation, all obligations under leases of fiber capacity) that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA and ordinary course trade payables), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vi) the face amount of any undrawn letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (vii) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (viii) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; and (ix) any liability of such Person for the obligation of another through any agreement (contingent or CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 18 26 otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above; and (x) obligations of such Person in respect of any exchange traded or over the counter derivative transaction, including, without limitation, any Interest Rate Agreement or Currency Agreement, whether entered into for hedging or speculative purposes; PROVIDED, in no event shall obligations under any Interest Rate Agreement or Currency Agreement be deemed "Indebtedness" for any purpose under Section 6.6. "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby (including Lenders' agreement to make Credit Extensions or the use or intended use of the proceeds thereof, or any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty)); (ii) the statements contained in the commitment letter delivered by any Lender to Company with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Holdings or any of its Subsidiaries. "INDEMNITEE" as defined in Section 10.3. "INTELLECTUAL PROPERTY" means "Intellectual Property" as such term is defined in the Pledge and Security Agreement. "INTERCONNECTION AGREEMENT" means any agreement entered into with an incumbent provider of local exchange telephone service in accordance with Sections 251 and 252 of the Communications Act. "INTEREST PAYMENT DATE" means with respect to (i) any Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 19 27 after the Closing Date and Maturity Date; and (ii) any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; PROVIDED, in the case of each Interest Period of longer than three months "Interest Payment Date" shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period. "INTEREST PERIOD" means, in connection with a Eurodollar Rate Loan, an interest period of one-, two-, three- or six-months, as selected by Company in the applicable Funding Notice or Conversion/Continuation Notice, (i) initially, commencing on the Credit Date or Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; PROVIDED, (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) of this definition, end on the last Business Day of a calendar month; and (c) no Interest Period with respect to any portion of the Loans shall extend beyond the Maturity Date. "INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure associated with Holdings' and its Subsidiaries' operations and not for speculative purposes. "INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. "INVESTMENT" means (i) any direct or indirect purchase or other acquisition by Holdings or any of its Subsidiaries of, or of a beneficial interest in, any of the Securities of any other Person (other than a Guarantor Subsidiary); (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Holdings from any Person (other than Holdings or any Guarantor Subsidiary), of any Capital Stock of such Person; and (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Holdings or any of its Subsidiaries to any other Person (other than Holdings or any Guarantor Subsidiary), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 20 28 "INVESTMENT PROPERTY" means "investment property" as that term is defined in Section 9-115 of the UCC "JOINT LEAD ARRANGER" as defined in the preamble hereto. "JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership, limited liability company, or other legal form; PROVIDED, in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold Property, a letter, certificate or other instrument in writing from the lessor under the related lease, pursuant to which, among other things, the landlord consents to the granting of a Mortgage on such Leasehold Property by the Credit Party tenant, such Landlord Consent and Estoppel to be in form and substance acceptable to Collateral Agent in its reasonable discretion, but in any event sufficient to enable Collateral Agent to obtain a Title Policy with respect to such Mortgage. "LANDLORD PERSONAL PROPERTY COLLATERAL ACCESS AGREEMENT" means a Landlord Personal Property Collateral Access Agreement substantially in the form of EXHIBIT K, with such amendments or modifications as may be approved by Collateral Agent. "LEASEHOLD PROPERTY" means any leasehold interest of any Credit Party as lessee under any lease of real property, other than any such leasehold interest designated from time to time by Collateral Agent in its sole discretion as not being required to be included in the Collateral. "LEC" means a local exchange carrier or telephone company that provides "basic" (as defined by the FCC) telecommunications services to its customers from whom Company may receive payments with respect to Accounts. "LENDER" means each financial institution that becomes a Lender under this Agreement as of the Closing Date together with each such institution's successors and permitted assigns. "LENDER COUNTERPARTY" means each Lender or any Affiliate thereof counterparty to a Hedge Agreement. "LIEN" means (i) any lien, claim, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities. "LOANS" means any loan made by Lender to Company pursuant to Section 2.1(a) of this Agreement. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 21 29 "LOAN EXPOSURE" means, with respect to any Lender as of any date of determination, the outstanding principal amount of the Loans of such Lender; PROVIDED, at any time prior to the making of the initial Loans, the Loan Exposure of any Lender shall be equal to such Lender's Commitment. "MARGIN STOCK" as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings and its Subsidiaries, taken as a whole; (ii) the ability of any Credit Party to fully and timely perform its Obligations; (iii) the legality, validity, binding effect or enforceability against a Credit Party of a Credit Document to which it is a party; (iv) the rights and remedies available to, or conferred upon, any Agent and any Lender or any Secured Party under any Credit Document; or (v) the Collateral Agent's Liens, on behalf of Secured Parties on the Collateral or the priority of such Liens (except as affected by Permitted Liens). "MATERIAL CONTRACT" means any contract or other arrangement to which Holdings or any of its Subsidiaries is a party (other than the Credit Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect. "MATERIAL REAL ESTATE ASSET" means (a) any fee-owned Real Estate Assets having a fair market value in excess of $1,000,000 as of the date of the acquisition thereof (b) all Leasehold Properties other than those with respect to which the aggregate payments under the term of the lease are less than $1,000,000 per annum and (c) any Real Estate Assets that the Administrative Agent has reasonably determined are material to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings or any Subsidiary thereof, including Company. "MATURITY DATE" means the earlier of (i) June 30, 2002 and (ii) the date that all Loans shall otherwise become due and payable in full hereunder, whether by acceleration or otherwise. "MAXIMUM DAYS SALES OUTSTANDING" means (A) (i) the accounts receivable of Company as of the end of a Fiscal Quarter DIVIDED by (ii) annualized revenues for such Fiscal Quarter MULTIPLIED by (B) 360. "MOODY'S" means Moody's Investor Services, Inc. "MORTGAGE" means a mortgage, deed of trust or similar instrument, substantially in the form of EXHIBIT J, as it may be amended, supplemented or otherwise modified from time to time. "MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer plan" as defined in Section 3(37) of ERISA. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 22 30 "NAIC" means The National Association of Insurance Commissioners, and any successor thereto. "NEGOTIABLE COLLATERAL" means, all of a Person's present and future letters of credit, notes, drafts, instruments, Investment Property, documents, personal property leases (wherein such Person is the lessor), chattel paper and books relating to any of the foregoing. "NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, an amount equal to: (i) Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by Holdings or any of its Subsidiaries from such Asset Sale, MINUS (ii) any bona fide direct costs incurred in connection with such Asset Sale, including (a) income or gains taxes payable by the seller as a result of any gain recognized in connection with such Asset Sale, (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale and (c) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller's indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Holdings or any of its Subsidiaries in connection with such Asset Sale. "NET INSURANCE/CONDEMNATION PROCEEDS" means an amount equal to: (i) any Cash payments or proceeds received by Holdings or any of its Subsidiaries (a) under any casualty insurance policy in respect of a covered loss thereunder or (b) as a result of the taking of any assets of Holdings or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, MINUS (ii) (a) any actual and reasonable costs incurred by Holdings or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Holdings or such Subsidiary in respect thereof, and (b) any bona fide direct costs incurred in connection with any sale of such assets as referred to in clause (i)(b) of this definition, including income taxes payable as a result of any gain recognized in connection therewith. "NON-US LENDER" as defined in Section 2.18(c). "NOTE" means a promissory note in the form of EXHIBIT B, as it may be amended, supplemented or otherwise modified from time to time. "NOTICE" means a Funding Notice or a Conversion/Continuation Notice. "OBLIGATIONS" means all obligations of every nature of each Credit Party from time to time owed to the Agents, the Lenders or any of them or their respective Affiliates (including, without limitation, all former Agents, Lenders or Lender Counterparties) under any Credit Document or Hedge Agreement (including, without limitation, with respect to a Hedge Agreement, obligations owed thereunder to any person who was a Lender or an Affiliate of a Lender at the time such Hedge Agreement was entered into), whether for principal, interest (including interest which, but for the filing CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 23 31 of a petition in bankruptcy with respect to such Credit Party, would have accrued on any Obligation, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy proceeding), payments for early termination of Hedge Agreements, fees, expenses, indemnification or otherwise. "OBLIGEE GUARANTOR" as defined in Section 7.7. "ORGANIZATIONAL DOCUMENTS" means (i) with respect to any corporation, its certificate or articles of incorporation, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its certificate of formation or articles of organization, as amended, and its operating agreement, as amended. In the event any term or condition of this Agreement or any other Credit Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such "Organizational Document" shall only be to a document of a type customarily certified by such governmental official. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "PERMITTED ACQUISITION" means any acquisition by the Company or any of its Subsidiary, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the Capital Stock of, or a business line or unit or a division of, any Person; PROVIDED, (i) immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions in connection therewith shall be consummated in accordance with all applicable laws and in conformity with all applicable Governmental Authorizations; (iii) in the case of the acquisition of Capital Stock, (A) all of the Capital Stock (except for any such Securities in the nature of directors' qualifying shares required pursuant to applicable law), acquired or otherwise issued by such Person or any newly formed Subsidiary of Company in connection with such acquisition shall be owned 100% by the Company or a Guarantor Subsidiary thereof, and (B) Holdings and Company shall have taken, or caused to be taken, as of the date such Person becomes a Subsidiary of Borrower, each of the actions set forth in Section 5.9, as applicable; (iv) Holdings and its Subsidiaries shall be in compliance with, immediately before and after giving pro forma effect to such acquisition, Section 6.6; CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 24 32 (v) Company shall have delivered to Administrative Agent (A) at least 10 Business Days prior to such proposed acquisition, a Compliance Certificate evidencing pro forma compliance with Section 6.6, as required under clause (iv) above, together with all relevant financial information with respect to such acquired assets, including, without limitation, the aggregate consideration for such acquisition and any other information required to demonstrate pro forma compliance with Section 6.6; (vi) any Person or assets or division as acquired in accordance herewith shall be in same or related business or lines of business in which Company and/or its Subsidiaries are engaged as of the Closing Date or such other lines of business as may be consented to by Requisite Lenders; and (vii) the aggregate purchase price (whether cash, equity, indebtedness (incurred or assumed), or a combination thereof) paid in connection with all such acquisitions since the Closing Date does not exceed $5,000,000. "PERMITTED HOLDERS" means the Hales, their respective Family Members, and their respective Family Trusts. "PERMITTED LIENS" means each of the Liens permitted pursuant to Section 6.2. "PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities. "PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security Agreement to be executed by Company and each Guarantor substantially in the form of EXHIBIT I, as it may be amended, supplemented or otherwise modified from time to time. "PREMIUM" as defined in Section 2.12(c) "PRIME RATE" means the variable per annum rate of interest so designated from time to time by the Administrative Agent or any successor thereto, as its prime rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. "PRINCIPAL OFFICE" means such Person's "Principal Office" as set forth on APPENDIX B, or such other office as such Person may from time to time designate in writing to Company, Administrative Agent and each Lender. "PROJECTIONS" as defined in Section 4.8. "PRO RATA SHARE" means, with respect to all payments, computations and other matters relating to the Commitment or the Loans of any Lender, the percentage obtained by dividing (x) the CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 25 33 Loan Exposure of that Lender by (y) the aggregate Loan Exposure of all Lenders Loan Exposure. The Pro Rata Share of each Lender as of the Closing Date for purposes of each of clauses (i) and (ii) of the preceding sentence is set forth opposite the name of that Lender in APPENDIX A. "PUC" means, with respect the any state, the public utilities commission, public service commission or other state Governmental Authority with responsibility for telecommunications regulation in such state and/or having telecommunications regulatory jurisdiction over Holdings, Company or any of its Subsidiaries, or any of their respective business, operations or assets. "REAL ESTATE ASSET" means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Credit Party in any real property. "RECORD DOCUMENT" means, with respect to any Leasehold Property, (i) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (ii) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Collateral Agent. "RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document has been recorded in all places necessary or desirable, in Administrative Agent's reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. "REGISTER" as defined in Section 2.4(b). "REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "RELATED AGREEMENTS" means the FEC Security Agreement and all agreements with respect to the Comdisco equipment financing. "RELATED FUND" means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "RELEASE" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater. "REPLACEMENT LENDER" as defined in Section 2.21. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 26 34 "REQUISITE LENDERS" means two or more Lenders having or holding Loan Exposure representing more than 50% of the aggregate Loan Exposure of all Lenders. "RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Holdings or Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Holdings or Company now or hereafter outstanding; (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Holdings or Company now or hereafter outstanding. "REVENUES" means, for any Fiscal Quarter, the gross revenues of Holdings and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Corporation. "SECURED PARTIES" has the meaning assigned to that term in the Pledge and Security Agreement. "SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute. "SOLVENCY CERTIFICATE" means a Solvency Certificate of the chief financial officer of Holdings substantially in the form of EXHIBIT G-2. "SOLVENT" means, with respect to any Person, that as of the date of determination both (i) (a) the sum of such Person's debt (including contingent liabilities) does not exceed all of its property, at a fair valuation; (b) the present fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured; (c) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (d) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (ii) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 27 35 definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No.5). "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; PROVIDED, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a "qualifying share" of the former Person shall be deemed to be outstanding. "SYNDICATION AGENT" as defined in the preamble hereto. "SYSTEMS" means any of the computer hardware, firmware or software systems associated with information processing and delivery, operations or services (e.g., security and alarms, elevators, communications, and HVAC) operated by, provided to or otherwise reasonably necessary to the business or operations of Holdings and its Subsidiaries. "TAX" means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; PROVIDED, "Tax on the overall net income" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person's applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office). "TERMINATED LENDER" as defined in Section 2.21. "TOTAL CAPITALIZATION" means the sum of (a) Consolidated Total Debt and (b) paid-in-equity capital (including preferred stock) and excluding any accumulated deficits resulting from operations. "TOTAL UTILIZATION OF COMMITMENTS" means, as of any date of determination, the sum of the aggregate outstanding principal amount of all Loans. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 28 36 "TRANSACTION COSTS" means the fees, costs and expenses payable by Company on or before the Closing Date in connection with the transactions contemplated by the Credit Documents. "TYPE OF LOAN" means a Base Rate Loan or a Eurodollar Rate Loan. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. "UCC QUESTIONNAIRE" means a certificate in form satisfactory to the Collateral Agent that provides information with respect to the personal or mixed property of each Credit Party. 1.2. ACCOUNTING TERMS. Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Holdings to Lenders pursuant to Section 5.1(a), 5.1(b) and 5.1(c) shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in Section 5.1(e), if applicable). Subject to the foregoing, calculations in connection with the definitions, covenants and other provisions hereof shall utilize accounting principles and policies in conformity with those used to prepare the Historical Financial Statements. 1.3. INTERPRETATION, ETC. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically provided. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. SECTION 2. LOANS 2.1. LOANS. (a) LOANS. During the Commitment Period, subject to the terms and conditions hereof, each Lender holding a Commitment severally agrees to make Loans to Company in the aggregate amount up to but not exceeding such Lender's Commitment; PROVIDED, HOWEVER, the aggregate amount of Loans outstanding at any one time shall not exceed the lesser of (i) the aggregate Commitments and (ii) the Borrowing Base. Company may make one or more drawings on the Commitments during the Commitment Period. Subject to Sections 2.9, 2.10 and 2.11, all amounts owed hereunder with respect to the Loans shall be paid in full no later than the Maturity Date. Subject to Section 2.11, each Lender's Commitment shall terminate immediately and without further action upon the funding in full of such Lender's Commitment. Any amounts borrowed under this Section CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 29 37 2.1(a) and subsequently repaid or prepaid may not be re-borrowed; PROVIDED that, notwithstanding the foregoing, any prepayments by Borrower pursuant to Sections 2.11(a), 2.11(b) or 2.11(e)(i) shall reinstate Commitments by the amount of such prepayment and Loans may subsequently be made in the amount of such reinstated Commitments in accordance with the terms of this Agreement. (b) BORROWING MECHANICS FOR LOANS. (i) Loans shall be made in a minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof. (ii) Whenever Company desires that Lenders make Loans, Company shall deliver to Administrative Agent telephonic notice, followed by a fully executed and delivered (A) Funding Notice, (B) Borrowing Base Certificate and (C) in the case of the initial drawing, a Compliance Certificate as of the most recently completed Fiscal Quarter, in each case no later than 10:00 a.m. (New York City time) at least three Business Days in advance of the proposed Credit Date in the case of a Eurodollar Rate Loan, and at least one Business Day in advance of the proposed Credit Date in the case of a Loan that is a Base Rate Loan. Except as otherwise provided herein, a Funding Notice for a Loan that is a Eurodollar Rate Loan shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. Anything contained in this Agreement to the contrary notwithstanding, in no event shall the Total Utilization of Commitments at any time exceed the Borrowing Base Amount then in effect (determined on the date on which Administrative Agent has most recently received a Borrowing Base Certificate) and in no event shall the Total Utilization of Commitments exceed the amount of all Commitments then in effect. (iii) Notice of receipt of each Funding Notice in respect of Loans, together with the amount of each Lender's Pro Rata Share thereof, if any, the Type of Loan being funded together with the applicable interest rate, shall be provided by Administrative Agent to each applicable Lender by telefacsimile with reasonable promptness, but not later than 2:00 p.m. (New York City time) on the same day as Administrative Agent's receipt of such Notice from Company. (iv) Each Lender shall make the amount of its Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at the Administrative Agent's Principal Office. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Loans available to Company on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Administrative Agent from Lenders to be credited to the account of Company at the Administrative Agent's Principal Office or such other account as may be designated in writing to Administrative Agent by Company not later than 2:00 p.m. (New York City time) on the applicable Credit Date. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 30 38 2.2. PRO RATA SHARES; AVAILABILITY OF FUNDS. (a) PRO RATA SHARES. All Loans shall be made, by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender's obligation to make a Loan requested hereunder or purchase a participation required hereby nor shall any Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender's obligation to make a Loan requested hereunder required hereby. (b) AVAILABILITY OF FUNDS. Unless Administrative Agent shall have been notified by any Lender prior to the applicable Credit Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Loan requested on such Credit Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Credit Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Credit Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the rate payable hereunder for Base Rate Loans. Nothing in this Section 2.2(b) shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. 2.3. USE OF PROCEEDS. The proceeds of the Loans shall be used by Company to (y) to provide purchase money financing for the cost of design, development, acquisition, construction, installation, improvement, transportation or integration of equipment, inventory, and network assets and (z) for general corporate purposes, and working capital financing for Company and its Domestic Subsidiaries. No portion of the proceeds of any Credit Extension shall be used in any manner that causes or might cause such Credit Extension or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation thereof or to violate the Exchange Act. 2.4. EVIDENCE OF DEBT; REGISTER; LENDERS' BOOKS AND RECORDS; NOTES. (a) LENDERS' EVIDENCE OF DEBT. Each Lender shall maintain on its internal records an account or accounts evidencing the Indebtedness of Company to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall be prima facie evidence, absent manifest error; PROVIDED, failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 31 39 in respect of any applicable Loans; and PROVIDED FURTHER, in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern. (b) REGISTER. Administrative Agent shall maintain at its Principal Office a register for the recordation of the names and addresses of Lenders and the Commitments and Loans of each Lender from time to time (the "REGISTER"). The Register shall be available for inspection by Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. Administrative Agent shall record in the Register the Commitments and the Loans, and each repayment or prepayment in respect of the principal amount of the Loans, and any such recordation shall be conclusive and binding on Company and each Lender, absent manifest error; PROVIDED, failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of any Loan. Company hereby designates Fleet to serve as Company's agent solely for purposes of maintaining the Register as provided in this Section 2.4, and Company hereby agrees that, to the extent Fleet serves in such capacity, Fleet and its officers, directors, employees, agents and affiliates shall constitute "Indemnitees." (c) NOTES. If so requested by any Lender by written notice to Company (with a copy to Administrative Agent) at least two Business Days prior to the Closing Date, or at any time thereafter, Company shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to Section 10.6) on the Closing Date (or, if such notice is delivered after the Closing Date, promptly after Company's receipt of such notice) a Note or Notes to evidence such Lender's Loans. 2.5. INTEREST ON LOANS. (a) Except as otherwise set forth herein, each Loan shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows: (i) if a Base Rate Loan, at the Base Rate plus the Applicable Margin; or (ii) if a Eurodollar Rate Loan, at the Adjusted LIBOR Rate plus the Applicable Margin. (b) The basis for determining the rate of interest with respect to any Loan, and the Interest Period with respect to any Eurodollar Rate Loan, shall be selected by Company and notified to Administrative Agent and Lenders pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as the case may be. If on any day a Loan is outstanding with respect to which a Funding Notice or Conversion/Continuation Notice has not been delivered to Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Loan shall be a Base Rate Loan. (c) In connection with Eurodollar Rate Loans there shall be no more than ten (10) Interest Periods outstanding at any time. In the event Company fails to specify between a Base Rate CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 32 40 Loan or a Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, such Loan (if outstanding as a Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then-current Interest Period for such Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then outstanding) will be made as, a Base Rate Loan). In the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, Company shall be deemed to have selected an Interest Period of one month. As soon as practicable after 10:00 a.m. (New York City time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. (d) Interest payable pursuant to Section 2.5(a) shall be computed (v) in the case of Base Rate Loans on the basis of a 365-day or 366-day year, as the case may be, and (vi) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; PROVIDED, if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. (e) Except as otherwise set forth herein, interest on each Loan shall be payable in arrears on and to (vii) each Interest Payment Date applicable to that Loan; (viii) any prepayment of that Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid; and (ix0 at maturity, including final maturity; PROVIDED, however, with respect to any voluntary prepayment of a Base Rate Loan, accrued interest shall instead be payable on the applicable Interest Payment Date. 2.6. CONVERSION/CONTINUATION. (a) Subject to Section 2.16 and so long as no Default or Event of Default shall have occurred and then be continuing, Company shall have the option: (x) to convert at any time all or any part of any Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount from one Type of Loan to another Type of Loan; PROVIDED, a Eurodollar Rate Loan may only be converted into a Base Rate Loan on the expiration of the Interest Period applicable to such Eurodollar Rate Loan unless Company shall pay all amounts due under Section 2.16(c) in connection with any such conversion; or CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 33 41 (xi) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $5,000,000and integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Loan. (b) Company shall deliver a Conversion/Continuation Notice to Administrative Agent no later than 10:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, any Eurodollar Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance therewith. 2.7. DEFAULT INTEREST. Upon the occurrence and during the continuance of an Event of Default described in Section 8.1(a), the principal amount of all Loans and, to the extent permitted by applicable law, any interest payments on the Loans or any fees or other amounts owed hereunder not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate that is 2% per annum in excess of the interest rate otherwise payable hereunder with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans); PROVIDED, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this Section 2.7 is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. 2.8. FEES. (a) Company agrees to pay to Lenders through Administrative Agent a commitment fee equal to (1) the average daily unused Commitments of such Lender during the preceding quarter multiplied by (2) 0.50% per annum. The aforementioned fee shall be paid to Administrative Agent at its Principal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof. (b) The fee referred to in Section 2.8(a) shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable (i) quarterly in arrears on March 31, June 30, September 30 and December 31 of each year commencing on the first such date to occur after the Closing Date and (ii) on the Commitment Termination Date. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 34 42 (c) On each Credit Date, Company agrees to pay to Lenders a fee equal to (1) the aggregate amount of Loans made available to Company on such Credit Date (other than re-borrowings of amounts previously prepaid pursuant to Sections 2.11(a), 2.11(b) and 2.11(e)) multiplied by (2) 1.00%. The aforementioned fee shall be paid to Administrative Agent at its Principal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof. (d) In addition to any of the foregoing fees, Company agrees to pay to Agents such other fees in the amounts and at the times separately agreed upon by Company and such Agents thereby. 2.9. PAYMENTS/COMMITMENT REDUCTIONS. The principal amounts of the Loans, together with all other amounts owed hereunder with respect thereto, shall be permanently repaid in full no later than the Maturity Date, subject to any voluntary or mandatory reduction or prepayments of the Commitments and/or the Loans in accordance with Sections 2.10, 2.11 and 2.12. 2.10. VOLUNTARY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) VOLUNTARY PREPAYMENTS. (xii) Any time and from time to time: (1) with respect to Base Rate Loans, Company may prepay, any such Loans on any Business Day in whole or in part; PROVIDED, any such partial prepayments shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount; and (2) with respect to Eurodollar Rate Loans, Company may prepay (subject to Section 2.16) any such Loans on any Business Day in whole or in part; PROVIDED, any such partial prepayments shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. (xiii) All such prepayments shall be made: (1) upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans; and (2) upon not less than three Business Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans; in each case given to Administrative Agent, as the case may be, by 12:00 p.m. (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent (and Administrative Agent will promptly transmit such telephonic or original notice by telefacsimile or telephone to each Lender). Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 35 43 (b) VOLUNTARY COMMITMENT REDUCTIONS. (i) Company may, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each applicable Lender), at any time and from time to time terminate in whole or permanently reduce in part the Commitments in an amount up to the amount by which the Commitments exceed the Total Utilization of Commitments at the time of such proposed termination or reduction; PROVIDED, any such partial reduction of the Commitments shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. (ii) Company's notice to Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Commitments shall be effective on the date specified in Company's notice and shall reduce the Commitment of each Lender proportionately to its Pro Rata Share thereof. 2.11. MANDATORY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) ASSET SALES. No later than the first Business Day following the date of receipt by Holdings or any of its Subsidiaries of any Net Asset Sale Proceeds, Company shall prepay the Loans and/or permanently reduce the Commitments in accordance with Section 2.12(a) in an aggregate amount equal to such Net Asset Sale Proceeds; PROVIDED, so long as no Default or Event of Default shall have occurred and be continuing, Company shall have the option, directly or through one or more of its Subsidiaries, to invest Net Asset Sale Proceeds, up to an aggregate $5,000,000 from the Closing Date through the applicable date of determination, within two hundred seventy (270) days of receipt thereof in long-term productive assets of the general type used in the business of Company and its Subsidiaries. During the period between the receipt of Net Asset Sale Proceeds and the investment of Net Assets Sale Proceeds in accordance with the proviso in the immediately preceding sentence, the Company may prepay, subject to Section 2.12(c), any outstanding Loans (and, concurrently therewith, the Commitments shall be increased by the amount thereof) and subsequently re-borrow such amount, without any fee pursuant to Section 2.8(c), for the purpose of making such investment. (b) INSURANCE/CONDEMNATION PROCEEDS. No later than the first Business Day following the date of receipt by Holdings or any of its Subsidiaries, or Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds, Company shall prepay the Loans and/or permanently reduce the Commitments in accordance with Section 2.12(a) in an aggregate amount equal to such Net Insurance/Condemnation Proceeds; PROVIDED, so long as no Default or Event of Default shall have occurred and be continuing, Company shall have the option, directly or through one or more of its Subsidiaries, to invest such Net Insurance/Condemnation Proceeds, up to an aggregate $5,000,000 from the Closing Date through the applicable date of determination, within two hundred seventy (270) days of receipt thereof in long term productive assets of the general type used in the business of Holdings and its Subsidiaries, which investment may include the repair, restoration or replacement of the applicable assets thereof. During the period between the receipt of Net Insurance/Condemnation CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 36 44 Proceeds and the investment of Net Insurance/Condemnation Proceeds in accordance with the proviso in the immediately preceding sentence, the Company may prepay, subject to Section 2.12(c), any outstanding Loans (and, concurrently therewith, the Commitments shall be increased by the amount thereof) and subsequently re-borrow such amount, without any fee pursuant to Section 2.8(c), for the purpose of making such investment. (c) ISSUANCE OF EQUITY SECURITIES. On the date of receipt by Holdings of any Cash proceeds from a capital contribution to, or the issuance of, any Capital Stock of Holdings or any of its Subsidiaries (other than pursuant to any warrants, employee stock or stock option compensation plan), Company shall prepay the Loans and/or permanently reduce the Commitments in accordance with Section 2.12(a) in an aggregate amount equal to 100% of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses. (d) ISSUANCE OF DEBT. On the date of receipt by Holdings or any of its Subsidiaries of any Cash proceeds from incurrence of any Indebtedness of Holdings or any of its Subsidiaries (other than with respect to any Indebtedness permitted to be incurred pursuant to Section 6.1), Company shall prepay the Loans and/or permanently reduce the Commitments in accordance with Section 2.12(a) in an aggregate amount equal to 100% of such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses. (e) COMMITMENT LIMITS. Company shall from time to time prepay the Loans to the extent necessary so that the Total Utilization of Commitments shall not at any time exceed the lesser of (i) the Borrowing Base Amount then in effect (determined on the date on which Administrative Agent has most recently received a Borrowing Base Certificate) and (ii) the Commitments then in effect; PROVIDED that, in the case of prepayments pursuant to clause (i) no Premium shall be payable with respect thereto pursuant to Section 2.12(c). Any prepayments made pursuant to clause (i) above shall, concurrently therewith, increase Commitments by the amount thereof and may subsequently be re-borrowed, without any fee pursuant to Section 2.8(c), in accordance with the provisions of this Agreement. (f) PREPAYMENT CERTIFICATE. Concurrently with any prepayment of the Loans and/or reduction of the Commitments pursuant to Sections 2.11(a) through 2.11(d), Company shall deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the calculation of the amount of the applicable net proceeds. In the event that Company shall subsequently determine that the actual amount received exceeded the amount set forth in such certificate, Company shall promptly make an additional prepayment of the Loans and/or the Commitments shall be permanently reduced) in an amount equal to such excess, and Company shall concurrently therewith deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the derivation of such excess. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 37 45 2.12. APPLICATION OF PREPAYMENTS/REDUCTIONS. (a) APPLICATION OF MANDATORY PREPAYMENTS. Any amount required to be paid pursuant to Sections 2.11(a) through 2.11(d) shall be applied FIRST to prepay Loans and SECOND to reduce Commitments. (b) APPLICATION OF PREPAYMENTS OF LOANS TO BASE RATE LOANS AND EURODOLLAR RATE LOANS. Any prepayment of Loans shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to Section 2.16(c). (c) PREPAYMENT/REDUCTION PREMIUM. Notwithstanding anything herein to the contrary but subject to the provisions set forth in Section 2.11(e), upon any prepayment of any Loan or any reduction of Commitments pursuant to Section 2.10 or 2.11 on or prior to the eighteen (18) month anniversary of the Closing Date, Company shall also pay to Administrative Agent, for the account of the holders of the Loans then being prepaid or Lenders with Commitments being reduced, as the case may be, an amount equal to (i) in the case of Loan prepayments, (A) the aggregate principal amount of such Loans, times (B) the Applicable Premium Percentage for Loan prepayments determined as of such date of prepayment and (ii) in the case of Commitment reductions, (A) the aggregate principal amount of such reduction of Commitments, times (B) the Applicable Premium Percentage for Commitment reductions determined as of such date of reduction (in both instances (A) and (B), such amount being the "PREMIUM"). Any payment of the Premium shall be in addition to, and not in limitation of, any other amount payable hereunder or under any other Credit Document in connection with any prepayment of the Term Loans or reduction of the Commitments. Upon receipt thereof, Administrative Agent shall promptly distribute each Premium to each applicable Lender pursuant to Section 2.14(c). 2.13. ALLOCATION OF CERTAIN PAYMENTS AND PROCEEDS. If an Event of Default shall have occurred and not otherwise been waived, and the maturity of the Obligations shall have been accelerated pursuant to Section 8.1, all payments or proceeds received by Agents hereunder in respect of any of the Obligations, shall be applied in accordance with the application arrangements described in Section 6.5 of the Pledge and Security Agreement. 2.14. GENERAL PROVISIONS REGARDING PAYMENTS. (a) All payments by Company of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 p.m. (New York City time) on the date due at the Administrative Agent's Principal Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. (b) All payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 38 46 (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal. (c) Administrative Agent shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender's applicable Pro Rata Share, giving effect to any adjustments in Pro Rata Shares on and after the Closing Date, of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including, without limitation, all fees payable with respect thereto, to the extent received by Administrative Agent. (d) Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter. (e) Subject to the provisos set forth in the definition of "Interest Period", whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder and of the Commitment fees payable hereunder. (f) Company hereby authorizes Administrative Agent to charge Company's accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). (g) Administrative Agent shall deem any payment by or on behalf of Company hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) on or before the due date to be a non-conforming payment. Any such payment shall not be deemed to have been received by Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day. Administrative Agent shall give prompt telephonic notice to Company and each applicable Lender (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 8.1(a). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable Business Day) at the rate determined pursuant to Section 2.7 from the date such amount was due and payable until the date such amount is paid in full. (h) If an Event of Default shall have occurred and not otherwise been waived, and the maturity of the Obligations shall have been accelerated pursuant to Section 8.1, all payments or proceeds received by Agents hereunder in respect of any of the Obligations, shall be applied in accordance with the application arrangements described in Section 6.5 of the Pledge and Security Agreement. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 39 47 2.15. RATABLE SHARING. Lenders hereby agree among themselves that, except as otherwise provided in the Collateral Documents with respect to amounts realized from the exercise of rights with respect to Liens on the Collateral, if any of them shall after the occurrence and during the continuance of a Default or Event of Default, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, fees and other amounts then due and owing to such Lender hereunder or under the other Credit Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (a) notify Administrative Agent and each other Lender of the receipt of such payment and (b) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; PROVIDED, if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. 2.16. MAKING OR MAINTAINING EURODOLLAR RATE LOANS. (a) INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted LIBOR Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Funding Notice or Conversion/Continuation Notice given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. (b) ILLEGALITY OR IMPRACTICABILITY OF EURODOLLAR RATE LOANS. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 40 48 unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or (ii) has become impracticable, as a result of contingencies occurring after the date hereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter (1) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (2) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Funding Notice or a Conversion/Continuation Notice, the Affected Lender shall make such Loan as (or continue such Loan as or convert such Loan to, as the case may be) a Base Rate Loan, (3) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (4) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Funding Notice or a Conversion/Continuation Notice, Company shall have the option, subject to the provisions of Section 2.15(c), to rescind such Funding Notice or Conversion/Continuation Notice as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this Section 2.16(b) shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms hereof. (c) COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS. Company shall compensate each Lender, upon written request by such Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Funding Notice or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation; (ii) if any prepayment or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan; (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company; or (iv) as a consequence of any other default by Company in the repayment of its Eurodollar Rate Loans when required by the terms hereof. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 41 49 (d) BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of such Lender. (e) ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS. Calculation of all amounts payable to a Lender under this Section 2.16 and under Section 2.17 shall be made as though such Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted LIBOR Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America; PROVIDED, HOWEVER, each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.16 and under Section 2.17. 2.17. INCREASED COSTS; CAPITAL ADEQUACY. (a) COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions of Section 2.18 (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall reasonably determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or Governmental Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any other Credit Document or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted LIBOR Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Lender shall provide reasonable notice to Company of such determination and Company shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 42 50 compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this Section 2.17(a), which statement shall be prima facie evidence absent manifest error. (b) CAPITAL ADEQUACY ADJUSTMENT. In the event that any Lender shall have reasonably determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or other obligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could reasonably have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in the next sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.17(b), which statement shall be prima facie evidence absent manifest error. 2.18. TAXES; WITHHOLDING, ETC. (a) PAYMENTS TO BE FREE AND CLEAR. All sums payable by any Credit Party hereunder and under the other Credit Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of any Credit Party or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. (b) WITHHOLDING OF TAXES. If any Credit Party or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by any Credit Party to Administrative Agent or any Lender under any of the Credit Documents: (i) Company shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (ii) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Credit Party) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 43 51 may be) on behalf of and in the name of Administrative Agent or such Lender; (iii) the sum payable by such Credit Party in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (iv) within thirty (30) days after paying any sum from which it is required by law to make any deduction or withholding, and within thirty (30) days after the due date of payment of any Tax which it is required by clause (ii) above to pay, Company shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided, no such additional amount shall be required to be paid to any Lender under clause (iii) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof on the Closing Date) or after the effective date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date hereof or at the date of such Assignment Agreement in respect of payments to such Lender. (c) EVIDENCE OF EXEMPTION FROM U.S. WITHHOLDING TAX. Each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a "NON-US LENDER") shall deliver to Administrative Agent for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof on the Closing Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), (i) two original copies of Internal Revenue Service Form W-8BEN or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Company to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Credit Documents, or (ii) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form W-8BEN or W-8ECI pursuant to clause (i) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8 (or any successor form), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Company to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Credit Documents. Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to this Section 2.18(c) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly deliver to Administrative Agent for transmission to Company two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI , or a Certificate re CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 44 52 Non-Bank Status and two original copies of Internal Revenue Service Form W-8, as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Company to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Credit Documents, or notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence. Company shall not be required to pay any additional amount to any Non-US Lender under Section 2.18(b)(iii) if such Lender shall have failed (1) to deliver the forms, certificates or other evidence referred to in the second sentence of this Section 2.18(c), or (2) to notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence, as the case may be; PROVIDED, if such Lender shall have satisfied the requirements of the first sentence of this Section 2.18(c) on the Closing Date or on the date of the Assignment Agreement pursuant to which it became a Lender, as applicable, nothing in this last sentence of Section 2.18(c) shall relieve Company of its obligation to pay any additional amounts pursuant to Section 2.18(a) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein. (d) If any Tax is refunded to Administrative Agent, it will pay such refund to Company to the extent Administrative Agent determines in its sole discretion that such refund is attributable to any Tax paid by Company and to the extent Company has previously indemnified the Administrative Agent therefor pursuant to this Section 2.18, net of expenses and without interest except any interest (net of taxes) included in such refund. Company shall return such refund (together with any taxes, penalties or other charges) in the event any Agent or any Lender is required to repay such refund. Notwithstanding the foregoing, nothing in this Section 2.18 shall be construed to (i) entitle Company or any other Persons to (A) any information determined by any Agent or Lender, in each case, in its sole discretion, to be confidential or proprietary information of such Agent or Lender, (B) any tax or financial information of such Agent or Lender, or (C) inspect or review any books and records of any Agent or Lender, or (ii) interfere with the rights of any Agent or Lender to conduct its fiscal or tax affairs in such matter as it deems fit. A certificate as to the amount of such payment or liability delivered to Company by Administrative Agent on its own behalf or on behalf of any Lender or Agent shall be conclusive absent manifest error. 2.19. OBLIGATION TO MITIGATE. Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering its Loans becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.16, 2.17 or 2.18, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use commercially reasonable efforts to (a) make, issue, fund or maintain its applicable Commitment or Loans, including any Affected Loans, through another office of such Lender, or (b) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.16, 2.17 or 2.18 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 45 53 issuing, funding or maintaining of such Commitments or Loans through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Commitments or Loans or the interests of such Lender; PROVIDED, such Lender will not be obligated to utilize such other office pursuant to this Section 2.19 unless Company agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described in clause (a) above. A certificate as to the amount of any such expenses payable by Company pursuant to this Section 2.19 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Company (with a copy to Administrative Agent) shall be conclusive absent manifest error. 2.20. DEFAULTING LENDERS. Anything contained herein to the contrary notwithstanding, in the event that any Lender, defaults (a "DEFAULTING LENDER") in its obligation to fund (a "FUNDING DEFAULT") any Loan (in each case, a "DEFAULTED LOAN"), then (a) during any such period when such default is continuing with respect to such Defaulting Lender (the "DEFAULT PERIOD"), such Defaulting Lender shall not be deemed to be a "Lender" for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Credit Documents; (b) to the extent permitted by applicable law, until such time as the Default Excess with respect to such Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment of the Loans shall be applied to the Loans of other Lenders as if such Defaulting Lender had no Loans outstanding and the Loan Exposure of such Defaulting Lender were zero, and (ii) any mandatory prepayment of the Loans shall be applied to the Loans of other Lenders (but not to the Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender, it being understood and agreed that Company shall be entitled to retain any portion of any mandatory prepayment of the Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); (c) such Defaulting Lender's Commitment and outstanding Loans shall be excluded for purposes of calculating the commitment fee payable to Lenders in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any commitment fee pursuant to Section 2.8 with respect to such Defaulting Lender's Commitment in respect of any Default Period with respect to such Defaulting Lender; and (d) the Total Utilization of Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender. Except as otherwise expressly provided in this Section 2.20, performance by Company of its obligations hereunder and the other Credit Documents shall not be excused or otherwise modified as a result of any Funding Default or the operation of this Section 2.20. The rights and remedies against a Defaulting Lender under this Section 2.20 are in addition to other rights and remedies which Company may have against such Defaulting Lender with respect to any Funding Default and which Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default. 2.21. REMOVAL OR REPLACEMENT OF A LENDER. Anything contained herein to the contrary notwithstanding, in the event that: (a) any Lender (an "INCREASED-COST LENDER") shall give notice to Company that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.16, 2.17 or 2.18, the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect, and such Lender shall fail to withdraw such notice within five Business Days after Company's request for such withdrawal; or (b) any Lender shall become a Defaulting Lender, the Default Period for such Defaulting CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 46 54 Lender shall remain in effect, and such Defaulting Lender shall fail to cure the default as a result of which it has become a Defaulting Lender within five Business Days after Company's request that it cure such default; or (c) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof as contemplated by Section 10.5(b), the consent of Requisite Lenders shall have been obtained but the consent of one or more of such other Lenders (each a "NON-CONSENTING LENDER") whose consent is required shall not have been obtained; then, with respect to each such Increased-Cost Lender, Defaulting Lender or Non-Consenting Lender (the "TERMINATED LENDER"), Company may, by giving written notice to Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loans, if any, in full to one or more Eligible Assignees (each a "REPLACEMENT LENDER") in accordance with the provisions of Section 10.6 and Terminated Lender shall pay any fees payable thereunder in connection with such assignment; PROVIDED, (1) on the date of such assignment, the Replacement Lender shall pay to Terminated Lender an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Terminated Lender, (B) an amount equal to all unreimbursed drawing that have been funded by such Terminated Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid fees owing to such Terminated Lender pursuant to Section 2.18; (2) on the date of such assignment, Company shall pay any amounts payable to such Terminated Lender pursuant to Section 2.16(c), 2.17 or 2.18; and (3) in the event such Terminated Lender is a Non-Consenting Lender, each Replacement Lender shall consent, at the time of such assignment, to each matter in respect of which such Terminated Lender was a Non-Consenting Lender. Upon the prepayment of all amounts owing to any Terminated Lender and the termination of such Terminated Lender's outstanding Commitments, if any, such Terminated Lender shall no longer constitute a "Lender" for purposes hereof; PROVIDED, any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender. SECTION 3. CONDITIONS PRECEDENT 3.1. CLOSING DATE. The obligation of any Lender to make a Credit Extension on the Closing Date is subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions on or before the Closing Date: (a) CREDIT DOCUMENTS AND RELATED AGREEMENTS. Administrative Agent shall have received sufficient copies of each Credit Document originally executed and delivered by each applicable Credit Party for each Lender and each Related Agreement. (b) ORGANIZATIONAL DOCUMENTS; INCUMBENCY. Administrative Agent shall have received (i) sufficient copies of each Organizational Document and, to the extent applicable, certified as of a recent date by the appropriate governmental official or clerk; (ii) signature and incumbency certificates of the officers of such Person executing the Credit Documents to which it is a party; (iii) resolutions of the Board of Directors or similar governing body of each Credit Party approving and authorizing the execution, delivery and performance of this Agreement and the other Credit Documents to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of the Closing Date by its secretary or an assistant secretary as being in full force and effect without CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 47 55 modification or amendment; (iv) a good standing certificate from the applicable Governmental Authority of each Credit Party's jurisdiction of incorporation, organization or formation and in each jurisdiction in which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the Closing Date (or such other date reasonably acceptable to Administrative Agent); and (v) such other related documents as Administrative Agent may reasonably request. (c) ORGANIZATIONAL AND CAPITAL STRUCTURE. The organizational structure and the capital structure of Holdings and its Subsidiaries shall be as set forth on SCHEDULE 4.2. (d) EXISTING INDEBTEDNESS. On the Closing Date, Holdings and its Subsidiaries shall have delivered to Syndication Agent and Administrative Agent all documents or instruments necessary to release all Liens securing any obligations of Holdings and its Subsidiaries thereunder being repaid on the Closing Date. (e) BORROWING BASE CERTIFICATE; APPRAISALS. Company shall have delivered a Borrowing Base Certificate, dated as of August 31, 2000, demonstrating a Borrowing Base Amount as of such date of not less than $100,000,000 and otherwise in form and substance reasonably satisfactory to Agents. (f) PERSONAL PROPERTY COLLATERAL. In order to create in favor of Collateral Agent, for the benefit of Secured Parties, a valid and perfected First Priority security interest in the personal property Collateral, Collateral Agent shall have received: (i) evidence satisfactory to the Collateral Agent of the compliance by each Credit Party of their obligations under the Pledge and Security Agreement and the other Collateral Documents (including, without limitation, their obligations to execute and deliver UCC financing statements, originals of securities, instruments and chattel paper). (ii) A completed UCC Questionnaire dated the Closing Date and executed by an Authorized Officer of each Credit Party, together with all attachments contemplated thereby, including (A) the results of a recent search, by a Person satisfactory to Collateral Agent, of all effective UCC financing statements (or equivalent filings) made with respect to any personal or mixed property of any Credit Party in the jurisdictions contemplated by the UCC Questionnaire, together with copies of all such filings disclosed by such search, and (B) UCC termination statements (or similar documents) duly executed by all applicable Persons for filing in all applicable jurisdictions, or evidence of filing of such termination statements or documents, as may be necessary to terminate any effective UCC financing statements (or equivalent filings) disclosed in such search (other than any such financing statements in respect of Permitted Liens); and (iii) opinions of counsel (which counsel shall be reasonably satisfactory to Collateral Agent), which may include a CCH opinion at the discretion of the Collateral Agent, with respect to the creation and perfection of the security interests in favor of Collateral Agent in such Collateral and such other matters governed by the laws of each jurisdiction in which any Credit Party CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 48 56 or any personal property Collateral is located) as Collateral Agent may reasonably request, in each case in form and substance reasonably satisfactory to Collateral Agent. (g) FINANCIAL STATEMENTS; PROJECTIONS. Lenders shall have received from Holdings (i) the Historical Financial Statements and (ii) the Business Plan; and all of the foregoing financial statements and other information will not be inconsistent, in any material respect, with any information previously provided to Lenders. (h) EVIDENCE OF INSURANCE. Syndication Agent and Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to them that all insurance required to be maintained pursuant to Section 5.5 (other than business interruption insurance as contemplated by Schedule 5.11) is in full force and effect and that Administrative Agent, for the benefit of Lenders has been named as additional insured and loss payee thereunder to the extent required under Section 5.5. (i) OPINIONS OF COUNSEL TO CREDIT PARTIES. Lenders and their respective counsel shall have received originally executed copies of the favorable written opinions of (i) Hale and Dorr LLP, counsel for Credit Parties, in the form of EXHIBIT D-1, and (ii) Swidler Berlin Shereff Friedman, LLP, regulatory counsel for the Credit Parties, in the form of EXHIBIT D-2, each dated as of the Closing Date and otherwise in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent and its counsel (and such Credit Party hereby instructs such counsel to deliver such opinions to Agents and Lenders). (j) OPINIONS OF COUNSEL TO SYNDICATION AGENT AND ADMINISTRATIVE AGENT. Lenders shall have received originally executed copies of one or more favorable written opinions of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Syndication Agent and Administrative Agent, dated as of the Closing Date, in form and substance reasonably satisfactory to Syndication Agent and Administrative Agent. (k) FEES. Company shall have paid to Syndication Agent, Administrative Agent and Documentation Agent, the fees payable on the Closing Date referred to in Section 2.8(d). (l) SOLVENCY CERTIFICATE. On the Closing Date, Syndication Agent and Administrative Agent shall have received a Solvency Certificate in form and substance satisfactory to Syndication Agent and Administrative Agent. (m) COMPLETION OF PROCEEDINGS. All partnership, corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent or Syndication Agent and its counsel shall be satisfactory in form and substance to Administrative Agent and Syndication Agent and such counsel, and Administrative Agent, Syndication Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent or Syndication Agent may reasonably request. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 49 57 (n) CLOSING DATE CERTIFICATE. Holdings and Company shall have delivered to Syndication Agent and Administrative Agent an originally executed Closing Date Certificate, together with all attachments thereto. (o) MATERIAL CONTRACTS. Holdings and its Subsidiaries shall have delivered to Syndication Agent and Administrative Agent copies of all Material Contracts in effect on the Closing Date. (p) OTHER DOCUMENTS. Administrative Agent shall have received sufficient copies of the Hale Subordination Agreement originally executed and delivered by each applicable Credit Party for each Lender. Each Lender, by delivering its signature page to this Agreement on the Closing Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Credit Document and each other document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable, on or prior to the Closing Date. 3.2. CONDITIONS TO EACH CREDIT EXTENSION. (a) CONDITIONS PRECEDENT. The obligation of each Lender to make any Loan on any Credit Date, including the Closing Date, are subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions precedent: (i) Administrative Agent shall have received a fully executed and delivered Funding Notice; (ii) Administrative Agent shall have received a fully executed and delivered Borrowing Base Certificate; (iii) in the case of the initial drawing, Administrative Agent shall have received a fully executed and delivered Compliance Certificate as of the most recently completed Fiscal Quarter; (iv) after making any Loans requested on such Credit Date, the Total Utilization of Commitments shall not exceed the Commitments then in effect; (v) after making the Loans requested on such Credit Date, the Total Utilization of Commitments shall not exceed the Borrowing Base Amount then in effect; (vi) no injunction or other restraining order shall have been issued and no hearing to cause an injunction or other restraining order to be issued shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby or the making of any Loan; CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 50 58 (vii) as of such Credit Date, the representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects on and as of that Credit Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; (viii) as of such Credit Date, each Credit Party shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Credit Documents and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to Syndication Agent and Administrative Agent. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Credit Documents and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired; and (ix) as of such Credit Date, no event shall have occurred and be continuing or would result from the consummation of the applicable Credit Extension that would constitute an Event of Default or a Default. (b) NOTICES. Any Notice shall be executed by an Authorized Officer in a writing delivered to Administrative Agent. In lieu of delivering a Notice, Company may give Administrative Agent telephonic notice by the required time of any proposed borrowing, conversion/continuation; PROVIDED each such notice shall be promptly confirmed in writing by delivery of the applicable Notice to Administrative Agent on or before the applicable date of borrowing, continuation/conversion. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized on behalf of Company or for otherwise acting in good faith. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Agreement and to make each Credit Extension to be made thereby, each Credit Party represents and warrants to each Lender, on the Closing Date and on each Credit Date, that the following statements are true and correct (it being understood that Schedule 4.1 may be updated on each Credit Date): 4.1. ORGANIZATION; REQUISITE POWER AND AUTHORITY; QUALIFICATION. Each of Holdings and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as identified in SCHEDULE 4.1, (b) has all requisite power and authority to CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 51 59 own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Credit Documents to which it is a party and to carry out the transactions contemplated thereby, and (c) is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not be reasonably expected to have, a Material Adverse Effect. 4.2. CAPITAL STOCK AND OWNERSHIP. The Capital Stock of each of Holdings and its Subsidiaries has been duly authorized and validly issued and is fully paid and non-assessable. SCHEDULE 4.2 correctly sets forth the ownership interest of Company as of the Closing Date. 4.3. DUE AUTHORIZATION. The execution, delivery and performance of the Credit Documents have been duly authorized by all necessary action on the part of each Credit Party that is a party thereto. 4.4. NO CONFLICT. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not (a) violate any provision of any law or any governmental rule or regulation applicable to Holdings or any of its Subsidiaries, any of the Organizational Documents of Holdings or any of its Subsidiaries, or any order, judgment or decree of any court or other agency of government binding on Holdings or any of its Subsidiaries; (b) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Holdings or any of its Subsidiaries; (c) result in or require the creation or imposition of any Lien upon any of the properties or assets of Holdings or any of its Subsidiaries (other than any Liens created under any of the Credit Documents in favor of Collateral Agent, on behalf of Secured Parties); or (d) require any approval of stockholders or members or partners or any approval or consent of any Person under any Contractual Obligation of Holdings or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Administrative Agent. 4.5. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority (except Hawaii to the extent such lack of registration, consent, approval or notice does not constitute a Material Adverse Effect) except those which have been received or as otherwise set forth on SCHEDULE 4.5, and except for filings and recordings with respect to the Collateral to be made, or otherwise delivered to Collateral Agent for filing and/or recordation, as of the Closing Date. 4.6. BINDING OBLIGATION. Each Credit Document has been duly executed and delivered by each Credit Party that is a party thereto and is the legally valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 52 60 4.7. HISTORICAL FINANCIAL STATEMENTS. The Historical Financial Statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position, on a consolidated basis, of the Persons described in such financial statements as at the respective dates thereof and the results of operations and cash flows, on a consolidated basis, of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. As of the Closing Date, neither Holdings nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the Historical Financial Statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Holdings and any of its Subsidiaries taken as a whole. 4.8. PROJECTIONS. On and as of the Closing Date, the Business Plan of Holdings and its Subsidiaries delivered pursuant to Section 3.1(g) is based on good faith estimates and assumptions made by the management of Holdings; PROVIDED, the (i) Business Plan is not to be viewed as fact and (ii) actual results during the period or periods covered by the Business Plan may differ from such Business Plan and the differences may be material; PROVIDED FURTHER, as of the Closing Date, management of Holdings believed that the Business Plan was reasonable and attainable. 4.9. NO MATERIAL ADVERSE CHANGE. Since July 1, 2000, no event or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. 4.10. NO RESTRICTED JUNIOR PAYMENTS. Since July 1, 2000, neither Holdings nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted pursuant to Section 6.4. 4.11. ADVERSE PROCEEDINGS, ETC. There are no Adverse Proceedings, individually or in the aggregate, that could reasonably be expected to have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries (a) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 4.12. PAYMENT OF TAXES. Except as otherwise permitted under Section 5.3, all tax returns and reports of Holdings and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Holdings and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Holdings knows of no proposed tax assessment against Holdings or any of its Subsidiaries which is not being actively contested by Holdings or such Subsidiary in good faith and by appropriate proceedings; PROVIDED, such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 53 61 4.13. PROPERTIES. (a) TITLE. Each of Holdings and its Subsidiaries has (i) good, sufficient and legal title to (in the case of fee interests in real property), and (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), all of their respective properties and assets reflected in their respective Historical Financial Statements referred to in Section 4.7 and in the most recent financial statements delivered pursuant to Section 5.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under Section 6.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. (b) REAL ESTATE. As of the Closing Date, SCHEDULE 4.13 contains a true, accurate and complete list of (i) all material Real Estate Assets, and (ii) all material leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each such Real Estate Asset of any Credit Party, regardless of whether such Credit Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Except as specified in SCHEDULE 4.13, each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and Holdings does not have knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Credit Party, enforceable against such Credit Party in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. 4.14. ENVIRONMENTAL MATTERS. To their knowledge, neither Holdings nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. There are and, to each of Holdings' and its Subsidiaries' knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities which could reasonably be expected to form the basis of an Environmental Claim against Holdings or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. None of Holdings, any of its Subsidiaries or, to any Credit Party's knowledge, any predecessor of Holdings or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of Holdings' or any of its Subsidiaries' operations is done in violation of any Environmental Law concerning the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent. Compliance with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. No event or condition has occurred or is occurring with respect to Holdings or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 54 62 4.15. NO DEFAULTS. Neither Holdings nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its material Contractual Obligations, and no condition exists which, with the giving of notice or the lapse of time or both, could constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect. 4.16. MATERIAL CONTRACTS. SCHEDULE 4.16 contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date, and except as described thereon, all such Material Contracts are in full force and effect and no defaults currently exist thereunder. 4.17. GOVERNMENTAL REGULATION. Neither Holdings nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. Neither Holdings nor any of its Subsidiaries is a "registered investment company" or company "controlled" by a "registered investment company" or a "principal underwriter" of a "registered investment company" as such terms are defined in the Investment Company Act of 1940. 4.18. MARGIN STOCK. Neither Holdings nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Loans made to such Credit Party will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System. 4.19. EMPLOYEE MATTERS. Neither Holdings nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (a) no unfair labor practice complaint pending against Holdings or any of its Subsidiaries, or to the best knowledge of Holdings and Company, threatened against any of them before the National Labor Relations Board and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement that is so pending against Holdings or any of its Subsidiaries or to the best knowledge of Holdings and Company, threatened against any of them, (b) no strike or work stoppage in existence or threatened involving Holdings or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and (c) to the best knowledge of Holdings and Company, no union representation question existing with respect to the employees of Holdings or any of its Subsidiaries and, to the best knowledge of Holdings and Company, no union organization activity that is taking place, except (with respect to any matter specified in clause (a), (b) or (c) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 55 63 4.20. EMPLOYEE BENEFIT PLANS. Holdings, each of its Subsidiaries and each of their respective ERISA Affiliates are in compliance with all applicable provisions and requirements of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan where the failure to do so could reasonably be expected to have a Material Adverse Effect. No liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Employee Benefit Plan or any Trust established under Title IV of ERISA has been or is expected to be incurred by Holdings, any of its Subsidiaries or any of their ERISA Affiliates which would have a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur which would have a Material Adverse Effect. Except to the extent required under Section 4980B of the Internal Revenue Code or similar state laws, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates. As of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $5,000,000. As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of Holdings, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA, does not exceed $5,000,000. Holdings, each of its Subsidiaries and each of their ERISA Affiliates have complied with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in material "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan. 4.21. CERTAIN FEES. No broker's or finder's fee or commission will be payable with respect hereto or any of the transactions contemplated hereby except to the Agents and Lenders as contemplated herein. 4.22. SOLVENCY. Each Credit Party is and, upon the incurrence of any Obligation by such Credit Party on any date on which this representation and warranty is made, will be, Solvent. 4.23. COMPLIANCE WITH STATUTES, ETC. Each of Holdings and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws with respect to any Real Estate Asset or governing its business and the requirements of any permits issued under such Environmental Laws with respect to any such Real Estate Asset or the operations of Holdings or any of its Subsidiaries), except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 4.24. DISCLOSURE. No representation or warranty of any Credit Party contained in any Credit Document or in any other documents, certificates or written statements furnished to Lenders by or on behalf of Holdings or any of its Subsidiaries in connection with or attached to any Credit Documents CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 56 64 contains any untrue statement of a material fact or omits to state a material fact (known to Holdings or Company, in the case of any document not furnished by either of them) necessary in order to make the statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Holdings and Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known (or which should upon the reasonable exercise of diligence be known) to Holdings or Company (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. SECTION 5. AFFIRMATIVE COVENANTS Each Credit Party covenants and agrees that so long as any Commitment is in effect and until payment in full of all Obligations, each Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5. 