EXHIBIT 4.1

                             STOCKHOLDERS' AGREEMENT

     This STOCKHOLDERS'  AGREEMENT (the "Agreement") is made as of this 30th day
of March  2000,  by and  among  PATHNET  TELECOMMUNICATIONS,  INC.,  a  Delaware
corporation (the "Company"); and the undersigned parties identified on Exhibit A
(collectively the "Stockholders").

                              W I T N E S S E T H:

     WHEREAS, the Company has entered into the following contribution agreements
(collectively,  the "Contribution Agreements"):  (i) Contribution Agreement (the
"BNSF  Contribution  Agreement")  by and among the  Company  and The  Burlington
Northern  and  Santa  Fe  Railway   Company  and  certain   affiliates   thereof
(collectively,  "BNSF");  (ii)  Contribution  Agreement  (the "CSX  Contribution
Agreement")  by and between the Company and CSX  Transportation,  Inc.  ("CSX");
(iii)  Contribution  Agreement  (the "Colonial  Contribution  Agreement") by and
between the Company and  Colonial  Pipeline  Company,  a Delaware  and  Virginia
corporation  ("Colonial");   and  (iv)  Contribution  Agreements  (the  "Pathnet
Stockholders  Contribution  Agreements")  by  and  among  the  Company  and  the
stockholders  (the  "Pathnet   Stockholders")  of  Pathnet,   Inc.,  a  Delaware
corporation  ("Pathnet").  Each of BNSF,  CSX,  Colonial and certain  individual
Pathnet Stockholders,  together with Jalkut (as defined below), is a Stockholder
under this Agreement.

     WHEREAS,  pursuant  to the  Contribution  Agreements,  the  Company and the
Stockholders  have agreed to enter into this Agreement to provide certain rights
to the  Stockholders of shares of the Company's  Series A Convertible  Preferred
Stock (the "Series A Preferred  Stock"),  Series B Convertible  Preferred  Stock
(the "Series B Preferred  Stock"),  Series C  Convertible  Preferred  Stock (the
"Series C Preferred Stock"), Series D Convertible Preferred Stock (the "Series D
Preferred  Stock")  and Series E  Convertible  Preferred  Stock  (the  "Series E
Preferred Stock" and,  collectively with the other  aforementioned  series,  the
"Series  Preferred Stock") in the amounts set forth in Exhibit A, which shall be
convertible into shares of the Company's common stock,  $.01 par value per share
(the "Common Stock") in accordance  with the terms of the Company's  Certificate
of Incorporation.

     WHEREAS, the undersigned  Stockholders wish to enter into this Agreement in
order  better to  regulate  the  conduct of the  business  of the Company and to
provide for certain voting and stock transfer arrangements both before and after
the conversion of the Series  Preferred Stock into shares of the Common Stock as
contemplated in the Certificate of Incorporation of the Company.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
contained in this Agreement, the parties hereto agree as follows:

SECTION 1 DEFINED TERMS

     1.1. Certain Definitions.

     For purposes of this Agreement,  the following defined terms shall have the
meanings set forth below:




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     "Affiliate"  of  a  party  or  other  person  (whether  a  natural  person,
corporation,  partnership, association, company, or other entity) shall mean (i)
the spouse,  child,  parent,  sibling, or other familial relation of any natural
person,  and (ii) any natural  person,  corporation,  partnership,  association,
company  or  other  entity,  in each  case  controlled  by or  operating  at the
direction  of,  under  common  control or  operating  in  conjunction  with,  or
controlling or otherwise directing, any such party or other person;

     "Board of Directors"  shall mean the Board of Directors of the Company,  as
duly elected and qualified from time to time;

     "Bylaws" shall mean the duly adopted bylaws of the company,  as such Bylaws
may be amended from time to time hereafter;

     "Certificate  of  Incorporation"  shall mean the Company's  Certificate  of
Incorporation, as such Certificate may be amended from time to time hereafter;

     "Electing Purchasers" shall mean those Eligible  Stockholders  electing, by
notice in writing to the Company  delivered within the thirty-day  notice period
set forth in Section 8.1(c)  hereof,  to purchase  additional  securities of the
Company  pursuant to the  exercise of their rights to purchase  such  additional
securities pursuant to Section 8.1 hereof;

     "Eligible  Stockholder"  shall  mean  each  and all of  such of the  Series
Preferred  Stockholders  and  the  Founder  as  shall  in each  case  and at the
applicable  date  continue to own at least fifty  percent (50%) of the number of
shares of the  Company's  voting  capital  stock  (as  adjusted  for any  split,
recombination,  stock dividend, or other  reclassification of the voting capital
stock  of the  Company,  as may be  provided  in the  Company's  Certificate  of
Incorporation)  as such person owned  immediately  following  the closing of the
initial transactions  contemplated in the Contribution  Agreements including any
shares of voting  capital  stock held by  Affiliates  of such  Series  Preferred
Stockholder;

     "Founder" shall mean David Schaeffer, an individual resident of Potomac,
Maryland;

     "Founder  Securities"  shall  mean  shares  of Common  Stock  issued to the
Founder  whether  initially or by way of a stock  dividend,  stock split,  or in
connection   with  any   combination   of  shares,   recapitalization,   merger,
consolidation or other reorganization; provided, however, that the term "Founder
Securities"  shall not include any shares of Common  Stock that have  previously
been registered with the SEC under the provisions of Article 9 or otherwise,  or
which have been sold to the public either  pursuant to a registration  statement
or SEC Rule 144, or that may be sold by the holder thereof  pursuant to SEC Rule
144(k);

     "Holder" shall mean a holder of Registrable Securities or Founder
Securities;

     "IRC" shall mean the  Internal  Revenue Code of 1986,  as amended,  and any
reference to any  particular  IRC section  shall be  interpreted  to include any
revision  of or  successor  to  that  section  regardless  of  how  numbered  or
classified;

     "Jalkut" shall mean Richard A. Jalkut, an individual resident of Bedford,
New York ;



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     "Jalkut Employment Agreement" shall mean that certain Employment Agreement,
dated as of August 4, 1997, by and between Jalkut and Pathnet,  Inc., as amended
and assigned to the Company as of March 30, 2000;

     "Pathnet"  shall  have  the  meaning  set  forth  in the  preamble  to this
Agreement.

     "Person"  shall  mean an  individual,  a  partnership,  a  corporation,  an
association,  a joint stock company, a trust, a joint venture, an unincorporated
organization,  a limited  liability  company  and a  governmental  entity or any
department, agency or political subdivision thereof.

     "Pro Rata Share" shall mean that portion of the total number of  securities
proposed to be sold or otherwise issued by the Company  determined by a fraction
(i) the  numerator  of which is the  aggregate  number of shares of Common Stock
owned by such party  immediately prior to any proposed sale or other issuance of
securities  (assuming the full  conversion of any shares of the capital stock of
the  Company  held by such  party  that are  convertible  into  shares of Common
Stock);  and (ii) the  denominator  of which is the  total  number  of shares of
Common  Stock  owned by all such  parties  owning  Common  Stock,  assuming  the
exercise  of all  outstanding  options,  warrants,  and other  rights to acquire
Common  Stock  (or  securities  convertible  into  Common  Stock)  and the  full
conversion  of any shares of the capital stock of the Company  convertible  into
shares of Common Stock;

     "Qualified  Public  Offering"  shall mean the closing of a firm  commitment
underwritten  public offering  pursuant to an effective  registration  statement
under the  Securities  Act  covering  the offer and sale of Common  Stock to the
public (i) in which the proceeds  received by the Company,  net of  underwriting
discounts and commissions,  equal or exceed $75,000,000;  (ii) immediately prior
to the consummation of which the Company is valued (based on the per-share price
paid in such public offering,  but without regard to any proceeds to be received
by the  Company  in  connection  with such  public  offering)  at  greater  than
$600,000,000;  and  (iii) in which  the  Company  uses a  nationally  recognized
underwriter acceptable to the Board of Directors;

     "Registrable Securities" shall have the meaning ascribed to such term in
Section 9.4 hereof;

     "Required  Holders"  shall mean:  (i) prior to the first  Qualified  Public
Offering,  the holders at any time and from time to time of at least sixty-seven
percent (67%) of the Registrable Securities;  and (ii) after the first Qualified
Public  Offering,  the  holders  at any time  and from  time to time of at least
twenty percent (20%) of the Registrable Securities;

     "SEC" shall mean the United States Securities and Exchange Commission, or
any successor entity thereto;

     "Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations from time to time promulgated thereunder;

     "Series A Preferred  Stockholders"  shall mean the holders of the shares of
Series A Preferred Stock;

     "Series B Preferred  Stockholders"  shall mean the holders of the shares of
Series B Preferred Stock;



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<PAGE>

     "Series C Preferred  Stockholders"  shall mean the holders of the shares of
Series C Preferred Stock;

     "Series D Preferred  Stockholders"  shall mean the holders of the shares of
Series D Preferred Stock;

     "Series E Preferred  Stockholders"  shall mean the holders of the shares of
Series E Preferred Stock;

     "Series Preferred  Stockholder"  shall mean the holder of any shares of any
one or more of the Series A Preferred  Stock,  the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock or the Series E Preferred
Stock;

     "Series  Preferred  Stockholder  Director" shall mean any nominee of any of
the Series  Preferred  Stockholders  appointed in accordance with the provisions
hereof and serving from time to time as a director of the Company;

     "Shares" shall mean any shares of the capital stock of the Company;

     "Stockholder  Director"  shall  mean any of the  directors  of the  Company
appointed pursuant to the provisions of Section 5.1(b)(i) through (v) hereof;

     "Stock  Incentive Plan" shall mean the Company's 1995 Stock Incentive Plan,
in substantially the form attached as Exhibit B hereto and as contemplated to be
adopted by the Board of Directors as of the date hereof;

     "Stock  Option Plan" shall mean the  Company's  1997 Stock Option Plan,  in
substantially  the form attached as Exhibit C hereto and as  contemplated  to be
adopted by the Board of Directors as of the date hereof;

     "Subsidiary"  shall mean Pathnet and (i) any other corporation of which the
securities  having a majority of the ordinary voting power in electing the board
of directors are, at the time as of which any determination is being made, owned
by the Company  either  directly or through one or more  Subsidiaries,  (ii) any
partnership,  joint venture or similar  entity of which or in which such Person,
such Person and one or more of its Subsidiaries,  or one or more Subsidiaries of
such Person directly or indirectly own more than 50% of the capital  interest or
profits  interest,  or (iii)  any  trust,  association  or other  unincorporated
organization  of which or in which such  Person,  such Person and one or more of
its  Subsidiaries,  or one or more  Subsidiaries  of  such  Person  directly  or
indirectly own more than 50% of the beneficial interest.

     "Treasury   Regulations"  means  the  United  States  Treasury  Regulations
promulgated  under  the  IRC,  and  any  reference  to any  particular  Treasury
Regulation  section  shall be  interpreted  to  include  any final or  temporary
revision  of or  successor  to  that  section  regardless  of  how  numbered  or
classified.

     "Warrant Registration Rights Agreement" shall mean that certain Amended and
Restated Warrant  Registration Rights Agreement,  dated as of March 30, 2000, by
and among the Company  and the  Permitted  Holders  named  therein,  relating to
certain  Warrants  proposed to be issued by the Company in exchange  for certain
warrants  previously  issued by  Pathnet  pursuant  to the terms of the  Warrant
Agreement, dated April 8, 1998, by and between



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<PAGE>

Pathnet and certain other parties  thereto,  in connection with the placement of
certain  senior  indebtedness  of Pathnet,  all as more fully  described in such
Amended and Restated Warrant  Registration  Rights Agreement,  which Amended and
Restated Warrant  Registration  Rights Agreement shall be on terms substantially
similar to those of the Warrant  Registration  Rights Agreement,  dated April 8,
1998, by and between Pathnet and certain other parties thereto.

     1.2.  Interpretation  of Provisions.  The definitions of terms herein shall
apply  equally to the singular and plural forms of the terms  defined.  Whenever
the context may require, any pronoun shall include the corresponding  masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation".  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall".
Unless the context requires  otherwise (a) any definition of or reference to any
agreement,  instrument or other document  herein shall be construed as referring
to such  agreement,  instrument or other  document as from time to time amended,
supplemented  or  otherwise  modified  (subject  to  any  restrictions  on  such
amendments,  supplements or modifications  set forth herein),  (b) any reference
herein  to any  person  (whether  natural,  corporate,  or  otherwise)  shall be
construed  to  include  such  person's  successors  and  assigns,  (c) the words
"herein",  "hereof"  and  "hereunder",  and words of  similar  import,  shall be
construed to refer to this  Agreement in its entirety and not to any  particular
provision hereof, (d) all references herein to Sections,  Exhibits and Schedules
shall be construed to refer to Sections of, and Exhibits and  Schedules to, this
Agreement  and (e) the words "asset" and  "property"  shall be construed to have
the same meaning and effect and to refer to any and all tangible and  intangible
assets and properties, including cash, securities, accounts and contract rights.

SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

In order to induce the  Stockholders to enter into this  Agreement,  the Company
represents and warrants,  as of the date hereof,  to each of the Stockholders as
follows:

     2.1. Organization and Corporate Power.

          (a) The Company is a corporation duly organized,  validly existing and
in good standing under the laws of the State of Delaware, and is qualified to do
business as a foreign  corporation in each  jurisdiction in which the failure to
be so qualified would have a material adverse effect on its business,  financial
condition or results of operations.

          (b) The Company has all  required  corporate  power and  authority  to
carry on its  business as  presently  conducted,  to enter into and perform this
Agreement and to carry out the transactions contemplated hereby.

          (c) The Company is not in violation of any term of its  Certificate of
Incorporation  or  Bylaws,  each as  amended  to date,  or in  violation  of any
material term of any agreement,  instrument,  judgment,  decree, order, statute,
rule or government  regulation applicable to the Company or to which the Company
is a party, in each case in any manner that could reasonably be expected to have
a  material  adverse  effect on the  Company's  business,  financial  condition,
prospects, assets, liabilities or results of operations.



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<PAGE>

     2.2. Authorization and Non-Contravention.

          (a) This  Agreement  and all  documents  executed  pursuant  hereto or
otherwise in connection  herewith (including without limitation the Contribution
Agreements  and the  documents  and  other  agreements  executed  in  connection
therewith)  are valid and binding  obligations  of the Company,  enforceable  in
accordance with their terms,  except as such  enforcement may be limited by laws
of general  application  relating  to  bankruptcy,  reorganization,  insolvency,
moratorium or other laws affecting  creditors'  rights and the  availability  of
equitable remedies which are subject to the discretion of the court before which
an action may be brought.

          (b) The execution,  delivery and performance of this Agreement and all
agreements,  documents and instruments  executed pursuant hereto or otherwise in
connection  herewith  (including without limitation the Contribution  Agreements
and the documents and other  agreements  executed in connection  therewith) have
been duly authorized by all necessary corporate action of the Company.

          (c)  The  execution  of this  Agreement  and  the  performance  of any
transaction  contemplated hereby shall not (i) violate,  conflict with or result
in a default  under any  contract  or  obligation  to which the  Company  or any
Subsidiary  is a party or by which it or any  Subsidiary  or any of their assets
are bound, or any provision of its Certificate of Incorporation or Bylaws,  each
as amended to date,  or cause the  creation of any  encumbrance  upon any of the
assets of the Company or any  Subsidiary;  (ii) violate or result in a violation
of, or constitute a default  (whether after the giving of notice,  lapse of time
or both) under any provision of any law, regulation or rule, or any order of, or
any  restriction  imposed  by,  any court or other  governmental  agency;  (iii)
require from the Company or any Subsidiary any notice to,  declaration or filing
with, or consent or approval of any governmental authority or other third party;
or (iv)  accelerate any obligation  under or give rise to a right of termination
of,  any  material  agreement,  permit,  license or  authorization  to which the
Company or any  Subsidiary is a party or by which the Company or any  Subsidiary
is bound.

     2.3. Tax-Related Representations.

          (a) There is no plan or  intention by the Company to dispose of any of
the property contributed to the Company pursuant to the Contribution  Agreements
except that the Company may (i) transfer certain contributed property to Pathnet
or another  Subsidiary in a transaction that will qualify as a tax-free transfer
pursuant to Section 351,  and (ii) effect the  conversion  of certain  shares of
preferred stock of Pathnet into shares of common stock of Pathnet.

          (b) There is no current  plan or intention on behalf of the Company to
redeem  or  otherwise  reacquire  any  of  the  Shares  issued  pursuant  to the
transactions set forth in the Contribution Agreements.

          (c) The  Company  intends  that the  contributions  of property to the
Company in exchange for Shares pursuant to the  Contribution  Agreements will be
treated as part of a single  integrated  transaction  in which gain or loss will
not be  recognized  pursuant  to IRC Section 351 and, in the case of Persons who
contribute   Pathnet   stock  to  the  Company  in  exchange  for  Shares,   the
contributions also will qualify as a tax-free  reorganization  under IRC Section
368(a)(1)(B) pursuant to which gain or loss will not be recognized.



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<PAGE>

SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

     In order to induce  the other  Stockholders  and the  Company to enter into
this Agreement,  their respective  Contribution  Agreements (between the Company
and  such  other  Stockholders),  and the  other  documents  being  executed  in
connection herewith and therewith,  each Stockholder individually represents and
warrants,  as of the  date  hereof,  to the  Company  and to each  of the  other
Stockholders as follows:

     3.1. Organization and Corporate, Partnership and Individual Power.

          (a) Such  Stockholder is either (i) a partnership or corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
respective  jurisdiction,   and  is  qualified  to  do  business  as  a  foreign
partnership or corporation  in each  jurisdiction  in which the failure to be so
qualified  would  have a  material  adverse  effect on its  business,  financial
condition or results of operations,  (ii) a natural person whose  individual net
worth,  or joint net worth  with such  person's  spouse,  as of the date  hereof
exceeds $1,000,000,  or (iii) a natural person who has a preexisting personal or
business  relationship with one of the directors of the Company, or by reason of
his or her  business  or  financial  experience  or the  business  or  financial
experience of his or her professional advisors who are unaffiliated with and who
are not compensated by the Company or any selling agent of the Company, directly
or indirectly,  could be reasonably  assumed to have the capacity to protect his
or her own interests in connection  with the  transactions  contemplated by this
Agreement.

          (b) Such  Stockholder,  if a  partnership  or a  corporation,  has all
required  corporate or partnership  power and authority to carry on its business
as  presently  conducted,  to enter  into and  perform  this  Agreement  and the
agreements  contemplated  hereby  to  which it is a party  and to carry  out the
transactions  contemplated  hereby  and  thereby;  provided,  however,  that  no
representation  or warranty is made herein with respect to any  agreement by any
Stockholder to contribute  any assets to the Company.  Such  Stockholder,  if an
individual,  has the capacity to enter into and perform this  Agreement  and the
agreements  contemplated  hereby  to  which he is a party  and to carry  out the
transactions contemplated hereby and thereby.

     3.2. Authorization and Non-Contravention.

          (a) This  Agreement  and all  documents  executed  pursuant  hereto or
otherwise in connection  herewith  (including  without limitation the applicable
Contribution  Agreement  and the  documents  and other  agreements  executed  in
connection  therewith) are valid and binding  obligations  of such  Stockholder,
enforceable in accordance  with their terms,  except as such  enforcement may be
limited by laws of general application  relating to bankruptcy,  reorganization,
insolvency,  moratorium  or  other  laws  affecting  creditors'  rights  and the
availability  of equitable  remedies  which are subject to the discretion of the
court before which an action may be brought.

          (b) The execution,  delivery and performance of this Agreement and all
agreements,  documents and instruments  executed pursuant hereto or otherwise in
connection  herewith  (including without limitation the respective  Contribution
Agreement  and  the  documents  and  other  agreements  executed  in  connection
therewith) have been duly authorized by all necessary corporate, partnership, or
individual  action of such  Stockholder,  and  represent  the  exercise  of such
Stockholder's  own free will and have not been executed  under any compulsion or
duress.



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<PAGE>

          (c)  The  execution  of this  Agreement  and  the  performance  of any
transaction contemplated hereby shall not: (i) violate,  conflict with or result
in a default  under any contract or obligation  to which such  Stockholder  is a
party or by which it or its assets are bound, or, in the case of any Stockholder
that is a  partnership  or  corporation,  any  provision  of such  Stockholder's
certificate  of  incorporation,   bylaws,   partnership   agreement,   or  other
organizational  or  voting  documents,  each as  amended  to date,  or cause the
creation  of any  encumbrance  upon any of the assets of any  Stockholder;  (ii)
violate or result in a violation of, or constitute a default  (whether after the
giving  of  notice,  lapse  of time or both)  under  any  provision  of any law,
regulation or rule normally  applicable to the transactions  contemplated hereby
(and  excluding  any  federal,  state or local  antitrust,  tax,  environmental,
health,  safety or employment laws or laws,  regulations or rules  applicable to
such Stockholder  solely as a result of its business  activities),  or any order
of, or any restriction imposed by, any court or other governmental agency; (iii)
require from such  Stockholder  any notice to,  declaration  or filing with,  or
consent or approval of any governmental  authority or other third party; or (iv)
accelerate any obligation  under or give rise to a right of termination  of, any
material agreement,  permit,  license or authorization to which such Stockholder
is a party or by which such  Stockholder is bound;  provided,  however,  that no
representation  or warranty is made herein with respect to the  contribution  to
the Company by any Stockholder of any assets.

     3.3. Tax-Related Representations.

          (a) Such  Stockholder  has no present  intention or plan,  formally or
informally,  on the date  hereof,  to  transfer  or dispose of any of the Shares
received by such Stockholder pursuant to its Contribution Agreement.

          (b) Each Stockholder intends that the contributions of property to the
Company in exchange for Shares pursuant to the  Contribution  Agreements will be
treated as part of a single  integrated  transaction  in which gain or loss will
not be recognized  and, in the case of Persons who  contribute  Pathnet stock to
the Company in exchange  for Shares,  the  contributions  also will qualify as a
tax-free reorganization under IRC Section 368(a)(1)(B) pursuant to which gain or
loss will not be recognized.

SECTION 4 COVENANTS OF THE COMPANY AND THE STOCKHOLDERS

     The  Company  hereby  covenants  with  and for the  benefit  of the  Series
Preferred  Stockholders to comply,  and, in order to induce the Series Preferred
Stockholders to enter into this Agreement,  all of the undersigned  Stockholders
shall, if required, vote their shares of the Company's capital stock in a manner
consistent  with the covenants set forth in this Section 4, until the earlier of
the date on which no shares of the Series Preferred Stock remain  outstanding or
the Company's  first Qualified  Public  Offering,  except as otherwise  provided
herein,  and until such date the Series Preferred  Stockholders  hereby agree to
comply with the covenants set forth in Section 4.10.

     4.1. Financial Statements and Budgetary Information.

          (a) The Company shall deliver to the Stockholders  internally prepared
unaudited   quarterly   financial   statements  and  audited  annual   financial
statements,  as well as annual budgetary  information.  The quarterly  financial
information and reports shall be provided to the Stockholders  within forty-five
(45) days after the end of each fiscal  quarter of the  Company's  fiscal  year.
Annual  financial  statements  audited by a Big Five accounting firm selected by
the Board of Directors shall



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<PAGE>

be provided to the  Stockholders  within  ninety (90) days after the end of each
fiscal year of the Company.

          (b) The annual  budgetary  information  for each upcoming  fiscal year
shall be presented at the Board of Directors'  meeting at least 60 days prior to
each  fiscal  year-end  of the  Company  and shall be subject to approval by the
Board of Directors.  Such budgetary  information  shall include a budget for the
upcoming  fiscal year and the  succeeding two years  describing in detail,  at a
minimum,  assumptions  with  respect to  revenues,  key  operating  expenses and
capital expenditures and financing.  Any material deviations from the budget for
any fiscal year shall be subject to prior approval by the Board of Directors.

          (c) The Company shall deliver to the Stockholders  such other periodic
information  as it may  provide  to holders of the  Company's  outstanding  debt
obligations.

     4.2. Indemnification and Insurance.

     For so  long  as any  of  the  shares  of  Series  Preferred  Stock  remain
outstanding,  the Certificate of  Incorporation  shall at all times during which
any Series Preferred  Stockholder  Director serves as a director of the Company,
provide for indemnification of the directors and limitations on the liability of
the directors to the fullest extent  permitted under  applicable state law. Upon
the reasonable request of any Series Preferred Stockholder Director,  and in any
event prior to the effective date of a public  offering by the Company of equity
securities  registered pursuant to the Securities Act, the Company shall use its
best efforts to obtain and maintain on reasonable  business terms  directors and
officers  liability  insurance  coverage at a level reasonably  suitable for the
Company but in no event less than $1,000,000 per occurrence,  including coverage
of knowing  violations  under federal and state  securities laws, which coverage
shall apply to, but not be limited to, the Company's initial public offering.

     4.3. Restrictions on other Agreements.

     The  Company  shall  not enter  into any  agreement  with any  party  which
eliminates,  amends or  restricts  the  rights  and  preferences  of the  Series
Preferred  Stock as set forth in the Certificate of  Incorporation  or otherwise
take any other action that adversely  affects the rights of the Series Preferred
Stockholders or any class of Series Preferred Stock.

     4.4. Stock Options.

          (a) Except as set forth on Schedule  4.4, the Company  shall not issue
stock, grant stock options,  warrants,  or other rights to purchase stock in the
Company, except pursuant to and in accordance with the terms of the Stock Option
Plan and the Stock Incentive  Plan.  Unless  otherwise  approved by the Board of
Directors,  the  Company  shall not issue or grant any of such  securities  with
respect to the purchase of more than 5.5 million shares of Common Stock,  or any
shares of Preferred Stock,  under the Stock Option Plan and Stock Incentive Plan
(including  options issued in exchange for options for shares of Common Stock of
Pathnet which are issued and outstanding as of the date hereof,  and as adjusted
for stock splits, stock dividends, reclassification and similar events).

