Document:

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 ;

                                       -2-

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                       -3-

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

                                       -4-

<PAGE>

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

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

SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

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

     2.1. Organization and Corporate Power.

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

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

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

                                       -5-

<PAGE>

     2.2. Authorization and Non-Contravention.

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

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

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

     2.3. Tax-Related Representations.

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

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

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

                                       -6-

<PAGE>

SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

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

     3.1. Organization and Corporate, Partnership and Individual Power.

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

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

     3.2. Authorization and Non-Contravention.

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

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

                                       -7-

<PAGE>

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

     3.3. Tax-Related Representations.

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

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

SECTION 4 COVENANTS OF THE COMPANY AND THE STOCKHOLDERS

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

     4.1. Financial Statements and Budgetary Information.

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

                                       -8-

<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-PATHNET, INC.

                        PATHNET TELECOMMUNICATIONS, INC.

                              THE BANK OF NEW YORK

                         ------------------------------

                             SUPPLEMENTAL INDENTURE

                           Dated as of March 30, 2000

                                       To

                      Indenture, Dated as of April 8, 1998,

                                     Between

                                  Pathnet, Inc.

                                       and

                        The Bank of New York, as Trustee

                         ------------------------------

<PAGE>

                                      -81-
<TABLE>

                                TABLE OF CONTENTS
                                                                                                               PAGE
<CAPTION>
<S>                                                                                                               <C>

RECITALS..........................................................................................................1

AMENDMENTS TO "DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION"...........................................2

   Section 101.       Introduction................................................................................2
   Section 102.       Revised Definitions.........................................................................3
      Accounts Receivable Subsidiary..............................................................................3
      Amendment Date..............................................................................................4
      Asset Sale..................................................................................................4
      Board of Directors..........................................................................................4
      Board Resolution............................................................................................4
      Cash Equivalents............................................................................................4
      Change of Control...........................................................................................5
      Consolidated Adjusted Net Income............................................................................6
      Consolidated Indebtedness...................................................................................6
      Consolidated Indebtedness to Consolidated Operating Cash Flow Ratio.........................................6
      Consolidated Interest Expense...............................................................................7
      Consolidated Operating Cash Flow............................................................................8
      Consolidated Tax Expense....................................................................................8
      Credit Facilities...........................................................................................8
      Currency Agreements.........................................................................................8
      Debt Securities.............................................................................................8
      Disinterested Director......................................................................................8
      Event of Default............................................................................................9
      Fair Market Value..........................................................................................10
      Guarantee..................................................................................................10
      Incumbent..................................................................................................10
      Incumbent Agreement........................................................................................10
      Incur......................................................................................................11
      Indebtedness...............................................................................................11
      Invested Capital...........................................................................................12
      Investment.................................................................................................12
      Net Cash Proceeds..........................................................................................12
      Officers' Certificate......................................................................................13
      Parent.....................................................................................................13
      Permitted Indebtedness.....................................................................................13
      Permitted Investment.......................................................................................16
      Permitted Liens............................................................................................17
      Permitted Telecommunications Asset Sale....................................................................19
      Permitted Telecommunications Joint Venture.................................................................19
      Redeemable Capital Stock...................................................................................19
      Restricted Company Subsidiary..............................................................................19
      Restricted Entity..........................................................................................20
      Restricted Parent Subsidiary...............................................................................20
      Restricted Subsidiary......................................................................................20
      Sale-Leaseback Transaction.................................................................................20
      Significant Subsidiary.....................................................................................20
      Subsidiary.................................................................................................20
      Telecommunications Assets..................................................................................20
      Telecommunications Business................................................................................21
      Telecommunications Indebtedness............................................................................21
      Unrestricted Subsidiary....................................................................................21
   Section 103.       Definitions for Purposes of Section 1017(a)................................................22
      Accounts Receivable Subsidiary.............................................................................22
      Allowable Company Indebtedness.............................................................................22
      Asset Sale.................................................................................................22
      Board of Directors.........................................................................................23
      Board Resolution...........................................................................................23
      Cash Equivalents...........................................................................................23
      Consolidated Adjusted Net Income...........................................................................23
      Consolidated Indebtedness..................................................................................24
      Consolidated Indebtedness to Consolidated Operating Cash Flow Ratio........................................24
      Consolidated Interest Expense..............................................................................25
      Consolidated Operating Cash Flow...........................................................................25
      Consolidated Tax Expense...................................................................................26
      Event of Default...........................................................................................26
      Fair Market Value..........................................................................................27
      Incumbent..................................................................................................27
      Incumbent Agreement........................................................................................27
      Incur......................................................................................................27
      Indebtedness...............................................................................................28
      Invested Capital...........................................................................................29
      Investment.................................................................................................29
      Net Cash Proceeds..........................................................................................29
      Permitted Indebtedness.....................................................................................30
      Permitted Investment.......................................................................................32
      Permitted Liens............................................................................................33
      Permitted Restriction......................................................................................35
      Permitted Telecommunications Asset Sale....................................................................35
      Permitted Telecommunications Joint Venture.................................................................36
      Permitted Transaction......................................................................................36
      Restricted Payment.........................................................................................37
      Sale-Leaseback Transaction.................................................................................41
      Significant Subsidiary.....................................................................................41
      Telecommunications Assets..................................................................................41
      Telecommunications Business................................................................................41
      Telecommunications Indebtedness............................................................................42
      Unrestricted Company Subsidiary............................................................................42
   Section 104.       Amendment to Section 103...................................................................43

AMENDMENTS TO "NOTE FORMS".......................................................................................43

   Section 105.  Amendment to Section 202........................................................................43
   Section 106.       Amendment to Section 203...................................................................46
   Section 107.       Addition of Section 203A...................................................................48
   Section 108.       Amendment to Section 501...................................................................53

AMENDMENTS TO "CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE".............................................53

   Section 109.       Amendment to Article Eight.................................................................53

AMENDMENTS TO "SUPPLEMENTAL INDENTURES"..........................................................................55

   Section 110.       Amendment to Section 901...................................................................55
   Section 111.       Amendment to Section 902...................................................................56
   Section 112.       Amendment to Section 1002..................................................................57
   Section 113.       Amendment to Section 1003..................................................................58
   Section 114.       Amendment to Section 1004..................................................................59
   Section 115.       Amendment to Section 1005..................................................................59
   Section 116.       Amendment to Section 1006..................................................................60
   Section 117.       Amendment to Section 1007..................................................................60
   Section 118.       Amendment to Section 1008..................................................................61
   Section 119.       Amendment to Section 1009..................................................................61
   Section 120.       Amendment to Section 1010..................................................................62
   Section 121.       Amendment to Section 1011..................................................................63
   Section 122.       Amendment to Section 1012..................................................................63
   Section 123.       Amendment to Section 1013..................................................................66
   Section 124.       Amendment to Section 1014..................................................................67
   Section 125.       Amendment to Section 1015..................................................................68
   Section 126.       Amendment to Section 1016..................................................................68
   Section 127.       Amendment to Section 1017..................................................................69
   Section 128.       Amendment to Section 1018..................................................................71

AMENDMENTS TO "SECURITY".........................................................................................72

   Section 129.       Amendments to Article 12...................................................................72

AMENDMENTS TO "DEFEASANCE AND COVENANT DEFEASANCE"...............................................................74

   Section 130.       Amendments to Article 13...................................................................74

PARENT GUARANTEE.................................................................................................77

   Section 131.       Guarantee..................................................................................78

MISCELLANEOUS....................................................................................................78

   Section 132        Waiver.....................................................................................78
   Section 133.       Acts of Holders............................................................................78
   Section 134.       Notice of Holders; Waiver..................................................................79
   Section 135.       Counterparts...............................................................................79
   Section 136.       Governing Law..............................................................................79
   Section 137.       Separability Clause........................................................................80
   Section 138.       Headings...................................................................................80
   Section 139.       Effect of Supplemental Indenture...........................................................80
   Section 140.       Indenture in Full Force and Effect as Supplemented.........................................80

</TABLE>

<PAGE>

              SUPPLEMENTAL   INDENTURE,   dated  as  of  March  30,   2000  (the
"Supplemental  Indenture"),  among PATHNET, INC., a Delaware corporation (herein
called the  "Company")  having its principal  office at 1015 31st Street,  N.W.,
Washington D.C. 20007, PATHNET TELECOMMUNICATIONS,  INC., a Delaware corporation
(herein  called the "Parent")  having its principal  office at 1015 31st Street,
N.W.,  Washington  D.C.  20007,  and THE BANK OF NEW  YORK,  a New York  banking
corporation, as Trustee (herein called the "Trustee") to the Indenture, dated as
of  April  8,  1998,   between  the  Company  and  the  Trustee  (the  "Original
Indenture").

                                    RECITALS

              The  Company  and the  Trustee  have  entered  into  the  Original
Indenture.  The Company has issued $350,000,000 in aggregate principal amount of
12 1/4%  Senior  Notes due 2008.  The Company  originally  issued the notes in a
so-called A/B private placement transaction pursuant to which, in September 1998
(as required by the terms of the Original Indenture),  the Company exchanged the
privately placed notes for substantially identical series notes (the "Notes") in
an  offering  registered  under  the  Securities  Act.  The  Notes,  which  were
registered  with the SEC in the "B"  portion  of the  "A/B"  exchange  offering,
continue to be governed by the terms of the Original Indenture;

              The  Company  and  the  Parent  are  proposing  to  enter  into  a
contribution and re-organization transaction (the "Transaction").  In connection
with the  Transaction,  the Parent and the Company have entered into a series of
Contribution  Agreements with the parties to the  Transaction  pursuant to which
the Parent will (i) issue shares of Series D Convertible Preferred Stock, with a
par value of $0.01 per share and Series E Convertible  Preferred  Stock,  with a
liquidation  preference of $0.01 per share in exchange for the  contribution  of
leasehold interests in rights of way owned by the several  counterparties to the
Contribution  Agreements,  and (ii) exchange  shares of Common Stock,  par value
$0.01 per share and Series A, B and C Convertible  Preferred Stock,  each with a
par value of $0.01 per share,  for shares of Common  Stock,  par value $0.01 per
share, and Series A, B and C Preferred Stock, each with a liquidation preference
of $0.01 per share,  of the Company held by existing  holders of such securities
of the Company;

              In  connection  with the  Transaction,  the Parent will deliver an
irrevocable and unconditional  guarantee of the Company's  obligations under the
Notes;

              In addition,  the Parent has agreed to accept covenant obligations
similar to the covenant  obligations  that are currently  imposed on the Company
under the Original  Indenture and the Parent and the Company wish to ensure that
transactions between the Company and the Parent or the Company and certain other
subsidiaries  of  the  Parent  are  permitted  to  the  same  extent  that  such
transactions were permitted between the Company and its Restricted  Subsidiaries
under the Original Indenture;

              Pursuant to Section  902 of the  Original  Indenture,  the parties
hereto  desire to enter into this  Supplemental  Indenture and the holders of at
least a majority in aggregate  principal  amount of the  Outstanding  Notes have
consented  to the  amendments  to the  Original  Indenture  set  forth  in  this
Supplemental Indenture as required by Section 902 of the Original Indenture;

              Any references  herein to the "Indenture"  shall be deemed to be a
reference to the Original  Indenture as amended by this Supplemental  Indenture,
and  unmodified  references to Sections or  Subsections  are to such Sections or
Subsections of the Indenture;

              It is the intent of the parties that this  Supplemental  Indenture
be effective as of the date set forth above;

              NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

              For and in consideration  of the foregoing  premises and for other
good and valuable consideration, the receipt of which is hereby acknowledged, it
is mutually covenanted and agreed for the equal and proportionate benefit of all
Holders of the Notes as follows:

                           AMENDMENTS TO "DEFINITIONS
                  AND OTHER PROVISIONS OF GENERAL APPLICATION"
SECTION 101.      INTRODUCTION.
                  ------------

(a) The definitions in the Original  Indenture are amended in this  Supplemental
Indenture to the extent  necessary (1) to impose covenant  obligations  upon the
Parent that are  substantively  equivalent to those imposed on the Company under
the Original Indenture,  and (2) to permit  transactions  between the Parent and
the  Company or any other  Restricted  Subsidiaries  of the  Parent  that may be
created in the future to the extent that such transactions are permitted between
the Company and its Restricted Subsidiaries under the Original Indenture.  These
amended definitions are contained in Section 102 of this Supplemental Indenture.

(b) It is the intent of the parties to this  Supplemental  Indenture to preserve
unmodified the substance of the covenant and other obligations  imposed upon the
Company under the Original Indenture.

(c) Section 902(2) of the Original Indenture provides that the obligation of the
Company (1) to make and consummate an Excess  Proceeds Offer with respect to any
Asset Sale by the Company or any of its  Restricted  Subsidiaries  in accordance
with Section 1017 of the Original  Indenture,  and (2) to make and  consummate a
Change of Control  Offer in the event of a Change of  Control of the  Company in
accordance with Section 1010 of the Original Indenture (together, the "Specified
Obligations") cannot be amended,  changed or modified without the consent of the
Holder of each Outstanding Note affected thereby. Section 902(2) of the Original
Indenture  further  provides  that the  definitions  relating  to the  Specified
Obligations  cannot be amended,  changed or  modified so as to amend,  change or
modify the obligations of the Company with respect to the Specified  Obligations
without the consent of the Holder of each Outstanding Note affected thereby.

(d) In order to effect the  amendments  described in paragraph (a) above,  it is
necessary to amend certain defined terms that are otherwise used in Section 1017
of the Original  Indenture.  In order to comply with the  provisions  of Section
902(2) of the Original  Indenture,  as described  in  paragraph  (c) above,  the
obligations on the Company and the Restricted Company  Subsidiaries  pursuant to
Section  1017  of the  Original  Indenture  have  been  reproduced  without  the
inclusion of  references  to the Parent in Section  122(a) of this  Supplemental
Indenture,  and will be incorporated  as Section  1017(a) of the Indenture.  The
definitions  from  Section 102 of this  Supplemental  Indenture  used in Section
1017(a) of the Indenture are also reproduced without the inclusion of references
to  the  Parent.  Certain  technical  modifications  to  these  definitions  are
necessary to preserve the economic substance of these Company-specific covenants
and  obligations.  These  "Section  1017(a) only"  definitions  are set forth in
Section 103 of this Supplemental Indenture.

(e) It is not  necessary to  reproduce  the  obligations  of the Company and the
Restricted Company  Subsidiaries  pursuant to Section 1010 without the inclusion
of  reference  to the Parent in order to comply  with  Section  902(2).  This is
because the proposed  amendment  does not modify or amend the  obligation of the
Company and its Restricted Company  Subsidiaries to make and consummate a Change
of Control Offer,  but rather provides that such obligation is also triggered by
a Change of Control of the  Parent.  The  definition  of "Change of  Control" is
modified  accordingly and the revised  definition is contained in Section 102 of
this  Supplemental  Indenture.  All other capitalized terms used in Section 1010
are  defined  within  that  Section  or have  the  meaning  given to them in the
Original Indenture.

(f) Defined terms set forth in Section 101 of the Original Indenture that do not
need to be amended for the purposes of this Supplemental Indenture,  and are not
included in the revised  definitions in Section 102 or 103 of this  Supplemental
Indenture, retain the meaning given to them in the Original Indenture.

(g) Wherever used in this Supplemental Indenture, "including" shall be deemed to
mean "including without limitation".

SECTION 102.      REVISED DEFINITIONS.
                  -------------------

              For  all  purposes  of  this  Supplemental  Indenture,  except  as
otherwise  expressly  provided  herein  and  subject  to  Section  103  of  this
Supplemental  Indenture,  the defined terms listed below shall have the meanings
ascribed thereto below.  For the avoidance of doubt, any capitalized  terms used
in Section  1017(a) shall have the meanings  ascribed  thereto in Section 103 of
this Supplemental Indenture,  and to the extent any such term is also defined in
this Section 102, the  definition  contained in this Section 102 shall not apply
to such term as used in Section 1017(a);

              "ACCOUNTS  RECEIVABLE  SUBSIDIARY"  means any  Restricted  Company
Subsidiary or Restricted  Parent  Subsidiary  that is,  directly or  indirectly,
wholly  owned by the  Company or the  Parent  (as the case may be)  (other  than
directors qualifying shares) and organized for the purpose of and engaged in (i)
purchasing,   financing  and  collecting  accounts  receivable   obligations  of
customers  of any  Restricted  Entity,  (ii) the sale or  financing  of accounts
receivable  or interests  therein and (iii) other  activities  directly  related
thereto.

              "AMENDED AND RESTATED PLEDGE AGREEMENT" means the amended and
restated  pledge  agreement  dated as of the date  hereof,  by and  between  the
Trustee  and the  Company,  governing  the  disbursement  of funds in the Escrow
Account.

              "AMENDMENT  DATE"  means  the date as of which  this  Supplemental
Indenture is executed by the parties hereto.

              "ASSET SALE" means any sale, issuance, conveyance, transfer, lease
or  other   disposition   (including   by  way  of  merger,   consolidation   or
Sale-Leaseback   Transaction)   (collectively,   a   "transfer"),   directly  or
indirectly, in one or a series of related transactions, of (i) any Capital Stock
of any Subsidiary; (ii) all or substantially all of the properties and assets of
the Parent or any  Subsidiary;  or (iii) any other  properties  or assets of the
Parent or any  Subsidiary,  other than in the  ordinary  course of business  (it
being  understood  that the  ordinary  course of business  includes,  but is not
restricted to, any transfer or sale of, or the grant of a right to use, an asset
to an Incumbent  pursuant to (x) an Incumbent  Agreement,  (y) applicable law or
(z) an agreement to which such Incumbent is a party which exists on the date of,
and is not entered into in contemplation of, such Incumbent Agreement).  For the
purposes  of this  definition,  the term  "Asset  Sale"  shall not  include  any
transfer  of  properties  or assets (A) that is governed  by the  provisions  of
Article  Eight of this  Indenture  (B) of the  Parent to any  Restricted  Parent
Subsidiary,  or of any Restricted  Parent  Subsidiary to the Parent or any other
Restricted Parent Subsidiary in accordance with the terms of this Indenture, (C)
having an aggregate Fair Market Value of less than $2,000,000 (or the equivalent
thereof in any other  currency) in any given fiscal year, (D) by the Parent or a
Restricted  Parent  Subsidiary to a Person who is not an Affiliate of the Parent
in  exchange  for  Telecommunications  Assets  (or not less  than 66 2/3% of the
outstanding Voting Stock of a Person that becomes a Restricted  Subsidiary,  the
assets of which  consist  primarily  of  Telecommunications  Assets)  or related
telecommunications  services  where,  in the good faith judgment of the board of
directors of the Parent evidenced by a board  resolution,  the Fair Market Value
of such Telecommunications Assets (or such Voting Stock) or services so received
is at least equal to the Fair Market Value of the properties or assets  disposed
of or, if less, the difference is received by the Parent in cash in an amount at
least  equal  to  such  difference,   (E)  constituting   Capital  Stock  of  an
Unrestricted  Subsidiary or other  Investment  that was permitted  under Section
1012 of the Indenture when made,  (F)  constituting  accounts  receivable of the
Parent or a Restricted  Parent Subsidiary to an Accounts  Receivable  Subsidiary
or, in  consideration  of Fair Market  Value  thereof,  to Persons  that are not
Affiliates of the Parent or any Subsidiary of the Parent in the ordinary  course
of  business,  including  in  connection  with  financing  transactions,  (G) in
connection with a Sale-Leaseback  Transaction otherwise permitted to be incurred
under Section 1011 of the Indenture, (H) to a Permitted Telecommunications Joint
Venture  if such  transfer  of  properties  or  assets  is  permitted  under the
definition  of  "Permitted  Investments",  (I) in  connection  with a  Permitted
Telecommunications  Asset Sale or (J) to an Unrestricted Subsidiary if permitted
under Section 1012 of the Indenture.