5.1. FINANCIAL STATEMENTS AND OTHER REPORTS. Holdings will deliver to Administrative Agent and Lenders: (a) MONTHLY REPORTS. As soon as available, and in any event within forty-five (45) days after the end of each month ending after the Closing Date, the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such month and the related consolidated statements of income of Holdings and its Subsidiaries for such month, to the extent prepared on a monthly basis, all in reasonable detail; (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and in any event within forty-five (45) days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income and cash flows of Holdings and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail, together with a Financial Officer Certification; (c) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event within ninety (90) days after the end of each Fiscal Year, (i) the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows of Holdings and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year and the corresponding figures from the Financial Plan for the Fiscal Year covered by such financial statements, in reasonable detail, together with a Financial Officer Certification with respect thereto; and (ii) with CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 57 65 respect such consolidated financial statements a report thereon of PricewaterhouseCoopers or other independent certified public accountants of recognized national standing selected by Holdings, and reasonably satisfactory to Administrative Agent (which report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Holdings and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards) together with a written statement by such independent certified public accountants stating (1) that their audit examination has included a review of the terms of the Credit Documents, (2) whether, in connection therewith, any condition or event that constitutes a Default or an Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof, and (3) that nothing has come to their attention that causes them to believe that the information contained in any Compliance Certificate is not correct or that the matters set forth in such Compliance Certificate are not stated in accordance with the terms hereof; (d) COMPLIANCE CERTIFICATE. Together with each delivery of financial statements of Holdings and its Subsidiaries pursuant to Sections 5.1(b) and 5.1(c), a duly executed and completed Compliance Certificate; (e) BORROWING BASE CERTIFICATE. (i) Prior to each Credit Extension and (ii) commencing with the quarterly accounting period beginning October 1, 2000, as soon as available and in any event within forty-five (45) days after the end of each quarterly accounting period (ending on the last day of each calendar quarter), furnish to the Administrative Agent a Borrowing Base Certificate. (f) STATEMENTS OF RECONCILIATION AFTER CHANGE IN ACCOUNTING PRINCIPLES. If, as a result of any change in accounting principles and policies from those used in the preparation of the Historical Financial Statements, the consolidated financial statements of Holdings and its Subsidiaries delivered pursuant to Section 5.1(b), 5.1(b) or 5.1(c) will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then, together with the first delivery of such financial statements after such change, one or more a statements of reconciliation for all such prior financial statements in form and substance satisfactory to Administrative Agent; (g) PUBLIC FILINGS. Promptly upon their becoming available, to the extent not otherwise publicly available, copies of (i) all financial statements, reports, notices and proxy statements sent or made available generally by Holdings to its security holders acting in such capacity or by any Subsidiary of Holdings to its security holders other than Holdings or another Subsidiary of Holdings, (ii) all regular and periodic reports (but not including, unless requested by Administrative Agent, routine reports regularly filed with the FCC and state commissions with jurisdiction over telecommunications matters) and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 58 66 with the Securities and Exchange Commission or any governmental or private regulatory authority, and (iii) all press releases and other statements made available generally by Holdings or any of its Subsidiaries to the public concerning material developments in the business of Holdings or any of its Subsidiaries; (h) NOTICE OF DEFAULT. Promptly upon any officer of Holdings or Company obtaining knowledge (i) of any condition or event that constitutes a Default or an Event of Default or that notice has been given to Holdings or Company with respect thereto; (ii) that any Person has given any notice to Holdings or any of its Subsidiaries or taken any other action with respect to any event or condition set forth in Section 8.1(b); or (iii) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, a certificate of its Authorized Officers specifying the nature and period of existence of such condition, event or change, or specifying the notice given and action taken by any such Person and the nature of such claimed Event of Default, Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; (i) NOTICE OF LITIGATION. Promptly upon any officer of Holdings or Company obtaining knowledge of (i) the institution of, or non-frivolous threat of, any Adverse Proceeding not previously disclosed in writing by Company to Lenders, or (ii) any material development in any Adverse Proceeding that, in the case of either (i) or (ii) if adversely determined, could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may be reasonably available to Holdings or Company to enable Lenders and their counsel to evaluate such matters; (j) ERISA. (i) Promptly upon becoming aware of the occurrence of or forthcoming occurrence of any material ERISA Event, a written notice specifying the nature thereof, what action Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; and (ii) with reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; (k) FINANCIAL PLAN. As soon as practicable and in any event no later than thirty (30) days after the beginning of each Fiscal Year, a consolidated plan and financial forecast for such Fiscal Year and the next succeeding Fiscal Year (a "FINANCIAL PLAN"), including (i) a forecasted consolidated balance sheet and forecasted consolidated statements of income and cash flows of Holdings and its Subsidiaries for each such Fiscal Year, together with pro forma Compliance Certificates for each such Fiscal Year and an explanation of the assumptions on which such forecasts are based and (ii) forecasted consolidated statements of income and cash flows of Holdings and its Subsidiaries for each month of CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 59 67 each such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based; (l) INSURANCE REPORT. As soon as practicable and in any event by the last day of each Fiscal Year, a report in form and substance reasonably satisfactory to Administrative Agent outlining all material insurance coverage maintained as of the date of such report by Holdings and its Subsidiaries and all material insurance coverage planned to be maintained by Holdings and its Subsidiaries in the immediately succeeding Fiscal Year; (m) NOTICE OF CHANGE IN BOARD OF DIRECTORS. With reasonable promptness, written notice of any change in the board of directors (or similar governing body) of Holdings or Company; (n) NOTICE REGARDING MATERIAL CONTRACTS. Promptly, and in any event within ten (10) Business Days after any Material Contract of Holdings or any of its Subsidiaries is terminated prior to its scheduled term or amended in a manner that is materially adverse to Holdings or such Subsidiary, as the case may be; (o) ENVIRONMENTAL REPORTS AND AUDITS. As soon as practicable following receipt thereof, copies of all environmental audits and reports with respect to environmental matters at any Facility or which relate to any environmental liabilities of Holdings or its Subsidiaries which, in any such case, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect; and (p) REGULATORY NOTICES. Promptly upon receipt of notice of (i) any forfeiture, non-renewal, cancellation, termination, revocation, suspension, impairment or material modification of any material Communications License held by Holdings, Company or any of its Subsidiaries, or any notice of default or forfeiture with respect to any such material Communications License, or (ii) any refusal by the FCC or any PUC to renew or extend any such material Communications License, a certificate of an Authorized Officer specifying the nature of such event, the period of existence thereof, and what action Holdings, Company or its Subsidiaries, as the case may be, are taking and propose to take with respect thereto; (q) INFORMATION REGARDING COLLATERAL. The Company will furnish to the Collateral Agent prompt written notice of any change (A) in any Credit Party's corporate name, (B) in the location of any Credit Party's chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral (other than real property and improvements and fixtures thereto) owned by it with a book value in excess of $250,000 is located (including the establishment of any such new office or facility), (C) in any Credit Party's identity or corporate structure or (D) in any Credit Party's Federal Taxpayer Identification Number. The Company agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral and for the Collateral at all times following such change to have a valid, legal and perfected security interest as contemplated in the CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 60 68 Collateral Documents. The Company also agrees promptly to notify the Collateral Agent if any material portion of the Collateral is damaged or destroyed. (r) ANNUAL COLLATERAL VERIFICATION. Upon reasonable request of the Administrative Agent (but, so long as no Event of Default has occurred and is continuing, not more than once during any twelve month period), the Company shall deliver to the Collateral Agent an Officer's Certificate (i) either confirming that there has been no change in such information since the date of the UCC Questionnaire delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section and/or identifying such changes (ii) certifying such facts as Administrative Agent or its counsel may reasonably require for purposes of determining that all Uniform Commercial Code financing statements (including fixtures filings, as applicable) or other appropriate filings, recordings or registrations, have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Collateral Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). (s) OTHER INFORMATION. Promptly upon their becoming available, (i) all press releases and other statements made available generally by Holdings or any of its Subsidiaries to the public concerning material developments in the business of Holdings or any of its Subsidiaries, and (ii) such other information and data with respect to Holdings or any of its Subsidiaries as from time to time may be reasonably requested by Syndication Agent, Administrative Agent or any Lender. 5.2. EXISTENCE. Except as otherwise permitted under Section 6.7, each Credit Party will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business; PROVIDED, no Credit Party nor any of its Subsidiaries shall be required to preserve any such existence, right or franchise, licenses and permits if such Person's management shall determine that the preservation thereof is no longer desirable in the conduct of the business of such Person, and that the loss thereof would not have a Material Adverse Effect. 5.3. PAYMENT OF TAXES AND CLAIMS. Each Credit Party will, and will cause each of its Subsidiaries to, pay all Taxes imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; PROVIDED, no such Tax or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (a) adequate reserve or other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor, and (b) in the case of a charge or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such Tax or claim. No Credit Party will, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income Tax return with any Person (other than Holdings or any of its Subsidiaries). CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 61 69 5.4. MAINTENANCE OF PROPERTIES. Each Credit Party will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Holdings and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof, and each Credit Party shall defend any Collateral against all Persons at any time claiming any interest therein. 5.5. INSURANCE. Holdings will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Holdings and its Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons. Without limiting the generality of the foregoing, Holdings will maintain or cause to be maintained (a) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (b) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses. Each such policy of insurance shall (i) name Administrative Agent, on behalf of Lenders, as an additional insured thereunder as its interests may appear and (ii) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Administrative Agent, on behalf of Lenders as the loss payee thereunder for any covered loss in excess of $1,000,000 and provides for at least thirty (30) days' prior written notice to Administrative Agent of any modification or cancellation of such policy. 5.6. BOOKS AND RECORDS; INSPECTIONS; LENDERS MEETINGS. Each Credit Party will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Each Credit Party will, and will cause each of its Subsidiaries to, permit any authorized representatives designated by any Lender to visit and inspect any of the facilities of any Credit Party and any of its respective Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all upon reasonable notice and at such reasonable times during normal business hours and at reasonable intervals. Holdings and Company will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent. Without limiting any of the foregoing, each Credit Party will, and will cause each of its Subsidiaries to, permit Administrative Agent to, at least once in any Fiscal year and at any time CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 62 70 following the occurrence and continuation of an Event of Default, audit, inspect and/or appraise the assets the subject of the calculation of the Borrowing Base Amount. 5.7. COMPLIANCE WITH LAWS. Each Credit Party will comply, and shall cause each of its Subsidiaries and all other Persons, if any, on or occupying any Facilities to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.8. ENVIRONMENTAL. (a) ENVIRONMENTAL DISCLOSURE. Holdings will deliver to Administrative Agent and Lenders: (i) as soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character, whether prepared by personnel of Holdings or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility or with respect to any material Environmental Claims; (ii) promptly upon the Borrower having knowledge thereof, written notice describing in reasonable detail (1) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (2) any remedial action taken by Holdings or any other Person in response to (A) any Hazardous Materials Activities the existence of which could reasonably be expected to result in one or more Environmental Claims having, individually or in the aggregate, a Material Adverse Effect, or (B) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, and (3) Holdings or Company's discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws; (iii) as soon as practicable following the sending or receipt thereof by Holdings or any of its Subsidiaries, a copy of any and all written communications with respect to (1) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to give rise to a Material Adverse Effect, (2) any Release required to be reported to any federal, state or local governmental or regulatory agency, and (3) any request for information from any governmental agency that suggests such agency is investigating whether Holdings or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity; (iv) prompt written notice describing in reasonable detail (1) any proposed acquisition of stock, assets, or property by Holdings or any of its Subsidiaries that could reasonably be expected to (A) expose Holdings or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (B) CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 63 71 affect the ability of Holdings or any of its Subsidiaries to maintain in full force and effect all material Governmental Authorizations required under any Environmental Laws for their respective operations and (2) any proposed action to be taken by Holdings or any of its Subsidiaries to modify current operations in a manner that could reasonably be expected to subject Holdings or any of its Subsidiaries to any material additional obligations or requirements under any Environmental Laws; and (v) with reasonable promptness, such other documents and information as from time to time may be reasonably requested by Administrative Agent in relation to any matters disclosed pursuant to this Section 5.8(a). (b) HAZARDOUS MATERIALS ACTIVITIES, ETC. Each Credit Party shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by such Credit Party or its Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) make an appropriate response to any Environmental Claim against such Credit Party or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.9. SUBSIDIARIES. In the event that, after the Closing Date, any Person becomes a Domestic Subsidiary of Holdings, Holdings shall promptly (i) deliver, or cause to be delivered to Collateral Agent certificates (accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Collateral Agent) representing the Capital Stock of such Domestic Subsidiary, which shall be pledged pursuant to the Pledge and Security Agreement and deliver, or cause to be delivered, to Collateral Agent such other additional agreements or instruments, each in form and substance, as may be necessary or desirable to create in favor of Collateral Agent, for the benefit of the Secured Parties, a valid and perfected First Priority security interest in all of the Capital Stock of such Domestic Subsidiary, (ii) cause such Domestic Subsidiary to become a Guarantor hereunder and a Grantor under the Pledge and Security Agreement by executing and delivering to Administrative Agent and Collateral Agent a Counterpart Agreement, and (iii) take all such actions and execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements, and certificates similar to those described in Sections 3.1(b), 3.1(e), 3.1(f) and 3.1(i). With respect to each such Domestic Subsidiary, Company shall promptly send to Administrative Agent written notice setting forth with respect to such Person (i) the date on which such Person became a Subsidiary of Holdings, and (ii) all of the data required to be set forth in SCHEDULE 4.1 with respect to all Subsidiaries of Holdings, and such written notice shall be deemed to supplement SCHEDULE 4.1 for all purposes hereof. 5.10. ADDITIONAL MATERIAL REAL ESTATE ASSETS. In the event that any Credit Party acquires a Material Real Estate Asset or a Real Estate Asset owned on the Closing Date becomes a Material Real Estate Asset and such interest has not otherwise been made subject to the Lien of the Collateral Documents in favor of Collateral Agent, for the benefit of Lenders, then such Credit Party shall cause to be executed and delivered within 30 days thereof, all such mortgages, documents, instruments, agreements, opinions and certificates similar to those described in SCHEDULE 5.11 with respect to each such Material Real Estate Asset that Administrative Agent shall reasonably request to create in favor CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 64 72 of Collateral Agent, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interest in such Material Real Estate Asset. In addition to the foregoing, Holdings and Company shall, at the request of Requisite Lenders, deliver, from time to time, to Administrative Agent such appraisals as are required by law or regulation of Real Estate Assets with respect to which Collateral Agent has been granted a Lien. 5.11. CERTAIN POST CLOSING OBLIGATIONS. Each Credit Party agrees to take such actions as are set forth in SCHEDULE 5.11. 5.12. FURTHER ASSURANCES. At any time or from time to time upon the request of Administrative Agent, each Credit Party will, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as Administrative Agent or Collateral Agent may reasonably request in order to effect fully the purposes of the Credit Documents. In furtherance and not in limitation of the foregoing, each Credit Party shall take such actions as Administrative Agent or Collateral Agent may reasonably request from time to time to ensure that the Obligations are guarantied by the Guarantors in accordance with the provisions hereof and are secured by substantially all of the assets of Holdings, and its Subsidiaries and all of the outstanding Capital Stock of Company and its Subsidiaries (subject to limitations contained in the Credit Documents with respect to Foreign Subsidiaries). SECTION 6. NEGATIVE COVENANTS Each Credit Party covenants and agrees that, so long as any Commitment is in effect and until payment in full of all Obligations, such Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1. INDEBTEDNESS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (a) the Obligations, including any Indebtedness under any Hedge Agreement with any Lender Counterparty; (b) Indebtedness of any Guarantor Subsidiary to Company or to any other Guarantor Subsidiary, or of Company to any Guarantor Subsidiary; PROVIDED, (i) all such Indebtedness shall be evidenced by promissory notes and all such notes shall be subject to a First Priority Lien pursuant to the Pledge and Security Agreement, (ii) all such Indebtedness shall be unsecured and subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of the applicable promissory notes or an intercompany subordination agreement that in any such case, is reasonably satisfactory to Administrative Agent, and (iii) any payment by any such Guarantor Subsidiary under any guaranty of the Obligations shall result in a pro tanto reduction of the amount of any Indebtedness owed by such Subsidiary to Company or to any of its Subsidiaries for whose benefit such payment is made; CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 65 73 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. (c) Indebtedness incurred by Holdings or any of its Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guaranties or letters of credit, surety bonds or performance bonds securing the performance of Holdings or any such Subsidiary pursuant to such agreements, in connection with permitted dispositions of any business, assets or Subsidiary of Holdings or any of its Subsidiaries; (d) Indebtedness in respect of netting services, overdraft protections and otherwise in connection with Deposit Accounts; (e) guaranties in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Holdings and its Subsidiaries; (f) Indebtedness described in SCHEDULE 6.1, but not any extensions, renewals or replacements of such Indebtedness; (g) Indebtedness with respect to Capital Leases and purchase money Indebtedness of Holdings and its Subsidiaries, in an aggregate amount outstanding not to exceed at any time [**]; PROVIDED, any such purchase money Indebtedness shall be secured only by the asset acquired in connection with the incurrence of such Indebtedness and other assets financed by the same lender or lessor, and proceeds of the foregoing; (h) Indebtedness of Holdings and its Subsidiaries incurred for the purpose of leasing fiber (through indefeasible rights of use only) in an aggregate amount not to exceed at any time [**], with annual cash payments on a rolling twelve month basis not to exceed [**] during the term of this Agreement; (i) assumed Indebtedness resulting from any Permitted Acquisition not in excess of [**]; (j) Indebtedness with respect to letters of credit in an aggregate amount not to exceed [**]; and (k) other unsecured Indebtedness of Holdings and its Subsidiaries, which is unsecured and subordinated to the Obligations in a manner satisfactory to Administrative Agent in an aggregate amount not to exceed at any time [**]. 6.2. LIENS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 66 74 similar notice of any Lien with respect to any such property, asset, income or profits under the UCC of any State or under any similar recording or notice statute (to the extent any Credit Party has knowledge thereof and is not diligently pursuing the release thereof), except: (a) Liens in favor of Collateral Agent for the benefit of Secured Parties granted pursuant to any Credit Document; (b) Liens for Taxes if obligations with respect to such Taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (c) statutory Liens of landlords, banks (and rights of set-off), of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of ten days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts; (d) Liens incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, deposits made in the ordinary course of business with utility companies, and Liens incurred or deposits made in the ordinary course of business to secure the performance of tenders, statutory or regulatory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof; (e) Liens securing purchase money Indebtedness and Capital Leases permitted pursuant to Section 6.1(g); PROVIDED, any such Lien shall encumber only the asset acquired with the proceeds of such Indebtedness and other assets financed by the same lender or lessor, and proceeds of the foregoing; (f) Liens incurred in the ordinary course of business in connection with the purchase of goods subject to a purchase money security interest permitted pursuant to Section 6.1(g); (g) Liens incurred in connection with the leasing of dark fiber permitted pursuant to Section 6.1(h) only to the extent (i) Company has used its reasonable best efforts to enter into such leases on an unsecured basis and (ii) such Liens do not encumber any other property other than the dark fiber being leased; (h) Liens arising in connection with Indebtedness resulting from Permitted Acquisitions permitted pursuant to Section 6.1(i) securing Indebtedness not in excess of [**]; CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 67 75 (i) Liens constituting cash collateral provided by the Company (provided such cash collateral shall not consist of monies funded hereunder) to secure its reimbursement obligations under letters of credit permitted pursuant to Section 6.1(j); (j) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Holdings or any of its Subsidiaries; (k) any interest or title of a lessor or sublessor under any lease of real estate permitted hereunder; (l) Liens solely on any cash earnest money deposits made by Holdings or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder; (m) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business; (n) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (o) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; (p) licenses of patents, trademarks and other intellectual property rights granted by Holdings or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of Company or such Subsidiary; (q) Liens granted under the FEC Security Agreement; (r) Liens described in SCHEDULE 6.2 or on a title report delivered pursuant to item 1 on Schedule 5.11; and (s) Liens consisting of judgment or judicial attachment liens with respect to judgments that do not constitute an Event of Default. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 68 76 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. 6.3. EQUITABLE LIEN; NO FURTHER NEGATIVE PLEDGES. If any Credit Party or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Permitted Liens, it shall make or cause to be made effective provisions whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; PROVIDED, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not otherwise permitted hereby. Except with respect to (a) specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to a permitted Asset Sale, and (b) restrictions by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses and similar agreements entered into in the ordinary course of business (provided that such restrictions are limited to the property or assets secured by such Liens or the property or assets subject to such leases, licenses or similar agreements, as the case may be) no Credit Party nor any of its Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired. 6.4. RESTRICTED PAYMENTS; RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. (a) No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment except that (i) Holdings may declare or pay non-Cash dividends to the holders of its preferred stock securities at a rate not to exceed 7.5% per annum; (ii) so long as no Default or Event of Default shall have occurred and be continuing or shall be caused thereby, Company may make Restricted Junior Payments to Holdings (y) in an aggregate amount not to exceed [**] in any Fiscal Year, to the extent necessary to permit Holdings to pay general administrative costs and expenses and (z) to the extent necessary to permit Holdings to discharge the consolidated tax liabilities of Holdings and its Subsidiaries, in each case so long as Holdings applies the amount of any such Restricted Junior Payment for such purpose; and (iii) so long as no Default or Event of Default shall have occurred and be continuing or shall be caused thereby, Restricted Junior Payments may be made in an aggregate amount not to exceed [**] in any Fiscal Year, to repurchase, redeem or otherwise retire (y) the common stock of Holdings as may be required under any stock purchase agreements existing as of the Closing Date or (z) any options, warrants or any employee or incentive stock option plan as may be required by the terms thereof. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 69 77 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. (b) Except as provided herein, no Credit Party shall, nor shall it permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of Company to (a) pay dividends or make any other distributions on any of such Subsidiary's Capital Stock owned by Company or any other Subsidiary of Company, (b) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (c) make loans or advances to Company or any other Subsidiary of Company, or (d) transfer any of its property or assets to Company or any other Subsidiary of Company other than restrictions (i) by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses, joint venture agreements and similar agreements entered into in the ordinary course of business, and (ii) that are or were created by virtue of any transfer of, agreement to transfer or option or right with respect to any property, assets or Capital Stock not otherwise prohibited under this Agreement. 6.5. INVESTMENTS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, except: (a) Cash Equivalents; (b) equity Investments owned as of the Closing Date in any Subsidiary and Investments made after the Closing Date in wholly-owned Subsidiaries of Holdings or the Company; (c) Investments (i) in accounts receivable arising and trade credit granted in the ordinary course of business and in any Securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors and (ii) deposits, prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of Holdings and its Subsidiaries; (d) intercompany loans to the extent permitted under Section 6.1(b); (e) Consolidated Capital Expenditures permitted by Section 6.6(g); (f) Investments made in connection with any Permitted Acquisition permitted pursuant to section 6.7(b); (g) loans and advances (to the extent included in Investments) to employees of Holdings and its Subsidiaries made in the ordinary course of business in an aggregate principal amount not to exceed [**] in the aggregate outstanding at any time; (h) Investments described in SCHEDULE 6.5; (i) deposits permitted under Section 6.1(d); CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 70 78 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. (j) Investments in the form of Hedge Agreements; and (k) other Investments in an aggregate amount not to exceed at any time [**]. 6.6. FINANCIAL COVENANTS. (a) MINIMUM REVENUES. Holdings shall not permit Revenues as of the last day of any Fiscal Quarter commencing September 30, 2000, to be less than the correlative amount indicated as set forth on SCHEDULE 6.6(a) for such Fiscal Quarter. (b) MINIMUM ACCESS LINES. As of the last day of each Fiscal Quarter commencing September 30, 2000, Company and its Subsidiaries shall not permit the number of Access Lines to be less than the correlative amount indicated as set forth on SCHEDULE 6.6(b) for such Fiscal Quarter. (c) CONSOLIDATED EBITDA. Holdings shall not permit Consolidated EBITDA as of the last day of any Fiscal Quarter commencing September 30, 2000, to be less than the correlative amount indicated as set forth on SCHEDULE 6.6(c) for such Fiscal Quarter. (d) CONSOLIDATED TOTAL DEBT TO TOTAL CAPITALIZATION. Holdings shall not permit the ratio of Consolidated Total Debt to Total Capitalization at any time to exceed [**]. (e) CONSOLIDATED TOTAL DEBT TO CONSOLIDATED GROSS PP&E. Holdings shall not permit the ratio of Consolidated Total Debt to Consolidated Gross PP&E at any time to exceed [**]. (f) MAXIMUM DAYS SALES OUTSTANDING. Holdings shall not permit the Maximum Days Sales Outstanding as of the last day of any Fiscal Quarter commencing September 30, 2000, to be greater than the correlative amount indicated as set forth on SCHEDULE 6.6(f) for such Fiscal Quarter; (g) MAXIMUM CUMULATIVE CONSOLIDATED CAPITAL EXPENDITURES. Holdings shall not and shall not permit its Subsidiaries to make or incur Cumulative Consolidated Capital Expenditures, as of any Fiscal Quarter indicated on SCHEDULE 6.6(g), in an aggregate amount for Company and its Subsidiaries in excess of the corresponding amount set forth on SCHEDULE 6.6(g) opposite such Fiscal Quarter. 6.7. FUNDAMENTAL CHANGES; DISPOSITION OF ASSETS; ACQUISITIONS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any material part of its business, assets or property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, whether now owned or hereafter acquired, or acquire by purchase or otherwise (other than purchases or other acquisitions of inventory, materials CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 71 79 and equipment in the ordinary course of business) the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person or any division or line of business or other business unit of any Person, except: (a) any Subsidiary of Company may be merged with or into Company or any Guarantor Subsidiary, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any Guarantor Subsidiary; PROVIDED, in the case of such a merger, Company or such Guarantor Subsidiary, as applicable shall be the continuing or surviving Person; (b) Permitted Acquisitions; (c) sales or other dispositions of assets which do not constitute Asset Sales; (d) licenses to or from other Persons of Intellectual Property by Holdings or any Subsidiary; (e) Investments made in accordance with Section 6.5; and (f) Subject to the requirements of Section 2.11(a), Asset Sales. SECTION 6.8. DISPOSAL OF SUBSIDIARY INTERESTS. (i) Except for any sale of all of its interests in the Capital Stock of any of its Subsidiaries made in compliance with the provisions of Section 6.7 or as contemplated by the Credit Documents, no Credit Party shall, nor shall it permit any of its Subsidiaries to, (a) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries, except to qualify directors if required by applicable law; or (b) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries, except to another Credit Party (subject to the restrictions on such disposition otherwise imposed hereunder), or to qualify directors if required by applicable law. Notwithstanding anything contained in the preceding sentence, Holdings or the Company shall, in its sole discretion, have the authority to wind down the Australian Subsidiary. (ii) No Credit Party shall, nor shall it permit any of its Subsidiaries to, (a) create or permit to exist a Foreign Subsidiary of such Credit Party or applicable Subsidiary, as the case may, except for the Australian Subsidiary or (b) conduct any material business (other than such business as conducted as of the Closing Date) or locate material amounts of assets or lease or purchase material amounts of property in the State of Hawaii. Holdings shall not create or acquire any directly-owned Subsidiary other than the Company. 6.9. SALES AND LEASE-BACKS. Except as set forth on SCHEDULE 6.9, no Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed), whether now owned or hereafter acquired, which such Credit Party (a) has sold or transferred or is to CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 72 80 sell or to transfer to any other Person (other than Company or any of its Subsidiaries), or (b) intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by such Credit Party to any Person (other than Company or any of its Subsidiaries) in connection with such lease. 6.10. SALE OR DISCOUNT OF RECEIVABLES. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable (it being understood that the restrictions contained in this Section 6.10 shall not apply to any write-off in the ordinary course of business consistent with prior practice). 6.11. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of Capital Stock of Holdings or any of its Subsidiaries or with any Affiliate of Holdings or of any such holder, on terms that are less favorable to Holdings or that Subsidiary, as the case may be, than those that might be obtained at the time from a Person who is not such a holder or Affiliate; PROVIDED, the foregoing restriction shall not apply to (a) any transaction between Company and any Guarantor Subsidiary or between any of the Guarantor Subsidiaries; (b) reasonable and customary fees paid to members of the board of directors (or similar governing body) of Holdings and its Subsidiaries; (c) compensation arrangements entered into in the ordinary course for officers and other employees of Holdings and its Subsidiaries entered into in the ordinary course of business; and(d) transactions described in SCHEDULE 6.11. 6.12. CONDUCT OF BUSINESS. From and after the Closing Date, no Credit Party shall, nor shall it permit any of its Subsidiaries to, engage in any business other than (a) the businesses engaged in by such Credit Party on the Closing Date and similar or related businesses including, without limitation, telecommunications, data communications, Internet access, Internet portal, information portal, web hosting, application hosting, and communication equipment collocation businesses; PROVIDED that, in any event, all such operations and activities shall be consistent in all material respects with the Business Plan and Company and its Subsidiaries shall not incorporate, acquire or organize any Subsidiaries after the Closing Date without the prior written consent of the Agents, and (b) such other lines of business as may be consented to by Requisite Lenders. Holdings will not engage in any business activities or own any assets or properties other than the capital stock of its Subsidiaries and otherwise as incident to its existence as a holding company. 6.13. AMENDMENTS OR WAIVERS WITH RESPECT TO RELATED AGREEMENTS. No Credit Party will agree to any material amendment to, or waive any of its material rights under, any Related Agreement after the Effective Date to the extent materially disadvantageous to any Credit Party or Lenders. 6.14. DISPOSITION OF LICENSES, ETC. From and after the Closing Date, Holdings and its Subsidiaries shall not sell, assign, transfer or otherwise dispose or attempt to dispose of in any way any Governmental Authorization or any other licenses, permits or approvals, the assignments, transfer or CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 73 81 disposal of which could reasonably be expected to result in a Material Adverse Effect, without the prior written consent of the Requisite Lenders. 6.15. FISCAL YEAR. No Credit Party shall, nor shall it permit any of its Subsidiaries to change its Fiscal Year-end from December 31. SECTION 7. GUARANTY 7.1. GUARANTY OF THE OBLIGATIONS. Subject to the provisions of Section 7.2, Guarantors jointly and severally hereby irrevocably and unconditionally guaranty to Administrative Agent for the ratable benefit of the Beneficiaries the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)) (collectively, the "GUARANTEED OBLIGATIONS"). 7.2. CONTRIBUTION BY GUARANTORS. Each Guarantor desires to allocate among themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a "FUNDING GUARANTOR") under this Guaranty that exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in the amount of such other Contributing Guarantor's Fair Share Shortfall as of such date, with the result that all such contributions will cause each Contributing Guarantor's Aggregate Payments to equal its Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. "FAIR SHARE SHORTFALL" means, with respect to a Contributing Guarantor as of any date of determination, the excess, if any, of the Fair Share of such Contributing Guarantor over the Aggregate Payments of such Contributing Guarantor. "FAIR SHARE CONTRIBUTION AMOUNT" means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any comparable applicable provisions of state law; PROVIDED, solely for purposes of calculating the "FAIR SHARE CONTRIBUTION AMOUNT" with respect to any Contributing Guarantor for purposes of this Section 7.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including, without limitation, in respect of this Section 7.2), minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 74 82 Contributing Guarantors as contributions under this Section 7.2. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 7.2 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 7.2. 7.3. PAYMENT BY GUARANTORS. Subject to Section 7.2, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which any Beneficiary may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of Company to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)), Guarantors will upon demand pay, or cause to be paid, in Cash, to Administrative Agent for the ratable benefit of Beneficiaries, an amount equal to their Fair Share of the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for Company's becoming the subject of a case under the Bankruptcy code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against Company for such interest in the related bankruptcy case) and all other Obligations then owed to Beneficiaries as aforesaid. 7.4. LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows: (a) this Guaranty is a guaranty of payment when due and not of collectibility. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety; (b) Administrative Agent may enforce this Guaranty upon the occurrence and during the continuance of an Event of Default notwithstanding the existence of any dispute between Company and any Beneficiary with respect to the existence of such Event of Default; (c) the obligations of each Guarantor hereunder are independent of the obligations of Company and the obligations of any other guarantor (including any other Guarantor) of the obligations of Company, and a separate action or actions may be brought and prosecuted against such Guarantor whether or not any action is brought against Company or any of such other guarantors and whether or not Company is joined in any such action or actions; (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor's liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if Administrative Agent is awarded a judgment in any suit brought to enforce any Guarantor's covenant CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 75 83 to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor, limit, affect, modify or abridge any other Guarantor's liability hereunder in respect of the Guaranteed Obligations; (e) any Beneficiary, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor's liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Beneficiary in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that such Beneficiary may have against any such security, in each case as such Beneficiary in its discretion may determine consistent herewith or the applicable Hedge Agreement and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against Company or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Credit Documents or the Hedge Agreements; and (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Credit Documents or the Hedge Agreements, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Credit Documents, any of the Hedge Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Credit Document, such Hedge Agreement or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 76 84 unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Credit Documents or any of the Hedge Agreements or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though any Beneficiary might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) any Beneficiary's consent to the change, reorganization or termination of the corporate structure or existence of Holdings or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or counterclaims which Company may allege or assert against any Beneficiary in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations. 7.5. WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit of Beneficiaries: (a) any right to require any Beneficiary, as a condition of payment or performance by such Guarantor, to (i) proceed against Company, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from Company, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Deposit Account or credit on the books of any Beneficiary in favor of Company or any other Person, or (iv) pursue any other remedy in the power of any Beneficiary whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Company or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Company or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Beneficiary's errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor's obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, the Hedge Agreements or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to Company and notices of any of the matters referred to in Section 7.4 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 77 85 7.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the Guaranteed Obligations shall have been indefeasibly paid in full and all Commitments shall have terminated, each Guarantor hereby postpones and agrees not to enforce any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Company or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Company with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against Company, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. In addition, until the Guaranteed Obligations shall have been indefeasibly paid in full and the Commitments shall have terminated, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including, without limitation, any such right of contribution as contemplated by Section 7.2. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Company or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights any Beneficiary may have against Company, to all right, title and interest any Beneficiary may have in any such collateral or security, and to any right any Beneficiary may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. 7.7. SUBORDINATION OF OTHER OBLIGATIONS. Any Indebtedness of Company or any Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR") is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof. 7.8. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full and the Commitments shall have terminated. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 78 86 7.9. AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any Beneficiary to inquire into the capacity or powers of any Guarantor or Company or the officers, directors or any agents acting or purporting to act on behalf of any of them. 7.10. FINANCIAL CONDITION OF COMPANY. Any Credit Extension may be made to Company or continued from time to time, and any Hedge Agreements may be entered into from time to time, in each case without notice to or authorization from any Guarantor regardless of the financial or other condition of Company at the time of any such grant or continuation or at the time such Hedge Agreement is entered into, as the case may be. No Beneficiary shall have any obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor's assessment, of the financial condition of Company. Each Guarantor has adequate means to obtain information from Company on a continuing basis concerning the financial condition of Company and its ability to perform its obligations under the Credit Documents and the Hedge Agreements, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Company and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of any Beneficiary to disclose any matter, fact or thing relating to the business, operations or conditions of Company now known or hereafter known by any Beneficiary. 7.11. BANKRUPTCY, ETC. (a) So long as any Guaranteed Obligations remain outstanding, no Guarantor shall, without the prior written consent of Administrative Agent acting pursuant to the instructions of Requisite Lenders, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against Company or any other Guarantor. The obligations of Guarantors hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Company or any other Guarantor or by any defense which Company or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 79 87 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. (b) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors and Beneficiaries that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve Company of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Administrative Agent, or allow the claim of Administrative Agent in respect of, any such interest accruing after the date on which such case or proceeding is commenced with respect to the Company or any Guarantor. (c) In the event that all or any portion of the Guaranteed Obligations are paid by Company, the obligations of Guarantors hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Beneficiary as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder. 7.12. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the Capital Stock of any Guarantor or any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) in accordance with the terms and conditions hereof, the Guaranty of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any Beneficiary or any other Person effective as of the time of such Asset Sale. SECTION 8. EVENTS OF DEFAULT 8.1. EVENTS OF DEFAULT. If any one or more of the following conditions or events shall occur: (a) FAILURE TO MAKE PAYMENTS WHEN DUE. Failure by Company to pay (i) when due any installment of principal of any Loan, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or (ii) any interest on any Loan or any fee or any other amount due hereunder within five (5) days after the date due; or (b) DEFAULT IN OTHER AGREEMENTS. (i) Failure of any Credit Party to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in Section 8.1(a)) in an individual principal amount of $[**] or more or beyond the grace period, if any, provided therefor; or (ii) breach or default by any Credit Party with respect to any other material term of (1) one or more items of Indebtedness in the CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 80 88 individual or aggregate principal amounts referred to in clause (i) above or (2) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the grace period, if any, provided therefor, if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders), to cause, that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or (c) BREACH OF CERTAIN COVENANTS. Failure of any Credit Party to perform or comply with any term or condition contained in Section 2.3, Section 5.2 or Section 6; or (d) BREACH OF REPRESENTATIONS, ETC. Any representation, warranty, certification or other statement made or deemed made by any Credit Party in any Credit Document or in any statement or certificate at any time given by any Credit Party or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect as of the date made or deemed made; or (e) OTHER DEFAULTS UNDER CREDIT DOCUMENTS. Any Credit Party shall default in the performance of or compliance with any term contained herein or any of the other Credit Documents, other than any such term referred to in any other Section of this Section 8.1, and such default shall not have been remedied or waived within thirty (30) days after the earlier of (i) an officer of such Credit Party becoming aware of such default or (ii) receipt by Company of notice from Administrative Agent or any Lender of such default; or (f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.. (i) A court of competent jurisdiction shall enter a decree or order for relief in respect of Holdings or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Holdings or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Holdings or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Holdings or any of its Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Holdings or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for sixty (60) days without having been dismissed, bonded or discharged; or CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 81 89 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. (g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.. (i) Holdings or any of its Subsidiaries shall have an order for relief entered with respect to it or shall commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Holdings or any of its Subsidiaries shall make any assignment for the benefit of creditors; or (ii) Holdings or any of its Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of Holdings or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to herein or in Section 8.1(f); or (h) JUDGMENTS AND ATTACHMENTS. Any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $[**] (to the extent not adequately covered by insurance) shall be entered or filed against Holdings or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days (or in any event later than five days prior to the date of any proposed sale thereunder); or (i) DISSOLUTION. Any order, judgment or decree shall be entered against any Credit Party decreeing the dissolution or split up of such Credit Party and such order shall remain undischarged or unstayed for a period in excess of thirty (30) days; or (j) EMPLOYEE BENEFIT PLANS. There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Holdings, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $[**] during the term hereof; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $[**]; or (k) CHANGE OF CONTROL. A Change of Control shall occur; (l) GUARANTIES, COLLATERAL DOCUMENTS AND OTHER CREDIT DOCUMENTS. At any time after the execution and delivery thereof, (i) the Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void or any Guarantor shall repudiate its obligations thereunder, (ii) this Agreement or any Collateral Document ceases to be in full force and effect (other than by reason of a release of Collateral in accordance with the terms hereof or thereof or the satisfaction in full of the Obligations in accordance with the terms hereof) or shall be declared null and void, or Collateral Agent CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 82 90 shall not have or shall cease to have a valid and perfected Lien in any Collateral purported to be covered by the Collateral Documents with the priority required by the relevant Collateral Document, in each case for any reason other than the failure of Collateral Agent or any Secured Party to take any action within its control, or (iii) any Credit Party shall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Credit Document to which it is a party; or (m) any of the following events shall occur and the occurrence thereof, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect: (i) any filing with, license, permit, certification or franchise granted by, or authorization or other consent or approval of, the FCC, any PUC or any other Governmental Authority (collectively, "REGULATORY AUTHORIZATIONS") (x) shall not be made or obtained, as the case may be, as and when required to permit (A) the continuing conduct by Company and its Subsidiaries of their respective businesses and operations in substantially the manner then being conducted and (B) the performance by each Credit Party of its obligations under the Credit Documents or (y) shall be cancelled, terminated, rescinded, revoked, suspended, materially impaired or otherwise finally denied renewal, or shall cease to be in full force and effect, or (ii) any proceeding shall have been instituted by or shall have been commenced before any court, the FCC, any PUC or any other Governmental Authority that could reasonably be expected to result in (x) cancellation, termination, rescission, revocation, suspension, material impairment or denial of renewal of any Regulatory Authorization or (y) a modification of any Regulatory Authorization in a material adverse respect or a renewal thereof on terms that materially and adversely affect the economic or commercial value or usefulness thereof, or (iii) any material Interconnection Agreement shall be terminated and not renewed or replaced or shall be suspended or otherwise materially impaired, or shall be renegotiated and renewed or replaced on terms that materially and adversely affect the economic or commercial value or usefulness thereof, whether by action of the parties thereto or by action of or under, modification to, or rescinding of the Communications Act or any other applicable laws or regulations, in whole or in part; THEN, (1) upon the occurrence of any Event of Default described in Section 8.1(f) or 8.1(g), automatically, and (2) upon the occurrence of any other Event of Default, at the request of (or with the consent of) Requisite Lenders, upon notice to Company by Administrative Agent, (A) the Commitments, if any, of each Lender having such Commitments shall immediately terminate; (B) each of the following shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Credit Party: (I) the unpaid principal amount of and accrued interest on the Loans and (II) all other Obligations; and (C) the Administrative Agent may cause the Collateral Agent to enforce any and all Liens and security interests created pursuant to Collateral Documents. SECTION 9. AGENTS 9.1. APPOINTMENT OF AGENTS. Each of GSCP and Fleet Securities is hereby appointed Joint Lead Arranger hereunder. GSCP is hereby appointed as Book Runner and Syndication Agent hereunder. Each Lender hereby authorizes Joint Lead Arranger and Syndication Agent to act as its agents in accordance with the terms hereof and the other Credit Documents. Fleet is hereby appointed CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 83 91 Administrative Agent (for purposes of this Section 9, the terms "Administrative Agent" and "Agent" shall also include Fleet in its capacity as Collateral Agent pursuant to the Collateral Documents) hereunder and under the other Credit Documents and each Lender hereby authorizes Administrative Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. DLJ is hereby appointed Documentation Agent hereunder, and each Lender hereby authorizes Documentation Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. Each Agent hereby agrees to act upon the express conditions contained herein and the other Credit Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agents and Lenders and no Credit Party shall have any rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, each Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Holdings or any of its Subsidiaries. Each of Syndication Agent and Documentation Agent, without consent of or notice to any party hereto, may assign any and all of its rights or obligations hereunder to any of its Affiliates. As of the Closing Date, all the respective obligations of GSCP, in its capacity as Book Runner and Syndication Agent and DLJ, in its capacity as Documentation Agent, shall terminate. 9.2. POWERS AND DUTIES. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Credit Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified herein and the other Credit Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason hereof or any of the other Credit Documents, a fiduciary relationship in respect of any Lender; and nothing herein or any of the other Credit Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect hereof or any of the other Credit Documents except as expressly set forth herein or therein. 9.3. GENERAL IMMUNITY. (a) NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency hereof or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any of Agent to Lenders or by or on behalf of any Credit Party to any Agent or any Lender in connection with the Credit Documents and the transactions contemplated thereby or for the financial condition or business affairs of any Credit Party or any other Person liable for the payment of any Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Credit Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Default. Anything contained herein to the contrary notwithstanding, Administrative Agent shall not have any CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 84 92 liability arising from confirmations of the amount of outstanding Loans or the component amounts thereof. (b) EXCULPATORY PROVISIONS. No Agent nor any of its officers, partners, directors, employees or agents shall be liable to Lenders for any action taken or omitted by any Agent under or in connection with any of the Credit Documents except to the extent caused by such Agent's gross negligence or willful misconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection herewith or any of the other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Holdings and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting hereunder or any of the other Credit Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5). 9.4. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans, each Agent in its individual capacity, shall have the same rights and powers hereunder as any other Lender and may exercise the same as if it were not performing the duties and functions delegated to it hereunder, and the term "Lender" shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent in its individual capacity, and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Holdings or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Holdings or any of its Affiliates for services in connection herewith and otherwise without having to account for the same to Lenders. 9.5. LENDERS' REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENT. Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Holdings and its Subsidiaries in connection with Credit Extensions hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Holdings and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 85 93 of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 9.6. RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent, to the extent that such Agent shall not have been reimbursed by any Credit Party, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Credit Documents or otherwise in its capacity as such Agent in any way relating to or arising out hereof or the other Credit Documents; PROVIDED, no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; PROVIDED, in no event shall this sentence require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Lender's Pro Rata Share thereof; and PROVIDED FURTHER, this sentence shall not be deemed to require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding sentence. 9.7. SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may resign at any time by giving thirty (30) days' prior written notice thereof to Lenders and Company, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Administrative Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall promptly (i) transfer to such successor Administrative Agent all sums, Securities and other items of Collateral held under the Collateral Documents, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Administrative Agent under the Credit Documents, and (ii) execute and deliver to such successor Administrative Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Administrative Agent of the security interests created under the Collateral Documents, whereupon such retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring or removed Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent hereunder. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 86 94 9.8. COLLATERAL DOCUMENTS AND GUARANTY. (a) AGENT UNDER COLLATERAL DOCUMENTS AND GUARANTIES. Each Lender hereby authorizes Collateral Agent, on behalf of and for the benefit of Secured Parties, to be the agent for and representative of Lenders and all other Secured Parties with respect to the Collateral and the Collateral Documents and to enter into the Collateral Documents. Each Lender hereby authorizes Administrative Agent, on behalf of and for the benefit of Lenders, to be the agent for and representative of Lenders with respect to the Guaranty. Subject to Section 10.5, without further written consent or authorization from Lenders, each of Administrative Agent and Collateral Agent, as applicable, may execute any documents or instruments necessary to (i) release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted hereby or with respect to the release of which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented or (ii) release any Guarantor from the Guaranty pursuant to Section 7.13 or with respect to the release of which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented. (b) RIGHT TO REALIZE ON COLLATERAL AND ENFORCE GUARANTY. Anything contained in any of the Credit Documents to the contrary notwithstanding, each Credit Party, Administrative Agent, Collateral Agent and each Lender hereby agree that (i) no Lender shall have any right individually to realize upon any of the Collateral or to enforce the Guaranty, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by Administrative Agent on behalf of Lenders, in accordance with the terms hereof and all powers, rights and remedies under the Collateral Documents may be exercised solely by Collateral Agent, and (ii) in the event of a foreclosure by Administrative Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Administrative Agent at such sale. SECTION 10. MISCELLANEOUS 10.1. NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to a Credit Party or any Agent, shall be sent to such Person's address as set forth on APPENDIX B or in the other relevant Credit Document, and in the case of any Lender, the address as indicated on APPENDIX B or otherwise indicated to Administrative Agent in writing. Each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; PROVIDED, no notice to any Agent shall be effective until received by such Agent. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 87 95 10.2. EXPENSES. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (a) all the actual and reasonable costs and expenses of each Joint Lead Arranger and the Syndication Agent associated with the syndication of the credit facilities hereunder and the preparation of the Credit Documents and any consents, amendments, waivers or other modifications thereto; (b) all the costs of furnishing all opinions by counsel for any Credit Party (including any opinions requested by Lenders as to any legal matters arising hereunder) and of Company's and each Credit Party's performance of and compliance with all agreements and conditions on its part to be performed or complied with hereunder and the other Credit Documents; (c) the reasonable fees, expenses and disbursements of counsel to Agents (in each case including allocated costs of internal counsel) in connection with the negotiation, preparation, execution and administration of the Credit Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by any Credit Party; (d) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Collateral Agent, for the benefit of Lenders pursuant hereto, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to Collateral Agent and of counsel providing any opinions that any Agent or Requisite Lenders may request in respect of the Collateral or the Liens created pursuant the Collateral Documents; (e) all the actual costs and reasonable fees, expenses and disbursements of any auditors, accountants, consultants or appraisers; (f) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Administrative Agent and its counsel) in connection with the custody or preservation of any of the Collateral; (g) all other actual and reasonable costs and expenses incurred by each Agent in connection with the syndication of the Loans and Commitments and the negotiation, preparation and execution of the Credit Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (h) after the occurrence of a Default or an Event of Default, all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by any Agent and Lenders in enforcing any Obligations of or in collecting any payments due from any Credit Party hereunder or under the other Credit Documents by reason of such Default or Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a "work-out" or pursuant to any insolvency or bankruptcy cases or proceedings. 10.3. INDEMNITY. In addition to the payment of expenses pursuant to Section 10.2, whether or not the transactions contemplated hereby shall be consummated, each Credit Party agrees to defend (subject to Indemnitees' selection of counsel, in consultation with the Credit Party), indemnify, pay and hold harmless, each Agent and Lender and the officers, partners, directors, trustees, employees, agents and Affiliates of each Agent and each Lender (each, an "INDEMNITEE"), from and against any and all Indemnified Liabilities; PROVIDED, no Credit Party shall have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, the applicable Credit Party shall CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 88 96 contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. To the extent permitted by applicable law, no Credit Party shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, any Credit Document or any agreement or instrument or transaction contemplated hereby. 10.4. SET-OFF. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default each Lender is hereby authorized by each Credit Party at any time or from time to time subject to the consent of Administrative Agent (such consent not to be unreasonably withheld or delayed), without notice to any Credit Party or to any other Person (other than Administrative Agent), any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Lender to or for the credit or the account of any Credit Party against and on account of the obligations and liabilities of any Credit Party to such Lender hereunder and participations therein and under the other Credit Documents, including all claims of any nature or description arising out of or connected hereto and participations therein or with any other Credit Document, irrespective of whether or not (a) such Lender shall have made any demand hereunder or (b) the principal of or the interest on the Loans or any amounts in respect of any other amounts due hereunder shall have become due and payable pursuant to Section 2 and although such obligations and liabilities, or any of them, may be contingent or unmatured. Each Credit Party hereby further grants to Administrative Agent and each Lender a security interest in all Deposit Accounts maintained with Administrative Agent or such Lender as security for the Obligations. 10.5. AMENDMENTS AND WAIVERS. (a) REQUISITE LENDERS' CONSENT. Subject to Sections 10.5(b) and 10.5(c), no amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders. (b) AFFECTED LENDERS' CONSENT. Without the written consent of each Lender (other than a Defaulting Lender) that would be affected thereby, no amendment, modification, termination, or consent shall be effective if the effect thereof would: (i) extend the scheduled final maturity of any Loan or Note; (ii) waive, reduce or postpone any scheduled repayment (but not prepayment) or the Commitment Termination Date; CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 89 97 (iii) reduce the rate of interest on any Loan (other than any waiver of any increase in the interest rate applicable to any Loan pursuant to Section 2.7) or any fee payable hereunder; (iv) extend the time for payment of any such interest or fees; (v) reduce the principal amount of any Loan; (vi) amend, modify, terminate or waive any provision of this Section 10.5(b) or Section 10.5(c) or Section 10.6(a); (vii) amend the definition of "REQUISITE LENDERS" or "PRO RATA SHARE"; PROVIDED, with the consent of Requisite Lenders (except that such consent shall not be required in the case of Indebtedness incurred or commitments made under Section 2.1(a) of this Agreement), additional extensions of credit pursuant hereto may be included in the determination of "REQUISITE LENDERS" or "PRO RATA SHARE" on substantially the same basis as the Commitments and the Loans are included on the Closing Date; (viii) release or otherwise subordinate all or substantially all of the Collateral or all or substantially all of the Guarantors from the Guaranty except as expressly provided in the Credit Documents; or (ix) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under any Credit Document. (c) OTHER CONSENTS. No amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall: (i) increase any Commitment of any Lender over the amount thereof then in effect without the consent of such Lender; PROVIDED, no amendment, modification or waiver of any condition precedent, covenant, Default or Event of Default shall constitute an increase in any Commitment of any Lender; or (ii) amend, modify, terminate or waive any provision of Section 9 or Section 10 as the same applies to any Agent, or any other provision hereof as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent. (d) EXECUTION OF AMENDMENTS, ETC. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 90 98 accordance with this Section 10.5 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by a Credit Party, on such Credit Party. 10.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) GENERALLY. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. No Credit Party's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Credit Party without the prior written consent of all Lenders. (b) REGISTER. Company, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case, unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been delivered to and accepted by Administrative Agent and recorded in the Register as provided in Section 10.6(e). Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. (c) RIGHT TO ASSIGN. Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including, without limitation, all or a portion of its Commitment or Loans owing to it, Note or Notes held by it, or other Obligation (PROVIDED, HOWEVER, that each such assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of any Loan and any related Commitments): (i) to any Person meeting the criteria of clause (i) of the definition of the term of "Eligible Assignee" upon the giving of notice to Company and Administrative Agent; and (ii) to any Person meeting the criteria of clause (ii) of the definition of the term of "Eligible Assignee" and, in the case of assignments of Loans or Commitments to any such Person, consented to by each of Company and Administrative Agent (such consent (x) not to be unreasonably withheld or delayed or, (y) in the case of Company, required at any time an Event of Default shall have occurred and then be continuing); PROVIDED, each such assignment pursuant to this Section 10.6(c)(ii) shall be in an aggregate amount of not less than $5,000,000 (or such lesser amount as may be agreed to by Company and Administrative Agent or as shall constitute the aggregate amount of the Commitments, Loans and other Obligations of the assigning Lender) with respect to the assignment of the Commitments and Loans; PROVIDED FURTHER that after giving effect to such assignment, the assigning Lender shall have Commitments and Loans aggregating at least $2,000,000 (unless such assigning Lender is assigning all of its Commitments and Loans), in each case unless otherwise agreed to the Company and the Administrative Agent. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 91 99 (d) MECHANICS. The assigning Lender and the assignee thereof shall execute and deliver to Administrative Agent an Assignment Agreement, together with (i) a processing and recordation fee of $750 in the case of assignments pursuant to Section 10.6(c)(i) or made by or to GSCP, and $3,500 in the case of all other assignments (except that only one fee shall be payable in the case of contemporaneous assignments to Related Funds), and (ii) such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to Section 2.18(c). (e) NOTICE OF ASSIGNMENT. Upon its receipt of a duly executed and completed Assignment Agreement, together with the processing and recordation fee referred to in Section 10.6(d) (and any forms, certificates or other evidence required by this Agreement in connection therewith), Administrative Agent shall record the information contained in such Assignment Agreement in the Register, shall give prompt notice thereof to Company and shall maintain a copy of such Assignment Agreement. (f) REPRESENTATIONS AND WARRANTIES OF ASSIGNEE. Each Lender, upon execution and delivery hereof or upon executing and delivering an Assignment Agreement, as the case may be, represents and warrants as of the Closing Date or as of the applicable Effective Date (as defined in the applicable Assignment Agreement) that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as the applicable Commitments or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitments or Loans for its own account in the ordinary course of its business and without a view to distribution of such Commitments or Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 10.6, the disposition of such Commitments or Loans or any interests therein shall at all times remain within its exclusive control). (g) EFFECT OF ASSIGNMENT. Subject to the terms and conditions of this Section 10.6, as of the "Effective Date" specified in the applicable Assignment Agreement: (i) the assignee thereunder shall have the rights and obligations of a "Lender" hereunder to the extent such rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement and shall thereafter be a party hereto and a "Lender" for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned thereby pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination hereof under Section 10.8) and be released from its obligations hereunder (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations hereunder, such Lender shall cease to be a party hereto; PROVIDED, anything contained in any of the Credit Documents to the contrary notwithstanding, such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder; (iii) the Commitments shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender, if any; and (iv) if any such assignment occurs after the issuance of any Note hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 92 100 practicable, surrender its applicable Notes to Administrative Agent for cancellation, and thereupon Company shall issue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to reflect the new Commitments and/or outstanding Loans of the assignee and/or the assigning Lender. (h) PARTICIPATIONS. Each Lender shall have the right at any time to sell one or more participations to any Person (other than Holdings, any of its Subsidiaries or any of its Affiliates) in all or any part of its Commitments, Loans or in any other Obligation. The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment modification or waiver that would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under the Collateral Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating. All amounts payable by any Credit Party hereunder, including amounts payable to such Lender pursuant to Section 2.16(c), 2.17 or 2.18, shall be determined as if such Lender had not sold such participation. Each Credit Party and each Lender hereby acknowledge and agree that, solely for purposes of Sections 2.15, (1) any participation will give rise to a direct obligation of each Credit Party to the participant and (2) the participant shall be considered to be a "Lender." (i) CERTAIN OTHER ASSIGNMENTS. In addition to any other assignment permitted pursuant to this Section 10.6, (i) any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Notes, if any, to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to any Federal Reserve Bank and this Section 10.6 shall not apply to any such pledge or assignment of a security interest; PROVIDED, (x) no Lender, as between Company and such Lender, shall be relieved of any of its obligations hereunder as a result of any such assignment and pledge, and (y) in no event shall the applicable Federal Reserve Bank or trustee be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder and (z) any transfer of the rights and obligations of a "Lender" hereunder to any Person upon the foreclosure of any pledge or security interest referred to in this clause (i) may only be made pursuant to the provisions of Sections 10.6(c) through (e) governing assignments of interests in the Loans. 10.7. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 93 101 10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations, warranties and agreements made herein shall survive the execution and delivery hereof and the making of any Credit Extension. Notwithstanding anything herein or implied by law to the contrary, the agreements of each Credit Party set forth in Sections 2.16(c), 2.17, 2.18, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in Sections 2.15 and 9.6 shall survive the payment of the Loans and the termination hereof. 10.9. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. The rights, powers and remedies given to each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any of the other Credit Documents or any of the Hedge Agreements. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. 10.10. MARSHALLING; PAYMENTS SET ASIDE. Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of any Credit Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Credit Party makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent, on behalf of Lenders), or Collateral Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.11. SEVERABILITY. In case any provision in or obligation hereunder or any Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.12. ENTIRE AGREEMENT. This Agreement (together with the Exhibits hereto, the schedules hereto and the other agreements, documents and instruments delivered in connection herewith) and the Credit Documents constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties or any of them with respect to the subject matter hereof. CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 94 102 10.13. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder. Nothing contained herein or in any other Credit Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising hereunder and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14. HEADINGS. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect. 10.15. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. 10.16. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY ARISING OUT OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.1; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES THAT AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION. 10.17. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/COMPANY RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 95 103 FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.17 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 10.18. CONFIDENTIALITY. Each Lender shall hold all non-public information obtained in connection with any Credit Document in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with prudent lending or investing practices, it being understood and agreed by Company that in any event a Lender may make disclosures to Affiliates of such Lender (and to other persons authorized by a Lender or Agent to organize, present or disseminate such information in connection with disclosures otherwise made in accordance with this Section 10.18), disclosures reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by such Lender of any Loans or any participations therein or by any direct or indirect contractual counterparties (or the professional advisors thereto) in Hedge Agreements (provided such Affiliates, counterparties, potential assignees, transferees or participants and advisors are advised of and agree to be bound by the provisions of this Section 10.18) or disclosures required or requested by any governmental agency or representative thereof or by the NAIC or pursuant to legal process; PROVIDED, unless specifically prohibited by applicable law or court order, each Lender shall make reasonable efforts to notify Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and PROVIDED, further that in no event shall any Lender be obligated or required to return any materials furnished by Holdings or any of its Subsidiaries. 10.19. USURY SAVINGS CLAUSE. Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate. If the rate of interest (determined without regard to the preceding sentence) under this Agreement CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 96 104 at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, Company shall pay to Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of Lenders and Company to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to Company. 10.20. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 97 105 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. NETWORK PLUS, INC. By: /s/ James J. Crowley --------------------------------- Name: James J. Crowley Title: EVP/COO NETWORK PLUS CORP. By: /s/ James J. Crowley --------------------------------- Name: James J. Crowley Title: EVP/COO GOLDMAN SACHS CREDIT PARTNERS L.P., as Joint Lead Arranger, Book Runner, Syndication Agent and a Lender By: /s/ Bruce H. Mendelsohn --------------------------------- Authorized Signatory FLEET NATIONAL BANK, as Administrative Agent, Collateral Agent and a Lender By: /s/ Kay H. Campbell --------------------------------- Name: Kay H. Campbell Title: Vice President DLJ BRIDGE FINANCE, INC., as Documentation Agent By: /s/ Eugene F. Martin --------------------------------- Name: Eugene F. Martin Title: Senior Vice President NETPLUS FUNDING, INC. as a Lender By: /s/ Eugene F. Martin --------------------------------- Name: Eugene F. Martin Title: Senior Vice President CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A 98 106 APPENDIX A TO CREDIT AND GUARANTY AGREEMENT COMMITMENTS
==================================================================================================== LENDER COMMITMENT PRO RATA SHARE - ---------------------------------------------------------------------------------------------------- Goldman Sachs Credit Partners L.P. $75,000,000.00 33 1/3% - ---------------------------------------------------------------------------------------------------- Fleet National Bank $75,000,000.00 33 1/3% - ---------------------------------------------------------------------------------------------------- Netplus Funding, Inc. $75,000,000.00 33 1/3% - ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- TOTAL $225,000,000.00 100% ====================================================================================================
CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A APPENDIX A 107 APPENDIX B TO CREDIT AND GUARANTY AGREEMENT NOTICE ADDRESSES NETWORK PLUS CORP. 41 Pacella Park Drive Randolph, Massachusetts 02368 Attention: Robert Cobuzzi, Chief Financial Officer and James Crowley, Chief Operating Officer Telecopier: 781-473-3972 NETWORK PLUS, INC. 41 Pacella Park Drive Randolph, Massachusetts 02368 Attention: Robert Cobuzzi, Chief Financial Officer and James Crowley, Chief Operating Officer Telecopier: 781-473-3972 in each case, with a copy to: Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Attention: Mitchel Appelbaum, Esq. Telecopier: 617-526-5000 GOLDMAN SACHS CREDIT PARTNERS L.P., as Joint Lead Arranger, Syndication Agent and a Lender Goldman Sachs Credit Partners L.P. 85 Broad Street New York, New York 10004 Attention: Bruce H. Mendelsohn Telecopier: (212) 902-3757 with a copy to: Goldman Sachs Credit Partners L.P. 85 Broad Street New York, New York 10004 Attention: John Makrinos Telecopier: (212) 357-4597 CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A APPENDIX B 108 FLEET NATIONAL BANK as Administrative Agent and a Lender Administrative Agent's Principal Office: Fleet National Bank 100 Federal Street Boston, MA 02110 Attention: Kay H. Campbell Telecopier: 617-434-3401 DLJ BRIDGE FINANCE, INC. as Documentation Agent and a Lender DLJ Bridge Finance, Inc. 277 Park Avenue New York, NY 10172 Attention: Gene Martin Telecopier: 212-892-7542 CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A APPENDIX B 109 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. SCHEDULE 6.6(a)