          (b)  Notwithstanding  any of the foregoing clause 4.4(a),  the Company
shall be  permitted  to grant stock  options  (and issue  Common  Stock upon the
exercise  thereof)  of the Company to the  individuals  and  entities  listed on
Schedule 4.4 in the amounts and under the terms



                                       -9-

<PAGE>

and  conditions set forth  opposite such  individual or entity.  Pursuant to the
terms of the Stock Option Plan and the Stock Incentive Plan, qualified incentive
stock options and  nonqualified  options may be granted to employees,  officers,
directors and consultants of the Company  pursuant to and in accordance with the
terms of this  Agreement  and the terms of the Stock  Option  Plan and the Stock
Incentive Plan as adopted as of the date hereof, and the exercise of any options
shall be  conditioned  on the optionee  making  satisfactory  provisions for the
payment of any  withholding  taxes due on such exercise and agreeing to be bound
by the  provisions  of Section 5 and Section 7 hereof.  Neither the Stock Option
Plan nor the Stock  Incentive  Plan may be amended,  revised or waived after the
date  hereof  without  the  consent  of  a  majority  of  the  Series  Preferred
Stockholder Directors.

          (c)  Notwithstanding  anything  set forth in this  Section  4.4 to the
contrary,   management  may  change  the   composition  and   compensation   and
remuneration  of existing  management,  consultants and employees of the Company
and may hire new management,  consultants and employees of the Company, provided
the  compensation  and  remuneration  of  such  new  and  existing   management,
consultants and employees  (including any capital stock of the Company issued to
such new existing management, consultants or employees and any vesting schedules
relating  to the  grant  of  any  such  capital  stock)  is  within  the  ranges
established  from time to time by the Board of Directors  with the approval of a
majority of the Series Preferred Stockholder Directors. Pursuant to the terms of
the Stock Option Plan and the Stock  Incentive Plan, all awards under such plans
must be  administered  by a "Committee"  whose members must be designated by the
Board of Directors.

          (d) The Company shall cause Pathnet not to issue or grant any options,
warrants,  or other  rights  to  purchase,  or  securities  convertible  into or
exchangeable  for,  shares of the capital stock of Pathnet;  provided,  however,
that  the  foregoing  covenant  shall  not  apply  to the  existing  rights  and
obligations of Pathnet under options, warrants,  purchaser rights or convertible
securities that are issued and outstanding on the date hereof.

     4.5. Conduct of Business.

          (a) The Company shall engage principally in the business of acquiring,
constructing,  developing  and/or operating  telecommunications  networks in the
United  States or a  business  or  businesses  similar or  otherwise  related or
incidental thereto or reasonably compatible therewith. The Company shall keep in
full force and effect its  corporate  existence  and all  intellectual  property
rights  useful in its  business and shall use its best efforts to cause (i) each
existing and new employee to execute a Non-Disclosure  Agreement in such form as
may from  time to time be  approved  by the  Board of  Directors,  (ii) each new
engineer and information technology professional to execute a Non-Disclosure and
Assignment  of  Inventions  Agreement  in such  form as may from time to time be
approved  by the Board of  Directors,  and (iii)  each new  employee  holding an
office of vice  president or higher of the Company to execute a  Non-Disclosure,
Assignment of Inventions and Non-Competition  Agreement in such form as may from
time to time be approved by the Board of Directors.

          (b) The Company shall  maintain all  properties  used or useful in the
conduct of its business in good repair,  working order and  condition,  ordinary
wear and tear excepted,  as necessary to permit such business to be properly and
advantageously conducted.



                                      -10-

<PAGE>

     4.6. Payment of Taxes, Compliance with Laws, etc.

     The Company  shall pay and  discharge  all lawful  taxes,  assessments  and
governmental charges or levies imposed upon it or upon its income,  franchise or
property  before the same shall become in default,  as well as all lawful claims
for labor,  materials  and supplies  which if not paid when due,  might become a
lien or charge upon its property or any part thereof;  provided,  however,  that
the Company shall not be required to pay and discharge any such tax, assessment,
charge,  levy or claim so long as the validity thereof is being contested by the
Company  in good  faith  by  appropriate  proceedings  and an  adequate  reserve
therefor has been  established  on its books.  The Company shall comply with all
applicable  laws and  regulations  in the  conduct of its  business,  including,
without  limitation,  all  applicable  federal  and  state  securities  laws  in
connection with the issuance of any securities.

     4.7. Material Events.

     The  Company  will  continuously  monitor  and  promptly  advise the Series
Preferred Stockholders and the Founder in writing of any event that, in the good
faith  judgment of the  Company,  represents  a material  adverse  change in the
condition,  financial or otherwise, or business of the Company, and of each suit
or proceeding  commenced or threatened  against the Company which,  if adversely
determined,  in the good faith  judgment of the  Company,  could have a material
adverse effect on the Company or its financial condition, business or prospects.

     4.8. Management and Compensation.

     The Board of Directors may establish a Compensation  Committee,  consisting
of such  members as the Board  shall  determine.  Subject to the  provisions  of
applicable  law,  the Board of Directors  may delegate to any such  Compensation
Committee all or any part of the  authority of the Board of Directors  regarding
the employment and compensation of all officers and employees of the Company.

     4.9. Inspection.

     The Company shall,  upon reasonable prior notice to the Company and so long
as  not  unduly  disruptive  to  the  Company's   business,   permit  authorized
representatives  of the  holders  of the  Series  Preferred  Stock to visit  and
inspect any of the  properties  of the Company,  including its books or accounts
(and to make copies  thereof and take  extracts  therefrom),  and to discuss its
affairs,  finances and accounts with its officers,  administrative employees and
independent  accountants,  all at such  reasonable  times and as often as may be
requested.

     4.10. Tax Free Transfers.

          (a) The  Company  and the  Stockholders  will  prepare  and file their
Federal  and  state  income  tax  returns  in a manner  that  characterizes  the
contributions  set forth in the Contribution  Agreements in the manner described
in Sections 2.3(c) and 3.3(b) of this Agreement; provided, however, that neither
the  representations  in Section  2.3(c) nor the  covenants in this Section 4.10
shall apply to any  transfers  of property or the  provision  of services to any
Stockholder subsequent to the date of this Agreement.



                                      -11-

<PAGE>

          (b)  The  Stockholders  agree  to file  the  information  required  by
Treasury  Regulation  Section  1.351-3 for their  respective  Federal income tax
returns  for the taxable  year of the  contribution,  and the Company  agrees to
furnish to the Stockholders  information necessary to enable the Stockholders to
comply  with the  information  reporting  requirements  of  Treasury  Regulation
Section 1.351-3.

          (c) The Company will exercise  reasonable  care not to take any action
subsequent  to the date hereof that will cause the  transfers of property to the
Company in exchange for Shares as set forth in the  Contribution  Agreements not
to qualify as tax-free  transfers pursuant to IRC Sections 351 and 368(a)(1)(B),
as applicable.

          (d) Notwithstanding  the introductory  sentence of this Section 4, the
covenants  of the  Stockholders  and the Company  pursuant to this  Section 4.10
shall survive the closing of the Company's first  Qualified  Public Offering and
the conversion of the Series  Preferred Stock and shall remain in full force and
effect for a period of 20 years from the date hereof.

SECTION 5 BOARD OF DIRECTORS

     5.1. Appointments to the Board of Directors Prior to a Qualified Public
Offering.

     Until the  earlier of the date on which no shares of the  Series  Preferred
Stock remain  outstanding or the Company's first Qualified Public Offering,  the
Company  shall  comply,  and the  Stockholders  shall vote  their  shares of the
Company's  capital stock in compliance  with, and to cause the Company to comply
with, the covenants set forth in this Section 5.1:

          (a) Size of Board of Directors. The Company and the Stockholders shall
fix the number of members of the Board of Directors at ten (10) directors.

          (b) Composition of Board of Directors

               (i) Series A Preferred Stockholder Directors.  The holders of the
          Series  A  Preferred  Stock  shall  be  entitled  to  vote  as a class
          separately  from all other classes of stock of the Company in any vote
          for the election of directors of the Company, and shall be entitled to
          elect by such  class vote two  directors  (the  "Series A  Stockholder
          Directors"),  one of which  Series A  Stockholder  Directors  shall be
          designated by Spectrum Equity Investors, L.P. ("Spectrum") for so long
          as it owns shares of Series A Preferred  Stock and  thereafter  by the
          holders of a majority of the issued and outstanding shares of Series A
          Preferred  Stock,  and the other of which shall be  designated  by New
          Enterprise  Associates  VI,  Limited  Partnership  or  its  affiliates
          (collectively,  "NEA  VI") for so long as it owns  shares  of Series A
          Preferred  Stock and  thereafter  by the  holders of a majority of the
          issued and outstanding shares of Series A Preferred Stock.

               (ii) Series B Preferred Stockholder Director.  The holders of the
          Series  B  Preferred  Stock  shall  be  entitled  to  vote  as a class
          separately  from all other classes of stock of the Company in any vote
          for the election of directors of the Company, and shall be entitled to
          elect by such  class  vote one  director  (the  "Series B  Stockholder
          Director"),  which shall be  designated  by Grotech  Partners IV, L.P.
          ("Grotech IV") for



                                      -12-

<PAGE>

          so long as it owns shares of Series B Preferred  Stock, and thereafter
          by the holders of a majority of the issued and  outstanding  shares of
          Series B Preferred Stock.

               (iii) Series C Preferred Stockholder Director. The holders of the
          Series  C  Preferred  Stock  shall  be  entitled  to  vote  as a class
          separately  from all other classes of stock of the Company in any vote
          for the  election of directors of the Company and shall be entitled to
          elect by such  class  vote one  director  (the  "Series C  Stockholder
          Director") to be designated by the holders of a majority of the issued
          and outstanding shares of Series C Preferred Stock, provided, however,
          that if the holders of a majority of the issued and outstanding shares
          of Series C Preferred  Stock  designate  for  election as the Series C
          Stockholder  Director an individual  who is not a partner or associate
          of a Series C Stockholder  or an entity under  substantially  the same
          management as a Series C  Stockholder,  such designee shall be elected
          as a  director  only  with  the  vote of a  majority  of the  Series A
          Stockholder  Directors and the Series B Stockholder  Director,  voting
          together.  Initially,  the  Series  C  Stockholder  Director  shall be
          designated  by Toronto  Dominion  Capital  (U.S.A.),  Inc. In no event
          shall the Series C Stockholder Director be: (A) a partner or associate
          of Spectrum or an entity under  substantially  the same  management as
          Spectrum  for so long as Spectrum  has  designation  rights under this
          Section  5.1(b);  (B) a partner  or  associate  of NEA VI or an entity
          under  substantially  the same management as NEA VI for so long as NEA
          VI has designation  rights under this Section 5.1(b); or (C) a partner
          or associate of Grotech IV or an entity under  substantially  the same
          management  as Grotech  IV for so long as  Grotech IV has  designation
          rights under this Section 5.1(b).

               (iv) Series D/E Stockholder Directors.  The holders of the Series
          D Preferred Stock and Series E Preferred  Stock,  voting together as a
          single class, shall be entitled to vote as a class separately from all
          other  classes of stock of the Company in any vote for the election of
          directors of the Company, and shall be entitled to elect by such class
          vote three  directors (the "Series D/E  Stockholder  Directors").  The
          Series D/E Stockholder Directors shall be designated as follows:

               (A)  one Series D/E  Stockholder  Director shall be designated by
                    CSX for so long as it owns  shares  of  Series  D  Preferred
                    Stock,  and thereafter shall be designated by the holders of
                    a majority of the issued and outstanding  shares of Series D
                    Preferred  Stock  and  Series  E  Preferred  Stock,   voting
                    together as a single class;

               (B)  one Series D/E  Stockholder  Director shall be designated by
                    BNSF for so long as it owns  shares  of  Series D  Preferred
                    Stock,  and thereafter shall be designated by the holders of
                    a majority of the issued and outstanding  shares of Series D
                    Preferred  Stock  and  Series  E  Preferred  Stock,   voting
                    together as a single class; and

               (C)  one Series D/E  Stockholder  Director shall be designated by
                    Colonial for so long as it owns shares of Series E Preferred
                    Stock or Series D Preferred  Stock,  and thereafter shall be
                    designated  by the  holders of a majority  of the issued and
                    outstanding  shares of Series D Preferred Stock and Series E
                    Preferred Stock, voting together as a single class.



                                      -13-

<PAGE>

               (v) Independent  Director.  The holders of all classes of Shares,
          voting as a single class, shall elect one independent  director who is
          not an officer or employee of the Company or any  Subsidiary and not a
          holder or an  Affiliate of any holder of Shares of any class as of the
          date of such election.

               (vi) Chief  Executive  Officer.  The  holders  of all  classes of
          Shares,  voting as a single  class,  shall  elect the Chief  Executive
          Officer (and any replacement or successor Chief Executive  Officer) as
          a director.

     5.2. Appointments to the Board of Directors Following a Qualified Public
Offering.

     Following  the  earlier  of the  date on  which  no  shares  of the  Series
Preferred  Stock remain  outstanding  or the Company's  first  Qualified  Public
Offering,  the  Stockholders  shall,  for so  long  as they  own  shares  of the
Company's  voting  capital  stock,  vote their  shares of the  Company's  voting
capital  stock in  compliance  with the covenants set forth in this Section 5.2;
provided,  however,  that the terms of this  Section  5.2 shall not apply to any
transferee of the shares owned by such Stockholders if such transferee is not an
Affiliate of such Stockholder:

          (a)  Representative  of  BNSF.  For  so  long  as  BNSF  shall  be the
beneficial  owner of not less than five percent (5%) of the  outstanding  voting
capital  stock of the Company,  the  Stockholders  shall cast their votes as the
holders  of shares  of the  voting  capital  stock of the  Company  to cause the
designee of BNSF to be elected as a director of the Company.