              "BOARD OF  DIRECTORS"  means (i) either the board of  directors of
the  Company or any duly  authorized  committee  of that  board,  when used with
respect to the  Company,  or (ii) either the board of directors of the Parent or
any duly  authorized  committee  of that  board,  when used with  respect to the
Parent.

              "BOARD  RESOLUTION" means a copy of a resolution  certified by the
Secretary or an  Assistant  Secretary of the Parent to have been duly adopted by
the Board of  Directors  of the Parent and to be in full force and effect on the
day of such certification and delivered to the Trustee; unless used with respect
to the Company when  references to the "Parent" in the preceding  sentence shall
be replaced by references to the "Company".

              "CASH EQUIVALENTS" means:

(a) any evidence of  Indebtedness  with a maturity of 180 days or less issued or
directly and fully  guaranteed or insured by the United States of America or any
agency or  instrumentality  thereof  (PROVIDED that the full faith and credit of
the United States of America is pledged in support thereof);

(b)  certificates of deposit or acceptances  with a maturity of 180 days or less
of any financial  institution that is a member of the Federal Reserve System, in
each case having combined capital and surplus and undivided  profits of not less
than $500,000,000;

(c) commercial paper with a maturity of 180 days or less issued by a corporation
that is not an affiliate  of the Parent and is  organized  under the laws of any
state of the  United  States  and  rated at least  A-1 by S&P or at least P-1 by
Moody's; and

(d) money market mutual funds that invest  substantially  all of their assets in
securities of the type described in the preceding clauses.

              "CHANGE OF CONTROL" means any of the following events:

(a) any "person" or "group" (as such terms are used in Sections  13(d) and 14(d)
of  the  Exchange  Act),  other  than  Permitted  Holders,  is  or  becomes  the
"beneficial  owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except  that a Person  shall be deemed  to have  "beneficial  ownership"  of all
securities  that such  Person has the right to  acquire,  whether  such right is
exercisable  immediately  or only  after  the  passage  of  time),  directly  or
indirectly,  of more  than  50% of the  total  outstanding  Voting  Stock of the
Company or of the Parent.

(b) the Company or the Parent consolidates with, or merges with or into, another
Person  or  conveys,   transfers,   leases  or  otherwise  disposes  of  all  or
substantially all of its assets to any Person, or any Person  consolidates with,
or merges with or into, the Company or the Parent, in any such event pursuant to
a transaction in which the outstanding Voting Stock of the Company or the Parent
(as the case may be) is converted  into or  exchanged  for cash,  securities  or
other property, other than any such transaction (i) where the outstanding Voting
Stock of the  Company  or the Parent  (as the case may be) is not  converted  or
exchanged  at all  (except  to the extent  necessary  to reflect a change in the
jurisdiction of incorporation of the Company or the Parent (as the case may be))
or is converted  into or exchanged  for (A) Voting Stock (other than  Redeemable
Capital  Stock)  of  the  surviving  or  transferee  corporation  or  (B)  cash,
securities and other property (other than Capital Stock of the Surviving Entity)
in an  amount  that  could be paid by the  Parent  as a  Restricted  Payment  as
described  in Section  1012 of the  Indenture  in the event of a  conversion  or
exchange  by the  Parent or that could be paid by the  Company  as a  Restricted
Payment  as  described  in  Section  1012 of the  Indenture  in the  event  of a
conversion  or  exchange  by  the  Company  and  (ii)  immediately   after  such
transaction,  no "person"  or "group" (as such terms are used in Sections  13(d)
and 14(d) of the Exchange Act), other than Permitted Holders, is the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,  except that
a Person shall be deemed to have  "beneficial  ownership" of all securities that
such  Person  has the  right to  acquire,  whether  such  right  is  exercisable
immediately or only after the passage of time), directly or indirectly,  of more
than 50% of the total  outstanding  Voting Stock of the  surviving or transferee
corporation;

(c) during any consecutive two-year period,  individuals who at the beginning of
such period  constituted  the Board of  Directors of the Company or the Board of
Directors of the Parent  (together with any new directors whose election to such
Board of Directors,  or whose nomination for election by the stockholders of the
Company or the Parent (as the case may be) was  approved by a vote of 66 2/3% of
the directors then still in office who were either directors at the beginning of
such period or whose  election or  nomination  for  election was  previously  so
approved)  cease  for any  reason  to  constitute  a  majority  of the  Board of
Directors of the Company or the Parent (as the case may be) then in office; or

(d) the Company is  liquidated or dissolved or adopts a plan of  liquidation  or
dissolution   other  than  in  a  transaction   which  constitutes  a  Permitted
Transaction,  or the  Parent  is  liquidated  or  dissolved  or adopts a plan of
liquidation or dissolution  other than in a transaction  which complies with the
provisions of Article 8 of the Indenture.

              "CONSOLIDATED  ADJUSTED  NET INCOME"  means,  with  respect to any
period,  the  consolidated  net income (or loss) of all Restricted  Entities for
such period as  determined  in  accordance  with GAAP,  adjusted  by  excluding,
without duplication:

(a) any net after-tax  extraordinary gains or losses (less all fees and expenses
relating thereto);

(b) any net  after-tax  gains or  losses  (less all fees and  expenses  relating
thereto) attributable to asset dispositions other than in the ordinary course of
business;

(c) the portion of net income (or loss) of any Person  (other than a  Restricted
Entity), including Unrestricted Subsidiaries, in which any Restricted Entity has
an ownership interest,  except to the extent of the amount of dividends or other
distributions  actually  paid to any  Restricted  Entity  in cash  dividends  or
distributions during such period;

(d) the net income (or loss) of any Person  combined with any Restricted  Entity
on a "pooling of interests"  basis  attributable to any period prior to the date
of combination;

(e) the net income of the  Company or any  Restricted  Subsidiary  to the extent
that the  declaration  or payment of dividends or similar  distributions  by the
Company  or such  Restricted  Subsidiary  is not at the  date  of  determination
permitted,  directly or indirectly,  by operation of the terms of its charter or
any  agreement,   instrument,   judgment,   decree,   order,  statute,  rule  or
governmental  regulation applicable to the Company or such Restricted Subsidiary
or its stockholders (except, for purposes of determining compliance with Section
1011 of the Indenture, any restriction permitted under clause (vii) or (viii) of
Section 1018 of the Indenture; and

(f) any net income (or loss) from the Company or any Restricted  Subsidiary that
was an  Unrestricted  Subsidiary  at any time during such period  other than any
amounts actually received from the Company or such Restricted Subsidiary.

              "CONSOLIDATED INDEBTEDNESS" means, with respect to any period, the
aggregate amount of Indebtedness of all Restricted  Entities  outstanding at the
date of determination  as determined on a consolidated  basis in accordance with
GAAP.

              "CONSOLIDATED  INDEBTEDNESS  TO  CONSOLIDATED  OPERATING CASH FLOW
RATIO"  means,  at any date of  determination,  the  ratio  of (i)  Consolidated
Indebtedness of all Restricted Entities to (ii) Consolidated Operating Cash Flow
of all  Restricted  Entities  for the two  preceding  fiscal  quarters for which
financial   information   is  available   immediately   prior  to  the  date  of
determination,  multiplied  by  two;  PROVIDED  further  that  any  Indebtedness
incurred or retired by any Restricted  Entity during the fiscal quarter in which
the transaction date occurs shall be calculated as if such  Indebtedness were so
incurred or retired on the first day of the fiscal  quarter in which the date of
determination occurs (PROVIDED further that, in making any such computation, the
aggregate amount of Indebtedness  under any revolving credit or similar facility
shall be deemed to include an amount of funds equal to the average daily balance
of such  Indebtedness  during  such two fiscal  quarter  period);  and  PROVIDED
further that (x) if the  transaction  giving rise to the need to  calculate  the
Consolidated  Indebtedness to Consolidated  Operating Cash Flow Ratio would have
the effect of increasing or decreasing Consolidated Indebtedness or Consolidated
Operating Cash Flow in the future,  Consolidated  Indebtedness  and Consolidated
Operating  Cash  Flow  shall  be  calculated  on a pro  forma  basis  as if such
transaction  had  occurred  on the first day of such two fiscal  quarter  period
preceding  the date of  determination;  (y) if during  such two  fiscal  quarter
period, any Restricted Entity shall have engaged in any Asset Sale in respect of
any  company,  entity or  business,  Consolidated  Operating  Cash Flow for such
period shall be reduced by an amount equal to the  Consolidated  Operating  Cash
Flow  (if  positive),  or  increased  by an  amount  equal  to the  Consolidated
Operating Cash Flow (if negative),  directly attributable to the company, entity
or business that is the subject of such Asset Sale and any related retirement of
Indebtedness  as if such Asset Sale and any related  retirement of  Indebtedness
had occurred on the first day of such  period;  or (z) if during such two fiscal
quarter period any Restricted Entity shall have acquired any company,  entity or
business,  Consolidated  Operating  Cash Flow shall be calculated on a pro forma
basis as if such acquisition and any related financing had occurred on the first
day of such period.

              "CONSOLIDATED  INTEREST  EXPENSE" means,  for any period,  without
duplication, the sum of:

(a) the  consolidated  interest  expense  of all  Restricted  Entities  for such
period,  including  (i)  amortization  of debt  discount,  (ii)  the net cost of
Interest  Rate  Agreements  (including  amortization  of  discounts),  (iii) the
interest portion of any deferred payment obligation,  (iv) accrued interest, (v)
the consolidated amount of any interest capitalized by the Company or the Parent
and (vi) amortization of debt issuance costs; plus

(b) the consolidated  interest component of Capitalized Lease Obligations of all
Restricted  Entities paid, accrued and/or scheduled to be paid or accrued during
such period;  excluding,  however, any amount of such interest of any Restricted
Subsidiary  if the net income of such  Restricted  Subsidiary is excluded in the
calculation of  Consolidated  Adjusted Net Income  pursuant to clause (e) of the
definition  thereof (but only in the same  proportion  as the net income of such
Restricted  Subsidiary is excluded from the calculation of Consolidated Adjusted
Net Income pursuant to clause (e) of the definition  thereof);  PROVIDED that in
making such computation,  (x) the Consolidated  Interest Expense attributable to
interest  on any  Indebtedness  computed  on a pro forma basis and (A) bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not  outstanding  during the period for which the  computation is being made but
which bears, at the option of the Parent,  a fixed or floating rate of interest,
shall be computed by applying,  at the option of the Parent, either the fixed or
floating rate, (y) the Consolidated Interest Expense attributable to interest on
any Indebtedness under a revolving credit facility computed on a pro forma basis
shall be computed  based upon the  average  daily  balance of such  Indebtedness
during the  applicable  period  and (z) the  interest  rate with  respect to any
Indebtedness  covered by an Interest  Rate  Agreement  shall be deemed to be the
effective  interest  rate with  respect to such  Indebtedness  after taking into
account such Interest Rate Agreement.

              "CONSOLIDATED  OPERATING  CASH FLOW"  means,  with  respect to any
period, the Consolidated Adjusted Net Income of all Restricted Entities for such
period:

(a) increased by (to the extent deducted in computing  Consolidated Adjusted Net
Income)  the  sum of  (i)  the  Consolidated  Tax  Expense  of  such  Restricted
Subsidiaries as are subject to the immediately  preceding  parenthetical  clause
for such period  (other than taxes  attributable  to  extraordinary,  unusual or
non-recurring  gains or  losses);  (ii)  Consolidated  Interest  Expense  of all
Restricted  Entities  for such  period;  (iii)  depreciation  of all  Restricted
Entities for such period,  determined on a consolidated basis in accordance with
GAAP; (iv) amortization of all Restricted  Entities for such period,  determined
on a  consolidated  basis in accordance  with GAAP;  and (v) any other  non-cash
charges  that were  deducted  in  computing  Consolidated  Adjusted  Net  Income
(excluding  any non-cash  charge  which  requires an accrual or reserve for cash
charges for any future  period) of the  Restricted  Entities  for such period in
accordance with GAAP; and

(b)  decreased  by any  non-cash  gains of the  Restricted  Entities  that  were
included in computing Consolidated Adjusted Net Income.

              "CONSOLIDATED  TAX EXPENSE" means,  for any period,  the provision
for U.S.  federal,  state,  provincial,  local and foreign  income  taxes of all
Restricted  Entities for such period as  determined on a  consolidated  basis in
accordance with GAAP.

              "CREDIT  FACILITIES"  means, with respect to a Restricted  Entity,
one or more debt facilities or commercial  paper  facilities with banks or other
institutional  lenders  providing  for  revolving  credit  loans,  terms  loans,
receivables financing (including through the sale of receivables to such lenders
or to special  purpose  entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.

              "CURRENCY   AGREEMENTS"   means  any  spot  or  forward   exchange
agreements  and  currency  swap,  currency  option  or other  similar  financial
agreements or arrangements entered into by the any Restricted Entity.

              "DEBT  SECURITIES"  means  any  debt  securities   (including  any
Guarantee of such securities) issued by any Restricted Entity in connection with
a public offering (whether or not underwritten) or a private placement (PROVIDED
that such private  placement is  underwritten  for resale pursuant to Rule 144A,
Regulation S or otherwise under the Securities Act or sold on an agency basis by
a broker-dealer or one of its Affiliates to 10 or more non-affiliated beneficial
holders);  it being understood that the term "Debt Securities" shall not include
any evidence of indebtedness under the Vendor Credit Facility,  any financing by
the Company or a Restricted  Subsidiary similar to the Vendor Credit Facility or
any Credit Facility or other  commercial bank  borrowings,  any vendor equipment
financing  facility or any similar  financings,  recourse transfers of financial
assets,  capital  leases or other types of  borrowings  incurred in a manner not
customarily viewed as a "securities offering".

              "DISINTERESTED DIRECTOR" means, with respect to any transaction or
series of transactions in respect of which the board of directors of the Company
is required to deliver a resolution  thereof under this  Indenture,  a member of
the board of directors  of the Company who does not have any material  direct or
indirect  financial interest in or with respect to such transaction or series of
transactions,  and with respect to any  transaction or series of transactions in
respect of which the board of  directors  of the Parent is required to deliver a
resolution  thereof under this Indenture,  a member of the board of directors of
the Parent who does not have any material direct or indirect  financial interest
in or with respect to such transaction or series of  transactions.  For purposes
of this definition, no Person shall be deemed not to be a Disinterested Director
solely because such Person or an Affiliate of such Person holds or  beneficially
owns  Capital  Stock of the  Company,  the  Parent  or any of  their  Restricted
Subsidiaries.

              "ESCROW ACCOUNT" means the account established with the Trustee in
its name pursuant to the terms of the Original Pledge  Agreement for the deposit
of Pledged Securities.

              "EVENT  OF  DEFAULT",  means  any  one  of  the  following  events
(whatever the reason for such Event of Default and whether it shall be voluntary
or  involuntary  or be effected by operation of law or pursuant to any judgment,
decree  or  order  of  any  court  or  any  order,  rule  or  regulation  of any
administrative or governmental body):

(a) default in the  payment of any  interest on any Note when it becomes due and
payable,  and  continuance  of  such  default  for a  period  of 30 days or more
(provided  that such 30-day grace period  shall not be  applicable  to the first
four interest payments due on the Notes);

(b) default in the payment of the principal of (or premium, if any, on) any Note
at its Maturity (upon acceleration,  optional  redemption,  required purchase or
otherwise);

(c) default in the performance,  or breach,  of any covenant or agreement of the
Company or of the Parent  contained in this  Indenture  (other than a default in
the  performance,  or breach,  of a covenant or agreement  which is specifically
dealt with in the immediately  preceding clause (a) or (b) or in clause (B), (C)
or (D) of this  clause  (c)) and  continuance  of such  default  or breach for a
period of 30 days after  written  notice shall have been given to the Company or
the Parent (as the case may be) by the  Trustee or to the  Company or the Parent
and the Trustee by the Holders of at least 25% in aggregate  principal amount of
the Notes then  Outstanding;  (B)  default in the  performance  or breach of the
provisions  of Section  1017;  (C) default in the  performance  or breach of the
provisions of Article  Eight;  and (D) default in the  performance  or breach of
Section 1010;

(d) (A) one or more defaults in the payment of principal of or premium,  if any,
or interest  on  Indebtedness  of the  Company or the Parent or any  Significant
Subsidiary aggregating $7,500,000 or more, when the same becomes due and payable
at the  Stated  Maturity  thereof,  and such  default  or  defaults  shall  have
continued  after any  applicable  grace  period and shall not have been cured or
waived or (B)  Indebtedness  of the  Company  or the  Parent or any  Significant
Subsidiary  aggregating  $7,500,000  or more  shall  have  been  accelerated  or
otherwise  declared  due and payable,  or required to be prepaid or  repurchased
(other than by regularly  scheduled  required  prepayment),  prior to the Stated
Maturity thereof;

(e) one or more final  judgments,  orders or decrees of any court or  regulatory
agency  shall be rendered  against the Company or the Parent or any  Significant
Subsidiary  or their  respective  properties  for the  payment of money,  either
individually or in an aggregate  amount,  in excess of $7,500,000 and either (A)
an  enforcement  proceeding  shall have been commenced by any creditor upon such
judgment or order or (B) there shall have been a period of 30 days during  which
a stay of enforcement  of such judgment or order,  by reason of a pending appeal
or otherwise,  was not in effect;  (f) the entry of a decree or order by a court
having  jurisdiction in the premises  adjudging the Company or the Parent or any
Significant Subsidiary as bankrupt or insolvent,  or approving as properly filed
a petition seeking reorganization,  arrangement, adjustment or composition of or
in respect of the Company or the Parent or any Significant  Subsidiary under the
Federal  Bankruptcy  Code or any  other  applicable  federal  or state  law,  or
appointing a receiver,  liquidator,  assignee,  trustee,  sequestrator (or other
similar official) of the Company or the Parent or any Significant  Subsidiary or
of  any  substantial  part  of its  property,  or  ordering  the  winding  up or
liquidation  of its  affairs,  and the  continuance  of any such decree or order
unstayed and in effect for a period of 90 consecutive days;

(g) the institution by the Company or the Parent or any  Significant  Subsidiary
of proceedings  to be adjudicated a bankrupt or insolvent,  or the consent by it
to the  institution of bankruptcy or insolvency  proceedings  against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under the Federal  Bankruptcy Code or any other applicable federal or state law,
or the consent by it to the filing of any such petition or to the appointment of
a  receiver,  liquidator,  assignee,  trustee,  sequestrator  (or other  similar
official) of the Company or the Parent or any  Significant  Subsidiary or of any
substantial  part of its property,  or the making by it of an assignment for the
benefit of creditors,  or the admission by it in writing of its inability to pay
its debts generally as they become due;

(h) the Amended and  Restated  Pledge  Agreement  ceases to be in full force and
effect before payment in full of the obligations thereunder; or

              the Guarantee ceases to be in full force and effect before payment
in full of the obligations thereunder.