============================================================================ FISCAL QUARTER MINIMUM REVENUES - ---------------------------------------------------------------------------- September 30, 2000 $[**] - ---------------------------------------------------------------------------- December 31, 2000 $[**] - ---------------------------------------------------------------------------- March 31, 2001 $[**] - ---------------------------------------------------------------------------- June 30, 2001 $[**] - ---------------------------------------------------------------------------- September 30, 2001 $[**] - ---------------------------------------------------------------------------- December 31, 2001 $[**] - ---------------------------------------------------------------------------- March 31, 2002 $[**] - ---------------------------------------------------------------------------- June 30, 2002 $[**] ============================================================================
CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A Schedule 6.6(a) 110 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. SCHEDULE 6.6(b)
============================================================================ FISCAL QUARTER MINIMUM ACCESS LINES - ---------------------------------------------------------------------------- September 30, 2000 [**] - ---------------------------------------------------------------------------- December 31, 2000 [**] - ---------------------------------------------------------------------------- March 31, 2001 [**] - ---------------------------------------------------------------------------- June 30, 2001 [**] - ---------------------------------------------------------------------------- September 30, 2001 [**] - ---------------------------------------------------------------------------- December 31, 2001 [**] - ---------------------------------------------------------------------------- March 31, 2002 [**] - ---------------------------------------------------------------------------- June 30, 2002 [**] ============================================================================
CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A Schedule 6.6(b) 111 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. SCHEDULE 6.6(c)
========================================================================== FISCAL QUARTER CONSOLIDATED EBITDA - -------------------------------------------------------------------------- September 30, 2000 $([**]) - -------------------------------------------------------------------------- December 31, 2000 $([**]) - -------------------------------------------------------------------------- March 31, 2001 $([**]) - -------------------------------------------------------------------------- June 30, 2001 $([**]) - -------------------------------------------------------------------------- September 30, 2001 $ [**] - -------------------------------------------------------------------------- December 31, 2001 $ [**] - -------------------------------------------------------------------------- March 31, 2002 $ [**] - -------------------------------------------------------------------------- June 30, 2002 $ [**] ==========================================================================
CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A Schedule 6.6(c) 112 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. SCHEDULE 6.6(f)
====================================================================== FISCAL QUARTER MAXIMUM DAYS SALES OUTSTANDING - ---------------------------------------------------------------------- September 30, 2000 [**] - ---------------------------------------------------------------------- December 31, 2000 [**] - ---------------------------------------------------------------------- March 31, 2001 [**] - ---------------------------------------------------------------------- June 30, 2001 [**] - ---------------------------------------------------------------------- September 30, 2001 [**] - ---------------------------------------------------------------------- December 31, 2001 [**] - ---------------------------------------------------------------------- March 31, 2002 [**] - ---------------------------------------------------------------------- June 30, 2002 [**] ======================================================================
CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A Schedule 6.6(f) 113 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. SCHEDULE 6.6(g)
=============================================================================== FISCAL QUARTER MAXIMUM CUMULATIVE CONSOLIDATED CAPITAL EXPENDITURES - ------------------------------------------------------------------------------- September 30, 2000 $[**] - ------------------------------------------------------------------------------- December 31, 2000 $[**] - ------------------------------------------------------------------------------- March 31, 2001 $[**] - ------------------------------------------------------------------------------- June 30, 2001 $[**] - ------------------------------------------------------------------------------- September 30, 2001 $[**] - ------------------------------------------------------------------------------- December 31, 2001 $[**] - ------------------------------------------------------------------------------- March 31, 2002 $[**] - ------------------------------------------------------------------------------- June 30, 2002 $[**] ===============================================================================
CREDIT AND GUARANTY AGREEMENT 419908-New York Server 7A Schedule 6.6(g) EX-10.3 4 b37246npex10-3.txt PLEDGE AND SECURITY AGREEMENT 1 Exhibit 10.3 EXECUTION PLEDGE AND SECURITY AGREEMENT DATED AS OF SEPTEMBER 27, 2000 BETWEEN EACH OF THE GRANTORS PARTY HERETO AND FLEET NATIONAL BANK, AS THE COLLATERAL AGENT 2 TABLE OF CONTENTS PAGE ---- SECTION 1. DEFINITIONS; GRANT OF SECURITY.....................................1 1.1 General Definitions.............................................1 1.2 Definitions; Interpretation.....................................8 1.3 Grant of Security...............................................8 1.4 Certain Limited Exclusions......................................9 SECTION 2. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE.......................................................10 2.1 Security for Obligations.......................................10 2.2 Grantors Remain Liable.........................................10 SECTION 3. REPRESENTATIONS AND WARRANTIES AND COVENANTS...........................................................11 3.1 Generally......................................................11 3.2 Equipment and Inventory........................................14 3.3 Receivables....................................................15 3.4 Investment Related Property....................................18 3.5 Material Contracts.............................................24 3.6 Letter of Credit Rights........................................26 3.7 Intellectual Property..........................................26 3.8 Commercial Tort Claims.........................................30 SECTION 4. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL GRANTORS.................................................30 4.1 Access; Right of Inspection....................................30 4.2 Further Assurances.............................................31 4.3 Additional Grantors............................................33 SECTION 5. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT....................................................33 5.1 Power of Attorney..............................................33 5.2 No Duty on the Part of Collateral Agent or Secured Parties.....34 SECTION 6. REMEDIES..........................................................34 6.1 Generally......................................................34 6.2 Investment Related Property....................................36 6.3 Intellectual Property..........................................37 6.4 Cash Proceeds. ...............................................38 6.5 Application of Proceeds........................................39 PLEDGE AND SECURITY AGREEMENT EXECUTION 383562-New York S7A 3 SECTION 7. COLLATERAL AGENT..................................................39 SECTION 8. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS...................................................40 SECTION 9. STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM.........................................................41 SECTION 10. INDEMNITY AND EXPENSES...........................................41 SECTION 11. MISCELLANEOUS....................................................42 SCHEDULE 3.1 - (A) FULL LEGAL NAME/ CHIEF EXECUTIVE OFFICE (B) JURISDICTION OF ORGANIZATION (C) OTHER NAMES (D) FINANCING STATEMENTS SCHEDULE 3.2 - LOCATION OF EQUIPMENT AND INVENTORY SCHEDULE 3.4 - INVESTMENT RELATED PROPERTY SCHEDULE 3.6 - DESCRIPTION OF LETTERS OF CREDIT SCHEDULE 3.7 - INTELLECTUAL PROPERTY SCHEDULE 3.8 - COMMERCIAL TORT CLAIMS EXHIBIT A - PLEDGE SUPPLEMENT EXHIBIT B - UNCERTIFICATED SECURITIES CONTROL AGREEMENT EXHIBIT C - SECURITIES ACCOUNT CONTROL AGREEMENT EXHIBIT D - DEPOSIT ACCOUNT CONTROL AGREEMENT ii 4 This PLEDGE AND SECURITY AGREEMENT, dated as of September 27, 2000 (this "AGREEMENT"), between EACH OF THE UNDERSIGNED, whether as an original signatory hereto or as an Additional Grantor (as herein defined) (each, a "GRANTOR"), and FLEET NATIONAL BANK, as collateral agent for the Secured Parties (as herein defined) (in such capacity as collateral agent, the "COLLATERAL AGENT"). RECITALS: WHEREAS, reference is made to that certain Credit and Guaranty Agreement, dated as of the date hereof (as it may be amended, supplemented or otherwise modified, the "CREDIT AGREEMENT"), by and among NETWORK PLUS, INC., a Massachusetts corporation ("COMPANY"), NETWORK PLUS CORP., a Delaware corporation, certain Subsidiaries of Company, as Guarantors, the Lenders party thereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P., as a Joint Lead Arranger, as Book Runner and as Syndication Agent, FLEET SECURITIES, INC., as a Joint Lead Arranger, DLJ BRIDGE FINANCE, INC., as Documentation Agent, and FLEET NATIONAL BANK, as Administrative Agent and as Collateral Agent; WHEREAS, subject to the terms and conditions of the Credit Agreement, certain Grantors may enter into one or more Hedge Agreements with one or more Lender Counterparties; WHEREAS, in consideration of the extensions of credit and other accommodations of Lenders and Lender Counterparties as set forth in the Credit Agreement and the Hedge Agreements, respectively, each Grantor has agreed, subject to the terms and conditions hereof, each other Credit Document and each of the Hedge Agreements, to secure such Grantor's obligations under the Credit Documents and the Hedge Agreements as set forth herein; and NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each Grantor and the Collateral Agent agree as follows: 1. SECTION DEFINITIONS; GRANT OF SECURITY. 1.1 GENERAL DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "ACCOUNT DEBTOR" shall mean each Person who is obligated on a Receivable or any Supporting Obligation related thereto. 1 5 "ACCOUNTS" shall mean (i) all "accounts" as defined in Article 9 of the UCC and (ii) all Health-Care-Insurance Receivables. "AGREEMENT" shall have the meaning set forth in the preamble. "ADDITIONAL GRANTORS" shall have the meaning assigned in Section 4.3. "ASSIGNED AGREEMENTS" shall mean all agreements and contracts to which such Grantor is a party as of the date hereof, including, without limitation, each Material Contract, or to which such Grantor becomes a party after the date hereof, as each such agreement may be amended, supplemented or otherwise modified from time to time. "CASH PROCEEDS" shall have the meaning assigned in Section 6.4. "CHATTEL PAPER" shall mean all "chattel paper" as defined in Article 9 of the UCC. "COLLATERAL" shall have the meaning assigned in Section 1.3. "COLLATERAL AGENT" shall have the meaning set forth in the preamble. "COLLATERAL RECORDS" shall mean books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon. "COLLATERAL SUPPORT" shall mean all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property. "COMMERCIAL TORT CLAIMS" shall mean all "commercial tort claims" as defined in Revised Article 9, including, without limitation, all commercial tort claims listed on Schedule 3.8 (as such schedule may be amended or supplemented from time to time). "COMMODITIES ACCOUNTS" (i) shall mean all "commodity accounts" as defined in the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 3.4 under the heading "Commodities Accounts" (as such schedule may be amended or supplemented from time to time). "CONTROLLED FOREIGN CORPORATION" shall mean "controlled foreign corporation" as defined in the United States Internal Revenue Code of 1986, as amended from time to time. 2 6 "COPYRIGHT LICENSES" shall mean any and all agreements providing for the granting of any right in or to Copyrights (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 3.7(B) (as amended or supplemented from time to time). "COPYRIGHTS" shall mean all United States, state and foreign copyrights, all mask works fixed in semi-conductor chip products (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, now or hereafter in force throughout the world, all registrations and applications therefor including, without limitation, the applications referred to in Schedule 3.7(A) (as amended or supplemented from time to time), all rights corresponding thereto throughout the world, all extensions and renewals of any thereof, the right to sue for past, present and future infringements of any of the foregoing, and all proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "CREDIT AGREEMENT" shall have the meaning set forth in the preamble. "DOCUMENTS" shall mean all "documents" as defined in Article 9 of the UCC. "DEPOSIT ACCOUNTS" (i) shall mean all "deposit accounts" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 3.4 under the heading "Deposit Accounts" (as such schedule may be amended or supplemented from time to time). "EQUIPMENT" shall mean: (i) all "equipment" as defined in Article 9 of the UCC, (ii) all machinery, manufacturing equipment, data processing equipment, computers, office equipment, furnishings, furniture, appliances, fixtures and tools (in each case, regardless of whether characterized as equipment under the UCC) and (iii) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefor, wherever located, now or hereafter existing, including any fixtures. "FOREIGN GRANTOR" shall have the meaning assigned in Section 3.3(b)(v) herein. "GENERAL INTANGIBLES" (i) shall mean all "general intangibles" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all interest rate or currency protection or hedging arrangements, all tax refunds, all licenses, permits, concessions and authorizations, all Assigned Agreements, all Intellectual Property and all Payment Intangibles (in each case, regardless of whether characterized as general intangibles under the UCC). "GOODS" (i) shall mean all "goods" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all Inventory and Equipment and any computer program 3 7 embedded in the goods and any supporting information provided in connection with such program if (x) the program is associated with the goods in such a manner that is customarily considered part of the goods or (y) by becoming the owner of the goods, a Person acquires a right to use the program in connection with the goods (in each case, regardless of whether characterized as goods under the UCC). "HEALTH-CARE-INSURANCE RECEIVABLE" shall have the meaning specified in Revised Article 9. "INDEMNITEE" shall mean the Collateral Agent, and its officers, partners, directors, trustees, employees, agents and Affiliates. "INSTRUMENTS" shall mean all "instruments" as defined in Article 9 of the UCC. "INSURANCE" shall mean: (i) all insurance policies covering any or all of the Collateral (regardless of whether the Collateral Agent is the loss payee thereof) and (ii) any key man life insurance policies. "INTELLECTUAL PROPERTY" shall mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses. "INVENTORY" shall mean: (i) all "inventory" as defined in the UCC and (ii) all goods held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any Grantor's business; all goods in which any Grantor has an interest in mass or a joint or other interest or right of any kind; and all goods which are returned to or repossessed by any Grantor, all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC). "INVESTMENT RELATED PROPERTY" shall mean: (i) all "investment property" (as such term is defined in Article 9 of the UCC) and (ii) all of the following (regardless of whether classified as investment property under the UCC): all Pledged Equity Interests, Pledged Debt, Securities Accounts, Commodities Accounts, Deposit Accounts and certificates of deposit. "LETTER OF CREDIT RIGHT" shall have the meaning specified in Revised Article 9. "MONEY" shall mean "money" as defined in the UCC. 4 8 "PATENT LICENSES" shall mean all agreements providing for the granting of any right in or to Patents (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 3.7(D) (as amended or supplemented from time to time). "PATENTS" shall mean all United States, state and foreign patents and applications for letters patent throughout the world, including, but not limited to each patent and patent application referred to in Schedule 3.7(C) (as amended or supplemented from time to time), all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations of any of the foregoing, all rights corresponding thereto throughout the world, and all proceeds of the foregoing including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit and the right to sue for past, present and future infringements of any of the foregoing. "PAYMENT INTANGIBLE" shall have the meaning specified in Revised Article 9. "PERMITTED SALE" shall mean those sales, transfers or assignments permitted by Section 6 of the Credit Agreement. "PLEDGED DEBT" shall mean all Indebtedness owed to such Grantor, including, without limitation, all Indebtedness described on Schedule 3.4 under the heading "Pledged Debt" (as such schedule may be amended or supplemented from time to time), issued by the obligors named therein, the instruments evidencing such Indebtedness, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Indebtedness. "PLEDGED EQUITY INTERESTS" shall mean all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests. "PLEDGED LLC INTERESTS" shall mean all interests in any limited liability company including, without limitation, all limited liability company interests listed on Schedule 3.4 under the heading "Pledged LLC Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such limited liability company interests and any interest of such Grantor on the books and records of such limited liability company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such limited liability company interests. "PLEDGED PARTNERSHIP INTERESTS" shall mean all interests in any general partnership, limited partnership, limited liability partnership or other partnership including, without limitation, all partnership interests listed on Schedule 3.4 under the heading "Pledged 5 9 Partnership Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such partnership interests and any interest of such Grantor on the books and records of such partnership or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such partnership interests. "PLEDGED TRUST INTERESTS" shall mean all interests in a Delaware business trust or other trust including, without limitation, all trust interests listed on Schedule 3.4 under the heading "Pledged Trust Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such trust interests and any interest of such Grantor on the books and records of such trust or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such trust interests. "PLEDGED STOCK" shall mean all shares of capital stock owned by such Grantor, including, without limitation, all shares of capital stock described on Schedule 3.4 under the heading "Pledged Stock" (as such schedule may be amended or supplemented from time to time), and the certificates, if any, representing such shares and any interest of such Grantor in the entries on the books of the issuer of such shares or on the books of any securities intermediary pertaining to such shares, and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares. "PLEDGE SUPPLEMENT" shall mean any supplement to this agreement in substantially the form of Exhibit A. "PROCEEDS" shall mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Investment Related Property and (iii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. "RECEIVABLES" shall mean all rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, including, without limitation all such rights constituting or evidenced by any Account, Chattel Paper, Instrument, General Intangible or Investment Related Property, together with all of Grantor's rights, if any, in any goods or other property giving rise to such right to payment and all Collateral Support and Supporting Obligations related thereto and all Receivables Records. 6 10 "RECEIVABLES RECORDS" shall mean (i) all original copies of all documents, instruments or other writings or electronic records or other Records evidencing the Receivables, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to Receivables, including, without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping systems and other papers and documents relating to the Receivables, whether in the possession or under the control of Grantor or any computer bureau or agent from time to time acting for Grantor or otherwise, (iii) all evidences of the filing of financing statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including, without limitation, lien search reports, from filing or other registration officers, (iv) all credit information, reports and memoranda relating thereto and (v) all other written or non-written forms of information related in any way to the foregoing or any Receivable. "RECORD" shall have the meaning specified in Revised Article 9. "REQUISITE OBLIGEES" shall have the meaning assigned in Section 7. "REVISED ARTICLE 9" shall mean the 1999 Official Text of Article 9 of the Uniform Commercial Code with conforming amendments to Articles 1, 2, 2a, 4, 5, 6, 7 and 8 until such time as a version of such Official Text is adopted in the State of New York and subsequent thereto shall mean the version of such Official Text as adopted. "SECURED OBLIGATIONS" shall have the meaning assigned in Section 2.1. "SECURED PARTIES" means the Agents, the Lenders and the Lender Counterparties and shall include, without limitation, all former Agents, Lenders and Lender Counterparties to the extent that any Obligations owing to such Persons were incurred while such Persons were Agents, Lenders or Lender Counterparties and such Obligations have not been paid or satisfied in full. "SECURITIES ACCOUNTS" (i) shall mean all "securities accounts" as defined in the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 3.4 under the heading "Securities Accounts" (as such schedule may be amended or supplemented from time to time). "SUPPORTING OBLIGATION" shall mean all "supporting obligations" as defined in Revised Article 9. "TRADEMARK LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trademarks (whether such Grantor is licensee or licensor 7 11 thereunder) including, without limitation, each agreement referred to in Schedule 3.7(F) (as amended or supplemented from time to time). "TRADEMARKS" shall mean all United States, state and foreign trademarks, trade names, corporate names, company names, business names, fictitious business names, internet domain names, trade styles, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, all registrations and applications for any of the foregoing including, but not limited to the registrations and applications referred to in Schedule 3.7(E) (as amended or supplemented from time to time) (the forgoing, however, shall exclude any "intent to use" trademarks and applications until the statement of use is filed in connection therewith; provided, however, that each Grantor shall not assign or grant a lien in such "intent to use" trademarks or applications to any Person other than the Collateral Agent) , all extensions or renewals of any of the foregoing, all of the goodwill of the business connected with the use of and symbolized by the foregoing, the right to sue for past, present and future infringement or dilution of any of the foregoing or for any injury to goodwill, and all proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "TRADE SECRET LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trade Secrets (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 3.7(G) (as amended or supplemented from time to time). "TRADE SECRETS" shall mean all trade secrets and all other confidential or proprietary information and know-how now or hereafter owned or used in, or contemplated at any time for use in, the business of such Grantor (all of the foregoing being collectively called a "Trade Secret"), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating, or referring in any way to such Trade Secret, the right to sue for past, present and future infringement of any Trade Secret, and all proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction. 1.2 DEFINITIONS; INTERPRETATION. The following capitalized terms are used as defined in the Credit Agreement: Credit Documents, Counterpart Agreement, Event of Default, Governmental Authority, Indebtedness, Lien, Material Adverse Effect, Material Contract, Net Asset Sale Proceeds, Obligations, Permitted Lien and Securities. All other capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement or, if not defined therein, in the UCC or, if 8 12 not defined in either of the foregoing, in Revised Article 9. References to "Sections", "Exhibits" and "Schedules" shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. The rules of construction set forth in Section 1.3 of the Credit Agreement shall be applicable to this Agreement mutatis mutandis. If any conflict or inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shall govern. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC. 1.3 GRANT OF SECURITY. Each Grantor hereby grants to the Collateral Agent a security interest and continuing lien on all of such Grantor's right, title and interest in, to and under the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the "Collateral"): (a) Accounts; (b) Chattel Paper; (c) Documents; (d) General Intangibles; (e) Goods; (f) Instruments; (g) Insurance; (h) Intellectual Property; (i) Investment Related Property; (j) Letter of Credit Rights; (k) Money; (l) Receivables and Receivable Records; (m) Commercial Tort Claims; 9 13 (n) to the extent not otherwise included above, all Collateral Records, Collateral Support and Supporting Obligations relating to any of the foregoing; and (o) to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing. For avoidance of doubt it is expressly understood and agreed that, to the extent the Uniform Commercial Code is revised subsequent to the date hereof such that the definition of any of the foregoing terms included in the description of Collateral is changed, the parties hereto desire that any property which is included in such changed definitions which would not otherwise be included in the foregoing grant on the date hereof be included in such grant immediately upon the effective date of such revision, it being the intention of the Grantors that the description of Collateral set forth above be construed to include the broadest possible range of assets (except as specifically excluded by Section 1.4 hereof). Notwithstanding the immediately preceding sentence, the foregoing grant is intended to apply immediately on the date hereof to all Collateral to the fullest extent permitted by applicable law regardless of whether any particular item of Collateral is currently subject to the UCC. 1.4 CERTAIN LIMITED EXCLUSIONS. Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in, any of such Grantor's right, title or interest (a) any Collateral located in the State of Hawaii, (b) in any Intellectual Property if the grant of such security interest shall constitute or result in the abandonment, invalidation or rendering unenforceable any right, title or interest of any Grantor therein; (c) in any license, contract or agreement to which such Grantor is a party or any of its rights or interests thereunder, including, without limitation, with respect to any Pledged Partnership Interests or any Pledged LLC Interests, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement (including, without limitation, any partnership agreements or any limited liability company agreements), or otherwise, result in a breach or termination of the terms of, or constitute a default under or termination of any such license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-318(4) of the Uniform Commercial Code (or any successor provision or provisions, including, without limitation, Section 9-406 of Revised Article 9) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity); provided, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and such Grantor shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect; (d) in any of the outstanding capital stock of a Controlled Foreign Corporation, in excess of 65% of the voting power of all classes of capital stock of such Controlled Foreign Corporation entitled to vote; or (e) in any title and interest of any Pledged Stock of International Software Developers Austrailia Pty Ltd. or NorthPoint Communications Group, Inc. 10 14 2. SECTION SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE. 2.1 SECURITY FOR OBLIGATIONS. This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all Obligations with respect to any Grantor (the "SECURED OBLIGATIONS"). (a) GRANTORS REMAIN LIABLE. Anything contained herein to the contrary notwithstanding: (i) each Grantor shall remain liable under any partnership agreement or limited liability company agreement relating to any Pledged Partnership Interest or Pledged LLC Interest, any Assigned Agreement and/or any other contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed; (ii) the exercise by the Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral; and (iii) neither the Collateral Agent nor any Lender nor Lender Counterparty shall have any obligation or liability under any partnership agreement or limited liability company agreement relating to any Pledged Partnership Interests or Pledged LLC Interests, any Assigned Agreement or any other contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Collateral Agent, any Lender or any Lender Counterparty be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. (b) Neither the Collateral Agent, any Lender, any Lender Counterparty nor any purchaser at a foreclosure sale under this Agreement shall be obligated to assume any obligation or liability under any partnership agreement or limited liability company agreement relating to any Pledged Partnership Interests or Pledged LLC Interests, any Assigned Agreement or any other contracts and agreements included in the Collateral unless the Collateral Agent, any Lender, any Lender Counterparty or any such purchaser otherwise expressly agrees in writing to assume any or all of said obligations. 3. SECTION REPRESENTATIONS AND WARRANTIES AND COVENANTS. 3.1 GENERALLY. 11 15 (a) REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) it owns the Collateral purported to be owned by it and otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Collateral, in each case free and clear of any and all Liens, rights or claims of all other Persons other than Permitted Liens; (ii) upon the filing of all UCC financing statements and other filings delivered by each Grantor, the security interests granted to the Collateral Agent hereunder constitute valid and perfected First Priority Liens (subject only to Permitted Liens and to the rights of the United States government (including any agency or department thereof) with respect to United States government Receivables) on all of the Collateral; (iii) its chief executive office is, and has been for the four month period preceding the date hereof, located at the places indicated on Schedule 3.1(A) (as amended or supplemented from time to time), and the jurisdiction of organization of such Grantor is the jurisdiction indicated on Schedule 3.1(B) (as amended or supplemented from time to time). If the chief executive office or sole place of business of any Grantor is located outside of the United States, then Schedule 3.1(A) (as amended or supplemented from time to time) shall also include the address of the major executive office in the United States, if any, of such Grantor; (iv) the full legal name of such Grantor is as set forth on Schedule 3.1(A) and it has not in the last five (5) years and does not do business under any other name (including any trade-name or fictitious business name) except for those names set forth on Schedule 3.1(C) (as amended or supplemented from time to time); (v) such Grantor has not within the last five (5) years become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not heretofore been terminated, except Permitted Liens; (vi) except for the filing of all UCC financing statements naming each Grantor as "debtor" and the Collateral Agent as "secured party" and describing the Collateral in the filing offices set forth opposite such Grantor's name on Schedule 3.1(D) hereof (as amended or supplemented from time to time) and all other filings delivered by each Grantor to the Collateral Agent, all actions and consents, including all filings, notices, registrations and recordings necessary or desirable to 12 16 create, perfect or ensure the First Priority (subject only to Permitted Liens) of the security interests granted to the Collateral Agent hereunder or for the exercise by the Collateral Agent of the voting or other rights provided for in this Agreement or the exercise of remedies in respect of the Collateral have been made or obtained; (vii) it has delivered to the Collateral Agent evidence and copies of all actions and consents, including all filings, notices, registrations and recordings (including the filings referred to in the immediately preceding clause (vi) above); (viii) other than the financing statements filed in favor of the Collateral Agent, no effective UCC financing statement, fixture filing or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for (x) financing statements for which proper termination statements have been delivered to the Collateral Agent for filing or have been submitted for filing and (y) financing statements, instruments and fixture filings filed in connection with Permitted Liens; (ix) no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for either (i) the pledge or grant by such Grantor of the Liens purported to be created in favor of the Collateral Agent hereunder or (ii) the exercise by the Collateral Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by the immediately preceding clause (vi) above, (B) as may be required, in connection with the disposition of any Investment Related Property, by laws generally affecting the offering and sale of Securities, (C) as set forth in Schedule 4.5 of the Credit Agreement, and (D) any filing required under the Federal Assignment of Claims Act, 41 USC ss.15; 31 USC ss.3727; and (x) all information supplied by any Grantor with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects. (b) COVENANTS AND AGREEMENTS. Each Grantor hereby covenants and agrees that: (i) except for the security interest created by this Agreement, it shall not create or suffer to exist any Lien upon or with respect to any of the Collateral, except Permitted Liens, and such Grantor shall defend the Collateral against all Persons at any time claiming any interest therein; 13 17 (ii) it shall not produce, use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral; (iii) it shall not change such Grantor's name, identity, corporate structure, sole place of business, chief executive office or jurisdiction of organization or establish any trade names unless it shall have notified the Collateral Agent in writing, by executing and delivering to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure, chief executive office, jurisdiction of organization or trade name and providing such other information in connection therewith as the Collateral Agent may reasonably request, Grantor agrees to promptly take all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Agent's security interest in the Collateral intended to be granted and agreed to hereby; (iv) it shall pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good faith; provided, such Grantor shall in any event pay such taxes, assessments, charges, levies or claims not later than five (5) days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against such Grantor or any of the Collateral as a result of the failure to make such payment; (v) upon such Grantor or any officer of such Grantor obtaining knowledge thereof, it shall promptly notify the Collateral Agent in writing of any event that may reasonably be expected to materially and adversely affect the value of the Collateral or any material portion thereof, the ability of any Grantor or the Collateral Agent to dispose of the Collateral or any material portion thereof, or the rights and remedies of the Collateral Agent in relation thereto, including, without limitation, the levy of any legal process against the Collateral or any material portion thereof; (vi) it shall not take or permit any action which could reasonably be expected to impair the Collateral Agent's rights in the Collateral; and 3.2 EQUIPMENT AND INVENTORY. (a) REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants, on the Closing Date and on each Credit Date, that: 14 18 (i) all of the Equipment and Inventory included in the Collateral is kept only at the locations specified in Schedule 3.2 (as amended or supplemented from time to time) or in transit between any such locations; (ii) any Goods now or hereafter produced by any Grantor included in the Collateral have been and will be produced in compliance with the requirements of the Fair Labor Standards Act, as amended; and (iii) none of the Inventory or Equipment is in the possession of an issuer of a negotiable document (as defined in Section 7-104 of the UCC) therefor or otherwise in the possession of a bailee except as specified on Schedule 3.2. (b) COVENANTS AND AGREEMENTS. Each Grantor covenants and agrees that: (i) it shall keep the Equipment, Inventory and any Documents evidencing any Equipment and Inventory in the locations specified on Schedule 3.2 (as amended or supplemented from time to time) or in transit between any such locations unless it shall have (a) notified the Collateral Agent in writing, by executing and delivering to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any change in locations, identifying such new locations and providing such other information in connection therewith as the Collateral Agent may reasonably request; Grantor agrees to promptly take all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Agent's security interest in the Collateral intended to be granted and agreed to hereby, or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder, with respect to such Equipment and Inventory; (ii) it shall keep correct and accurate records of the Inventory, as is customarily maintained under similar circumstances by Persons of established reputation engaged in similar business, and in any event in conformity with GAAP; (iii) it shall not deliver any Document evidencing any Equipment and Inventory to any Person other than the issuer of such Document to claim the Goods evidenced therefor or the Collateral Agent; (iv) if any Equipment or Inventory is in possession or control of any third party, each Grantor shall join with the Collateral Agent in notifying the third party of the Collateral Agent's security interest and using reasonable efforts to 15 19 obtain an acknowledgment from the third party that it is holding the Equipment and Inventory for the benefit of the Collateral Agent; and (v) with respect to any item of Equipment which is covered by a certificate of title under a statute of any jurisdiction under the law of which indication of a security interest on such certificate is required as a condition of perfection thereof, upon the reasonable request of the Collateral Agent, (A) provide information with respect to any such Equipment in excess of $100,000 individually or $1,000,000 in the aggregate, (B) execute and file with the registrar of motor vehicles or other appropriate authority in such jurisdiction an application or other document requesting the notation or other indication of the security interest created hereunder on such certificate of title, and (C) deliver to the Collateral Agent copies of all such applications or other documents filed during such calendar quarter and copies of all such certificates of title issued during such calendar quarter indicating the security interest created hereunder in the items of Equipment covered thereby. 3.3 RECEIVABLES. (a) REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants, on the Closing Date and on each Credit Date, that: (i) each Receivable (a) is and will be the legal, valid and binding obligation of the Account Debtor in respect thereof, representing an unsatisfied obligation of such Account Debtor (except for any pre-billed or unbilled Accounts), (b) is and will be enforceable in accordance with its terms and applicable law, and (c) is and will be in compliance with all applicable laws, whether federal, state, local or foreign; (ii) none of the Account Debtors in respect of any Receivable, in excess of $100,000 individually or $1,000,000 in the aggregate, is the government of the United States, any agency or instrumentality thereof, any state or municipality or any foreign sovereign. No Receivable, in excess of $100,000 individually or $1,000,000 in the aggregate, requires the consent of the Account Debtor in respect thereof in connection with the pledge hereunder, except any consent which has been obtained; and (iii) no Receivable is evidenced by, or constitutes, an Instrument or Chattel Paper which has not been delivered to, or otherwise subjected to the control of, the Collateral Agent to the extent required by, and in accordance with Section 3.3(c). 16 20 (b) COVENANTS AND AGREEMENTS: Each Grantor hereby covenants and agrees that: (i) it shall keep and maintain at its own cost and expense satisfactory and complete records of the Receivables, including, but not limited to, the originals of all documentation with respect to all Receivables and records of all payments received and all credits granted on the Receivables, all merchandise returned and all other dealings therewith; (ii) it shall mark conspicuously, in form and manner reasonably satisfactory to the Collateral Agent, all Chattel Paper and Instruments (other than any delivered to the Collateral Agent as provided herein), as well as the Receivables Records with an appropriate reference to the fact that the Collateral Agent has a security interest therein; (iii) it shall perform in all material respects all of its obligations with respect to the Receivables except those subject to a reasonable contest. Notwithstanding the foregoing, such non-performance shall not continue past 90 days; (iv) it shall not amend, modify, terminate or waive any provision of any Receivable in any manner which could reasonably be expected to have a Material Adverse Effect on the value of such Receivable as Collateral. Other than in the ordinary course of business as generally conducted by it on and prior to the date hereof, and except as otherwise provided in subsection (v) below, while an Event of Default exists, such Grantor shall not (w) grant any extension or renewal of the time of payment of any Receivable, (x) compromise or settle any dispute, claim or legal proceeding with respect to any Receivable for less than the total unpaid balance thereof, (y) release, wholly or partially, any Person liable for the payment thereof, or (z) allow any credit or discount thereon; (v) except as otherwise provided in this subsection, each Grantor shall continue to collect all amounts due or to become due to such Grantor under the Receivables and any Supporting Obligation and diligently exercise each material right it may have under any Receivable, any Supporting Obligation or Collateral Support, in each case, at its own expense and in its reasonable business judgment. Notwithstanding the foregoing, the Collateral Agent shall have the right at any time to notify, or require any Grantor "located" (as such term is used in Section 9-103 of the UCC) in a jurisdiction which is not a part of the United States (such Additional Grantor, a "Foreign Grantor") to notify, any Account Debtor of such Foreign Grantor of the Collateral Agent's security interest in the Receivables and any Supporting Obligation and, in addition, at any time following the occurrence 17 21 and during the continuation of an Event of Default, the Collateral Agent may in a commercially reasonable manner: (1) direct the Account Debtors under any Receivables to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent; (2) notify, or require any Grantor to notify, each Person maintaining a lockbox or similar arrangement to which Account Debtors under any Receivables have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to the Collateral Agent; and (3) enforce, at the expense of such Grantor, collection of any such Receivables and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. If the Collateral Agent notifies any Grantor that it has elected to collect the Receivables in accordance with the preceding sentence, any payments of Receivables, received by such Grantor shall be forthwith (and in any event within two (2) Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Agent if required, in an account maintained under the sole dominion and control of the Collateral Agent, and until so turned over, all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Receivables, any Supporting Obligation or Collateral Support shall be received in trust for the benefit of the Collateral Agent hereunder and shall be segregated from other funds of such Grantor and such Grantor shall not adjust, settle or compromise the amount or payment of any Receivable, or release wholly or partly any Account Debtor or obligor thereof, or allow any credit or discount thereon; and (vi) it shall use its commercially reasonable efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Receivable. (c) Delivery and Control of Receivables. With respect to any Receivables in excess of $100,000 individually or $1,000,000 in the aggregate that is evidenced by, or constitutes, Chattel Paper or Instruments, each Grantor shall cause each originally executed copy thereof to be delivered to the Collateral Agent (or its agent or designee) appropriately indorsed to the Collateral Agent or indorsed in blank: (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor acquiring rights therein. With respect to any Receivables in excess of $100,000 individually or $1,000,000 in the aggregate which would constitute "electronic chattel paper" under Revised Article 9, each Grantor shall take all steps necessary to give the Collateral Agent control over such Receivables (within the meaning of Section 9-105 of Revised Article 9): (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivable hereafter 18 22 arising, within ten (10) days of such Grantor acquiring rights therein. Any Receivable not otherwise required to be delivered or subjected to the control of the Collateral Agent in accordance with this subsection (c) shall be delivered or subjected to such control upon request of the Collateral Agent. 3.4 INVESTMENT RELATED PROPERTY. (a) REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 3.4 (as amended or supplemented from time to time) sets forth under the headings "Pledged Stock, "Pledged LLC Interests," "Pledged Partnership Interests" and "Pledged Trust Interests," respectively, all of the Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests owned by any Grantor and such Pledged Equity Interests constitute the percentage of issued and outstanding shares of stock, percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the respective issuers thereof indicated on such Schedule; (ii) it is the record and beneficial owner of the Pledged Equity Interests free of all Liens, rights or claims of other Persons other than Permitted Liens and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any Pledged Equity Interests; (iii) without limiting the generality of Section 3.1(a)(v), no consent of any Person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Collateral Agent in any Pledged Equity Interests or the exercise by the Collateral Agent of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof; (iv) none of the Pledged LLC Interests nor Pledged Partnership Interests are or represent interests in issuers that are: (a) registered as investment companies, (b) are dealt in or traded on securities exchanges or markets or (c) have opted to be treated as securities under the uniform commercial code of any jurisdiction; (v) Schedule 3.4 (as amended or supplemented from time to time) sets forth under the heading "Pledged Debt" all of the Pledged Debt owned by any Grantor and all of such Pledged Debt, exceeding $100,000 individually or 19 23 $1,000,000 in the aggregate, has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default and constitutes all of the issued and outstanding inter-company Indebtedness evidenced by an instrument or certificated security of the respective issuers thereof owing to such Grantor; (vi) Schedule 3.4 (as amended or supplemented from time to time) sets forth under the headings "Securities Accounts" and "Commodities Accounts," respectively, all of the Securities Accounts and Commodities Accounts in which each Grantor has an interest. Each Grantor is the sole entitlement holder of each such Securities Account and Commodities Account, and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral Agent pursuant hereto) having "control" (as defined in Section 9-115(e) of the UCC) over, or any other interest in, any such Securities Account or Commodity Account or any securities or other property credited thereto; (vii) Schedule 3.4 (as amended or supplemented from time to time) sets forth under the heading "Deposit Accounts" all of the Deposit Accounts in which each Grantor has an interest and each Grantor is the sole account holder of each such Deposit Account and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral Agent pursuant hereto) having either sole dominion and control or "control" (within the meaning of Section 9-104 of Revised Article 9) over, or any other interest in, any such Deposit Account or any money or other property deposited therein; and (viii) each Grantor has taken all actions necessary or desirable (other than such actions identified in Schedule 5.11 of the Credit Agreement), including those specified in Section 3.4(c), to, upon the reasonable request of the Collateral Agent: (a) establish the Collateral Agent's "control" (within the meaning of Section 9-115 of the UCC) over any portion of the Investment Related Property constituting Certificated Securities, Uncertificated Securities, Securities Accounts or Securities Entitlements; (b) establish the Collateral Agent's sole dominion and control over all Deposit Accounts; (c) establish the Collateral Agent's "control" (within the meaning of Section 9-104 of Revised Article 9) over all Deposit Accounts; and (d) to deliver all Instruments to the Collateral Agent. (b) COVENANTS AND AGREEMENTS. Each Grantor hereby covenants and agrees that: (i) without the prior written consent of the Collateral Agent, it shall not vote to enable or take any other action to: (a) amend or terminate any partnership agreement, limited liability company agreement, certificate of 20 24 incorporation, by-laws or other organizational documents in any way that has a Material Adverse Effect on the rights of such Grantor with respect to any Investment Related Property or has a Material Adverse Effect on the validity, perfection or priority of the Collateral Agent's security interest, (b) permit any issuer of any Pledged Equity Interest to issue any additional stock, partnership interests, limited liability company interests or other equity interests of any nature or to issue securities convertible into or granting the right of purchase or exchange for any stock or other equity interest of any nature of such issuer, (c) other than as permitted under the Credit Agreement, permit any issuer of any Pledged Equity Interest to dispose of all or a material portion of their assets, (d) waive any default under or breach of any terms of organizational document relating to the issuer of any Pledged Equity Interest or the terms of any Pledged Debt, or (e) cause any issuer of any Pledged Partnership Interests or Pledged LLC Interests which are not securities (for purposes of the UCC) on the date hereof to elect or otherwise take any action to cause such Pledged Partnership Interests or Pledged LLC Interests to be treated as securities for purposes of the Uniform Commercial Code of any jurisdiction; provided, however, notwithstanding the foregoing, if any issuer of any Pledged Partnership Interests or Pledged LLC Interests takes any such action in violation of the foregoing in this clause (e), such Grantor shall promptly notify the Collateral Agent in writing of any such election or action and, in such event, shall take all steps necessary or advisable to establish the Collateral Agent's "control" thereof; (ii) in the event it acquires rights in any Investment Related Property after the date hereof, it shall deliver to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, reflecting such new Investment Related Property and all other Investment Related Property. Notwithstanding the foregoing, it is understood and agreed that the security interest of the Collateral Agent shall attach to all Investment Related Property immediately upon any Grantor's acquisition of rights therein and shall not be affected by the failure of any Grantor to deliver a supplement to Schedule 3.4 as required hereby; (iii) except as provided in the next sentence, in the event such Grantor receives any dividends, interest or distributions on any Investment Related Property, or any securities or other property upon the merger, consolidation, liquidation or dissolution of any issuer of any Investment Related Property, then (a) such dividends, interest or distributions and securities or other property shall be included in the definition of Collateral without further action and (b) such Grantor shall immediately take all steps, if any, necessary or advisable to ensure the validity, perfection, priority and, if applicable, control of the Collateral Agent over such Investment Related Property (including, without limitation, delivery 21 25 thereof to the Collateral Agent) and pending any such action such Grantor shall be deemed to hold such dividends, interest, distributions, securities or other property in trust for the benefit of the Collateral Agent and shall be segregated from all other property of such Grantor. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, the Collateral Agent authorizes each Grantor to retain all ordinary cash dividends and distributions paid in the normal course of the business of the issuer and consistent with the past practice of the issuer and all scheduled payments of interest; (iv) it shall comply with all of its obligations under any partnership agreement or limited liability company agreement relating to Pledged Partnership Interests or Pledged LLC Interests and shall enforce all of its rights with respect to any Investment Related Property; (v) it shall notify the Collateral Agent of any default under any Pledged Debt that has caused, either in any case or in the aggregate, a Material Adverse Effect; (vi) without the prior written consent of the Collateral Agent, it shall not permit any issuer of any Pledged Equity Interest to merge or consolidate unless all the outstanding capital stock or other equity interests of the surviving or resulting corporation, limited liability company, partnership or other entity is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding equity interests of any other constituent company; provided that if the surviving or resulting company upon any such merger or consolidation involving an issuer which is a Controlled Foreign Corporation, then such Grantor shall only be required to pledge equity interests having 65% of the voting power of all classes of capital stock of such issuer entitled to vote; and (vii) each Grantor consents to the grant by each other Grantor of a security interest in all Investment Related Property to the Collateral Agent and, without limiting the foregoing, consents to the transfer of any Pledged Partnership Interest and any Pledged LLC Interest to the Collateral Agent or its nominee following an Event of Default and to the substitution of the Collateral Agent or its nominee as a partner in any partnership or as a member in any limited liability company with all the rights and powers related thereto. (c) DELIVERY AND CONTROL. Each Grantor agrees that with respect to any Investment Related Property in which it currently has rights it shall comply with the provisions of this Section 3.4(c) on or before the Closing Date and with respect to any Investment Related Property hereafter acquired by such Grantor it shall comply with the provisions of this Section 22 26 3.4(c) immediately upon acquiring rights therein, in each case in form and substance satisfactory to the Collateral Agent. With respect to any Investment Related Property that is represented by a certificate or that is an "instrument" (other than any Investment Related Property credited to a Securities Account) it shall cause such certificate or instrument to be delivered to the Collateral Agent, indorsed in blank by an "effective indorsement" (as defined in Section 8-107 of the UCC), regardless of whether such certificate constitutes a "certificated security" for purposes of the UCC. With respect to any Investment Related Property that is an "uncertificated security" for purposes of the UCC (other than any "uncertificated securities" credited to a Securities Account), it shall use reasonable efforts to cause, and in the case of an issuer that is a Subsidiary, cause the issuer of such uncertificated security to either (i) register the Collateral Agent as the registered owner thereof on the books and records of the issuer or (ii) execute an agreement substantially in the form of Exhibit B hereto, pursuant to which such issuer agrees to comply with the Collateral Agent's instructions with respect to such uncertificated security without further consent by such Grantor. With respect to any Investment Related Property consisting of Securities Accounts or Securities Entitlements, it shall use reasonable efforts to cause the securities intermediary maintaining such Securities Account or Securities Entitlement to enter into an agreement substantially in the form of Exhibit C hereto pursuant to which it shall agree to comply with the Collateral Agent's "entitlement orders" without further consent by such Grantor. With respect to any Investment Related Property that is a "Deposit Account," it shall use reasonable efforts to cause the depositary institution maintaining such account to enter into an agreement substantially in the form of Exhibit D hereto, pursuant to which the Collateral Agent shall have both sole dominion and control over such Deposit Account (within the meaning of the common law) and "control" (as defined in Section 9-104 of Revised Article 9) over such Deposit Account. In addition to the foregoing, if any issuer of any Investment Related Property is located in a jurisdiction outside of the United States, each Grantor shall take such additional actions, including, without limitation, causing the issuer to register the pledge on its books and records or making such filings or recordings, in each case as may be necessary or advisable, under the laws of such issuer's jurisdiction to insure the validity, perfection and priority of the security interest of the Collateral Agent. Upon the occurrence of, and during the continuation of, an Event of Default, the Collateral Agent shall have the right, without notice to any Grantor, to transfer all or any portion of the Investment Related Property to its name or the name of its nominee or agent. In addition, the Collateral Agent shall have the right at any time, without notice to any Grantor, to exchange any certificates or instruments representing any Investment Related Property for certificates or instruments of smaller or larger denominations. (d) VOTING AND DISTRIBUTIONS. (i) So long as no Event of Default shall have occurred and be continuing: (A) except as otherwise provided in Section 3.4(b)(i) of this Agreement or elsewhere herein or in the Credit Agreement, each Grantor shall be entitled 23 27 to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Investment Related Property or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; provided, no Grantor shall exercise or refrain from exercising any such right if the Collateral Agent shall have notified such Grantor that, in the Collateral Agent's reasonable judgment, such action would have a Material Adverse Effect on the value of the Investment Related Property or any part thereof; and provided further, such Grantor shall give the Collateral Agent at least five (5) Business Days prior written notice of the manner in which it intends to exercise, or the reasons for refraining from exercising, any such right; it being understood, however, that neither the voting by such Grantor of any Pledged Stock for, or such Grantor's consent to, the election of directors (or similar governing body) at a regularly scheduled annual or other meeting of stockholders or with respect to incidental matters at any such meeting, nor such Grantor's consent to or approval of any action otherwise permitted under this Agreement and the Credit Agreement, shall be deemed inconsistent with the terms of this Agreement or the Credit Agreement within the meaning of this Section 3.4(d)(i)(A), and no notice of any such voting or consent need be given to the Collateral Agent; and (B) the Collateral Agent shall promptly execute and deliver (or cause to be executed and delivered) to each Grantor all proxies, and other instruments as such Grantor may from time to time reasonably request for the purpose of enabling such Grantor to exercise the voting and other consensual rights when and to the extent which it is entitled to exercise pursuant to clause (A) above; (ii) Upon the occurrence and during the continuation of an Event of Default: (A) all rights of each Grantor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Collateral Agent who shall thereupon have the sole right to exercise such voting and other consensual rights; and (B) in order to permit the Collateral Agent to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (1) each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Agent all proxies, 24 28 dividend payment orders and other instruments as the Collateral Agent may from time to time reasonably request and (2) each Grantor acknowledges that the Collateral Agent may utilize the power of attorney set forth in Section 5. 3.5 MATERIAL CONTRACTS. (a) REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 3.5 (as amended or supplemented from time to time) sets forth all of the Material Contracts to which such Grantor has rights; (ii) the Material Contracts, true and complete copies (including any amendments or supplements thereof) of which have been furnished to the Collateral Agent, have been duly authorized, executed and delivered by all parties thereto, are in full force and effect and are binding upon and enforceable against all parties thereto in accordance with their respective terms. There exists no default under any Material Contract by any party thereto and neither such Grantor, nor to its best knowledge, any other Person party thereto is likely to become in default thereunder and no Person party thereto has any defenses, counterclaims or right of set-off with respect to any Material Contract. Each Person party to a Material Contract (other than any Grantor) has executed and delivered, to the extent necessary or advisable, to the applicable Grantor a consent to the assignment of such Material Contract to the Collateral Agent pursuant to this Agreement; and (iii) no Material Contract prohibits assignment or requires consent of or notice to any Person in connection with the assignment to the Collateral Agent hereunder, except such as has been given or made or is currently sought pursuant to Section 3.5(b)(v) hereof and Section 5.11 of the Credit Agreement. (b) COVENANTS AND AGREEMENTS. Each Grantor hereby covenants and agrees that: (i) in addition to any rights under Section 3.3, the Collateral Agent may at any time notify, or require any Grantor to so notify, the counterparty on any Material Contract of the security interest of the Collateral Agent therein. In addition, after the occurrence and during the continuance of an Event of Default, the Collateral Agent may upon written notice to the applicable Grantor, notify, or require any Grantor to notify, the counterparty to make all payments under the Material Contracts directly to the Collateral Agent; 25 29 (ii) it shall perform in all material respects all of its obligations with respect to the Material Contracts; (iii) it shall promptly and diligently exercise each material right (except the right of termination) it may have under any Material Contract, any Supporting Obligation or Collateral Support, in each case, at its own expense, and in connection with such collections and exercise, such Grantor shall take such action as such Grantor or the Collateral Agent may deem necessary or advisable; (iv) it shall use its commercially reasonable efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Material Contract; and (v) with respect to any agreement, contract or license to which any Grantor is a party that prevents the assignment or granting of a security interest therein (either by its terms or by any federal or state statutory prohibition or otherwise) (any such agreement, contract or license, a "Non-Assignable Contract"), each Grantor shall, within forty-five (45) days of the date hereof with respect to any Non-Assignable Contract in effect on the date hereof and within thirty (30) days after entering into any Non-Assignable Contract after the Closing Date, request in writing the consent of the counterparty or counterparties to the Non-Assignable Contract pursuant to the terms of such Non-Assignable Contract or applicable law to the assignment or granting of a security interest in such Non-Assignable Contract to the Collateral Agent for the benefit of Secured Parties and use its reasonable efforts to obtain such consent as soon as practicable thereafter. 3.6 LETTER OF CREDIT RIGHTS. (a) REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) all material letters of credit to which such Grantor is a beneficiary is listed on Schedule 3.6 (as amended or supplemented from time to time) hereto; and (ii) it has obtained the consent of each issuer of any material letter of credit to the assignment of the proceeds of the letter of credit to the Collateral Agent. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that with respect to any material letter of credit hereafter arising it shall use its reasonable efforts to obtain the consent of the issuer thereof to the assignment of the proceeds of the letter of credit to the Collateral Agent and shall deliver to the Collateral Agent a completed Pledge Supplement, 26 30 substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto. 3.7 INTELLECTUAL PROPERTY. (a) Representations and Warranties. Except as disclosed in Schedule 3.7(H) (as amended or supplemented from time to time), each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 3.7 (as amended or supplemented from time to time) sets forth a true and complete list of (i) all United States, state and foreign registrations of and applications for Patents, Trademarks, and Copyrights owned by each Grantor and (ii) all Patent Licenses, Trademark Licenses and Copyright Licenses material to the business of such Grantor; (ii) it is the sole and exclusive owner of the entire right, title, and interest in and to all Intellectual Property on Schedule 3.7 (as amended or supplemented from time to time), and owns or has the valid right to use all other Intellectual Property used in or necessary to conduct its business, free and clear of all Liens, claims, encumbrances and licenses, except for Permitted Liens and the licenses contemplated under subsection (v) below; (iii) all material Intellectual Property is subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and each Grantor has performed all acts and has paid all renewal, maintenance, and other fees and taxes required to maintain each and every registration and application of Intellectual Property in full force and effect; (iv) all material Intellectual Property is valid and enforceable; no holding, decision, or judgment has been rendered in any action or proceeding before any court or administrative authority challenging the validity of, such Grantor's right to register, or such Grantor's rights to own or use, any Intellectual Property and no such action or proceeding is pending or, to the best of such Grantor's knowledge, threatened; (v) all registrations and applications for Copyrights, Patents and Trademarks are standing in the name of each Grantor, and none of the Trademarks, Patents, Copyrights or Trade Secret Collateral has been licensed by any Grantor to any affiliate or third party other than non-exclusive licenses issued to agents or customers in the ordinary course of business , except as disclosed in Schedule 3.7(B), (D), (F), or (G) (as each may be amended or supplemented from time to time); 27 31 (vi) each Grantor has been using appropriate statutory notice of registration in connection with its use of registered Trademarks, proper marking practices in connection with the use of Patents, and appropriate notice of copyright in connection with the publication of Copyrights material to the business of such Grantor; (vii) except to the extent Grantor determines in its reasonable business judgment, each Grantor uses adequate standards of quality in the manufacture, distribution, and sale of all products sold and in the provision of all services rendered under or in connection with all Trademark Collateral and has taken all action necessary to insure that all licensees of the Trademark Collateral owned by such Grantor use such adequate standards of quality sufficient to maintain the validity and Grantors' ownership of the respective license agreement and licensed marks; (viii) to our knowledge, the conduct of such Grantor's business does not infringe upon any trademark, patent, copyright, trade secret or similar intellectual property right owned or controlled by a third party; no claim has been made against any Grantor, or, to its knowledge, against anyone else that the use of any Intellectual Property owned or used by Grantor (or any of its respective licensees) violates the asserted rights of any third party; (ix) to the best of each Grantor's knowledge, no third party is infringing upon any material Intellectual Property owned or used by such Grantor; (x) no settlement or consents, covenants not to sue, non-assertion assurances, or releases have been entered into by Grantor or to which Grantor is bound that have a Material Adverse Effect on Grantor's rights to own or use any Intellectual Property; and (xi) each Grantor has not made a previous assignment, sale, transfer, or agreement constituting a present or future assignment, sale, transfer, or agreement of any Intellectual Property that has not been terminated or released, except for the licenses contemplated under subsection (v) above. There is no effective financing statement or other document or instrument now executed, or on file or recorded in any public office, granting a security interest in or otherwise encumbering any part of the Intellectual Property, other than in favor of the Collateral Agent, except Permitted Liens. (b) COVENANTS AND AGREEMENTS. Each Grantor hereby covenants and agrees as follows: 28 32 (i) it shall not do any act or omit to do any act whereby any of the Intellectual Property which is material to the business of Grantor may lapse, or become abandoned, dedicated to the public, or unenforceable, or which would have a Material Adverse Effect upon the validity, grant, or enforceability of the security interest granted therein; (ii) except to the extent Grantor determines in its reasonable business judgment, it shall not, with respect to any Trademarks which are material to the business of any Grantor, cease the use of any of such Trademarks or fail to maintain the level of the quality of products sold and services rendered under any of such Trademark at a level at least substantially consistent with the quality of such products and services as of the date hereof, and each Grantor shall take all steps necessary to insure that licensees of such Trademarks use such consistent standards of quality sufficient to maintain the validity and Grantors' ownership of the respective license agreement and licensed marks; (iii) it shall, within sixty (60) days of the creation or acquisition of any Copyrightable work which is material to the business of Grantor, apply to register the Copyright in the United States Copyright Office; all exclusive Copyright licenses under which any Grantor is the licensee have been duly recorded in the U.S. Copyright Office and are listed on Schedule 3.7; (iv) it shall promptly notify the Collateral Agent if it knows or has reason to know that any item of the Intellectual Property that is material to the business of any Grantor may become (a) abandoned or dedicated to the public or placed in the public domain, (b) invalid or unenforceable, or (c) subject to any adverse determination or development (including the institution of proceedings) in any action or proceeding in the United States Patent and Trademark Office, the United States Copyright Office, and state registry, any foreign counterpart of the foregoing, or any court; (v) it shall take all reasonable steps in the United States Patent and Trademark Office, the United States Copyright Office, any state registry or any foreign counterpart of the foregoing, to pursue any application and maintain any registration of each Trademark, Patent, and Copyright owned by any Grantor and material to its business which is now or shall become included in the Intellectual Property (except for such works with respect to which such Grantor has determined in the exercise of its commercially reasonable judgment that it shall not seek registration) including, but not limited to, those items on Schedule 3.7(A), (C) and (E) (as each may be amended or supplemented from time to time); 29 33 (vi) in the event that any Intellectual Property owned by or exclusively licensed to any Grantor is infringed, misappropriated, or diluted by a third party, such Grantor shall promptly take all reasonable actions to stop such infringement, misappropriation, or dilution and protect its exclusive rights in such Intellectual Property including, but not limited to, the initiation of a suit for injunctive relief and to recover damages; (vii) it shall promptly (but in no event more than thirty (30) days after any Grantor obtains knowledge thereof) report to the Collateral Agent (i) the filing of any application to register any Intellectual Property and any statement of use in connection with any "intent to use" trademark with the United States Patent and Trademark Office, the United States Copyright Office, or any state registry or foreign counterpart of the foregoing (whether such application is filed by such Grantor or through any agent, employee, licensee, or designee thereof) and (ii) the registration of any Intellectual Property by any such office, in each case by executing and delivering to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto; (viii) it shall, promptly upon the reasonable request of the Collateral Agent, execute and deliver to the Collateral Agent any document required to acknowledge, confirm, register, record, or perfect the Collateral Agent's interest in any part of the Intellectual Property, whether now owned or hereafter acquired; (ix) except with the prior consent of the Collateral Agent or as permitted under the Credit Agreement, (a) each Grantor shall not execute, nor authorize the filing in any public office, any financing statement or other document or instruments, except financing statements or other documents or instruments filed or to be filed in favor of the Collateral Agent and (b) each Grantor shall not sell, assign, transfer, license, grant any option, or create or suffer to exist any Lien upon or with respect to the Intellectual Property, except for the Lien created by and under this Agreement and the other Credit Documents; (x) it shall hereafter use commercially reasonable efforts so as not to permit the inclusion in any contract to which it hereafter becomes a party of any provision that could or might in any way materially impair or prevent the creation of a security interest in, or the assignment of, such Grantor's rights and interests in any such contract or in any Intellectual Property; (xi) it shall take all steps reasonably necessary to protect the secrecy of all material trade secrets relating to the products and services sold or delivered under or in connection with the Intellectual Property, including, without 30 34 limitation, entering into confidentiality agreements with employees and labeling and restricting access to material secret information and documents; (xii) it shall use proper statutory notice and marketing practices in connection with its use of any of the material Intellectual Property, to the extent that such is legally required in order to obtain all available types of damages, make all available claims, and defeat available defenses; and (xiii) it shall continue to collect, at its own expense, all amounts due or to become due to such Grantor in respect of the Intellectual Property or any portion thereof. In connection with such collections, each Grantor may take (and, at the Collateral Agent's reasonable direction, shall take) such action as such Grantor may deem reasonably necessary or advisable to enforce collection of such amounts. Notwithstanding the foregoing, the Collateral Agent shall have the right at any time, to notify, or require any Foreign Grantor to notify, any obligors of such Foreign Grantor with respect to any such amounts of the existence of the security interest created hereby. 3.8 COMMERCIAL TORT CLAIMS. (a) REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that Schedule 3.8 (as amended or supplemented from time to time) sets forth all Commercial Tort Claims of each Grantor; and (b) COVENANTS AND AGREEMENTS. Each Grantor hereby covenants and agrees that with respect to any Commercial Tort Claim hereafter arising it shall deliver to the Collateral Agent a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, identifying such new Commercial Tort Claims. 4. SECTION ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL GRANTORS. 4.1 ACCESS; RIGHT OF INSPECTION. Upon reasonable notice, the Collateral Agent shall at all times have full and free access during normal business hours to all the books, correspondence and records of each Grantor, and the Collateral Agent and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and each Grantor agrees to render to the Collateral Agent, at such Grantor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. The Collateral Agent and its representatives shall, during normal business hours and at reasonable intervals, also have the right to enter any premises of each Grantor and inspect any property of each Grantor where any of the Intellectual Property, Inventory or Equipment of such Grantor granted pursuant to this Agreement is located 31 35 for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein. 4.2 FURTHER ASSURANCES. (a) Each Grantor agrees that from time to time, at the expense of such Grantor, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor shall: (i) execute and file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (ii) take all actions reasonably necessary to ensure the recordation of appropriate evidence of the liens and security interest granted hereunder in the Intellectual Property with any intellectual property registry in which said Intellectual Property is registered or in which an application for registration is pending including, without limitation, the United States Patent and Trademark Office, the United States Copyright Office, the various Secretaries of State, and the foreign counterparts on any of the foregoing; (iii) within 60 days after the date of effectiveness of Revised Article 9 in the State of Massachusetts, furnish to the Collateral Agent an opinion of counsel covering such jurisdiction either (x) stating that, in the opinion of such counsel, such action has been taken to maintain the validity, perfection and priority of the lien and security interest granted hereby, including, without limitation, with respect to the execution and filing of any financing statements and continuation statements as is necessary and reciting the details of such action or (y) stating that in the opinion of such counsel no such action is necessary to maintain the validity, perfection and priority of such lien and security interest under Revised 9; (iv) at any reasonable time, upon reasonable notice, during normal business hours and at reasonable intervals, upon request by the Collateral Agent, exhibit the Collateral to and allow inspection of the Collateral by the Collateral Agent, or persons designated by the Collateral Agent; and 32 36 (v) at the Collateral Agent's request, appear in and defend any action or proceeding that may reasonably be expected to have a Material Adverse Effect on such Grantor's title to or the Collateral Agent's security interest in all or any part of the Collateral. (b) In addition, to the extent permitted by applicable law, each Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor, consistent as set forth in the Agreement herein. Each Grantor agrees that a carbon, photographic or other reproduction of this Agreement or of a financing statement signed by such Grantor shall be sufficient as a financing statement and may be filed as a financing statement in any and all jurisdictions. Each Grantor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. (c) Each Grantor hereby authorizes the Collateral Agent to file a record or records (as defined in Revised Article 9), including, without limitation, financing statements, in all jurisdictions and with all filing offices as the Collateral Agent may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Collateral Agent herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Collateral Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Collateral Agent herein, including, without limitation, describing such property as "all assets" or "all personal property." (d) Each Grantor hereby authorizes the Collateral Agent to modify this Agreement after obtaining such Grantor's approval of or signature to such modification by amending Schedule 3.7 (as amended or supplemented from time to time) to include reference to any right, title or interest in any existing material Intellectual Property or any material Intellectual Property acquired or developed by any Grantor after the execution hereof or to delete any reference to any right, title or interest in any Intellectual Property in which any Grantor no longer has or claims any right, title or interest. 4.3 ADDITIONAL GRANTORS. From time to time subsequent to the date hereof, additional Persons may become parties hereto as additional Grantors (each, an "ADDITIONAL GRANTOR"), by executing a Counterpart Agreement. Upon delivery of any such Counterpart Agreement to the Collateral Agent, notice of which is hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall be as fully a party hereto as if Additional Grantor were an original signatory hereto. Each Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of 33 37 Collateral Agent not to cause any Subsidiary of Company to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder. 5. SECTION COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. 5.1 POWER OF ATTORNEY. Each Grantor hereby irrevocably appoints the Collateral Agent (such appointment being coupled with an interest) as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, the Collateral Agent or otherwise, from time to time in the Collateral Agent's discretion to take any action and to execute any instrument that the Collateral Agent may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation and subject to, the following: (a) upon the occurrence and during the continuance of any Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to the Collateral Agent pursuant to the Credit Agreement; (b) upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (c) upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (b) above; (d) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Collateral; (e) to prepare, sign and file any UCC financing statements in the name of such Grantor as debtor; (f) to prepare, sign, and file for recordation in any intellectual property registry, appropriate evidence of the lien and security interest granted herein in the Intellectual Property in the name of Grantor as assignor; (g) to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens (other than Liens permitted under this Agreement or the Credit Agreement) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined 34 38 by the Collateral Agent in its sole discretion, any such payments made by the Collateral Agent to become obligations of such Grantor to the Collateral Agent, due and payable immediately without demand; and (h) If any Event of Default shall have occurred and be continuing, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and to do, at the Collateral Agent's option and such Grantor's expense, at any time or from time to time, all acts and things that the Collateral Agent deems reasonably necessary to protect, preserve or realize upon the Collateral and the Collateral Agent's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. 