          (b)  Representative of CSX. For so long as CSX shall be the beneficial
owner of not less than five percent (5%) of the outstanding voting capital stock
of the Company, the Stockholders shall cast their votes as the holders of shares
of the voting  capital  stock of the Company to cause the  designee of CSX to be
elected as a director of the Company

          (c)  Representative of Colonial.  For so long as Colonial shall be the
beneficial  owner of not less than five percent (5%) of the  outstanding  voting
capital  stock of the Company,  the  Stockholders  shall cast their votes as the
holders  of shares  of the  voting  capital  stock of the  Company  to cause the
designee of Colonial to be elected as a director of the Company.

     5.3. Other Covenants Concerning Officers and Directors.

     For so long as a Stockholder  is bound by the provisions of Sections 5.1 or
5.2 hereof,  such Stockholder  shall vote their shares of the Company's  capital
stock in  compliance  with and to cause the Company to comply with the following
covenants:

          (a) Selection of Chief  Executive  Officer.  The first Chief Executive
Officer of the Company shall be Jalkut. Upon the termination, resignation, death
or disability of the Chief Executive  Officer of the Company,  the Company shall
select and hire a successor Chief Executive Officer (and any successor  thereto)
by the affirmative vote of a majority of the Board of Directors.

          (b)  Meetings  of  Board  of  Directors.  A  meeting  of the  Board of
Directors  shall be held at least four times each  calendar year at intervals of
not more than three months.

          (c) Removal of Directors. Each of the Stockholder Directors shall be
nominated, elected and continued as a director of the Company as provided in
Section 5.1 or Section 5.2, as



                                      -14-

<PAGE>

applicable,  and shall not be removed  for any reason  other than in  connection
with the designation and election of a successor  Series A Stockholder  Director
by the Series A Stockholders,  a successor Series B Stockholder  Director by the
Series B Stockholders, a successor Series C Stockholder Director by the Series C
Stockholders,  or a successor  Series D/E  Stockholder  Director by the Series D
Stockholders and Series E Stockholders,  as applicable, in each case as provided
in Section 5.1(b) hereof or 5.2 hereof, as applicable. All Stockholders agree to
vote for the removal of a Stockholder  Director,  if required,  by the person or
persons entitled to designate such Stockholder Director, and for the election to
the Board of  Directors  of a  substitute  designated  by the  person or persons
entitled to designate such  replacement  director under this Section 5.3(c),  if
requested  by the person or  persons  entitled  to  designate  such  replacement
director.

     5.4. Other Matters. For so long as a Stockholder is bound by the provisions
of Section 5.1, 5.2 or 5.3, such Stockholder shall vote all of his or its shares
of the Company and shall take all other  necessary or desirable  actions  within
his or its  control  in  its  capacity  as a  stockholder,  (including,  without
limitation,  attendance  at  meetings  in  person or by proxy  for  purposes  of
obtaining  a quorum,  execution  of written  consents  in lieu of  meetings  and
placing into nomination the names of the board designees permitted hereunder) to
satisfy its  obligations  pursuant to this Section 5, and the Company shall take
all  necessary  or  desirable  actions  within its control  (including,  without
limitation,  calling  special  board and  stockholder  meetings and placing into
nomination the names of the board designees  permitted  hereunder) to enable and
facilitate the satisfaction by the stockholders of their obligations pursuant to
this  Section  5 and the  election  of  members  of the  board of  directors  as
described herein.

SECTION 6 NEGATIVE COVENANTS OF THE COMPANY

     So long as not less  than  25% of the  shares  of  Series  Preferred  Stock
outstanding  immediately  after the closing of the transactions  contemplated in
the Contribution Agreements (as such number may be adjusted for any stock split,
reverse  stock  split,   recombination,   reclassification,   or  other  similar
transaction)  remain  outstanding,  the Company  shall comply with the following
covenants, except as (i) in the case of Sections 6.1 through 6.5, the holders of
more than two-thirds of the  then-outstanding  shares of Series Preferred Stock,
voting together as a single class, may otherwise  consent,  and (ii) in the case
of Section 6.6, as provided therein:

     6.1. Mergers, Dispositions, Acquisitions and Other Actions.

     The Company shall not: (a) sell, lease or otherwise  dispose of (whether in
one transaction or in a series of related transactions) all or substantially all
of its assets;  (b) merge with or into or consolidate  with another entity;  (c)
acquire  any other  corporation  or  business  concern for more than $5 million,
whether by  acquisition  of assets,  capital stock or otherwise,  and whether in
consideration of the payment of cash, the issuance of capital stock or otherwise
whether in one or a series of  installments  or make any loans to or investments
in any other entities or persons (other than cash  equivalents)  of more than $5
million  in  any  one or a  series  of  related  transactions;  (d)  voluntarily
liquidate or wind up its  operations;  (e) issue any shares of its capital stock
which are  senior to or on a parity  with any shares of Series  Preferred  Stock
with respect to dividends,  liquidation,  redemptions or otherwise,  or with any
special voting rights; (f) incur, create,  assume or become liable in any manner
(by way of guarantee,  surety, or otherwise) any new or additional  indebtedness
for borrowed money,  whether by the issue of notes,  other debt  securities,  or
otherwise, except that the Company may so incur, create, assume or become liable
for: (A) indebtedness (and any refinancing  thereof) existing within the Company
or its Subsidiaries upon the completion of the transactions contemplated



                                      -15-

<PAGE>

in the Contribution Agreements;  or (B) any indebtedness the principal amount of
which so incurred,  created,  assumed by, or otherwise  becoming a liability of,
the Company in any one transaction or series of related transaction is less than
or equal to $5 million; or (C) indebtedness incurred, created, or assumed by the
Company in the ordinary course of its business.

     6.2. No Amendments to Certificate of Incorporation or Bylaws.

     The  Company   shall  not  make  any  amendment  to  its   Certificate   of
Incorporation or Bylaws.

     6.3. Restrictions on Other Agreements.

     The Company shall not enter into any agreement  with any party which by its
terms  (a)  restricts  the  payments  due the  holders  of the  shares of Series
Preferred  Stock,  or (b) except as  contemplated  by Section 10.11,  grants any
right  relating  to the  registration  of its Common  Stock  superior to or on a
parity with the rights granted to the Stockholders pursuant to Section 9 hereof.

     6.4. Affiliated Transactions.

     The Company shall not enter into or amend any  transactions,  agreements or
arrangements  with,  or make any  payments  to,  any  director,  officer  or key
employee of the Company or any person or entities which or who are relatives of,
controlled  by, or otherwise  affiliated  with any of the  foregoing  persons or
entities (an  "Affiliate")  other than in the ordinary course of business and on
terms no less  favorable to the Company than those that would be available  from
unaffiliated third parties.

     6.5. Issuances of, Distributions on, and Redemptions of, Capital Stock.

     Except  as  otherwise  expressly  provided  in  this  Agreement  and in the
Certificate  of  Incorporation,  the Company  shall not  authorize or issue,  or
obligate itself to issue, any additional  shares of capital stock of the Company
of any class,  declare or pay any dividends,  or make any distributions of cash,
property or  securities  of the Company with respect to any shares of its Common
Stock or any other class of its capital stock, or directly or indirectly  redeem
purchase, or otherwise acquire for consideration, any shares of its Common Stock
or  any  other  class  of  its  capital  stock;  provided,  however,  that  this
restriction  shall not apply to (x) the repurchase of shares of the Common Stock
from individuals and entities who have entered into stockholder  agreements when
the Company has the option to  repurchase  such  shares upon the  occurrence  of
certain  events,   including  the  termination  of  employment  and  involuntary
transfers by operation of law (and their permitted  transferees),  provided that
the aggregate amount of repurchase thereunder shall not exceed $250,000 plus the
cash  proceeds  from the issuance of any stock to employees of the Company other
than  pursuant  to the  Stock  Option  Plan or the Stock  Incentive  Plan or (y)
transactions  contemplated by the Jalkut Employment  Agreement.  Any redemption,
repurchase  or other  acquisition  by the  Company of any shares of its  capital
stock shall be made in  compliance  with all laws,  including but not limited to
federal and state securities laws.

     Notwithstanding  the  foregoing,  the  Company  shall have the right to (i)
enter into and perform the Colonial Option Agreement,  including the issuance of
Series E Preferred Stock and Common Stock  thereunder,  and (ii) issue shares of
the Series D Preferred Stock of the Company in exchange for the  contribution of
right-of-way rights on terms acceptable to the Board of Directors of the Company
and add any such  purchaser  as a  "Stockholder"  hereunder as  contemplated  by
Section



                                      -16-

<PAGE>

10.11 below,  in each case without the consent of the holders of  two-thirds  of
the shares of Series  Preferred Stock as contemplated  above,  provided,  in the
case of clause (ii)  above,  that such  issuance of Series D Preferred  Stock in
excess of the amount  currently  authorized  does not  materially  prejudice the
rights of the existing holders of the Series D Preferred Stock of the Company.

     6.6.  Adverse Change in Terms or Rights of a Series of Preferred Stock. The
Company shall not modify the terms of any Series of Preferred Stock as set forth
in the Certificate of Incorporation  of the Company without,  in addition to any
other consent required,  the consent of the holders of a majority of such Series
of Preferred Stock. The Company shall not amend the Certificate of Incorporation
or Bylaws in a manner that  materially  and adversely  affects the rights of any
Series of  Preferred  Stock,  relative  to the  rights  of any  other  Series of
Preferred Stock, without, in addition to any other consent required, the consent
of the  holders of a majority of such  adversely  affected  Series of  Preferred
Stock.  Any  increase  in the  authorized  number  of any class of shares of the
Company  shall not be deemed to be adverse to any Series of  Preferred  Stock by
reason of the effects of differing levels of protection  against dilution as set
forth in the Certificate of Incorporation.

SECTION 7 TRANSFER BY FOUNDER; RIGHTS TO PURCHASE

The following  provisions of this Section 7 shall  terminate  upon the Company's
first Qualified Public Offering:

     7.1. General Restrictions on Transfer by the Founder.

          (a) The Founder agrees that he will not directly or indirectly  offer,
transfer, donate, sell, assign, pledge, hypothecate or otherwise dispose of (any
such action a "Transfer"),  all or any portion of the shares of capital stock of
the Company now owned or hereafter  acquired by him, except in connection  with,
and  strictly  in  compliance  with,  the  conditions  of any  of the  following
(hereinafter "Permitted Transfers"):

               (i)  Transfers  effected  pursuant to Section 7.2 and Section 7.3
     hereof,  in each  case made in  accordance  with the  procedures  set forth
     therein;

               (ii)  Transfers  by the Founder to his spouse or children or to a
     trust of which he is the settlor or a trustee for the benefit of his spouse
     or  children,   provided  that  such  trust  does  not  require  or  permit
     distribution  of  such  shares  during  the  term of  this  Agreement,  and
     provided,   further,  that  the  transferee  shall  have  entered  into  an
     enforceable written agreement satisfactory to the Company and a majority of
     the Series  Preferred  Stockholders  (voting  together  as a single  class)
     providing  that all shares so  Transferred  shall continue to be subject to
     all  provisions of this  Agreement as if such shares were still held by the
     Founder; and

               (iii) Transfers upon the Founder's death to his heirs,  executors
     or  administrators  or to a trust under his will or  Transfers  between the
     Founder and his guardian or conservator, provided that the transferee shall
     have entered into an  enforceable  written  agreement  satisfactory  to the
     Company and the Series Preferred Stockholders,  voting together as a single
     class,  providing  that all  shares so  Transferred  shall  continue  to be
     subject to all  provisions  of this  Agreement as if such shares were still
     held by the Founder; and



                                      -17-

<PAGE>

               (iv) Transfers constituting a bona fide pledge,  hypothecation or
     other granting of a security interest in the Founder Securities to secure a
     loan for borrowed money, provided that:

               (A) the  financial  institution  making  such loan shall have net
               assets in excess of $100 million;

               (B)  neither  the purpose nor the effect of such loan shall be to
               establish,  support,  or  facilitate  any short  position  in the
               Company's securities;

               (C)   the   documentation   and   structure   of   such   pledge,
               hypothecation,  or other granting of a security  interest and the
               underlying  loan  documentation  shall  have  been  reviewed  for
               compliance  with the  terms of this  Agreement  by,  and shall be
               reasonably satisfactory to, outside counsel to the Company; and

               (D) no such  Transfer  under this clause (iv) shall be  permitted
               during any period in which the Founder  Securities  are otherwise
               subject to the  provisions  of  Section  9.8  hereof,  other than
               pursuant to a bona fide pledge,  hypothecation  or other security
               interest  outstanding in accordance with the terms of this clause
               (iv) on the date that the market stand-off agreement restrictions
               imposed by Section 9.8 become effective.