              "FAIR MARKET VALUE" means,  with respect to any asset or property,
the sale value that would be obtained in an arms' length transaction  between an
informed  and willing  seller  under no  compulsion  to sell and an informed and
willing  buyer under no  compulsion to buy.  Unless  otherwise  specified in the
Indenture,  Fair Market Value shall be  determined  by the Board of Directors of
the Parent  acting in good faith and as of the date on which such  determination
is made.

              "GUARANTEE"  means the guarantee dated as of March 30, 2000 by the
Parent for the benefit of each of the Holders of the  outstanding  Notes, a copy
of which is attached to this Supplemental Indenture as Exhibit 1.

              "INCUMBENT"  means any  railroad,  utility,  governmental  entity,
pipeline or other  licensed  owner (which  ownership is  determined  immediately
prior to any transaction with a Restricted Entity) of Telecommunications  Assets
to be used in the network of the Company or the Parent  pursuant to an Incumbent
Agreement  (and any subsidiary or affiliate of such Person that is a party to an
Incumbent Agreement for the sole purpose of receiving payments from a Restricted
Entity pursuant to such agreement).

              "INCUMBENT  AGREEMENT" means an agreement between an Incumbent and
a  Restricted  Entity  pursuant to which,  among other  things,  such  Incumbent
receives  a  payment  equal  to  such  Restricted  Entity's  revenues,  if  any,
attributable,  in whole or in part, to Telecommunications  Assets transferred or
leased,  or with  respect  to  which a right of use has  been  granted,  by such
Incumbent  such  Restricted  Entity  and  upon or with  respect  to  which  such
Restricted  Entity has  constructed  or intends  to  construct  a portion of its
network.

              "INCUR" OR "INCUR"  means,  with respect to any  Indebtedness,  to
incur,  create,  issue,  assume,  guarantee  or  otherwise  become  directly  or
indirectly  liable or responsible for the payment of, or otherwise  incur,  such
Indebtedness,  contingently  or otherwise;  PROVIDED that neither the accrual of
interest nor the  accretion of original  issue  discount  shall be considered an
incurrence of Indebtedness.  With respect to Indebtedness to be borrowed under a
binding commitment  previously entered into that provides for the Company or the
Parent to Incur Indebtedness on a revolving basis, the Company or the Parent (as
the case may be) shall be deemed to have Incurred the greater of:

(a)      the Indebtedness actually Incurred; or

(b) all or a  portion  of the  amount  of such  unborrowed  commitment  that the
Company  or the  Parent  (as the case may be)  shall  have so  designated  to be
Incurred in an Officer's Certificate delivered to the Trustee (in which case the
Company  or the  Parent  (as the case may be) shall not be deemed to incur  such
unborrowed amount at the time or times it is actually borrowed).

              "INDEBTEDNESS"  means,  with  respect to any Person at any date of
determination, without
duplication:

(a) all liabilities,  contingent or otherwise,  of such Person: (i) for borrowed
money (including overdrafts),  (ii) in connection with any letters of credit and
acceptances issued under letter of credit facilities,  acceptance  facilities or
other  similar  facilities  (including  reimbursement  obligations  with respect
thereto),   (iii)  evidenced  by  bonds,  notes,  debentures  or  other  similar
instruments,  (iv) for the  deferred  and unpaid  purchase  price of property or
services  or  created  or  arising  under any  conditional  sale or other  title
retention  agreement with respect to property acquired by such Person or (v) for
Capitalized Lease Obligations (including any Sale-Leaseback Transaction);

(b) all  obligations  of such  Person  under  or in  respect  of  Interest  Rate
Agreements and Currency Agreements;

(c) all  Indebtedness  referred  to in (but not  excluded  from)  the  preceding
clauses of other  Persons and all  dividends  of other  Persons,  the payment of
which is  secured  by (or for  which  the  holder  of such  Indebtedness  has an
existing right, contingent or otherwise, to be secured by) any Lien upon or with
respect to any property  (including  accounts and contract rights) owned by such
Person,  whether or not such Person has assumed or become liable for the payment
of such  Indebtedness  (the  amount of such  obligation  being  deemed to be the
lesser  of (i) the Fair  Market  Value of such  property  or asset  and (ii) the
amount of such obligation so secured);

(d) all guarantees by such Person of Indebtedness referred to in this definition
of any other Person; and

(e) all  Redeemable  Stock of such Person valued at the greater of its voluntary
or  involuntary   maximum  fixed  repurchase  price,  plus  accrued  and  unpaid
dividends.

              The amount of  Indebtedness  of any Person at any date will be the
outstanding balance at such date (or, in the case of a revolving credit or other
similar  facility,  the total amount of funds  outstanding  and/or designated as
incurred and certified by an officer of the Parent to have been Incurred on such
date pursuant to clause (b) of the last  sentence of the  definition of "Incur")
of all  unconditional  obligations  as  described  above  and,  with  respect to
contingent  obligations,  the  maximum  liability  upon  the  occurrence  of the
contingency  giving  rise  to the  obligation;  PROVIDED  (i)  that  the  amount
outstanding at any time of any Indebtedness  issued with original issue discount
equals  the face  amount of such  Indebtedness  less the  remaining  unamortized
portion of the  original  issue  discount of such  Indebtedness  at such time as
determined in conformity with GAAP and (ii) that Indebtedness  shall not include
any liability for U.S. federal, state, local or other taxes owed by such Person.
For purposes  hereof,  the "maximum  fixed  repurchase  price" of any Redeemable
Capital Stock which does not have a fixed  repurchase  price shall be calculated
in  accordance  with  the  terms  of such  Redeemable  Capital  Stock as if such
Redeemable  Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined  pursuant to this  Indenture,  and if such price is
based upon,  or measured  by, the Fair Market Value of such  Redeemable  Capital
Stock,  such Fair Market Value will be  determined in good faith by the board of
directors of the issuer of such Redeemable  Capital Stock.  Notwithstanding  the
foregoing, trade accounts and accrued liabilities arising in the ordinary course
of business will not be considered Indebtedness for purposes of this definition.

                           "INVESTED CAPITAL" means the sum of:

(a) 75% of the  aggregate  net cash  proceeds  received by the Company  from the
issuance of (or capital  contributions  with respect to) any  Qualified  Capital
Stock of the Company  subsequent  to the Issue  Date,  or received by the Parent
from the issuance of (or capital contribution with respect to) Qualified Capital
Stock of the Parent subsequent to the Amendment Date, other than the Issuance of
Qualified Capital Stock to the Company or to a Restricted Subsidiary; and

(b) 75% of the aggregate net proceeds from sales of Redeemable  Capital Stock of
the  Company  or the  Parent  or  Indebtedness  of  the  Company  or the  Parent
convertible  into  Qualified  Capital Stock of the Company or the Parent (as the
case may be),  in each case upon such  redemption  or  conversion  thereof  into
Qualified Capital Stock.

              "INVESTMENT"  means, with respect to the Parent's or the Company's
investment  with any  Person,  any  direct or  indirect  advance,  loan or other
extension of credit or capital contribution to (by means of any transfer of cash
or other  property  to others or any payment  for  property or services  for the
account or use of others) or any  purchase,  acquisition  or  ownership  by such
Person of any Capital Stock,  bonds,  notes,  debentures or other  securities or
evidences  of  Indebtedness  issued or owned by, any other  Person and all other
items that would be classified  as  investments  on a balance sheet  prepared in
accordance with GAAP. In addition,  the portion  (proportionate to the Company's
or the Parent's equity interest in such  Subsidiary) of the Fair Market Value of
the net assets of any Subsidiary at the time that such  Subsidiary is designated
an Unrestricted  Subsidiary  shall be deemed to be an  "Investment"  made by the
Company or the Parent (as the case may be) in such  Unrestricted  Subsidiary  at
such time and the portion (proportionate to the Company's or the Parent's equity
interest in such  Subsidiary)  of the Fair Market Value of the net assets of any
Subsidiary  at  the  time  that  such  Subsidiary  is  designated  a  Restricted
Subsidiary   shall  be  considered  a  reduction  in  outstanding   Investments.
"Investments"   shall  exclude   extensions  of  trade  credit  on  commercially
reasonable terms in accordance with normal trade practices.

                           "NET CASH PROCEEDS" means:

(a) with respect to any Asset Sale, the proceeds  thereof in the form of cash or
Cash Equivalents,  including payments in respect of deferred payment obligations
when  received in the form of, or stock or other  assets  when  disposed of for,
cash or Cash  Equivalents  (except  to the  extent  that  such  obligations  are
financed or sold with recourse to any Restricted  Entity),  net of (i) brokerage
commissions  and other fees and expenses  (including  fees and expenses of legal
counsel and investment  banks) related to such Asset Sale,  (ii)  provisions for
all taxes payable as a result of such Asset Sale,  (iii) payments made to retire
Indebtedness  where  payment  of such  Indebtedness  is secured by the assets or
properties which are the subject of such Asset Sale, (iv) amounts required to be
paid to any  Person  (other  than any  Restricted  Entity)  owning a  beneficial
interest in the assets subject to the Asset Sale and (v) appropriate  amounts to
be PROVIDED by any Restricted  Entity, as the case may be, as a reserve required
in accordance with GAAP against any liabilities  associated with such Asset Sale
and retained by any Restricted  Entity after such Asset Sale,  including pension
and  other   post-employment   benefit   liabilities,   liabilities  related  to
environmental  matters and  liabilities  under any  indemnification  obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate of
the Parent or the Company, as the case may be, delivered to the Trustee; and

(b) with respect to any issuance or sale of Capital  Stock or options,  warrants
or rights to purchase  Capital Stock, or debt  securities or Redeemable  Capital
Stock that has been converted into or exchanged for Qualified  Capital Stock, as
referred to in Section 1012(b)(3),  the proceeds of such issuance or sale in the
form of cash or Cash  Equivalents,  including  payments  in respect of  deferred
payment  obligations when received in the form of, or stock or other assets when
disposed  of for,  cash or Cash  Equivalents  (except  to the  extent  that such
obligations  are financed or sold with recourse to the Parent or any  Subsidiary
of the  Parent),  net of fees,  commissions  and expenses  actually  incurred in
connection  with such  issuance  or sale and net of taxes  paid or  payable as a
result thereof.

              "NEW PLEDGED  SECURITIES"  means the  securities  purchased by the
Company  to be  deposited  in the  Escrow  Account  as  security  for the  fifth
scheduled interest payment on the Notes pursuant to the Indenture.

              "OFFICERS'   CERTIFICATE"   means  a  certificate  signed  by  the
Chairman,  the CEO,  the  President  or any  executive  vice  president  or vice
president,  and by the Treasurer,  an assistant  treasurer,  the Secretary or an
assistant secretary of the Company (when used with respect to the Company) or of
the Parent (when used with respect to the Parent),  and, in each case, delivered
to the Trustee.

              "PARENT"  means  Pathnet  Telecommunications,  Inc. a  corporation
organized and existing under the laws of the state of Delaware.

              "PARENT  REQUEST"  or "PARENT  ORDER"  means a written  request or
order  signed in the name of the  Parent by its  Chairman,  its Chief  Executive
Officer ("CEO"),  its President,  any executive vice president or vice president
or the Treasurer and delivered to the Trustee.

                           "PERMITTED INDEBTEDNESS" means:

(a)  Indebtedness of the Company pursuant to the Notes or of the Parent pursuant
to the Guarantee;

(b) Indebtedness of the Company or any Restricted Company Subsidiary outstanding
on the  Issue  Date or  Indebtedness  of the  Parent  or any  Restricted  Parent
Subsidiary outstanding on the Amendment Date;

(c) Indebtedness of the Company or the Parent owing to any Restricted Subsidiary
or of the Parent owing to the Company (but only so long as such  Indebtedness is
held by such  Restricted  Subsidiary)  or by the  Company,  as the  case may be;
PROVIDED that any Indebtedness of the Company or the Parent (as the case may be)
owing to any such Restricted  Subsidiary or the Company is subordinated in right
of payment  from and after such time as the Notes  shall  become due and payable
(whether at Stated  Maturity,  by  acceleration or otherwise) to the payment and
performance by the Company or the Parent (as the case may be) of its obligations
under the Notes or the  Guarantee;  and PROVIDED  further  that any  transaction
pursuant  to which  any  Restricted  Subsidiary  or the  Company  to which  such
Indebtedness is owed ceases to be a Restricted Subsidiary or, in the case of the
Company,  a Subsidiary  of the Parent,  shall be deemed to be an  incurrence  of
Indebtedness  by the Parent or the Company that is not  permitted by this clause
(c);

(d)  Indebtedness  of any  Restricted  Subsidiary  owing to the  Company  or the
Parent, of the Company owing to the Parent or of any Restricted Subsidiary owing
to another Restricted Subsidiary;

(e) Indebtedness of any Restricted  Entity in respect of performance,  surety or
appeal  bonds or under  letter of credit  facilities  PROVIDED  in the  ordinary
course of business and, in the case of letters of credit,  under which  recourse
to the  Company or the Parent is limited to the cash  securing  such  letters of
credit;

(f) Indebtedness of any Restricted Entity under Currency Agreements and Interest
Rate Agreements  entered into in the ordinary course of business;  PROVIDED that
such agreements are designed to protect any Restricted Entity against, or manage
exposure  to,  fluctuations  in  currency  exchange  rates and  interest  rates,
respectively,  and that such agreements do not increase the  Indebtedness of the
obligor  outstanding  at any time  other  than as a result  of  fluctuations  in
foreign  currency  exchange  rates  or  interest  rates  or by  reason  of fees,
indemnities and compensation payable thereunder;

(g) Telecommunications Indebtedness and any Indebtedness issued in exchange for,
or  the  net  proceeds  of  which  are  used  to   refinance  or  refund,   such
Telecommunications  Indebtedness  in an  amount  not to  exceed  the  amount  so
refinanced or refunded (plus premiums, accrued interest, and reasonable fees and
expenses);

(h) Indebtedness of any Restricted Entity consisting of guarantees,  indemnities
or  obligations  in connection  with (1)  Telecommunications  Indebtedness,  (2)
Indebtedness permitted under clause (j) or (m) of this "Permitted  Indebtedness"
definition or (3) in respect of purchase price  adjustments  in connection  with
the acquisition of or disposition of assets, including shares of Capital Stock;

(i) Indebtedness of the Company or the Parent (or  consolidated  Indebtedness of
the Company and the Parent) not to exceed,  at any time  outstanding,  2.0 times
the Net Cash  Proceeds  from the issuance  and sale after the Issue Date,  other
than an issuance and sale by the Company to a Restricted  Subsidiary or issuance
and sale by the  Parent  to the  Company  or to any  Restricted  Subsidiary,  of
Qualified  Capital  Stock of the Company or the  Parent,  to the extent such Net
Cash Proceeds have not been used to make Restricted  Payments pursuant to clause
(a)(3)(B) or clauses  (b)(ii) and (iii) of Section 1012 or to make any Permitted
Investments  under  clause  (h)  of the  definition  of  Permitted  Investments;
PROVIDED that such  Indebtedness does not mature prior to the Stated Maturity of
the Notes and has an Average Life longer than the Notes;

(j) Indebtedness of any Restricted  Entity under one or more Credit  Facilities;
PROVIDED  that the  aggregate  principal  amount  of any  Indebtedness  incurred
pursuant to this clause (j) (including any amounts  refinanced or refunded under
this clause (j)) does not exceed at any time  outstanding the greater of (x) 80%
of eligible consolidated accounts receivable of the Company and the Parent as of
the last  fiscal  quarter for which  financial  statements  are  prepared or (y)
$50,000,000 (or the equivalent thereof in one or more foreign  currencies);  and
any  Indebtedness  issued in exchange for, or the net proceeds of which are used
to refinance or refund, Indebtedness incurred under this clause (j) in an amount
not to exceed the amount so  refinanced  or  refunded  (plus  premiums,  accrued
interest, and reasonable fees and expenses);

(k)  Indebtedness  of any  Restricted  Entity issued in exchange for, or the net
proceeds of which are used to refinance or refund, then-outstanding Indebtedness
of any Restricted  Entity  incurred under the ratio test set forth in clause (i)
or (ii) of Section 1011 or under  clauses (b) through  (f),  (h), (i) and (m) of
this definition of "Permitted  Indebtedness," and any refinancings thereof in an
amount  not to exceed the  amount so  refinanced  or  refunded  (plus  premiums,
accrued  interest,  and reasonable  fees and  expenses);  PROVIDED that such new
Indebtedness  shall only be  permitted  under this clause (k) if (A) in case the
Notes are refinanced in part, or the Indebtedness to be refinanced ranks equally
with the  Notes,  such new  Indebtedness,  by its  terms or by the  terms of any
agreement or  instrument  pursuant to which such new  Indebtedness  is issued or
remains  outstanding  is expressly  made to rank equally with, or subordinate in
right of payment to, the remaining  Notes,  (B) in case the  Indebtedness  to be
refinanced  is  subordinated  in  right  of  payment  to  the  Notes,  such  new
Indebtedness,  by its  terms or by the  terms  of any  agreement  or  instrument
pursuant  to which such new  Indebtedness  is issued or remains  outstanding  is
expressly made subordinate in right of payment to the Notes at least to the same
extent that the  Indebtedness  to be refinanced is subordinated to the Notes and
(C) such new  Indebtedness,  determined as of the date of incurrence of such new
Indebtedness,  does not mature prior to the Stated Maturity of the  Indebtedness
to be refinanced or refunded,  and the Average Life of such new  Indebtedness is
at  least  equal  to  the  remaining  Average  Life  of the  Indebtedness  being
refinanced or refunded;  PROVIDED  further that no  Indebtedness  incurred under
this clause (k) in exchange  for, or the proceeds of which  refinance or refund,
any  Indebtedness  incurred  under the ratio test set forth under  clause (i) or
(ii) of Section  1011 will mature  prior to the Stated  Maturity of the Notes or
have an Average Life shorter than the Notes;  PROVIDED  further that in no event
may  Indebtedness  of the  Company or the Parent be  refinanced  by means of any
Indebtedness of any Restricted Subsidiary (in the case of the Company) or of the
Company or any Restricted Subsidiary (in the case of the Parent) issued pursuant
to this clause (k);

(l)  Indebtedness  arising  by  reason  of the  recharacterization  of a sale of
accounts receivable to an Accounts Receivable Subsidiary; and

(m)  Indebtedness  of any Restricted  Entity in addition to that permitted to be
incurred  pursuant to clauses (a)  through (l) above in an  aggregate  principal
amount not in excess of $30,000,000  (or the  equivalent  thereof in one or more
foreign currencies) at any time outstanding.