5.2 NO DUTY ON THE PART OF COLLATERAL AGENT OR SECURED PARTIES. The powers conferred on the Collateral Agent hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral Agent or any Secured Party to exercise any such powers. The Collateral Agent and the Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 6. SECTION REMEDIES. 6.1 GENERALLY. If any Event of Default shall have occurred and be continuing: (a) The Collateral Agent may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it at law or in equity, all the rights and remedies of the Collateral Agent on default under the UCC (whether or not the UCC applies to the affected Collateral), and also may pursue any of the following separately, successively or simultaneously: (i) require any Grantor to, and each Grantor hereby agrees that it shall at its expense and promptly upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process; (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in 35 39 any commercially reasonable manner to the extent the Collateral Agent deems appropriate; (iv) without notice except as specified below, sell, assign, lease, license (on an exclusive or non-exclusive basis) or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Collateral Agent may deem commercially reasonable; and (v) exercise dominion and control over, and refuse to permit further withdrawals (whether of money, securities, instruments or other property) from any Deposit Account maintained with the Collateral Agent constituting part of the Collateral. (b) The Collateral Agent or any Secured Party may be the purchaser of any or all of the Collateral at any such sale and the Collateral Agent, as collateral agent for and representative of the Secured Parties, shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims against the Collateral Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Agent accepts the first offer received and does not offer such Collateral to more than one offeree provided the sale is done in a commercially reasonable manner. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantors shall be liable for the deficiency and the fees of any attorneys employed by the Collateral Agent to collect such deficiency. Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Agent, that the Collateral Agent has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically 36 40 enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of the Collateral Agent hereunder. (c) The Collateral Agent may sell the Collateral without giving any warranties as to the Collateral. The Collateral Agent may specifically disclaim any warranties of title or the like. This procedure will not be considered to adversely effect the commercial reasonableness of any sale of the Collateral, except as required by law. (d) If the Collateral Agent sells any of the Collateral on credit, the Secured Obligations will be credited only with payments actually made by the purchaser and received by the Collateral Agent and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, the Collateral Agent may resell the Collateral. (e) The Collateral Agent shall have no obligation to marshall any of the Collateral. 6.2 INVESTMENT RELATED PROPERTY. Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Collateral Agent may be compelled, with respect to any sale of all or any part of the Investment Related Property conducted without prior registration or qualification of such Investment Related Property under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Investment Related Property for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Investment Related Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it, provided such sale is done in a commercially reasonable manner. If the Collateral Agent determines to exercise its right to sell any or all of the Investment Related Property, upon written request, each Grantor shall and shall cause each issuer of any Pledged Stock to be sold hereunder, each partnership and each limited liability company from time to time to furnish to the Collateral Agent all such information as the Collateral Agent may request in order to determine the number and nature of interest, shares or other instruments included in the Investment Related Property which may be sold by the 37 41 Collateral Agent in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. 6.3 INTELLECTUAL PROPERTY. (a) Anything contained herein to the contrary notwithstanding, upon the occurrence and during the continuation of an Event of Default: (i) the Collateral Agent shall have the right (but not the obligation) to bring suit or otherwise commence any action or proceeding in the name of any Grantor, the Collateral Agent or otherwise, in the Collateral Agent's sole discretion, to enforce any Intellectual Property, in which event such Grantor shall, at the request of the Collateral Agent, do any and all lawful acts and execute any and all documents reasonably required by the Collateral Agent in aid of such enforcement and such Grantor shall promptly, upon demand, reimburse and indemnify the Collateral Agent as provided in Section 10 hereof in connection with the reasonable exercise of its rights under this Section, and, to the extent that the Collateral Agent shall elect not to bring suit to enforce any Intellectual Property as provided in this Section, and to the extent provided for under applicable law each Grantor agrees to use all reasonable measures, whether by action, suit, proceeding or otherwise, to prevent the infringement of any of the Intellectual Property by others and for that purpose agrees to diligently maintain any action, suit or proceeding against any Person so infringing as shall be necessary to prevent such infringement; (ii) immediately after written demand from the Collateral Agent, each Grantor shall grant, assign, convey or otherwise transfer to the Collateral Agent all of such Grantor's right, title and interest in and to the Intellectual Property and shall execute and deliver to the Collateral Agent such documents as are necessary or appropriate to carry out the intent and purposes of this Agreement; (iii) the Collateral Agent shall have the right to notify, or require each Grantor to notify, any obligors with respect to amounts due or to become due to such Grantor in respect of the Intellectual Property, of the existence of the security interest created herein, to direct such obligors to make payment of all such amounts directly to the Collateral Agent, and, upon such notification and at the expense of such Grantor, to enforce collection of any such amounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done; (1) all amounts and proceeds (including checks and other instruments) received by Grantor in respect of amounts due to such Grantor in respect of the Collateral or any portion thereof shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from 38 42 other funds of such Grantor and shall be forthwith paid over or delivered to the Collateral Agent in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 6.5; and (2) Grantor shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon. (b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment or other transfer to the Collateral Agent of any rights, title and interests in and to the Intellectual Property shall have been previously made and shall have become absolute and effective, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Grantor, the Collateral Agent shall promptly execute and deliver to such Grantor, at such Grantor's sole cost and expense, such assignments or other transfer as may be necessary to reassign to such Grantor any such rights, title and interests as may have been assigned to the Collateral Agent as aforesaid, subject to any disposition thereof that may have been made by the Collateral Agent; provided, after giving effect to such reassignment, the Collateral Agent's security interest granted pursuant hereto, as well as all other rights and remedies of the Collateral Agent granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of all Liens other than Liens (if any) encumbering such rights, title and interest at the time of their assignment to the Collateral Agent and Permitted Liens. (c) Solely for the purpose of enabling the Collateral Agent to exercise rights and remedies under this Section 6 and at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Agent, to the extent it has the right to do so, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Grantor), subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Grantor to avoid the risk of invalidation of said Trademarks, to use, operate under, license, or sublicense any Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located. 6.4 CASH PROCEEDS. If any Event of Default shall have occurred and be continuing, in addition to the rights of the Collateral Agent specified in Section 3.3 with respect to payments of Receivables, all proceeds of any Collateral received by any Grantor consisting of cash, checks and other near-cash items (collectively, "CASH PROCEEDS") shall be held by such Grantor in trust for the Collateral Agent, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, unless otherwise provided pursuant to Section 3.4(b)(iii), be turned over 39 43 to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent, if required). Any Cash Proceeds received by the Collateral Agent (whether from a Grantor or otherwise): (i) if no Event of Default shall have occurred and be continuing, shall be held by the Collateral Agent for the benefit of the Grantor and turned over to the Grantor and (ii) if an Event of Default shall have occurred and be continuing, may, in the sole discretion of the Collateral Agent, (A) be held by the Collateral Agent for the ratable benefit of the Secured Parties, as collateral security for the Secured Obligations (whether matured or unmatured) and/or (B) then or at any time thereafter may be applied by the Collateral Agent against, the Secured Obligations then due and owing. 6.5 APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in this Agreement, all proceeds received by the Collateral Agent in respect of any sale, any collection from, or other realization upon all or any part of the Collateral, if any Event of Default shall have occurred and be continuing, shall be applied in full or in part by the Collateral Agent against, the Secured Obligations in the following order of priority: first, to the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Agent and its agents and counsel, and all other expenses, liabilities and advances made or incurred by the Collateral Agent in connection therewith, and all amounts for which the Collateral Agent is entitled to indemnification hereunder (in its capacity as the Collateral Agent and not as a Lender) and all advances made by the Collateral Agent hereunder for the account of the applicable Grantor, and to the payment of all costs and expenses paid or incurred by the Collateral Agent in connection with the exercise of any right or remedy hereunder or under the Credit Agreement, all in accordance with the terms hereof or thereof; second, to the extent of any excess, to the payment of all other Secured Obligations for the ratable benefit of the Lenders and the Lender Counterparties; and third, to the extent of any excess such proceeds, to the payment to or upon the order of such Grantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 7. SECTION COLLATERAL AGENT. The Collateral Agent has been appointed to act as Collateral Agent hereunder by Lenders and, by their acceptance of the benefits hereof, the other Secured Parties. The Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement; provided, the Collateral Agent shall, after payment in full of all Obligations under the Credit Agreement and the other Credit Documents, exercise, or refrain from exercising, any remedies provided for herein in accordance with the instructions of the holders of a majority of the aggregate notional amount (or, with respect to any Hedge Agreement that has been terminated in accordance with its terms, the amount then due and payable (exclusive of expenses and similar payments but including any early termination payments then due) under such Hedge Agreement) under all Hedge Agreements (Requisite Lenders or, if applicable, such holders being referred to herein as "REQUISITE OBLIGEES"). In furtherance of the foregoing provisions of this Section, each Lender Counterparty, by its 40 44 acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Lender Counterparty that all rights and remedies hereunder may be exercised solely by the Collateral Agent for the benefit of Lenders and Lender Counterparties in accordance with the terms of this Section. The Collateral Agent shall at all times be the same Person that is Administrative Agent under the Credit Agreement. Written notice of resignation by Administrative Agent pursuant to terms of the Credit Agreement shall also constitute notice of resignation as the Collateral Agent under this Agreement; removal of Administrative Agent pursuant to the terms of the Credit Agreement shall also constitute removal as the Collateral Agent under this Agreement; and appointment of a successor Administrative Agent pursuant to the terms of the Credit Agreement shall also constitute appointment of a successor Collateral Agent under this Agreement. Upon the acceptance of any appointment as Administrative Agent under the terms of the Credit Agreement by a successor Administrative Agent, that successor Administrative Agent shall thereby also be deemed the successor Collateral Agent and such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Agent under this Agreement, and the retiring or removed Collateral Agent under this Agreement shall promptly (i) transfer to such successor Collateral Agent all sums, Securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Agent under this Agreement, and (ii) execute and deliver to such successor Collateral Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Agent of the security interests created hereunder, whereupon such retiring or removed Collateral Agent shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Agent's resignation or removal hereunder as the Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Agent hereunder. 8. SECTION CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, be binding upon each Grantor, its successors and assigns, and inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and its successors, transferees and assigns. Without limiting the generality of the foregoing, but subject to the terms of the Credit Agreement, any Lender may assign or otherwise transfer any Loans held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Lenders herein or otherwise. Upon the payment in full of all Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, the security interest granted hereby shall terminate hereunder and of record and all rights to the 41 45 Collateral shall revert to Grantors. Upon any such termination the Collateral Agent shall, at Grantors' expense, execute and deliver to Grantors such documents as Grantors shall reasonably request to evidence such termination. 9. SECTION STANDARD OF CARE; COLLATERAL AGENT MAY PERFORM. The powers conferred on the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Agent accords its own property. Neither the Collateral Agent nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or otherwise. If any Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by each Grantor under Section 10.2 of the Credit Agreement. 10. SECTION INDEMNITY AND EXPENSES. (a) Each Grantor agrees: (i) to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless each Indemnitee, from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including without limitation enforcement of this Agreement), except to the extent such claims, losses or liabilities result from such Indemnitee's gross negligence or willful misconduct; and (ii) to pay to the Collateral Agent promptly following written demand the amount of any and all reasonable costs and reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents in accordance with the terms and conditions of the Credit Agreement. (b) The obligations of each Grantor in this Section 10 shall survive the termination of this Agreement and the discharge of such Grantor's other obligations under this Agreement, the Hedge Agreements, the Credit Agreement and any other Credit Documents. 42 46 11. SECTION MISCELLANEOUS. Any notice required or permitted to be given under this Agreement shall be given in accordance with Section 10.1 of the Credit Agreement. No failure or delay on the part of the Collateral Agent in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Credit Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. This Agreement shall be binding upon and inure to the benefit of the Collateral Agent and Grantors and their respective successors and assigns. No Grantor shall, without the prior written consent of the Collateral Agent, assign any right, duty or obligation hereunder. This Agreement and the other Credit Documents embody the entire agreement and understanding between Grantors and the Collateral Agent and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Credit Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. [Remainder of page intentionally left blank] 43 47 IN WITNESS WHEREOF, each Grantor and the Collateral Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. NETWORK PLUS, INC. By: /s/ James J. Crowley ------------------------ Name: James J. Crowley Title: EVP and COO NETWORK PLUS CORP. By: /s/ James J. Crowley ------------------------ Name: James J. Crowley Title: EVP and COO FLEET NATIONAL BANK, as the Collateral Agent By: /s/ Kay H. Campbell ----------------------- Name: Kay H. Campbell Title: Vice President 44 48 EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT PLEDGE SUPPLEMENT This PLEDGE SUPPLEMENT, dated [MM/DD/YY], is delivered pursuant to the Pledge and Security Agreement, dated as of [MM/DD/YY] (as it may be from time to time amended, modified or supplemented, the "SECURITY AGREEMENT"), among NETWORK PLUS, INC., the other Grantors named therein, and FLEET NATIONAL BANK, as the Collateral Agent. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement. Grantor hereby confirms the grant to the Collateral Agent set forth in the Security Agreement of, and does hereby grant to the Collateral Agent, a security interest in all of Grantor's right, title and interest in and to all Collateral, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located. Grantor represents and warrants that the attached Supplements to Schedules accurately and completely set forth all additional information required pursuant to the Security Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the Schedules to the Security Agreement. IN WITNESS WHEREOF, Grantor has caused this Pledge Supplement to be duly executed and delivered by its duly authorized officer as of [MM/DD/YY]. [NAME OF GRANTOR] By:_____________________________ Name: Title: 1 49 SUPPLEMENT TO SCHEDULE 3.1 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Full Legal Name and Chief Executive Office or Sole Place of Business of each Grantor(1): (B) Jurisdiction of Organization of each Grantor: (C) Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted Business for the past Five (5) Years: (D) Financing Statements: Grantor Filing Jurisdiction(s) ------- ---------------------- - --------------- (1) If the principal place of business of any Grantor is located outside of the United States, include the address of the major executive office in the United States, if any, of such Grantor. 2 50 SUPPLEMENT TO SCHEDULE 3.2 TO PLEDGE AND SECURITY AGREEMENT Additional Information: Grantor Location of Equipment and Inventory - ------- ----------------------------------- PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 3 51 SUPPLEMENT TO SCHEDULE 3.4 TO PLEDGE AND SECURITY AGREEMENT Additional Information: Pledged Stock: Pledged Partnership Interests: Pledged LLC Interests: Pledged Trust Interests: Pledged Debt: Securities Account: Commodities Accounts: Deposit Accounts: PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 4 52 SUPPLEMENT TO SCHEDULE 3.5 TO PLEDGE AND SECURITY AGREEMENT Additional Information: Grantor Description of Material Contract - ------- -------------------------------- PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 5 53 SUPPLEMENT TO SCHEDULE 3.6 TO PLEDGE AND SECURITY AGREEMENT Additional Information: Grantor Description of Letters of Credit - ------- -------------------------------- PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 6 54 SUPPLEMENT TO SCHEDULE 3.7 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Copyrights (B) Copyright Licenses (C) Patents (D) Patent Licenses (E) Trademarks (F) Trademark Licenses (G) Trade Secret Licenses (H) Intellectual Property Matters PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 7 55 SUPPLEMENT TO SCHEDULE 3.8 TO PLEDGE AND SECURITY AGREEMENT Additional Information: Grantor Commercial Tort Claims - ------- ---------------------- Network Plus, Inc. Network Plus Corp. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 8 56 EXHIBIT B TO PLEDGE AND SECURITY AGREEMENT UNCERTIFICATED SECURITIES CONTROL AGREEMENT This Uncertificated Securities Control Agreement dated as of _________, 2000 among ________________ (the "PLEDGOR"), Fleet National Bank, as the collateral agent for the Secured Parties (the "COLLATERAL AGENT"), and __________, a ________corporation (the "ISSUER"). Capitalized terms used but not defined herein shall have the meaning assigned in the Pledge and Security Agreement dated [as of the date hereof], among the Pledgor, the other Grantors party thereto and the Collateral Agent (the "SECURITY AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. 1. SECTION REGISTERED OWNERSHIP OF SHARES. The Issuer hereby confirms and agrees that as of the date hereof the Pledgor is the registered owner of __________ shares of the Issuer's [common] stock (the "Pledged Shares") and the Issuer shall not change the registered owner of the Pledged Shares without the prior written consent of the Collateral Agent. 2. SECTION INSTRUCTIONS. If at any time the Issuer shall receive instructions originated by the Collateral Agent relating to the Pledged Shares, the Issuer shall comply with such instructions without further consent by the Pledgor or any other person. 3. SECTION ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer hereby represents and warrants to the Collateral Agent: (a) It has not entered into, and until the termination of the this agreement will not enter into, any agreement with any other person relating the Pledged Shares pursuant to which it has agreed to comply with instructions issued by such other person; and (b) It has not entered into, and until the termination of this agreement will not enter into, any agreement with the Pledgor or the Collateral Agent purporting to limit or condition the obligation of the Issuer to comply with Instructions as set forth in Section 2 hereof. (c) Except for the claims and interest of the Collateral Agent and of the Pledgor in the Pledged Shares, the Issuer does not know of any claim to, or interest in, the Pledged Shares. If any person asserts any lien, encumbrance or adverse claim (including any PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 1 57 writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Shares, the Issuer will promptly notify the Collateral Agent and the Pledgor thereof. (d) This Uncertificated Securities Control Agreement is the valid and legally binding obligation of the Issuer. 4. SECTION CHOICE OF LAW. This Agreement shall be governed by the laws of the State of New York. 5. SECTION CONFLICT WITH OTHER AGREEMENTS. In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail. No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto. 6. SECTION VOTING RIGHTS. Until such time as the Collateral Agent shall otherwise instruct the Issuer in writing, the Pledgor shall have the right to vote the Pledged Shares. 7. SECTION SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Agent may assign its rights hereunder only with the express written consent of the Issuer and by sending written notice of such assignment to the Pledgor. 8. SECTION INDEMNIFICATION OF ISSUER. The Pledgor and the Collateral Agent hereby agree that (a) the Issuer is released from any and all liabilities to the Pledgor and the Collateral Agent arising from the terms of this Agreement and the compliance of the Issuer with the terms hereof, except to the extent that such liabilities arise from the Issuer's negligence and (b) the Pledgor, its successors and assigns shall at all times indemnify and save harmless the Issuer from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Issuer with the terms hereof, except to the extent that such arises from the Issuer's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. 9. SECTION NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 2 58 Pledgor: [INSERT ADDRESS] Attention: Telecopier: Collateral Agent: [INSERT ADDRESS] Attention: Telecopier: Issuer: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. 10. SECTION TERMINATION. The obligations of the Issuer to the Collateral Agent pursuant to this Control Agreement shall continue in effect until the security interests of the Collateral Agent in the Pledged Shares have been terminated pursuant to the terms of the Security Agreement and the Collateral Agent has notified the Issuer of such termination in writing. The Collateral Agent agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Issuer upon the request of the Pledgor on or after the termination of the Collateral Agent's security interest in the Pledged Shares pursuant to the terms of the Security Agreement. The termination of this Control Agreement shall not terminate the Pledged Shares or alter the obligations of the Issuer to the Pledgor pursuant to any other agreement with respect to the Pledged Shares. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 3 59 11. SECTION COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. [NAME OF PLEDGOR] By: ------------------- Name: Title: FLEET NATIONAL BANK, as the Collateral Agent By: ------------------- Name: Title: [NAME OF ISSUER] By: ------------------- Name: Title: PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 4 60 EXHIBIT A [Letterhead of Collateral Agent] [Date] [Name and Address of Issuer] Attention: ------------------------------ Re: Termination of Control Agreement -------------------------------- You are hereby notified that the Uncertificated Securities Control Agreement between you, [THE PLEDGOR] and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to Pledged Shares (as defined in the Uncertificated Control Agreement) from [THE PLEDGOR]. This notice terminates any obligations you may have to the undersigned with respect to the Pledged Shares, however nothing contained in this notice shall alter any obligations which you may otherwise owe to [THE PLEDGOR] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [insert name of Pledgor]. Very truly yours, [NAME OF COLLATERAL AGENT], as the Collateral Agent By: ------------------------------- Name: Title: PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 1 61 EXHIBIT C TO PLEDGE AND SECURITY AGREEMENT SECURITIES ACCOUNT CONTROL AGREEMENT This Securities Account Control Agreement dated as of _________, 2000 (this "AGREEMENT") among ____________________________ (the "DEBTOR"), Fleet National Bank, as the collateral agent for the Secured Parties (the "COLLATERAL AGENT"), and ____________, in its capacity as a "securities intermediary" as defined in Section 8-102 of the UCC (in such capacity, the "SECURITIES INTERMEDIARY"). Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Pledge and Security Agreement, dated [as of the date hereof], among the Debtor, the other Grantors party thereto and the Collateral Agent (the "SECURITY AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. 1. SECTION Establishment of Securities Account. The Securities Intermediary hereby confirms and agrees that: (a) The Securities Intermediary has established account number [IDENTIFY ACCOUNT NUMBER] in the name "[IDENTIFY EXACT TITLE OF ACCOUNT]" (such account and any successor account, the "SECURITIES ACCOUNT") and the Securities Intermediary shall not change the name or account number of the Securities Account without the prior written consent of the Collateral Agent; (b) All securities or other property underlying any financial assets credited to the Securities Account shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any financial asset credited to the Securities Account be registered in the name of the Debtor, payable to the order of the Debtor or specially indorsed to the Debtor except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank; (c) All property delivered to the Securities Intermediary pursuant to the Security Agreement will be promptly credited to the Securities Account; and (d) The Securities Account is a "securities account" within the meaning of Section 8-501 of the UCC. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 1 62 2. SECTION "FINANCIAL ASSETS" ELECTION. The Securities Intermediary hereby agrees that each item of property (including, without limitation, any investment property, financial asset, security, instrument, general intangible or cash) credited to the Securities Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. 3. SECTION CONTROL OF THE SECURITIES ACCOUNT. If at any time the Securities Intermediary shall receive any order from the Collateral Agent directing transfer or redemption of any financial asset relating to the Securities Account, the Securities Intermediary shall comply with such entitlement order without further consent by the Debtor or any other person. If the Debtor is otherwise entitled to issue entitlement orders and such orders conflict with any entitlement order issued by the Collateral Agent, the Securities Intermediary shall follow the orders issued by the Collateral Agent. 4. SECTION SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Securities Intermediary has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Securities Account or any security entitlement credited thereto, the Securities Intermediary hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Agent. The financial assets and other items deposited to the Securities Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Collateral Agent (except that the Securities Intermediary may set off (i) all amounts due to the Securities Intermediary in respect of customary fees and expenses for the routine maintenance and operation of the Securities Account and (ii) the face amount of any checks which have been credited to such Securities Account but are subsequently returned unpaid because of uncollected or insufficient funds). 5. SECTION CHOICE OF LAW. This Agreement and the Securities Account shall each be governed by the laws of the State of New York. Regardless of any provision in any other agreement, for purposes of the UCC and Revised Article 9, New York shall be deemed to be the Securities Intermediary's jurisdiction (within the meaning of Section 8-110 of the UCC) and the Securities Account (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York. 6. SECTION CONFLICT WITH OTHER AGREEMENTS. (a) In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail; (b) No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto; PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 2 63 (c) The Securities Intermediary hereby confirms and agrees that: (i) There are no other agreements entered into between the Securities Intermediary and the Debtor with respect to the Securities Account; (ii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating to the Securities Account and/or any financial assets credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the UCC) of such other person; and (iii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with the Debtor or the Collateral Agent purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in Section 3 hereof. 7. SECTION ADVERSE CLAIMS. Except for the claims and interest of the Collateral Agent and of the Debtor in the Securities Account, the Securities Intermediary does not know of any claim to, or interest in, the Securities Account or in any "financial asset" (as defined in Section 8-102(a) of the UCC) credited thereto. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Securities Account or in any financial asset carried therein, the Securities Intermediary will promptly notify the Collateral Agent and the Debtor thereof. 8. SECTION MAINTENANCE OF SECURITIES ACCOUNT. In addition to, and not in lieu of, the obligation of the Securities Intermediary to honor entitlement orders as agreed in Section 3 hereof, the Securities Intermediary agrees to maintain the Securities Account as follows: (a) NOTICE OF SOLE CONTROL. If at any time the Collateral Agent delivers to the Securities Intermediary a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Securities Intermediary agrees that after receipt of such notice, it will take all instruction with respect to the Securities Account solely from the Collateral Agent. (b) VOTING RIGHTS. Until such time as the Securities Intermediary receives a Notice of Sole Control pursuant to subsection (a) of this Section 8, the Debtor shall direct the Securities Intermediary with respect to the voting of any financial assets credited to the Securities Account. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 3 64 (c) PERMITTED INVESTMENTS. Until such time as the Securities Intermediary receives a Notice of Sole Control signed by the Collateral Agent, the Debtor shall direct the Securities Intermediary with respect to the selection of investments to be made for the Securities Account; provided, however, that the Securities Intermediary shall not honor any instruction to purchase any investments other than investments of a type described on Exhibit B hereto. (d) STATEMENTS AND CONFIRMATIONS. The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Securities Account and/or any financial assets credited thereto simultaneously to each of the Debtor and the Collateral Agent at the address for each set forth in Section 12 of this Agreement. (e) TAX REPORTING. All items of income, gain, expense and loss recognized in the Securities Account shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor. 9. SECTION REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SECURITIES INTERMEDIARY. The Securities Intermediary hereby makes the following representations, warranties and covenants: (a) The Securities Account has been established as set forth in Section 1 above and such Securities Account will be maintained in the manner set forth herein until termination of this Agreement; and (b) This Agreement is the valid and legally binding obligation of the Securities Intermediary. 10. SECTION INDEMNIFICATION OF SECURITIES INTERMEDIARY. The Debtor and the Collateral Agent hereby agree that (a) the Securities Intermediary is released from any and all liabilities to the Debtor and the Collateral Agent arising from the terms of this Agreement and the compliance of the Securities Intermediary with the terms hereof, except to the extent that such liabilities arise from the Securities Intermediary's negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Securities Intermediary from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Securities Intermediary with the terms hereof, except to the extent that such arises from the Securities Intermediary's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. 11. SECTION SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 4 65 law. The Collateral Agent may assign its rights hereunder only with the express written consent of the Securities Intermediary and by sending written notice of such assignment to the Debtor. 12. SECTION NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Debtor: [INSERT ADDRESS] Attention: Telecopier: Collateral Agent: [INSERT ADDRESS] Attention: Telecopier: Financial Institution: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. 13. SECTION TERMINATION. The obligations of the Securities Intermediary to the Collateral Agent pursuant to this Agreement shall continue in effect until the security interest of the Collateral Agent in the Securities Account has been terminated pursuant to the terms of the Security Agreement and the Collateral Agent has notified the Securities Intermediary of such termination in writing. The Collateral Agent agrees to provide Notice of Termination in substantially the form of Exhibit C hereto to the Securities Intermediary upon the request of the Debtor on or after the termination of the Collateral Agent's security interest in the Securities Account pursuant to the terms of the Security Agreement. The termination of this Agreement shall not terminate the Securities Account or alter the obligations of the Securities Intermediary to the Debtor pursuant to any other agreement with respect to the Securities Account. 14. SECTION COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 5 66 IN WITNESS WHEREOF, the parties hereto have caused this Securities Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. [DEBTOR] By: ------------------------ Name: Title: FLEET NATIONAL BANK, as the Collateral Agent By: ------------------------ Name: Title: [NAME OF INSTITUTION SERVING AS FINANCIAL INSTITUTION] By: ------------------------ Name: Title: PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 6 67 EXHIBIT A TO SECURITIES ACCOUNT CONTROL AGREEMENT [Letterhead of Collateral Agent] [Date] [Name and Address of Financial Institution] Attention: Re: Notice of Sole Control ---------------------- Ladies and Gentlemen: As referenced in the Securities Account Control Agreement dated as of _______, 2000 among [NAME OF THE DEBTOR], you and the undersigned (a copy of which is attached), we hereby give you notice of our sole control over securities account number ____________ (the "SECURITIES ACCOUNT") and all financial assets credited thereto. You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Securities Account or the financial assets credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, [NAME OF COLLATERAL AGENT], as the Collateral Agent By: ------------------------------ Name: Title: cc: [NAME OF THE DEBTOR] PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 7 68 EXHIBIT B TO SECURITIES ACCOUNT CONTROL AGREEMENT Permitted Investments --------------------- [TO COME] PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 8 69 EXHIBIT C TO SECURITIES ACCOUNT CONTROL AGREEMENT [Letterhead of Collateral Agent] [Date] [Name and Address of Financial Institution] Attention: Re: Termination of Securities Account Control Agreement --------------------------------------------------- You are hereby notified that the Securities Account Control Agreement dated as of _______, 2000 among you, [NAME OF THE DEBTOR] and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to account number(s) from [NAME OF THE DEBTOR]. This notice terminates any obligations you may have to the undersigned with respect to such account, however nothing contained in this notice shall alter any obligations which you may otherwise owe to [NAME OF THE DEBTOR] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, [NAME OF COLLATERAL AGENT], as the Collateral Agent By: -------------------------------- Name: Title: PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 9 70 EXHIBIT D TO PLEDGE AND SECURITY AGREEMENT DEPOSIT ACCOUNT CONTROL AGREEMENT This Deposit Account Control Agreement dated as of _________, 2000 (this "AGREEMENT") among ____________________________ (the "DEBTOR"), Fleet National Bank, as the collateral agent for the Secured Parties (the "COLLATERAL AGENT"),and ____________, in its capacity as a "bank" as defined in Section 9-102 of Revised Article 9 (in such capacities, the "FINANCIAL INSTITUTION"). Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Pledge and Security Agreement, dated [as of the date hereof], among the Debtor, the other Grantors party thereto and the Collateral Agent (the "SECURITY AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. 1. SECTION ESTABLISHMENT OF DEPOSIT ACCOUNT. The Financial Institution hereby confirms and agrees that: (a) The Financial Institution has established account number [IDENTIFY ACCOUNT NUMBER] in the name "[IDENTIFY EXACT TITLE OF ACCOUNT]" (such account and any successor account, the "DEPOSIT ACCOUNT") and the Financial Institution shall not change the name or account number of the Deposit Account without the prior written consent of the Collateral Agent; and (b) The Deposit Account is a "deposit account" within the meaning of Section 9-102(a)(29) of Revised Article 9. 2. SECTION CONTROL OF THE DEPOSIT ACCOUNT. If at any time the Financial Institution shall receive any instructions originated by the Collateral Agent directing the disposition of funds in the Deposit Account, the Financial Institution shall comply with such instructions without further consent by the Debtor or any other person. [The Financial Institution hereby acknowledges that for purposes of Section 9-302 of the [California Uniform Commercial Code/Illinois Uniform Commercial Code] it has received notice of the security interest of the Collateral Agent in the Deposit Account and hereby acknowledges and consents to such lien.] 3. SECTION SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Financial Institution has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Deposit Account or any funds credited thereto, the Financial Institution hereby agrees that such security interest shall be subordinate to the security interest of the PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 1 71 Collateral Agent. Money and other items credited to the Deposit Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Collateral Agent (except that the Financial Institution may set off (i) all amounts due to the Financial Institution in respect of customary fees and expenses for the routine maintenance and operation of the Deposit Account and (ii) the face amount of any checks which have been credited to such Deposit Account but are subsequently returned unpaid because of uncollected or insufficient funds). 4. SECTION CHOICE OF LAW. This Agreement and the Deposit Account shall each be governed by the laws of the State of New York. Regardless of any provision in any other agreement, for purposes of the UCC and Revised Article 9, New York shall be deemed to be the Financial Institution's jurisdiction (within the meaning of Section 9-304 of Revised Article 9 and the Deposit Account shall be governed by the laws of the State of New York. 5. SECTION CONFLICT WITH OTHER AGREEMENTS. (a) In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail; (b) No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto; and (c) The Financial Institution hereby confirms and agrees that: (i) There are no other agreements entered into between the Financial Institution and the Debtor with respect to the Deposit Account; and (ii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating the Deposit Account and/or any funds credited thereto pursuant to which it has agreed to comply with instructions originated by such persons as contemplated by Section 9-104 of Revised Article 9. 6. SECTION ADVERSE CLAIMS. The Financial Institution does not know of any liens, claims or encumbrances relating to the Deposit Account. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Deposit Account, the Financial Institution will promptly notify the Collateral Agent and the Debtor thereof. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 2 72 7. SECTION MAINTENANCE OF DEPOSIT ACCOUNT. In addition to, and not in lieu of, the obligation of the Financial Institution to honor instructions as set forth in Section 2 hereof, the Financial Institution agrees to maintain the Deposit Account as follows: (a) STATEMENTS AND CONFIRMATIONS. The Financial Institution will promptly send copies of all statements, confirmations and other correspondence concerning the Deposit Account simultaneously to each of the Debtor and the Collateral Agent at the address for each set forth in Section 11 of this Agreement; and (b) TAX REPORTING. All interest, if any, relating to the Deposit Account, shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor. 8. SECTION REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FINANCIAL INSTITUTION. The Financial Institution hereby makes the following representations, warranties and covenants: (a) The Deposit Account has been established as set forth in Section 1 and such Deposit Account will be maintained in the manner set forth herein until termination of this Agreement; and (b) This Agreement is the valid and legally binding obligations of the Financial Institution. 9. SECTION INDEMNIFICATION OF FINANCIAL INSTITUTION. The Debtor and the Collateral Agent hereby agree that (a) the Financial Institution is released from any and all liabilities to the Debtor and the Collateral Agent arising from the terms of this Agreement and the compliance of the Financial Institution with the terms hereof, except to the extent that such liabilities arise from the Financial Institution's negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Financial Institution from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Financial Institution with the terms hereof, except to the extent that such arises from the Financial Institution's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. 10. SECTION SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Agent may assign its rights hereunder only with the express written consent of the Financial Institution and by sending written notice of such assignment to the Debtor. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 3 73 11. SECTION NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Debtor: [INSERT ADDRESS] Attention: Telecopier: Collateral Agent: [INSERT ADDRESS] Attention: Telecopier: Financial Institution: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. 12. SECTION TERMINATION. The obligations of the Financial Institution to the Collateral Agent pursuant to this Agreement shall continue in effect until the security interest of the Collateral Agent in the Deposit Account has been terminated pursuant to the terms of the Security Agreement and the Collateral Agent has notified the Financial Institution of such termination in writing. The Collateral Agent agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Financial Institution upon the request of the Debtor on or after the termination of the Collateral Agent's security interest in the Deposit Account pursuant to the terms of the Security Agreement. The termination of this Agreement shall not terminate the Deposit Account or alter the obligations of the Financial Institution to the Debtor pursuant to any other agreement with respect to the Deposit Account. 13. SECTION COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 4 74 IN WITNESS WHEREOF, the parties hereto have caused this Deposit Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. [DEBTOR] By: ------------------------ Name: Title: FLEET NATIONAL BANK, as the Collateral Agent By: ------------------------ Name: Title: [NAME OF INSTITUTION SERVING AS FINANCIAL INSTITUTION] By: ------------------------ Name: Title: PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 5 75 EXHIBIT A TO DEPOSIT ACCOUNT CONTROL AGREEMENT [Letterhead of Collateral Agent] [Date] [Name and Address of Financial Institution] Attention: Re: Termination of Deposit Account Control Agreement ------------------------------------------------ You are hereby notified that the Deposit Account Control Agreement dated as of __________, 2000 among [NAME OF THE DEBTOR], you and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to account number(s) from [NAME OF THE DEBTOR]. This notice terminates any obligations you may have to the undersigned with respect to such account, however nothing contained in this notice shall alter any obligations which you may otherwise owe to [NAME OF THE DEBTOR] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, [NAME OF COLLATERAL AGENT], as the Collateral Agent By: -------------------- Name: Title: PLEDGE AND SECURITY AGREEMENT 383562.10-New York S7A 1 EX-10.4 5 b37246npex10-4.txt COMMON STOCK PURCHASE WARANT NO. FW-1 1 EXHIBIT 10.4 NETWORK PLUS CORP. Common Stock Purchase Warrant New York, New York No. FW-1 September 27, 2000 NETWORK PLUS CORP. (the "COMPANY"), a Delaware corporation, for value received, hereby certifies that GOLDMAN, SACHS & CO., or registered assigns, is entitled to purchase from the Company 1,284,686 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, par value $0.01 per share (the "COMMON STOCK") of the Company at the purchase price per share of $7.01, at any time or from time to time prior to 5:00 P.M., New York City time, on September 27, 2003 (or such earlier date as may be determined pursuant to section 3), all subject to the terms, conditions and adjustments set forth below in this Warrant. This Warrant evidences rights to purchase an aggregate of 1,284,686 shares of Common Stock subject to adjustment as provided herein. Certain capitalized terms used in this Warrant are defined in section 13; references to an "Exhibit" are, unless otherwise specified, to one of the Exhibits attached to this Warrant and references to a "section" are, unless otherwise specified, to one of the sections of this Warrant. 1. EXERCISE OF WARRANT. 1.1. MANNER OF EXERCISE. This Warrant may be exercised by the holder hereof, in whole or in part, during normal business hours on any Business Day, by surrender of this Warrant to the Company at its principal office, accompanied by a subscription in substantially the form attached to this Warrant (or a reasonable facsimile thereof) duly executed by such holder and accompanied by payment, in cash, by certified or official bank check payable to the order of the Company, or in the manner provided in section 1.4 or section 1.5 (or by any combination of such methods), in the amount obtained by multiplying (a) the whole number of shares of Common Stock (without giving effect to any adjustment thereof) designated in such subscription by (b) $7.01 (as adjusted pursuant to the terms hereof), and such holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) determined as provided in sections 2 through 4. 1.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in section 1.1, and at such time FW-1 WARRANT EXECUTION 2 the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise as provided in section 1.3 shall be deemed to have become the holder or holders of record thereof. 1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within ten Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof or, subject to section 9, as such holder (upon payment by such holder of any applicable transfer taxes) may direct, (a) a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount equal to the same fraction of the Market Price per share on the Business Day next preceding the date of such exercise, and (b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares designated by the holder upon such exercise as provided in section 1.1. The holder hereof shall comply will all applicable provisions of the Hart-Scott-Rodino Antitrust Improvements Law of 1976, as amended, and any successor statute, in connection with the exercise of this Warrant, and shall provide to the Company upon its reasonable request a certificate of such compliance. 1.4. PAYMENT BY APPLICATION OF SHARES OTHERWISE ISSUABLE. Upon any exercise of this Warrant, the holder hereof may, at its option, instruct the Company, by written notice accompanying the surrender of this Warrant at the time of such exercise, to apply to the payment required by section 1.1 such number of the shares of Common Stock otherwise issuable to such holder upon such exercise as shall be specified in such notice, in which case an amount equal to the excess of the aggregate Current Market Price of such specified number of shares on the date of exercise over the portion of the payment required by section 1.1 attributable to such shares shall be deemed to have been paid to the Company and the number of shares issuable upon such exercise shall be reduced by such specified number. 1.5. EXERCISE OF WARRANTS. Notwithstanding anything to the contrary set forth herein, no Warrant shall be exercisable other than in accordance with this section 1.5. The Warrants shall be exercisable as follows: (i) 72.73% of holder's Warrants shall be exercisable at any time on or after the Closing Date (as defined in the Credit Agreement), (ii) 13.64% shall be exercisable on a pro rata basis with each amount drawn by the Company on the first $100 million of loans under the Credit Agreement divided by $100 million, and (iii) 13.63% shall be exercisable at any time on or after the date the amount drawn by the Company under the Credit Agreement exceeds $100 million FW-1 WARRANT EXECUTION 3 2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE. 2.1. GENERAL; WARRANT PRICE. The number of shares of Common Stock which the holder of this Warrant shall be entitled to receive upon each exercise hereof shall be determined by multiplying the number of shares of Common Stock which would otherwise (but for the provisions of this section 2) be issuable upon such exercise, as designated by the holder hereof pursuant to section 1.1, by the fraction of which (a) the numerator is $7.01 and (b) the denominator is the Warrant Price in effect on the date of such exercise. The "Warrant Price" shall initially be $7.01 per share, shall be adjusted and readjusted from time to time as provided in this section 2 and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this section 2. 2.2. ADJUSTMENT OF WARRANT PRICE. 2.2.1 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company at any time or from time to time after the date hereof shall issue or sell Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration or for a consideration per share less than the Current Market Price in effect immediately prior to such issue or sale, then, subject to section 2.8, the Warrant Price shall be reduced, concurrently with such issue or sale, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Warrant Price by a fraction (a) the numerator of which shall be (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such Additional Shares of Common Stock so issued or sold would purchase at such Current Market Price, and (b) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale, PROVIDED that, for the purposes of this section 2.2.1, (x) immediately after any Additional Shares of Common Stock are deemed to have been issued pursuant to section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding, and (y) treasury shares shall not be deemed to be outstanding. 2.2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the Company at any time or from time to time after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or FW-1 WARRANT 3 EXECUTION 4 other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock, other than a dividend payable in Additional Shares of Common Stock, then, and in each such case, subject to section 2.8, the Warrant Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of any class of securities entitled to receive such dividend or distribution shall be reduced, effective as of the close of business on such record date, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Warrant Price by a fraction (x) the numerator of which shall be the Current Market Price in effect on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, less the amount of such dividend or distribution (as determined in good faith by the Board of Directors of the Company) applicable to one share of Common Stock, and (y) the denominator of which shall be such Current Market Price. 2.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the Company at any time or from time to time after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities entitled to receive, any Options or Convertible Securities, then, and in each such case, the maximum number of Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, sale, grant or assumption or, in case such a record date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), PROVIDED that such Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to section 2.5) of such shares would be less than the Current Market Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), and PROVIDED, FURTHER, that in any such case in which Additional Shares of Common Stock are deemed to be issued (a) no further adjustment of the Warrant Price shall be made upon the subsequent issue or sale of Convertible Securities or shares of Common Stock upon the exercise of such Options or the conversion or exchange of such Convertible Securities, except in the case of any such Options or Convertible Securities which contain provisions requiring an adjustment, subsequent to the date of the issue or sale thereof, of the number FW-1 WARRANT 4 EXECUTION 5 of Additional Shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities by reason of (x) a change of control of the Company, (y) the acquisition by any Person or group of Persons of any specified number or percentage of the Voting Securities of the Company or (z) any similar event or occurrence, each such case to be deemed hereunder to involve a separate issuance of Additional Shares of Common Stock, Options or Convertible Securities, as the case may be; (b) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the Warrant Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options, or the rights of conversion or exchange under such Convertible Securities, which are outstanding at such time; (c) upon the expiration (or purchase by the Company and cancellation or retirement) of any such Options which shall not have been exercised or the expiration of any rights of conversion or exchange under any such Convertible Securities which (or purchase by the Company and cancellation or retirement of any such Convertible Securities the rights of conversion or exchange under which) shall not have been exercised, the Warrant Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if: (i) in the case of Options for Common Stock or Convertible Securities, the only Additional Shares of Common Stock issued or sold were the Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue or sale of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or FW-1 WARRANT 5 EXECUTION 6 exchange, and (ii) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise of such Options were issued at the time of the issue, sale, grant or assumption of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have then been issued was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (pursuant to section 2.5) upon the issue or sale of such Convertible Securities with respect to which such Options were actually exercised; (d) no readjustment pursuant to subdivision (b) or (c) above shall have the effect of increasing the Warrant Price by an amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities; and (e) in the case of any such Options which expire by their terms not more than 30 days after the date of issue, sale, grant or assumption thereof, no adjustment of the Warrant Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the manner provided in subdivision (c) above. 2.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the Company at any time or from time to time after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, Additional Shares of Common Stock shall be deemed to have been issued (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. 2.5. COMPUTATION OF CONSIDERATION. For the purposes of this section 2, (a) the consideration for the issue or sale of any Additional Shares of Common Stock shall, irrespective of the accounting treatment of such consideration, (i) insofar as it consists of cash, be computed at the net amount of cash FW-1 WARRANT 6 EXECUTION 7 received by the Company, (ii) insofar as it consists of property (including securities) other than cash, be computed at the fair value thereof at the time of such issue or sale, as determined in good faith by the Board of Directors of the Company, and (iii) in case Additional Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (i) and (ii) above, allocable to such Additional Shares of Common Stock, all as determined in good faith by the Board of Directors of the Company; (b) Additional Shares of Common Stock deemed to have been issued pursuant to section 2.3, relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by dividing (i) the total amount, if any, received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as provided in the foregoing subdivision (a), by (ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number to protect against dilution) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities; and (c) Additional Shares of Common Stock deemed to have been issued pursuant to section 2.4, relating to stock dividends, stock splits, etc., shall be deemed to have been issued for no consideration. FW-1 WARRANT 7 EXECUTION 8 2.6. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares of Common Stock shall be combined or consolidated, by reclassification, reverse stock-split or otherwise, into a lesser number of shares of Common Stock, the Warrant Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. 2.7. MINIMUM ADJUSTMENT OF WARRANT PRICE. If the amount of any adjustment of the Warrant Price required pursuant to this section 2 would be less than one tenth (1/10) of one percent (1%) of the Warrant Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least one tenth (1/10) of one percent (1%) of such Warrant Price. 3. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC. In case the Company after the date hereof (a) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, or (b) shall permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (c) shall transfer all or substantially all of its properties or assets to any other Person, or (d) shall effect a capital reorganization or reclassification of the Common Stock or Other Securities (other than a capital reorganization or reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment in the Warrant Price is provided in section 2.2.1 or 2.2.2), THEN, this Warrant shall automatically terminate in its entirety immediately upon the consummation of such transaction; provided that, upon the basis and the terms and in the manner provided in this Warrant, the holder of this Warrant shall be permitted to exercise this Warrant immediately preceding the consummation of such transaction and immediately after such exercise shall be entitled to receive (at the aggregate Warrant Price in effect at the time of such consummation for all Common Stock or Other Securities issuable upon such exercise immediately prior to such consummation), in lieu of the Common Stock or Other Securities issuable upon such exercise prior to such consummation, the stock and other securities, cash and property to which such holder would have been entitled upon such consummation if such holder had exercised the rights represented by this Warrant immediately prior thereto. 4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the provisions of section 2 or section 3 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles of such sections, then, in each such case, the Company shall appoint a firm FW-1 WARRANT 8 EXECUTION 9 of independent certified public accountants of recognized national standing (which may be the regular auditors of the Company), which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in sections 2 and 3, necessary to preserve, without dilution, the purchase rights represented by this Warrant. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the holder of this Warrant and shall make the adjustments described therein. 5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not permit the par value of any shares of stock receivable upon the exercise of this Warrant to exceed the amount payable therefor upon such exercise, (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock on the exercise of the Warrants from time to time outstanding and (c) will not take any action which results in any adjustment of the Warrant Price if the total number of shares of Common Stock (or Other Securities) issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock (or Other Securities) then authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise. 6. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable upon the exercise of this Warrant, the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms of this Warrant and provide to holder an officers certificate verifying such computation (other than any computation of the fair value of property as determined in good faith by the Board of Directors of the Company) and prepare a report setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Warrant Price in effect immediately prior to such issue or sale and as adjusted and readjusted (if required by section 2) on account thereof. The Company will forthwith mail a copy of each such report to each holder of a Warrant and will, upon the written request at any time of any holder of a Warrant, furnish to such holder a like report setting forth the Warrant Price at the time in effect and showing in reasonable detail how it was calculated. FW-1 WARRANT 9 EXECUTION 10 7. NOTICES OF CORPORATE ACTION. In the event of (a) any taking by the Company of a record of the holders of Common Stock for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a regular periodic dividend payable in cash out of earned surplus in an amount not exceeding the amount of the immediately preceding cash dividend for such period) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer of all or substantially all the assets of the Company to any other Person, or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company will mail to each holder of a Warrant a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least twenty days prior to the date therein specified. 8. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the Securities Act) before such shares may be issued upon exercise, the Company will, at its expense and as expeditiously as possible, use its reasonable best efforts to cause such shares to be duly registered or approved, as the case may be. At any such time as Common Stock is listed on any national securities exchange, the Company will, at its expense, use its reasonable best efforts to obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing of such shares after their issuance; and the Company will use its reasonable best efforts to list on such national securities exchange, register under the Exchange Act and maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities FW-1 WARRANT 10 EXECUTION 11 exchange by the Company. 9. RESTRICTIONS ON TRANSFER. 9.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this section 9, each Warrant (including each Warrant issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted with a legend in substantially the following form: "This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while a registration under such Act is in effect or pursuant to an exemption therefrom under such Act. This Warrant and such shares may be transferred only in compliance with the conditions specified in this Warrant." Except as otherwise permitted by this section 9, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act. Such shares may be transferred only in compliance with the conditions specified in certain Common Stock Purchase Warrants issued by Network Plus Corp. A complete and correct copy of the form of such Warrant is available from Network Plus Corp. and will be furnished to the holder of such shares upon written request and without charge." 9.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Prior to any transfer of any Restricted Securities which are not registered under an effective registration statement under the Securities Act, the holder thereof will give written notice to the Company of such holder's intention to effect such transfer and to comply in all other respects with this section 9.2. Each such notice (a) shall describe the manner and circumstances of the proposed transfer in sufficient detail to enable counsel to render the opinions referred to below, and (b) shall designate counsel for the holder giving such notice (who may be house counsel for such holder). The holder giving such notice will submit a copy thereof to the counsel designated in such notice and the Company will promptly submit a copy thereof to its counsel. The following provisions shall then apply: (i) If (A) in the opinion of such counsel for the holder the proposed transfer may be effected without registration of such Restricted Securities under FW-1 WARRANT 11 EXECUTION 12 the Securities Act, and (B) counsel for the Company shall not have rendered a reasoned written objection thereto within 15 days after the receipt by the Company of such written notice that such registration is required, such holder shall thereupon be entitled to transfer such securities in accordance with the terms of the notice delivered by such holder to the Company. Each warrant or certificate, if any, representing such securities issued upon or in connection with such transfer shall bear the appropriate restrictive legend required by section 9.1, unless in the opinion of each such counsel such legend is no longer required to insure compliance with the Securities Act. (ii) If in the opinion of either of or both such counsel the proposed transfer may not legally be effected without registration of such Restricted Securities under the Securities Act (such opinion or opinions to state the basis of the legal conclusions reached therein), the Company will promptly so notify the holder thereof and thereafter such holder shall not be entitled to transfer such Restricted Securities until either (x) receipt by the Company of a further notice from such holder pursuant to the foregoing provisions of this section 9.2 and fulfillment of the provisions of clause (i) above or (y) such shares have been effectively registered under the Securities Act. Notwithstanding the foregoing provisions of this section 9.2(ii), Goldman, Sachs & Co. shall be permitted to transfer any Restricted Securities to a limited number of institutional investors, PROVIDED that (A) each such investor represents in writing that it is acquiring such Restricted Securities for investment and not with a view to the distribution thereof (subject, however, to any requirement of law that the disposition thereof shall at all times be within the control of such transferee), (B) each such investor agrees in writing to be bound by all the restrictions on transfer of such Restricted Securities contained in this section 9.2 and (C) Goldman, Sachs & Co. delivers to the Company an opinion of Skadden, Arps, Slate, Meagher & Flom, or other counsel satisfactory to the Company, stating that such transfer may be effected without registration under the Securities Act. The Company will pay the reasonable fees and disbursements of Skadden, Arps, Slate, Meagher & Flom or Hale & Dorr for any holder of Restricted Securities and of counsel for the Company in connection with all opinions rendered by them pursuant to this section 9.2 and pursuant to section 9.3; provided that such opinions relate to the transfer of at least 1,284,685 shares of Common Stock in the aggregate (subject to proportionate adjustment as provided for hereunder) and that such shares will cease to constitute Restricted Securities following such transfer for the purposes of this section 9.2 and section 9.3. 9.3. TERMINATION OF RESTRICTIONS. The restrictions imposed by this section 9 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities (a) when such securities shall have been effectively registered under the Securities Act, or (b) when, in the opinions of both counsel for the holder thereof and counsel for FW-1 WARRANT 12 EXECUTION 13 the Company, such restrictions are no longer required in order to insure compliance with the Securities Act. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by section 9.1. 10. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep available, solely for issuance and delivery upon exercise of the Warrants, the number of shares of Common Stock (or Other Securities) from time to time issuable upon exercise of all Warrants at the time outstanding. All shares of Common Stock (or Other Securities) issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof. 11. REGISTRATION AND TRANSFER OF WARRANTS, ETC. 11.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. The Company will keep at the principal office of the Company or its transfer agent a register in which the Company will provide for the registration of Warrants and the registration of transfers of Warrants. The Company may treat the Person in whose name any Warrant is registered on such register as the owner thereof for all other purposes, and the Company shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. Subject to section 9, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued. 11.2. TRANSFER AND EXCHANGE OF WARRANTS. Upon surrender of any Warrant for registration of transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to compliance with section 9, if applicable) execute and deliver in exchange therefor a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered. 11.3. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant, upon delivery of an indemnity bond in such reasonable amount as the Company may determine (or, in the case of any Warrant held by any Institutional Holder or its nominee, of an indemnity agreement from such Institutional Holder reasonably satisfactory to the Company), or, in the case of any such mutilation, upon the surrender of such Warrant for cancellation to the Company at its principal office, the Company at FW-1 WARRANT 13 EXECUTION 14 its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 12. REGISTRATION UNDER SECURITIES ACT, ETC. 12.1. REGISTRATION ON REQUEST. (a) REQUEST. On no more than three occasions upon the written request of one or more Initiating Holders, requesting that the Company effect the registration under the Securities Act of all or part of such Initiating Holders' Registerable Securities and specifying the intended method of disposition thereof, the Company will, subject to the terms of this Warrant, promptly give written notice of such requested registration to all registered holders of Registerable Securities, and thereupon the Company will effect the registration under the Securities Act of (i) the Registerable Securities which the Company has been so requested to register by such Initiating Holders for disposition in accordance with the intended method of disposition stated in such request, and (ii) all other Registerable Securities the holders of which shall have made a written request to the Company for registration thereof within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registerable Securities), all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registerable Securities so to be registered. (b) REGISTRATION STATEMENT FORM. Registrations under this section 12.1 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and (ii) as shall permit the disposition of such Registerable Securities in accordance with the intended method or methods of disposition specified in their request for such registration. The Company agrees to include in any such registration statement all information which holders of Registerable Securities being registered shall reasonably request. If, in connection with any registration under this section 12.1 which is proposed by the Company to be on Form S-3 or any similar short form registration statement which is a successor to Form S-3, the managing underwriters, if any, shall advise the Company in writing that in their opinion the use of another permitted form is of material importance to the success of the offering, then such registration shall be on such other permitted form. (c) EXPENSES. The Company will pay all Registration Expenses in connection with any registration requested pursuant to this section 12.1 by any Initiating Holders of Registerable Securities prior to the time at which three such registrations shall have been FW-1 WARRANT 14 EXECUTION 15 effected in which all of the Registerable Securities requested to be included in such registration by any holders of Registerable Securities shall have been registered pursuant to this section 12.1. The Registration Expenses (and underwriting discounts and commissions and transfer taxes, if any) in connection with each other registration requested under this section 12.1 shall be allocated pro rata among all Persons on whose behalf securities of the Company are included in such registration, on the basis of the respective amounts of the securities then being registered on their behalf. (d) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to this section 12.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, PROVIDED that a registration which does not become effective after the Company has filed a registration statement with respect thereto solely by reason of the refusal to proceed of the Initiating Holders (other than a refusal to proceed based upon the advice of counsel relating to a matter with respect to the Company OR material adverse information concerning the business or financial condition of the Company which is made known to the Initiating Holders after the date on which such registration was requested) shall be deemed to have been effected by the Company at the request of such Initiating Holders unless the Initiating Holders shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration becomes subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, (provided that, in lieu of such registration not being deemed to have been effected, the Company may extend the registration period may be extended by the period of such stop order, injunction or other order, up to a maximum of ninety days) or (iii) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by such Initiating Holders. (e) SELECTION OF UNDERWRITERS. If a requested registration pursuant to this section 12.1 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by the holders of at least a majority (by number of shares) of the Registerable Securities as to which registration has been requested and shall be acceptable to the Company, which shall not unreasonably withhold its acceptance of any such underwriters. (f) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration pursuant to this section 12.1 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy to each holder of Registerable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in such offering within a price range acceptable to the holders of a majority of the Registerable Securities requested to be included in such registration, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, Registerable Securities FW-1 WARRANT 15 EXECUTION 16 requested to be included in such registration, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, Registerable Securities requested to be included in such registration by the holder or holders of Registerable Securities, PRO RATA among the holders thereof requesting such registration on the basis of the number of such securities requested to be included by such holders. In connection with any such registration, no securities other than Registerable Securities shall be covered by such registration. (g) If at the time of any request to register Registerable Securities by any holder, pursuant to this Section 12.1, the Company is engaged or has plans to engage in a registered public offering or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the requested registration, then the Company may at its option direct, upon no less than five days prior written notice, that such request be delayed for a period not in excess of 90 days from the date of the expiration of such notice, such right to delay a request to be exercised by the Company not more than once in any 12-month period. 12.2. INCIDENTAL REGISTRATION. (a) RIGHT TO INCLUDE REGISTERABLE SECURITIES. If the Company at any time proposes to register any of its securities under the Securities Act (other than by a registration on Form S-4 or S-8 or any successor or similar forms and other than pursuant to section 12.1), whether or not for sale for its own account, it will each such time give prompt written notice to all holders of Registerable Securities of its intention to do so and of such holders' rights under this section 12.2. Upon the written request of any such holder made within fifteen days after the receipt of any such notice (which request shall specify the Registerable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Company will, subject to the terms of this Warrant, effect the registration under the Securities Act of all Registerable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registerable Securities so to be registered, by inclusion of such Registerable Securities in the registration statement which covers the securities which the Company proposes to register, PROVIDED that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registerable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registerable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection FW-1 WARRANT 16 EXECUTION 17 therewith), without prejudice, however, to the rights of any holder or holders of Registerable Securities entitled to do so to request that such registration be effected as a registration under section 12.1, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registerable Securities, for the same period as the delay in registering such other securities. No registration effected under this section 12.2 shall relieve the Company of its obligation to effect any registration upon request under section 12.1 nor shall any such registration hereunder be deemed to have been effected pursuant to section 12.1. The Company will pay all Registration Expenses in connection with each registration of Registerable Securities requested pursuant to this section 12.2. (b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a registration pursuant to this section 12.2 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters of recognized standing under underwriting terms appropriate for such a transaction, (ii) the Registerable Securities so requested to be registered for sale for the account of holders of Registerable Securities are not also to be included in such underwritten offering (either because the Company has not been requested so to include such Registerable Securities pursuant to section 12.4(b) or, if requested to do so, is not obligated to do so under section 12.4(b)), and (iii) the managing underwriter of such underwritten offering shall inform the Company and holders of the Registerable Securities requesting such registration by letter of its belief that the distribution of all or a specified number of such Registerable Securities concurrently with the securities being distributed by such underwriters would interfere with the successful marketing of the securities being distributed by such underwriters (such writing to state the basis of such belief and the approximate number of such Registerable Securities which may be distributed without such effect), then the Company may, upon written notice to all holders of such Registerable Securities, reduce PRO RATA (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registerable Securities the registration of which shall have been requested by each holder of Registerable Securities so that the resultant aggregate number of such Registerable Securities so included in such registration shall be equal to the number of shares stated in such managing underwriter's letter. 