          (b)  Anything  to the  contrary  in  this  Agreement  notwithstanding,
transferees of the Founder permitted by clauses (ii) and (iii) of Section 7.1(a)
shall take any shares so Transferred subject to all provisions of this Agreement
as if such shares were still held by the  Founder,  whether or not they so agree
with the Founder.

     7.2. Right of Refusal.

     If at any time on or after the Closing Date, the Founder (including for all
purposes of this Section 7.2, any permitted transferee of his shares pursuant to
Section  7.1(a)(ii)  or  Section  7.1(a)(iii))  receives  a bona  fide  offer to
purchase any or all of his shares (the "Offer") from an unaffiliated third party
(the  "Offeror")  which the Founder wishes to accept  (whether  initiated by the
Founder or the third party),  the Founder may transfer  such shares  pursuant to
and in accordance with the following provisions of this Section 7.2:

          (a) The  Founder  shall  cause the Offer to be reduced to writing  and
shall  notify  the  Series  Preferred  Stockholders  in writing of his desire to
accept the Offer and  otherwise  comply with the  provisions of this Section 7.2
and Section 7.3. The Founder's notice shall  constitute an irrevocable  offer to
sell such shares to the Series Preferred  Stockholders at a purchase price equal
to the price  contained in, and on the same terms and  conditions of, the Offer.
The  notice  shall be  accompanied  by a true  copy of the  Offer  (which  shall
indemnify the Offeree).

          (b) At any time  within  thirty (30) days after the date of the giving
of notice pursuant to Section 7.2(a) (the "Notice  Period"),  one or more of the
Series Preferred Stockholders may, subject to the terms hereof, choose to accept
the Offer with  respect to all or a portion  of the  shares  covered  thereby by
giving written notice to the Founder to such effect; provided,  however, that if
two or more Series Preferred  Stockholders  choose, in the aggregate,  to accept
such Offer with  respect to an  aggregate  number of shares  which  exceeds  the
number of shares subject to such Offer



                                      -18-

<PAGE>

and  available  for  purchase by the Series  Preferred  Stockholders  taken as a
whole,  the  number of shares for which the Offer may be  accepted  by each such
Series  Preferred  Stockholder  shall,  in each case, be reduced by the smallest
number of shares as shall be necessary to reduce the aggregate  number of shares
for which the Offer may be  accepted  by the Series  Preferred  Stockholders  as
contemplated  herein to the  number  of shares  for which the Offer was made and
which are available for purchase by them; provided,  further, that the number of
shares  for which any Series  Preferred  Stockholder  may  accept  such Offer as
contemplated  herein  shall in no event be  reduced  to less than the  number of
shares which bears the same  proportion  to the total number of shares for which
the Offer was made and which are available for purchase by the Series  Preferred
Stockholders  as the number of shares of capital  stock of the Company (or other
securities  convertible  into shares of capital  stock of the Company) (any such
shares being referred to hereinafter as  "Securities")  then held by such Series
Preferred  Stockholder  bears to the total number of Securities then held by all
Series Preferred Stockholders accepting such Offer; and provided,  further, that
the Series Preferred  Stockholders who elect to purchase shares may purchase any
shares which other Series Preferred  Stockholders do not elect to purchase based
on the relative holdings of such electing Series Preferred Stockholders.

          (c) If shares  covered by any Offer are purchased  pursuant to Section
7.2(b),  such purchase  shall be (i) at the same price and on the same terms and
conditions  as the  Offer if the Offer is for cash  and/or  notes or (ii) if the
Offer  includes  any  consideration  other  than  cash  and  notes,  then at the
equivalent  all cash price for such other  consideration  as  determined  by the
Board of  Directors.  The closing of the  purchase  of the shares  subject to an
Offer  pursuant to this  Section 7.2 shall take place  within  fifteen (15) days
after  the  expiration  of  the  Notice  Period,  or  upon  satisfaction  of any
governmental  approval  requirements,  if later,  by delivery by the  respective
Series  Preferred  Stockholders  of the  purchase  price  for the  shares  being
purchased as provided above to the Founder against  delivery of the certificates
representing the shares so purchased  appropriately endorsed for transfer by the
Founder.

     7.3. Sales by the Founder.

     Any shares  covered by an Offer which are not acquired  pursuant to Section
7.2 that the Founder  desires to sell following  compliance with Section 7.2 may
be sold to the Offeror only during the 90-day period after the expiration of the
Notice  Period and only on terms no more  favorable  to the  Founder  than those
contained in the Offer.  Promptly  after such sale, the Founder shall notify the
Series Preferred Stockholders of the consummation thereof and shall furnish such
evidence of the  completion and time of completion of such sale and of the terms
thereof as may reasonably be requested by the Series Preferred Stockholders.  So
long as the Offeror is neither a party,  nor an affiliate or relative of a party
to this  Agreement,  such Offeror shall take the shares so Transferred  free and
clear of the  provisions  of this  Agreement,  other  than  Section  5.1 and 5.3
hereof.  If, at the end of such 90-day period, the Founder has not completed the
sale of such shares as aforesaid,  all the restrictions on Transfer contained in
this Agreement shall again be in effect with respect to such shares.

SECTION 8 RIGHTS TO PURCHASE

     Notwithstanding  anything herein to the contrary,  the following provisions
of this Section 8 shall not apply to, and shall thereafter terminate immediately
upon, the Company's first Qualified Public Offering.



                                      -19-

<PAGE>

     8.1  Right to Participate in Certain Sales of Additional Securities.

          (a) The  Company  agrees that it shall not sell or issue any shares of
capital  stock  of  the  Company,  or  other  securities   convertible  into  or
exchangeable  for capital stock of the Company,  or options,  warrants or rights
carrying any rights to purchase  capital stock of the Company unless the Company
first  submits a written  offer to each Eligible  Stockholder,  identifying  the
terms of the proposed sale (including cash price,  number or aggregate principal
amount of securities and all other material terms).

          (b) Pursuant to such notice,  the Company shall offer to each Eligible
Stockholder  the  opportunity  to purchase its Pro Rata Share of the  securities
proposed to be sold by the Company on terms and conditions, including price, not
less  favorable  to the  Eligible  Stockholders  than those on which the Company
proposes to sell such  securities to a third party.  Each  Eligible  Stockholder
shall have a right of over-allotment such that if any Eligible Stockholder fails
to exercise its right  hereunder  to purchase  its Pro Rata Share,  the Electing
Purchasers may purchase the non-purchasing Eligible Stockholder's Pro Rata Share
(allocated  among them, pro rata in proportion to the aggregate number of shares
of Common Stock owned by such Electing Purchasers  (assuming the full conversion
of any shares of the  capital  stock of the Company  convertible  into shares of
Common Stock)).

          (c) The Company's offer to the Eligible Stockholders shall remain open
and  irrevocable,  for a period of thirty (30) days.  Any  securities so offered
which are not  purchased  pursuant to such offer may be sold by the Company,  at
any time within one hundred twenty (120) days  following the  termination of the
above-referenced 30-day period, but such securities may not be sold on terms and
conditions, including price, that are more favorable to the purchaser than those
set forth in such offer.  No  securities  may be sold by the Company  after such
120-day period without renewed compliance with this Section 8.1.

          (d) Notwithstanding the foregoing,  the Company may (i) issue options,
warrants or rights to subscribe for shares of its Common Stock (as appropriately
adjusted for stock splits,  stock dividend and the like) to officers,  employees
and directors of the Company  pursuant to the terms of the Stock Option Plan and
the Stock  Incentive  Plan and  Section  4.4 hereof and may issue  shares of its
Common Stock upon the exercise of any such stock  options,  or upon  exercise of
warrants  outstanding  as of the Closing,  (ii) issue shares of its Common Stock
upon the conversion of the Series Preferred Stock (as appropriately adjusted for
stock splits,  stock  dividends and the like);  (iii) issue shares of its Common
Stock in connection with the acquisition of another Company approved  consistent
with Section 6.1; (iv) issue shares of its Common Stock pursuant to the exercise
of the outstanding options listed on Exhibit D hereto (as appropriately adjusted
for stock splits,  stock  dividends  and the like),  and (v) issue shares of its
capital stock as  contemplated by the  Contribution  Agreements and the Colonial
Option Agreement.

SECTION 9 REGISTRATION RIGHTS; STAND-OFF AGREEMENT

     9.1. Optional Registrations.

          (a) If, at any time or from time to time  after the date  hereof,  the
Company  shall  determine  to  register  any  shares  of its  capital  stock  or
securities  convertible  into capital stock under the Securities Act (whether in
connection  with a public  offering  of  securities  by the  Company (a "primary
offering"),  for the account of any security holder or holders of the Company (a
"secondary



                                      -20-

<PAGE>

offering"),  or both), the Company shall promptly give written notice thereof to
each Series Preferred Stockholder holding Registrable Securities (as hereinafter
defined in Section 9.4 below) then outstanding,  Jalkut (for so long as he shall
hold  Registrable  Securities)  and the  Founder  (for so long as he shall  hold
Founder Securities);  provided,  however,  that such notice obligation shall not
apply to any registration:

               (i) relating to a public offering pursuant to any demand
registration rights under the Warrant Registration Rights Agreement;

               (ii) relating to the registration of any of the Company's
employee benefit plans;

               (iii) on any form that does not permit secondary offerings; or

               (iv) relating to a corporate  reorganization or other transaction
under Rule 145 or any similar rule of the SEC.

          (b) If,  within  thirty  (30) days  after  their  receipt  of a notice
delivered  pursuant  to  clause  (a) of this  Section  9.1,  one or more  Series
Preferred  Stockholders,  Jalkut or the Founder request the inclusion of some or
all of the  Registrable  Securities or Founder  Securities  held by them in such
registration,  the Company shall use its best efforts to effect the registration
under the Securities Act of all  Registrable  Securities and Founder  Securities
which such Holders may request in a writing delivered to the Company within such
thirty (30) days.

          (c) In the case of the  registration of shares of capital stock by the
Company  in  connection  with  any   underwritten   public   offering,   if  the
underwriter(s)  shall have  informed  the  Company  and the  Holders  requesting
inclusion in such offering,  in writing,  that in such underwriter's opinion the
number of Registrable  Securities  and Founder  Securities to be included in the
offering is such as to materially  and  adversely  affect the price at which the
securities  can  be  sold,  the  Company  shall  not  be  required  to  register
Registrable  Securities and Founder  Securities of such Holders in excess of the
amount,  if any, of shares of the capital stock which the principal  underwriter
of such  underwritten  offering  shall  reasonably  and in good  faith  agree to
include  in such  offering  in excess of any  amount  to be  registered  for the
Company.  If any  limitation  of the  number of shares  of  capital  stock to be
registered by the Holders is required pursuant to this clause 9.1(c), the number
of shares  that may be  included  in the  registration  on behalf of the Holders
shall be  allocated  among the Holders or the holders of any other  registration
rights in proportion,  as nearly as practicable,  to their relative  holdings of
Registrable  Securities and Founder Securities,  in the aggregate (provided that
for such purpose the Series E Preferred  Stockholders shall be deemed to own two
times their actual holdings of Series E Preferred  Stock,  and provided  further
that if any Holder does not  register all shares that it is entitled to register
under the foregoing  formula,  then its unused shares shall be reallocated among
the remaining  requesting  Holders in proportion to their  relative  holdings of
Registrable Securities and Founder Securities),  after first excluding from such
registration   statement  all  shares  of  Common  Stock,   other  than  Founder
Securities, sought to be included therein by:

              (i) any  director,  officer or employee of the Company,  including
          Jalkut (unless and until Jalkut has been  involuntarily  terminated as
          an officer of the Company  pursuant  to  Sections  6(d) or 6(f) of the
          Jalkut Employment  Agreement),  pro rata based on the number of shares
          of  Registrable  Securities  requested by each such  individual  to be
          included in such registration;



                                      -21-

<PAGE>

               (ii) any holder thereof not having any such contractual
          incidental registration rights; and


               (iii)  any   holder   thereof   having   contractual   incidental
          registration rights subordinate and junior to the rights of the Series
          Preferred Stockholders.

If such  underwritten  public  offering  is an initial  public  offering  of the
Company's  Common  Stock,  the Company  may limit or  exclude,  to the extent so
advised  by the  underwriter  as  provided  above,  the  amount  of  Registrable
Securities and Founder  Securities to be included in the  registration.  If such
underwritten  public offering is not an initial public offering of the Company's
Common  Stock,  then  the  Series  Preferred  Stockholders  holding  Registrable
Securities,  the Founder, and Jalkut if he has been involuntarily  terminated as
an officer  of the  Company  pursuant  to  Sections  6(d) and 6(f) of the Jalkut
Employment Agreement, shall be allowed to include in the aggregate not less than
thirty-five percent (35%) of the shares subject to such registration  statement,
provided,  however,  that in addition to any limitations  imposed by this clause
(c), in connection with any registration  that includes  securities  pursuant to
the Warrant Registration Rights Agreement, the terms of the Warrant Registration
Rights Agreement as in effect on the date hereof shall govern the inclusion (and
limitations  on inclusion) of  Registrable  Securities,  Founder  Securities and
other securities in such registration.