                      "PERMITTED INVESTMENT" means any of the following:

(a) Investments in Cash Equivalents;  PROVIDED that the term "with a maturity of
180  days or  less"  in  clauses  (a),  (b) and (c) of the  definition  of "Cash
Equivalents"  is  changed  to "with a  maturity  of one  year or  less"  for the
purposes of this definition of "Permitted Investments" only;

(b)      Investments in any Restricted Entity;

(c)  Investments by any  Restricted  Entity in another Person if, as a result of
such Investment,  (i) such other Person becomes a Restricted Entity or (ii) such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to a Restricted Entity;

(d) Investments in the form of intercompany Indebtedness to the extent permitted
under clauses (c) and (d) of the definition of "Permitted Indebtedness;"

(e) Investments by the Company or any Restricted Company Subsidiary in existence
on the  Issue  Date and  Investments  by the  Parent  or any  Restricted  Parent
Subsidiary in existence on the Amendment Date;

(f) Investments in the Pledged  Securities to the extent required by the Amended
and Restated Pledge Agreement;

(g) Investments in an amount not to exceed $1,000,000 (or the equivalent thereof
in one or more foreign currencies) at any one time outstanding;

(h)  Investments  in an  aggregate  amount not to exceed the sum of (1) Invested
Capital, (2) the Fair Market Value of Qualified Capital Stock of the Company and
the Parent,  Redeemable  Capital Stock of the Company and the Parent convertible
into Qualified  Capital Stock of the Company or the Parent (as the case may be),
and  Indebtedness  of the  Company  and the Parent  convertible  into  Qualified
Capital  Stock of the  Company or the Parent (as the case may be), in the latter
two cases upon such  redemption or  conversion  thereof into  Qualified  Capital
Stock  of the  Company  or the  Parent  (as the  case  may  be),  issued  by any
Restricted  Entity as  consideration  for any such  Investments made pursuant to
this clause (h),  and (3) in the case of the  disposition  or  repayment  of any
Investment  made pursuant to this clause (h) after the Issue Date  (including by
redesignation  of an  Unrestricted  Subsidiary to a Restricted  Subsidiary),  an
amount  equal to the  lesser  of the  return of  capital  with  respect  to such
Investment and the initial amount of such  Investment,  in either case, less the
cost of the disposition of such Investment;  PROVIDED,  however, that the amount
of any  Permitted  Investments  under this clause (h) shall be excluded from the
computation of the amount of any Restricted Payment under Section 1012;

(i) Investments in trade receivables,  prepaid expenses,  negotiable instruments
held for collection and lease,  utility and worker's  compensation,  performance
and other similar deposits or escrow;

(j) Loans,  advances and  extensions of credit to employees made in the ordinary
course of business  of the  Company or the Parent not in excess of $500,000  (or
the equivalent thereof in one or more foreign currencies) in any fiscal year;

(k)  Bonds,  notes,  debentures  or  other  securities  evidencing  indebtedness
received as a result of Asset Sales permitted under Section 1017;

(l) Endorsements for collection or deposit in the ordinary course of business by
any Restricted Entity of bank drafts and similar  negotiable  instruments of any
other  person  received  as  payment  for  ordinary  course  of  business  trade
receivables;

(m)  Investments  deemed to have been made as a result of the  acquisition  of a
Person  that at the  time  of such  acquisition  held  instruments  constituting
Investments that were not acquired in  contemplation  of, or in connection with,
the acquisition of such Person;

(n) Investments in or acquisitions of Capital Stock, indebtedness, securities or
other property of Persons  (other than  Affiliates of the Company or the Parent)
received by the any Restricted  Entity in the bankruptcy or reorganization of or
by such Person or any  exchange of such  Investment  with the issuer  thereof or
taken in  settlement of or other  resolution of claim or disputes,  and, in each
case, extensions, modifications and renewals thereof;

(o)  Investments  in any Person to which  Telecommunications  Assets  used in an
Initial  System  have  been  transferred  and which  person  has  PROVIDED  to a
Restricted  Entity  the  right  to use  such  assets  pursuant  to an  Incumbent
Agreement;  PROVIDED  that,  in the good  faith  determination  of the  Board of
Directors of the Parent or the Company, as the case may be, the present value of
the future  payments  expected  to be  received  by the Company or the Parent in
respect of any such  Investment  plus the Fair Market Value of any capital stock
or other securities received in connection  therewith shall be at least equal to
the Fair Market Value of such Investment; and

(p)  Investments in one or more  Permitted  Telecommunications  Joint  Ventures;
PROVIDED that the total original cost of all such  Permitted  Telecommunications
Joint  Ventures  plus the  cost or Fair  Market  Value,  as  applicable,  of all
additions  thereto less the sum of all amounts received as returns thereon shall
not  exceed  $20,000,000  (or the  equivalent  thereof  in one or  more  foreign
currencies).

                      "PERMITTED LIENS" means:

(a) Liens  existing on the Issue Date,  when used with respect to the Company or
any Restricted Company Subsidiary, or Liens existing on the Amendment Date, when
used with respect to the Parent or any Restricted Parent Subsidiary;

(b) Liens on any property or assets of the Company or any Restricted  Subsidiary
granted in favor of any Restricted Entity;

(c) Liens on any property or assets of the Company or any Restricted  Subsidiary
securing the Notes or the Guarantee;

(d) any interest or title of a lessor under any Capitalized  Lease Obligation or
operating lease permitted by this Indenture;

(e) Liens  securing  Indebtedness  incurred under clauses (g), (j) or (m) of the
definition of "Permitted Indebtedness";

(f)  statutory  Liens  of  landlords  and  carriers,  warehousemen,   mechanics,
suppliers,  materialmen,  repairmen or other like Liens  arising in the ordinary
course of business of any Restricted Entity and, with respect to amounts not yet
delinquent  or being  contested in good faith by  appropriate  proceeding,  if a
reserve or other appropriate  provision,  if any, as required in conformity with
GAAP shall have been made therefor;

(g) Liens for taxes,  assessments,  government  charges or claims that are being
contested  in good faith by  appropriate  proceedings  promptly  instituted  and
diligently conducted and if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor;

(h) Liens incurred or deposits made to secure the performance of tenders,  bids,
leases,  statutory obligations,  surety and appeal bonds,  government contracts,
performance  bonds,  escrows and other  obligations of a like nature incurred in
the ordinary course of business (other than contracts for the payment of money);

(i)  easements,  rights-of-way,   restrictions  and  other  similar  charges  or
encumbrances  not  interfering in any material  respect with the business of any
Restricted Entity incurred in the ordinary course of business;

(j) Liens  arising  by reason of any  judgment,  decree or order of any court so
long as such Lien is adequately  bonded and any  appropriate  legal  proceedings
that may have been duly  initiated  for the review of such  judgment,  decree or
order shall not have been  finally  terminated  or the period  within which such
proceedings may be initiated shall not have expired;

(k) Liens securing Acquired Indebtedness created prior to (and not in connection
with  or in  contemplation  of)  the  incurrence  of  such  Indebtedness  by any
Restricted  Entity;  PROVIDED  that such Lien does not extend to any property or
assets of any  Restricted  Entity other than the assets  acquired in  connection
with the incurrence of such Acquired Indebtedness;

(l) Liens securing  obligations of the Company or the Parent under Interest Rate
Agreements or Currency  Agreements  permitted to be incurred under clause (f) of
the   definition  of  "Permitted   Indebtedness"   or  any  collateral  for  the
Indebtedness  to which such  Interest  Rate  Agreements  or Currency  Agreements
relate;

(m) Liens  incurred  or  deposits  made in the  ordinary  course of  business in
connection with workers' compensation, unemployment insurance and other types of
social security;

(n) Liens  securing  reimbursement  obligations  of any  Restricted  Entity with
respect to letters of credit that encumber documents and other property relating
to such letters of credit and the products and proceeds thereof;

(o) Liens arising from purchase  money  mortgages  and purchase  money  security
interests;  PROVIDED that (i) the related  Indebtedness  shall not be secured by
any  property or assets of any  Restricted  Entity  other than the  property and
assets so acquired and (ii) the Lien securing such Indebtedness shall be created
within 60 days of such acquisition;

(p) Liens securing the Escrow Account,  the Pledged  Securities and the proceeds
thereof and the security  interest  created by the Amended and  Restated  Pledge
Agreement;

(q) any  extension,  renewal or  replacement,  in whole or in part,  of any Lien
described  in the  foregoing  clauses (a) through  (o);  PROVIDED  that any such
extension,  renewal or replacement  shall be no more restrictive in any material
respect than the Lien so  extended,  renewed or replaced and shall not extend to
any additional property or assets;

(r) Liens with respect to the equipment and related assets of the Company or the
Parent  installed  on their  respective  networks in favor of Persons  that have
licensed, leased, transferred or granted to any Restricted Entity a right to use
Telecommunications  Assets or financed the purchase of Telecommunications Assets
or  securing  the  obligations  of such  Restricted  Entity  under an  Incumbent
Agreement;  PROVIDED  that such  Liens  will (1) be  created  on terms  that the
Company  or the Parent (as the case may be)  reasonably  believes  to be no less
favorable  to the Company or the Parent than Liens  granted  under clause (e) of
this definition and (2) not secure any Indebtedness in excess of the Fair Market
Value of the equipment and assets so secured;

(s) Liens relating to revenues of any  Restricted  Entity arising as a result of
obligations under an Incumbent Agreement; and

(t) Liens on the  property  or assets or Capital  Stock of  Accounts  Receivable
Subsidiaries  and Liens  arising out of any sale of Accounts  Receivable  in the
ordinary   course  of  business   (including  in  connection  with  a  financing
transaction) to or by an Accounts  Receivable  Subsidiary or to Persons that are
not Affiliates of the Company or the Parent.

              "PERMITTED  TELECOMMUNICATIONS  ASSET  SALE"  means any  transfer,
conveyance,  sale,  lease or other  disposition  of a  capital  asset  that is a
Telecommunications  Asset,  the  proceeds  of  which  are  treated  as  revenues
(including  deferred  revenues) by the Parent or the Company in accordance  with
GAAP.

              "PERMITTED  TELECOMMUNICATIONS JOINT VENTURE" means a corporation,
partnership or other entity engaged in one or more  Telecommunications  Business
in which the  Company or the Parent  owns,  directly  or  indirectly,  an equity
interest.

              "PLEDGED   SECURITIES"   means  the   securities,   consisting  of
Government Securities,  deposited in the Escrow Account pursuant to the Original
Pledge Agreement together with the New Pledged Securities.

              "REDEEMABLE  CAPITAL  STOCK"  means any class or series of Capital
Stock that,  either by its terms,  by the terms of any security into which it is
convertible  or  exchangeable  or by  contract  or  otherwise,  is or,  upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated  Maturity of the Notes or is redeemable at the option of the
holder  thereof at any time prior to such final Stated  Maturity of the Notes or
is  redeemable  at the  option of the  holder  thereof at any time prior to such
final  Stated  Maturity,  or  is  convertible  into  or  exchangeable  for  debt
securities  at any time prior to such final Stated  Maturity;  PROVIDED that any
Capital Stock that would not otherwise  constitute  Redeemable Capital Stock but
for  provisions  giving  holders  thereof  the right to require  such  Person to
repurchase or redeem such Capital  Stock upon the  occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Notes shall
not  constitute  Redeemable  Capital  Stock if the  "asset  sale" or  "change of
control"  provisions  applicable to such Capital Stock are no more  favorable in
any  material  respect  to holders of such  Capital  Stock that then  provisions
contained  in Section  1017 and Section 1010 are to holders of the Notes and the
Guarantees,  and such Capital Stock specifically  provides that such Person will
not repurchase or redeem any such Capital Stock pursuant to any provision  prior
to the  repurchase by the Company or the Parent of such Notes and  Guarantees as
are required to be repurchased pursuant to Section 1017 and Section 1010.

              "RESTRICTED  COMPANY  SUBSIDIARY"  means  any  Subsidiary  of  the
Company other than an Unrestricted Subsidiary.

              "RESTRICTED ENTITY" means (i) any Restricted Subsidiary,  (ii) the
Parent, and (iii) the Company.

              "RESTRICTED  PARENT SUBSIDIARY" means any Subsidiary of the Parent
other than (i) the Company,  (ii) a Restricted Company Subsidiary,  and (iii) an
Unrestricted Subsidiary.

              "RESTRICTED  SUBSIDIARY" means any Restricted  Company  Subsidiary
and any Restricted Parent Subsidiary.

              "SALE-LEASEBACK   TRANSACTION"   means  any  direct  or   indirect
arrangement,  or series of related  arrangements,  with any Person (other than a
Restricted  Entity) or to which any Person (other than a Restricted Entity) is a
party,  providing for the leasing to a Restricted  Entity of any property for an
aggregate term exceeding three years,  whether owned by the Company,  the Parent
or by any  Subsidiary  of either of them at the  Issue  Date or later  acquired,
which has been or is to be sold or transferred by such Restricted Entity to such
Person or to any other Person from whom funds have been or are to be advanced by
such Person on the security of such property;  PROVIDED that the transfer by any
Restricted  Entity of  Telecommunications  Assets  to,  and the  leasing  by any
Restricted  Entity of such assets  from,  a Permitted  Telecommunications  Joint
Venture shall not constitute a Sale-Leaseback Transaction.

              "SIGNIFICANT  SUBSIDIARY" means at any date of determination,  the
Company and any Restricted Subsidiary that, together with its Subsidiaries,  (i)
for the most recent fiscal year of the Parent accounted for more than 10% of the
consolidated revenues of the Parent and the Restricted Parent Subsidiaries, (ii)
as of the  end of such  fiscal  year,  was the  owner  of more  than  10% of the
consolidated  assets of the Parent and the Restricted  Parent  Subsidiaries,  or
(iii) owns one or more FCC licenses the  aggregate  cost or Fair Market Value of
which  represents  5% or more of the  net  asset  value  of the  Parent  and the
Restricted  Parent  Subsidiaries  on a consolidated  basis as of the end of such
fiscal year, in the case of (i), (ii) or (iii) as set forth on the most recently
available consolidated financial statements of the Parent for such fiscal year.

              "SUBSIDIARY"  means, any Person a majority of the equity ownership
or Voting Stock of which is at the time owned,  directly or  indirectly,  by the
Parent or by one or more  other  Subsidiaries  or by the  Parent and one or more
other  Subsidiaries,  unless used with respect to the Company, in which event as
shall mean any Person a majority  of the  equity  ownership  or Voting  Stock of
which is at the time owned, directly or indirectly,  by the Company or by one or
more  other of its  Subsidiaries  or by the  Company  and one or more  other its
Subsidiaries.

              "TELECOMMUNICATIONS  ASSETS"  means,  with  respect to any Person,
assets  (including  rights of way,  trademarks and licenses)  other than current
assets that are utilized by such Person, directly or indirectly, for the design,
development,  construction,   installation,  integration  or  provision  of  the
Company's or the Parent's network, including, without limitation, any businesses
or  services  in which the  Company  or the  Parent  is  currently  engaged  and
including  any  computer   systems  used  in  a   Telecommunications   Business.
Telecommunications  Assets also  include 66 2/3% of the Voting  Stock of another
Person,  PROVIDED  that  substantially  all of the assets of such  other  Person
consist of  Telecommunications  Assets,  and PROVIDED  further such Voting Stock
shall  be  held  by a  Restricted  Entity,  such  other  Person  either  is,  or
immediately  following  the  relevant  transaction  shall  become,  a Restricted
Subsidiary  pursuant to this Indenture or a Permitted  Telecommunications  Joint
Venture  subject to the limitations set forth under clause (p) of the definition
of  "Permitted  Investment"  contained  in  Section  102  of  this  Supplemental
Indenture. The determination of what constitutes Telecommunications Assets shall
be made by the  Board  of  Directors  of the  Parent  and  evidenced  by a Board
Resolution delivered to the Trustee.

              "TELECOMMUNICATIONS   BUSINESS"   means,   the   business  of  (i)
transmitting,  or providing  services  relating to the  transmission  of, voice,
video  or  data  through   owned  or  leased   transmission   facilities,   (ii)
constructing,  creating,  developing,  acquiring or marketing  Telecommunication
Assets or other  communications  related network  equipment,  software and other
devices  for  use  in  a   telecommunications   business  or  (iii)  evaluating,
participating  or pursuing any other activity or  opportunity  that is primarily
related to those  identified  in clause  (i) or (ii)  above;  PROVIDED  that the
determination of what constitutes a Telecommunications Business shall be made in
good faith by the Board of Directors  of the Parent or the Company,  as the case
may be.

              "TELECOMMUNICATIONS   INDEBTEDNESS"   means  Indebtedness  of  any
Restricted  Entity  incurred at any time within 315 days of, and for the purpose
of  financing  all or any  part of the  cost of,  the  construction,  expansion,
installation,  acquisition or  improvement  by any Restricted  Entity of any new
Telecommunications  Assets;  PROVIDED that the proceeds of such Indebtedness are
expended for such purposes within such 315-day period; and PROVIDED further that
the Net Cash Proceeds from the issuance of such Indebtedness does not exceed, as
of the date of incurrence thereof, 100% of the lesser of the cost or Fair Market
Value of such Telecommunications Assets; PROVIDED further that, to the extent an
Incumbent Agreement is characterized as a Capitalized Lease Obligation, it shall
be considered Telecommunications Indebtedness.

              "UNRESTRICTED SUBSIDIARY" means:

(a) any Subsidiary  that at the time of  determination  shall be an Unrestricted
Subsidiary  (as  designated  by the Board of Directors of the Parent as provided
below); and

(b) any Subsidiary of an Unrestricted Subsidiary.