12.3. REGISTRATION PROCEDURES. If and whenever the Company is required to effect the registration of any Registerable Securities under the Securities Act as provided in sections 12.1 and 12.2 the Company shall promptly: (i) prepare and (within sixty days after the end of the period within which requests for registration may be given to the Company or in any event as soon thereafter as possible) (in the case of a registration pursuant to section 12.1, such FW-1 WARRANT 17 EXECUTION 18 filing to be made within sixty days after the initial request of one or more Initiating Holders of Registerable Securities or in any event as soon thereafter as possible) file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and thereafter use its reasonable best efforts to cause such registration statement to become and remain effective, PROVIDED, however, that the Company may discontinue any registration of its securities which are not Registerable Securities (and, under the circumstances specified in section 12.2(a), its securities which are Registerable Securities) at any time prior to the effective date of the registration statement relating thereto; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or (i) in the case of a registration pursuant to section 12.1, the expiration of 180 days after such registration statement becomes effective, or (ii) in the case of a registration pursuant to section 12.2, the expiration of 90 days after such registration statement becomes effective; (iii) furnish to each seller of Registerable Securities covered by such registration statement and each underwriter, if any, of the securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request; (iv) use its reasonable best efforts to register or qualify all Registerable Securities and other securities covered by such registration statement under such other securities laws or blue sky laws of such jurisdictions as any seller thereof and any underwriter of the securities being sold by such seller shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such seller and underwriter to FW-1 WARRANT 18 EXECUTION 19 consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (v) use its reasonable best efforts to cause all Registerable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registerable Securities; (vi) use its reasonable best efforts to furnish to each seller of Registerable Securities a signed counterpart, addressed to such seller and the underwriters, if any of (x) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (y) a "comfort" letter (or, in the case of such Person which does not satisfy the conditions for receipt of a "comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities (with, in the case of an "agreed upon procedures" letter, such modifications or deletions as may be required under Statement on Auditing Standards No. 35) and, in the case of the accountants' letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as such seller (or the underwriters, if any) may reasonably request; (vii) notify the holders of Registerable Securities and the managing underwriter or underwriters, if any, promptly and confirm such advice in writing FW-1 WARRANT 19 EXECUTION 20 promptly thereafter: (v) when the registration statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective; (w) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; (x) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; (y) if at any time the representations and warranties of the Company made as contemplated by section 12.4 below cease to be true and correct; (z) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registerable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; (viii) notify each seller of Registerable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon the Company's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include 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 not misleading in the light of the circumstances then existing; (ix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which FW-1 WARRANT 20 EXECUTION 21 earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, and will furnish to each such seller prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any thereof to which any such seller shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (x) make available for inspection by a representative or representatives of the holders of Registerable Securities any underwriter participating in any disposition pursuant to the registration statement and any attorney or accountant retained by such selling holders or underwriter (each, an "INSPECTOR"), all financial and other records, pertinent corporate documents and properties of the Company (the "RECORDS"), and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration in order to permit a reasonable investigation within the meaning of Section 11 of the Securities Act, PROVIDED that the Company shall not be required to comply with this subdivision (xi) if there is a reasonable likelihood, in the judgment of the Company, that such delivery could result in the loss of any attorney-client privilege related thereto; and PROVIDED FURTHER that Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (other than to any holder of Registerable Securities) unless (x) such Records have become generally available to the public or (y) the disclosure of such Records may be necessary or appropriate (A) in compliance with any law, rule, regulation or order applicable to any such Inspectors or holder of Registerable Securities, (B) in response to any subpoena or other legal process or (C) in connection with any litigation to which such Inspectors or any holder of Registerable Securities is a party; (xi) provide and cause to be maintained a transfer agent and registrar for all Registerable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; (xii) take such other actions as sellers of such Registerable Securities holding 51% of the shares so to be sold shall reasonably request in order to expedite or facilitate the disposition of such Registerable Securities; (xiii) use its best efforts to list all Registerable Securities covered by such registration statement on any securities exchange on which any of the securities of the same class as the Registerable Securities are then listed; and FW-1 WARRANT 21 EXECUTION 22 (xiv) use its best efforts to provide a CUSIP number for the Registerable Securities, not later than the effective date of the registration statement. The Company may require each seller of Registerable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. Each holder of Registerable Securities shall be deemed to have agreed by acquisition of such Registerable Securities that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in subdivision (vii) or (viii) of this section 12.3, such holder will forthwith discontinue such holder's disposition of Registerable Securities pursuant to the registration statement relating to such Registerable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (vii) of this section 12.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registerable Securities current at the time of receipt of such notice. In the event that, in the reasonable judgment of the Company, it is necessary or advisable to suspend use of a prospectus included in a Registration Statement due to pending material developments or other material events that have not yet been publicly disclosed and as to which the Company believes public disclosure would be detrimental to the Company, the Company shall notify all sellers of Registerable Securities to such effect, and upon receipt of such notice, each such seller of Registerable Securities shall promptly discontinue any sales of Registerable Securities pursuant to Registration Statement until such seller of Registerable Securities has received copies of a supplemented or amended prospectus or until such seller of Registerable Securities is advised in writing by the Company that the current prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such prospectus. Notwithstanding anything to the contrary herein, the Company shall not exercise its rights under this paragraph to suspend sales of Registerable Securities for a period in excess of ninety days in any 365 day-period. If any such registration or comparable statement refers to any holder of Registerable Securities 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 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 or any FW-1 WARRANT 22 EXECUTION 23 similar federal statute then in force, the deletion of the reference to such holder. 12.4. UNDERWRITTEN OFFERINGS. (a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters for any underwritten offering by holders of Registerable Securities pursuant to a registration requested under section 12.1, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to be satisfactory in substance and form to the Company, each such holder and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of this type, including, without limitation, indemnities to the effect and to the extent provided in section 12.7. The holders of the Registerable Securities will cooperate with the Company in the negotiation of the underwriting agreement and will give consideration to the reasonable suggestions of the Company regarding the form thereof, PROVIDED that nothing herein contained shall diminish the foregoing obligations of the Company. The holders of Registerable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registerable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registerable Securities. Any such holder of Registerable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in such registration statement, customary representations and warranties contained in the relevant underwriting agreement, or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. (b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by section 12.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registerable Securities as provided in section 12.2 and subject to the provisions of section 12.2(b), use its best efforts to arrange for such underwriters to include all the Registerable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, PROVIDED that if the managing underwriter of such underwritten offering shall inform the holders of the Registerable Securities requesting such registration and the holders of any other securities which shall have exercised, in respect of such underwritten offering, registration rights comparable to the rights under section 12.2 by letter of its belief that inclusion in such FW-1 WARRANT 23 EXECUTION 24 underwritten distribution of all or a specified number of such Registerable Securities or of such other shares of securities so requested to be included would interfere with the successful marketing of the securities (other than such Registerable Securities and other shares of securities so requested to be included) by the underwriters (such writing to state the basis of such belief and the approximate number of such Registerable Securities and shares of other securities so requested to be included which may be included in such underwritten offering without such effect), then the Company may, upon written notice to all holders of such Registerable Securities and of such other shares of securities so requested to be included, exclude pro rata from such underwritten offering (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registerable Securities and shares of such other securities so requested to be included the registration of which shall have been requested by each holder of Registerable Securities and by the holders of such other so that the resultant aggregate number of such Registerable Securities and of such other shares of securities so requested to be included which are included in such underwritten offering shall be equal to the approximate number of shares stated in such managing underwriter's letter. The holders of Registerable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registerable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registerable Securities. Any such holder of Registerable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. Notwithstanding anything to the contrary contained herein, in the event that any terms of this Section 12 are inconsistent with or conflict with the terms of the proviso to Section 5.01(b) of the Warrant Agreement dated as of September 3, 1998 between the Company and American Stock Transfer & Trust Company (the "UNIT AGREEMENT"), the terms of the Unit Agreement shall govern and the terms hereof shall be deemed to be amended insofar as is necessary to resolve such inconsistency or conflict. (c) CONFIDENTIALITY. Any holder receiving any written notice from the Company regarding the Company's plans to file a Registration Statement shall treat such notice confidentially and shall not disclose such information to any person other than as necessary to exercise its rights under this Warrant. (d) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No Person may participate in any FW-1 WARRANT 24 EXECUTION 25 underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority of Registerable Securities to be included in such underwritten offering and (ii) completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. Notwithstanding the foregoing, no underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registerable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in the related registration statement, customary representations or warranties contained in the relevant underwriting agreement, or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. 12.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Warrant, the Company will give the holders of Registerable Securities registered under such registration statement, their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act, provided that the Company shall not be required to comply with this section 12.5 if there is a reasonable likelihood, in the judgment of the Company, that such delivery could result in the loss of any attorney-client privilege related thereto; and provided further that Records which the Company determines, in good faith, to be confidential and which it notifies the holders of Registerable Securities are confidential shall not be disclosed by the holders of Registerable Securities unless (x) such Records have become generally available to the public or (y) the disclosure of such Records may be necessary or appropriate (A) in compliance with any law, rule, regulation or order applicable to any such holder of Registerable Securities, (B) in response to any subpoena or other legal process or (C) in connection with any litigation to which any such holder of Registerable Securities is a party. 12.6. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does, indemnify and hold harmless in the case of any registration statement filed pursuant to section 12.1 or 12.2, the holder of any Registerable Securities covered by such registration FW-1 WARRANT 25 EXECUTION 26 statement, its directors and officers, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such holder or any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such holder and each such director, officer, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, PROVIDED that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such holder specifically stating that it is for use in the preparation thereof and, PROVIDED, FURTHER that the Company shall not be liable to any Person who participates as an underwriter, in the offering or sale of Registerable Securities or to any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, within the time required by the Securities Act to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registerable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder. (b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a condition to including any Registerable Securities in any registration statement filed pursuant to section 12.3, that the Company shall have received an undertaking satisfactory to it from the prospective seller of such Registerable Securities, to indemnify and hold harmless (in FW-1 WARRANT 26 EXECUTION 27 the same manner and to the same extent as set forth in subdivision (a) of this section 12.6) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. (c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this section 12.6 and subdivision (f) below, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, PROVIDED that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this section 12.6, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability, or a covenant not to sue, in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any action for which indemnity is required to be provided by an indemnifying party hereunder without the consent of such indemnifying party; in no event shall the indemnifying party be required to pay the expenses of more than one law firm per jurisdiction as counsel for the indemnified party. The provisions of this subsection (c) shall also apply to a contribution FW-1 WARRANT 27 EXECUTION 28 pursuant to subsection (f) below. (d) OTHER INDEMNIFICATION. Indemnification similar to that specified in the preceding subdivisions of this section 12.6 (with appropriate modifications) shall be given by the Company and each seller of Registerable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. (e) INDEMNIFICATION PAYMENTS. The indemnification required by this section 12.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) CONTRIBUTION. If the indemnification provided for in the preceding subdivisions of this section 12.6 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the holder or underwriter, as the case may be, on the other from the distribution of the Registerable Securities 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 on the one hand and of the holder or underwriter, as the case may be, on the other in connection with the statements or omissions which resulted in such expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the holder or underwriter, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company, by the holder or by the underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, PROVIDED that the foregoing contribution agreement shall not inure to the benefit of any indemnified party if indemnification would be unavailable to such indemnified party by reason of the provisions contained in the first sentence of subdivision (a) of this section 12.6, and in no event shall the obligation of any indemnifying party to contribute under this subdivision (f) exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under subdivisions (a) or (b) of this section 12.6 had been available under the circumstances. The Company and the holders of Registerable Securities agree that it would not be FW-1 WARRANT 28 EXECUTION 29 just and equitable if contribution pursuant to this subdivision (f) were determined by PRO RATA allocation (even if the holders and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in the preceding sentence and subdivision (c) of this section 12.6, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subdivision (f), no holder of Registerable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder, the net proceeds received by such holder from the sale of Registerable Securities or (ii) in the case of an underwriter, the total price at which the Registerable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person 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 guilty of such fraudulent misrepresentation. 13. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: ACQUIRING PERSON: With reference to the transactions referred to in clauses (a) through (d) of section 3.1, the continuing or surviving corporation of a consolidation or merger with the Company (if other than the Company), the transferee of substantially all of the properties of the Company, the corporation consolidating with or merging into the Company in a consolidation or merger in connection with which the Common Stock is changed into or exchanged for stock or other securities of any other Person or cash or any other property, or, in the case of a capital reorganization or reclassification, the Company. ACQUISITION PRICE: As applied to the Common Stock, (a) the Market Price on the date immediately preceding the date on which any transaction to which section 3 applies is consummated, or (b) if a purchase, tender or exchange offer is made by the Acquiring Person (or by any of its affiliates) to the holders of the Common Stock and such offer is accepted by the holders of more than 50% of the outstanding shares of Common Stock, the greater of (i) the price determined in accordance with the provisions of the foregoing clause (a) of this sentence and (ii) the Market Price on the date immediately preceding the acceptance of such offer by the holders of more than 50% of the outstanding shares of Common Stock. FW-1 WARRANT 29 EXECUTION 30 ADDITIONAL SHARES OF COMMON STOCK: All shares (including treasury shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4, deemed to be issued) by the Company after the date hereof, whether or not subsequently reacquired or retired by the Company, other than (a) shares issued upon the exercise of the Warrants, (b) shares issued (including upon the exercise of options) to directors, advisors, employees or consultants of the Company pursuant to a stock option plan, employee stock purchase plan, restricted stock plan or other agreement approved by the board of directors of the Company, (c) such additional number of shares as may become issuable upon the exercise of any of the securities referred to in the foregoing clauses (a) and (b) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, but only if and to the extent that such adjustments are required as the result of the original issuance of the Warrants, (d) such additional number of shares as may become issuable upon the exercise of any of the securities referred to in the foregoing clauses (a) and (b) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock, (e) shares issued upon exercise of any warrants outstanding on the date hereof, and (f) shares issued pursuant to the terms of the Company's 71/2% Series A Cumulative Convertible Preferred Stock, including as dividends thereon or pursuant to the conversion thereof. BUSINESS DAY: Any day other than a Saturday or a Sunday or a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference to "days" (unless Business Days are specified) shall mean calendar days. COMMISSION: The Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. COMMON STOCK: As defined in the introduction to this Warrant, such term to FW-1 WARRANT 30 EXECUTION 31 include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. COMPANY: As defined in the introduction to this Warrant, such term to include any corporation which shall succeed to or assume the obligations of the Company hereunder in compliance with section 3. CONVERTIBLE SECURITIES: Any evidences of indebtedness, shares of stock (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Additional Shares of Common Stock. CREDIT AGREEMENT: That certain Credit Agreement, by and among Network Plus, Inc., Network Plus Corp., the lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as a joint lead arranger, book runner and as syndication agent, FleetBoston Robertson Stephens Inc., as a joint lead arranger, DLJ Bridge Finance, Inc., as documentation agent and Fleet National Bank, as administrative agent and as collateral agent, dated as of September 27, 2000. CURRENT MARKET PRICE: On any date specified herein, the average daily Market Price during the period of the most recent 20 days, ending on such date, on which the national securities exchanges were open for trading, except that if no Common Stock is then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date. EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. INITIATING HOLDERS: Any holder or holders of Registerable Securities holding at least 50% of the Registerable Securities (by number of shares at the time issued and outstanding), and initiating a request pursuant to section 12.1 for the registration of all or part of such holder's or holders' Registerable Securities. INSTITUTIONAL HOLDER: Any original purchaser of any Warrant, any insurance company, pension fund, mutual fund, investment company, bank, savings bank, savings and loan association, broker-dealer, investment adviser, investment banking company, trust company or any finance or credit company, any portfolio or any investment fund managed by any of the FW-1 WARRANT 31 EXECUTION 32 foregoing, any other institutional investor and any nominee of any of the foregoing. MARKET PRICE: On any date specified herein, the amount per share of the Common Stock, equal to (a) the last sale price of such Common Stock, regular way, on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted to trading, or (b) if such Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the NASD, the last trading price of the Common Stock on such date, or (c) if there shall have been no trading on such date or if the Common Stock is not so designated, the average of the closing bid and asked prices of the Common Stock on such date as shown by the NASD automated quotation system, or (d) if such Common Stock is not then listed or admitted to trading on any national exchange or quoted in the over-the-counter market, the higher of (x) the book value thereof as determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Company as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the fair value thereof determined in good faith by the Board of Directors of the Company as of a date which is within 18 days of the date as of which the determination is to be made. MARKET VALUE: Per share of common stock (or equivalent equity interests) of the Acquiring Person or its Parent on any date specified herein, (a) the average of the last sale prices, regular way, on the 20 consecutive business days immediately preceding such date or, if there shall have been no sale on any such day, the average of the closing bid and asked prices on such date, in each case as officially reported on the principal national securities exchange on which such common stock is at the time listed or admitted to trading, or (b) if such common stock is not then listed or admitted to trading on any national securities exchange, but is designated as a national market system security by the NASD, the last trading price of the common stock on such date, or if there shall have been no trading on such date or if the common stock is not so designated, the average of the reported closing bid and asked prices on such 20 days as shown by the NASD automated quotation system. NASD: The National Association of Securities Dealers, Inc. OPTIONS: Rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities. OTHER SECURITIES: Any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to FW-1 WARRANT 32 EXECUTION 33 section 3 or otherwise. PARENT: As to any Acquiring Person any corporation which (a) controls the Acquiring Person directly or indirectly through one or more intermediaries, (b) is required to include the Acquiring Person in the consolidated financial statements contained in such Parent's Annual Report on Form 10-K and (c) is not itself included in the consolidated financial statements of any other person (other than its consolidated subsidiaries). PERSON: A corporation, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a governmental agency. PURCHASER: As defined in the introduction to this Warrant. REGISTERABLE SECURITIES: (a) Any shares of Common Stock or Other Securities issued or issuable upon exercise of this Warrant and (b) any securities issued or issuable with respect to any securities referred to in the foregoing subdivision 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 Registerable Securities, once issued such securities shall cease to be Registerable Securities when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, (d) they shall have ceased to be outstanding or, (e) such securities are eligible for sale pursuant to Rule 144(k) (or any successor provision) under the Securities Act. REGISTRATION EXPENSES: All expenses incident to the Company's performance of or compliance with section 12, including, without limitation, all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, the reasonable fees and disbursements of one counsel retained by holder or holders and accountants retained by the holder or holders of more than 50% of the Registerable Securities being registered, premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registerable Securities being registered and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes and fees and expenses of counsel for FW-1 WARRANT 33 EXECUTION 34 any holder except as set forth above, if any, PROVIDED that, in any case where Registration Expenses are not to be borne by the Company, such expenses shall not include salaries of Company personnel or general overhead expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance required by underwriters of the Company or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any event. RESTRICTED SECURITIES: (a) any Warrants bearing the applicable legend set forth in section 9.2, (b) any shares of Common Stock (or Other Securities) issued upon the exercise of Warrants which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, (c) any shares of Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding shares of Common Stock (or Other Securities) into a greater number of shares by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, and (d) unless the context otherwise requires, any shares of Common Stock (or Other Securities) issuable upon the exercise of Warrants, which, when so issued, will be evidenced by a certificate or certificates bearing the applicable legend set forth in such section. SECURITIES ACT: The Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. TRANSFER: Any sale, assignment, pledge or other disposition of any security, or of any interest therein, which could constitute a "sale" as that term is defined in section 2(3) of the Securities Act. VOTING SECURITIES: Stock of any class or classes (or equivalent interests), if the holders of the stock of such class or classes (or equivalent interests) are ordinarily, in the absence of contingencies, entitled to vote for the election of the directors (or persons performing similar functions) of such business entity, even though the right so to vote has been suspended by the happening of such a contingency. WARRANT PRICE: As defined in section 2.1. WARRANTS: The common stock purchase warrants issued in connection with this warrant agreement. WEIGHTED AVERAGE WARRANT PRICE: As to any holder of Restricted Securities, the price determined by dividing (a) the sum of the aggregate consideration previously paid by such FW-1 WARRANT 34 EXECUTION 35 holder upon the exercise of Warrants plus the consideration payable upon the exercise of all Warrants held by such holder by (b) the sum of (i) the aggregate number of shares previously received by such holder upon the exercise of Warrants plus (ii) the number of shares which would be received by such holder upon the exercise of all Warrants held by such holder, based upon the Warrant Price in effect on the effective date of the registration statement in respect of which the Weighted Average Warrant Price is being determined. 14. REMEDIES. Each party hereto stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant shall be construed as conferring upon the holder hereof any rights as a stockholder of the Company or as imposing any obligation on such holder to purchase any securities or as imposing any liabilities on such holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 16. NOTICES. All notices and other communications under this Warrant shall be in writing and shall be delivered, or mailed by registered or certified mail, return receipt requested, by a nationally recognized overnight courier, postage prepaid, addressed (a) if to any holder of any Warrant, at the registered address of such holder as set forth in the register kept at the principal office of the Company, or (b) if to the Company, to the attention of its President at its principal office, PROVIDED that the exercise of any Warrant shall be effective in the manner provided in section 1. 17. AMENDMENTS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Notwithstanding the foregoing, any term of Section 12 of this Warrant may be amended or waived upon the written consent of the Company and the holders of Company Warrants (as defined below) representing at least a majority of the number of shares of Common Stock then subject to the outstanding Company Warrants; PROVIDED that any such amendment or waiver must apply to all Company Warrants then outstanding. "COMPANY WARRANTS" shall mean this Warrant and all other warrants in the series of warrants issued by the Company in connection with the Credit Agreement, all dated the date hereof and of like tenor (other than the number of shares of Common Stock issuable upon exercise thereof), including any warrants issued upon partial exercise or transfer thereof. FW-1 WARRANT 35 EXECUTION 36 18. EXPIRATION. The right to exercise this Warrant shall expire at 5.00 p.m., New York City time, on September 27, 2003. Notwithstanding anything to the contrary set forth herein all rights to registration hereunder shall expire at 5:00 p.m. on September 27, 2005. 19. DESCRIPTIVE HEADINGS. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. 20. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 21. JUDICIAL PROCEEDINGS; WAIVER OF JURY. Any judicial proceeding brought against the Company with respect to this Warrant may be brought in any court of competent jurisdiction in the State of New York or of the United States of America for the Southern District of New York and, by execution and delivery of this Warrant, each of the Company and holder (a) accepts, generally and unconditionally, the nonexclusive jurisdiction of such courts and any related appellate court, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Warrant, subject to any rights of appeal, and (b) irrevocably waives any objection the Company may now or hereafter have as to the venue of any such suit, action or proceeding brought in such a court or that such court is an inconvenient forum. The Company hereby waives personal service of process and consents, that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of section 16, and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail or, if earlier, when delivered. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any holder of any Warrant to bring proceedings against the Company in the courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER. FW-1 WARRANT 36 EXECUTION 37 NETWORK PLUS CORP. By: /s/ James J. Crowley ------------------------------ Title: EVP and COO FW-1 WARRANT S-1 EXECUTION 38 FORM OF SUBSCRIPTION -------------------- [To be executed only upon exercise of Warrant] To: [NAME OF ISSUER] The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder, ______(1) shares of Common Stock of [NAME OF ISSUER] and herewith makes payment of $ therefor, and requests that the certificates for such shares be issued in the name of, and delivered to , whose address is . Dated: --------------------------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of Warrant) --------------------------------------------------------- - ----------- (1) Insert here the number of shares called for on the face of this Warrant (or, in the case of a partial exercise, the portion thereof as to which this Warrant is being exercised), in either case without making any adjustment for Additional Shares of Common Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of this Warrant, may be delivered upon exercise. In the case of partial exercise, a new Warrant or Warrants will be issued and delivered, representing the unexercised portion of the Warrant, to the holder surrendering the Warrant. FW-1 WARRANT EXECUTION 39 (Street Address) ---------------------------------------- (City)(State)(Zip Code) FW-1 WARRANT EXECUTION 40 FORM OF ASSIGNMENT ------------------ [To be executed only upon transfer of Warrant] For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the right represented by such Warrant to purchase shares of [Common Stock] of [NAME OF ISSUER] to which such Warrant relates, and appoints Attorney to make such transfer on the books of [NAME OF ISSUER] maintained for such purpose, with full power of substitution in the premises. Dated: ------------------------------------------------------------ (Signature must conform in all respects to name of holder as specified on the face of Warrant) ------------------------------------------------------------ (Street Address) ------------------------------------------------------------ (City)(State)(Zip Code) Signed in the presence of: FW-1 WARRANT EXECUTION 41 -------------------------------------------------------- NETWORK PLUS CORP. Common Stock Purchase Warrant Dated as of September 27, 2000 -------------------------------------------------------- [THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.] FW-1 WARRANT EXECUTION 42 TABLE OF CONTENTS ----------------- 1. EXERCISE OF WARRANT........................................................1 1.1. MANNER OF EXERCISE....................................................1 1.2. WHEN EXERCISE EFFECTIVE...............................................1 1.3. DELIVERY OF STOCK CERTIFICATES, ETC...................................2 1.4. PAYMENT BY APPLICATION OF SHARES OTHERWISE ISSUABLE...................2 1.5. EXERCISE OF WARRANTS..................................................2 2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE..........................3 2.1. GENERAL; WARRANT PRICE................................................3 2.2. ADJUSTMENT OF WARRANT PRICE...........................................3 2.2.1 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.....................3 2.2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS.........................3 2.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES.......................4 2.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC.......................6 2.5. COMPUTATION OF CONSIDERATION..........................................6 2.6. ADJUSTMENTS FOR COMBINATIONS, ETC.....................................8 2.7. MINIMUM ADJUSTMENT OF WARRANT PRICE...................................8 3. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC.8 4. OTHER DILUTIVE EVENTS......................................................8 5. NO DILUTION OR IMPAIRMENT..................................................9 6. REPORT AS TO ADJUSTMENTS...................................................9 7. NOTICES OF CORPORATE ACTION...............................................10 8. REGISTRATION OF COMMON STOCK..............................................10 9. RESTRICTIONS ON TRANSFER..................................................11 9.1. RESTRICTIVE LEGENDS..................................................11 9.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL.....................11 9.3. TERMINATION OF RESTRICTIONS..........................................12 10. RESERVATION OF STOCK, ETC.................................................13 11. REGISTRATION AND TRANSFER OF WARRANTS, ETC................................13 11.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS..............................13 11.2. TRANSFER AND EXCHANGE OF WARRANTS....................................13 11.3. REPLACEMENT OF WARRANTS..............................................13 12. REGISTRATION UNDER SECURITIES ACT, ETC....................................14 12.1. REGISTRATION ON REQUEST..............................................14 12.2. INCIDENTAL REGISTRATION..............................................16 12.3. REGISTRATION PROCEDURES..............................................17
FW-1 WARRANT EXECUTION 43 12.4. UNDERWRITTEN OFFERINGS..............................................23 12.5. PREPARATION; REASONABLE INVESTIGATION...............................25 12.6. INDEMNIFICATION.....................................................25 13. DEFINITIONS..............................................................29 14. REMEDIES.................................................................35 15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER..................................35 16. NOTICES..................................................................35 17. AMENDMENTS...............................................................35 18. EXPIRATION...............................................................36 19. DESCRIPTIVE HEADINGS.....................................................36 20. GOVERNING LAW............................................................36 21. JUDICIAL PROCEEDINGS; WAIVER OF JURY.....................................36
FW-1 WARRANT EXECUTION 44 FORM OF SUBSCRIPTION..........................................................53 FORM OF ASSIGNMENT............................................................54 EX-10.5 6 b37246npex10-5.txt COMMON STOCK PURCHASE WARRANT NO. FW-2 1 Exhibit 10.5 NETWORK PLUS CORP. Common Stock Purchase Warrant New York, New York No. FW-2 September 27, 2000 NETWORK PLUS CORP. (the "COMPANY"), a Delaware corporation, for value received, hereby certifies that FSC CORPORATION, or registered assigns, is entitled to purchase from the Company 1,284,685 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, par value $0.01 per share (the "COMMON STOCK") of the Company at the purchase price per share of $7.01, at any time or from time to time prior to 5:00 P.M., New York City time, on September 27, 2003 (or such earlier date as may be determined pursuant to section 3), all subject to the terms, conditions and adjustments set forth below in this Warrant. This Warrant evidences rights to purchase an aggregate of 1,284,685 shares of Common Stock subject to adjustment as provided herein. Certain capitalized terms used in this Warrant are defined in section 13; references to an "Exhibit" are, unless otherwise specified, to one of the Exhibits attached to this Warrant and references to a "section" are, unless otherwise specified, to one of the sections of this Warrant. 1. EXERCISE OF WARRANT. 1.1. MANNER OF EXERCISE. This Warrant may be exercised by the holder hereof, in whole or in part, during normal business hours on any Business Day, by surrender of this Warrant to the Company at its principal office, accompanied by a subscription in substantially the form attached to this Warrant (or a reasonable facsimile thereof) duly executed by such holder and accompanied by payment, in cash, by certified or official bank check payable to the order of the Company, or in the manner provided in section 1.4 or section 1.5 (or by any combination of such methods), in the amount obtained by multiplying (a) the whole number of shares of Common Stock (without giving effect to any adjustment thereof) designated in such subscription by (b) $7.01 (as adjusted pursuant to the terms hereof), and such holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) determined as provided in sections 2 through 4. 1.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in section 1.1, and at such time 2 the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock (or Other Securities) shall be issuable upon such exercise as provided in section 1.3 shall be deemed to have become the holder or holders of record thereof. 1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within ten Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof or, subject to section 9, as such holder (upon payment by such holder of any applicable transfer taxes) may direct, (a) a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount equal to the same fraction of the Market Price per share on the Business Day next preceding the date of such exercise, and (b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares designated by the holder upon such exercise as provided in section 1.1. The holder hereof shall comply will all applicable provisions of the Hart-Scott-Rodino Antitrust Improvements Law of 1976, as amended, and any successor statute, in connection with the exercise of this Warrant, and shall provide to the Company upon its reasonable request a certificate of such compliance. 1.4. PAYMENT BY APPLICATION OF SHARES OTHERWISE ISSUABLE. Upon any exercise of this Warrant, the holder hereof may, at its option, instruct the Company, by written notice accompanying the surrender of this Warrant at the time of such exercise, to apply to the payment required by section 1.1 such number of the shares of Common Stock otherwise issuable to such holder upon such exercise as shall be specified in such notice, in which case an amount equal to the excess of the aggregate Current Market Price of such specified number of shares on the date of exercise over the portion of the payment required by section 1.1 attributable to such shares shall be deemed to have been paid to the Company and the number of shares issuable upon such exercise shall be reduced by such specified number. 1.5. EXERCISE OF WARRANTS. Notwithstanding anything to the contrary set forth herein, no Warrant shall be exercisable other than in accordance with this section 1.5. The Warrants shall be exercisable as follows: (i) 72.73% of holder's Warrants shall be exercisable at any time on or after the Closing Date (as defined in the Credit Agreement), (ii) 13.64% shall be exercisable on a pro rata basis with each amount drawn by the Company on the first $100 million of loans under the Credit Agreement divided by $100 million, and (iii) 13.63% shall be exercisable at any time on or after the date the amount drawn by the Company under the Credit Agreement exceeds $100 million. 3 2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE. 2.1. GENERAL; WARRANT PRICE. The number of shares of Common Stock which the holder of this Warrant shall be entitled to receive upon each exercise hereof shall be determined by multiplying the number of shares of Common Stock which would otherwise (but for the provisions of this section 2) be issuable upon such exercise, as designated by the holder hereof pursuant to section 1.1, by the fraction of which (a) the numerator is $7.01 and (b) the denominator is the Warrant Price in effect on the date of such exercise. The "Warrant Price" shall initially be $7.01 per share, shall be adjusted and readjusted from time to time as provided in this section 2 and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this section 2. 2.2. ADJUSTMENT OF WARRANT PRICE. 2.2.1 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company at any time or from time to time after the date hereof shall issue or sell Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration or for a consideration per share less than the Current Market Price in effect immediately prior to such issue or sale, then, subject to section 2.8, the Warrant Price shall be reduced, concurrently with such issue or sale, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Warrant Price by a fraction (a) the numerator of which shall be (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such Additional Shares of Common Stock so issued or sold would purchase at such Current Market Price, and (b) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale, PROVIDED that, for the purposes of this section 2.2.1, (x) immediately after any Additional Shares of Common Stock are deemed to have been issued pursuant to section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding, and (y) treasury shares shall not be deemed to be outstanding. 2.2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the Company at any time or from time to time after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or 3 4 other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock, other than a dividend payable in Additional Shares of Common Stock, then, and in each such case, subject to section 2.8, the Warrant Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of any class of securities entitled to receive such dividend or distribution shall be reduced, effective as of the close of business on such record date, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Warrant Price by a fraction (x) the numerator of which shall be the Current Market Price in effect on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, less the amount of such dividend or distribution (as determined in good faith by the Board of Directors of the Company) applicable to one share of Common Stock, and (y) the denominator of which shall be such Current Market Price. 2.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the Company at any time or from time to time after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities entitled to receive, any Options or Convertible Securities, then, and in each such case, the maximum number of Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, sale, grant or assumption or, in case such a record date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), PROVIDED that such Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to section 2.5) of such shares would be less than the Current Market Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), and PROVIDED, FURTHER, that in any such case in which Additional Shares of Common Stock are deemed to be issued (a) no further adjustment of the Warrant Price shall be made upon the subsequent issue or sale of Convertible Securities or shares of Common Stock upon the exercise of such Options or the conversion or exchange of such Convertible Securities, except in the case of any such Options or Convertible Securities which contain provisions requiring an adjustment, subsequent to the date of the issue or sale thereof, of the number 4 5 of Additional Shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities by reason of (x) a change of control of the Company, (y) the acquisition by any Person or group of Persons of any specified number or percentage of the Voting Securities of the Company or (z) any similar event or occurrence, each such case to be deemed hereunder to involve a separate issuance of Additional Shares of Common Stock, Options or Convertible Securities, as the case may be; (b) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the Warrant Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options, or the rights of conversion or exchange under such Convertible Securities, which are outstanding at such time; (c) upon the expiration (or purchase by the Company and cancellation or retirement) of any such Options which shall not have been exercised or the expiration of any rights of conversion or exchange under any such Convertible Securities which (or purchase by the Company and cancellation or retirement of any such Convertible Securities the rights of conversion or exchange under which) shall not have been exercised, the Warrant Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if: (i) in the case of Options for Common Stock or Convertible Securities, the only Additional Shares of Common Stock issued or sold were the Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue or sale of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or 5 6 exchange, and (ii) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise of such Options were issued at the time of the issue, sale, grant or assumption of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have then been issued was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (pursuant to section 2.5) upon the issue or sale of such Convertible Securities with respect to which such Options were actually exercised; (d) no readjustment pursuant to subdivision (b) or (c) above shall have the effect of increasing the Warrant Price by an amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities; and (e) in the case of any such Options which expire by their terms not more than 30 days after the date of issue, sale, grant or assumption thereof, no adjustment of the Warrant Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the manner provided in subdivision (c) above. 2.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the Company at any time or from time to time after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, Additional Shares of Common Stock shall be deemed to have been issued (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. 2.5. COMPUTATION OF CONSIDERATION. For the purposes of this section 2, (a) the consideration for the issue or sale of any Additional Shares of Common Stock shall, irrespective of the accounting treatment of such consideration, (i) insofar as it consists of cash, be computed at the net amount of cash 6 7 received by the Company, (ii) insofar as it consists of property (including securities) other than cash, be computed at the fair value thereof at the time of such issue or sale, as determined in good faith by the Board of Directors of the Company, and (iii) in case Additional Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (i) and (ii) above, allocable to such Additional Shares of Common Stock, all as determined in good faith by the Board of Directors of the Company; (b) Additional Shares of Common Stock deemed to have been issued pursuant to section 2.3, relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by dividing (i) the total amount, if any, received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as provided in the foregoing subdivision (a), by (ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number to protect against dilution) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities; and (c) Additional Shares of Common Stock deemed to have been issued pursuant to section 2.4, relating to stock dividends, stock splits, etc., shall be deemed to have been issued for no consideration. 7 8 2.6. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares of Common Stock shall be combined or consolidated, by reclassification, reverse stock-split or otherwise, into a lesser number of shares of Common Stock, the Warrant Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. 2.7. MINIMUM ADJUSTMENT OF WARRANT PRICE. If the amount of any adjustment of the Warrant Price required pursuant to this section 2 would be less than one tenth (1/10) of one percent (1%) of the Warrant Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least one tenth (1/10) of one percent (1%) of such Warrant Price. 3. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC. In case the Company after the date hereof (a) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, or (b) shall permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (c) shall transfer all or substantially all of its properties or assets to any other Person, or (d) shall effect a capital reorganization or reclassification of the Common Stock or Other Securities (other than a capital reorganization or reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment in the Warrant Price is provided in section 2.2.1 or 2.2.2), THEN, this Warrant shall automatically terminate in its entirety immediately upon the consummation of such transaction; provided that, upon the basis and the terms and in the manner provided in this Warrant, the holder of this Warrant shall be permitted to exercise this Warrant immediately preceding the consummation of such transaction and immediately after such exercise shall be entitled to receive (at the aggregate Warrant Price in effect at the time of such consummation for all Common Stock or Other Securities issuable upon such exercise immediately prior to such consummation), in lieu of the Common Stock or Other Securities issuable upon such exercise prior to such consummation, the stock and other securities, cash and property to which such holder would have been entitled upon such consummation if such holder had exercised the rights represented by this Warrant immediately prior thereto. 4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the provisions of section 2 or section 3 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles of such sections, then, in each such case, the Company shall appoint a firm 8 9 of independent certified public accountants of recognized national standing (which may be the regular auditors of the Company), which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in sections 2 and 3, necessary to preserve, without dilution, the purchase rights represented by this Warrant. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the holder of this Warrant and shall make the adjustments described therein. 5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not permit the par value of any shares of stock receivable upon the exercise of this Warrant to exceed the amount payable therefor upon such exercise, (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock on the exercise of the Warrants from time to time outstanding and (c) will not take any action which results in any adjustment of the Warrant Price if the total number of shares of Common Stock (or Other Securities) issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock (or Other Securities) then authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise. 6. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable upon the exercise of this Warrant, the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms of this Warrant and provide to holder an officers certificate verifying such computation (other than any computation of the fair value of property as determined in good faith by the Board of Directors of the Company) and prepare a report setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Warrant Price in effect immediately prior to such issue or sale and as adjusted and readjusted (if required by section 2) on account thereof. The Company will forthwith mail a copy of each such report to each holder of a Warrant and will, upon the written request at any time of any holder of a Warrant, furnish to such holder a like report setting forth the Warrant Price at the time in effect and showing in reasonable detail how it was calculated. 9 10 7. NOTICES OF CORPORATE ACTION. In the event of (a) any taking by the Company of a record of the holders of Common Stock for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a regular periodic dividend payable in cash out of earned surplus in an amount not exceeding the amount of the immediately preceding cash dividend for such period) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer of all or substantially all the assets of the Company to any other Person, or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company will mail to each holder of a Warrant a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least twenty days prior to the date therein specified. 8. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the Securities Act) before such shares may be issued upon exercise, the Company will, at its expense and as expeditiously as possible, use its reasonable best efforts to cause such shares to be duly registered or approved, as the case may be. At any such time as Common Stock is listed on any national securities exchange, the Company will, at its expense, use its reasonable best efforts to obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing of such shares after their issuance; and the Company will use its reasonable best efforts to list on such national securities exchange, register under the Exchange Act and maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities 10 11 exchange by the Company. 9. RESTRICTIONS ON TRANSFER. 9.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this section 9, each Warrant (including each Warrant issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted with a legend in substantially the following form: "This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while a registration under such Act is in effect or pursuant to an exemption therefrom under such Act. This Warrant and such shares may be transferred only in compliance with the conditions specified in this Warrant." Except as otherwise permitted by this section 9, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act. Such shares may be transferred only in compliance with the conditions specified in certain Common Stock Purchase Warrants issued by Network Plus Corp. A complete and correct copy of the form of such Warrant is available from Network Plus Corp. and will be furnished to the holder of such shares upon written request and without charge." 9.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Prior to any transfer of any Restricted Securities which are not registered under an effective registration statement under the Securities Act, the holder thereof will give written notice to the Company of such holder's intention to effect such transfer and to comply in all other respects with this section 9.2. Each such notice (a) shall describe the manner and circumstances of the proposed transfer in sufficient detail to enable counsel to render the opinions referred to below, and (b) shall designate counsel for the holder giving such notice (who may be house counsel for such holder). The holder giving such notice will submit a copy thereof to the counsel designated in such notice and the Company will promptly submit a copy thereof to its counsel. The following provisions shall then apply: (i) If (A) in the opinion of such counsel for the holder the proposed transfer may be effected without registration of such Restricted Securities under 11 12 the Securities Act, and (B) counsel for the Company shall not have rendered a reasoned written objection thereto within 15 days after the receipt by the Company of such written notice that such registration is required, such holder shall thereupon be entitled to transfer such securities in accordance with the terms of the notice delivered by such holder to the Company. Each warrant or certificate, if any, representing such securities issued upon or in connection with such transfer shall bear the appropriate restrictive legend required by section 9.1, unless in the opinion of each such counsel such legend is no longer required to insure compliance with the Securities Act. (ii) If in the opinion of either of or both such counsel the proposed transfer may not legally be effected without registration of such Restricted Securities under the Securities Act (such opinion or opinions to state the basis of the legal conclusions reached therein), the Company will promptly so notify the holder thereof and thereafter such holder shall not be entitled to transfer such Restricted Securities until either (x) receipt by the Company of a further notice from such holder pursuant to the foregoing provisions of this section 9.2 and fulfillment of the provisions of clause (i) above or (y) such shares have been effectively registered under the Securities Act. Notwithstanding the foregoing provisions of this section 9.2(ii), FSC Corporation shall be permitted to transfer any Restricted Securities to a limited number of institutional investors, PROVIDED that (A) each such investor represents in writing that it is acquiring such Restricted Securities for investment and not with a view to the distribution thereof (subject, however, to any requirement of law that the disposition thereof shall at all times be within the control of such transferee), (B) each such investor agrees in writing to be bound by all the restrictions on transfer of such Restricted Securities contained in this section 9.2 and (C) FSC Corporation delivers to the Company an opinion of Skadden, Arps, Slate, Meagher & Flom, or other counsel satisfactory to the Company, stating that such transfer may be effected without registration under the Securities Act. The Company will pay the reasonable fees and disbursements of Skadden, Arps, Slate, Meagher & Flom or Hale & Dorr for any holder of Restricted Securities and of counsel for the Company in connection with all opinions rendered by them pursuant to this section 9.2 and pursuant to section 9.3; provided that such opinions relate to the transfer of at least 1,284,685 shares of Common Stock in the aggregate (subject to proportionate adjustment as provided for hereunder) and that such shares will cease to constitute Restricted Securities following such transfer for the purposes of this section 9.2 and section 9.3. 9.3. TERMINATION OF RESTRICTIONS. The restrictions imposed by this section 9 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities (a) when such securities shall have been effectively registered under the Securities Act, or (b) when, in the opinions of both counsel for the holder thereof and counsel for 12 13 the Company, such restrictions are no longer required in order to insure compliance with the Securities Act. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by section 9.1. 10. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep available, solely for issuance and delivery upon exercise of the Warrants, the number of shares of Common Stock (or Other Securities) from time to time issuable upon exercise of all Warrants at the time outstanding. All shares of Common Stock (or Other Securities) issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof. 11. REGISTRATION AND TRANSFER OF WARRANTS, ETC. 11.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. The Company will keep at the principal office of the Company or its transfer agent a register in which the Company will provide for the registration of Warrants and the registration of transfers of Warrants. The Company may treat the Person in whose name any Warrant is registered on such register as the owner thereof for all other purposes, and the Company shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. Subject to section 9, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued. 11.2. TRANSFER AND EXCHANGE OF WARRANTS. Upon surrender of any Warrant for registration of transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to compliance with section 9, if applicable) execute and deliver in exchange therefor a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered. 11.3. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant, upon delivery of an indemnity bond in such reasonable amount as the Company may determine (or, in the case of any Warrant held by any Institutional Holder or its nominee, of an indemnity agreement from such Institutional Holder reasonably satisfactory to the Company), or, in the case of any such mutilation, upon the surrender of such Warrant for cancellation to the Company at its principal office, the Company at 13 14 its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 12.0 REGISTRATION UNDER SECURITIES ACT, ETC. 12.1. REGISTRATION ON REQUEST. (a) REQUEST. On no more than three occasions upon the written request of one or more Initiating Holders, requesting that the Company effect the registration under the Securities Act of all or part of such Initiating Holders' Registerable Securities and specifying the intended method of disposition thereof, the Company will, subject to the terms of this Warrant, promptly give written notice of such requested registration to all registered holders of Registerable Securities, and thereupon the Company will effect the registration under the Securities Act of (i) the Registerable Securities which the Company has been so requested to register by such Initiating Holders for disposition in accordance with the intended method of disposition stated in such request, and (ii) all other Registerable Securities the holders of which shall have made a written request to the Company for registration thereof within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registerable Securities), all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registerable Securities so to be registered. (b) REGISTRATION STATEMENT FORM. Registrations under this section 12.1 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and (ii) as shall permit the disposition of such Registerable Securities in accordance with the intended method or methods of disposition specified in their request for such registration. The Company agrees to include in any such registration statement all information which holders of Registerable Securities being registered shall reasonably request. If, in connection with any registration under this section 12.1 which is proposed by the Company to be on Form S-3 or any similar short form registration statement which is a successor to Form S-3, the managing underwriters, if any, shall advise the Company in writing that in their opinion the use of another permitted form is of material importance to the success of the offering, then such registration shall be on such other permitted form. (c) EXPENSES. The Company will pay all Registration Expenses in connection with any registration requested pursuant to this section 12.1 by any Initiating Holders of 14 15 Registerable Securities prior to the time at which three such registrations shall have been effected in which all of the Registerable Securities requested to be included in such registration by any holders of Registerable Securities shall have been registered pursuant to this section 12.1. The Registration Expenses (and underwriting discounts and commissions and transfer taxes, if any) in connection with each other registration requested under this section 12.1 shall be allocated pro rata among all Persons on whose behalf securities of the Company are included in such registration, on the basis of the respective amounts of the securities then being registered on their behalf. (d) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to this section 12.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, PROVIDED that a registration which does not become effective after the Company has filed a registration statement with respect thereto solely by reason of the refusal to proceed of the Initiating Holders (other than a refusal to proceed based upon the advice of counsel relating to a matter with respect to the Company OR material adverse information concerning the business or financial condition of the Company which is made known to the Initiating Holders after the date on which such registration was requested) shall be deemed to have been effected by the Company at the request of such Initiating Holders unless the Initiating Holders shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration becomes subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, (provided that, in lieu of such registration not being deemed to have been effected, the Company may extend the registration period may be extended by the period of such stop order, injunction or other order, up to a maximum of ninety days) or (iii) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by such Initiating Holders. (e) SELECTION OF UNDERWRITERS. If a requested registration pursuant to this section 12.1 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by the holders of at least a majority (by number of shares) of the Registerable Securities as to which registration has been requested and shall be acceptable to the Company, which shall not unreasonably withhold its acceptance of any such underwriters. (f) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration pursuant to this section 12.1 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy to each holder of Registerable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in such offering 15 16 within a price range acceptable to the holders of a majority of the Registerable Securities requested to be included in such registration, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, Registerable Securities requested to be included in such registration by the holder or holders of Registerable Securities, PRO RATA among the holders thereof requesting such registration on the basis of the number of such securities requested to be included by such holders. In connection with any such registration, no securities other than Registerable Securities shall be covered by such registration. (g) If at the time of any request to register Registerable Securities by any holder, pursuant to this Section 12.1, the Company is engaged or has plans to engage in a registered public offering or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the requested registration, then the Company may at its option direct, upon no less than five days prior written notice, that such request be delayed for a period not in excess of 90 days from the date of the expiration of such notice, such right to delay a request to be exercised by the Company not more than once in any 12-month period. 12.2. INCIDENTAL REGISTRATION. (a) RIGHT TO INCLUDE REGISTERABLE SECURITIES. If the Company at any time proposes to register any of its securities under the Securities Act (other than by a registration on Form S-4 or S-8 or any successor or similar forms and other than pursuant to section 12.1), whether or not for sale for its own account, it will each such time give prompt written notice to all holders of Registerable Securities of its intention to do so and of such holders' rights under this section 12.2. Upon the written request of any such holder made within fifteen days after the receipt of any such notice (which request shall specify the Registerable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Company will, subject to the terms of this Warrant, effect the registration under the Securities Act of all Registerable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registerable Securities so to be registered, by inclusion of such Registerable Securities in the registration statement which covers the securities which the Company proposes to register, PROVIDED that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registerable Securities and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registerable Securities in connection with such 16 17 registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registerable Securities entitled to do so to request that such registration be effected as a registration under section 12.1, and (II) in the case of a determination to delay registering, shall be permitted to delay registering any Registerable Securities, for the same period as the delay in registering such other securities. No registration effected under this section 12.2 shall relieve the Company of its obligation to effect any registration upon request under section 12.1 nor shall any such registration hereunder be deemed to have been effected pursuant to section 12.1. The Company will pay all Registration Expenses in connection with each registration of Registerable Securities requested pursuant to this section 12.2. (b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a registration pursuant to this section 12.2 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters of recognized standing under underwriting terms appropriate for such a transaction, (ii) the Registerable Securities so requested to be registered for sale for the account of holders of Registerable Securities are not also to be included in such underwritten offering (either because the Company has not been requested so to include such Registerable Securities pursuant to section 12.4(b) or, if requested to do so, is not obligated to do so under section 12.4(b)), and (iii) the managing underwriter of such underwritten offering shall inform the Company and holders of the Registerable Securities requesting such registration by letter of its belief that the distribution of all or a specified number of such Registerable Securities concurrently with the securities being distributed by such underwriters would interfere with the successful marketing of the securities being distributed by such underwriters (such writing to state the basis of such belief and the approximate number of such Registerable Securities which may be distributed without such effect), then the Company may, upon written notice to all holders of such Registerable Securities, reduce PRO RATA (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registerable Securities the registration of which shall have been requested by each holder of Registerable Securities so that the resultant aggregate number of such Registerable Securities so included in such registration shall be equal to the number of shares stated in such managing underwriter's letter. 12.3. REGISTRATION PROCEDURES. If and whenever the Company is required to effect the registration of any Registerable Securities under the Securities Act as provided in sections 12.1 and 12.2 the Company shall promptly: (i) prepare and (within sixty days after the end of the period within which requests for registration may be given to the Company or in any event as soon 17 18 thereafter as possible) (in the case of a registration pursuant to section 12.1, such filing to be made within sixty days after the initial request of one or more Initiating Holders of Registerable Securities or in any event as soon thereafter as possible) file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and thereafter use its reasonable best efforts to cause such registration statement to become and remain effective, PROVIDED, however, that the Company may discontinue any registration of its securities which are not Registerable Securities (and, under the circumstances specified in section 12.2(a), its securities which are Registerable Securities) at any time prior to the effective date of the registration statement relating thereto; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or (i) in the case of a registration pursuant to section 12.1, the expiration of 180 days after such registration statement becomes effective, or (ii) in the case of a registration pursuant to section 12.2, the expiration of 90 days after such registration statement becomes effective; (iii) furnish to each seller of Registerable Securities covered by such registration statement and each underwriter, if any, of the securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request; (iv) use its reasonable best efforts to register or qualify all Registerable Securities and other securities covered by such registration statement under such other securities laws or blue sky laws of such jurisdictions as any seller thereof and any underwriter of the securities being sold by such seller shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be 18 19 reasonably necessary or advisable to enable such seller and underwriter to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (v) use its reasonable best efforts to cause all Registerable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registerable Securities; (vi) use its reasonable best efforts to furnish to each seller of Registerable Securities a signed counterpart, addressed to such seller and the underwriters, if any of (x) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (y) a "comfort" letter (or, in the case of such Person which does not satisfy the conditions for receipt of a "comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities (with, in the case of an "agreed upon procedures" letter, such modifications or deletions as may be required under Statement on Auditing Standards No. 35) and, in the case of the accountants' letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as such seller (or the underwriters, if any) may reasonably request; (vii) notify the holders of Registerable Securities and the managing 19 20 underwriter or underwriters, if any, promptly and confirm such advice in writing promptly thereafter: (v) when the registration statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective; (w) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; (x) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; (y) if at any time the representations and warranties of the Company made as contemplated by section 12.4 below cease to be true and correct; (z) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registerable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; (viii) notify each seller of Registerable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon the Company's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include 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 not misleading in the light of the circumstances then existing; (ix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full 20 21 calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, and will furnish to each such seller prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any thereof to which any such seller shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (x) make available for inspection by a representative or representatives of the holders of Registerable Securities any underwriter participating in any disposition pursuant to the registration statement and any attorney or accountant retained by such selling holders or underwriter (each, an "INSPECTOR"), all financial and other records, pertinent corporate documents and properties of the Company (the "RECORDS"), and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration in order to permit a reasonable investigation within the meaning of Section 11 of the Securities Act, PROVIDED that the Company shall not be required to comply with this subdivision (xi) if there is a reasonable likelihood, in the judgment of the Company, that such delivery could result in the loss of any attorney-client privilege related thereto; and PROVIDED FURTHER that Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (other than to any holder of Registerable Securities) unless (x) such Records have become generally available to the public or (y) the disclosure of such Records may be necessary or appropriate (A) in compliance with any law, rule, regulation or order applicable to any such Inspectors or holder of Registerable Securities, (B) in response to any subpoena or other legal process or (C) in connection with any litigation to which such Inspectors or any holder of Registerable Securities is a party; (xi) provide and cause to be maintained a transfer agent and registrar for all Registerable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; (xii) take such other actions as sellers of such Registerable Securities holding 51% of the shares so to be sold shall reasonably request in order to expedite or facilitate the disposition of such Registerable Securities; (xiii) use its best efforts to list all Registerable Securities covered by such registration statement on any securities exchange on which any of the securities of 21 22 the same class as the Registerable Securities are then listed; and (xiv) use its best efforts to provide a CUSIP number for the Registerable Securities, not later than the effective date of the registration statement. The Company may require each seller of Registerable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. Each holder of Registerable Securities shall be deemed to have agreed by acquisition of such Registerable Securities that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in subdivision (vii) or (viii) of this section 12.3, such holder will forthwith discontinue such holder's disposition of Registerable Securities pursuant to the registration statement relating to such Registerable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (vii) of this section 12.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registerable Securities current at the time of receipt of such notice. In the event that, in the reasonable judgment of the Company, it is necessary or advisable to suspend use of a prospectus included in a Registration Statement due to pending material developments or other material events that have not yet been publicly disclosed and as to which the Company believes public disclosure would be detrimental to the Company, the Company shall notify all sellers of Registerable Securities to such effect, and upon receipt of such notice, each such seller of Registerable Securities shall promptly discontinue any sales of Registerable Securities pursuant to Registration Statement until such seller of Registerable Securities has received copies of a supplemented or amended prospectus or until such seller of Registerable Securities is advised in writing by the Company that the current prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such prospectus. Notwithstanding anything to the contrary herein, the Company shall not exercise its rights under this paragraph to suspend sales of Registerable Securities for a period in excess of ninety days in any 365 day-period. If any such registration or comparable statement refers to any holder of Registerable Securities 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 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 22 23 such reference to such holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such holder. 12.4. UNDERWRITTEN OFFERINGS. (a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters for any underwritten offering by holders of Registerable Securities pursuant to a registration requested under section 12.1, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to be satisfactory in substance and form to the Company, each such holder and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of this type, including, without limitation, indemnities to the effect and to the extent provided in section 12.7. The holders of the Registerable Securities will cooperate with the Company in the negotiation of the underwriting agreement and will give consideration to the reasonable suggestions of the Company regarding the form thereof, PROVIDED that nothing herein contained shall diminish the foregoing obligations of the Company. The holders of Registerable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registerable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registerable Securities. Any such holder of Registerable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in such registration statement, customary representations and warranties contained in the relevant underwriting agreement, or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. (b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by section 12.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registerable Securities as provided in section 12.2 and subject to the provisions of section 12.2(b), use its best efforts to arrange for such underwriters to include all the Registerable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, PROVIDED that if the managing underwriter of such underwritten offering shall inform the holders of the Registerable Securities requesting such registration and the holders of any other securities which shall have exercised, in respect of such underwritten offering, registration rights 23 24 comparable to the rights under section 12.2 by letter of its belief that inclusion in such underwritten distribution of all or a specified number of such Registerable Securities or of such other shares of securities so requested to be included would interfere with the successful marketing of the securities (other than such Registerable Securities and other shares of securities so requested to be included) by the underwriters (such writing to state the basis of such belief and the approximate number of such Registerable Securities and shares of other securities so requested to be included which may be included in such underwritten offering without such effect), then the Company may, upon written notice to all holders of such Registerable Securities and of such other shares of securities so requested to be included, exclude pro rata from such underwritten offering (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registerable Securities and shares of such other securities so requested to be included the registration of which shall have been requested by each holder of Registerable Securities and by the holders of such other so that the resultant aggregate number of such Registerable Securities and of such other shares of securities so requested to be included which are included in such underwritten offering shall be equal to the approximate number of shares stated in such managing underwriter's letter. The holders of Registerable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registerable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registerable Securities. Any such holder of Registerable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. Notwithstanding anything to the contrary contained herein, in the event that any terms of this Section 12 are inconsistent with or conflict with the terms of the proviso to Section 5.01(b) of the Warrant Agreement dated as of September 3, 1998 between the Company and American Stock Transfer & Trust Company (the "UNIT AGREEMENT"), the terms of the Unit Agreement shall govern and the terms hereof shall be deemed to be amended insofar as is necessary to resolve such inconsistency or conflict. (c) CONFIDENTIALITY. Any holder receiving any written notice from the Company regarding the Company's plans to file a Registration Statement shall treat such notice confidentially and shall not disclose such information to any person other than as necessary to exercise its rights under this Warrant. 