          (d) The Company shall not grant any rights  relating to the piggy-back
registration  of its capital stock which are superior to or on a parity with the
rights granted to the Series Preferred  Stockholders,  the Founder and Jalkut in
this  Section  9.1  other  than  pursuant  to this  Agreement  and  the  Warrant
Registration Rights Agreement.

     9.2. Required Registrations.

          (a) If on any three (3)  occasions  after the date hereof the Required
Holders notify the Company in writing that the Required  Holders intend to offer
or cause to be  offered  for  public  sale  all or any  portion  of its or their
Registrable Securities, the Company shall notify all of the Holders who would be
entitled  to notice of a proposed  registration  under  Section 9.1 above of its
receipt  of such  notification  from such  Required  Holders.  Upon the  written
request of any such Holder or Holders  delivered  to the Company  within  twenty
(20) days after the Company's delivery of such notification to the Holders,  the
Company shall either:

               (i) elect to make a primary offering, in which case the rights of
          such Holders to  participate in such offering shall be as set forth in
          Section 9.1 above  (except that the Company  shall not be permitted to
          limit the number of shares which may be registered by any Holder,  and
          Holders holding a majority of the Registrable  Securities requested to
          be  included  in such  required  registration  will  have the right to
          select the underwriter); or

               (ii)  use its  best  efforts  to  cause  such of the  Registrable
          Securities  and Founder  Securities as may be requested by any Holders
          to be registered under the Securities Act in accordance with the terms
          of this Section 9.2.

          (b) In the event that (i) the Company shall have completed its initial
     Qualified Public Offering, and (ii) the registration statement filed by the
     Company  under the  Securities  Act in  respect  of such  Qualified  Public
     Offering shall:



                                      -22-

<PAGE>

               (A)  have ceased to be  effective  on or before the date which is
                    thirty (30) days  following  the  expiration  of the lock-up
                    period specified in Section 9.8 hereof; or

               (B)  not have included  pursuant to the provisions of section 9.1
                    hereof the shares of Common Stock  proposed to be registered
                    by the Founder,

then,  in  either  of such  events  but  only in  either  of  such  events  (the
"Triggering Event"), the Founder shall have the rights set forth in this Section
9.2(b).  If on any one occasion at any time following the Triggering  Event, and
subject  to the other  terms  and  conditions  of this  Agreement,  the  Founder
notifies the Company in writing that the Founder intends to offer or cause to be
offered  for public  sale all or any  portion  of his  Founder  Securities,  the
Company  shall  notify all of the  Holders  who would be entitled to notice of a
proposed   registration   under  Section  9.1  above  of  its  receipt  of  such
notification  from the Founder.  Upon the written  request of any such Holder or
Holders  delivered to the Company  within  twenty (20) days after the  Company's
delivery of such notification to the Holders, the Company shall either:

               (x)  elect to make a primary  offering,  in which case the rights
                    of all such Holders to participate in such offering shall be
                    as set forth in Section 9.1 above  (except  that the Company
                    shall not be  permitted  to limit the number of shares which
                    may be registered by any Holder); or

               (y)  use its  best  efforts  to  cause  such  of the  Registrable
                    Securities and Founder Securities as may be requested by any
                    Holders  to  be  registered  under  the  Securities  Act  in
                    accordance with the terms of this Section 9.2;

provided,  however,  that in the event that the  notification  delivered  by the
Founder under this Section 9.2(b) shall have been delivered to the Company on or
before the date which is one year  following  the  completion  of the  Qualified
Public Offering of the Company,  the number of shares of Founder Securities that
may be included in such notification by the Founder hereunder (and in respect of
which the Company shall have the obligations under this Section 9.2(b)) shall be
limited and:

               (1)  shall  not,  in the  case  of an  initial  Qualified  Public
                    Offering in which  shares  constituting  fewer than  fifteen
                    percent  (15%) of the  equity  capital  of the  Company on a
                    fully  diluted  basis  shall  have  been  so  registered  in
                    connection  with such  initial  Qualified  Public  Offering,
                    exceed  thirty  percent  (30%) of the  aggregate  number  of
                    shares  so  registered  in  connection   with  such  initial
                    Qualified Public Offering, and

               (2)  shall not, in all other cases,  exceed twenty  percent (20%)
                    of  the   aggregate   number  of  shares  so  registered  in
                    connection with such initial Qualified Public Offering.

          (c) The Company may postpone the filing of any registration  statement
required by this  Section  9.2 for a  reasonable  period of time,  not to exceed
sixty (60) days during any twelve month period,  if the Company has been advised
by  legal  counsel  that  such  filing  would  require  a  special  audit or the
disclosure of a material  impending  transaction or other matter and the Company
determines  reasonably  and in good  faith  that such  disclosure  would  have a
material  adverse  effect on the Company.  The Company  shall not be required to
cause a registration statement requested



                                      -23-

<PAGE>

pursuant to this  Section 9.2 to become  effective  prior to the later of (i) 90
days following the effective date of a registration  statement  initiated by the
Company  (other than a  registration  effected  solely to  implement an employee
benefit plan or a transaction to which Rule 145 or any other similar rule of the
SEC under the Securities Act is applicable), if the request for registration has
been received by the Company  subsequent to the giving of written  notice by the
Company made in good faith to the Holders  holding  Registrable  Securities  and
Founder Securities that the Company is commencing to prepare a Company-initiated
registration statement,  and (ii) the end of any 'lock-up" or "black-out" period
imposed on the Company or any of the holders of its securities pursuant to or in
connection  with  any  underwriting  or  purchase   agreement   relating  to  an
underwritten  offering  under Rule 144A of the  Securities  Act or a  registered
public offering of equity  securities of the Company,  such period not to exceed
180 days;  provided,  however,  that the Company  shall use its best  efforts to
achieve such effectiveness promptly following the end of the period set forth in
clause (i) or (ii) of this clause (c), as applicable.

               (d)  Notwithstanding the provisions of clauses (a), (b) or (c) of
this Section 9.2, the Company shall not be obligated to effect any  registration
pursuant to:

               (1)  Section 9.2(a),  if the Required Holders propose to register
                    Registrable Securities that may be immediately registered on
                    SEC Form S-3  pursuant to a request  made under  Section 9.3
                    hereof;

               (2)  Section  9.2(a) if the Required  Holders do not request that
                    the offering  which is the subject of such  registration  be
                    firmly underwritten by underwriters selected by the Required
                    Holders and reasonably acceptable to the Company;

               (3)  Section  9.2(b),  if the Founder  does not request  that the
                    offering which is the subject of such registration be firmly
                    underwritten  by  underwriters  selected  by the Founder and
                    reasonably acceptable to the Company; or

               (4)  Section  9.2(a) or 9.2(b),  if the Company,  after using its
                    best efforts to do so, is unable to obtain the commitment of
                    the  underwriter  selected in clauses  (2) or (3) above,  as
                    applicable, to underwrite such offering on a firm commitment
                    basis.

     9.3. Form S-3.

     Following its initial  public  offering,  the Company shall timely file all
reports  required  to be filed  with the SEC  under the  Exchange  Act and shall
otherwise use reasonable  efforts to qualify for registration on SEC Form S-3 or
any comparable or successor form  promulgated by the SEC. If the Company becomes
eligible to use SEC Form S-3 or a comparable  successor  form, the Company shall
use its best  efforts to  continue to qualify at all times for  registration  on
Form S-3 or such  successor  form.  One or more of the  Holders  other  than the
Founder shall have the right to request and have effected one  registration  per
year of shares of Registrable  Securities on Form S-3 or such successor form for
a public  offering of shares of  Registrable  Securities and having an aggregate
proposed offering price exceeding  $1,000,000 (such requests shall be in writing
and shall state the number of shares of Registrable Securities to be disposed of
and the  intended  method  of  disposition  of such  shares  by such  Holder  or
Holders).  The  Company  shall give  notice to all  Holders of the  receipt of a
request  for  registration  pursuant  to this  Section  9.3 and shall  provide a
reasonable opportunity for such Holders to participate in the registration.  The
Company  shall  not be  required  to cause a  registration  statement  requested
pursuant to this Section 9.3 to become effective prior to the later of



                                      -24-

<PAGE>

(i) 90 days following the effective date of a registration  statement  initiated
by the Company  (other  than a  registration  effected  solely to  implement  an
employee  benefit plan or a  transaction  to which Rule 145 or any other similar
rule of the SEC under the  Securities  Act is  applicable),  if the  request for
registration  has been  received  by the  Company  subsequent  to the  giving of
written  notice  by the  Company  made  in good  faith  to the  Holders  holding
Registrable  Securities and Founder Securities that the Company is commencing to
prepare  a  Company-initiated  registration  statement,  and (ii) the end of any
"lock-up"  or "black  out"  period  imposed  on the  Company  pursuant  to or in
connection  with  any  underwriting  or  purchase   agreement   relating  to  an
underwritten SEC Rule 144A or a registered  public offering of equity securities
of the Company, such period not to exceed 180 days; provided,  however, that the
Company  shall use its best  efforts  to  achieve  such  effectiveness  promptly
following  the end of the  period  set forth in clauses  (i) or (ii)  above,  as
applicable,  if the request  pursuant to this Section 9.3 has been made prior to
the  expiration  of such  period.  The  Company may  postpone  the filing of any
registration  statement  required hereunder for a reasonable period of time, not
to exceed 60 days  during  any  twelve-month  period,  if the  Company  has been
advised by legal  counsel that such filing  would  require the  disclosure  of a
material  transaction or other factor and the Company determines  reasonably and
in good faith that such disclosure  would have a material  adverse effect on the
Company.  Subject to the  foregoing,  the Company  shall use its best efforts to
effect  promptly the  registration  of all shares of Common Stock on Form S-3 or
such successor form to the extent requested by the Holder or Holders thereof for
purposes of  disposition.  If so  requested by any Holder in  connection  with a
registration  under this Section  9.3, the Company  shall take such steps as are
required to register such Holder's Registrable  Securities or Founder Securities
for sale on a delayed or  continuous  basis under SEC Rule 415, and to keep such
registration  effective  for the  shorter  of (x) six months or (y) until all of
such Holder's Registrable Securities or Founder Securities registered thereunder
are sold.

     9.4. Registrable Securities.

     For purposes of this Agreement,  the term  "Registrable  Securities"  shall
mean any shares of Common Stock:

          (a) purchased  by, or issued to, a Series  Preferred  Stockholder,  or
issuable upon conversion of the Series  Preferred Stock or other Preferred Stock
of the Corporation;

          (b) issued or issuable to Jalkut upon the exercise of options granted
to him by the Company; or

          (c) issued by way of a stock  dividend or stock split or in connection
with a combination of shares,  recapitalization,  merger, consolidation or other
reorganization,  or any exchange or other  replacement of the shares referred to
in clauses (i) or (ii) above;

provided,  however,  that (x) if a Series  Preferred  Stockholder  owns or holds
shares of Series  Preferred  Stock  (or,  in the case of  Jalkut,  owns or holds
options   exercisable  for  shares  of  Common  Stock),  such  Series  Preferred
Stockholder  (or  optionholder)  shall not be  required  to cause such shares of
Series  Preferred  Stock to be  converted  to Common  Stock (or,  in the case of
Jalkut,  shall not be required to exercise such options) until immediately prior
to the effective date of any applicable registration statement pursuant to which
such shares shall be sold, and (y)  notwithstanding  any other provision of this
Agreement,  the term  "Registrable  Securities"  shall not include any shares of
Common Stock which have  previously  been  registered or which have been sold to
the public either pursuant to a



                                      -25-

<PAGE>

registration  statement  or SEC  Rule  144,  or that  may be sold by the  holder
thereof pursuant to SEC Rule 144(k).

     9.5. Further Obligations of the Company.

     Whenever  the Company is required  hereunder  to register  any  Registrable
Securities or Founder Securities it agrees that it also shall do the following:

          (a) Pay all expenses of such registrations and offerings (exclusive of
underwriting  discounts and  commissions)  and the reasonable fees and expenses,
not to exceed $60,000 per offering, of not more than one independent counsel for
the  Holders  satisfactory  to a  majority  in  interest  of  the  Holders  with
Registrable Securities included in such registration, voting as a single class.