              The Board of Directors of the Parent may designate any  Subsidiary
(including any newly acquired or newly formed  Subsidiary) to be an Unrestricted
Subsidiary  so long  as (i)  neither  the  Company,  the  Parent  nor any  other
Subsidiary  is  directly  or  indirectly  liable  for any  Indebtedness  of such
Subsidiary,  (ii) no default with respect to any Indebtedness of such Subsidiary
would permit (upon notice,  lapse of time or otherwise)  any holder of any other
Indebtedness  of the  Company  or the  Parent or any  Restricted  Subsidiary  to
declare a default on such other  Indebtedness or cause the payment thereof to be
accelerated  or payable prior to its Stated  Maturity,  (iii) any  Investment in
such Subsidiary made as a result of designating  such Subsidiary an Unrestricted
Subsidiary  will not violate the provisions of Section 1012,  (iv) no Restricted
Entity has a contract,  agreement,  arrangement,  understanding or obligation of
any kind,  whether written or oral,  with such Subsidiary  other than those that
might be obtained at the time from persons who are not Affiliates of the Parent,
and (v) none of the Company,  the Parent,  nor any other Subsidiary of either of
them has any obligation (1) to subscribe for additional  shares of Capital Stock
or other equity interest in such Subsidiary, or (2) to maintain or preserve such
Subsidiary's  financial condition or to cause such Subsidiary to achieve certain
levels of operating  results.  Any such designation by the Board of Directors of
the Parent shall be evidenced to the Trustee by filing a Board  Resolution  with
the  Trustee  giving  effect to such  designation.  The Board of  Directors  may
designate any Unrestricted Subsidiary as a Restricted Subsidiary if, immediately
after giving effect to such  designation,  there would be no Default or Event of
Default under this  Indenture and the Company or the Parent (as the case may be)
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 1011.

SECTION 103.      DEFINITIONS FOR PURPOSES OF SECTION 1017(A).

              The  following   definitions   will  apply  for  the  purposes  of
interpretation  of Section  1017(a)  and the  defined  terms  contained  in this
Section 103.  Capitalized  terms used in Section  1017(a) or in this Section 103
which are not defined in this Section 103 shall be given the meaning ascribed to
them in  Section  102 of this  Supplemental  Indenture,  or, if such term is not
defined in such Section 102, in Section 101 of the Indenture.

              "ACCOUNTS  RECEIVABLE  SUBSIDIARY"  means any  Restricted  Company
Subsidiary that is,  directly or indirectly,  wholly owned by the Company (other
than directors  qualifying  shares) and organized for the purpose of and engaged
in (i) purchasing,  financing and collecting accounts receivable  obligations of
customers of any Restricted  Company  Subsidiary,  (ii) the sale or financing of
accounts  receivable or interests  therein and (iii) other  activities  directly
related thereto.

              "ALLOWABLE COMPANY  INDEBTEDNESS"  means Indebtedness  incurred by
the Company if, at the time of such incurrence, the Consolidated Indebtedness to
Consolidated Operating Cash Flow Ratio would have been less than or equal to (i)
6.0 to 1.0 but  greater  than zero,  for  Indebtedness  incurred  on or prior to
December  31, 2001,  or (ii) 5.0 to 1.0 but greater  than zero for  Indebtedness
incurred thereafter.

              "ASSET SALE" means any sale, issuance, conveyance, transfer, lease
or  other   disposition   (including   by  way  of  merger,   consolidation   or
Sale-Leaseback   Transaction)   (collectively,   a   "transfer"),   directly  or
indirectly, in one or a series of related transactions, of (i) any Capital Stock
of  any  Subsidiary  of  the  Company;  (ii)  all  or  substantially  all of the
properties and assets of the Company or any Subsidiary of the Company;  or (iii)
any other  properties or assets of the Company or any Subsidiary of the Company,
other than in the  ordinary  course of business  (it being  understood  that the
ordinary course of business includes,  but is not restricted to, any transfer or
sale of, or the grant of a right to use,  an asset to an  Incumbent  pursuant to
(x) an Incumbent Agreement, (y) applicable law or (z) an agreement to which such
Incumbent  is a party which  exists on the date of, and is not  entered  into in
contemplation  of,  such  Incumbent   Agreement).   For  the  purposes  of  this
definition,  the term "Asset Sale" shall not include any transfer of  properties
or assets (A) that  constitutes a Permitted  Transaction,  (B) of the Company to
any Restricted  Company  Subsidiary,  or of any Restricted Company Subsidiary to
the Company or any other  Restricted  Company  Subsidiary in accordance with the
terms of this Indenture,  (C) having an aggregate Fair Market Value of less than
$2,000,000 (or the equivalent thereof in any other currency) in any given fiscal
year, (D) by the Company or a Restricted  Company  Subsidiary to a Person who is
not an Affiliate of the Company in exchange  for  Telecommunications  Assets (or
not less than 66 2/3% of the outstanding Voting Stock of a Person that becomes a
Restricted  Company  Subsidiary,  the  assets  of  which  consist  primarily  of
Telecommunications Assets) or related telecommunications  services where, in the
good faith  Judgment of the Board of  Directors  of the Company  evidenced  by a
Board Resolution,  the Fair Market Value of such  Telecommunications  Assets (or
such Voting  Stock) or services so received is at least equal to the Fair Market
Value of the  properties or assets  disposed of or, if less,  the  difference is
received by the Company in cash in an amount at least equal to such  difference,
(E) constituting  Capital Stock of an Unrestricted  Company  Subsidiary or other
Investment  that  was not a  Restricted  Payment  when  made,  (F)  constituting
accounts  receivable  of the Company or a Restricted  Company  Subsidiary  to an
Accounts Receivable Subsidiary or in consideration of Fair Market Value thereof,
to Persons  that are not  Affiliates  of the  Company or any  Subsidiary  of the
Company  in the  ordinary  course of  business,  including  in  connection  with
financing  transactions,  (G) in connection  with a  Sale-Leaseback  Transaction
otherwise  permitted  to be incurred as Permitted  Indebtedness  or as Allowable
Company  Indebtedness,  (H) to a Permitted  Telecommunications  Joint Venture if
such  transfer of  properties  or assets is permitted  under the  definition  of
"Permitted Investments",  (I) in connection with a Permitted  Telecommunications
Asset Sale or (J) to an  Unrestricted  Company  Subsidiary  if not a  Restricted
Payment.

              "BOARD OF DIRECTORS"  means,  either the board of directors of the
Company or any duly authorized committee of that board.

              "BOARD RESOLUTION" means, a copy of a resolution  certified by the
Secretary or an Assistant  Secretary of the Company to have been duly adopted by
the Board of  Directors of the Company and to be in full force and effect on the
date of such certification, and delivered to the Trustee.

              "CASH EQUIVALENTS" means:

(a) any evidence of  Indebtedness  with a maturity of 180 days or less issued or
directly and fully  guaranteed or insured by the United States of America or any
agency or  instrumentality  thereof  (PROVIDED that the full faith and credit of
the United States of America is pledged in support thereof);

(b) certificates of deposit or acceptance with a maturity of 180 days or less of
any financial  institution  that is a member of the Federal Reserve  System,  in
each case having combined capital and surplus and undivided  profits of not less
than $500,000,000;

(c) commercial paper with a maturity of 180 days or less issued by a corporation
that is not an Affiliate  of the Company and is organized  under the laws of any
state of the  United  States  and  rated at least  A-1 by S&P or at least P-1 by
Moody's; and

(d) money market mutual funds that invest  substantially  all of their assets in
securities of the type described in the preceding clauses.

              "CONSOLIDATED  ADJUSTED  NET INCOME"  means,  with  respect to any
period,  the consolidated net income (or loss) of the Company and all Restricted
Company  Subsidiaries  for such period as determined  in  accordance  with GAAP,
adjusted by excluding, without duplication:

(a) any net after-tax  extraordinary gains or losses (less all fees and expenses
relating thereto);

(b) any net  after-tax  gains or  losses  (less all fees and  expenses  relating
thereto) attributable to asset dispositions other than in the ordinary course of
business;

(c) the portion of net income (or loss) of any Person (other than the Company or
a Restricted Company Subsidiary),  including Unrestricted Subsidiaries, in which
the Company or any  Restricted  Company  Subsidiary  has an ownership  interest,
except to the extent of the amount of dividends or other distributions  actually
paid to the Company or any  Restricted  Company  Subsidiary in cash dividends or
distributions during such period;

(d) the net  income  (or loss) of any Person  combined  with the  Company or any
Restricted  Company Subsidiary on a "pooling of interests" basis attributable to
any period prior to the date of combination;

(e) the net income of any Restricted  Company  Subsidiary to the extent that the
declaration or payment of dividends or similar  distributions by such Restricted
Company  Subsidiary is not at the date of determination  permitted,  directly or
indirectly,  by  operation  of the  terms  of  its  charter  or  any  agreement,
instrument,  judgment,  decree, order, statute, rule or governmental  regulation
applicable to such Restricted  Company  Subsidiary or its stockholders  (except,
for  purposes of  determining  whether any  Indebtedness  is  Allowable  Company
Indebtedness, any Permitted Restriction); and

(f) any net income (or loss) from any Restricted  Company Subsidiary that was an
Unrestricted  Company  Subsidiary  at any time during such period other than any
amounts actually received from such Restricted Company Subsidiary.

              "CONSOLIDATED INDEBTEDNESS" means, with respect to any period, the
aggregate  amount of  Indebtedness  of the  Company and its  Restricted  Company
Subsidiaries  outstanding  at the  date  of  determination  as  determined  on a
consolidated basis in accordance with GAAP.

              "CONSOLIDATED  INDEBTEDNESS  TO  CONSOLIDATED  OPERATING CASH FLOW
RATIO"  means,  at any date of  determination,  the  ratio  of (i)  Consolidated
Indebtedness  to (ii)  Consolidated  Operating  Cash Flow for the two  preceding
fiscal quarters for which financial  information is available  immediately prior
to the date of determination,  multiplied by two; PROVIDED that any Indebtedness
incurred or retired by the Company or any of its Restricted Company Subsidiaries
during  the  fiscal  quarter  in which  the  transaction  date  occurs  shall be
calculated as if such  Indebtedness were so incurred or retired on the first day
of the  fiscal  quarter  in which  the date of  determination  occurs  (PROVIDED
further  that,  in  making  any  such  computation,   the  aggregate  amount  of
Indebtedness  under any revolving  credit or similar facility shall be deemed to
include  an  amount  of  funds  equal  to the  average  daily  balance  of  such
Indebtedness  during such two fiscal quarter period);  and PROVIDED FURTHER that
(x) if the  transaction  giving rise to the need to calculate  the  Consolidated
Indebtedness to Consolidated  Operating Cash Flow Ratio would have the effect of
increasing or decreasing  Consolidated  Indebtedness or  Consolidated  Operating
Cash Flow in the future,  Consolidated  Indebtedness and Consolidated  Operating
Cash Flow shall be  calculated on a pro forma basis as if such  transaction  had
occurred on the first day of such two fiscal quarter  period  preceding the date
of determination;  (y) if during such two fiscal quarter period,  the Company or
any of its Restricted Company  Subsidiaries shall have engaged in any Asset Sale
in respect of any company, entity or business,  Consolidated Operating Cash Flow
for such  period  shall  be  reduced  by an  amount  equal  to the  Consolidated
Operating  Cash Flow (if  positive),  or  increased  by an  amount  equal to the
Consolidated  Operating Cash Flow (if negative),  directly  attributable  to the
company,  entity or  business  that is the  subject  of such  Asset Sale and any
related  retirement  of  Indebtedness  as if such  Asset  Sale  and any  related
retirement of Indebtedness had occurred on the first day of such period;  or (z)
if during such two fiscal  quarter  period the Company or any of its  Restricted
Company  Subsidiaries  shall have  acquired  any  company,  entity or  business,
Consolidated  Operating Cash Flow shall be calculated on a pro forma basis as if
such acquisition and any related financing had occurred on the first day of such
period.

              "CONSOLIDATED  INTEREST  EXPENSE" means,  for any period,  without
duplication, the sum of:

(a) the consolidated  interest expense of the Company and its Restricted Company
Subsidiaries for such period,  including (i) amortization of debt discount, (ii)
the net cost of Interest Rate Agreements (including  amortization of discounts),
(iii) the interest  portion of any  deferred  payment  obligation,  (iv) accrued
interest, (v) the consolidated amount of any interest capitalized by the Company
and (vi) amortization of debt issuance costs, plus

(b) the consolidated  interest component of Capitalized Lease Obligations of the
Company and its Restricted  Company  Subsidiaries paid, accrued and/or scheduled
to be paid or accrued during such period; excluding, however, any amount of such
interest  of any  Restricted  Company  Subsidiary  if the  net  income  of  such
Restricted  Company  Subsidiary is excluded in the  calculation of  Consolidated
Adjusted Net Income  pursuant to clause (e) of the definition  thereof (but only
in the same proportion as the net income of such Restricted  Company  Subsidiary
is excluded from the calculation of Consolidated Adjusted Net Income pursuant to
clause (e) of the definition thereof); PROVIDED that in making such computation,
(x)  the  Consolidated   Interest  Expense   attributable  to  interest  on  any
Indebtedness  computed on a pro forma basis and (A) bearing a floating  interest
rate shall be computed as if the rate in effect on the date of  computation  had
been the applicable rate for the entire period and (B) which was not outstanding
during the period for which the  computation  is being made but which bears,  at
the  option of the  Company,  a fixed or  floating  rate of  interest,  shall be
computed by applying, at the option of the Company, either the fixed or floating
rate, (y) the  Consolidated  Interest  Expense  attributable  to interest on any
Indebtedness  under a revolving  credit  facility  computed on a pro forma basis
shall be computed  based upon the  average  daily  balance of such  Indebtedness
during the  applicable  period  and (z) the  interest  rate with  respect to any
Indebtedness  covered by an Interest  Rate  Agreement  shall be deemed to be the
effective  interest  rate with  respect to such  Indebtedness  after taking into
account such Interest Rate Agreement.

              "CONSOLIDATED  OPERATING  CASH FLOW"  means,  with  respect to any
period, the Consolidated Adjusted Net Income for such period:

(a) increased by (to the extent deducted in computing  Consolidated Adjusted Net
Income) the sum of (i) the Consolidated  Tax Expense of such Restricted  Company
Subsidiaries as are subject to the immediately  preceding  parenthetical  clause
for such period  (other than taxes  attributable  to  extraordinary,  unusual or
non-recurring  gains or losses);  (ii)  Consolidated  Interest  Expense for such
period;   (iii)   depreciation  of  the  Company  and  the  Restricted   Company
Subsidiaries for such period,  determined on a consolidated  basis in accordance
with  GAAP;  (iv)  amortization  of  the  Company  and  the  Restricted  Company
Subsidiaries for such period,  determined on a consolidated  basis in accordance
with GAAP;  and (v) any other  non-cash  charges that were deducted in computing
Consolidated  Adjusted Net Income  (excluding any non-cash charge which requires
an accrual or reserve for cash charges for any future period) of the Company and
its Restricted Company Subsidiaries for such period in accordance with GAAP; and

(b) decreased by any non-cash  gains of the Company and the  Restricted  Company
Subsidiaries that were included in computing Consolidated Adjusted Net Income.

              "CONSOLIDATED  TAX EXPENSE" means,  for any period,  the provision
for U.S.  federal,  state,  provincial,  local and foreign  income  taxes of the
Company and the Restricted Company Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP.

              "EVENT OF DEFAULT" means any one of the following events (whatever
the  reason  for such Event of Default  and  whether  it shall be  voluntary  or
involuntary  or be effected  by  operation  of law or pursuant to any  judgment,
decree  or  order  of  any  court  or  any  order,  rule  or  regulation  of any
administrative or governmental body):

(a) default in the  payment of any  interest on any Note when it becomes due and
payable,  and  continuance  of  such  default  for a  period  of 30 days or more
(provided  that such 30-day grace period  shall not be  applicable  to the first
four interest payments due on the Notes);

(b) default in the payment of the principal of (or premium, if any, on) any Note
at its Maturity (upon acceleration,  optional  redemption,  required purchase or
otherwise);

(c) default in the performance,  or breach,  of any covenant or agreement of the
Company contained in this Indenture (other than a default in the performance, or
breach,  of a covenant  or  agreement  which is  specifically  dealt with in the
immediately  preceding  clause (a) or (b) or in clause  (B),  (C) or (D) of this
clause (c)) and  continuance  of such  default or breach for a period of 30 days
after  written  notice shall have been given to the Company by the Trustee or to
the  Company  and the  Trustee  by the  Holders  of at  least  25% in  aggregate
principal amount of the Notes then  Outstanding;  (B) default in the performance
or breach of the provisions of Section 1017;  (C) completion of any  transaction
or series of  transactions  pursuant to which the Company  consolidates  with or
merges into any other Person or sells, assigns,  conveys,  transfers,  leases or
otherwise  disposes of all of the  properties  and assets of the Company and the
Restricted  Subsidiaries on a consolidated basis to any other Person or Persons,
which  does not  constitute  a  Permitted  Transaction;  and (D)  default in the
performance or breach of Section 1010;

(d) (A) one or more defaults in the payment of principal of or premium,  if any,
or  interest  on  Indebtedness  of the  Company  or any  Significant  Subsidiary
aggregating  $7,500,000  or more,  when the same  becomes due and payable at the
Stated Maturity thereof, and such default or defaults shall have continued after
any  applicable  grace  period  and shall  not have been  cured or waived or (B)
Indebtedness of the Company or any Significant Subsidiary aggregating $7,500,000
or more shall have been  accelerated or otherwise  declared due and payable,  or
required  to be  prepaid  or  repurchased  (other  than by  regularly  scheduled
required prepayment), prior to the Stated Maturity thereof;

(e) one or more final  judgments,  orders or decrees of any court or  regulatory
agency shall be rendered  against the Company or any  Significant  Subsidiary or
their respective  properties for the payment of money, either individually or in
an  aggregate  amount,  in excess of  $7,500,000  and either (A) an  enforcement
proceeding shall have been commenced by any creditor upon such judgment or order
or (B)  there  shall  have  been a  period  of 30  days  during  which a stay of
enforcement  of such  judgment  or  order,  by  reason  of a  pending  appeal or
otherwise, was not in effect;

(f) the  entry  of a  decree  or order  by a court  having  jurisdiction  in the
premises  adjudging  the Company or any  Significant  Subsidiary  as bankrupt or
insolvent,  or approving as properly  filed a petition  seeking  reorganization,
arrangement,  adjustment or  composition  of or in respect of the Company or any
Significant Subsidiary under the Federal Bankruptcy Code or any other applicable
federal or state law, or appointing a receiver,  liquidator,  assignee, trustee,
sequestrator  (or other  similar  official)  of the  Company or any  Significant
Subsidiary or of any substantial  part of its property,  or ordering the winding
up or  liquidation  of its affairs,  and the  continuance  of any such decree or
order unstayed and in effect for a period of 90 consecutive days;

(g) the institution by the Company or any Significant  Subsidiary of proceedings
to be  adjudicated  a  bankrupt  or  insolvent,  or  the  consent  by it to  the
institution of bankruptcy or insolvency proceedings against it, or the filing by
it of a petition or answer or consent seeking reorganization or relief under the
Federal  Bankruptcy  Code or any other  applicable  federal or state law, or the
consent  by it to the filing of any such  petition  or to the  appointment  of a
receiver,   liquidator,   assignee,  trustee,  sequestrator  (or  other  similar
official) of the Company or any  Significant  Subsidiary  or of any  substantial
part of its property,  or the making by it of an  assignment  for the benefit of
creditors,  or the  admission by it in writing of its inability to pay its debts
generally as they become due; or

(h) the Pledge Agreement ceases to be in full force and effect before payment in
full of the obligations
thereunder.