24 25 (d) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No Person may participate in any underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority of Registerable Securities to be included in such underwritten offering and (ii) completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. Notwithstanding the foregoing, no underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registerable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in the related registration statement, customary representations or warranties contained in the relevant underwriting agreement, or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. 12.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Warrant, the Company will give the holders of Registerable Securities registered under such registration statement, their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act, provided that the Company shall not be required to comply with this section 12.5 if there is a reasonable likelihood, in the judgment of the Company, that such delivery could result in the loss of any attorney-client privilege related thereto; and provided further that Records which the Company determines, in good faith, to be confidential and which it notifies the holders of Registerable Securities are confidential shall not be disclosed by the holders of Registerable Securities unless (x) such Records have become generally available to the public or (y) the disclosure of such Records may be necessary or appropriate (A) in compliance with any law, rule, regulation or order applicable to any such holder of Registerable Securities, (B) in response to any subpoena or other legal process or (C) in connection with any litigation to which any such holder of Registerable Securities is a party. 12.6. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does, indemnify and hold harmless in the case of any registration statement filed pursuant to 25 26 section 12.1 or 12.2, the holder of any Registerable Securities covered by such registration statement, its directors and officers, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such holder or any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company will reimburse such holder and each such director, officer, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, PROVIDED that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such holder specifically stating that it is for use in the preparation thereof and, PROVIDED, FURTHER that the Company shall not be liable to any Person who participates as an underwriter, in the offering or sale of Registerable Securities or to any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, within the time required by the Securities Act to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registerable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder. (b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a condition to including any Registerable Securities in any registration statement filed pursuant to section 12.3, that the Company shall have received an undertaking satisfactory to it from 26 27 the prospective seller of such Registerable Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this section 12.6) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. (c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this section 12.6 and subdivision (f) below, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, PROVIDED that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this section 12.6, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability, or a covenant not to sue, in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any action for which indemnity is required to be provided by an indemnifying party hereunder without the consent of such indemnifying party; in no event shall the indemnifying party be required to pay the expenses of more than one law firm per jurisdiction as counsel for the 27 28 indemnified party. The provisions of this subsection (c) shall also apply to a contribution pursuant to subsection (f) below. (d) OTHER INDEMNIFICATION. Indemnification similar to that specified in the preceding subdivisions of this section 12.6 (with appropriate modifications) shall be given by the Company and each seller of Registerable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. (e) INDEMNIFICATION PAYMENTS. The indemnification required by this section 12.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) CONTRIBUTION. If the indemnification provided for in the preceding subdivisions of this section 12.6 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the holder or underwriter, as the case may be, on the other from the distribution of the Registerable Securities 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 on the one hand and of the holder or underwriter, as the case may be, on the other in connection with the statements or omissions which resulted in such expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the holder or underwriter, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company, by the holder or by the underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, PROVIDED that the foregoing contribution agreement shall not inure to the benefit of any indemnified party if indemnification would be unavailable to such indemnified party by reason of the provisions contained in the first sentence of subdivision (a) of this section 12.6, and in no event shall the obligation of any indemnifying party to contribute under this subdivision (f) exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under subdivisions (a) or (b) of this section 12.6 had been available under the circumstances. 28 29 The Company and the holders of Registerable Securities agree that it would not be just and equitable if contribution pursuant to this subdivision (f) were determined by PRO RATA allocation (even if the holders and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in the preceding sentence and subdivision (c) of this section 12.6, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subdivision (f), no holder of Registerable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder, the net proceeds received by such holder from the sale of Registerable Securities or (ii) in the case of an underwriter, the total price at which the Registerable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person 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 guilty of such fraudulent misrepresentation. 13. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: ACQUIRING PERSON: With reference to the transactions referred to in clauses (a) through (d) of section 3.1, the continuing or surviving corporation of a consolidation or merger with the Company (if other than the Company), the transferee of substantially all of the properties of the Company, the corporation consolidating with or merging into the Company in a consolidation or merger in connection with which the Common Stock is changed into or exchanged for stock or other securities of any other Person or cash or any other property, or, in the case of a capital reorganization or reclassification, the Company. ACQUISITION PRICE: As applied to the Common Stock, (a) the Market Price on the date immediately preceding the date on which any transaction to which section 3 applies is consummated, or (b) if a purchase, tender or exchange offer is made by the Acquiring Person (or by any of its affiliates) to the holders of the Common Stock and such offer is accepted by the holders of more than 50% of the outstanding shares of Common Stock, the greater of (i) the price determined in accordance with the provisions of the foregoing clause (a) of this sentence and (ii) the Market Price on the date immediately preceding the acceptance of such offer by the holders of 29 30 more than 50% of the outstanding shares of Common Stock. ADDITIONAL SHARES OF COMMON STOCK: All shares (including treasury shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4, deemed to be issued) by the Company after the date hereof, whether or not subsequently reacquired or retired by the Company, other than (a) shares issued upon the exercise of the Warrants, (b) shares issued (including upon the exercise of options) to directors, advisors, employees or consultants of the Company pursuant to a stock option plan, employee stock purchase plan, restricted stock plan or other agreement approved by the board of directors of the Company, (c) such additional number of shares as may become issuable upon the exercise of any of the securities referred to in the foregoing clauses (a) and (b) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, but only if and to the extent that such adjustments are required as the result of the original issuance of the Warrants, (d) such additional number of shares as may become issuable upon the exercise of any of the securities referred to in the foregoing clauses (a) and (b) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock, (e) shares issued upon exercise of any warrants outstanding on the date hereof, and (f) shares issued pursuant to the terms of the Company's 71/2% Series A Cumulative Convertible Preferred Stock, including as dividends thereon or pursuant to the conversion thereof. BUSINESS DAY: Any day other than a Saturday or a Sunday or a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference to "days" (unless Business Days are specified) shall mean calendar days. COMMISSION: The Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 30 31 COMMON STOCK: As defined in the introduction to this Warrant, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. COMPANY: As defined in the introduction to this Warrant, such term to include any corporation which shall succeed to or assume the obligations of the Company hereunder in compliance with section 3. CONVERTIBLE SECURITIES: Any evidences of indebtedness, shares of stock (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for Additional Shares of Common Stock. CREDIT AGREEMENT: That certain Credit Agreement, by and among Network Plus, Inc., Network Plus Corp., the lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as a joint lead arranger, book runner and as syndication agent, FleetBoston Robertson Stephens Inc., as a joint lead arranger, DLJ Bridge Finance, Inc., as documentation agent and Fleet National Bank, as administrative agent and as collateral agent, dated as of September 27, 2000. CURRENT MARKET PRICE: On any date specified herein, the average daily Market Price during the period of the most recent 20 days, ending on such date, on which the national securities exchanges were open for trading, except that if no Common Stock is then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date. EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. INITIATING HOLDERS: Any holder or holders of Registerable Securities holding at least 50% of the Registerable Securities (by number of shares at the time issued and outstanding), and initiating a request pursuant to section 12.1 for the registration of all or part of such holder's or holders' Registerable Securities. INSTITUTIONAL HOLDER: Any original purchaser of any Warrant, any insurance company, pension fund, mutual fund, investment company, bank, savings bank, savings and loan association, broker-dealer, investment adviser, investment banking company, trust company or 31 32 any finance or credit company, any portfolio or any investment fund managed by any of the foregoing, any other institutional investor and any nominee of any of the foregoing. MARKET PRICE: On any date specified herein, the amount per share of the Common Stock, equal to (a) the last sale price of such Common Stock, regular way, on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted to trading, or (b) if such Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the NASD, the last trading price of the Common Stock on such date, or (c) if there shall have been no trading on such date or if the Common Stock is not so designated, the average of the closing bid and asked prices of the Common Stock on such date as shown by the NASD automated quotation system, or (d) if such Common Stock is not then listed or admitted to trading on any national exchange or quoted in the over-the-counter market, the higher of (x) the book value thereof as determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Company as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the fair value thereof determined in good faith by the Board of Directors of the Company as of a date which is within 18 days of the date as of which the determination is to be made. MARKET VALUE: Per share of common stock (or equivalent equity interests) of the Acquiring Person or its Parent on any date specified herein, (a) the average of the last sale prices, regular way, on the 20 consecutive business days immediately preceding such date or, if there shall have been no sale on any such day, the average of the closing bid and asked prices on such date, in each case as officially reported on the principal national securities exchange on which such common stock is at the time listed or admitted to trading, or (b) if such common stock is not then listed or admitted to trading on any national securities exchange, but is designated as a national market system security by the NASD, the last trading price of the common stock on such date, or if there shall have been no trading on such date or if the common stock is not so designated, the average of the reported closing bid and asked prices on such 20 days as shown by the NASD automated quotation system. NASD: The National Association of Securities Dealers, Inc. OPTIONS: Rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities. OTHER SECURITIES: Any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been 32 33 issued in exchange for or in replacement of Common Stock or Other Securities pursuant to section 3 or otherwise. PARENT: As to any Acquiring Person any corporation which (a) controls the Acquiring Person directly or indirectly through one or more intermediaries, (b) is required to include the Acquiring Person in the consolidated financial statements contained in such Parent's Annual Report on Form 10-K and (c) is not itself included in the consolidated financial statements of any other person (other than its consolidated subsidiaries). PERSON: A corporation, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a governmental agency. PURCHASER: As defined in the introduction to this Warrant. REGISTERABLE SECURITIES: (a) Any shares of Common Stock or Other Securities issued or issuable upon exercise of this Warrant and (b) any securities issued or issuable with respect to any securities referred to in the foregoing subdivision 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 Registerable Securities, once issued such securities shall cease to be Registerable Securities when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, (d) they shall have ceased to be outstanding or, (e) such securities are eligible for sale pursuant to Rule 144(k) (or any successor provision) under the Securities Act. REGISTRATION EXPENSES: All expenses incident to the Company's performance of or compliance with section 12, including, without limitation, all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, the reasonable fees and disbursements of one counsel retained by holder or holders and accountants retained by the holder or holders of more than 50 % of the Registerable Securities being registered, premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registerable Securities being registered and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding 33 34 underwriting discounts and commissions and transfer taxes and fees and expenses of counsel for any holder except as set forth above, if any, PROVIDED that, in any case where Registration Expenses are not to be borne by the Company, such expenses shall not include salaries of Company personnel or general overhead expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance required by underwriters of the Company or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any event. RESTRICTED SECURITIES: (a) any Warrants bearing the applicable legend set forth in section 9.2, (b) any shares of Common Stock (or Other Securities) issued upon the exercise of Warrants which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, (c) any shares of Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding shares of Common Stock (or Other Securities) into a greater number of shares by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, and (d) unless the context otherwise requires, any shares of Common Stock (or Other Securities) issuable upon the exercise of Warrants, which, when so issued, will be evidenced by a certificate or certificates bearing the applicable legend set forth in such section. SECURITIES ACT: The Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. TRANSFER: Any sale, assignment, pledge or other disposition of any security, or of any interest therein, which could constitute a "sale" as that term is defined in section 2(3) of the Securities Act. VOTING SECURITIES: Stock of any class or classes (or equivalent interests), if the holders of the stock of such class or classes (or equivalent interests) are ordinarily, in the absence of contingencies, entitled to vote for the election of the directors (or persons performing similar functions) of such business entity, even though the right so to vote has been suspended by the happening of such a contingency. WARRANT PRICE: As defined in section 2.1. WARRANTS: The common stock purchase warrants issued in connection with this warrant agreement. WEIGHTED AVERAGE WARRANT PRICE: As to any holder of Restricted Securities, the 34 35 price determined by dividing (a) the sum of the aggregate consideration previously paid by such holder upon the exercise of Warrants plus the consideration payable upon the exercise of all Warrants held by such holder by (b) the sum of (i) the aggregate number of shares previously received by such holder upon the exercise of Warrants plus (ii) the number of shares which would be received by such holder upon the exercise of all Warrants held by such holder, based upon the Warrant Price in effect on the effective date of the registration statement in respect of which the Weighted Average Warrant Price is being determined. 14. REMEDIES. Each party hereto stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant shall be construed as conferring upon the holder hereof any rights as a stockholder of the Company or as imposing any obligation on such holder to purchase any securities or as imposing any liabilities on such holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 16. NOTICES. All notices and other communications under this Warrant shall be in writing and shall be delivered, or mailed by registered or certified mail, return receipt requested, by a nationally recognized overnight courier, postage prepaid, addressed (a) if to any holder of any Warrant, at the registered address of such holder as set forth in the register kept at the principal office of the Company, or (b) if to the Company, to the attention of its President at its principal office, PROVIDED that the exercise of any Warrant shall be effective in the manner provided in section 1. 17. AMENDMENTS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Notwithstanding the foregoing, any term of Section 12 of this Warrant may be amended or waived upon the written consent of the Company and the holders of Company Warrants (as defined below) representing at least a majority of the number of shares of Common Stock then subject to the outstanding Company Warrants; PROVIDED that any such amendment or waiver must apply to all Company Warrants then outstanding. "COMPANY WARRANTS" shall mean this Warrant and all other warrants in the series of warrants issued by the Company in connection with the Credit Agreement, all dated the date hereof and of like tenor (other than the number of shares of Common Stock issuable upon exercise thereof), including any warrants issued upon partial exercise or transfer thereof. 35 36 18. EXPIRATION. The right to exercise this Warrant shall expire at 5.00 p.m., New York City time, on September 27, 2003. Notwithstanding anything to the contrary set forth herein all rights to registration hereunder shall expire at 5:00 p.m. on September 27, 2005. 19. DESCRIPTIVE HEADINGS. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. 20. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 21. JUDICIAL PROCEEDINGS; WAIVER OF JURY. Any judicial proceeding brought against the Company with respect to this Warrant may be brought in any court of competent jurisdiction in the State of New York or of the United States of America for the Southern District of New York and, by execution and delivery of this Warrant, each of the Company and holder (a) accepts, generally and unconditionally, the nonexclusive jurisdiction of such courts and any related appellate court, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Warrant, subject to any rights of appeal, and (b) irrevocably waives any objection the Company may now or hereafter have as to the venue of any such suit, action or proceeding brought in such a court or that such court is an inconvenient forum. The Company hereby waives personal service of process and consents, that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of section 16, and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail or, if earlier, when delivered. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any holder of any Warrant to bring proceedings against the Company in the courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER. 36 37 NETWORK PLUS CORP. By: /s/ James J. Crowley ------------------------------------ Title: EVP and COO S-1 38 FORM OF SUBSCRIPTION [To be executed only upon exercise of Warrant] To: [NAME OF ISSUER] The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder, ______(1) shares of Common Stock of [NAME OF ISSUER] and herewith makes payment of $ therefor, and requests that the certificates for such shares be issued in the name of, and delivered to , whose address is . Dated: ------------------------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of Warrant) -------------------------------------------------- - ------------------------ 1 Insert here the number of shares called for on the face of this Warrant (or, in the case of a partial exercise, the portion thereof as to which this Warrant is being exercised), in either case without making any adjustment for Additional Shares of Common Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of this Warrant, may be delivered upon exercise. In the case of partial exercise, a new Warrant or Warrants will be issued and delivered, representing the unexercised portion of the Warrant, to the holder surrendering the Warrant. 39 (Street Address) -------------------------------------------------- (City)(State)(Zip Code) 40 FORM OF ASSIGNMENT [To be executed only upon transfer of Warrant] For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the right represented by such Warrant to purchase shares of [Common Stock] of [NAME OF ISSUER] to which such Warrant relates, and appoints Attorney to make such transfer on the books of [NAME OF ISSUER] maintained for such purpose, with full power of substitution in the premises. Dated: ------------------------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of Warrant) -------------------------------------------------- (Street Address) -------------------------------------------------- (City)(State)(Zip Code) Signed in the presence of: 41 -------------------------------------------------------- NETWORK PLUS CORP. Common Stock Purchase Warrant Dated as of September 27, 2000 - --------------------------------------------------------- [THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.] 42 TABLE OF CONTENTS 1. EXERCISE OF WARRANT..........................................................1 1.1. MANNER OF EXERCISE......................................................1 1.2. WHEN EXERCISE EFFECTIVE.................................................1 1.3. DELIVERY OF STOCK CERTIFICATES, ETC.....................................2 1.4. PAYMENT BY APPLICATION OF SHARES OTHERWISE ISSUABLE.....................2 1.5. EXERCISE OF WARRANTS....................................................2 2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE............................3 2.1. GENERAL; WARRANT PRICE..................................................3 2.2. ADJUSTMENT OF WARRANT PRICE.............................................3 2.2.1 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.......................3 2.2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS...........................3 2.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES.........................4 2.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC.........................6 2.5. COMPUTATION OF CONSIDERATION............................................6 2.6. ADJUSTMENTS FOR COMBINATIONS, ETC.......................................8 2.7. MINIMUM ADJUSTMENT OF WARRANT PRICE.....................................8 3. 8 ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC...8 4. OTHER DILUTIVE EVENTS........................................................8 5. NO DILUTION OR IMPAIRMENT....................................................9 6. REPORT AS TO ADJUSTMENTS.....................................................9 7. NOTICES OF CORPORATE ACTION.................................................10 8. REGISTRATION OF COMMON STOCK................................................10 9. RESTRICTIONS ON TRANSFER....................................................11 9.1. RESTRICTIVE LEGENDS....................................................11 9.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL.......................11 9.3. TERMINATION OF RESTRICTIONS............................................12 10. RESERVATION OF STOCK, ETC..................................................13 11. REGISTRATION AND TRANSFER OF WARRANTS, ETC.............................13 11.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS................................13 11.2. TRANSFER AND EXCHANGE OF WARRANTS.....................................13 11.3. REPLACEMENT OF WARRANTS...............................................13 12.0 REGISTRATION UNDER SECURITIES ACT, ETC....................................14 12.1. REGISTRATION ON REQUEST...............................................14 12.2. INCIDENTAL REGISTRATION...............................................16 12.3. REGISTRATION PROCEDURES...............................................17
43 12.4. UNDERWRITTEN OFFERINGS................................................23 12.5. PREPARATION; REASONABLE INVESTIGATION.................................25 12.6. INDEMNIFICATION.......................................................25 13. DEFINITIONS................................................................29 14. REMEDIES...................................................................35 15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER....................................35 16. NOTICES....................................................................35 17. AMENDMENTS.................................................................35 18. EXPIRATION.................................................................36 19. DESCRIPTIVE HEADINGS....................................................36 20. GOVERNING LAW...........................................................36 21. JUDICIAL PROCEEDINGS; WAIVER OF JURY....................................36
44 FORM OF SUBSCRIPTION............................................................53 FORM OF ASSIGNMENT..............................................................54
EX-10.6 7 b37246npex10-6.txt COMMON STOCK PURCHASE WARRANT NO. FW-3 1 Exhibit 10.6 NETWORK PLUS CORP. Common Stock Purchase Warrant New York, New York No. FW-3 September 27, 2000 NETWORK PLUS CORP. (the "COMPANY"), a Delaware corporation, for value received, hereby certifies that SNOGA, INC., or registered assigns, is entitled to purchase from the Company 1,284,685 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock, par value $0.01 per share (the "COMMON STOCK") of the Company at the purchase price per share of $7.01, at any time or from time to time prior to 5:00 P.M., New York City time, on September 27, 2003 (or such earlier date as may be determined pursuant to section 3), all subject to the terms, conditions and adjustments set forth below in this Warrant. This Warrant evidences rights to purchase an aggregate of 1,284,685 shares of Common Stock subject to adjustment as provided herein. Certain capitalized terms used in this Warrant are defined in section 13; references to an "Exhibit" are, unless otherwise specified, to one of the Exhibits attached to this Warrant and references to a "section" are, unless otherwise specified, to one of the sections of this Warrant. 1. EXERCISE OF WARRANT. 1.1. MANNER OF EXERCISE. This Warrant may be exercised by the holder hereof, in whole or in part, during normal business hours on any Business Day, by surrender of this Warrant to the Company at its principal office, accompanied by a subscription in substantially the form attached to this Warrant (or a reasonable facsimile thereof) duly executed by such holder and accompanied by payment, in cash, by certified or official bank check payable to the order of the Company, or in the manner provided in section 1.4 or section 1.5 (or by any combination of such methods), in the amount obtained by multiplying (a) the whole number of shares of Common Stock (without giving effect to any adjustment thereof) designated in such subscription by (b) $7.01 (as adjusted pursuant to the terms hereof), and such holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) determined as provided in sections 2 through 4. 1.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the Business Day on which this Warrant shall have been surrendered to the Company as provided in section 1.1, and at such time the Person or Persons in whose name or names any certificate or certificates for shares of Common 2 Stock (or Other Securities) shall be issuable upon such exercise as provided in section 1.3 shall be deemed to have become the holder or holders of record thereof. 1.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within ten Business Days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the holder hereof or, subject to section 9, as such holder (upon payment by such holder of any applicable transfer taxes) may direct, (a) a certificate or certificates for the number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such holder would otherwise be entitled, cash in an amount equal to the same fraction of the Market Price per share on the Business Day next preceding the date of such exercise, and (b) in case such exercise is in part only, a new Warrant or Warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock equal (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares designated by the holder upon such exercise as provided in section 1.1. The holder hereof shall comply will all applicable provisions of the Hart-Scott-Rodino Antitrust Improvements Law of 1976, as amended, and any successor statute, in connection with the exercise of this Warrant, and shall provide to the Company upon its reasonable request a certificate of such compliance. 1.4. PAYMENT BY APPLICATION OF SHARES OTHERWISE ISSUABLE. Upon any exercise of this Warrant, the holder hereof may, at its option, instruct the Company, by written notice accompanying the surrender of this Warrant at the time of such exercise, to apply to the payment required by section 1.1 such number of the shares of Common Stock otherwise issuable to such holder upon such exercise as shall be specified in such notice, in which case an amount equal to the excess of the aggregate Current Market Price of such specified number of shares on the date of exercise over the portion of the payment required by section 1.1 attributable to such shares shall be deemed to have been paid to the Company and the number of shares issuable upon such exercise shall be reduced by such specified number. 1.5. EXERCISE OF WARRANTS. Notwithstanding anything to the contrary set forth herein, no Warrant shall be exercisable other than in accordance with this section 1.5. The Warrants shall be exercisable as follows: (i) 72.73% of holder's Warrants shall be exercisable at any time on or after the Closing Date (as defined in the Credit Agreement), (ii) 13.64% shall be exercisable on a pro rata basis with each amount drawn by the Company on the first $100 million of loans under the Credit Agreement divided by $100 million, and (iii) 13.63% shall be exercisable at any time on or after the date the amount drawn by the Company under the Credit Agreement exceeds $100 million 2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE. 3 2.1. GENERAL; WARRANT PRICE. The number of shares of Common Stock which the holder of this Warrant shall be entitled to receive upon each exercise hereof shall be determined by multiplying the number of shares of Common Stock which would otherwise (but for the provisions of this section 2) be issuable upon such exercise, as designated by the holder hereof pursuant to section 1.1, by the fraction of which (a) the numerator is $7.01 and (b) the denominator is the Warrant Price in effect on the date of such exercise. The "Warrant Price" shall initially be $7.01 per share, shall be adjusted and readjusted from time to time as provided in this section 2 and, as so adjusted or readjusted, shall remain in effect until a further adjustment or readjustment thereof is required by this section 2. 2.2. ADJUSTMENT OF WARRANT PRICE. 2.2.1 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company at any time or from time to time after the date hereof shall issue or sell Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration or for a consideration per share less than the Current Market Price in effect immediately prior to such issue or sale, then, subject to section 2.8, the Warrant Price shall be reduced, concurrently with such issue or sale, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Warrant Price by a fraction (a) the numerator of which shall be (i) the number of shares of Common Stock outstanding immediately prior to such issue or sale plus (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such Additional Shares of Common Stock so issued or sold would purchase at such Current Market Price, and (b) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale, PROVIDED that, for the purposes of this section 2.2.1, (x) immediately after any Additional Shares of Common Stock are deemed to have been issued pursuant to section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding, and (y) treasury shares shall not be deemed to be outstanding. 2.2.2 EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the Company at any time or from time to time after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other or additional stock or other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock, other than a dividend payable in Additional 3 4 Shares of Common Stock, then, and in each such case, subject to section 2.8, the Warrant Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of any class of securities entitled to receive such dividend or distribution shall be reduced, effective as of the close of business on such record date, to a price (calculated to the nearest .001 of a cent) determined by multiplying such Warrant Price by a fraction (x) the numerator of which shall be the Current Market Price in effect on such record date or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading, less the amount of such dividend or distribution (as determined in good faith by the Board of Directors of the Company) applicable to one share of Common Stock, and (y) the denominator of which shall be such Current Market Price. 2.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the Company at any time or from time to time after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities entitled to receive, any Options or Convertible Securities, then, and in each such case, the maximum number of Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, sale, grant or assumption or, in case such a record date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), PROVIDED that such Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to section 2.5) of such shares would be less than the Current Market Price in effect on the date of and immediately prior to such issue, sale, grant or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), and PROVIDED, FURTHER, that in any such case in which Additional Shares of Common Stock are deemed to be issued (a) no further adjustment of the Warrant Price shall be made upon the subsequent issue or sale of Convertible Securities or shares of Common Stock upon the exercise of such Options or the conversion or exchange of such Convertible Securities, except in the case of any such Options or Convertible Securities which contain provisions requiring an adjustment, subsequent to the date of the issue or sale thereof, of the number of Additional Shares of Common Stock issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities by reason of (x) a change of control of the 4 5 Company, (y) the acquisition by any Person or group of Persons of any specified number or percentage of the Voting Securities of the Company or (z) any similar event or occurrence, each such case to be deemed hereunder to involve a separate issuance of Additional Shares of Common Stock, Options or Convertible Securities, as the case may be; (b) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the Warrant Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options, or the rights of conversion or exchange under such Convertible Securities, which are outstanding at such time; (c) upon the expiration (or purchase by the Company and cancellation or retirement) of any such Options which shall not have been exercised or the expiration of any rights of conversion or exchange under any such Convertible Securities which (or purchase by the Company and cancellation or retirement of any such Convertible Securities the rights of conversion or exchange under which) shall not have been exercised, the Warrant Price computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if: (i) in the case of Options for Common Stock or Convertible Securities, the only Additional Shares of Common Stock issued or sold were the Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue or sale of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and (ii) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise of such Options were 5 6 issued at the time of the issue, sale, grant or assumption of such Options, and the consideration received by the Company for the Additional Shares of Common Stock deemed to have then been issued was the consideration actually received by the Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (pursuant to section 2.5) upon the issue or sale of such Convertible Securities with respect to which such Options were actually exercised; (d) no readjustment pursuant to subdivision (b) or (c) above shall have the effect of increasing the Warrant Price by an amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities; and (e) in the case of any such Options which expire by their terms not more than 30 days after the date of issue, sale, grant or assumption thereof, no adjustment of the Warrant Price shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made in the manner provided in subdivision (c) above. 2.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the Company at any time or from time to time after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, Additional Shares of Common Stock shall be deemed to have been issued (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (b) in the case of any such subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. 2.5. COMPUTATION OF CONSIDERATION. For the purposes of this section 2, (a) the consideration for the issue or sale of any Additional Shares of Common Stock shall, irrespective of the accounting treatment of such consideration, (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company, (ii) insofar as it consists of property (including securities) other than cash, be computed at the fair value thereof at the time of such issue or sale, as determined in good faith by the Board of Directors of the Company, and 6 7 (iii) in case Additional Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (i) and (ii) above, allocable to such Additional Shares of Common Stock, all as determined in good faith by the Board of Directors of the Company; (b) Additional Shares of Common Stock deemed to have been issued pursuant to section 2.3, relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by dividing (i) the total amount, if any, received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Options or the conversion or exchange of such Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as provided in the foregoing subdivision (a), by (ii) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number to protect against dilution) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities; and (c) Additional Shares of Common Stock deemed to have been issued pursuant to section 2.4, relating to stock dividends, stock splits, etc., shall be deemed to have been issued for no consideration. 2.6. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares of Common Stock shall be combined or consolidated, by reclassification, reverse stock-split or otherwise, into a lesser number of shares of Common Stock, the Warrant Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. 7 8 2.7. MINIMUM ADJUSTMENT OF WARRANT PRICE. If the amount of any adjustment of the Warrant Price required pursuant to this section 2 would be less than one tenth (1/10) of one percent (1%) of the Warrant Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least one tenth (1/10) of one percent (1%) of such Warrant Price. 3. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC. In case the Company after the date hereof (a) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation of such consolidation or merger, or (b) shall permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (c) shall transfer all or substantially all of its properties or assets to any other Person, or (d) shall effect a capital reorganization or reclassification of the Common Stock or Other Securities (other than a capital reorganization or reclassification resulting in the issue of Additional Shares of Common Stock for which adjustment in the Warrant Price is provided in section 2.2.1 or 2.2.2), THEN, this Warrant shall automatically terminate in its entirety immediately upon the consummation of such transaction; provided that, upon the basis and the terms and in the manner provided in this Warrant, the holder of this Warrant shall be permitted to exercise this Warrant immediately preceding the consummation of such transaction and immediately after such exercise shall be entitled to receive (at the aggregate Warrant Price in effect at the time of such consummation for all Common Stock or Other Securities issuable upon such exercise immediately prior to such consummation), in lieu of the Common Stock or Other Securities issuable upon such exercise prior to such consummation, the stock and other securities, cash and property to which such holder would have been entitled upon such consummation if such holder had exercised the rights represented by this Warrant immediately prior thereto. 4. OTHER DILUTIVE EVENTS. In case any event shall occur as to which the provisions of section 2 or section 3 are not strictly applicable but the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles of such sections, then, in each such case, the Company shall appoint a firm of independent certified public accountants of recognized national standing (which may be the regular auditors of the Company), which shall give their opinion upon the adjustment, if any, on a basis consistent with the essential intent and principles established in sections 2 and 3, necessary to preserve, without dilution, the purchase rights represented by this Warrant. Upon receipt of such opinion, the Company will promptly mail a copy thereof to the holder of this Warrant and shall make the adjustments described therein. 8 9 5. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against dilution or other impairment. Without limiting the generality of the foregoing, the Company (a) will not permit the par value of any shares of stock receivable upon the exercise of this Warrant to exceed the amount payable therefor upon such exercise, (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock on the exercise of the Warrants from time to time outstanding and (c) will not take any action which results in any adjustment of the Warrant Price if the total number of shares of Common Stock (or Other Securities) issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock (or Other Securities) then authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise. 6. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable upon the exercise of this Warrant, the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms of this Warrant and provide to holder an officers certificate verifying such computation (other than any computation of the fair value of property as determined in good faith by the Board of Directors of the Company) and prepare a report setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Warrant Price in effect immediately prior to such issue or sale and as adjusted and readjusted (if required by section 2) on account thereof. The Company will forthwith mail a copy of each such report to each holder of a Warrant and will, upon the written request at any time of any holder of a Warrant, furnish to such holder a like report setting forth the Warrant Price at the time in effect and showing in reasonable detail how it was calculated. 7. NOTICES OF CORPORATE ACTION. In the event of (a) any taking by the Company of a record of the holders of Common Stock for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a regular periodic dividend payable in cash out of earned surplus in an amount not exceeding the amount of the immediately preceding cash dividend for such period) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or 9 10 (b) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer of all or substantially all the assets of the Company to any other Person, or (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, the Company will mail to each holder of a Warrant a notice specifying (i) the date or expected date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least twenty days prior to the date therein specified. 8. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the Securities Act) before such shares may be issued upon exercise, the Company will, at its expense and as expeditiously as possible, use its reasonable best efforts to cause such shares to be duly registered or approved, as the case may be. At any such time as Common Stock is listed on any national securities exchange, the Company will, at its expense, use its reasonable best efforts to obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Common Stock issuable upon exercise of the then outstanding Warrants and maintain the listing of such shares after their issuance; and the Company will use its reasonable best efforts to list on such national securities exchange, register under the Exchange Act and maintain such listing of, any Other Securities that at any time are issuable upon exercise of the Warrants, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company. 9. RESTRICTIONS ON TRANSFER. 9.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this section 9, each Warrant (including each Warrant issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted with a legend in substantially the following form: 10 11 "This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933, as amended, and may not be transferred, sold or otherwise disposed of except while a registration under such Act is in effect or pursuant to an exemption therefrom under such Act. This Warrant and such shares may be transferred only in compliance with the conditions specified in this Warrant." Except as otherwise permitted by this section 9, each certificate for Common Stock (or Other Securities) issued upon the exercise of any Warrant, and each certificate issued upon the transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form: "The shares represented by this certificate have not been registered under the Securities Act of 1933 and may not be transferred in the absence of such registration or an exemption therefrom under such Act. Such shares may be transferred only in compliance with the conditions specified in certain Common Stock Purchase Warrants issued by Network Plus Corp. A complete and correct copy of the form of such Warrant is available from Network Plus Corp. and will be furnished to the holder of such shares upon written request and without charge." 9.2. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Prior to any transfer of any Restricted Securities which are not registered under an effective registration statement under the Securities Act, the holder thereof will give written notice to the Company of such holder's intention to effect such transfer and to comply in all other respects with this section 9.2. Each such notice (a) shall describe the manner and circumstances of the proposed transfer in sufficient detail to enable counsel to render the opinions referred to below, and (b) shall designate counsel for the holder giving such notice (who may be house counsel for such holder). The holder giving such notice will submit a copy thereof to the counsel designated in such notice and the Company will promptly submit a copy thereof to its counsel. The following provisions shall then apply: (i) If (A) in the opinion of such counsel for the holder the proposed transfer may be effected without registration of such Restricted Securities under the Securities Act, and (B) counsel for the Company shall not have rendered a reasoned written objection thereto within 15 days after the receipt by the Company of such written notice that such registration is required, such holder shall thereupon be entitled to transfer such securities in accordance with the terms of the notice delivered by such holder to the Company. Each warrant or certificate, if any, representing such securities issued upon or in connection with such transfer shall bear the appropriate restrictive legend required by section 9.1, unless in the opinion of each such counsel such legend is no longer required to insure compliance with the 11 12 Securities Act. (ii) If in the opinion of either of or both such counsel the proposed transfer may not legally be effected without registration of such Restricted Securities under the Securities Act (such opinion or opinions to state the basis of the legal conclusions reached therein), the Company will promptly so notify the holder thereof and thereafter such holder shall not be entitled to transfer such Restricted Securities until either (x) receipt by the Company of a further notice from such holder pursuant to the foregoing provisions of this section 9.2 and fulfillment of the provisions of clause (i) above or (y) such shares have been effectively registered under the Securities Act. Notwithstanding the foregoing provisions of this section 9.2(ii), Snoga, Inc. shall be permitted to transfer any Restricted Securities to a limited number of institutional investors, PROVIDED that (A) each such investor represents in writing that it is acquiring such Restricted Securities for investment and not with a view to the distribution thereof (subject, however, to any requirement of law that the disposition thereof shall at all times be within the control of such transferee), (B) each such investor agrees in writing to be bound by all the restrictions on transfer of such Restricted Securities contained in this section 9.2 and (C) Snoga, Inc. delivers to the Company an opinion of Skadden, Arps, Slate, Meagher & Flom, or other counsel satisfactory to the Company, stating that such transfer may be effected without registration under the Securities Act. The Company will pay the reasonable fees and disbursements of Skadden, Arps, Slate, Meagher & Flom or Hale & Dorr for any holder of Restricted Securities and of counsel for the Company in connection with all opinions rendered by them pursuant to this section 9.2 and pursuant to section 9.3; provided that such opinions relate to the transfer of at least 1,284,685 shares of Common Stock in the aggregate (subject to proportionate adjustment as provided for hereunder) and that such shares will cease to constitute Restricted Securities following such transfer for the purposes of this section 9.2 and section 9.3. 9.3. TERMINATION OF RESTRICTIONS. The restrictions imposed by this section 9 upon the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities (a) when such securities shall have been effectively registered under the Securities Act, or (b) when, in the opinions of both counsel for the holder thereof and counsel for the Company, such restrictions are no longer required in order to insure compliance with the Securities Act. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the holder thereof shall be entitled to receive from the Company, without expense (other than applicable transfer taxes, if any), new securities of like tenor not bearing the applicable legends required by section 9.1. 10. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep available, solely for issuance and delivery upon exercise of the Warrants, the number of shares of Common Stock (or Other Securities) from time to time issuable upon exercise of all Warrants at the 12 13 time outstanding. All shares of Common Stock (or Other Securities) issuable upon exercise of any Warrants shall be duly authorized and, when issued upon such exercise, shall be validly issued and, in the case of shares, fully paid and nonassessable with no liability on the part of the holders thereof. 11. REGISTRATION AND TRANSFER OF WARRANTS, ETC. 11.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. The Company will keep at the principal office of the Company or its transfer agent a register in which the Company will provide for the registration of Warrants and the registration of transfers of Warrants. The Company may treat the Person in whose name any Warrant is registered on such register as the owner thereof for all other purposes, and the Company shall not be affected by any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes. Subject to section 9, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued. 11.2. TRANSFER AND EXCHANGE OF WARRANTS. Upon surrender of any Warrant for registration of transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to compliance with section 9, if applicable) execute and deliver in exchange therefor a new Warrant or Warrants of like tenor, in the name of such holder or as such holder (upon payment by such holder of any applicable transfer taxes) may direct, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant or Warrants so surrendered. 11.3. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Warrant and, in the case of any such loss, theft or destruction of any Warrant, upon delivery of an indemnity bond in such reasonable amount as the Company may determine (or, in the case of any Warrant held by any Institutional Holder or its nominee, of an indemnity agreement from such Institutional Holder reasonably satisfactory to the Company), or, in the case of any such mutilation, upon the surrender of such Warrant for cancellation to the Company at its principal office, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 12. REGISTRATION UNDER SECURITIES ACT, ETC. 12.1. REGISTRATION ON REQUEST. (a) REQUEST. On no more than three occasions upon the written request of one or more Initiating Holders, requesting that the Company effect the registration under the Securities Act of all or part of such Initiating Holders' Registerable Securities and specifying 13 14 the intended method of disposition thereof, the Company will, subject to the terms of this Warrant, promptly give written notice of such requested registration to all registered holders of Registerable Securities, and thereupon the Company will effect the registration under the Securities Act of (i) the Registerable Securities which the Company has been so requested to register by such Initiating Holders for disposition in accordance with the intended method of disposition stated in such request, and (ii) all other Registerable Securities the holders of which shall have made a written request to the Company for registration thereof within 30 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registerable Securities), all to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registerable Securities so to be registered. (b) REGISTRATION STATEMENT FORM. Registrations under this section 12.1 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Company and (ii) as shall permit the disposition of such Registerable Securities in accordance with the intended method or methods of disposition specified in their request for such registration. The Company agrees to include in any such registration statement all information which holders of Registerable Securities being registered shall reasonably request. If, in connection with any registration under this section 12.1 which is proposed by the Company to be on Form S-3 or any similar short form registration statement which is a successor to Form S-3, the managing underwriters, if any, shall advise the Company in writing that in their opinion the use of another permitted form is of material importance to the success of the offering, then such registration shall be on such other permitted form. (c) EXPENSES. The Company will pay all Registration Expenses in connection with any registration requested pursuant to this section 12.1 by any Initiating Holders of Registerable Securities prior to the time at which three such registrations shall have been effected in which all of the Registerable Securities requested to be included in such registration by any holders of Registerable Securities shall have been registered pursuant to this section 12.1. The Registration Expenses (and underwriting discounts and commissions and transfer taxes, if any) in connection with each other registration requested under this section 12.1 shall be allocated pro rata among all Persons on whose behalf securities of the Company are included in such registration, on the basis of the respective amounts of the securities then being registered on their behalf. 14 15 (d) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to this section 12.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, PROVIDED that a registration which does not become effective after the Company has filed a registration statement with respect thereto solely by reason of the refusal to proceed of the Initiating Holders (other than a refusal to proceed based upon the advice of counsel relating to a matter with respect to the Company OR material adverse information concerning the business or financial condition of the Company which is made known to the Initiating Holders after the date on which such registration was requested) shall be deemed to have been effected by the Company at the request of such Initiating Holders unless the Initiating Holders shall have elected to pay all Registration Expenses in connection with such registration, (ii) if, after it has become effective, such registration becomes subject to any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason, (provided that, in lieu of such registration not being deemed to have been effected, the Company may extend the registration period may be extended by the period of such stop order, injunction or other order, up to a maximum of ninety days) or (iii) the conditions to closing specified in the purchase agreement or underwriting agreement entered into in connection with such registration are not satisfied, other than by reason of some act or omission by such Initiating Holders. (e) SELECTION OF UNDERWRITERS. If a requested registration pursuant to this section 12.1 involves an underwritten offering, the underwriter or underwriters thereof shall be selected by the holders of at least a majority (by number of shares) of the Registerable Securities as to which registration has been requested and shall be acceptable to the Company, which shall not unreasonably withhold its acceptance of any such underwriters. (f) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration pursuant to this section 12.1 involves an underwritten offering, and the managing underwriter shall advise the Company in writing (with a copy to each holder of Registerable Securities requesting registration) that, in its opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in such offering within a price range acceptable to the holders of a majority of the Registerable Securities requested to be included in such registration, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, Registerable Securities requested to be included in such registration by the holder or holders of Registerable Securities, PRO RATA among the holders thereof requesting such registration on the basis of the number of such securities requested to be included by such holders. In connection with any such registration, no securities other than Registerable Securities shall be covered by such registration. 15 16 (g) If at the time of any request to register Registerable Securities by any holder, pursuant to this Section 12.1, the Company is engaged or has plans to engage in a registered public offering or is engaged in any other activity which, in the good faith determination of the Company's Board of Directors, would be adversely affected by the requested registration, then the Company may at its option direct, upon no less than five days prior written notice, that such request be delayed for a period not in excess of 90 days from the date of the expiration of such notice, such right to delay a request to be exercised by the Company not more than once in any 12-month period. 12.2. INCIDENTAL REGISTRATION. (a) RIGHT TO INCLUDE REGISTERABLE SECURITIES. If the Company at any time proposes to register any of its securities under the Securities Act (other than by a registration on Form S-4 or S-8 or any successor or similar forms and other than pursuant to section 12.1), whether or not for sale for its own account, it will each such time give prompt written notice to all holders of Registerable Securities of its intention to do so and of such holders' rights under this section 12.2. Upon the written request of any such holder made within fifteen days after the receipt of any such notice (which request shall specify the Registerable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Company will, subject to the terms of this Warrant, effect the registration under the Securities Act of all Registerable Securities which the Company has been so requested to register by the holders thereof, to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registerable Securities so to be registered, by inclusion of such Registerable Securities in the registration statement which covers the securities which the Company proposes to register, PROVIDED that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each holder of Registerable Securities and, thereupon, (I) in the case of a determination not to register, shall be relieved of its obligation to register any Registerable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any holder or holders of Registerable Securities entitled to do so to request that such registration be effected as a registration under section 12.1, and (II) in the case of a determination to delay registering, shall be permitted to delay registering any Registerable Securities, for the same period as the delay in registering such other securities. No registration effected under this section 12.2 shall relieve the Company of its obligation to effect any registration upon request under section 12.1 nor shall any such registration hereunder be deemed to have been effected pursuant to section 12.1. The Company will pay all Registration Expenses in 16 17 connection with each registration of Registerable Securities requested pursuant to this section 12.2. (b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a registration pursuant to this section 12.2 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed (on a firm commitment basis) by or through one or more underwriters of recognized standing under underwriting terms appropriate for such a transaction, (ii) the Registerable Securities so requested to be registered for sale for the account of holders of Registerable Securities are not also to be included in such underwritten offering (either because the Company has not been requested so to include such Registerable Securities pursuant to section 12.4(b) or, if requested to do so, is not obligated to do so under section 12.4(b)), and (iii) the managing underwriter of such underwritten offering shall inform the Company and holders of the Registerable Securities requesting such registration by letter of its belief that the distribution of all or a specified number of such Registerable Securities concurrently with the securities being distributed by such underwriters would interfere with the successful marketing of the securities being distributed by such underwriters (such writing to state the basis of such belief and the approximate number of such Registerable Securities which may be distributed without such effect), then the Company may, upon written notice to all holders of such Registerable Securities, reduce PRO RATA (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registerable Securities the registration of which shall have been requested by each holder of Registerable Securities so that the resultant aggregate number of such Registerable Securities so included in such registration shall be equal to the number of shares stated in such managing underwriter's letter. 12.3. REGISTRATION PROCEDURES. If and whenever the Company is required to effect the registration of any Registerable Securities under the Securities Act as provided in sections 12.1 and 12.2 the Company shall promptly: (i) prepare and (within sixty days after the end of the period within which requests for registration may be given to the Company or in any event as soon thereafter as possible) (in the case of a registration pursuant to section 12.1, such filing to be made within sixty days after the initial request of one or more Initiating Holders of Registerable Securities or in any event as soon thereafter as possible) file with the Commission the requisite registration statement to effect such registration (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and thereafter use its reasonable best efforts to cause such registration statement to become and remain effective, PROVIDED, however, that the Company may discontinue any registration of its 17 18 securities which are not Registerable Securities (and, under the circumstances specified in section 12.2(a), its securities which are Registerable Securities) at any time prior to the effective date of the registration statement relating thereto; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement or (i) in the case of a registration pursuant to section 12.1, the expiration of 180 days after such registration statement becomes effective, or (ii) in the case of a registration pursuant to section 12.2, the expiration of 90 days after such registration statement becomes effective; (iii) furnish to each seller of Registerable Securities covered by such registration statement and each underwriter, if any, of the securities being sold by such seller such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller and underwriter, if any, may reasonably request; (iv) use its reasonable best efforts to register or qualify all Registerable Securities and other securities covered by such registration statement under such other securities laws or blue sky laws of such jurisdictions as any seller thereof and any underwriter of the securities being sold by such seller shall reasonably request, to keep such registrations or qualifications in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable such seller and underwriter to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (iv) be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (v) use its reasonable best efforts to cause all Registerable Securities covered 18 19 by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registerable Securities; (vi) use its reasonable best efforts to furnish to each seller of Registerable Securities a signed counterpart, addressed to such seller and the underwriters, if any of (x) an opinion of counsel for the Company, dated the effective date of such registration statement (or, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to such seller, and (y) a "comfort" letter (or, in the case of such Person which does not satisfy the conditions for receipt of a "comfort" letter specified in Statement on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities (with, in the case of an "agreed upon procedures" letter, such modifications or deletions as may be required under Statement on Auditing Standards No. 35) and, in the case of the accountants' letter, such other financial matters, and, in the case of the legal opinion, such other legal matters, as such seller (or the underwriters, if any) may reasonably request; (vii) notify the holders of Registerable Securities and the managing underwriter or underwriters, if any, promptly and confirm such advice in writing promptly thereafter: (v) when the registration statement, the prospectus or any prospectus supplement related thereto or post-effective amendment to the registration statement has been filed, and, with respect to the registration statement or any post-effective amendment thereto, when the same has become effective; (w) of any request by the Commission for amendments or supplements to the registration statement or the prospectus or for additional information; 19 20 (x) of the issuance by the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceedings by any Person for that purpose; (y) if at any time the representations and warranties of the Company made as contemplated by section 12.4 below cease to be true and correct; (z) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registerable Securities for sale under the securities or blue sky laws of any jurisdiction or the initiation or threat of any proceeding for such purpose; (viii) notify each seller of Registerable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon the Company's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include 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 not misleading in the light of the circumstances then existing; (ix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, and will furnish to each such seller prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any thereof to which any such seller shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (x) make available for inspection by a representative or representatives of the holders of Registerable Securities any underwriter participating in any disposition 20 21 pursuant to the registration statement and any attorney or accountant retained by such selling holders or underwriter (each, an "INSPECTOR"), all financial and other records, pertinent corporate documents and properties of the Company (the "RECORDS"), and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such registration in order to permit a reasonable investigation within the meaning of Section 11 of the Securities Act, PROVIDED that the Company shall not be required to comply with this subdivision (xi) if there is a reasonable likelihood, in the judgment of the Company, that such delivery could result in the loss of any attorney-client privilege related thereto; and PROVIDED FURTHER that Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (other than to any holder of Registerable Securities) unless (x) such Records have become generally available to the public or (y) the disclosure of such Records may be necessary or appropriate (A) in compliance with any law, rule, regulation or order applicable to any such Inspectors or holder of Registerable Securities, (B) in response to any subpoena or other legal process or (C) in connection with any litigation to which such Inspectors or any holder of Registerable Securities is a party; (xi) provide and cause to be maintained a transfer agent and registrar for all Registerable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; (xii) take such other actions as sellers of such Registerable Securities holding 51% of the shares so to be sold shall reasonably request in order to expedite or facilitate the disposition of such Registerable Securities; (xiii) use its best efforts to list all Registerable Securities covered by such registration statement on any securities exchange on which any of the securities of the same class as the Registerable Securities are then listed; and (xiv) use its best efforts to provide a CUSIP number for the Registerable Securities, not later than the effective date of the registration statement. The Company may require each seller of Registerable Securities as to which any registration is being effected to furnish the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. Each holder of Registerable Securities shall be deemed to have agreed by acquisition of such Registerable Securities that, upon receipt of any notice from the Company of the occurrence 21 22 of any event of the kind described in subdivision (vii) or (viii) of this section 12.3, such holder will forthwith discontinue such holder's disposition of Registerable Securities pursuant to the registration statement relating to such Registerable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (vii) of this section 12.3 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such holder's possession of the prospectus relating to such Registerable Securities current at the time of receipt of such notice. In the event that, in the reasonable judgment of the Company, it is necessary or advisable to suspend use of a prospectus included in a Registration Statement due to pending material developments or other material events that have not yet been publicly disclosed and as to which the Company believes public disclosure would be detrimental to the Company, the Company shall notify all sellers of Registerable Securities to such effect, and upon receipt of such notice, each such seller of Registerable Securities shall promptly discontinue any sales of Registerable Securities pursuant to Registration Statement until such seller of Registerable Securities has received copies of a supplemented or amended prospectus or until such seller of Registerable Securities is advised in writing by the Company that the current prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such prospectus. Notwithstanding anything to the contrary herein, the Company shall not exercise its rights under this paragraph to suspend sales of Registerable Securities for a period in excess of ninety days in any 365 day-period. If any such registration or comparable statement refers to any holder of Registerable Securities 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 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 or any similar federal statute then in force, the deletion of the reference to such holder. 12.4. UNDERWRITTEN OFFERINGS. (a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters for any underwritten offering by holders of Registerable Securities pursuant to a registration requested under section 12.1, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to be satisfactory in substance and form to the Company, each such holder and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements 22 23 of this type, including, without limitation, indemnities to the effect and to the extent provided in section 12.7. The holders of the Registerable Securities will cooperate with the Company in the negotiation of the underwriting agreement and will give consideration to the reasonable suggestions of the Company regarding the form thereof, PROVIDED that nothing herein contained shall diminish the foregoing obligations of the Company. The holders of Registerable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registerable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registerable Securities. Any such holder of Registerable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in such registration statement, customary representations and warranties contained in the relevant underwriting agreement, or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. (b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by section 12.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by any holder of Registerable Securities as provided in section 12.2 and subject to the provisions of section 12.2(b), use its best efforts to arrange for such underwriters to include all the Registerable Securities to be offered and sold by such holder among the securities to be distributed by such underwriters, PROVIDED that if the managing underwriter of such underwritten offering shall inform the holders of the Registerable Securities requesting such registration and the holders of any other securities which shall have exercised, in respect of such underwritten offering, registration rights comparable to the rights under section 12.2 by letter of its belief that inclusion in such underwritten distribution of all or a specified number of such Registerable Securities or of such other shares of securities so requested to be included would interfere with the successful marketing of the securities (other than such Registerable Securities and other shares of securities so requested to be included) by the underwriters (such writing to state the basis of such belief and the approximate number of such Registerable Securities and shares of other securities so requested to be included which may be included in such underwritten offering without such effect), then the Company may, upon written notice to all holders of such Registerable Securities and of such other shares of securities so requested to be included, exclude pro rata from such underwritten offering (if and to the extent stated by such managing underwriter to be necessary to eliminate such effect) the number of such Registerable Securities and shares of such other securities so 23 24 requested to be included the registration of which shall have been requested by each holder of Registerable Securities and by the holders of such other so that the resultant aggregate number of such Registerable Securities and of such other shares of securities so requested to be included which are included in such underwritten offering shall be equal to the approximate number of shares stated in such managing underwriter's letter. The holders of Registerable Securities to be distributed by such underwriters shall be parties to the underwriting agreement between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registerable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such holders of Registerable Securities. Any such holder of Registerable Securities shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, such holder's Registerable Securities and such holder's intended method of distribution and any other representation required by law. Notwithstanding anything to the contrary contained herein, in the event that any terms of this Section 12 are inconsistent with or conflict with the terms of the proviso to Section 5.01(b) of the Warrant Agreement dated as of September 3, 1998 between the Company and American Stock Transfer & Trust Company (the "UNIT AGREEMENT"), the terms of the Unit Agreement shall govern and the terms hereof shall be deemed to be amended insofar as is necessary to resolve such inconsistency or conflict. (c) CONFIDENTIALITY. Any holder receiving any written notice from the Company regarding the Company's plans to file a Registration Statement shall treat such notice confidentially and shall not disclose such information to any person other than as necessary to exercise its rights under this Warrant. (d) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No Person may participate in any underwritten offering hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved, subject to the terms and conditions hereof, by the holders of a majority of Registerable Securities to be included in such underwritten offering and (ii) completes and executes all questionnaires, indemnities, underwriting agreements and other documents (other than powers of attorney) required under the terms of such underwriting arrangements. Notwithstanding the foregoing, no underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registerable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations and warranties contained in a writing furnished by such holder expressly for use in the related registration statement, customary representations or warranties contained in the relevant underwriting agreement, or agreements regarding such holder, such holder's Registerable Securities 24 25 and such holder's intended method of distribution and any other representation required by law. 12.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the preparation and filing of each registration statement under the Securities Act pursuant to this Warrant, the Company will give the holders of Registerable Securities registered under such registration statement, their underwriters, if any, and their respective counsel and accountants, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act, provided that the Company shall not be required to comply with this section 12.5 if there is a reasonable likelihood, in the judgment of the Company, that such delivery could result in the loss of any attorney-client privilege related thereto; and provided further that Records which the Company determines, in good faith, to be confidential and which it notifies the holders of Registerable Securities are confidential shall not be disclosed by the holders of Registerable Securities unless (x) such Records have become generally available to the public or (y) the disclosure of such Records may be necessary or appropriate (A) in compliance with any law, rule, regulation or order applicable to any such holder of Registerable Securities, (B) in response to any subpoena or other legal process or (C) in connection with any litigation to which any such holder of Registerable Securities is a party. 12.6. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of any securities of the Company under the Securities Act, the Company will, and hereby does, indemnify and hold harmless in the case of any registration statement filed pursuant to section 12.1 or 12.2, the holder of any Registerable Securities covered by such registration statement, its directors and officers, each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such holder or any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder or any such director or officer or underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company 25 26 will reimburse such holder and each such director, officer, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, PROVIDED that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such holder specifically stating that it is for use in the preparation thereof and, PROVIDED, FURTHER that the Company shall not be liable to any Person who participates as an underwriter, in the offering or sale of Registerable Securities or to any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, within the time required by the Securities Act to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registerable Securities to such Person if such statement or omission was corrected in such final prospectus. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such holder or any such director, officer, underwriter or controlling person and shall survive the transfer of such securities by such holder. (b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a condition to including any Registerable Securities in any registration statement filed pursuant to section 12.3, that the Company shall have received an undertaking satisfactory to it from the prospective seller of such Registerable Securities, to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this section 12.6) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Any such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling person and shall survive the transfer of such securities by such seller. 