          (b) Use its best efforts (with due regard to management of the ongoing
business of the Company and the allocation of managerial  resources)  diligently
to prepare and file with the SEC a  registration  statement and such  amendments
and  supplements  to said  registration  statement  and the  prospectus  used in
connection  therewith as may be necessary  to keep said  registration  statement
effective for at least 90 days (6 months in the case of a Form S-3  registration
statement under Section 9.3) or such earlier date on which the Holder or Holders
have completed the distribution described in such registration statement, and to
comply with the  provisions  of the  Securities  Act with respect to the sale of
securities covered by said registration for the period necessary to complete the
proposed public offering;

          (c) Furnish to each selling Holder such copies of each preliminary and
final prospectus and such other documents as such Holder may reasonably  request
to  facilitate  the public  offering of its  Registrable  Securities  or Founder
Securities, as the case may be;

          (d) Enter into any reasonable  underwriting  agreement required by the
proposed  underwriter  for the  selling  Holders,  if  any,  in  such  form  and
containing such terms as are customary;  provided, however, that no Holder shall
be required to make any representations or warranties other than with respect to
its title to the Registrable  Securities or Founder Securities,  as the case may
be, and if the underwriter  requires that representations or warranties be made,
the Company shall make all such  representations  and warranties relating to the
Company;

          (e) Use its best efforts to register or qualify the securities covered
by said  registration  statement  under the  securities or blue-sky laws of such
jurisdictions  as any selling Holder may reasonably  request,  provided that the
Company  shall not be required to  register  or qualify  the  securities  in any
jurisdictions which require it to qualify to do business therein or in which the
Company  would be  required to consent  generally  to service of process in such
jurisdiction unless the Company is already so subject;

          (f)  Immediately  notify  each  selling  Holder,  at any  time  when a
prospectus relating to his Registrable Securities or Founder Securities,  as the
case may be, is  required  to be  delivered  under the  Securities  Act,  of the
happening of any event as a result of which such  prospectus  contains an untrue
statement of a material  fact or omits any material  fact  necessary to make the
statements  therein not  misleading,  and,  at the  request of any such  selling
Holder,  prepare a  supplement  or  amendment  to such  prospectus  so that,  as
thereafter  delivered  to the  purchasers  of such  Registrable  Securities  and
Founder Securities, as the case may be, such prospectus shall not



                                      -26-

<PAGE>

contain any untrue  statement  of a material  fact or omit to state any material
fact necessary to make the statements therein not misleading.

          (g) Cause all such Registrable  Securities and Founder Securities,  as
the case may be, to be listed on each securities exchange or quotation system on
which similar securities issued by the Company are then listed or quoted:

          (h)  Otherwise  use its best  efforts  to comply  with the  applicable
securities laws of the United States and other applicable  jurisdictions and all
applicable rules and regulations of the SEC and comparable governmental agencies
in other applicable  jurisdictions and make generally  available to its Holders,
in each case as soon as practicable,  but not later than 45 days after the close
of the period covered thereby,  an earnings statement of the Company which shall
satisfy the provisions of Section 11(a) of the Securities Act;

          (i) Use best  efforts to obtain and  furnish to each  selling  Holder,
immediately  prior to the  effectiveness of the registration  statement (and, in
the case of an underwritten offering, at the time of delivery of any Registrable
Securities or Founder Securities sold pursuant  thereto),  a cold comfort letter
from the Company's independent public accountants in customary form and covering
such  matters of the type  customarily  covered by cold  comfort  letters as the
holders of a majority of the Registrable Securities and Founder Securities being
sold may reasonably request;

          (j) Make available appropriate  management personnel for participation
in the  preparation  and  drafting  of  such  registration  statement,  for  due
diligence  meetings and, to the extent that doing so does not interfere with the
operations and management of the Company, for "road show" meetings, in each case
as reasonably requested by the Holders or the lead managing underwriter; and

          (k) Otherwise  cooperate  with the  underwriter or  underwriters,  the
Commission  and other  regulatory  agencies and take all actions and execute and
deliver or cause to be executed and delivered all documents  necessary to effect
the registration of any Registrable Securities and Founder Securities under this
Section 9.

     9.6. Indemnification; Contribution.

          (a) Incident to any registration statement referred to in this Section
9, and subject to applicable  law, the Company shall indemnify and hold harmless
each  underwriter,  each  Holder  who  offers  or  sells  any  such  Registrable
Securities or Founder Securities in connection with such registration  statement
(including its partners  (including partners of partners and stockholders of any
such partners)), and directors, officers, employees and agents of any of them (a
"Selling  Holder"),  and each person who controls any of them within the meaning
of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
of 1934, as amended (hereinafter the "Exchange Act") (a "Controlling  Person")),
from and against any and all losses, claims, damages,  expenses and liabilities,
joint or several (including any investigation, legal and other expenses incurred
in connection  with, and any amount paid in settlement  of, any action,  suit or
proceeding or any claim  asserted),  to which they,  or any of them,  may become
subject  under the  Securities  Act, the Exchange Act or other  federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims,  damages  or  liabilities  arise out of or are  based on (i) any  untrue
statement  or alleged  untrue  statement  of a material  fact  contained in such
registration   statement   (including  any  related  preliminary  or  definitive
prospectus, or any amendment or supplement to such registration statement



                                      -27-

<PAGE>

or prospectus),  (ii) any omission or alleged omission to state in such document
a material fact required to be stated in it or necessary to make the  statements
in it not  misleading,  or (iii) any violation by the Company of the  Securities
Act, any state securities or blue sky laws or any rule or regulation  thereunder
in connection with such registration;  provided, however, that the Company shall
not be liable to the extent that such loss, claim, damage,  expense or liability
arises from and is based on an untrue  statement  or omission or alleged  untrue
statement or omission  made in reliance on and in  conformity  with  information
furnished  in writing  to the  Company by such  underwriter,  Selling  Holder or
Controlling  Person  expressly  for use in  such  registration  statement.  With
respect to such untrue  statement  or omission or alleged  untrue  statement  or
omission in the  information  furnished  to the Company by such  Selling  Holder
expressly  for use in such  registration  statement,  such Selling  Holder shall
indemnify  and hold  harmless  each  underwriter,  the  Company  (including  its
directors,  officers,  employees and agents),  each other Holder  (including its
partners  (including partners of partners and stockholders of such partners) and
directors,  officers,  employees and agents of any of them) whose securities are
so  registered,  and each person who  controls any of them within the meaning of
Section 15 of the  Securities  Act or Section 20 of the Exchange  Act,  from and
against any and all losses, claims, damages, expenses and liabilities,  joint or
several,  to which they, or any of them, may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation,  at
common law or otherwise to the same extent provided in the immediately preceding
sentence.  In no event,  however,  shall the  liability of a Selling  Holder for
indemnification  under this  Section  9.6(a) in its capacity as such (and not in
its capacity as an officer or director of the Company)  exceed the lesser of (i)
that  proportion  of the total of such losses,  claims,  damages or  liabilities
indemnified  against equal to that proportion of the total securities sold under
such  registration  statement which is being sold by such Selling Holder or (ii)
the  proceeds  received  by such  Selling  Holder  from its sale of  Registrable
Securities (or Founder  Securities,  as the case may be) under such registration
statement.

          (b) If the  indemnification  provided for in Section  9.6(a) above for
any reason is held by a court of competent  jurisdiction to be unavailable to an
indemnified  party in  respect  of any  losses,  claims,  damages,  expenses  or
liabilities referred to therein, then each indemnifying party under this Section
9.6, in lieu of indemnifying such indemnified party thereunder, shall contribute
to the  amount  paid or payable  by such  indemnified  party as a result of such
losses,  claims,  damages,  expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company,  the other
Selling  Holders  and the  underwriters  from the  offering  of the  Registrable
Securities  and Founder  Securities,  as  applicable,  or (ii) if the allocation
provided  by clause  (i)  above is not  permitted  by  applicable  law,  in such
proportion as is appropriate to reflect not only the relative  benefits referred
to in clause (i) above but also the  relative  fault of the  Company,  the other
Selling  Holders and the  underwriters  in  connection  with the  statements  or
omissions  which  resulted  in  such  losses,  claims,   damages,   expenses  or
liabilities,  as  well  as any  other  relevant  equitable  considerations.  The
relative  benefits  received  by  the  Company,  the  Selling  Holders  and  the
underwriters  shall be deemed to be in the same respective  proportions that the
net  proceeds  from the offering  (before  deducting  expenses)  received by the
Company and the Selling Holders and the  underwriting  discount  received by the
underwriters,  in each case as set  forth in the table on the cover  page of the
applicable  prospectus,  bear to the  aggregate  public  offering  price  of the
Registrable Securities and Founder Securities, as applicable. The relative fault
of the Company,  the Selling Holders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged  omission to state a material fact
relates to  information  supplied by the  Company,  the  Selling  Holders or the
underwriters and the parties' relative intent, knowledge,  access to information
and opportunity to correct or prevent such statement or omission.



                                      -28-

<PAGE>

          (c) The Company,  the Selling Holders and the underwriters  agree that
it would not be just and  equitable  if  contribution  pursuant to this  Section
9.6(b)  were  determined  by pro rata or per capita  allocation  or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph.  In no event, however, shall
a Selling  Holder be required to contribute any amount under this Section 9.6(b)
in excess  of the  lesser of (i) that  proportion  of the total of such  losses,
claims,  damages or liabilities  indemnified against equal to that proportion of
the total securities sold under such registration  statement which is being sold
by such Selling Holder or (ii) the proceeds received by such Selling Holder from
its sale of Registrable  Securities or Founder  Securities,  as the case may be,
under  such  registration  statement.  No  person  found  guilty  of  fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be entitled to  contribution  from any person who was not found  guilty of
such fraudulent misrepresentation.

          (d)  The  amount  paid  by an  indemnifying  party  or  payable  to an
indemnified  party as a result of the losses,  claims,  damages and  liabilities
referred  to in this  Section  9.6 shall be deemed to  include,  subject  to the
limitations set forth above, any legal or other expenses  reasonably incurred by
such  indemnified  party in connection with  investigating or defending any such
action or claim,  payable  as the same are  incurred.  The  indemnification  and
contribution provided for this Section 9.6 shall remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified  parties
or  any  officer,  director,  employee,  agent  or  controlling  person  of  the
indemnified  parties.  Any  indemnification  of legal fees and costs pursuant to
this Section 9.6 shall be paid by the  indemnifying  party when and as such fees
and costs are incurred by the indemnified party.

     9.7. Rule 144 and Rule 144A Requirements.

     In the event that the Company becomes and for so long as it remains subject
to Section 13 or Section  15(d) of the Exchange  Act, the Company  shall use its
best  efforts  to take all  action  as may be  required  as a  condition  to the
availability of Rule 144 or Rule 144A under the Securities Act (or any successor
or similar  exemptive rules  hereafter in effect).  The Company shall furnish to
any Series  Preferred  Stockholder  holding  Registrable  Securities  and to the
Founder  holding  Founder  Securities,  within  fifteen  (15)  days of a written
request,  a written  statement  executed  by the  Company as to the steps it has
taken to comply with the current public  information  requirement of Rule 144 or
Rule 144A or such successor rules.

     9.8. Market Stand-off Agreement.

     Each and all of the Stockholders  party to this Agreement,  if so requested
by the underwriter of the Company's securities, shall agree not to sell, pledge,
encumber  or  otherwise  transfer  or  dispose  of any  Common  Stock  (or other
securities) of the Company held by such  Stockholders  during the 180-day period
following the effective  date of the Company's  initial  public  offering or any
other  registration  statement  of the  Company  in which such  Stockholder  has
included securities for registration,  or during any shorter period agreeable to
the  managing  underwriter.  Such  agreement  shall be in writing  and in a form
reasonably  satisfactory  to the Company and such  underwriter.  The Company may
impose  stop-transfer  instructions  with respect to the shares of Common Stock,
Series  Preferred  Stock, or any other  securities of the Company subject to the
foregoing restriction until the end of such period.



                                      -29-

<PAGE>

SECTION 10 GENERAL.

     10.1. Amendments, Waivers and Consents.

          (a) For the purposes of this  Agreement  and all  agreements  executed
pursuant  hereto,  no course of dealing  between the Company and any Stockholder
and no delay on the part of any party hereto in exercising any rights  hereunder
or thereunder shall operate as a waiver of the rights hereof and thereof. Except
as otherwise  provided in Section  10.1(c)  hereof,  no provision  hereof may be
waived  otherwise  than by a written  instrument  signed by the party so waiving
such covenant or other provision.

          (b)  Except  as  otherwise  provided  by the  terms of this  Agreement
(including  Section  10(c)  hereof),  all and  any  amendments  to and  consents
required by this Agreement may be made, and compliance with any term,  covenant,
condition  or  provision  set forth  herein  may be  omitted  or waived  (either
generally or in a particular instance and either retroactively or prospectively)
by the consent of the holders of a majority of the issued and outstanding shares
of Series Preferred Stock and Common Stock, voting together as a single class.

          (c) No amendment,  waiver or consent that adversely affects the Series
A Preferred  Stock,  the Series B Preferred Stock, the Series C Preferred Stock,
the Series D Preferred  Stock,  or the Series E Preferred  Stock, or affects any
rights  specifically  granted  to the  Series A  Preferred  Stock,  the Series B
Preferred  Stock, the Series C Preferred Stock, the Series D Preferred Stock, or
the Series E  Preferred  Stock shall be  approved  without  the  approval of the
holders of a majority of the issued and  outstanding  Series A Preferred  Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, or
Series E  Preferred  Stock,  respectively,  each voting  separately  as a class;
provided,  however, that any amendment, waiver or consent that adversely affects
one Series Preferred Stockholder,  or affects any rights specifically granted to
such Series Preferred  Stockholder,  in a manner different than all other Series
Preferred  Stockholders  holding  the same  series  of Series  Preferred  Stock,
including,  but not limited to, the right to  designate  certain  directors  set
forth in Sections 5.1 and 5.2 hereof,  shall not be approved without such Series
Preferred Stockholder's consent.

          (d) No amendment to Articles 7, 8 or 9 hereof that would,  relative to
the rights of any other class of Stock,  adversely  affect any rights granted to
the  Founder  under this  Agreement  shall be  approved  without  the  Founder's
consent.