              "FAIR MARKET VALUE" means,  with respect to any asset or property,
the sale value that would be obtained in an arm's length transaction  between an
informed  and willing  seller  under no  compulsion  to sell and an informed and
willing buyer under no compulsion to buy.  Unless  otherwise  specified  herein,
Fair Market Value shall be determined  by the Board of Directors  acting in good
faith and as of the date on which such determination is made.

              "INCUMBENT"  means any  railroad,  utility,  governmental  entity,
pipeline or other  licensed  owner (which  ownership is  determined  immediately
prior to any transaction with the Company or a Restricted Company Subsidiary) of
Telecommunications  Assets to be used in the  Company's  network  pursuant to an
Incumbent  Agreement  (and any  subsidiary or Affiliate of such Person that is a
party to an Incumbent  Agreement for the sole purpose of receiving payments from
the Company or a Restricted Company Subsidiary pursuant to such agreement).

              "INCUMBENT  AGREEMENT" means an agreement between an Incumbent and
the Company or a Restricted  Company  Subsidiary  pursuant to which, among other
things, such Incumbent receives a payment equal to a percentage of the Company's
or such Restricted Company Subsidiary's revenues, if any, attributable, in whole
or in part, to Telecommunications  Assets transferred or leased, or with respect
to which a right of use has been  granted,  by such  Incumbent to the Company or
such Restricted Company Subsidiary and upon or with respect to which the Company
or such Restricted  Company Subsidiary has constructed or intends to construct a
portion of its network.

              "INCUR" OR "INCUR"  means,  with respect to any  Indebtedness,  to
incur,  create,  issue,  assume,  guarantee  or  otherwise  become  directly  or
indirectly  liable or responsible for the payment of, or otherwise  incur,  such
Indebtedness,  contingently  or otherwise;  PROVIDED that neither the accrual of
interest nor the  accretion of original  issue  discount  shall be considered an
incurrence of Indebtedness.  With respect to Indebtedness to be borrowed under a
binding  commitment  previously  entered  into that  provides for the Company to
Incur  Indebtedness  on a revolving  basis,  the Company shall be deemed to have
Incurred the greater of (a) the Indebtedness  actually  Incurred or (b) all or a
portion of the amount of such unborrowed  commitment that the Company shall have
so  designated  to be  Incurred in an  Officer's  Certificate  delivered  to the
Trustee (in which case the Company shall not be deemed to incur such  unborrowed
amount at the time or times it is actually borrowed).

              "INDEBTEDNESS"  means,  with  respect to any Person at any date of
determination, without duplication:

(a) all liabilities,  contingent or otherwise,  of such Person: (i) for borrowed
money (including overdrafts),  (ii) in connection with any letters of credit and
acceptances issued under letter of credit facilities,  acceptance  facilities or
other  similar  facilities  (including  reimbursement  obligations  with respect
thereto),   (iii)  evidenced  by  bonds,  notes,  debentures  or  other  similar
instruments,  (iv) for the  deferred  and unpaid  purchase  price of property or
services  or  created  or  arising  under any  conditional  sale or other  title
retention  agreement with respect to property acquired by such Person or (v) for
Capitalized Lease Obligations (including any Sale-Leaseback Transaction);

(b) all  obligations  of such  Person  under  or in  respect  of  Interest  Rate
Agreements and Currency Agreements;

(c) all  Indebtedness  referred  to in (but not  excluded  from)  the  preceding
clauses of other  Persons and all  dividends  of other  Persons,  the payment of
which is  secured  by (or for  which  the  holder  of such  Indebtedness  has an
existing right, contingent or otherwise, to be secured by) any Lien upon or with
respect to any property  (including  accounts and contract rights) owned by such
Person,  whether or not such Person has assumed or become liable for the payment
of such  Indebtedness  (the  amount of such  obligation  being  deemed to be the
lesser  of (i) the Fair  Market  Value of such  property  or asset  and (ii) the
amount of such obligation so secured);

(d) all guarantees by such Person of Indebtedness referred to in this definition
of any other Person; and

(e) all  Redeemable  Stock of such Person valued at the greater of its voluntary
or  involuntary   maximum  fixed  repurchase  price,  plus  accrued  and  unpaid
dividends.

              The amount of  Indebtedness  of any Person at any date will be the
outstanding balance at such date (or, in the case of a revolving credit or other
similar  facility,  the total amount of funds  outstanding  and/or designated as
incurred  and  certified  by an officer of the Company to have been  Incurred on
such date  pursuant  to clause (b) of the last  sentence  of the  definition  of
"Incur") of all  unconditional  obligations as described above and, with respect
to contingent  obligations,  the maximum  liability  upon the  occurrence of the
contingency  giving  rise  to the  obligation;  PROVIDED  (i)  that  the  amount
outstanding at any time of any Indebtedness  issued with original issue discount
equals  the face  amount of such  Indebtedness  less the  remaining  unamortized
portion of the  original  issue  discount of such  Indebtedness  at such time as
determined in conformity with GAAP and (ii) that Indebtedness  shall not include
any liability for U.S. federal, state, local or other taxes owed by such Person.
For purposes  hereof,  the "maximum  fixed  repurchase  price" of any Redeemable
Capital Stock which does not have a fixed  repurchase  price shall be calculated
in  accordance  with  the  terms  of such  Redeemable  Capital  Stock as if such
Redeemable  Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined  pursuant to this  Indenture,  and if such price is
based upon,  or measured  by, the Fair Market Value of such  Redeemable  Capital
Stock,  such Fair Market Value will be  determined in good faith by the board of
directors of the issuer of such Redeemable  Capital Stock.  Notwithstanding  the
foregoing, trade accounts and accrued liabilities arising in the ordinary course
of business will not be considered Indebtedness for purposes of this definition.

              "INVESTED CAPITAL" means the sum of:

(a) 75% of the  aggregate  net cash  proceeds  received by the Company  from the
issuance of (or capital  contributions  with respect to) any  Qualified  Capital
Stock subsequent to the Issue Date, other than the issuance of Qualified Capital
Stock to a Restricted Company Subsidiary; and

(b) 75% of the aggregate  net cash  proceeds  from sales of  Redeemable  Capital
Stock of the Company or Indebtedness of the Company  convertible  into Qualified
Capital  Stock of the Company,  in each case upon such  redemption or conversion
thereof into Qualified Capital Stock.

              "INVESTMENT"  means,  with respect to the  Company's  relationship
with any Person,  any direct or indirect  advance,  loan or other  extension  of
credit or capital  contribution  to (by means of any  transfer  of cash or other
property to others or any payment  for  property or services  for the account or
use of others) or any purchase,  acquisition  or ownership by such Person of any
Capital  Stock,  bonds,  notes,  debentures or other  securities or evidences of
Indebtedness issued or owned by, any other Person and all other items that would
be classified as  investments  on a balance  sheet  prepared in accordance  with
GAAP. In addition,  the portion  (proportionate to the Company's equity interest
in such Subsidiary) of the Fair Market Value of the net assets of any Subsidiary
at  the  time  that  such  Subsidiary  is  designated  an  Unrestricted  Company
Subsidiary  shall be deemed to be an  "Investment"  made by the  Company in such
Unrestricted  Company Subsidiary at such time and the portion  (proportionate to
the Company's equity interest in such Subsidiary of the Fair Market Value of the
net assets of any  Subsidiary  at the time that such  Subsidiary is designated a
Restricted  Company  Subsidiary  shall be considered a reduction in  outstanding
Investments.   "Investments"   shall  exclude  extensions  of  trade  credit  on
commercially reasonable terms in accordance with normal trade practices.

              "NET CASH PROCEEDS" means:

(a) with respect to any Asset Sale, the proceeds  thereof in the form of cash or
Cash Equivalents,  including payments in respect of deferred payment obligations
when  received in the form of, or stock or other  assets  when  disposed of for,
cash or Cash  Equivalents  (except  to the  extent  that  such  obligations  are
financed  or  sold  with  recourse  to the  Company  or any  Restricted  Company
Subsidiary),  net of (i)  brokerage  commissions  and  other  fees and  expenses
(including  fees and expenses of legal counsel and investment  banks) related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale,  (iii)  payments  made  to  retire  Indebtedness  where  payment  of  such
Indebtedness  is secured by the assets or  properties  which are the  subject of
such Asset Sale, (iv) amounts  required to be paid to any Person (other than the
Company or any Restricted Company  Subsidiary)  owning a beneficial  interest in
the assets subject to the Asset Sale and (v) appropriate  amounts to be PROVIDED
by the Company or any Restricted  Company  Subsidiary,  as the case may be, as a
reserve required in accordance with GAAP against any liabilities associated with
such  Asset  Sale  and  retained  by  the  Company  or  any  Restricted  Company
Subsidiary,  as the case may be,  after such Asset Sale,  including  pension and
other post-employment benefit liabilities,  liabilities related to environmental
matters and liabilities under any  indemnification  obligations  associated with
such Asset Sale, all as reflected in an Officers'  Certificate  delivered to the
Trustee; and

(b) with respect to any issuance or sale of Capital  Stock or options,  warrants
or rights to purchase  Capital Stock, or debt  securities or Redeemable  Capital
Stock that has been converted into or exchanged for Qualified  Capital Stock, as
referred to in the definition of "Restricted  Payment" contained in this Section
103,  the  proceeds  of  such  issuance  or  sale  in the  form  of cash or Cash
Equivalents,  including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when  disposed of for, cash or
Cash  Equivalents  (except to the extent that such  obligations  are financed or
sold with recourse to the Parent or any Subsidiary of the Parent),  net of fees,
commissions and expenses  actually  incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.

              "PERMITTED INDEBTEDNESS" means:

(a)  Indebtedness  of the  Company  pursuant  to the Notes or of any  Restricted
Company Subsidiary pursuant to a Guarantee of the Notes;

(b) Indebtedness of the Company or any Restricted Company Subsidiary outstanding
on the Issue Date;

(c) Indebtedness of the Company owing to any Restricted  Company Subsidiary (but
only  so  long  as  such  Indebtedness  is  held  by  such  Restricted   Company
Subsidiary);  PROVIDED  that any  Indebtedness  of the Company owing to any such
Restricted Company Subsidiary is subordinated in right of payment from and after
such time as the Notes shall become due and payable (whether at Stated Maturity,
by  acceleration  or otherwise) to the payment and  performance of the Company's
obligations under the Notes; and PROVIDED further that any transaction  pursuant
to which any Restricted  Company  Subsidiary to which such  Indebtedness is owed
ceases to be a Restricted Company Subsidiary shall be deemed to be an incurrence
of Indebtedness by the Company that is not permitted by this clause (c);

(d) Indebtedness of any Restricted Company Subsidiary owing to the Company or of
any  Restricted   Company   Subsidiary  owing  to  another   Restricted  Company
Subsidiary;

(e) Indebtedness of the Company or any Restricted  Company Subsidiary in respect
of  performance,  surety or appeal  bonds or under  letter of credit  facilities
PROVIDED  in the  ordinary  course of  business  and,  in the case of letters of
credit, under which recourse to the Company is limited to the cash securing such
letters of credit;

(f)  Indebtedness  of the Company under  Currency  Agreements  and Interest Rate
Agreements  entered into in the ordinary course of business;  PROVIDED that such
agreements  are  designed  to  protect  the  Company or any  Restricted  Company
Subsidiary  against,  or manage exposure to,  fluctuations in currency  exchange
rates and interest rates, respectively, and that such agreements do not increase
the  Indebtedness of the obligor  outstanding at any time other than as a result
of  fluctuations  in foreign  currency  exchange  rates or interest  rates or by
reason of fees, indemnities and compensation payable thereunder;

(g) Telecommunications Indebtedness and any Indebtedness issued in exchange for,
or  the  net  proceeds  of  which  are  used  to   refinance  or  refund,   such
Telecommunications  Indebtedness  in an  amount  not to  exceed  the  amount  so
refinanced or refunded (plus premiums, accrued interest, and reasonable fees and
expenses);

(h) Indebtedness of the Company or any Restricted Company Subsidiary  consisting
of   guarantees,   indemnities   or   obligations   in   connection   with   (1)
Telecommunications  Indebtedness, (2) Indebtedness permitted under clause (j) or
(m) of this  "Permitted  Indebtedness"  definition or (3) in respect of purchase
price  adjustments  in connection  with the  acquisition  of or  disposition  of
assets, including shares of Capital Stock;

(i)  Indebtedness  of the Company not to exceed,  at any time  outstanding,  2.0
times the Net Cash  Proceeds  from the  issuance  and sale after the Issue Date,
other than to a Restricted Company Subsidiary, of Qualified Capital Stock of the
Company,  to the  extent  such Net  Cash  Proceeds  have  not been  used to make
Restricted Payments pursuant to clause (a)(3)(B) or clauses (b)(ii) and (iii) of
the  definition of  "Restricted  Payment" or to make any  Permitted  Investments
under clause (h) of the definition of Permitted Investments;  PROVIDED that such
Indebtedness  does not mature prior to the Stated  Maturity of the Notes and has
an Average Life longer than the Notes;

(j) Indebtedness of the Company or any Restricted  Company  Subsidiary under one
or more Credit Facilities;  PROVIDED that the aggregate  principal amount of any
Indebtedness  incurred  pursuant  to this  clause  (j)  (including  any  amounts
refinanced  or  refunded  under  this  clause  (j)) does not  exceed at any time
outstanding the greater of (x) 80% of eligible  consolidated accounts receivable
of the Company as of the last fiscal quarter for which financial  statements are
prepared or (y)  $50,000,000  or the  equivalent  thereof in one or more foreign
currencies;  and any Indebtedness  incurred in exchange for, or the net proceeds
of which are used to refinance or refund,  Indebtedness issued under this clause
(j) in an amount  not to exceed  the  amount so  refinanced  or  refunded  (plus
premiums, accrued interest, and reasonable fees and expenses);

(k)  Indebtedness of the Company or a Restricted  Company  Subsidiary  issued in
exchange  for,  or the net  proceeds of which are used to  refinance  or refund,
then-outstanding Indebtedness of the Company or a Restricted Company Subsidiary,
incurred  under the ratio test set forth in clause (i) or (ii) of the definition
of "Allowable  Company  Indebtedness" or under clauses (b) through (f), (h), (i)
and (m) of this  definition of "Permitted  Indebtedness,"  and any  refinancings
thereof in an amount not to exceed the amount so  refinanced  or refunded  (plus
premiums,  accrued  interest,  and reasonable fees and expenses);  PROVIDED that
such new  Indebtedness  shall only be permitted  under this clause (k) if (A) in
case the Notes are  refinanced  in part,  or the  Indebtedness  to be refinanced
ranks  equally  with the Notes,  such new  Indebtedness,  by its terms or by the
terms of any agreement or instrument  pursuant to which such new Indebtedness is
issued or remains  outstanding,  is  expressly  made to rank  equally  with,  or
subordinate  in  right of  payment  to,  the  remaining  Notes,  (B) in case the
Indebtedness  to be refinanced is subordinated in right of payment to the Notes,
such  new  Indebtedness,  by its  terms  or by the  terms  of any  agreement  or
instrument  pursuant  to which  such  new  Indebtedness  is  issued  or  remains
outstanding  is expressly  made  subordinate in right of payment to the Notes at
least to the same extent that the  Indebtedness to be refinanced is subordinated
to the  Notes  and (C)  such  new  Indebtedness,  determined  as of the  date of
incurrence  of such new  Indebtedness,  does  not  mature  prior  to the  Stated
Maturity of the Indebtedness to be refinanced or refunded,  and the Average Life
of such new Indebtedness is at least equal to the remaining  Average Life of the
Indebtedness being refinanced or refunded; PROVIDED further that no Indebtedness
incurred  under this  clause  (k) in  exchange  for,  or the  proceeds  of which
refinance or refund,  any  Indebtedness  incurred under the ratio test set forth
under clause (i) or (ii) of the definition of "Allowable  Company  Indebtedness"
will mature  prior to the Stated  Maturity of the Notes or have an Average  Life
shorter than the Notes;  PROVIDED  further that in no event may  Indebtedness of
the Company be refinanced by means of any Indebtedness of any Restricted Company
Subsidiary issued pursuant to this clause (k);

(l)  Indebtedness  arising  by  reason  of the  recharacterization  of a sale of
accounts receivable to an Accounts Receivable Subsidiary; and

(m) Indebtedness of the Company or any Restricted Company Subsidiary in addition
to that permitted to be incurred pursuant to clauses (a) through (l) above in an
aggregate  principal  amount  not in excess of  $30,000,000  (or the  equivalent
thereof in one or more foreign currencies) at any time outstanding.