26 27 (c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this section 12.6 and subdivision (f) below, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, PROVIDED that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this section 12.6, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified, to the extent that the indemnifying party may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement of any such action which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability, or a covenant not to sue, in respect to such claim or litigation. No indemnified party shall consent to entry of any judgment or enter into any settlement of any action for which indemnity is required to be provided by an indemnifying party hereunder without the consent of such indemnifying party; in no event shall the indemnifying party be required to pay the expenses of more than one law firm per jurisdiction as counsel for the indemnified party. The provisions of this subsection (c) shall also apply to a contribution pursuant to subsection (f) below. (d) OTHER INDEMNIFICATION. Indemnification similar to that specified in the preceding subdivisions of this section 12.6 (with appropriate modifications) shall be given by the Company and each seller of Registerable Securities with respect to any required registration or other qualification of securities under any Federal or state law or regulation of any governmental authority, other than the Securities Act. (e) INDEMNIFICATION PAYMENTS. The indemnification required by this section 12.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. 27 28 (f) CONTRIBUTION. If the indemnification provided for in the preceding subdivisions of this section 12.6 is unavailable to an indemnified party in respect of any expense, loss, claim, damage or liability referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such expense, loss, claim, damage or liability (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the holder or underwriter, as the case may be, on the other from the distribution of the Registerable Securities 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 on the one hand and of the holder or underwriter, as the case may be, on the other in connection with the statements or omissions which resulted in such expense, loss, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the holder or underwriter, as the case may be, on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission to state a material fact relates to information supplied by the Company, by the holder or by the underwriter and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, PROVIDED that the foregoing contribution agreement shall not inure to the benefit of any indemnified party if indemnification would be unavailable to such indemnified party by reason of the provisions contained in the first sentence of subdivision (a) of this section 12.6, and in no event shall the obligation of any indemnifying party to contribute under this subdivision (f) exceed the amount that such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided for under subdivisions (a) or (b) of this section 12.6 had been available under the circumstances. The Company and the holders of Registerable Securities agree that it would not be just and equitable if contribution pursuant to this subdivision (f) were determined by PRO RATA allocation (even if the holders and any underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth in the preceding sentence and subdivision (c) of this section 12.6, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subdivision (f), no holder of Registerable Securities or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any such holder, the net proceeds received by such holder from the 28 29 sale of Registerable Securities or (ii) in the case of an underwriter, the total price at which the Registerable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission. No Person 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 guilty of such fraudulent misrepresentation. 13.0 DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: ACQUIRING PERSON: With reference to the transactions referred to in clauses (a) through (d) of section 3.1, the continuing or surviving corporation of a consolidation or merger with the Company (if other than the Company), the transferee of substantially all of the properties of the Company, the corporation consolidating with or merging into the Company in a consolidation or merger in connection with which the Common Stock is changed into or exchanged for stock or other securities of any other Person or cash or any other property, or, in the case of a capital reorganization or reclassification, the Company. ACQUISITION PRICE: As applied to the Common Stock, (a) the Market Price on the date immediately preceding the date on which any transaction to which section 3 applies is consummated, or (b) if a purchase, tender or exchange offer is made by the Acquiring Person (or by any of its affiliates) to the holders of the Common Stock and such offer is accepted by the holders of more than 50% of the outstanding shares of Common Stock, the greater of (i) the price determined in accordance with the provisions of the foregoing clause (a) of this sentence and (ii) the Market Price on the date immediately preceding the acceptance of such offer by the holders of more than 50% of the outstanding shares of Common Stock. ADDITIONAL SHARES OF COMMON STOCK: All shares (including treasury shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4, deemed to be issued) by the Company after the date hereof, whether or not subsequently reacquired or retired by the Company, other than (a shares issued upon the exercise of the Warrants, (b shares issued (including upon the exercise of options) to directors, advisors, employees or consultants of the Company pursuant to a stock option plan, employee stock purchase plan, restricted stock plan or other agreement approved by the board of directors of the Company, 29 30 (c) such additional number of shares as may become issuable upon the exercise of any of the securities referred to in the foregoing clauses (a) and (b) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, but only if and to the extent that such adjustments are required as the result of the original issuance of the Warrants, (d) such additional number of shares as may become issuable upon the exercise of any of the securities referred to in the foregoing clauses (a) and (b) by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock, (e) shares issued upon exercise of any warrants outstanding on the date hereof, and (f) shares issued pursuant to the terms of the Company's 71/2% Series A Cumulative Convertible Preferred Stock, including as dividends thereon or pursuant to the conversion thereof. BUSINESS DAY: Any day other than a Saturday or a Sunday or a day on which commercial banking institutions in the City of New York are authorized by law to be closed. Any reference to "days" (unless Business Days are specified) shall mean calendar days. COMMISSION: The Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. COMMON STOCK: As defined in the introduction to this Warrant, such term to include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. COMPANY: As defined in the introduction to this Warrant, such term to include any corporation which shall succeed to or assume the obligations of the Company hereunder in compliance with section 3. CONVERTIBLE SECURITIES: Any evidences of indebtedness, shares of stock (other than Common Stock) or other securities directly or indirectly convertible into or exchangeable for 30 31 Additional Shares of Common Stock. CREDIT AGREEMENT: That certain Credit Agreement, by and among Network Plus, Inc., Network Plus Corp., the lenders party thereto from time to time, Goldman Sachs Credit Partners L.P., as a joint lead arranger, book runner and as syndication agent, FleetBoston Robertson Stephens Inc., as a joint lead arranger, DLJ Bridge Finance, Inc., as documentation agent and Fleet National Bank, as administrative agent and as collateral agent, dated as of September 27, 2000. CURRENT MARKET PRICE: On any date specified herein, the average daily Market Price during the period of the most recent 20 days, ending on such date, on which the national securities exchanges were open for trading, except that if no Common Stock is then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market Price on such date. EXCHANGE ACT: The Securities Exchange Act of 1934, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. INITIATING HOLDERS: Any holder or holders of Registerable Securities holding at least 50% of the Registerable Securities (by number of shares at the time issued and outstanding), and initiating a request pursuant to section 12.1 for the registration of all or part of such holder's or holders' Registerable Securities. INSTITUTIONAL HOLDER: Any original purchaser of any Warrant, any insurance company, pension fund, mutual fund, investment company, bank, savings bank, savings and loan association, broker-dealer, investment adviser, investment banking company, trust company or any finance or credit company, any portfolio or any investment fund managed by any of the foregoing, any other institutional investor and any nominee of any of the foregoing. MARKET PRICE: On any date specified herein, the amount per share of the Common Stock, equal to (a) the last sale price of such Common Stock, regular way, on such date or, if no such sale takes place on such date, the average of the closing bid and asked prices thereof on such date, in each case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted to trading, or (b) if such Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the NASD, the last trading price of the Common Stock on such date, or (c) if there shall have been no trading on such date or if the Common Stock is not so designated, the average of the closing bid and asked prices of the Common Stock on such date as shown by the NASD automated quotation system, or (d) if such Common Stock is not then listed or admitted to trading on any national 31 32 exchange or quoted in the over-the-counter market, the higher of (x) the book value thereof as determined by any firm of independent public accountants of recognized standing selected by the Board of Directors of the Company as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the fair value thereof determined in good faith by the Board of Directors of the Company as of a date which is within 18 days of the date as of which the determination is to be made. MARKET VALUE: Per share of common stock (or equivalent equity interests) of the Acquiring Person or its Parent on any date specified herein, (a) the average of the last sale prices, regular way, on the 20 consecutive business days immediately preceding such date or, if there shall have been no sale on any such day, the average of the closing bid and asked prices on such date, in each case as officially reported on the principal national securities exchange on which such common stock is at the time listed or admitted to trading, or (b) if such common stock is not then listed or admitted to trading on any national securities exchange, but is designated as a national market system security by the NASD, the last trading price of the common stock on such date, or if there shall have been no trading on such date or if the common stock is not so designated, the average of the reported closing bid and asked prices on such 20 days as shown by the NASD automated quotation system. NASD: The National Association of Securities Dealers, Inc. OPTIONS: Rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities. OTHER SECURITIES: Any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or otherwise) which the holders of the Warrants at any time shall be entitled to receive, or shall have received, upon the exercise of the Warrants, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to section 3 or otherwise. PARENT: As to any Acquiring Person any corporation which (a) controls the Acquiring Person directly or indirectly through one or more intermediaries, (b) is required to include the Acquiring Person in the consolidated financial statements contained in such Parent's Annual Report on Form 10-K and (c) is not itself included in the consolidated financial statements of any other person (other than its consolidated subsidiaries). PERSON: A corporation, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a governmental agency. PURCHASER: As defined in the introduction to this Warrant. 32 33 REGISTERABLE SECURITIES: (a) Any shares of Common Stock or Other Securities issued or issuable upon exercise of this Warrant and (b) any securities issued or issuable with respect to any securities referred to in the foregoing subdivision 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 Registerable Securities, once issued such securities shall cease to be Registerable Securities when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) they shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, (d) they shall have ceased to be outstanding or, (e) such securities are eligible for sale pursuant to Rule 144(k) (or any successor provision) under the Securities Act. REGISTRATION EXPENSES: All expenses incident to the Company's performance of or compliance with section 12, including, without limitation, all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, the reasonable fees and disbursements of one counsel retained by holder or holders and accountants retained by the holder or holders of more than 50 % of the Registerable Securities being registered, premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registerable Securities being registered and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes and fees and expenses of counsel for any holder except as set forth above, if any, PROVIDED that, in any case where Registration Expenses are not to be borne by the Company, such expenses shall not include salaries of Company personnel or general overhead expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance required by underwriters of the Company or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any event. RESTRICTED SECURITIES: (a) any Warrants bearing the applicable legend set forth in section 9.2, (b) any shares of Common Stock (or Other Securities) issued upon the exercise of Warrants which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, (c) any shares of Common Stock (or Other Securities) issued subsequent to the exercise of any of the Warrants as a dividend or other distribution with respect to, or resulting from 33 34 a subdivision of the outstanding shares of Common Stock (or Other Securities) into a greater number of shares by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are evidenced by a certificate or certificates bearing the applicable legend set forth in such section, and (d) unless the context otherwise requires, any shares of Common Stock (or Other Securities) issuable upon the exercise of Warrants, which, when so issued, will be evidenced by a certificate or certificates bearing the applicable legend set forth in such section. SECURITIES ACT: The Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. TRANSFER: Any sale, assignment, pledge or other disposition of any security, or of any interest therein, which could constitute a "sale" as that term is defined in section 2(3) of the Securities Act. VOTING SECURITIES: Stock of any class or classes (or equivalent interests), if the holders of the stock of such class or classes (or equivalent interests) are ordinarily, in the absence of contingencies, entitled to vote for the election of the directors (or persons performing similar functions) of such business entity, even though the right so to vote has been suspended by the happening of such a contingency. WARRANT PRICE: As defined in section 2.1. WARRANTS: The common stock purchase warrants issued in connection with this warrant agreement. WEIGHTED AVERAGE WARRANT PRICE: As to any holder of Restricted Securities, the price determined by dividing (a) the sum of the aggregate consideration previously paid by such holder upon the exercise of Warrants plus the consideration payable upon the exercise of all Warrants held by such holder by (b) the sum of (i) the aggregate number of shares previously received by such holder upon the exercise of Warrants plus (ii) the number of shares which would be received by such holder upon the exercise of all Warrants held by such holder, based upon the Warrant Price in effect on the effective date of the registration statement in respect of which the Weighted Average Warrant Price is being determined. 14. REMEDIES. Each party hereto stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the 34 35 terms hereof or otherwise. 15. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant shall be construed as conferring upon the holder hereof any rights as a stockholder of the Company or as imposing any obligation on such holder to purchase any securities or as imposing any liabilities on such holder as a stockholder of the Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 16. NOTICES. All notices and other communications under this Warrant shall be in writing and shall be delivered, or mailed by registered or certified mail, return receipt requested, by a nationally recognized overnight courier, postage prepaid, addressed (a) if to any holder of any Warrant, at the registered address of such holder as set forth in the register kept at the principal office of the Company, or (b) if to the Company, to the attention of its President at its principal office, PROVIDED that the exercise of any Warrant shall be effective in the manner provided in section 1. 17. AMENDMENTS. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. Notwithstanding the foregoing, any term of Section 12 of this Warrant may be amended or waived upon the written consent of the Company and the holders of Company Warrants (as defined below) representing at least a majority of the number of shares of Common Stock then subject to the outstanding Company Warrants; PROVIDED that any such amendment or waiver must apply to all Company Warrants then outstanding. "COMPANY WARRANTS" shall mean this Warrant and all other warrants in the series of warrants issued by the Company in connection with the Credit Agreement, all dated the date hereof and of like tenor (other than the number of shares of Common Stock issuable upon exercise thereof), including any warrants issued upon partial exercise or transfer thereof. 18. EXPIRATION. The right to exercise this Warrant shall expire at 5.00 p.m., New York City time, on September 27, 2003. Notwithstanding anything to the contrary set forth herein all rights to registration hereunder shall expire at 5:00 p.m. on September 27, 2005. 19. DESCRIPTIVE HEADINGS. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. 20. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. 21. JUDICIAL PROCEEDINGS; WAIVER OF JURY. Any judicial proceeding brought against 35 36 the Company with respect to this Warrant may be brought in any court of competent jurisdiction in the State of New York or of the United States of America for the Southern District of New York and, by execution and delivery of this Warrant, each of the Company and holder (a) accepts, generally and unconditionally, the nonexclusive jurisdiction of such courts and any related appellate court, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Warrant, subject to any rights of appeal, and (b) irrevocably waives any objection the Company may now or hereafter have as to the venue of any such suit, action or proceeding brought in such a court or that such court is an inconvenient forum. The Company hereby waives personal service of process and consents, that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of section 16, and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail or, if earlier, when delivered. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of any holder of any Warrant to bring proceedings against the Company in the courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER. 36 37 NETWORK PLUS CORP. By: /s/ James J. Crowley ----------------------------------------- Title: EVP and COO S-1 38 FORM OF SUBSCRIPTION [To be executed only upon exercise of Warrant] To: [NAME OF ISSUER] The undersigned registered holder of the within Warrant hereby irrevocably exercises such Warrant for, and purchases thereunder, ______* shares of Common Stock of [NAME OF ISSUER] and herewith makes payment of $ therefor, and requests that the certificates for such shares be issued in the name of, and delivered to , whose address is . Dated: ------------------------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of Warrant) -------------------------------------------------- (Street Address) -------------------------------------------------- (City)(State)(Zip Code) - ---------------------------- * Insert here the number of shares called for on the face of this Warrant (or, in the case of a partial exercise, the portion thereof as to which this Warrant is being exercised), in either case without making any adjustment for Additional Shares of Common Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of this Warrant, may be delivered upon exercise. In the case of partial exercise, a new Warrant or Warrants will be issued and delivered, representing the unexercised portion of the Warrant, to the holder surrendering the Warrant. 39 FORM OF ASSIGNMENT [To be executed only upon transfer of Warrant] For value received, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the right represented by such Warrant to purchase shares of [Common Stock] of [NAME OF ISSUER] to which such Warrant relates, and appoints Attorney to make such transfer on the books of [NAME OF ISSUER] maintained for such purpose, with full power of substitution in the premises. Dated: ------------------------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of Warrant) -------------------------------------------------- (Street Address) -------------------------------------------------- (City)(State)(Zip Code) Signed in the presence of: 40 -------------------------------------------------------- NETWORK PLUS CORP. Common Stock Purchase Warrant Dated as of September 27, 2000 --------------------------------------------------------- [THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.] 41 TABLE OF CONTENTS 1. Exercise of Warrant..........................................................1 1.1. Manner of Exercise.........................................................1 1.2. When Exercise Effective....................................................1 1.3. Delivery of Stock Certificates, etc........................................1 1.4. Payment by Application of Shares Otherwise Issuable........................2 1.5. Exercise of Warrants. ....................................................2 2. Adjustment of Common Stock Issuable Upon Exercise............................2 2.1. General; Warrant Price.....................................................2 2.2. Adjustment of Warrant Price................................................2 2.2.1 Issuance of Additional Shares of Common Stock.............................2 2.2.2 Extraordinary Dividends and Distributions.................................3 2.3. Treatment of Options and Convertible Securities............................3 2.4. Treatment of Stock Dividends, Stock Splits, etc............................5 2.5. Computation of Consideration...............................................5 2.6. Adjustments for Combinations, etc..........................................6 2.7. Minimum Adjustment of Warrant Price........................................6 3. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc...6 4. Other Dilutive Events........................................................7 5. No Dilution or Impairment....................................................7 6. Report as to Adjustments.....................................................7 7. Notices of Corporate Action..................................................8 8. Registration of Common Stock.................................................8 9. Restrictions on Transfer.....................................................9 9.1. Restrictive Legends........................................................9 9.2. Notice of Proposed Transfer; Opinions of Counsel...........................9 9.3. Termination of Restrictions...............................................10
42 10. Reservation of Stock, etc..................................................10 11. Registration and Transfer of Warrants, etc.............................10 11.1. Warrant Register; Ownership of Warrants..................................10 11.2. Transfer and Exchange of Warrants........................................11 11.3. Replacement of Warrants..................................................11 12. Registration under Securities Act, etc.....................................11 12.1. Registration on Request..................................................11 12.2. Incidental Registration..................................................13 12.3. Registration Procedures..................................................14 12.4. Underwritten Offerings...................................................18 12.5. Preparation; Reasonable Investigation....................................20 12.6. Indemnification..........................................................21 13. Definitions................................................................23 14. Remedies...................................................................28 15. No Rights or Liabilities as Stockholder. ..................................28 16. Notices....................................................................28 17. Amendments.................................................................29 18. Expiration.................................................................29 19. Descriptive Headings.......................................................29 20. GOVERNING LAW..............................................................29 21. Judicial Proceedings; Waiver of Jury.......................................29
43 FORM OF SUBSCRIPTION............................................................53 FORM OF ASSIGNMENT..............................................................54
EX-10.7 8 b37246npex10-7.txt LEASE BETWEEN NETWORK PLUS, INC. AND TRUNKS UP 1 Exhibit 10.7 LEASE BETWEEN NETWORK PLUS, INC., AS TENANT AND TRUNKS UP LLC, AS LANDLORD 41 Pacella Park Drive Randolph, MA 02368 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 BASIC DATA; DEFINITIONS.................................. 1 1.1 BASIC DATA............................................... 1 1.2 DEFINITIONS.............................................. 2 1.3 ENUMERATION OF EXHIBITS.................................. 5 ARTICLE 2 PREMISES AND APPURTENANT RIGHTS.......................... 5 2.1 LEASE OF PREMISES........................................ 5 2.2 APPURTENANT RIGHTS....................................... 5 2.3 OPTION TO EXTEND......................................... 5 ARTICLE 3 BASIC RENT............................................... 8 3.1 PAYMENT.................................................. 8 ARTICLE 4 COMMENCEMENT AND CONDITION............................... 8 4.1 COMMENCEMENT DATE........................................ 8 4.2 CONDITION OF THE PREMISES................................ 9 ARTICLE 5 USE OF PREMISES.......................................... 9 5.1 PERMITTED USE............................................ 9 5.2 INSTALLATIONS AND ALTERATIONS BY TENANT.................. 9 5.3 EXTRA HAZARDOUS USE...................................... 11 5.4 HAZARDOUS MATERIALS...................................... 11 5.5 LANDLORD'S RESPONSIBILITY RE: ASBESTOS TILE.............. 12 ARTICLE 6 ASSIGNMENT AND SUBLETTING................................ 12 6.1 PROHIBITION.............................................. 12 6.2 ACCEPTANCE OF RENT....................................... 13 6.3 EXCESS PAYMENTS.......................................... 14 6.4 LANDLORD'S RECAPTURE RIGHT............................... 14 6.5 FURTHER REQUIREMENTS..................................... 15 ARTICLE 7 RESPONSIBILITY FOR REPAIRS AND CONDITIONOF PREMISES; SERVICES TO BE FURNISHED BY TENANT..................... 18 7.1 LANDLORD REPAIRS......................................... 18 7.2 TENANT REPAIRS AND MAINTENANCE........................... 18 7.3 FLOOR LOAD - HEAVY MACHINERY............................. 20 7.4 ELECTRICITY SERVICE...................................... 20 7.5 INTERRUPTION OF SERVICE.................................. 21
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PAGE ---- ARTICLE 8 REAL ESTATE TAXES........................................ 21 8.1 PAYMENTS ON ACCOUNT OF REAL ESTATE TAXES................. 21 8.2 ABATEMENT................................................ 23 ARTICLE 9 OPERATING AND UTILITY EXPENSES........................... 24 9.1 DEFINITIONS.............................................. 24 9.2 TENANT'S PAYMENT OF OPERATING EXPENSES................... 24 9.3 UTILITY PAYMENTS......................................... 25 ARTICLE 10 INDEMNITY AND PUBLIC LIABILITY INSURANCE................. 25 10.1 TENANT'S INDEMNITY....................................... 25 10.2 TENANT INSURANCE......................................... 26 10.3 TENANT'S RISK............................................ 26 10.4 WAIVER OF SUBROGATION.................................... 27 ARTICLE 11 FIRE, EMINENT DOMAIN, ETC................................ 27 11.1 NOTICE OF DAMAGE......................................... 27 11.2 MINOR CASUALTY........................................... 27 11.3 MAJOR CASUALTY........................................... 28 11.4 CASUALTY IN LAST SIX MONTHS.............................. 29 11.5 LEASE TERMINATION IN FINAL TWO YEARS..................... 29 11.6 LANDLORD'S INSURANCE..................................... 29 11.7 ABATEMENT OF RENT........................................ 30 11.8 CONDEMNATION............................................. 30 11.9 CONDEMNATION AWARD....................................... 30 ARTICLE 12 HOLDING OVER; SURRENDER.................................. 31 12.1 HOLDING OVER............................................. 31 12.2 SURRENDER OF PREMISES.................................... 31 ARTICLE 13 RIGHTS OF MORTGAGEES; TRANSFER OF TITLE.................. 32 13.1 RIGHTS OF MORTGAGEES..................................... 32 13.2 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE................ 32 13.3 NOTICE TO MORTGAGEE...................................... 33 ARTICLE 14 DEFAULT; REMEDIES........................................ 33 14.1 TENANT'S DEFAULT......................................... 33 14.2 LANDLORD'S REMEDIES...................................... 37 14.3 ADDITIONAL RENT.......................................... 39 14.4 REMEDYING DEFAULTS....................................... 39 14.5 REMEDIES CUMULATIVE...................................... 39 14.6 ATTORNEYS' FEES.......................................... 39 14.7 WAIVER................................................... 39 14.8 LANDLORD'S DEFAULT....................................... 40
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PAGE ---- ARTICLE 15 MISCELLANEOUS PROVISIONS................................. 40 15.1 RIGHTS OF ACCESS......................................... 40 15.2 COVENANT OF QUIET ENJOYMENT.............................. 40 15.3 LANDLORD'S LIABILITY..................................... 41 15.4 ESTOPPEL CERTIFICATE..................................... 41 15.5 BROKERAGE................................................ 41 15.6 RULES AND REGULATIONS.................................... 42 15.7 INVALIDITY OF PARTICULAR PROVISIONS...................... 42 15.8 PROVISIONS BINDING, ETC.................................. 42 15.9 RECORDING................................................ 42 15.10 NOTICE................................................... 42 15.11 WHEN LEASE BECOMES BINDING; ENTIRE AGREEMENT; MODIFICATION............................................. 43 15.12 PARAGRAPH HEADINGS AND INTERPRETATION OF SECTIONS........ 43 15.13 DISPUTE RESOLUTION....................................... 43 15.14 WAIVER OF JURY TRIAL..................................... 44 15.15 TIME IS OF THE ESSENCE................................... 44 15.16 MULTIPLE COUNTERPARTS.................................... 44 15.17 GOVERNING LAW............................................ 44 EXHIBIT A Legal Description of Land........................................ A-1 EXHIBIT B Site Plan of Building............................................ B-1 EXHIBIT C Commencement Date Letter......................................... C-1 EXHIBIT D Operating Expenses............................................... D-1 EXHIBIT E Rules and Regulations of Building................................ E-1
5 L E A S E THIS LEASE is dated as of ______________, 2000 between the Landlord and the Tenant named below, and is of space in the Building described below. ARTICLE 1 BASIC DATA; DEFINITIONS 1.1 BASIC DATA. Each reference in this Lease to any of the following terms shall be construed to incorporate the data for that term set forth in this Section: LANDLORD: Trunks Up LLC, a Delaware limited liability corporation LANDLORD'S ADDRESS: c/o Network Plus, Inc. 234 Copeland Street Quincy, MA 02169 Attn: Mr. Robert Hale, Jr. TENANT: Network Plus, Inc., a Massachusetts corporation TENANT'S ADDRESS: 41 Pacella Park Drive Randolph, MA 02368 Attn: CFO and General Counsel PROPERTY: The land located in Randolph, Massachusetts, together with the Building and other improvements thereon, all as more particularly described in EXHIBIT A attached hereto. BUILDING: The building commonly known and numbered as 41 Pacella Park Drive, consisting of 80,000 rentable square feet, as shown on the site plan attached hereto as EXHIBIT B. PREMISES: The entire Property, including the Land and the Building, as shown on the site plan attached hereto as EXHIBIT B. BASIC RENT: The Basic Rent is as follows: 6
- ---------------------------------------------------------------------------------------------------------- RENTAL PERIOD ANNUAL BASIC RENT MONTHLY PAYMENT - ---------------------------------------------------------------------------------------------------------- From the Commencement Date to February 28, 2009. $1,200,000.00, based upon an $100,000.00 annual lease rate of $15.00 per square foot - ---------------------------------------------------------------------------------------------------------- From March 1, 2009 to February 28, 2013. $1,360,000.00, based upon an $113,333.33 annual lease rate of $17 per square foot - ----------------------------------------------------------------------------------------------------------
SCHEDULED COMMENCEMENT DATE: March 1, 2005. TERM: 8 years, commencing on the Commencement Date and expiring at the close of the day immediately preceding the 9th anniversary of the Commencement Date, except that if the Commencement Date is other than the first day of a calendar month, the expiration of the Term shall be at the close of the last day of the calendar month in which such anniversary falls. The Term shall include any extension thereof that is expressly provided for by this Lease and that is effected strictly in accordance with this Lease; if no extension of the Term is expressly provided for by this Lease, no right to extend the Term shall be implied by this provision. INITIAL GENERAL LIABILITY INSURANCE: $1,000,000 per occurrence/$2,000,000 aggregate (combined single limit) for property damage, bodily injury or death. PERMITTED USES: General office, warehousing and light manufacturing. 1.2 DEFINITIONS. When used in Lease, the capitalized terms set forth below shall bear the meanings set forth below. ADEQUATE ASSURANCE: As defined in SECTION 14.1. ADEQUATE ASSURANCE OF FUTURE PERFORMANCE: As defined in SECTION 14.1. ADDITIONAL RENT: All charges and sums payable by Tenant as set forth in this Lease, other than and in addition to Basic Rent. ALTERATIONS: As defined in SECTION 5.2. BANKRUPTCY CODE: As defined in SECTION 14.1. BASIC RENT: As defined in SECTION 1.1. 7 BUILDING: As defined in SECTION 1.1. BUSINESS DAY: All days except Saturdays, Sundays, and other days when national banks in the state in which the property is located are not open for business. COMMENCEMENT DATE: As defined in SECTION 4.1. COMMON FACILITIES: As defined in SECTION 2.2. DEFAULT OF TENANT: As defined in SECTION 14.1. ENVIRONMENTAL CONDITION: Any disposal, release or threat of release of Hazardous Materials on, from or about the Building or the Property or storage of Hazardous Materials on, from or about the Building or the Property. ENVIRONMENTAL LAWS: Any federal, state and/or local statute, ordinance, bylaw, code, rule and/or regulation now or hereafter enacted, pertaining to any aspect of the environment or human health, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.ss.9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C.ss.6901 et seq., the Toxic Substances Control Act, 15 U.S.C.ss.2061 et seq., the Federal Clean Water Act, 33 U.S.C.ss.1251, and the Federal Clean Air Act, 42 U.S.C.ss.7401 et seq. EVENT OF BANKRUPTCY: As defined in SECTION 14.1. FORCE MAJEURE: Collectively and individually, strikes or other labor trouble, fire or other casualty, acts of God, governmental preemption of priorities or other controls in connection with a national or other public emergency or shortages of fuel, supplies or labor resulting therefrom, or any other cause, whether similar or dissimilar, beyond the reasonable control of the party required to perform an obligation. HOLDER: As defined in SECTION 13.1. HAZARDOUS MATERIALS: Shall mean each and every element, compound, chemical mixture, contaminant, pollutant, material, waste or other substance which is defined, determined or identified as hazardous or toxic under any Environmental Law, including, without limitation, any "oil," "hazardous material," "hazardous waste," "hazardous substance" or "chemical substance or mixture", as the foregoing terms (in quotations) are defined in any Environmental Laws. INITIAL GENERAL LIABILITY INSURANCE: As defined in SECTION 1.1. LAND: The land that constitutes a portion of the Property. LANDLORD: As defined in SECTION 1.1. 8 LANDLORD'S ADDRESS: As defined in SECTION 1.1. MORTGAGE: As defined in SECTION 13.1. OPERATING EXPENSES: As defined in SECTION 9.1. OPERATING YEAR: As defined in SECTION 9.1. PERMITTED USES: As defined in SECTION 1.1. PLANS: As defined in SECTION 4.2. PREMISES: As defined in SECTION 1.1. PROPERTY: As defined in SECTION 1.1. RULES AND REGULATIONS : As defined in SECTION 2.2. SCHEDULED COMMENCEMENT DATE: As defined in SECTION 1.1. SERVICE INTERRUPTION: As defined in SECTION 7.6. SUCCESSOR: As defined in SECTION 13.1. TAXES: As defined in SECTION 8.1. TAX YEAR: As defined in SECTION 8.1. TENANT: As defined in SECTION 1.1. TENANT'S ADDRESS: As defined in SECTION 1.1. TENANT'S REMOVABLE PROPERTY: As defined in SECTION 5.2. TERM: As defined in SECTION 1.1. 1.3 ENUMERATION OF EXHIBITS. The following Exhibits are a part of this Lease, are incorporated herein by reference attached hereto, and are to be treated as a part of this Lease for all purposes. Undertakings contained in such Exhibits are agreements on the part of Landlord and Tenant, as the case may be, to perform the obligations stated therein. Exhibit A - Legal Description of Land Exhibit B - Site Plan of Building Exhibit C - Commencement Date Letter 9 Exhibit D - Operating Expenses Exhibit E - Rules and Regulations ARTICLE 2 PREMISES AND APPURTENANT RIGHTS 2.1 LEASE OF PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises for the Term and upon the terms and conditions hereinafter set forth. 2.2 APPURTENANT RIGHTS. (a) Tenant shall have, as appurtenant to the Premises, the non-exclusive right to use, and permit its invitees to use in common with others entitled thereto, the easements, rights of way or other rights, if any, which are appurtenant to the Property pursuant to any recorded documents evidencing such easements or rights; but such rights shall always be subject to such conditions, rules and regulations from time to time established by Landlord pursuant to SECTION 15.6 (the "RULES AND REGULATIONS") and to the right of Landlord to designate and change from time to time such appurtenant rights pursuant to the terms of the recorded documents evidencing such rights. 2.3 OPTION TO EXTEND. (a) Provided that, at the time of such exercise, (i) this Lease is in full force and effect, (ii) no Default of Tenant shall have occurred and be continuing (either at the time of exercise or at the commencement of an Extended Term), and (iii) Tenant or its successor by merger or other transaction in accordance with the terms of Section 6.1(b), shall then be occupying at least fifty percent (50%) Premises and shall not have assigned or sublet more than fifty percent (50%) of the Premises other than by a transaction permitted by the terms of Section 6.1(b), Tenant shall have the right and option to extend the Term of this Lease for two (2) extended terms (each an "Extended Term") of five (5) years each by giving written notice to Landlord not later than twelve (12) months nor earlier than fifteen (15) months prior to the expiration date of the then current Term, subject to the terms of SECTION 11.5 below. Subject to the terms of PARAGRAPH (b) below, the effective giving of such notice of extension by Tenant shall automatically extend the Term of this Lease for the Extended Term, and no instrument of renewal or extension need be executed. In the event that Tenant fails timely to give such notice to Landlord, this Lease shall automatically terminate at the end of then current Term and Tenant shall have no further option to extend the Term of this Lease. The first Extended Term shall commence on the day immediately succeeding the expiration date of the Initial Term, and shall end on the day immediately preceding the fifth anniversary of the first day of the Extended Term. The second Extended Term shall commence on the day immediately succeeding the expiration of the first Extended Term and shall end on the day immediately preceding the fifth anniversary of the first day of the second Extended Term. Each Extended Term shall be on all the terms and conditions of this Lease, except: (i) during the second Extended Term, Tenant shall have no further option to extend the Term, and (ii) the Basic Rent for each Extended Term 10 shall be the greater of (x) ninety five percent (95%) of the Fair Market Rental Value for the Premises as of the commencement of the applicable Extended Term, determined pursuant to PARAGRAPH (b), and (y) the Basic Rent due for the last year of the Term immediately prior to the commencement of the applicable Extended Term (either the Initial Term or the first Extended Term, as applicable). (b) Promptly after receiving Tenant's notice extending the Term of this Lease pursuant to PARAGRAPH (a) above, Landlord shall provide Tenant with Landlord's good faith estimate of the Fair Market Rental Value of the Premises for the Extended Term based upon rents being paid by tenants entering into leases in the area in which the Property is located. If Tenant is unwilling to accept Landlord's estimate of Fair Market Rental Value as set forth in Landlord's notice referred to above, and the parties are unable to reach agreement thereon within thirty (30) days after the delivery of such notice by Landlord, then Landlord and Tenant shall, not later than thirty (30) days after the expiration of the aforesaid thirty (30) day period, each retain a real estate professional with at least ten (10) years continuous experience in the business of appraising or marketing commercial real estate in the greater Boston area who shall, within thirty (30) days of his or her selection, prepare a written report summarizing his or her determination of the Fair Market Rental Value for such Extended Term. Landlord and Tenant shall simultaneously exchange such reports; provided, however, if either party has not obtained such a report within sixty (60) days after Tenant receives Landlord's notice, then the determination set forth in the other party's report shall be final and binding upon the parties. If both parties receive reports within such time and the lower determination is within ten percent (10%) of the higher determination, then the greater of (i) the annual Basic Rent in effect immediately preceding such Extended Term or (ii) the average of the two determinations shall be deemed to be the Fair Market Rental Value for such Extended Term. If the lower determination is not within ten percent (10%) of the higher determination, then Landlord and Tenant shall mutually select a person with the qualifications stated above (the "Final Professional") to resolve the dispute as to the Fair Market Rental Value for such Extended Term. If Landlord and Tenant cannot agree upon the designation of the Final Professional within thirty (30) days of the exchange of the first valuation reports, either party may apply to the American Arbitration Association, the Greater Boston Real Estate Board, or any successor thereto, for the designation of a Final Professional. Within ten (10) days of the selection of the Final Professional, Landlord and Tenant shall each submit to the Final Professional a copy of their respective real estate professional's determination of the Fair Market Rental Value for such Extended Term. The Final Professional shall not perform his or her own valuation, but rather shall, within thirty (30) days after such submissions, select the submission which is closest to the determination of the Fair Market Rental Value for such Extended Term which the Final Professional would have made acting alone. The Final Professional shall give notice of his or her selection to Landlord and Tenant and such decision shall, subject to the terms of the last two (2) sentences of this PARAGRAPH (b) below, be final and binding upon Landlord and Tenant, provided, however, in no event shall the Fair Market Rental Value be less than the annual Basic Rent in effect immediately preceding such Extended Term. Each party shall pay the fees and expenses of its real estate professional and counsel, if any, in connection with any proceeding under this paragraph, and the parties shall each pay one-half of the fees and expenses of the Final Professional. If Tenant is unwilling to accept the Fair Market Rental Value determined in 11 accordance with the process set forth above, then Tenant shall have the option to rescind its notice of election to extend the Term of this Lease by delivering written notice to Landlord within ten (10) days of, as applicable, (i) receipt of both reports from each of Tenant's and Landlord's respective selected real estate professionals, if the lower determination is within ten percent (10%) of the higher determination, (ii) the expiration of the sixty (60) day period after Tenant receives Landlord's notice of its estimate of Fair Market Value, if Tenant is unwilling to accept such estimate and either party has not obtained a report summarizing a real estate professional's determination of Fair Market Value within such sixty (60) day period, or (iii) receipt of notice from the Final Professional of his or her selection of the determination of the Fair Market Rental Value. The effective giving of such notice by Tenant shall rescind its notice of extension, and thereafter Tenant shall have no further option to extend the Term of this Lease, and the Lease shall expire on the originally scheduled expiration date of the Initial Term or, if Tenant has extended the Initial Term in accordance with the terms hereof, the first Extended Term, as applicable. ARTICLE 3 BASIC RENT 3.1 PAYMENT. (a) Tenant agrees to pay the Basic Rent and Additional Rent to Landlord, or as directed by Landlord, commencing on the Commencement Date, without offset, abatement (except as provided in SECTION 11.4), deduction or demand. Basic Rent shall be payable in equal monthly installments, in advance, on the first day of each and every calendar month during the Term of this Lease, to Landlord at Landlord's Address or at such other place as Landlord shall from time to time designate by notice, in lawful money of the United States. In the event that any installment of Basic Rent or any regularly scheduled payment of Additional Rent is not paid within three (3) Business Days of when due, Tenant shall pay, in addition to any charges under SECTION 14.4, at Landlord's request an administrative fee equal to 5% of the overdue payment. Landlord and Tenant agree that all amounts due from Tenant under or in respect of this Lease, whether labeled Basic Rent, Additional Rent or otherwise, shall be considered as rental reserved under this Lease for all purposes, including without limitation regulations promulgated pursuant to the Bankruptcy Code, and including further without limitation Section 502(b) thereof. (b) Basic Rent for any partial month shall be pro-rated on a daily basis, and if the first day on which Tenant must pay Basic Rent shall be other than the first day of a calendar month, the first payment which Tenant shall make to Landlord shall be equal to a proportionate part of the monthly installment of Basic Rent for the partial month from the first day on which Tenant must pay Basic Rent to the last day of the month in which such day occurs, plus the installment of Basic Rent for the succeeding calendar month. ARTICLE 4 COMMENCEMENT AND CONDITION 4.1 COMMENCEMENT DATE. The "COMMENCEMENT DATE" shall be the Scheduled 12 Commencement Date set forth in SECTION 1.1 hereof. Promptly upon the occurrence of the Commencement Date, Landlord and Tenant shall execute a letter substantially in the form attached hereto as EXHIBIT C, but the failure by either party to execute such a letter shall have no effect on the Commencement Date, as hereinabove determined. 4.2 CONDITION OF THE PREMISES. Tenant agrees to accept the Premises in an as-is condition. Landlord shall have no obligation to perform any work or construction. No improvements or alterations shall occur prior to the Commencement Date. Should Tenant desire to perform any work or construction, the same shall be done only in accordance with this Lease. ARTICLE 5 USE OF PREMISES 5.1 PERMITTED USE. (a) Tenant agrees that the Premises shall be used and occupied by Tenant only for Permitted Uses and for no other use without Landlord's express written consent. (b) Tenant agrees to conform to the following provisions during the Term of this Lease: (i) Intentionally omitted; (ii) Intentionally omitted. (iii) Tenant shall not perform any act or carry on any practice which may injure the Premises, or cause any offensive odors or loud noise or constitute a nuisance or a menace; (iv) Subject to the terms of Section 7.1 below, Tenant shall, in its use of the Premises, comply with the requirements of all applicable governmental laws, rules and regulations, including, without limitation, the Americans With Disabilities Act of 1990 and the regulations of the Massachusetts Architectural Access Board; and (v) Tenant shall not abandon the Premises. 5.2 INSTALLATIONS AND ALTERATIONS BY TENANT. (a) Tenant shall make no alterations, additions (including, for the purposes hereof, wall-to-wall carpeting), or improvements (collectively, "ALTERATIONS") in or to the Premises without Landlord's prior written consent, which consent shall not be unreasonably withheld or delayed with respect to non-structural Alterations that do not affect or involve the Building's electrical, plumbing or mechanical systems or any other Building systems. Any 13 Alterations shall be in accordance with the Rules and Regulations in effect with respect thereto and with plans and specifications meeting the requirements set forth in the Rules and Regulations and approved in advance by Landlord. All work shall (i) be performed in a good and workmanlike manner and in compliance with all applicable laws, ordinances, rules and regulations; (ii) be made at Tenant's sole cost and expense; (iii) become part of the Premises and the property of Landlord except for (A) those Alterations designated by Landlord at the time Landlord approves the Alterations pursuant to this Section to be removed upon the expiration or earlier termination of the Term and/or (B) those Alterations which can be removed without any damage to the Building caused by such removal unless Tenant, at its expense, shall repair any such damage to the Building; and (iv) be coordinated with any work being performed by Landlord in such a manner as not to damage the Building or interfere with the construction or operation of the Building. At Landlord's request, Tenant shall, before its work is started, secure assurances satisfactory to Landlord in its reasonable discretion protecting Landlord against claims arising out of the furnishing of labor and materials for the Alterations. If any Alterations shall involve the removal of fixtures, equipment or other property in the Premises which are not Tenant's Removable Property, such fixtures, equipment or property shall be promptly replaced by Tenant at its expense with new fixtures, equipment or property of like utility and of at least equal quality. (b) All articles of personal property and all business fixtures, machinery and equipment and furniture owned or installed by Tenant solely at its expense (including, without limitation, any of the foregoing items which are paid for by the "Subtenant Improvement Allowance" as such term is defined in that certain Sublease by and between PacSci Motion Control, Inc., as sublandlord, and Tenant, as subtenant, dated as of October 22, 1999 (the "PacSciSublease")) in the Premises ("TENANT'S REMOVABLE PROPERTY") shall remain the property of Tenant and may be removed by Tenant at any time prior to the expiration or earlier termination of the Term, provided that Tenant, at its expense, shall repair any damage to the Building caused by such removal. (c) Notice is hereby given that Landlord shall not be liable for any labor or materials furnished or to be furnished to Tenant upon credit, and that no mechanic's or other lien for any such labor or materials shall attach to or affect the reversion or other estate or interest of Landlord in and to the Premises, the Building or the Property. To the maximum extent permitted by law, before such time as any contractor commences to perform work on behalf of Tenant, such contractor (and any subcontractors) shall furnish a written statement acknowledging the provisions set forth in the prior clause. Tenant agrees to pay promptly when due the entire cost of any work done on behalf of Tenant, its agents, employees or independent contractors, and not to cause or permit any liens for labor or materials performed or furnished in connection therewith to be filed against all or any part of the Property and to discharge any such liens which may be so filed as set forth in the next sentence. If, notwithstanding the foregoing, any lien is filed against all or any part of the Property for work claimed to have been done for, or materials claimed to have been furnished to, Tenant or its agents, employees or independent contractors, Tenant, at its sole cost and expense, shall cause such lien to be dissolved promptly after receipt of notice that such lien has been filed (and in any event within fifteen (15) days of Tenant's receipt of notice or 14 other knowledge thereof), by the payment thereof or by the filing of a bond sufficient to accomplish the foregoing. If Tenant shall fail to discharge any such lien, Landlord may, at its option, discharge such lien and treat the cost thereof (including attorneys' fees incurred in connection therewith) as Additional Rent payable upon demand, it being expressly agreed that such discharge by Landlord shall not be deemed to waive or release the default of Tenant in not discharging such lien. Tenant shall indemnify and hold Landlord harmless from and against any and all expenses, liens, claims, liabilities and damages based on or arising, directly or indirectly, by reason of the making of any alterations, additions or improvements by or on behalf of Tenant to the Premises under this Section, which obligation shall survive the expiration or termination of this Lease. (d) In the course of any work being performed by Tenant (including, without limitation, the "field installation" of any of Tenant's Removable Property), Tenant agrees to use labor compatible with that being employed by Landlord for work in the Building or on the Property and not to employ or permit the use of any labor or otherwise take any action which might result in a labor dispute involving personnel providing services in the Building or on the Property pursuant to arrangements made by Landlord. 5.3 EXTRA HAZARDOUS USE. Tenant covenants and agrees that Tenant will not do or permit anything to be done in or upon the Premises, or bring in anything or keep anything therein, which shall increase the rate of property or liability insurance on the Premises or the Property above the standard rate applicable to Premises being occupied for the Permitted Uses. If the premium or rates payable with respect to any policy or policies of insurance purchased by Landlord with respect to the Property increases as a result of any act or activity on or use of the Premises during the Term or payment by the insurer of any claim arising from any act or neglect of Tenant, its employees, agents, contractors or invitees, Tenant shall pay such increase, from time to time, within fifteen (15) days after demand therefor by Landlord, as Additional Rent. 5.4 HAZARDOUS MATERIALS. (a) Tenant may use chemicals such as adhesives, lubricants, ink, solvents and cleaning fluids of the kind and in amounts and in the manner customarily found and used in business offices in order to conduct its business at the Premises and to maintain and operate the business machines located in the Premises. Except as specifically set forth in the immediately preceding sentence, Tenant shall not use, store, handle, treat, transport, release or dispose of any Hazardous Materials on or about the Premises or the Property without Landlord's prior written consent, which Landlord may withhold or condition in Landlord's sole discretion. (b) Any handling, treatment, transportation, storage, disposal or use of Hazardous Materials by Tenant in or about the Premises or the Property and Tenant's use of the Premises shall comply with all applicable Environmental Laws. (c) Tenant shall indemnify, defend upon demand with counsel reasonably acceptable to Landlord, and hold Landlord harmless from and against, any liabilities, losses 15 claims, damages, interest, penalties, fines, attorneys' fees, experts' fees, court costs, remediation costs, and other expenses which result from the use, storage, handling, treatment, transportation, release, threat of release or disposal of Hazardous Materials in or about the Premises or the Property by Tenant or Tenant's agents, employees, contractors or invitees. (d) Tenant shall give written notice to Landlord as soon as reasonably practicable of (i) any communication received by Tenant from any governmental authority concerning Hazardous Materials which relates to the Premises or the Property, and (ii) any Environmental Condition of which Tenant is aware. 5.5 LANDLORD'S RESPONSIBILITY RE: ASBESTOS TILE. Subject to Tenant's compliance with all applicable laws, ordinances and regulations, including, without limitation, any operation and maintenance plan, and the terms of this Lease, Landlord agrees to indemnify and save Tenant harmless from and against any claims, liabilities, losses, damages, interest, penalties, fines, attorneys' fees, experts' fees and court costs and other expenses actually incurred by Tenant arising from any enforcement action, third party claim for bodily injury or property damage or remediation required by any Environmental Law, in each case, resulting from the presence of any asbestos tiles or other asbestos containing materials in the Building. ARTICLE 6 ASSIGNMENT AND SUBLETTING 6.1 PROHIBITION. (a) Tenant covenants and agrees that neither this Lease nor the term and estate hereby granted, nor any interest herein or therein, will be assigned, mortgaged, pledged, encumbered or otherwise transferred, whether voluntarily, involuntarily, by operation of law or otherwise, and that neither the Premises nor any part thereof will be encumbered in any manner by reason of any act or omission on the part of Tenant, or used or occupied or permitted to be used or occupied, by anyone other than Tenant, or for any use or purpose other than a Permitted Use, or be sublet (which term, without limitation, shall include granting of concessions, licenses and the like) in whole or in part, or be offered or advertised for assignment or subletting by Tenant or any person acting on behalf of Tenant, without, in each case, the prior written consent of Landlord. Without limiting the foregoing, any agreement pursuant to which: (x) Tenant is relieved from the obligation to pay, or a third party agrees to pay on Tenant's behalf, all or any portion of the Basic Rent or Additional Rent under this Lease; and/or (y) a third party undertakes or is granted by or on behalf of Tenant the right to assign or attempt to assign this Lease or sublet or attempt to sublet all or any portion of the Premises, shall for all purposes hereof be deemed to be an assignment of this Lease and subject to the provisions of this ARTICLE 6. The provisions of this PARAGRAPH (a) shall apply to a transfer (by one or more transfers) of a controlling portion of or interest in the stock or partnership or membership interests or other evidences of equity interests of Tenant as if such transfer were an assignment of this Lease; provided that if equity interests in Tenant at any time are or become traded on a public stock exchange, the transfer of equity interests in Tenant on a public stock exchange shall not be deemed an assignment within 16 the meaning of this Article. (b) The provisions of PARAGRAPH (a) shall not apply to either (x) transactions with an entity into or with which Tenant is merged or consolidated, or to which all or substantially all of Tenant's assets are transferred, or (y) transactions with any entity which controls or is controlled by Tenant or is under common control with Tenant; provided that in any such event: (i) with respect to an assignment of the Lease, the successor to Tenant has a net worth, computed in accordance with generally accepted accounting principles consistently applied, at least equal to the net worth of Tenant immediately prior to such merger, consolidation or transfer; (ii) proof satisfactory to Landlord of such net worth shall have been delivered to Landlord at least ten (10) days prior to the effective date of any such transaction unless such delivery is prohibited by applicable securities laws or regulations, and in which case such proof shall be delivered promptly upon closing of the transaction, and in the absence thereof, the closing of such transaction shall automatically and immediately constitute a Default of Tenant; and (iii) the assignee agrees directly with Landlord, by written instrument in form satisfactory to Landlord in its reasonable discretion, to be bound by all the obligations of Tenant hereunder (or, with respect to a sublease, those obligations of Tenant under the Lease which are binding upon the subleased premises) including, without limitation, the covenant against further assignment and subletting. 6.2 ACCEPTANCE OF RENT. If this Lease be assigned, or if the Premises or any part thereof be sublet or occupied by anyone other than Tenant, whether or not in violation of the terms and conditions of the Lease, Landlord may, at any time and from time to time, collect rent and other charges from the assignee, subtenant or occupant, and apply the net amount collected to the rent and other charges herein reserved, but no such assignment, subletting, occupancy, collection or modification of any provisions of this Lease shall be deemed a waiver of this covenant, or the acceptance of the assignee, subtenant or occupant as a tenant or a release of Tenant from the further performance of covenants on the part of Tenant to be performed hereunder. Any consent by Landlord to a particular assignment, subletting or occupancy or other act for which Landlord's consent is required under PARAGRAPH (a) of SECTION 6.1 shall not in any way diminish the prohibition stated in PARAGRAPH (a) of SECTION 6.1 as to any further such assignment, subletting or occupancy or other act or the continuing liability of the original named Tenant. No assignment or subletting hereunder shall relieve Tenant from its obligations hereunder, and Tenant shall remain fully and primarily liable therefor. Landlord may revoke any consent by Landlord to a particular assignment, subletting or occupancy if the assignment or sublease does not provide that the assignee, subtenant or other occupant agrees to be independently bound by and upon all of the covenants, agreements, terms, provisions and conditions set forth in this Lease on the part of Tenant to be kept and performed. 17 6.3 EXCESS PAYMENTS. If Tenant assigns this Lease or sublets the Premises or any portion thereof, Tenant shall pay to Landlord as Additional Rent fifty percent (50%) of the amount, if any, by which (a) any and all compensation received by Tenant as a result of such assignment or subletting, net of reasonable expenses actually incurred by Tenant in connection with such assignment or subletting, exceeds (b) in the case of an assignment, the Basic Rent and Additional Rent under this Lease, and in the case of a subletting, the portion of the Basic Rent and Additional Rent allocable to the portion of the Premises subject to such subletting. Such payments shall be made on the date the corresponding payments under this Lease are due. Notwithstanding the foregoing, the provisions of this Section shall impose no obligation on Landlord to consent to an assignment of this Lease or a subletting of all or a portion of the Premises. 6.4 LANDLORD'S RECAPTURE RIGHT. (a) Notwithstanding anything herein to the contrary, in addition to withholding or granting consent with respect to any proposed assignment of this Lease or proposed sublease of all or a portion of the Premises, Landlord shall have the right, to be exercised in writing within thirty (30) days after written notice from Tenant seeking Landlord's consent to assign this Lease or sublease all or any portion of the Premises, to terminate this Lease (in the event of a proposed assignment) or recapture that portion of the Premises to be subleased (in the event of a proposed sublease) for the period of time equal to the term of the proposed sublease. In the case of a proposed assignment, this Lease shall terminate as of the date (the "RECAPTURE DATE") which is the later of (a) sixty (60) days after the date of Landlord's election, and (b) the proposed effective date of such assignment or sublease, as if such date were the last day of the Term of this Lease, subject to the forgoing and succeeding provisions with respect to proposed subleases that are for a term of less than the entire remainder of the Term. If Landlord exercises the rights under this Section in connection with a proposed sublease, this Lease shall be deemed amended to eliminate the proposed sublease premises from the Premises as of the Recapture Date through the end of the term of the proposed sublease, and thereafter, until the expiration of period of time equal to the term of the proposed sublease, all Basic Rent and Additional Rent shall be appropriately prorated to reflect the reduction of the Premises for such period as of the Recapture Date until the expiration of period of time equal to the term of the proposed sublease. (b) Landlord's right set forth in SECTION 6.4(a) above to recapture any portion of the Premises proposed to be subleased shall not apply if (i) the portion of the Premises covered by such proposed sublease is, together with any other portion of the Premises sublet previously by Tenant, for an area of not more than 20,000 rentable square feet of the Premises; (ii) the proposed sublease is for a term of not more than two (2) years; (iii) there shall remain, at the expiration of proposed sublease, at least two (2) years prior to the expiration of the Term of this Lease, including any applicable Extension Term exercised at the time of Tenant's notice requesting Landlord's consent to such proposed sublease; (iv) Tenant is occupying no less than fifty percent (50%) of the Premises for the conduct of its business; and (v) no Default of Tenant shall have occurred and be continuing beyond any applicable notice and cure periods. 18 6.5 FURTHER REQUIREMENTS. Tenant shall reimburse Landlord on demand, as an additional charge, for any out-of-pocket costs (including reasonable attorneys' fees and expenses) incurred by landlord in connection with any actual or proposed assignment or sublease or other act described in paragraph (a) of SECTION 6.1, whether or not consummated, including the costs of making investigations as to the acceptability of the proposed assignee or subtenant. Any sublease to which Landlord gives its consent shall not be valid or binding on Landlord unless and until Tenant and the sublessee execute a consent agreement in form and substance reasonably satisfactory to Landlord. In the event that Landlord consents to any sublease under the provisions of this Article, any such sublease shall provide that: (i) the term of the sublease must end no later than the last day of the Term of this Lease; (ii) no sublease shall be valid, and no subtenant shall take possession of all or any part of the Premises until a fully executed counterpart of such sublease has been delivered to Landlord; (iii) such sublease is subject and subordinate to this Lease; (iv) Landlord may enforce the provisions of the sublease, including collection of rents; (v) in the event of termination of this Lease or reentry or repossession of the Premises by Landlord, Landlord may, at its sole discretion and option, take over all of the right, title and interest of Tenant, as sublessor, under such sublease, and such subtenant shall, at Landlord's option, attorn to Landlord but nevertheless Landlord shall not (A) be liable for any previous act or omission of Tenant under such sublease; (B) be subject to any defense or offset previously accrued in favor of the subtenant against Tenant; or (C) be bound by any previous modification of such sublease made without Landlord's written consent or by any previous prepayment of more than one month's rent. 6.6 STANDARDS FOR CONSENT TO ASSIGNMENT AND SUBLETTING. In the event Landlord does not exercise its option pursuant to Section 6.4 to recapture the Premises or terminate this Lease in whole or in part and providing that Tenant is not in default of any of Tenant's obligations under this Lease, Landlord's consent to a proposed assignment or sublease shall not be unreasonably withheld, conditioned or delayed, provided and upon condition that: (i) In Landlord's judgment the proposed assignee or subtenant is engaged in a business which is in keeping with the then standards of the Building and Property and the proposed use is limited to the Permitted Use expressly permitted under Section 1.1 and will not violate any negative covenant as to use contained in any other lease of space in the Property; (ii) The proposed assignee or subtenant is a reputable person or entity with sufficient financial worth considering the responsibility involved, based on evidence provided by Tenant (and others) to Landlord, as determined by Landlord in its reasonable discretion; (iii) Neither (a) the proposed assignee or sublessee nor (b) any person or entity which, directly or indirectly, controls, is controlled by, or is under common control with, the proposed assignee or sublessee or any person or entity who controls the proposed assignee or sublessee, is then an occupant of any part of the Property or any other building owned or operated under a ground or underlying lease by Landlord or any person or entity which, directly or indirectly, 19 controls, is controlled by, or is under common control with Landlord or any person or entity who controls Landlord, PROVIDED THAT any such party has space available to offer for lease to any such proposed assignee or sublessee; (iv) The proposed assignee or sublessee is not a person or entity with whom Landlord is then negotiating to lease space at the Property; (v) The proposed sublease or assignment shall be in form reasonably satisfactory to Landlord and shall comply with the applicable provisions of this ARTICLE 6; (vi) Intentionally Omitted; (vii) The amount of the aggregate rent to be paid by the proposed subtenant is not less than the then current market rent per rentable square foot for the Premises as determined by Landlord in its sole discretion, reasonably exercised; and (viii) Tenant shall not have (a) advertised or publicized in any way the availability of the Premises without prior notice to and approval by Landlord, or (b) listed the Premises for subletting, whether through a broker, agent, representative, or otherwise at a rental rate less than the Annual Basic Rent and Additional Rent at which Landlord is then offering to lease other space in the Building. ARTICLE 7 RESPONSIBILITY FOR REPAIRS AND CONDITION OF PREMISES; SERVICES TO BE FURNISHED BY TENANT 7.1 LANDLORD REPAIRS. (a) Except as otherwise provided in this Lease, Landlord agrees to keep in good order, condition and repair the roof, and the other structural components of the Building consisting of the structural walls, footings, foundations, floor slabs, columns, girders, load bearing interior walls (but specifically excluding all plumbing, mechanical, electrical, heating, ventilation and air conditioning systems), except that Landlord shall in no event be responsible to Tenant for the repair of any exterior or interior glass in the Building, the doors (or related glass and finish work) to the Building, or any condition in the Premises or the Building caused by any act or neglect of Tenant, its invitees or contractors, including, without limitation, any damage to the roof caused by Tenant's placement of equipment thereon in excess of the design criteria and performance standards of the roof. Landlord shall not be responsible to make any improvements or repairs to the Building other than as expressly in this SECTION 7.1 provided, unless expressly provided otherwise in this Lease. (b) Landlord shall never be liable for any failure to make repairs which 20 Landlord has undertaken to make under the provisions of this SECTION 7.1 or elsewhere in this Lease, unless Tenant has given notice to Landlord of the need to make such repairs, and Landlord has failed to commence to make such repairs within a reasonable time after receipt of such notice, or fails to proceed with reasonable diligence to complete such repairs. (c) Without limiting any term of SECTION 5.2 above, in the event of any change after the Lease Commencement Date in any law, code, or ordinance (i) affecting office buildings generally, or (ii) affecting generally buildings used for the Permitted Uses hereunder which, by itself and without any Alterations to the Building or changes in Tenant's use thereof, requires a change in the Building (other than Tenant's Alterations or fixtures) into compliance with such law, code or ordinance, Landlord shall take such steps as are reasonablely necessary to bring the Building (other than Tenant's Alterations or fixtures) into compliance with the same, and the costs thereof shall be an Operating Expense. Without limiting any other term of this Lease, all costs and expenses incurred by Landlord for making repairs or replacements described in this Section 7.1, shall be included in the Operating Expenses as described in Section 9.2 above to be paid by Tenant, in accordance with the calculation set forth in item 6 of EXHIBIT D attached hereto, other than structural repairs or replacements to the roof, the structural walls, footings, foundations, floor slabs, columns, girders, and load bearing interior walls. 7.2 TENANT REPAIRS AND MAINTENANCE. (a) Except as otherwise provided in this Lease, Tenant agrees to keep in good order, condition and repair each and every part of the Premises, including without limitation, exterior walls (including exterior glass) and all plumbing, mechanical, electrical, heating, ventilation and air conditioning systems (collectively, "BUILDING SYSTEMS"), excepting only reasonable wear and tear of the Premises; and Tenant shall surrender the Premises, at the end of the Term, in such condition. Without limitation, Tenant shall comply with all laws, codes and ordinances from time to time in effect and all directions, rules and regulations of governmental agencies having jurisdiction, and the standards recommended by the local Board of Fire Underwriters applicable to Tenant's use and occupancy of the Premises, and shall, at Tenant's expense, obtain all permits, licenses and the like required thereby. Subject to SECTION 10.4 regarding waiver of subrogation, Tenant shall be responsible for the cost of repairs which may be made necessary by reason of damage to the Building caused by any act or neglect of Tenant, or its contractors or invitees (including any damage by fire or other casualty arising therefrom). Tenant shall also keep and maintain all the Land in a good and clean order, condition and repair, free of snow and ice and accumulation of rubbish, and shall keep and maintain all landscaped areas on the Property in a neat and orderly condition. (b) If repairs are required to be made by Tenant pursuant to the terms hereof, and Tenant fails to make the repairs, upon not less than fifteen (15) days' prior written notice (except that no notice shall be required in the event of an emergency), Landlord may make or cause such repairs to be made (but shall not be required to do so), and the provisions of SECTION 14.4 shall be applicable to the costs thereof. Landlord shall not be responsible to Tenant for any loss or damage whatsoever that may accrue to Tenant's stock or business by reason of Landlord's making such repairs. 21 (c) Except as set forth below with respect to the Building Systems, notwithstanding anything to the contrary in this Lease, in no event shall Tenant be obligated to make any repairs or replacements which would constitute capital expenditures under generally accepted accounting principles, which repairs and replacements shall be made by Landlord pursuant to Section 7.1, PROVIDED, HOWEVER, that the cost of any expenditures by Landlord which are capital in nature, as referred to above, shall, pursuant to Section 7.1, be included in the Operating Expenses to be paid by Tenant as set forth in Section 9.2, amortized over the useful life of such replacement item in accordance with the provisions of Item 6 of EXHIBIT D attached hereto, and Tenant shall reimburse Landlord therefore in accordance therewith. (d) Without limiting any other term of this Lease, Tenant shall maintain the Building Systems in accordance with its obligations under Section 7.2(a), provided that if Tenant shall make any replacement of a capital nature, as determined in accordance with generally accepted principles of accounting, to the Building Systems during the two (2) year period immediately preceding the expiration or earlier termination of this Lease (including, without limitation, any Extended Term), unless such termination is a result of a Default of Tenant, then Landlord shall promptly reimburse Tenant for the unamortized cost thereof as of the date of expiration or earlier termination of this Lease, it being understood and agreed that Landlord's payment obligation hereunder shall survive the expiration or termination of this Lease. The unamortized cost shall be determined in accordance with generally accepted principles of accounting. 7.3 FLOOR LOAD - HEAVY MACHINERY. (a) Tenant shall not place a load upon any floor in the Premises exceeding the floor load per square foot of area which such floor was designed to carry and which is allowed by law. Landlord reserves the right to prescribe, in its reasonable discretion, the weight and position of all business machines and mechanical equipment, including safes, which shall be placed so as to distribute the weight. Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant's expense in settings sufficient, in Landlord's reasonable judgment, to absorb and prevent vibration, noise and annoyance. Tenant shall not move any safe, heavy machinery, heavy equipment, freight, bulky matter or fixtures into or out of the Building without Landlord's prior consent, which consent not to be unreasonably withheld or delayed, but which may include a requirement to provide insurance, naming Landlord as an insured, in such amounts as Landlord may deem reasonable. (b) If any such safe, machinery, equipment, freight, bulky matter or fixtures requires special handling, Tenant agrees to employ only persons holding a Master Rigger's License to do such work, and that all work in connection therewith shall comply with applicable laws and regulations. Any such moving shall be at the sole risk and hazard of Tenant, and Tenant will exonerate, indemnify and save Landlord harmless against and from any liability, loss, injury, claim or suit resulting directly or indirectly from such moving. 7.4 ELECTRICITY SERVICE. 22 (a) The Premises shall be separately metered for electricity such that the applicable public utility company can provide electricity directly to the Premises, and Tenant shall be responsible for payment of all electricity charges directly to such utility (including electricity for all lighting, heating, ventilation and air conditioning in the Premises). Landlord shall permit Landlord's existing wires, risers, conduits and other electrical equipment to be used to supply electricity to Tenant at the Premises, provided Tenant's demand requirements shall not exceed watts per rentable square foot for standard single-phase volt alternating current, and Tenant agrees in its use of the Premises (i) not to exceed such requirements, and (ii) that its total connected lighting load will not exceed the maximum from time to time permitted under applicable governmental regulations. If, without in any way derogating from the foregoing limitation, Tenant shall require electricity in excess of the requirements set forth above, provided Tenant first obtains Landlord's consent (which Landlord may withhold in its reasonable discretion), Tenant may perform the work necessary to supply such additional service or equipment, at Tenant's sole cost and expense and subject to the requirements of SECTION 5.2 of this Lease. In order to assure that the foregoing requirements are not exceeded and to avert possible adverse effect on the Building's electric system, Tenant shall not, without Landlord's prior consent, connect any fixtures, appliances or equipment to the Building's electric distribution system other than personal computers, facsimile transceivers, typewriters, pencil sharpeners, adding machines, photocopiers, word and data processors, clocks, radios, hand-held or desk top calculators, Dictaphones, desktop computers and other similar small electrical equipment normally found in business offices unless Tenant continues to comply with the provisions of this Section 7.4(a) or Tenant performs the work necessary to make the repairs and/or replacements to the Building's electrical systems required by Tenant's electrical demands and usage in excess of the requirements set forth in this Section 7.4(a). (b) From time to time during the Term of this Lease, Landlord shall have the right to have an electrical consultant selected by Landlord make a survey of Tenant's electric usage, the result of which survey shall be conclusively binding upon Landlord and Tenant. In the event that such survey shows that Tenant has exceeded the requirements set forth in PARAGRAPH (a), in addition to any other rights Landlord may have hereunder, Tenant shall, upon demand, reimburse Landlord for the cost of such survey and Tenant shall, upon demand, perform the work necessary to make the repairs and/or replacements to the Building's electrical systems required by Tenant's electrical demands and usage in excess of the requirements set forth in PARAGRAPH (a). 7.5 INTERRUPTION OF SERVICE. (a) Landlord shall not be responsible in any manner for any suspension, interruption or curtailment of any services or utilities to the Premises, regardless of the cause thereof, and no such suspension, interruption or curtailment shall give rise to any claim for abatement of rent or other compensation to Tenant from Landlord, nor shall Tenant claim any direct, indirect or consequential damages or constructive eviction on account thereof, nor shall this Lease or any obligation of Tenant be affected thereby. 