          (e)  Except  as  otherwise  expressly  provided  by the  terms of this
Agreement, any amendment or waiver effected in accordance with this Section 10.1
shall be binding upon:

              (i) the Company;

              (ii) each holder of the shares Series  Preferred Stock at the time
outstanding and each future holder of the shares of Series Preferred Stock;

              (iii) the Founder and any transferee of the shares of Common
Stock owned by the Founder as of the date hereof; and

              (iv) Jalkut and any transferee of the Shares of Common Stock owned
by Jalkut as of the date hereof.



                                      -30-

<PAGE>

10.2. Legend on Securities.

     The Company and the  Stockholders  acknowledge and agree that the following
legend  shall be typed  on each  certificate  evidencing  any of the  shares  of
capital  stock  of  the  Company  issued  hereunder  held  at  any  time  by the
Stockholders.

     "THE  SECURITIES  REPRESENTED  HEREBY  HAVE NOT BEEN  REGISTERED  UNDER THE
SECURITIES  ACT OF 1933, AS AMENDED (THE ACT),  OR ANY STATE  SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED,  SOLD,  TRANSFERRED,  HYPOTHECATED OR OTHERWISE
ASSIGNED  EXCEPT (1) PURSUANT TO A  REGISTRATION  STATEMENT WITH RESPECT TO SUCH
SECURITIES  WHICH IS  EFFECTIVE  UNDER THE ACT OR (2)  PURSUANT TO AN  AVAILABLE
EXEMPTION  FROM  REGISTRATION  UNDER  THE ACT  RELATING  TO THE  DISPOSITION  OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE  STATE  SECURITIES AND BLUE SKY
LAWS.  THESE  SECURITIES ARE ALSO SUBJECT TO THE  PROVISIONS OF A  STOCKHOLDERS'
AGREEMENT  DATED  AS OF  MARCH  30,  2000,  INCLUDING  CERTAIN  RESTRICTIONS  ON
TRANSFER,  INDEMNITY  PROVISIONS  AND VOTING  PROVISIONS  SET FORTH  THEREIN.  A
COMPLETE AND CORRECT COPY OF THIS  AGREEMENT IS AVAILABLE FOR  INSPECTION AT THE
PRINCIPAL  OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN  REQUEST AND
WITHOUT CHARGE."

The Company shall be obligated to reissue  promptly at the request of any Holder
thereof  unlegended  certificates  if the Holder  thereof shall have obtained an
opinion of counsel at such Holder's expense reasonably acceptable to the Company
to the effect that the securities  proposed to be disposed of may lawfully be so
disposed of without registration,  qualification, or legend, whether pursuant to
Rule 144(k), an effective registration statement, or otherwise.

     10.3. Governing Law.

     This  Agreement  shall be deemed to be a contract made under,  and shall be
construed in accordance with, the laws of the State of Delaware,  without giving
effect to conflict of laws principles thereof.

     10.4. Section Headings and Gender.

     The  descriptive   headings  in  this  Agreement  have  been  inserted  for
convenience  only and  shall  not be deemed  to limit or  otherwise  affect  the
construction  of any provision  thereof or hereof.  The use in this Agreement of
the masculine  pronoun in reference to a party hereto shall be deemed to include
the feminine or neuter as the context may require.

     10.5. Counterparts.

     This   Agreement   may  be  executed   simultaneously   in  any  number  of
counterparts,  each of which when so executed and delivered shall be taken to be
an original;  but such  counterparts  shall together  constitute but one and the
same document.



                                      -31-

<PAGE>

     10.6. Notices and Demands.

     Any notice or demand  which is  required or provided to be given under this
Agreement shall be deemed to have been  sufficiently  given and received for all
purposes when delivered by hand,  telecopy,  telex or other method of facsimile,
or five business days after being sent by certified or registered mail,  postage
and charges prepaid,  return receipt requested, or two business days after being
sent by  overnight  delivery  providing  receipt of  delivery  to the  following
addresses: If to the Company, at 1015 31st Street, N.W., Washington, D.C. 20007,
or at any  other  address  designated  by the  Company  to the  Stockholders  in
writing; if to a Stockholder,  at his or its mailing address as shown on Exhibit
A hereto, or at any other address  designated by such Stockholder to the Company
and the Stockholders in writing.

     10.7. Severability.

     Whenever possible, each provision of this Agreement shall be interpreted in
such a manner as to be  effective  and valid under  applicable  law,  but if any
provision of this  Agreement  shall be deemed  prohibited  or invalid under such
applicable  law,  such  provision  shall be  ineffective  to the  extent of such
prohibition  or  invalidity,  and  such  prohibition  or  invalidity  shall  not
invalidate  the  remainder  of such  provision or the other  provisions  of this
Agreement.

     10.8. Integration.

     This Agreement,  including the exhibits, documents and instruments referred
to herein or therein,  constitutes the entire agreement and supersedes all other
prior  agreements and  understandings,  both written and oral, among the parties
with respect to the subject mater hereof.

     10.9. Review with Counsel.

     Each party to this  Agreement  hereby  confirms  and  acknowledges  for the
benefit of each and all of the other  parties  hereto that he has  obtained  the
advice of counsel  with respect to its  execution,  and that he has entered into
this Agreement of his own free will and not under compulsion or duress.

     10.10. Waiver of Jury Trial.

     EACH PARTY HERETO HEREBY  WAIVES ANY RIGHT WHICH IT MAY  OTHERWISE  HAVE AT
LAW OR IN EQUITY TO A TRIAL BY JURY IN CONNECTION WITH ANY SUIT OR PROCEEDING AT
LAW OR IN EQUITY  BROUGHT BY ANY PARTY HERETO AGAINST  ANOTHER  WAIVING PARTY OR
WHICH OTHERWISE RELATES TO THIS AGREEMENT.

     10.11.Subsequent Series D or E Preferred  Stockholders.  To the extent that
the Company  issues in  accordance  with the terms hereof any Series D Preferred
Stock or Series E Preferred Stock subsequent to the date hereof,  each purchaser
thereof (i) shall be required to become a party to this  Agreement,  with all of
the benefits,  rights and obligations of a Stockholder  hereunder by executing a
written agreement between such purchaser and the Company,  which agreement shall
not require the execution of the then current Stockholders  hereunder,  and (ii)
shall make the  representations  in Section 3,  provided  that,  with respect to
Section  3.3(a),  such  purchaser  shall make the  representation  of no present
intention or plan as of the date thereof, formally or informally, to transfer or
dispose of any of the purchased  shares to any person who is not a member of the
controlling group of



                                      -32-

<PAGE>

shareholders  for purposes of IRC Section 351.  The Company  shall  provide each
Stockholder  notice of any parties added to this Agreement pursuant to the terms
hereof.

     10.12. Transferees. Except as specifically set forth in this Agreement, any
transferee of Founder Securities or Series Preferred Stock shall be bound by and
subject to the  restrictions  and  agreements  and  entitled to the benefits and
rights set forth in Sections 2, 4, 5, 6, 7, 8, 9 and 10 of this  Agreement as if
such transferee was a Founder or Series Preferred Stockholder as defined herein.
The relevant Holder or Holders,  as the case may be, shall notify the Company at
the time of such transfer.  All  certificates  representing  shares held by such
transferees shall bear a legend to such effect.  Any transfers of shares subject
to  this  Agreement   shall  be  effected  in  compliance  with  all  applicable
requirements  of the Federal  Communications  Commission (the "FCC") and federal
telecommunications  law, including any relevant limitations on foreign ownership
of FCC licenses.



                                      -33-

<PAGE>

     IN WITNESS  WHEREOF,  the parties  have caused  this  Agreement  to be duly
executed and  delivered by their proper and duly  authorized  officers as of the
day and year first above written.

                                    PATHNET TELECOMMUNICATIONS, INC.

                                       By:/s/ Richard Jalkut
                                         ---------------------------------
                                          Name: CEO
                                          Title:

                                  STOCKHOLDERS

                                    SPECTRUM EQUITY INVESTORS, L.P.

                                       By:/s/ Chris J. Maroni
                                         ---------------------------------
                                          Name: K.J. Maroni
                                          Title:

                                    SPECTRUM EQUITY INVESTORS II, L.P.

                                       By:/s/ Chris J. Maroni
                                         ---------------------------------
                                          Name:K.J. Maroni
                                          Title:

                                        /s/ Shawn J. Colo
                                    -------------------------------------
                                          Shawn J. Colo

                                        /s/ Ben Coughlin
                                    -------------------------------------
                                          Benjamin M. Coughlin


                                       /s/ illegible
                                    -------------------------------------
                                          Michael J. Kenneally



                                      -34-

<PAGE>

                                      /s/ illegible
                                    -------------------------------------
                                          Matthew N. Mochary


                                      /s/ illegible
                                    -------------------------------------
                                          Robert A. Nicholson


                                     /s/ F Wang
                                    -------------------------------------
                                          Fred Wang


                                    NEW ENTERPRISE ASSOCIATES VI, LIMITED
                                   PARTNERSHIP

                                       By: /s/ illegible
                                         ---------------------------------
                                          Name:
                                          Title:

                                    ONSET ENTERPRISE ASSOCIATES II, L.P.

                                       By: /s/ illegible
                                         ---------------------------------
                                          Name:
                                          Title: illegible

                                    ONSET ENTERPRISES ASSOCIATES III, L.P.

                                       By: /s/ illegible
                                         ---------------------------------
                                          Name:
                                          Title: Managing Director
                                                 OEA III Management, LLC
                                                 The General Partner of
                                                 Onset Enterprise Associates III
                                                  L.P.

                                      -35-

<PAGE>


                                    MONTAUK PARTNERS, L.P.

                                       By: /s/ Brian M Smith
                                         ---------------------------------
                                          Name:   Brian M Smith
                                          Title:  Managing Member of
                                                  General Partner

                                    PAUL CAPITAL PARTNERS V, L.P.

                                       By: /s/ Bryon T. Sheets
                                         ---------------------------------
                                          Name:   Bryon T. Sheets
                                          Title:  Manager of Paul Capital
                                                       Management, LLC

                                    PAUL CAPITAL PARTNERS V (DOMESTIC ANNEX
                                    FUND), L.P.

                                       By:/s/ Bryon T. Sheets
                                         ---------------------------------
                                          Name:   Bryon T. Sheets
                                          Title:  Manager of Paul Capital
                                                       Management, LLC


                                    PAUL CAPITAL PARTNERS V INTERNATIONAL, L.P.

                                       By:/s/ Bryon T. Sheets
                                         ---------------------------------
                                          Name:   Bryon T. Sheets
                                          Title:  Manager of Paul Capital
                                                       Management, LLC



                                      -36-

<PAGE>

                                    PAUL CAPITAL PARTNERS VI, L.P.

                                       By:/s/ Bryon T. Sheets
                                         ---------------------------------
                                          Name:   Bryon T. Sheets
                                          Title:  Manager of Paul Capital
                                                       Management, LLC


                                    PCP ASSOCIATES, L.P.

                                       By:/s/ Bryon T. Sheets
                                         ---------------------------------
                                          Name:   Bryon T. Sheets
                                          Title:  Manager of Paul Capital
                                                       Management, LLC


                                        /s/ Thomas Domencich
                                    -------------------------------------
                                          Thomas Domencich


                                        /s/ Dennis R. Patrick
                                    -------------------------------------
                                          Dennis R. Patrick


                                    TORONTO DOMINION CAPITAL (U.S.A.), INC.

                                       By: /s/ Martha L. Gariepy
                                         ---------------------------------
                                          Name:   Martha L. Gariepy
                                          Title:  Secretary/Treasurer

                                    GROTECH PARTNERS IV, L.P.

                                       By:/s/ Patrick Kerins
                                         ---------------------------------
                                          Name:   Patrick Kerins
                                          Title:  Managing Director



                                      -37-

<PAGE>

                                    UTECH CLIMATE CHALLENGE FUND, L.P.

                                       By:/s/ Robert W. Shaw Jr
                                         ---------------------------------
                                          Name: Robert W. Shaw Jr
                                          Title: Managing Member

                                    UTILITY COMPETITIVE ADVANTAGE FUND

                                       By:/s/ William T. Heflin
                                         ---------------------------------
                                          Name:   William T. Heflin
                                          Title:  Managing Director

                                    FBR TECHNOLOGY VENTURE PARTNERS, L.P.

                                       By: /s/ Gene Riechers
                                         ---------------------------------
                                          Name: Gene Riechers
                                          Title: Managing Director

                                    THE BURLINGTON NORTHERN AND SANTA FE
                                    RAILWAY COMPANY

                                       By: /s/  Illegible
                                         ---------------------------------
                                          Name:
                                          Title:

                                    COLONIAL PIPELINE COMPANY

                                       By: /s/ D.L. Lemmon
                                         ---------------------------------
                                          Name:   D.L. Lemmon
                                          Title:  President and Chief Executive
                                                    Officer




                                      -38-

<PAGE>

                                    CSX TRANSPORTATION, INC.

                                       By: /s/ Paul Sandler
                                         ---------------------------------
                                          Name:   Paul D. Sandler
                                          Title:  Senior Vice President -
                                                   Corporate Services


                                        /s/ David Schaeffer
                                    -------------------------------------
                                          David Schaeffer



                                      -39-