                      "PERMITTED INVESTMENT" means any of the following:

(a) Investments in Cash Equivalents;  PROVIDED that the term "with a maturity of
180  days or  less"  in  clauses  (a),  (b) and (c) of the  definition  of "Cash
Equivalents"  is  changed  to "with a  maturity  of one  year or  less"  for the
purposes of this definition of "Permitted Investments" only;

(b)      Investments in the Company or any Restricted Company Subsidiary;

(c) Investments by the Company or any Restricted  Company  Subsidiary in another
Person  if, as a result of such  Investment,  (i) such  other  Person  becomes a
Restricted   Company   Subsidiary  or  (ii)  such  other  Person  is  merged  or
consolidated  with or into, or transfers or conveys all or substantially  all of
its assets to, the Company or a Restricted Company Subsidiary;

(d) Investments in the form of intercompany Indebtedness to the extent permitted
under clauses (c) and (d) of the definition of "Permitted Indebtedness;"

(e) Investments in existence on the Issue Date;

(f)  Investments in the Pledged  Securities to the extent required by the Pledge
Agreement;

(g) Investments in an amount not to exceed $1,000,000 (or the equivalent thereof
in one or more foreign currencies) at any one time outstanding;

(h)  Investments  in an  aggregate  amount not to exceed the sum of (1) Invested
Capital,  (2) the Fair Market Value of Qualified  Capital  Stock of the Company,
Redeemable  Capital  Stock  of the  Company,  or  Indebtedness  of  the  Company
convertible into Qualified Capital Stock of the Company, in the latter two cases
upon such redemption or conversion  thereof into Qualified  Capital Stock of the
Company,  issued  by  the  Company  or  any  Restricted  Company  Subsidiary  as
consideration for any such Investments made pursuant to this clause (h), and (3)
in the case of the  disposition or repayment of any Investment  made pursuant to
this  clause  (h)  after  the  Issue  Date  (including  by  redesignation  of an
Unrestricted Company Subsidiary to a Restricted Company  Subsidiary),  an amount
equal to the lesser of the return of capital with respect to such Investment and
the initial  amount of such  Investment,  in either  case,  less the cost of the
disposition  of such  Investment;  PROVIDED,  however,  that the  amount  of any
Permitted  Investments  under  this  clause  (h)  shall  be  excluded  from  the
computation of the amount of any Restricted Payment;

(i) Investments in trade receivables,  prepaid expenses,  negotiable instruments
held for collection and lease,  utility and worker's  compensation,  performance
and other similar deposits or escrow;

(j) Loans,  advances and  extensions of credit to employees made in the ordinary
course of business of the Company not in excess of $500,000  (or the  equivalent
thereof in one or more foreign currencies) in any fiscal year;

(k)  Bonds,  notes,  debentures  or  other  securities  evidencing  Indebtedness
received as a result of Asset Sales permitted under Section 1017);

(l) Endorsements for collection or deposit in the ordinary course of business by
the  Company or any  Restricted  Company  Subsidiary  of bank drafts and similar
negotiable  instruments  of any other  person  received as payment for  ordinary
course of business trade receivables;

(m)  Investments  deemed to have been made as a result of the  acquisition  of a
Person  that at the  time  of such  acquisition  held  instruments  constituting
Investments that were not acquired in  contemplation  of, or in connection with,
the acquisition of such Person;

(n) Investments in or acquisitions of Capital Stock, indebtedness, securities or
other property of Persons (other than Affiliates of the Company) received by the
Company or any of its  Restricted  Company  Subsidiaries  in the  bankruptcy  or
reorganization  of or by such Person or any exchange of such Investment with the
issuer  thereof  or  taken in  settlement  of or  other  resolution  of claim or
disputes, and, in each case, extensions, modifications and renewals thereof;

(o)  Investments  in any Person to which  Telecommunications  Assets  used in an
Initial  System  have been  transferred  and which  person has  PROVIDED  to the
Company or a Restricted Company Subsidiary the right to use such assets pursuant
to an Incumbent Agreement; PROVIDED that, in the good faith determination of the
Board of  Directors,  the present  value of the future  payments  expected to be
received by the Company in respect of any such  Investment  plus the Fair Market
Value of any capital stock or other securities received in connection  therewith
shall be at least equal to the Fair Market Value of such Investment; and

(p)  Investments in one or more  Permitted  Telecommunications  Joint  Ventures;
PROVIDED that the total original cost of all such  Permitted  Telecommunications
Joint  Ventures  plus the  cost or Fair  Market  Value,  as  applicable,  of all
additions  thereto less the sum of all amounts received as returns thereon shall
not  exceed  $20,000,000  (or the  equivalent  thereof  in one or  more  foreign
currencies).

                      "PERMITTED LIENS" means:

(a) Liens existing on the Issue Date;

(b) Liens on any property or assets of a Restricted  Company  Subsidiary granted
in favor of the Company or any Restricted Company Subsidiary;

(c) Liens on any  property  or assets of the Company or any  Restricted  Company
Subsidiary securing the Notes or any Guarantees thereof;

(d) any interest or title of a lessor under any Capitalized  Lease Obligation or
operating lease permitted by this Indenture;

(e) Liens  securing  Indebtedness  incurred under clauses (g), (j) or (m) of the
definition of "Permitted Indebtedness";

(f)  statutory  Liens  of  landlords  and  carriers,  warehousemen,   mechanics,
suppliers,  materialmen,  repairmen or other like Liens  arising in the ordinary
course of business of the Company or any Restricted Company Subsidiary and, with
respect  to  amounts  not yet  delinquent  or being  contested  in good faith by
appropriate proceeding,  if a reserve or other appropriate provision, if any, as
required in conformity with GAAP shall have been made therefor;

(g) Liens for taxes,  assessments,  government  charges or claims that are being
contested  in good faith by  appropriate  proceedings  promptly  instituted  and
diligently conducted and if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor;

(h) Liens incurred or deposits made to secure the performance of tenders,  bids,
leases,  statutory obligations,  surety and appeal bonds,  government contracts,
performance  bonds,  escrows and other  obligations of a like nature incurred in
the ordinary course of business (other than contracts for the payment of money);

(i)  easements,  rights-of-way,   restrictions  and  other  similar  charges  or
encumbrances  not  interfering in any material  respect with the business of the
Company or any Restricted Company Subsidiary  incurred in the ordinary course of
business;

(j) Liens  arising  by reason of any  judgment,  decree or order of any court so
long as such Lien is adequately  bonded and any  appropriate  legal  proceedings
that may have been duly  initiated  for the review of such  judgment,  decree or
order shall not have been  finally  terminated  or the period  within which such
proceedings may be initiated shall not have expired;

(k) Liens securing Acquired Indebtedness created prior to (and not in connection
with or in contemplation  of) the incurrence of such Indebtedness by the Company
or any Restricted Company Subsidiary; PROVIDED that such Lien does not extend to
any property or assets of the Company or any Restricted Company Subsidiary other
than the assets  acquired in  connection  with the  incurrence  of such Acquired
Indebtedness;

(l) Liens securing  obligations of the Company under Interest Rate Agreements or
Currency Agreements  permitted to be incurred under clause (f) of the definition
of "Permitted Indebtedness" or any collateral for the Indebtedness to which such
Interest Rate Agreements or Currency Agreements relate;

(m) Liens  incurred  or  deposits  made in the  ordinary  course of  business in
connection with workers' compensation, unemployment insurance and other types of
social security;

(n) Liens  securing  reimbursement  obligations of the Company or any Restricted
Company Subsidiary with respect to letters of credit that encumber documents and
other property  relating to such letters of credit and the products and proceeds
thereof;

(o) Liens arising from purchase  money  mortgages  and purchase  money  security
interests;  PROVIDED that (i) the related  Indebtedness  shall not be secured by
any property or assets of the Company or of any  Restricted  Company  Subsidiary
other than the property and assets so acquired and (ii) the Lien  securing  such
Indebtedness shall be created within 60 days of such acquisition;

(p) Liens securing the Escrow Account,  the Pledged  Securities and the proceeds
thereof and the security interest created by the Pledge Agreement;

(q) any  extension,  renewal or  replacement,  in whole or in part,  of any Lien
described  in the  foregoing  clauses (a) through  (o);  PROVIDED  that any such
extension,  renewal or replacement  shall be no more restrictive in any material
respect than the Lien so  extended,  renewed or replaced and shall not extend to
any additional property or assets;

(r) Liens with  respect  to the  equipment  and  related  assets of the  Company
installed  on its  network  in favor of  Persons  that  have  licensed,  leased,
transferred  or granted to the Company or any  Restricted  Company  Subsidiary a
right  to  use   Telecommunications   Assets  or   financed   the   purchase  of
Telecommunications  Assets or securing  the  obligations  of the Company or such
Restricted Company Subsidiary under an Incumbent  Agreement;  PROVIDED that such
Liens will (1) be created on terms that the Company reasonably believes to be no
less  favorable  to the  Company  than Liens  granted  under  clause (e) of this
definition  and (2) not secure  any  Indebtedness  in excess of the Fair  Market
Value of the equipment and assets so secured;

(s)  Liens  relating  to  revenues  of the  Company  or any  Restricted  Company
Subsidiary arising as a result of obligations under an Incumbent Agreement; and

(t) Liens on the  property  or assets or Capital  Stock of  Accounts  Receivable
Subsidiaries  and Liens  arising out of any sale of Accounts  Receivable  in the
ordinary   course  of  business   (including  in  connection  with  a  financing
transaction) to or by an Accounts  Receivable  Subsidiary or to Persons that are
not Affiliates of the Company.

                      "PERMITTED RESTRICTION" means:

(a) any agreement or instrument  governing or relating to Indebtedness under any
senior financing  facility permitted to be incurred under clause (g), (j) or (m)
of the definition of Permitted  Indebtedness if such  encumbrance or restriction
applies  only (A) to amounts  which at any point in time (other than during such
periods as are  described  in the  following  clause  (B)) (1) exceed  scheduled
amounts due and payable (or which are to become due and payable  within 30 days)
in respect of the Notes or this Indenture for interest,  premium, and Liquidated
Damages,  if any,  and  principal  less the  amount  of cash  that is  otherwise
available to the Company at such time for the payment of  interest,  premium and
Liquidated  Damages,  if any,  and  principal  due and payable in respect of the
Notes or this  Indenture or (2) if paid,  would result in an event  described in
the  following  clause (B) of this  sentence,  or (B) during the tendency of any
event that causes,  permits or,  after  notice or lapse of time,  would cause or
permit the holder or holders of such  Indebtedness to declare such  Indebtedness
to be immediately due and payable or to require cash  collateralization  or cash
cover for such Indebtedness for so long as such cash  collateralization  or cash
cover has not been provided; and

(b) any encumbrance or restriction under the Vendor Credit Facility.

              "PERMITTED  TELECOMMUNICATIONS  ASSET  SALE"  means any  transfer,
conveyance,  sale,  lease or other  disposition  of a  capital  asset  that is a
Telecommunications  Asset,  the  proceeds  of  which  are  treated  as  revenues
(including deferred revenues) by the Company in accordance with GAAP.

              "PERMITTED  TELECOMMUNICATIONS JOINT VENTURE" means a corporation,
partnership or other entity engaged in one or more  Telecommunications  Business
in which the Company owns, directly or indirectly, an equity interest.

              "PERMITTED  TRANSACTION"  means  a  transaction  or  a  series  of
transactions  pursuant to which the Company  consolidates with or merges with or
into any other Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or  substantially  all of its properties and assets to any other
Person or Persons, or pursuant to which any Restricted Company Subsidiary enters
into any such transaction or series of  transactions,  PROVIDED always that such
transaction or series of  transactions,  shall not be permitted if it or they in
the aggregate would result in the sale, assignment,  conveyance, transfer, lease
or other disposition of all or substantially all of the properties and assets of
the Company and its Restricted  Company  Subsidiaries on a consolidated basis to
any other  Person or Persons,  unless at the time and  immediately  after giving
effect thereto:

(i)    either (A) the Company  shall be the  continuing  corporation  or (B) the
              Person (if other than the Company) formed by such consolidation or
              into which the Company or such  Restricted  Company  Subsidiary is
              merged  or  the  Person  that   acquires   by  sale,   assignment,
              conveyance,  transfer,  lease or disposition all or  substantially
              all the  properties  and assets of the Company and its  Restricted
              Company  Subsidiaries on a consolidated  basis, as the case may be
              (the  "Surviving  Company  Entity"),  (1)  shall be a  corporation
              organized and validly existing under the laws of the United States
              of America,  any state thereof or the District of Columbia and (2)
              shall  expressly  assume,  by a  supplemental  indenture  to  this
              Indenture  in form  satisfactory  to the  Trustee,  the  Company's
              obligations pursuant to the Notes for the due and punctual payment
              of the  principal  of,  premium,  if any,  and interest on all the
              Notes and the  performance and observance of every covenant herein
              on the part of the Company to be performed or observed;

(b) immediately  before and immediately  after giving effect to such transaction
or series of  transactions  on a pro forma basis (and treating any obligation of
the Company or any Restricted Company Subsidiary  incurred in connection with or
as a result  of such  transaction  or  series of  transactions  as  having  been
incurred at the time of such transaction),  no Default or Event of Default shall
have occurred and be continuing;

(c)  immediately   after  giving  effect  to  such   transaction  or  series  of
transactions  on a pro forma basis (on the  assumption  that the  transaction or
series of  transactions  occurred  on the first  day of the two  fiscal  quarter
period ending  immediately  prior to the  consummation  of such  transaction  or
series of  transactions,  with the appropriate  adjustments  with respect to the
transaction  or  series  of  transactions  being  included  in  such  pro  forma
calculation), the Company (or the Surviving Company Entity if the Company is not
the  continuing  obligor  hereunder)  could incur at least  $1.00 of  additional
Allowable Company Indebtedness (other than Permitted Indebtedness);  and (d) the
Company  or such  Person  shall  have  delivered  to the  Trustee,  in form  and
substance  reasonably  satisfactory  to the Trustee,  an  Officers'  Certificate
(attaching the computations to demonstrate compliance with clause (c) above) and
an Opinion of Counsel,  each  stating  that such  consolidation,  merger,  sale,
assignment,  conveyance,  transfer  or  lease  or other  disposition  and,  if a
supplemental  indenture is required in connection  with such  transaction,  such
supplemental  indenture,  constitute a Permitted Transaction for the purposes of
this definition and that all conditions  precedent  herein PROVIDED for relating
to such transaction have been complied with.

                  PROVIDED that:

(i)           any merger or  consolidation  of a Restricted  Company  Subsidiary
              with and into the Company  (with the Company  being the  surviving
              entity) or another  Restricted Company Subsidiary need only comply
              with  clauses (c) and (d) above in order to qualify as a Permitted
              Transaction.  Further,  any  reincorporation of the Company or any
              Restricted  Company Subsidiary under the laws of the United States
              of America, any state thereof or the District of Columbia shall be
              a Permitted Transaction;

(ii)          Upon  any  consolidation  of the  Company  with or  merger  of the
              Company  with  or  into  any  other   corporation   or  any  sale,
              assignment,  conveyance,  transfer,  lease or  disposition  of the
              properties and assets of the Company  substantially as an entirety
              to any Person that qualifies as a Permitted  Transaction  pursuant
              to clauses (a) through (d) of this definition in which the Company
              is not the continuing  obligor  hereunder,  the Surviving  Company
              Entity shall succeed to, and be substituted  for, and may exercise
              every  right and power of,  the  Company  hereunder  with the same
              effect as if such  successor  Person had been named as the Company
              herein.  When a successor  assumes all of the  obligations  of its
              predecessor under the Indenture, the predecessor shall be released
              from such obligations; PROVIDED that, in the case of a transfer by
              lease,  the predecessor  shall not be released from the payment of
              principal of, premium and Liquidated Damages, if any, and interest
              on the Notes.

(iii)         If, upon any such  consolidation  of the Company with or merger of
              the  Company  into  any  other  corporation,  or  upon  any  sale,
              assignment,  conveyance,  lease or transfer of the property of the
              Company  substantially  as an  entirety to any other  Person,  any
              property or assets of the Company would  thereupon  become subject
              to any Lien,  then unless such Lien  qualifies as a Permitted Lien
              without equally and ratably securing the Notes, the Company, prior
              to  or  simultaneously  with  such  consolidation,  merger,  sale,
              assignment,  conveyance,  lease  or  transfer,  shall  as to  such
              property or assets,  secure the Notes Outstanding  (together with,
              if the Company  shall so determine any other  Indebtedness  of the
              Company  now  existing  or   hereinafter   created  which  is  not
              subordinate  in right of payment to the Notes) equally and ratably
              with (or prior to) the Indebtedness which upon such consolidation,
              merger,  conveyance,  lease or transfer is to become secured as to
              such property or assets by such Lien, or shall cause such Notes to
              be so secured.

              "RESTRICTED  PAYMENT" means any of the following  actions  whether
taken  directly or indirectly and whether taken by the Company or any Restricted
Company Subsidiary:

 (a)                            (1) the  declaration  or payment of any dividend
              on, or making of any distribution to holders of, any shares of the
              Capital   Stock  of  the   Company   (other  than   dividends   or
              distributions  payable  solely in shares of its Qualified  Capital
              Stock or in  options,  warrants  or other  rights to acquire  such
              shares of Qualified Capital Stock);

                            (2) purchasing,  redeeming or otherwise acquiring or
              retiring for value, directly or indirectly,  any shares of Capital
              Stock of the Company or any Capital Stock of any of its Affiliates
              (other than Capital Stock of the Parent,  any  Subsidiaries of the
              Parent that are not Company Restricted Subsidiaries and any Wholly
              Owned  Restricted  Subsidiary)  or any options,  warrants or other
              rights to acquire such shares of Capital Stock;

                            (3)   making   any   principal    payment   on,   or
              repurchasing,  redeeming,  defeasing  or  otherwise  acquiring  or
              retiring for value,  prior to the Stated Maturity of any principal
              payment or any  sinking  fund  payment,  any  Indebtedness  of the
              Company that is expressly  subordinated in right of payment to the
              Notes; or

                            (4) making any Investment  (other than any Permitted
              Investment) in any Person;

         (such  payments or other actions  described in (but not excluded  from)
         clauses  (1) through (4) are  collectively  referred to as  "Restricted
         Payments");  unless at the time of, and immediately after giving effect
         to, the proposed  Restricted Payment (the amount of any such Restricted
         Payment,  if other than cash,  as  determined by the Board of Directors
         the Company, whose determination shall be conclusive and evidenced by a
         Board  Resolution),  (A) no  Default  or Event of  Default  shall  have
         occurred and be continuing,  (B) the Company could incur at least $1.00
         of additional  Allowable  Company  Indebtedness  (other than  Permitted
         Indebtedness)  and (C) the aggregate amount of all Restricted  Payments
         declared or made after the Issue Date shall not exceed the sum of:

(i)           (A) 100% of  Consolidated  Operating Cash Flow of the Company less
              1.5 times  Consolidated  Interest Expense of the Company or (B) if
              Consolidated  Operating  Cash Flow of the  Company is a  negative,
              minus 100% of such negative  amount,  in each case on a cumulative
              basis for the period  beginning on the first day of the  Company's
              first fiscal  quarter  after the Issue Date and ending on the last
              day of the Company's  last fiscal quarter ending prior to the date
              of such proposed Restricted Payment; plus

(ii)          the  aggregate  Net Cash  Proceeds  and the Fair  Market  Value of
              Telecommunications Assets or Voting Stock of a Person that becomes
              a Restricted Subsidiary,  the assets of which consist primarily of
              Telecommunications Assets, received by the Company after the Issue
              Date as capital  contributions or from the issuance or sale (other
              than to any  Subsidiary)  of shares of Qualified  Capital Stock of
              the Company  (including upon the exercise of options,  warrants or
              rights)  or  warrants,  options  or rights to  purchase  shares of
              Qualified Capital Stock of the Company; plus

(iii)         the  aggregate  Net Cash  Proceeds  and the Fair  Market  Value of
              Telecommunications Assets or Voting Stock of a Person that becomes
              a Restricted Subsidiary,  the assets of which consist primarily of
              Telecommunications Assets, received by the Company after the Issue
              Date from the issuance or sale (other than to any  Subsidiary)  of
              debt  securities  or  Redeemable  Capital  Stock  that  have  been
              converted  into or exchanged  for  Qualified  Capital Stock of the
              Company,  together  with the  aggregate  Net Cash Proceeds and the
              Fair Market Value of Telecommunications  Assets or Voting Stock of
              a Person that becomes a Restricted Subsidiary, the assets of which
              consist primarily of  Telecommunications  Assets,  received by the
              Company at the time of such conversion or exchange; plus

(iv)          to the extent not  otherwise  included in  Consolidated  Operating
              Cash Flow of the  Company,  an amount  equal to the sum of (a) the
              net reduction in Investments (other than Permitted Investments) in
              any Person (other than a Restricted Subsidiary) resulting from the
              payment in cash of  dividends,  repayments of loans or advances or
              other  transfers  of  assets,  in each case to the  Company or any
              Restricted  Subsidiary  after the Issue Date from such  Person and
              (b) the amount of any net reduction in Investments  resulting from
              the  redesignation  of an  Unrestricted  Company  Subsidiary  as a
              Restricted   Company   Subsidiary   (valued  as  provided  in  the
              definition  of  "Investment")  at the time of such  redesignation;
              PROVIDED that, in the case of (a) or (b) above,  the foregoing sum
              shall not  exceed  the total  amount of  Investments  (other  than
              Permitted   Investments)   previously   made  in  such  Person  or
              Unrestricted  Company Subsidiary by the Company and its Restricted
              Company Subsidiaries.