23 ARTICLE 8 REAL ESTATE TAXES 8.1 PAYMENTS ON ACCOUNT OF REAL ESTATE TAXES. (a) "TAX YEAR" shall mean a twelve month period commencing on March 1, 2005 and falling wholly or partially within the Term, and "TAXES" shall mean (i) all taxes, assessments (special or otherwise), levies, fees and all other government levies, exactions and charges of every kind and nature, general and special, ordinary and extraordinary, foreseen and unforeseen, which are, at any time prior to or during the Term, imposed or levied upon or assessed against the Property or any portion thereof, or against any Basic Rent, Additional Rent or other rent of any kind or nature payable to Landlord by anyone on account of the ownership, leasing or operation of the Property, or which arise on account of or in respect of the ownership, development, leasing, operation or use of the Property or any portion thereof; (ii) all gross receipts taxes or similar taxes imposed or levied upon, assessed against or measured by any Base Rent, Additional Rent or other rent of any kind or nature or other sum payable to Landlord by anyone on account of the ownership, development, leasing, operation, or use of the Property or any portion thereof; (iii) all value added, use and similar taxes at any time levied, assessed or payable on account of the ownership, development, leasing, operation, or use of the Property or any portion thereof; and (iv) reasonable expenses of any proceeding for abatement of any of the foregoing items included in Taxes, provided Landlord prevails in such abatement proceeding; but the amount of special taxes or special assessments included in Taxes shall be limited to the amount of the installment (plus any interest, other than penalty interest, payable thereon) of such special tax or special assessment required to be paid during the year in respect to which such Taxes are being determined. There shall be excluded from Taxes all income, estate, succession, inheritance and transfer taxes of Landlord; provided, however, that if at any time during the Term the present system of ad valorem taxation of real property shall be changed so that a capital levy, franchise, income, profits, sales, rental, use and occupancy, or other tax or charge shall in whole or in part be substituted for, or added to, such ad valorem tax and levied against, or be payable by, Landlord with respect to the Property or any portion thereof, such tax or charge shall be included in the term "TAXES" for the purposes of this Article. (b) Tenant shall pay to Landlord (or directly to the taxing authority, as Landlord shall direct from time to time), as Additional Rent, an amount equal to the amount of Taxes attributable to each Tax Year, such amount to be apportioned for any portion of a Tax Year in which the Commencement Date falls or the Term expires. (c) Estimated payments by Tenant on account of Taxes shall be made on the first day of each and every calendar month during the Term of this Lease, in the fashion herein provided for the payment of Basic Rent. The monthly amount so to be paid to Landlord shall be sufficient to provide Landlord by the time real estate tax payments are due with a sum equal to Tenant's required payment, as reasonably estimated by Landlord from time to time, on account of Taxes for the then current Tax Year. Promptly after receipt by Landlord of bills for such Taxes, Landlord shall advise Tenant of the amount thereof and the computation of Tenant's payment on account thereof. If estimated payments theretofore made by Tenant for the Tax Year 24 covered by such bills exceed the required payment on account thereof for such Tax Year, Landlord shall credit the amount of overpayment against subsequent obligations of Tenant on account of Taxes (or promptly refund such overpayment if the Term of this Lease has ended and Tenant has no further obligation to Landlord other than the indemnity obligations set forth herein which survive the termination of this Lease, provided that Landlord has no claims pursuant thereto at such time); but if the required payments on account thereof for such Tax Year are greater than estimated payments theretofore made on account thereof for such Tax Year, Tenant shall pay the difference to Landlord within thirty (30) days after being so advised by Landlord, and the obligation to make such payment for any period within the Term shall survive expiration of the Term. 8.2 ABATEMENT. (a) If Landlord shall receive any tax refund or reimbursement of Taxes or sum in lieu thereof with respect to any Tax Year all or any portion of which falls within the Term, then out of any balance remaining thereof after deducting Landlord's expenses in obtaining such refund, Landlord shall pay to Tenant, provided there does not then exist a Default of Tenant, an amount equal to such refund or reimbursement or sum in lieu thereof (exclusive of any interest other than interest received from the taxing authority on amounts previously paid by Tenant either directly to the taxing authority or to Landlord as Additional Rent and included in such refund, reimbursement or sum in lieu thereof paid to Landlord by the taxing authority, and apportioned if such refund is for a Tax Year a portion of which falls outside the Term,); provided, that in no event shall Tenant be entitled to receive more than the payments made by Tenant on account of Taxes for such Tax Year pursuant to PARAGRAPH (b) of SECTION 8.1 or to receive any payments or abatement of Basic Rent if Taxes for any year are less than Base Taxes or if Base Taxes are abated. (b) If Tenant desires to initiate and prosecute any proceedings permitted by law for the purpose of obtaining an abatement or reduction of any Taxes assessed against the Property with respect to any Tax Year all of any portion of which falls within the Term, and notifies Landlord in writing of such intent, then unless Landlord shall notify Tenant in writing within ten (10) Business Days following Tenant's notice to Landlord that Landlord will initiate such a tax review, Tenant, upon prior written notice to Landlord, shall have the right at its own cost and expense to initiate and prosecute any proceedings permitted by law for the purpose of obtaining an abatement or reduction of any Taxes assessed against the Property with respect to any Tax Year all of any portion of which falls within the Term. Tenant may take such action in the name of Landlord, and Landlord shall cooperate with Tenant as Tenant may reasonably require in connection with bringing such proceedings to a successful conclusion, including joining in, and signing of, any protest or pleading which Tenant may deem it advisable to file. Any penalties or interest charges imposed in connection with tax reduction proceedings commenced by Tenant shall be the sole responsibility of Tenant and shall be paid promptly. If Tenant initiates such a proceeding, Tenant agrees to use reasonable efforts to obtain a reduction in Taxes, keep Landlord informed of the status of its tax review or abatement proceeding and not terminate or withdraw the same without at least forty-five (45) days prior written notice to Landlord, during which forty-five (45) day period Landlord shall have the right, but not the 25 obligation, to be substituted for Tenant in any such proceeding, and if Landlord so elects, Tenant shall cooperate with Landlord as Landlord may reasonably require in order to effect such substitution, including, without limitation, by assigning all rights and claims under any such proceeding to Landlord. To the extent that Tenant is successful in obtaining any abatement or reduction through such proceedings, and Landlord receives a refund of Taxes previously paid, Landlord shall promptly pay over to Tenant such refund, net of any amounts owed to Landlord at such time. ARTICLE 9 OPERATING AND UTILITY EXPENSES 9.1 DEFINITIONS. "OPERATING YEAR" shall mean each calendar year all or any part of which falls within the Term, and "OPERATING EXPENSES" shall mean the aggregate costs and expenses incurred by Landlord with respect to the operation, administration, cleaning, repair, maintenance and management of the Property, all as, and to the extent, set forth in EXHIBIT D attached hereto. 9.2 TENANT'S PAYMENT OF OPERATING EXPENSES. (a) Tenant shall pay to Landlord, as Additional Rent, an amount equal to the Operating Expenses attributable to each Operating Year, such amount to be apportioned for any portion of an Operating Year in which the Commencement Date falls or the Term of this Lease ends. (b) Estimated payments by Tenant on account of Operating Expenses shall be made on the first day of each and every calendar month during the Term of this Lease, in the fashion herein provided for the payment of Basic Rent. The monthly amount so to be paid to Landlord shall be sufficient to provide Landlord by the end of each Operating Year a sum equal to Tenant's required payment, as reasonably estimated by Landlord from time to time during each Operating Year, on account of Operating Expenses for such Operating Year. After the end of each Operating Year, Landlord shall submit to Tenant a reasonably detailed accounting of Operating Expenses for such Operating Year, and Landlord shall certify to the accuracy thereof. If estimated payments theretofore made for such Operating Year by Tenant exceed Tenant's required payment on account thereof for such Operating Year according to such statement, Landlord shall credit the amount of overpayment against subsequent obligations of Tenant with respect to Operating Expenses (or promptly refund such overpayment if the Term of this Lease has ended and Tenant has no further obligation to Landlord other than the indemnity obligations set forth herein which survive the termination of this Lease, provided that Landlord has no claims pursuant thereto at such time); but if the required payments on account thereof for such Operating Year are greater than the estimated payments (if any) theretofore made on account thereof for such Operating Year, Tenant shall make payment to Landlord within thirty (30) days after being so advised by Landlord, and the obligation to make such payment for any period within the Term shall survive expiration of the Term. 26 (c) Tenant shall have the right to examine, copy and audit Landlord's books and records establishing Operating Expenses for any Operating Year for a period of one (1) year following the date that Tenant receives the statement of Operating Expenses for such Operating Year from Landlord. Tenant shall give Landlord not less than thirty (30) days' prior notice of its intention to examine and audit such books and records, and such examination and audit shall take place at such place within the continental United States as Landlord routinely maintains such books and records, unless Landlord elects to have such examination and audit take place in another location designated by Landlord in the city and state in which the Property is located. All costs of the examination and audit shall be borne by Tenant; provided, however, that if such examination and audit establishes that the actual Operating Expenses for the Operating Year in question are less than the amount set forth as the annual Operating Expenses on the annual statement delivered to Tenant by at least three percent (3%), then Landlord shall pay the reasonable costs of such examination and audit. If, pursuant to the audit, the payments made for such Operating Year by Tenant exceed Tenant's required payment on account thereof for such Operating Year, Landlord shall credit the amount of overpayment against subsequent obligations of Tenant with respect to Operating Expenses (or promptly refund such overpayment if the Term of this Lease has ended and Tenant has no further obligation to Landlord other than the indemnity obligations set forth herein which survive the termination of this Lease, provided that Landlord has no claims pursuant thereto at such time); but, if the payments made by Tenant for such Operating Year are less than Tenant's required payment as established by the examination and audit, Tenant shall pay the deficiency to Landlord within thirty (30) days after conclusion of the examination and audit, and the obligation to make such payment for any period within the Term shall survive expiration of the Term. If Tenant does not elect to exercise its right to examine and audit Landlord's books and records for any Operating Year within the time period provided for by this paragraph, Tenant shall have no further right to challenge Landlord's statement of Operating Expenses. 9.3 UTILITY PAYMENTS. Tenant shall be responsible for the payment of all utilities used and consumed in the Premises, including, without limitation, water, sewer, gas, electricity and telephone service, directly to the proper authorities charged with collection thereof. ARTICLE 10 INDEMNITY AND PUBLIC LIABILITY INSURANCE 10.1 TENANT'S INDEMNITY. Except to the extent arising from the negligence or willful misconduct of Landlord or its agents or employees, Tenant agrees to indemnify and save harmless Landlord and Landlord's partners, members, shareholders, officers, directors, managers, employees, agents and contractors from and against all claims, losses, cost, damages, liability or expenses of whatever nature arising: (i) from any accident, injury or damage whatsoever to any person, or to the property of any person, occurring in or about the Premises; or (ii) from the use or occupancy of the Premises or of any business conducted therein, and, in any case, occurring after the Commencement Date until the expiration of the Term of this Lease and thereafter so long as Tenant is in occupancy of any part of the Premises. This indemnity and hold harmless agreement shall include indemnity against all losses, costs, damages, expenses and liabilities incurred in or in connection with any such claim or any proceeding brought thereon, 27 and the defense thereof, including, without limitation, reasonable attorneys' fees and costs at both the trial and appellate levels. 10.2 TENANT INSURANCE. Tenant agrees to maintain in full force from the date upon which Tenant first enters the Premises for any reason, throughout the Term of this Lease, and thereafter so long as Tenant is in occupancy of any part of the Premises, a policy of commercial general liability and property damage insurance (including broad form contractual liability, independent contractor's hazard and completed operations coverage) under which Tenant is named as an insured and Landlord (and such other persons as are in privity of estate with Landlord as may be set out in a notice from time to time) are named as additional insureds, and under which the insurer agrees to indemnify and hold Landlord and those in privity of estate with Landlord, harmless from and against all cost, expense and/or liability arising out of or based upon any and all claims, accidents, injuries and damages set forth in SECTION 10.1. Tenant may satisfy such insurance requirements by including the Premises in a so-called "blanket" and/or "umbrella" insurance policy, provided that the amount of coverage allocated to the Premises shall fulfill the requirements set forth herein. Each policy required hereunder shall be non-cancelable and non-amendable with respect to Landlord and Landlord's said designees without thirty (30) days' prior notice, shall be written on an "occurrence" basis, and shall be in at least the amounts of the Initial General Liability Insurance specified in SECTION 1.1 or such greater amounts as Landlord in its reasonable discretion shall from time to time request, and a duplicate original or certificates thereof satisfactory to Landlord, together with a photocopy of the entire policy, shall be delivered to Landlord. 10.3 TENANT'S RISK. Tenant agrees to use and occupy the Premises at Tenant's own risk. Landlord shall not be liable to Tenant, its employees, agents, invitees or contractors for any damage, injury, loss, compensation, or claim (including, but not limited to, claims for the interruption of or loss to Tenant's business) based on, arising out of or resulting from any cause whatsoever, including, but not limited to, repairs to any portion of the Premises or the Property, any fire, robbery, theft, mysterious disappearance and/or any other crime or casualty, the actions of any person or persons, or any leakage in any part or portion of the Premises or the Building, or from water, rain or snow that may leak into, or flow from any part of the Premises or the Building, or from drains, pipes or plumbing fixtures in the Building, unless due to the negligence or willful misconduct of Landlord or Landlord's agents, contractors or employees. Any goods, property or personal effects stored or placed in or about the Premises shall be at the sole risk of Tenant, and neither Landlord nor Landlord's insurers shall in any manner be held responsible therefor. Notwithstanding the foregoing, Landlord shall not be released from liability for any injury, loss, damages or liability to the extent arising from any gross negligence or willful misconduct of Landlord, its servants, employees or agents acting within the scope of their authority on or about the Premises; provided, however, that in no event shall Landlord, its servants, employees or agents have any liability to Tenant based on any loss with respect to or interruption in the operation of Tenant's business. Tenant shall carry "all-risk" property insurance on a "replacement cost" basis, insuring Tenant's Removable Property and any Alterations made by Tenant pursuant to SECTION 5.2, to the extent that the same have not become the property of Landlord. 28 10.4 WAIVER OF SUBROGATION. The parties hereto shall each procure an appropriate clause in, or endorsement on, any property insurance policy on the Premises or any personal property, fixtures or equipment located thereon or therein, pursuant to which the insurer waives subrogation or consents to a waiver of right of recovery in favor of either party, its respective agents or employees. Having obtained such clauses and/or endorsements, each party hereby agrees that it will not make any claim against or seek to recover from the other or its agents or employees for any loss or damage to its property or the property of others resulting from fire or other perils covered by such property insurance. ARTICLE 11 FIRE, EMINENT DOMAIN, ETC. 11.1 NOTICE OF DAMAGE. If the Building shall be damaged or destroyed by fire or other casualty, Tenant shall promptly notify Landlord of such occurrence. 11.2 MINOR CASUALTY. In the event that the Building (other than Tenant's Alterations, fixtures and personal property), or any part thereof, or access thereto, shall be damaged or destroyed by fire or other insured casualty, but the Tenant shall continue to have reasonably convenient access to the Building and no portion of the Building (other than Tenant's Alterations, fixtures and personal property) shall thereby be rendered unfit for use and occupancy by the Tenant for the Permitted Uses, Landlord shall thereafter use reasonable efforts to restore the Building (including any Tenant's Alterations and/or fixtures which become part of the real estate comprising the Premises, but specifically EXCLUDING any of Tenant's Alterations and/or fixtures which are NOT insured under the insurance that Landlord maintains in accordance with the terms of this Lease, and EXCLUDING Tenant's personal property) to proper condition for Tenant's use and occupation, provided that Landlord's obligation shall be limited to the amount of insurance proceeds available therefor plus the amount of any deductibles for property insurance carried by Landlord pursuant to the terms of this Lease. If, for any reason, such restoration shall not be substantially completed within a six (6) month period after it was commenced the (which six (6) month period may be extended for such periods of time as Landlord is prevented from proceeding with or completing such restoration due to Force Majeure, but in no event for more than an additional three (3) months), Tenant shall have the right to terminate this Lease by giving notice to Landlord thereof within thirty (30) days after the expiration of such period (as so extended) provided that such restoration is not completed within such period. This Lease shall cease and come to an end without further liability or obligation on the part of either party thirty (30) days after such giving of notice by Tenant unless, within such thirty-day period, Landlord substantially completes such restoration. Such right of termination shall be Tenant's sole and exclusive remedy at law or in equity for Landlord's failure so to complete such restoration, and time shall be of the essence with respect thereto. 11.3 MAJOR CASUALTY. In the event that the Building (other than Tenant's Alterations, fixtures and personal property), or any part thereof, or access thereto, shall be so damaged or destroyed by fire or other insured casualty that the Tenant shall not have reasonably convenient access to the Building or any portion of the Building (other than Tenant's 29 Alterations, fixtures and personal property) or that the Building shall thereby be otherwise rendered unfit for use and occupancy by the Tenant for the Permitted Uses, and if in the sole reasonable judgment of the Landlord the damage or destruction may be repaired within nine (9) months from the time that repair work would commence, then the Landlord shall so notify the Tenant within sixty (60) days after the occurrence of the damage or destruction. Landlord shall thereafter use reasonable efforts to restore the Building (including any Tenant's Alterations and/or fixtures which become part of the real estate comprising the Premises, but specifically EXCLUDING any of Tenant's Alterations and/or fixtures which are NOT insured under the insurance that Landlord maintains in accordance with the terms of this Lease, and EXCLUDING Tenant's personal property) to proper condition for Tenant's use and occupation, provided that Landlord's obligation shall be limited to the amount of insurance proceeds available therefor. If, for any reason, such restoration shall not be substantially completed within a nine (9) month period after it was commenced the (which nine (9) month period may be extended for such periods of time as Landlord is prevented from proceeding with or completing such restoration due to Force Majeure, but in no event for more than an additional three (3) months), Tenant shall have the right to terminate this Lease by giving notice to Landlord thereof within thirty (30) days after the expiration of such period (as so extended) provided that such restoration is not completed within such period. This Lease shall cease and come to an end without further liability or obligation on the part of either party thirty (30) days after such giving of notice by Tenant unless, within such thirty-day period, Landlord substantially completes such restoration. Such right of termination shall be Tenant's sole and exclusive remedy at law or in equity for Landlord's failure so to complete such restoration, and time shall be of the essence with respect thereto. If such damage or destruction cannot, in the sole reasonable judgment of the Landlord, be expected to be repaired within nine (9) months from the time that repair work would commence), and the Landlord does not give the Tenant the notice referred to in this SECTION 11.3, then either party shall have the right to terminate this Lease by giving written notice of such termination to the other party within sixty (60) days after the occurrence of such damage or destruction, in the case of Landlord, and within thirty (30) days after the expiration of such sixty (60) day period in the case of Tenant, whereupon this Lease shall terminate thirty (30) days after the date of such notice with the same force and effect as if such date were the date originally established as the expiration date hereof. If neither party gives such notice of termination, then Landlord shall repair the damage or destruction in accordance with and subject to the terms of this SECTION 11.3. 11.4 CASUALTY IN LAST SIX MONTHS. In addition to and apart from the foregoing provisions of this ARTICLE 11, (i) if more than twenty-five percent (25%) of the rentable square feet of the Building shall be totally or almost totally damaged or destroyed by fire or other cause at any time during the last six (6) months of the Term of this Lease, (ii) if the Building is damaged or destroyed by fire or other cause to such extent that the cost to repair the damage or destruction, as reasonably estimated by the Landlord, will be more than twenty-five percent (25%) of the replacement value of the Building (excluding foundations) immediately prior to the occurrence of such damage or destruction, and (iii) if the estimated period to complete the repairs will result in less than two (2) months remaining in the Term of this Lease (including any exercised extension) following the completion of such repairs, either the Landlord or the Tenant may terminate this Lease by giving written notice of such termination to the other party whereupon this Lease shall terminate as of the date of such damage or destruction as if such date 30 were the date originally established as the expiration date hereof. 11.5 LEASE TERMINATION IN FINAL TWO YEARS. Landlord and Tenant each shall have the right to terminate this Lease if the Building is destroyed or damaged by fire or other casualty to the extent of at least fifty percent (50%) of the total cost of replacing it during the last two (2) years of the Initial Term or an Extended Term. Each party's termination rights under this Section shall be exercised, if at all, by written notice to the other party sent within thirty (30) days after the occurrence of the damage or destruction. If, however, Landlord sends such a notice terminating the Lease to Tenant during the last two (2) years of the Initial Term or an Extended Term, such termination notice shall take effect thirty (30) days after the date of such notice, unless within said thirty (30) day period, Tenant sends Landlord written notice exercising Tenant's extension option contained in SECTION 2.3 (which option may, under the circumstances set forth in this SECTION 11.5, be exercised earlier than permitted in SECTION 2.3), in which event Landlord's termination notice shall be void. 11.6 LANDLORD'S INSURANCE. Landlord agrees to maintain in full force and effect, during the Term of this Lease, at Tenant's expense as provided herein, property damage insurance with such deductibles and in such amounts as may from time to time be carried by reasonably prudent owners of similar buildings in the area in which the Property is located, including, without limitation, (i) fire and extended coverage insurance insuring the Building with one hundred percent (100%) replacement cost coverage together with rent loss insurance protecting Landlord against abatement or loss of rent in an amount equal to at least all Base Rent and Additional Rent payable for one year by the tenant(s) of the Building, (ii) commercial general liability and property damage insurance, including a broad form contractual liability endorsement, and (iii) insurance against other hazards as may from time to time be reasonably required by any bank, insurance company or other lending institution holding a first mortgage on the Property which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located. Without limiting any other term of this Lease, any costs incurred in connection with any insurance maintained by Landlord with respect to the Property shall be at Tenant's expense and shall be an Operating Expense. 11.7 ABATEMENT OF RENT. If the Building is damaged by fire or other casualty, or a partial taking occurs and this Lease is not terminated pursuant to SECTION 11.8 below, Basic Rent and Additional Rent payable by Tenant shall abate proportionately for the period during which, by reason of such damage or partial taking, there is substantial interference with Tenant's use of the Building, having regard for the extent to which Tenant may be required to discontinue Tenant's use of all or an undamaged portion of the Building due to such damage or partial taking, but such abatement or reduction shall end if and when Landlord shall have substantially completed sufficient restoration that Tenant is reasonably able to use the Building and the Building is in substantially the condition it was in prior to such damage (excluding any of Tenant's Alterations, fixtures or personal property). If the Premises shall be affected by any exercise of the power of eminent domain, Basic Rent and Additional Rent payable by Tenant shall be justly and equitably abated and reduced according to the nature and extent of the loss of use thereof suffered by Tenant. In no event shall Landlord have any liability for damages to Tenant for inconvenience, annoyance, or interruption of business arising from any fire or other 31 casualty or eminent domain. 11.8 CONDEMNATION. If the Premises or the Building is taken in its entirety by eminent domain then this Lease shall terminate as of the date when physical possession of the Building or the Premises is taken by the condemning authority. If there occurs a taking of (a) more than fifty (50%) percent of the usable floor area of the Building, (b) more than fifty (50%) percent of the area of the parking lot located on the Land, or (c) all possible means of access to the Premises, then, in any of these events, Tenant shall have the right to terminate this Lease by giving written notice to Landlord within ninety (90) days after the date of such partial taking. If this Lease is not terminated pursuant to this SECTION 11.8, then Landlord shall repair the Premises to the condition the Premises was in prior to the partial taking, to the extent practicable, provided however, that Landlord shall not be required to spend in connection with such repair more than the amount of proceeds actually received by Landlord and allocable thereto, less the costs of collecting the same. 11.9 CONDEMNATION AWARD. Landlord shall have and hereby reserves and excepts, and Tenant hereby grants and assigns to Landlord, all rights to recover for damages to the Property and the leasehold interest hereby created, and to compensation accrued or hereafter to accrue by reason of any taking, by exercise of the right of eminent domain, and by way of confirming the foregoing, Tenant hereby grants and assigns, and covenants with Landlord to grant and assign to Landlord, all rights to such damages or compensation, and covenants to deliver such further assignments and assurances thereof as Landlord may from time to time request, and Tenant hereby irrevocably appoints Landlord its attorney-in-fact to execute and deliver in Tenant's name all such assignments and assurances. Nothing contained herein shall be construed to prevent Tenant from prosecuting in any condemnation proceedings a claim for the value of any of Tenant's Removable Property installed in the Premises by Tenant at Tenant's expense and for relocation expenses, provided that such action shall not affect the amount of compensation otherwise recoverable by Landlord from the taking authority. ARTICLE 12 HOLDING OVER; SURRENDER 12.1 HOLDING OVER. Any holding over by Tenant after the expiration of the Term of this Lease shall be treated as a daily tenancy at sufferance at a Basic Rent of the Holdover Rent (defined below) plus the Additional Rent herein provided (prorated on a daily basis). "Holdover Rent" shall mean, for any calendar month of holding over, one and one half (1.5) times the Basic Rent in effect as of the end of the Term, for the second calendar month of any holding over, two (2) times the Basic Rent in effect as of the end of the Term, for the third calendar month of any holding over, two and one half (2.5) times the Basic Rent in effect as of the end of the Term, and shall be increased by an additional factor of fifty percent (50%) more than the previous month's increase factor times the Basic Rent in effect as of the end of the Term for each succeeding calendar month of the holding over. Tenant shall also pay to Landlord all damages, direct and/or indirect, sustained by reason of any such holding over, PROVIDED HOWEVER, that Landlord shall not attempt to enforce, and Tenant shall have no liability for, indirect damages sustained by reason 32 of any such holding over during the first ninety (90) days immediately following the end of the Term. In all other respects, such holding over shall be on the terms and conditions set forth in this Lease as far as applicable. Tenant shall have no right to hold over. 12.2 SURRENDER OF PREMISES. Upon the expiration or earlier termination of the Term of this Lease, Tenant shall peaceably quit and surrender to Landlord the Premises in neat and clean condition and in good order, condition and repair, together with all alterations, additions and improvements which may have been made or installed in, on or to the Premises prior to or during the Term of this Lease, including those Alterations designated by Landlord at the time Landlord approves the Alterations pursuant to Section 5.2 above to not be removed upon the expiration or earlier termination of the Term (except as hereinafter provided), excepting only ordinary wear and use and damage by fire or other casualty for which, under other provisions of this Lease, Tenant has no responsibility to repair or restore. Tenant shall remove all of Tenant's Removable Property and, to the extent specified by Landlord pursuant to SECTION 5.2, all alterations and additions made by Tenant; and shall repair any damages to the Premises or the Building caused by such removal. Nothing contained in this SECTION 12.2 shall prohibit Tenant from (as contemplated by SECTION 5.2) (i) removing, at its option, any Alterations made or installed by Tenant provided that Tenant shall repair any damage to the Building caused by such removal and otherwise restores the Building to a condition fit for use and occupation or (ii) leaving in the Premises any Alterations made or installed by Tenant which are NOT designated by Landlord at the time Landlord approves the Alterations pursuant to SECTION 5.2 to be removed upon the expiration or earlier termination of the Term. Any Tenant's Removable Property which shall remain in the Building or on the Premises after the expiration or termination of the Term of this Lease shall be deemed conclusively to have been abandoned, and either may be retained by Landlord as its property or may be disposed of in such manner as Landlord may see fit, at Tenant's sole cost and expense. ARTICLE 13 RIGHTS OF MORTGAGEES; TRANSFER OF TITLE 13.1 RIGHTS OF MORTGAGEES. (a This Lease shall be subordinate to any mortgage, deed of trust or ground lease or similar encumbrance (collectively, a "MORTGAGE", and the holder thereof from time to time the "HOLDER") from time to time encumbering the Premises, whether executed and delivered prior to or subsequent to the date of this Lease, unless the Holder shall elect otherwise; PROVIDED THAT such subordination shall only be effective if the Holder enters into a written agreement that, subject to such reasonable qualifications as the Holder may impose, in the event that the Holder or any other party shall succeed to the interest of Landlord hereunder pursuant to such Mortgage, so long as no Default of Tenant exists hereunder, Tenant's right to possession of the Premises shall not be disturbed and Tenant's other rights hereunder shall not be adversely affected by any foreclosure of such Mortgage. If this Lease is subordinate to any Mortgage and the Holder or any other party shall succeed to the interest of Landlord pursuant to the Mortgage (such Holder or other party, a "SUCCESSOR"), Tenant shall attorn to the or Successor and this Lease shall continue in full force and effect between the Holder or Successor and Tenant. Tenant agrees to 33 execute such instruments of subordination or attornment in confirmation of the foregoing agreement as the Holder or Successor reasonably may request, and Tenant hereby appoints the Holder or Successor as Tenant's attorney-in-fact to execute such subordination or attornment agreement upon default of Tenant in complying with the Holder's or Successor's request. 13.2 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. (a With reference to any assignment by Landlord of Landlord's interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage on property which includes the Premises, Tenant agrees that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage shall never be treated as an assumption by such holder of any of the obligations of Landlord hereunder unless such holder shall, by notice sent to Tenant, specifically otherwise elect and, except as aforesaid, such holder shall be treated as having assumed Landlord's obligations hereunder only upon foreclosure of such holder's mortgage or the taking of possession of the Premises. (b In no event shall the acquisition of Landlord's interest in the Property by a purchaser which, simultaneously therewith, leases Landlord's entire interest in the Property back to the seller thereof be treated as an assumption by operation of law or otherwise, of Landlord's obligations hereunder, but Tenant shall look solely to such seller-lessee, and its successors from time to time in title, for performance of Landlord's obligations hereunder. In any such event, this Lease shall be subject and subordinate to the lease to such purchaser. For all purposes, such seller-lessee, and its successors in title, shall be the Landlord hereunder unless and until Landlord's position shall have been assumed by such purchaser-lessor. (c Except for transfers described in PARAGRAPH (b) of this Section, in the event of any transfer of title to the Property by Landlord, Landlord shall thereafter be entirely freed and relieved from the performance and observance of all covenants and obligations hereunder arising after the date of such transfer. 13.3 NOTICE TO MORTGAGEE. After receiving notice from Landlord of any Holder of a Mortgage which includes the Premises, no notice from Tenant to Landlord alleging any default by Landlord shall be effective unless and until a copy of the same is given to such Holder (provided Tenant shall have been furnished with the name and address of such Holder), and the curing of any of Landlord's defaults by such Holder shall be treated as performance by Landlord. ARTICLE 14 DEFAULT; REMEDIES 14.1 TENANT'S DEFAULT. (a If at any time subsequent to the date of this Lease any one or more of the 34 following events (herein referred to as a "DEFAULT OF TENANT") shall happen: (i) Tenant shall fail to pay the Basic Rent or any other Additional Rent hereunder when due and such failure shall continue for three (3) Business Days after notice to Tenant from Landlord; or (ii) Tenant shall neglect or fail to perform or observe any other covenant herein contained on Tenant's part to be performed or observed and Tenant shall fail to remedy the same within thirty (30) days after notice to Tenant specifying such neglect or failure, or if such failure is of such a nature that Tenant cannot reasonably remedy the same within such thirty (30) day period, Tenant shall fail to commence promptly (and in any event within such thirty (30) day period) to remedy the same and to prosecute such remedy to completion with diligence and continuity; or (iii) Tenant's leasehold interest in the Premises shall be taken on execution or by other process of law directed against Tenant; or (iv) Tenant shall make an assignment for the benefit of creditors or shall be adjudicated insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future Federal, State or other statute, law or regulation for the relief of debtors (other than the Bankruptcy Code, as hereinafter defined), or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any substantial part of its properties, or shall admit in writing its inability to pay its debts generally as they become due; or (v) An Event of Bankruptcy (as hereinafter defined) shall occur with respect to Tenant; or (vi) A petition shall be filed against Tenant under any law (other than the Bankruptcy Code) seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future Federal, State or other statute, law or regulation and shall remain undismissed or unstayed for an aggregate of sixty (60) days (whether or not consecutive), or if any trustee, conservator, receiver or liquidator of Tenant or of all or any substantial part of its properties shall be appointed without the consent or acquiescence of Tenant and such appointment shall remain unvacated or unstayed for an aggregate of sixty (60) days (whether or not consecutive); (vii) If: (x) Tenant shall fail to pay the Basic Rent or any Additional Rent hereunder when due or shall fail to perform or observe any other covenant herein contained on Tenant's part to be performed or observed and Tenant shall cure any such failure within the applicable grace period set forth in clauses (i) or (ii) above; or (y) a Default of Tenant of the kind set forth in clauses (i) or (ii) above shall occur and Landlord shall, in its sole discretion, permit Tenant to cure such Default of Tenant after 35 the applicable grace period has expired; AND the same or a similar failure shall occur more than twice within the next 365 days (whether or not such similar failure is cured within the applicable grace period); then in any such case Landlord may terminate this Lease as hereinafter provided. (b For purposes of CLAUSE (A)(V) above, an "EVENT OF BANKRUPTCY" means the filing of a voluntary petition by Tenant, or the entry of an order for relief against Tenant, under Chapter 7, 11, or 13 of the Bankruptcy Code, and the term "BANKRUPTCY CODE" means 11 U.S.C. ss.101, ET SEQ. If an Event of Bankruptcy occurs, then the trustee of Tenant's bankruptcy estate or Tenant as debtor-in-possession may (subject to final approval of the court) assume this Lease, and may subsequently assign it, only if it does the following within sixty (60) days after the date of the filing of the voluntary petition, the entry of the order for relief (or such additional time as a court of competent jurisdiction may grant, for cause, upon a motion made within the original sixty-day period): (i) file a motion to assume the Lease with the appropriate court; (ii) satisfy all of the following conditions, which Landlord and Tenant acknowledge to be commercially reasonable: (A) cure all Defaults of Tenant under this Lease or provide Landlord with Adequate Assurance (as defined below) that it will (x) cure all monetary Defaults of Tenant hereunder within ten (10) days from the date of the assumption, and (y) cure all nonmonetary Defaults of Tenant hereunder within thirty (30) days from the date of the assumption; (B) compensate Landlord and any other person or entity, or provide Landlord with Adequate Assurance that within ten (10) days after the date of the assumption, it will compensate Landlord and such other person or entity, for any pecuniary loss that Landlord and such other person or entity incurred as a result of any Default of Tenant, the trustee, or the debtor-in-possession; (C) provide Landlord with Adequate Assurance of Future Performance (as defined below) of all of Tenant's obligations under this Lease; and (D) deliver to Landlord a written statement that the conditions herein have been satisfied. (c) For purposes only of the foregoing PARAGRAPH (b), and in addition to any other requirements under the Bankruptcy Code, any future federal bankruptcy law and applicable case law, "ADEQUATE ASSURANCE" means at least meeting the following conditions, which Landlord and Tenant acknowledge to be commercially reasonable: 36 (i) entering an order segregating sufficient cash to pay Landlord and any other person or entity under PARAGRAPH (b) above, and (ii) granting to Landlord a valid first lien and security interest (in form acceptable to Landlord) in all property comprising the Tenant's "property of the estate," as that term is defined in Section 541 of the Bankruptcy Code, which lien and security interest secures the trustee's or debtor-in-possession's obligation to cure the monetary and nonmonetary defaults under the Lease within the periods set forth in PARAGRAPH (b) above. (d) For purposes only of PARAGRAPH (B) above, and in addition to any other requirements under the Bankruptcy Code, any future federal bankruptcy law and applicable case law, "ADEQUATE ASSURANCE OF FUTURE PERFORMANCE" means at least meeting the following conditions, which Landlord and Tenant acknowledge to be commercially reasonable: (i) the trustee or debtor-in-possession depositing with Landlord, as security for the timely payment of rent and other monetary obligations, an amount equal to the sum of two (2) months' Basic Rent plus an amount equal to two (2) months' installments on account of Additional Rent; (ii) the trustee or the debtor-in-possession agreeing to pay in advance, on each day that the Basic Rent is payable, the monthly installments on account of Additional Rent; (iii) the trustee or debtor-in-possession providing adequate assurance of the source of the rent and other consideration due under this Lease; (iv) Tenant's bankruptcy estate and the trustee or debtor-in-possession providing Adequate Assurance that the bankruptcy estate (and any successor after the conclusion of the Tenant's bankruptcy proceedings) will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure Landlord that the bankruptcy estate (and any successor after the conclusion of the Tenant's bankruptcy proceedings) will have sufficient funds to fulfill Tenant's obligations hereunder. (e) If the trustee or the debtor-in-possession assumes the Lease under PARAGRAPH (b) above and applicable bankruptcy law, it may assign its interest in this Lease only if the proposed assignee first provides Landlord with Adequate Assurance of Future Performance of all of Tenant's obligations under the Lease, and if Landlord determines, in the exercise of its reasonable business judgment, that the assignment of this Lease will not breach any other lease, or any mortgage, financing agreement, or other agreement relating to the Property by which Landlord or the Property is then bound (and Landlord shall not be required to obtain consents or waivers from any third party required under any lease, mortgage, financing agreement, or other such agreement by which Landlord is then bound). 37 (f) For purposes only of PARAGRAPH (e) above, and in addition to any other requirements under the Bankruptcy Code, any future federal bankruptcy law and applicable case law, "ADEQUATE ASSURANCE OF FUTURE PERFORMANCE" means at least the satisfaction of the following conditions, which Landlord and Tenant acknowledge to be commercially reasonable: (i) the proposed assignee submitting a current financial statement, audited by a certified public accountant, that allows a net worth and working capital in amounts determined in the reasonable business judgment of Landlord to be sufficient to assure the future performance by the assignee of Tenant's obligation under this Lease; and (ii) if requested by Landlord in the exercise of its reasonable business judgment, the proposed assignee obtaining a guarantee (in form and substance satisfactory to Landlord) from one or more persons who satisfy Landlord's standards of creditworthiness. 14.2 LANDLORD'S REMEDIES. (a) Upon the occurrence of a Default of Tenant, Landlord may terminate this Lease by notice to Tenant, specifying a date not less than five (5) days after the giving of such notice on which this Lease shall terminate and this Lease shall come to an end on the date specified therein as fully and completely as if such date were the date herein originally fixed for the expiration of the Term of this Lease, and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter provided. (b) If this Lease shall have been terminated as provided in this ARTICLE, then Landlord may re-enter the Premises, either by summary proceedings, ejectment or otherwise, and remove and dispossess Tenant and all other persons and any and all property from the same, as if this Lease had not been made. (c) If this Lease shall have been terminated as provided in this Article, Tenant shall pay the Basic Rent, Additional Rent and other sums payable hereunder up to the time of such termination, and thereafter Tenant, until the end of what would have been the Term of this Lease in the absence of such termination, and whether or not the Premises shall have been relet, shall be liable to Landlord for, and shall pay to Landlord, as liquidated current damages: (x) the Basic Rent, Additional Rent and other sums that would be payable hereunder if such termination had not occurred, less the net proceeds, if any, of any reletting of the Premises, after deducting all expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, advertising, expenses of employees, alteration costs and expenses of preparation for such reletting; and (y) if this Lease provides that Tenant was entitled to occupy the Premises for any period of time without paying Basic Rent, the amount of Basic Rent that Tenant would have paid for any such period. Tenant shall pay the portion of such current damages referred to in clause (x) above to Landlord monthly on the days which the Basic Rent would have been payable hereunder if this Lease had not been terminated, and Tenant shall pay the portion of such current damages referred to in clause (y) 38 above to Landlord upon such termination. (d) At any time after termination of this Lease as provided in this Article, whether or not Landlord shall have collected any such current damages, as liquidated final damages and in lieu of all such current damages beyond the date of such demand, at Landlord's election Tenant shall pay to Landlord an amount equal to the present value (calculated using the Federal Reserve discount rate in effect on the date of such demand) of the excess, if any, of the Basic Rent, Additional Rent and other sums as hereinbefore provided which would be payable hereunder from the date of such demand assuming that, for the purposes of this paragraph, annual payments by Tenant on account of Taxes and Operating Expenses would be the same as the payments required for the immediately preceding Operating or Tax Year for what would be the then unexpired Term of this Lease if the same remained in effect, over the then fair net rental value of the Premises for the same period. (e) In case of any Default of Tenant, re-entry, expiration and dispossession by summary proceedings or otherwise, Landlord (i) shall use reasonable efforts to re-let the Premises or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms which may at Landlord's option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Term of this Lease and may grant concessions or free rent to the extent that Landlord considers advisable and necessary to re-let the same and (ii) may make such alterations, repairs and decorations in the Premises as Landlord considers advisable and necessary for the purpose of reletting the Premises; and the making of such alterations, repairs and decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord shall in no event be liable in any way whatsoever for failure to relet the Premises, or, in the event that the Premises are relet, for failure to collect the rent under such reletting. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants and conditions of this Lease. Notwithstanding the foregoing, in no event shall Landlord be required to (i) relet the Premises for a rental less than the current fair market rental then prevailing for similar office space, (ii) enter into a lease with any proposed tenant that does not have, in Landlord's sole discretion, sufficient financial resources or operating experience to operate the Premises in a first-class manner, or (iii) relet the Premises for use other than the Permitted Use. 14.3 ADDITIONAL RENT. If Tenant shall fail to pay when due any sums under this Lease designated as Additional Rent, Landlord shall have the same rights and remedies as Landlord has hereunder for failure to pay Basic Rent. 14.4 REMEDYING DEFAULTS. Subject to the notice and opportunity to cure periods specifically set forth in this Lease, Landlord shall have the right, but shall not be required, to pay such sums or do any act which requires the expenditure of monies which may be necessary or appropriate by reason of the failure or neglect of Tenant to perform any of the provisions of this 39 Lease, and in the event of the exercise of such right by Landlord, Tenant agrees to pay to Landlord forthwith upon demand all such sums, together with interest thereon at a rate equal to 3% over the base rate in effect from time to time at The First National Bank of Boston (but in no event less than 18% per annum), as Additional Rent. Any payment of Basic Rent, Additional Rent or other sums payable hereunder not paid when due shall, at the option of Landlord, bear interest at a rate equal to 3% over the base rate in effect from time to time at The First National Bank of Boston (but in no event less than 18% per annum) from the due date thereof and shall be payable forthwith on demand by Landlord, as Additional Rent. 14.5 REMEDIES CUMULATIVE. The specified remedies to which Landlord may resort hereunder are not intended to be exclusive of any remedies or means of redress to which Landlord may at any time be entitled lawfully, and Landlord may invoke any remedy (including the remedy of specific performance) allowed at law or in equity as if specific remedies were not herein provided for. 14.6 ATTORNEYS' FEES. Reasonable attorneys' fees and expenses incurred by or on behalf of Landlord in enforcing its rights hereunder or occasioned by any Default of Tenant shall be paid by Tenant if Landlord is successful in such enforcement. Reasonable attorneys' fees and expenses incurred by or on behalf of Tenant in enforcing its rights hereunder after a default of Landlord shall be paid by Landlord if Tenant is successful in such enforcement. 14.7 WAIVER. (a) Failure on the part of Landlord or Tenant to complain of any action or non-action on the part of the other, no matter how long the same may continue, shall never be a waiver by Tenant or Landlord, respectively, of any of the other's rights hereunder. Further, no waiver at any time of any of the provisions hereof by Landlord or Tenant shall be construed as a waiver of any of the other provisions hereof, and a waiver at any time of any of the provisions hereof shall not be construed as a waiver at any subsequent time of the same provisions. The consent or approval of Landlord or Tenant to or of any action by the other requiring such consent or approval shall not be construed to waive or render unnecessary Landlord's or Tenant's consent or approval to or of any subsequent similar act by the other. (b) No payment by Tenant, or acceptance by Landlord, of a lesser amount than shall be due from Tenant to Landlord shall be treated otherwise than as a payment on account of the earliest installment of any payment due from Tenant under the provisions hereof. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full, shall be given no effect, and Landlord may accept such check without prejudice to any other rights or remedies which Landlord may have against Tenant. 14.8 LANDLORD'S DEFAULT. Landlord shall in no event be in default under this Lease unless Landlord shall neglect or fail to perform any of its obligations hereunder and shall fail to remedy the same within thirty (30) days after notice to Landlord specifying such neglect or failure, or if such failure is of such a nature that Landlord cannot reasonably remedy the same 40 within such thirty (30) day period, Landlord shall fail to commence promptly (and in any event within such thirty (30) day period) to remedy the same and to prosecute such remedy to completion with diligence and continuity. ARTICLE 15 MISCELLANEOUS PROVISIONS 15.1 RIGHTS OF ACCESS. Landlord and its agents shall have the right to enter the Premises at all reasonable hours for the purpose of inspecting the Premises or otherwise exercising its rights or fulfilling its obligations under this Lease, and Landlord and its agents also shall have the right to make access available at all reasonable hours to prospective or existing mortgagees, purchasers or tenants of any part of the Property. 15.2 COVENANT OF QUIET ENJOYMENT. (a Reference is made to Policy No. 20335124 issued to Landlord by First American Title Insurance Company and dated December 21, 1999 (the "TITLE INSURANCE POLICY"), a copy of which has been delivered to Tenant. Landlord covenants that to the best of its actual knowledge without any duty of inquiry, there are no liens or encumbrances of record on the Premises as of the date hereof, except as disclosed in the Title Insurance Policy. (b Subject to the terms and conditions of this Lease, on payment of the Basic Rent and Additional Rent and observing, keeping and performing all of the other terms and conditions of this Lease on Tenant's part to be observed, kept and performed, Tenant shall lawfully, peaceably and quietly enjoy the Premises during the term hereof, without hindrance or ejection by any persons lawfully claiming under Landlord to have title to the Premises superior to Tenant. The foregoing covenant of quiet enjoyment is in lieu of any other covenant, express or implied except as otherwise expressly set forth herein. 15.3 LANDLORD'S LIABILITY. (a) Tenant agrees to look solely to Landlord's equity interest in the Property or proceeds therefrom, at the time of recovery for recovery of any judgment against Landlord, and agrees that neither Landlord nor any successor of Landlord shall be personally liable for any such judgment, or for the payment of any monetary obligation to Tenant. The provision contained in the foregoing sentence is not intended to, and shall not, limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord or any successor of Landlord, or to take any action not involving the personal liability of Landlord or any successor of Landlord to respond in monetary damages from Landlord's assets other than Landlord's equity interest in the Property. (b) In no event shall Landlord ever be liable to Tenant for any loss of business or any other indirect or consequential damages suffered by Tenant from whatever cause. Except with respect to a default under Section 12.1 above, in no event shall Tenant ever be liable to 41 Landlord for any loss of business or any other indirect or consequential damages suffered by Landlord from whatever cause. (c) Whenever Tenant requests Landlord's consent or approval (whether or not provided for herein), Tenant shall pay to Landlord, on demand, as Additional Rent, any reasonable expenses incurred by Landlord (including without limitation reasonable attorneys' fees and costs, if any) in connection therewith. (d) Any repairs or restoration permitted to be made by Landlord under this Lease may be made during normal business hours, and Landlord shall have no liability for damages to Tenant for inconvenience, annoyance or interruption of business arising therefrom. Notwithstanding the foregoing, Landlord agrees to use commercially reasonable efforts to minimize or eliminate interruption in Tenant's business in performing such repairs or restoration. 15.4 ESTOPPEL CERTIFICATE. Landlord and Tenant shall each, at any time and from time to time, upon not less than ten (10) business days prior written notice by the other party, execute, acknowledge and deliver to the requesting party an estoppel certificate containing such statements of fact regarding the Lease as the requesting party reasonably requests. 15.5 BROKERAGE. Landlord and Tenant each warrant and represent to the other that neither of them has dealt with any broker in connection with the consummation of this Lease. In the event of any brokerage claims against Landlord predicated upon prior dealings with Tenant, Tenant agrees to defend the same and indemnify Landlord against any such claim. In the event of any brokerage claims against Tenant predicated upon prior dealings with Landlord, Landlord agrees to defend the same and indemnify Tenant against any such claim. 15.6 RULES AND REGULATIONS. Tenant shall abide by the Rules and Regulations set forth in EXHIBIT E, as the same may be reasonably modified from time to time by Landlord. In the event that there shall be a conflict between such Rules and Regulations and the provisions of this Lease, the provisions of this Lease shall control. 15.7 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. 15.8 PROVISIONS BINDING, ETC. Except as herein otherwise provided, the terms hereof shall be binding upon and shall inure to the benefit of the successors and assigns, respectively, of Landlord and Tenant (except in the case of Tenant, ONLY such successors and assigns as may be permitted hereunder) and, if Tenant shall be an individual, upon and to his heirs, executors, administrators, successors and permitted assigns. Each term and each provision of this Lease to be performed by Tenant shall be construed to be both a covenant and a condition. Any reference 42 in this Lease to successors and assigns of Tenant shall not be construed to constitute a consent to assignment by Tenant. 15.9 RECORDING. Tenant agrees not to record this Lease, but each party hereto agrees, on the request of the other, to execute a notice of lease in recordable form and complying with applicable law. In no event shall such document set forth the rent or other charges payable by Tenant under this Lease; and any such document shall expressly state that it is executed pursuant to the provisions contained in this Lease, and is not intended to vary the terms and conditions of this Lease. At Landlord's request, promptly upon expiration of or earlier termination of the Term, Tenant shall execute and deliver to Landlord a release of any document recorded in the real property records for the location of the Property evidencing this Lease, and Tenant hereby appoints Landlord Tenant's attorney-in-fact, coupled with an interest, to execute any such document if Tenant fails to respond to Landlord's request to do so within fifteen (15) days. The obligations of Tenant under this Section shall survive the expiration or any earlier termination of the Term. 15.10 NOTICE. All notices or other communications required hereunder shall be in writing and shall be deemed duly given if delivered in person (with receipt therefor), if sent by reputable overnight delivery or courier service (e.g., Federal Express) providing for receipted delivery, or if sent by certified or registered mail, return receipt requested, postage prepaid, to the following address: (a) if to Landlord at Landlord's Address, to the attention of Robert Hale, Sr., with a copy to Maura Griffith Moffatt, Esq., Goodwin, Procter & Hoar LLP, Exchange Place, Boston, MA 02109-2881, and an additional copy to Mr. Michael Shuipis, 128 Oak Street, Duxbury, MA 02332. (b) if to Tenant, at Tenant's Address, to the attention of CFO and General Counsel, and after the Commencement Date, at the Premises, to the attention of CFO and General Counsel, with a copy to Keith R. Barnett, Esq., Hale & Dorr LLP, 60 State Street, Boston, MA 02109. Where receipt of notice or other communication shall be conclusively established by either (i) return of a return receipt indicating that the notice has been delivered; or (ii) return of the letter containing the notice with an indication from the courier or postal service that the addressee has refused to accept delivery of the notice. Either party may change its address for the giving of notices by notice given in accordance with this Section. 15.11 WHEN LEASE BECOMES BINDING; ENTIRE AGREEMENT; MODIFICATION. The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Premises, and this document shall become effective and binding only upon the execution and delivery hereof by both Landlord and Tenant. This Lease is the entire agreement between Landlord and Tenant, and this Lease expressly supersedes any negotiations, considerations, representations and understandings and proposals or other 43 written documents relating hereto. This Lease may be modified or altered only by written agreement between Landlord and Tenant, and no act or omission of any employee or agent of Landlord shall alter, change or modify any of the provisions hereof. 15.12 PARAGRAPH HEADINGS AND INTERPRETATION OF SECTIONS. The paragraph headings throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Lease. The provisions of this Lease shall be construed as a whole, according to their common meaning (except where a precise legal interpretation is clearly evidenced), and not for or against either party. Use in this Lease of the words "including," "such as" or words of similar import, when followed by any general term, statement or matter, shall not be construed to limit such term, statement or matter to the specified item(s), whether or not language of non-limitation, such as "without limitation" or "including, but not limited to," or words of similar import, are used with reference thereto, but rather shall be deemed to refer to all other terms or matters that could fall within a reasonably broad scope of such term, statement or matter. 15.13 DISPUTE RESOLUTION. In the event of a dispute between Landlord and Tenant pursuant to this Lease (other than a dispute relating to the payment of Basic Rent and Additional Rent) the parties agree that prior to pursuing other available remedies (excluding giving notices of default), they will attempt to directly negotiate resolution of their dispute. If negotiation is unsuccessful, then they agree to participate in at least three hours of mediation to be facilitated by a mediator mutually acceptable to them under the mediation procedures set by the mediator. The mediation session shall be conducted within thirty (30) days of the date on which the mediator receives the request to mediate. The costs of such mediation shall be shared equally by the parties. 15.14 WAIVER OF JURY TRIAL. Landlord and Tenant hereby each waive trial by jury in any action, proceeding or counterclaim brought by either against the other, on or in respect of any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant or Tenant's use or occupancy of the Premises. 15.15 TIME IS OF THE ESSENCE. Time is of the essence of each provision of this Lease. 15.16 MULTIPLE COUNTERPARTS. This Lease may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. 15.17 GOVERNING LAW. This Lease shall be governed by the laws of the state in which the Property is located. IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly 44 executed, under seal, by persons hereunto duly authorized, as of the date first set forth above. LANDLORD: Trunks Up LLC By: /s/ Robert T. Hale ----------------------------------- Name: Robert T. Hale Title: Partner TENANT: Network Plus, Inc. By: /s/ Robert T. Hale, Jr. ----------------------------------- Name: Robert T. Hale, Jr. Title: CEO By: /s/ James J. Crowley ----------------------------------- Name: James J. Crowley Title: EVP and COO 45 EXHIBIT A Legal Description of Land 46 EXHIBIT B Site Plan of Building 47 EXHIBIT C Commencement Date Letter _________________, 1999 Mr. Robert Hale, Jr. Mr. James J. Crowley Network Plus, Inc. 41 Pacella Park Drive Randolph, MA 02368 RE: Network Plus, Inc. 41 Pacella Park Drive Randolph, MA Dear Mr. Hale and Mr. Crowley: Reference is made to that certain Lease, dated as of , 2000, between Trunks Up LLC, as Landlord and Network Plus, Ice. as Tenant, with respect to the above-referenced building. In accordance with Section 4.1 of the Lease, this is to confirm that the Commencement Date of the Term of the Lease occurred on March 1, 2005, and that the Term of the Lease shall expire on February 28, 2013. If the foregoing is in accordance with your understanding, kindly execute the enclosed duplicate of this letter, and return the same to us. Very truly yours, Trunks Up LLC By: ---------------------------- Name: ---------------------------- Title: ---------------------------- 48 Accepted and Agreed: Network Plus, Inc. By: Name: Robert Hale, Jr. ---------------------------- Title: ---------------------------- Date: ---------------------------- By: Name: James J. Crowley ---------------------------- Title: ---------------------------- Date: ---------------------------- 49 EXHIBIT D Operating Expenses Operating Expenses shall include the following: 1. All expenses incurred by Landlord or Landlord's agents which shall be directly related to employment of personnel, including amounts incurred for wages, salaries and other compensation for services, payroll, social security, unemployment and similar taxes, workmen's compensation insurance, disability benefits, pensions, hospitalization, retirement plans and group insurance, uniforms and working clothes and the cleaning thereof, and expenses imposed on Landlord or Landlord's agents pursuant to any collective bargaining agreement for the services of employees of Landlord or Landlord's agents in connection with the operation, repair, maintenance, cleaning, management and protection of the Property, including, without limitation, janitors, carpenters, engineers, mechanics, electricians and plumbers and personnel engaged in supervision of any of the persons mentioned above, but specifically excluding, officers and executives and other employees of Landlord not directly connected with the operation of the Property, except for a reasonable management fee which may be included in Operating Expenses as set forth in Item 4 below; provided that, if any such employee is also employed on other property of Landlord, such compensation shall be suitably prorated among the Property and such other properties. 2. The cost of services, utilities, materials and supplies furnished or used in the operation, repair, maintenance, cleaning, management and protection of the Property. 3. The cost of replacements for tools and other similar equipment used in the repair, maintenance, cleaning and protection of the Property, provided that, in the case of any such equipment used jointly on other property of Landlord, such costs shall be suitably prorated among the Property and such other properties. 4. Where the Property is managed by Landlord or an affiliate of Landlord, a sum equal to the amounts customarily charged by management firms in the Randolph area for similar single tenant properties where tenant maintains the property, but in no event more than five percent (5%) of gross annual income, whether or not actually paid, or where managed by other than Landlord or an affiliate thereof, the reasonable amounts accrued for management, together with, in either case, amounts accrued for legal and other professional fees relating to the Property, but excluding such fees and commissions paid in connection with services rendered for securing or renewing leases and for matters not related to the normal administration and operation of the Property. 5. Premiums for insurance against damage or loss to the Property from such hazards as Landlord shall reasonably determine, including, but not by way of limitation, insurance covering loss of rent attributable to any such hazards, and public 50 liability insurance. 6. If, during the Term of this Lease, Landlord shall make a capital expenditure, the total cost of which is not properly includable in Operating Expenses for the Operating Year in which it was made, there shall nevertheless be included in such Operating Expenses for the Operating Year in which it was made and in Operating Expenses for each succeeding Operating Year the annual charge-off of such capital expenditure. Annual charge-off shall be determined by dividing the original capital expenditure PLUS an interest factor, reasonably determined by Landlord, as being the interest rate then being charged for long-term mortgages by institutional lenders on like properties within the locality in which the Property is located, by the number of years of useful life of the capital expenditure; and the useful life shall be determined reasonably by Landlord in accordance with generally accepted accounting principles and practices in effect at the time of making such expenditure. 7. Costs for electricity, water and sewer use charges, gas and other utilities supplied to the Property and not paid for directly by tenants. 8. Betterment assessments, provided the same are apportioned equally over the longest period permitted by law, and to the extent, if any, not included in Taxes. 9. Amounts paid to independent contractors for services, materials and supplies furnished for the operation, repair, maintenance, cleaning and protection of the Property. 51 EXHIBIT E Rules and Regulations of Building The following regulations are generally applicable: 1. Intentionally Omitted. 2. Intentionally Omitted. 3. Intentionally Omitted. 4. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were designed and constructed, and no sweepings, rubbish, rags, acids or like substances shall be deposited therein. All damages resulting from any misuse of the fixtures shall be borne by the Tenant. 5. Tenant shall not use the Premises or any part thereof or permit the Premises or any part thereof to be used other than for the Permitted Uses. Tenant shall not use the Premises or any part thereof or permit the Premises or any part thereof to be used as a public employment bureau or for the sale of property of any kind at auction, except in connection with Tenant's business. 6. Tenant must, upon the termination of its tenancy, return to the Landlord all locks, cylinders and keys to offices and toilet rooms of the Premises. 7. Intentionally Omitted. 8. Tenant shall not make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of any neighboring building or premises or those having business with them whether by use of any musical instrument, radio, talking machine, unmusical noise, whistling, singing, or in any other way. Tenant shall not throw anything out of the doors, windows or skylights or down the passageways. 9. The Premises shall not be used for lodging or sleeping or for any immoral or illegal purpose. 10. Intentionally Omitted. 11. Intentionally Omitted. 12. Intentionally Omitted. 13. The rules and regulations set forth in ATTACHMENT I to this Exhibit, which is by this reference made a part hereof, are applicable to any Alterations being undertaken by or for Tenant in the Premises pursuant to SECTION 5.2 of the Lease: 52 Attachment I to Exhibit E RULES AND REGULATIONS FOR TENANT ALTERATIONS A. GENERAL 1. All Alterations made by Tenant in, to or about the Premises shall be made in accordance with the requirements of this Exhibit and by contractors or mechanics approved by Landlord in its reasonable discretion. 2. Tenant shall, prior to the commencement of any work, submit for Landlord's written approval, complete plans for the Alterations, with full details and specifications for all of the Alterations, in compliance with Section D below. 3. Alterations must comply with the Building Code applicable to the Property and the requirements, rules and regulations and any other governmental agencies having jurisdiction. 4. No work shall be permitted to commence before Tenant obtains and furnishes to Landlord copies of all necessary licenses and permits from all governmental authorities having jurisdiction. 5. Intentionally Omitted. 6. Intentionally omitted. 7. All work, if performed by a contractor or subcontractor, shall be subject to reasonable inspection by Landlord's representative. Such inspection shall be at Tenant's sole expense and Tenant shall pay Landlord's reasonable charges for such supervision and inspection. B. PRIOR TO COMMENCEMENT OF WORK 1. Tenant shall submit to the Building manager a request to perform the work. The request shall include the following enclosures: (i) A list of Tenant's contractors and/or subcontractors for Landlord's approval not to be unreasonably withheld, conditioned or delayed. (ii) Four complete sets of plans and specifications prepared by an architect of engineer reasonably satisfactory to Landlord and, to the extent legally required, properly stamped by a registered architect or professional engineer. (iii) A properly executed building permit application form to the extent required by applicable law . (iv) Four executed copies of the Insurance Requirements Agreement in the form attached to this Exhibit as ATTACHMENT II and made a part hereof from Tenant's contractor and, if requested by Landlord, 53 from the contractor's subcontractors. (v) Contractor's and subcontractor's insurance certificates, including an indemnity in accordance with the Insurance Requirements Agreement. 2. Landlord will within seven (7) Business Days return the following to Tenant: (i) Two sets of plans approved or a disapproved with specific comments as to the reasons therefor (such approval or comments shall not constitute a waiver of approval of governmental authorities). (ii) Two fully executed copies of the Insurance Requirements Agreement. 3. Landlord's approval of the plans, drawings, specifications or other submissions in respect of any Alterations shall create no liability or responsibility on the part of Landlord for their completeness, design sufficiency or compliance with requirements of any applicable laws, rules or regulations of any governmental or quasi-governmental agency, board or authority. 4. To the extent required by applicable law, Tenant shall obtain a building permit from the Building Department and necessary permits from other governmental agencies. Tenant shall be responsible for keeping current all permits. Tenant shall submit copies of all approved plans and permits to Landlord and shall post the original permit on the Premises prior to the commencement of any work. C. REQUIREMENTS AND PROCEDURES 1. All structural and floor loading requirements shall be subject to the prior approval of Landlord's structural engineer. 2. All mechanical (HVAC, plumbing and sprinkler) and electrical requirements shall be subject to the approval of Landlord's mechanical and electrical engineers in their reasonable professional judgment. When necessary, Landlord will require engineering and shop drawings, which drawings must be approved by Landlord in its reasonable judgment before work is started. Drawings are to be prepared by Tenant and all approvals shall be obtained by Tenant. 3. No material or equipment shall be carried under or on top of elevators. If an operating engineer is required by any union regulations, such engineer shall be paid for by Tenant. 4. If shutdown of risers and mains for electrical, HVAC, sprinkler and plumbing work is required, such work shall be supervised by Landlord's representative. No work will be performed in Building mechanical equipment rooms without Landlord's approval, not to be unreasonably withheld, conditioned or delayed, and under Landlord's supervision. 5. Tenant's contractor shall: 54 (i) have a superintendent or foreman on the Premises at all times; (ii) police the job at all times, continually keeping the Premises orderly; (iii) maintain cleanliness and protection of all areas, including elevators and lobbies. (iv) protect the front and top of all peripheral HVAC units and thoroughly clean them at the completion of work; and (v) block off supply and return grills, diffusers and ducts to keep dust from entering into the Building air conditioning system. 6. If Tenant's contractor is negligent in any of its responsibilities, Tenant shall be charged for corrective work. 7. All equipment and installations must be equal to the standards generally in effect with respect to the remainder of the Building. Any deviation from such standards will be permitted only if indicated or specified on the plans and specifications and approved by Landlord. 8. A properly executed air balancing report signed by a professional engineer shall be submitted to Landlord upon the completion of all HVAC work. 9. Upon completion of the Alterations, Tenant shall submit to Landlord a permanent certificate of occupancy and final approval by the other governmental agencies having jurisdiction to the extent required by applicable law. 10. Tenant shall submit to Landlord a final "as-built" set of drawings showing all items of the Alterations in full detail. 11. Additional and differing provisions in the Lease, if any, will be applicable and will take precedence. D. STANDARDS FOR PLANS AND SPECIFICATIONS. Whenever Tenant shall be required by the terms of the Lease (including this Exhibit) to submit plans to Landlord in connection with any Alterations, such plans shall include at least the following, to the extent applicable: 1. Floor plan indicating location of partitions and doors (details required of partition and door types). 2. Location of standard electrical convenience outlets and telephone outlets. 3. Location and details of special electrical outlets, E.G., photocopiers, etc. 55 4. Reflected ceiling plan showing layout of standard ceiling and lighting fixtures. Partitions to be shown lightly with switches located indicating fixtures to be controlled. 5. Locations and details of special ceiling conditions, lighting fixtures, speakers, etc. 6. Location and specifications of floor covering, paint or paneling with paint colors referenced to standard color system. 7. Finish schedule plan indicating wall covering, paint, or paneling with paint colors referenced to standard color system. 8. Details and specifications of special millwork, glass partitions, rolling doors and grilles, blackboards, shelves, etc. 9. Hardware schedule indicating door number keyed to plan, size, hardware required including butts, latchets or locksets, closures, stops, and any special items such as thresholds, soundproofing, etc. Keying schedule is required. 10. Verified dimensions of all built-in equipment (file cabinets, lockers, plan files, etc.) 11. Location and weights of storage files. 12. Location of any special soundproofing requirements. 13. Location and details of special floor areas exceeding 50 pounds of live load per square foot. 14. All structural, mechanical, plumbing and electrical drawings, to be prepared by the base building consulting engineers, necessary to complete the Premises in accordance with Tenant's Plans. 15. All drawings to be uniform size (30" x 46") and shall incorporate the standard project electrical and plumbing symbols and be at a scale of 1/8" = 1' or larger. 16. All drawings shall be prepared by an architect (or, where applicable, an engineer) reasonably satisfactory to Landlord and, to the extent legally required, stamped by an architect (or, where applicable, an engineer) licensed in the jurisdiction in which the Property is located and without limiting the foregoing, shall be sufficient in all respects for submission to applicable authorization in connection with a building permit application. 56 Attachment II to Exhibit E Contractor's Insurance Requirements ----------------------------------- Building: Landlord: Tenant: Premises: The undersigned contractor or subcontractor ("CONTRACTOR") has been hired by the tenant named above (hereinafter called "TENANT") of the Building named above (or by Tenant's contractor) to perform certain work ("WORK") for Tenant in the Premises identified above. Contractor and Tenant have requested the landlord named above ("LANDLORD") to grant Contractor access to the Building and its facilities in connection with the performance of the Work, and Landlord agrees to grant such access to Contractor upon and subject to the following terms and conditions: 1. Contractor agrees to indemnify and save harmless Landlord and its respective officers, employees and agents and their affiliates, subsidiaries and partners, and each of them, from and with respect to any claims, demands, suits, liabilities, losses and expenses, including reasonable attorneys' fees, arising out of or in connection with the Work (and/or imposed by law upon any or all of them) because of personal injuries, bodily injury (including death at any time resulting therefrom) and loss of or damage to property, including consequential damages, whether such injuries to person or property are claimed to be due to negligence of the Contractor, Tenant, Landlord or any other party entitled to be indemnified as aforesaid except to the extent specifically prohibited by law (and any such prohibition shall not void this Agreement but shall be applied only to the minimum extent required by law). 2. Contractor shall provide and maintain at its own expense, until completion of the Work, the following insurance: (a) Workmen's Compensation and Employers, Liability Insurance covering each and every workman employed in, about or upon the Work, as provided for in each and every statute applicable to Workmen's Compensation and Employers' Liability Insurance. (b) Comprehensive General Liability Insurance including coverages for Protective and Contractual Liability (to specifically include coverage for the indemnification clause of this Agreement) for not less than the following limits: Personal Injury: $3,000,000 per person, $10,000,000 per occurrence for jobs over $100,000 57 $1,000,000 per person, $5,000,000 per occurrence for jobs under $100,000 Property Damage: $3,000,000 per occurrence $3,000,000 aggregate for jobs over $100,000 $1,000,000 per occurrence $1,000,000 aggregate for jobs under $100,000 (c) Comprehensive Automobile Liability Insurance (covering all owned, non-owned and/or hired motor vehicles to be used in connection with the Work) for not less than the following limits: Bodily Injury: $1,000,000 per person $1,000,000 per occurrence Property Damage: $1,000,000 per occurrence Contractor shall furnish a certificate from its insurance carrier or carriers to the Building office before commencing the Work, showing that it has complied with the above requirements regarding insurance and providing that the insurer will give Landlord ten (10) days' prior written notice of the cancellation of any of the foregoing policies. 3. Contractor shall require all of its subcontractors engaged in the Work to provide the following insurance: (a) Comprehensive General Liability Insurance including Protective and Contractual Liability coverages with limits of liability at least equal to the limits stated in paragraph 2(b). (b) Comprehensive Automobile Liability Insurance (covering all owned, non-owned and/or hired motor vehicles to be used in connection with the Work) with limits of liability at least equal to the limits stated in paragraph 2(c). Upon the request of Landlord, Contractor shall require all of its subcontractors engaged in the Work to execute an Insurance Requirements agreement in the same form as this Agreement. Agreed to and executed this day of , 19 . Contractor: By: ---------------------------------- By: ---------------------------------- 58 By: ---------------------------------- EX-27.1 9 b37246npex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 1 71,759 1,233 52,359 1,955 0 127,892 283,808 (27,743) 405,051 0 0 122,422 0 614 289,154 405,051 62,158 62,158 48,528 83,751 176 0 947 (20,724) 0 (20,724) 0 0 0 (20,724) (0.39) (0.39)
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