(b)  Notwithstanding  the above,  the  following  actions by the  Company or any
Restricted Company Subsidiary shall not constitute  Restricted  Payments so long
as (with  respect  to  clauses  (1)  through  (6)  below) no Default or Event of
Default shall have occurred and be continuing:

(1)      the  payment  of  any  dividend  within  60  days  after  the  date  of
         declaration thereof, if at such date of declaration the payment of such
         dividend would have complied with the provisions of paragraph (a) above
         and such  payment  will be  deemed  to have  been  paid on such date of
         declaration for purposes of the  calculation  required by paragraph (a)
         above;

(2)      the purchase,  redemption or other  acquisition or retirement for value
         of any shares of Capital  Stock of the Company (x) in exchange  for, or
         out of the Net Cash Proceeds of a substantially concurrent issuance and
         sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
         of the  Company;  (y) that are held by former  officers,  employees  or
         directors (or their estates or  beneficiaries  under their  estates) of
         the Company or any of its  Subsidiaries;  PROVIDED  that the  aggregate
         amount of such purchase,  redemption or other acquisition or retirement
         for value  under  this  clause  (y) will not  exceed  $250,000  (or the
         equivalent  thereof  in one or more  foreign  currencies)  in any given
         fiscal year; or (z) pursuant to the employment  agreement  dated August
         4, 1997,  between the Company and Richard Jalkut,  as amended and as in
         effect on the Issue  Date (and any  extensions  or  renewals  thereof);
         PROVIDED  that  the  amount  of  such  purchase,  redemption  or  other
         acquisition  or  retirement  for value  under this  clause (z) will not
         exceed  $1,000,000  (or the  equivalent  thereof in one or more foreign
         currencies) in any given fiscal year;

(3)      the purchase, redemption, defeasance or other acquisition or retirement
         for  value  of  any  Indebtedness  of the  Company  that  is  expressly
         subordinated  in right of payment to the Notes in exchange  for, or out
         of the Net Cash  Proceeds of a  substantially  concurrent  issuance and
         sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
         of the Company;

(4)      the  purchase  of any  Indebtedness  of the Company  that is  expressly
         subordinated  in right of payment to the Notes at a purchase  price not
         greater  than 101% of the  principal  amount  thereof in the event of a
         Change of  Control in  accordance  with  provisions  similar to Section
         1010;  PROVIDED  that prior to such  purchase  the Company has made the
         Change of Control  Offer as provided in such  covenant  with respect to
         the Notes and has purchased  all Notes validly  tendered for payment in
         connection with such Change of Control Offer;

(5)      the purchase, redemption, defeasance or other acquisition or retirement
         for value of Indebtedness  (other than Redeemable Capital Stock) of the
         Company that is expressly subordinated in right of payment to the Notes
         in  exchange  for, or out of the Net Cash  Proceeds of a  substantially
         concurrent incurrence (other than to a Subsidiary) of, new Indebtedness
         of the Company  that is expressly  subordinated  in right of payment to
         the Notes, so long as (A) the principal amount of such new Indebtedness
         does not exceed the principal  amount (or, if such  Indebtedness  being
         refinanced  provides  for an  amount  less  than the  principal  amount
         thereof  to be due  and  payable  upon a  declaration  of  acceleration
         thereof,  such lesser  amount as of the date of  determination)  of the
         Indebtedness  being  so  purchased,  redeemed,  defeased,  acquired  or
         retired,  plus the lesser of (x) the amount of any premium  required to
         be paid in connection  with such  refinancing  pursuant to the terms of
         the  Indebtedness  being  refinanced  or (y) the amount of any  premium
         reasonably  determined by the Company as necessary to  accomplish  such
         refinancing,  plus,  in either  case,  the  amount of  expenses  of the
         Company  incurred in  connection  with such  refinancing;  (B) such new
         Indebtedness  is  subordinated  to the Notes to the same extent as such
         Indebtedness so purchased, redeemed, defeased, acquired or retired; and
         (C) such new  Indebtedness  has an Average Life longer than the Average
         Life of the  Indebtedness  being refinanced and a final Stated Maturity
         of principal later than the final Stated  Maturity of the  Indebtedness
         being refinanced; and

(6)      the  payment of  cash  in  lieu of  fractional shares of  Common  Stock
         pursuant to the Warrant Agreement.

                  The  actions  described  in clauses (1) through (4) and (6) of
this  paragraph  (b) shall be  Restricted  Payments  that shall be  permitted in
accordance  with this  paragraph  (b) but shall  reduce  the  amount  that would
otherwise be available for Restricted Payments under clause (C) of paragraph (a)
above.  The  actions  described  in clause  (5) of this  paragraph  (b) shall be
Restricted  Payments that shall be permitted in accordance  with this  paragraph
(b) and shall not reduce  the  amount  that would  otherwise  be  available  for
Restricted Payments under clause (C) of paragraph (a).

              "RESTRICTED  SUBSIDIARY" means any Subsidiary of the Company other
than an Unrestricted Company Subsidiary.

              "SALE-LEASEBACK   TRANSACTION"   means  any  direct  or   indirect
arrangement, or series of related arrangements,  with any Person (other than the
Company or a Restricted  Company  Subsidiary) or to which any Person (other than
the Company or a Restricted  Company  Subsidiary) is a party,  providing for the
leasing to the Company or to a Restricted Company Subsidiary of any property for
an aggregate term exceeding three years,  whether owned by the Company or by any
Subsidiary of the Company at the Issue Date or later acquired, which has been or
is to be  sold  or  transferred  by  the  Company  or  such  Restricted  Company
Subsidiary  to such  Person or to any other  Person from whom funds have been or
are to be  advanced by such Person on the  security of such  property;  PROVIDED
that the  transfer  by the  Company  or any  Restricted  Company  Subsidiary  of
Telecommunications  Assets to, and the leasing by the Company or any  Restricted
Company  Subsidiary  of such assets from, a Permitted  Telecommunications  Joint
Venture shall not constitute a Sale-Leaseback Transaction.

              "SIGNIFICANT SUBSIDIARY" means, at any date of determination,  any
Restricted Company Subsidiary that, together with its Subsidiaries,  (i) for the
most  recent  fiscal  year of the  Company  accounted  for more  than 10% of the
consolidated  revenues of the Company and its Restricted  Company  Subsidiaries,
(ii) as of the end of such  fiscal  year,  was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Company  Subsidiaries,  or
(iii) owns one or more FCC licenses the  aggregate  cost or Fair Market Value of
which  represents  5% or more of the net  asset  value  of the  Company  and its
Restricted  Company  Subsidiaries on a consolidated  basis as of the end of such
fiscal year, in the case of (i), (ii) or (iii) as set forth on the most recently
available consolidated financial statements of the Company for such fiscal year.

              "TELECOMMUNICATIONS  ASSETS"  means,  with  respect to any Person,
assets  (including  rights of way,  trademarks and licenses)  other than current
assets that are utilized by such Person, directly or indirectly, for the design,
development,  construction,   installation,  integration  or  provision  of  the
Company's network,  including any businesses or services in which the Company is
currently   engaged   and   including   any   computer   systems   used   in   a
Telecommunications  Business.  Telecommunications Assets also include 66 2/3% of
the Voting  Stock of another  Person,  PROVIDED  that  substantially  all of the
assets of such other Person consist of  Telecommunications  Assets, and PROVIDED
further such Voting  Stock shall be held by the Company or a Restricted  Company
Subsidiary,  such other Person either is, or immediately  following the relevant
transaction  shall become,  a Restricted  Subsidiary of the Company  pursuant to
this Indenture or a Permitted  Telecommunications  Joint Venture  subject to the
limitations  set  forth  under  clause  (p)  of  the  definition  of  "Permitted
Investment" contained in this Section 103. The determination of what constitutes
Telecommunications  Assets shall be made by the Board of Directors and evidenced
by a Board Resolution delivered to the Trustee.

              "TELECOMMUNICATIONS   BUSINESS"   means,   the   business  of  (i)
transmitting,  or providing  services  relating to the  transmission  of, voice,
video  or  data  through   owned  or  leased   transmission   facilities,   (ii)
constructing,  creating,  developing,  acquiring or marketing  Telecommunication
Assets or other  communications  related network  equipment,  software and other
devices  for  use  in  a   telecommunications   business  or  (iii)  evaluating,
participating  or pursuing any other activity or  opportunity  that is primarily
related to those  identified  in clause  (i) or (ii)  above;  PROVIDED  that the
determination of what constitutes a Telecommunications Business shall be made in
good faith by the board of directors of the Company.

              "TELECOMMUNICATIONS   INDEBTEDNESS"  means,  Indebtedness  of  the
Company or any  Restricted  Company  Subsidiary  incurred at any time within 315
days of, and for the  purpose of  financing  all or any part of the cost of, the
construction, expansion, installation, acquisition or improvement by the Company
or any  Restricted  Company  Subsidiary  of any new  Telecommunications  Assets;
PROVIDED that the proceeds of such  Indebtedness  are expended for such purposes
within such 315-day period; and PROVIDED further that the Net Cash Proceeds from
the issuance of such  Indebtedness does not exceed, as at the date of incurrence
thereof,  100%  of the  lesser  of  the  cost  or  Fair  Market  Value  of  such
Telecommunications  Assets;  PROVIDED  further  that, to the extent an Incumbent
Agreement  is  characterized  as a  Capitalized  Lease  Obligation,  it shall be
considered Telecommunications Indebtedness.

              "UNRESTRICTED COMPANY SUBSIDIARY" means:

(a)           any  Subsidiary  of the Company that at the time of  determination
              shall be an Unrestricted  Company Subsidiary (as designated by the
              Board of Directors as provided below); and

(b)           any Subsidiary of an Unrestricted Company Subsidiary.

                            The Board of Directors may designate any  Subsidiary
              of the  Company  (including  any newly  acquired  or newly  formed
              Subsidiary  of  the  Company)  to  be  an   Unrestricted   Company
              Subsidiary  so long  as (i)  neither  the  Company  nor any  other
              Subsidiary of the Company is directly or indirectly liable for any
              Indebtedness of such  Subsidiary,  (ii) no default with respect to
              any  Indebtedness  of such  Subsidiary  would permit (upon notice,
              lapse of time or otherwise)  any holder of any other  Indebtedness
              of the Company or any Restricted  Company  Subsidiary to declare a
              default on such other Indebtedness or cause the payment thereof to
              be accelerated or payable prior to its Stated Maturity,  (iii) any
              Investment in such Subsidiary made as a result of designating such
              Subsidiary an Unrestricted Company Subsidiary will not violate the
              provisions  of Section  1012,  (iv)  neither  the  Company nor any
              Restricted   Company   Subsidiary   has  a  contract,   agreement,
              arrangement,  understanding  or  obligation  of any kind,  whether
              written or oral, with such Subsidiary  other than those that might
              be obtained at the time from persons who are not Affiliates of the
              Company,  and (v) neither the Company nor any other  Subsidiary of
              the Company has any  obligation  (1) to subscribe  for  additional
              shares  of  Capital  Stock  or  other  equity   interest  in  such
              Subsidiary,  or (2) to  maintain  or  preserve  such  Subsidiary's
              financial condition or to cause such Subsidiary to achieve certain
              levels of operating results.  Any such designation by the Board of
              Directors  shall be  evidenced  to the  Trustee  by filing a Board
              Resolution with the Trustee giving effect to such designation. The
              Board  of  Directors  may  designate  any   Unrestricted   Company
              Subsidiary  as a Restricted  Company  Subsidiary  if,  immediately
              after giving effect to such designation, there would be no Default
              or Event of Default  under this  Indenture  and the Company  could
              incur $1.00 of additional  Allowable Company  Indebtedness  (other
              than Permitted Indebtedness).

SECTION 104.  AMENDMENT TO SECTION 103.  Section 103 of the  Indenture is hereby
amended by deleting  the existing  Section 103 in its entirety and  replacing it
with the following:

Section 103.  FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
              ---------------------------------------

              In any case where several matters are required to be certified by,
or covered by an opinion of, any specified  Person, it is not necessary that all
such  matters  be  certified  by, or covered by the  opinion  of,  only one such
Person,  or that they be so certified or covered by only one  document,  but one
such Person may certify or give an opinion  with respect to some matters and one
or more other such Persons as to other matters,  and any such Person may certify
or give an opinion as to such matters in one or several documents.

              Any  certificate  or opinion of an officer of the  Company  may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or  representations
with respect to the matters upon which his  certificate  or opinion is based are
erroneous.  Any such certificate or Opinion of Counsel may be based,  insofar as
it  relates  to  factual   matters,   upon  a  certificate  or  opinion  of,  or
representations  by, an officer or officers of the Company,  unless such counsel
knows,  or in the exercise of reasonable  care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.

              Any  certificate  or  opinion  of an  officer of the Parent may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or  representations
with respect to the matters upon which his  certificate  or opinion is based are
erroneous.  Any such certificate or Opinion of Counsel may be based,  insofar as
it  relates  to  factual   matters,   upon  a  certificate  or  opinion  of,  or
representations  by, an officer or officers of the Parent,  unless such  counsel
knows,  or in the exercise of reasonable  care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.

              Where any Person is required to make,  give or execute two or more
applications,  requests, consents,  certificates,  statements, opinions or other
instruments  under this Indenture,  they may, but need not, be consolidated  and
form one instrument.

                           AMENDMENTS TO "NOTE FORMS"

SECTION 105.  AMENDMENT TO SECTION 202.  Section 202 of the  Indenture is hereby
amended by deleting  the existing  Section 202 in its entirety and  replacing it
with the following:

         Section 202.  FORM OF FACE OF NOTE.
                       --------------------

                                                   PATHNET, INC.

                          12 1/4% Senior Note due 2008

                             [CUSIP]_______________
                             [ISIN]_________________

No._____________                                                 $________

   Pathnet,  Inc., a Delaware  corporation  (herein called the "Company",  which
term  includes  any  successor  Person  under the  Indenture,  as amended by the
Supplemental  Indenture,  each  hereinafter  referred  to), for value  received,
hereby promises to pay to _____________ or registered assigns, the principal sum
of  ________________  Dollars on April 15, 2008,  at the office or agency of the
Company and the Parent (as defined below) referred to below, and to pay interest
thereon  on  October  15,  1998 and  semi-annually  thereafter,  on April 15 and
October 15 in each year,  from April 8, 1998,  or from the most recent  Interest
Payment Date to which  interest has been paid or duly  provided for, at the rate
of 12 1/4% per annum,  until the principal  hereof is paid or duly provided for,
and (to the extent lawful) to pay on demand interest on any overdue  interest at
the rate borne by the Notes from the date on which such overdue interest becomes
payable to the date payment of such interest has been made or duly provided for.
The  interest so  payable,  and  punctually  paid or duly  provided  for, on any
Interest  Payment  Date,  as  provided in such  Indenture,  shall be paid to the
Person in whose name this Note (or one or more Predecessor  Notes) is registered
at the close of  business of the Regular  Record Date for such  interest,  which
shall be the April 1 or October 1 (whether or not a Business  Day),  as the case
may be, next  preceding  such Interest  Payment Date.  This Note has been issued
with original issue discount for U.S. federal income tax purposes.

   This Note is unconditionally guaranteed by Pathnet Telecommunications, Inc.,
a  Delaware  corporation  (herein  called  the  "Parent")  as set  forth  in the
Guarantee endorsed hereon.

   The following  information  is supplied for purposes of Section 1273 and 1275
of the Internal Revenue Code.

                 Issue Date:                                      April 8, 1998
                 Issue Price:                                     $988.29
                 Original issue discount under Section 1273 of
                 the Internal Revenue Code (for each $1,000
                 principal amount):                               $11.71
                 Yield Maturity                                   12.46%

                  Any such interest not so punctually  paid or duly provided for
shall  forthwith  cease to be payable to the Holder on such Regular Record Date,
and  such  defaulted  interest,  and (to the  extent  lawful)  interest  on such
defaulted  interest at the rate borne by the Notes, may be paid to the Person in
whose name this Note (or one or more  Predecessor  Notes) is  registered  at the
close of  business on a Special  Record  Date for the payment of such  Defaulted
Interest to be fixed by the Trustee, notice whereof shall be given to Holders of
Notes not less than 10 days prior to such Special Record Date, or may be paid at
any time in any other lawful manner not  inconsistent  with the  requirements of
any securities  exchange on which the Notes may be listed,  and upon such notice
as may be  required  by  such  exchange,  all as  more  fully  provided  in said
Indenture. Payment of the principal of (and premium, if any, on) and interest on
this Note will be made to the Depositary or its nominee,  as the case may be, as
the registered  owner thereof,  in such coin or currency of the United States of
America  as at the time of payment  is legal  tender  for  payment of public and
private  debts;  PROVIDED,  HOWEVER,  the payment of interest may be made at the
option of the Company or the Parent,  as the case may be (i) by its check mailed
to the address of the Person  entitled  thereto as such address  shall appear on
the Note Register or (ii) by wire transfer to an account maintained by the payee
located in the United States.

   The Holder of this Note is entitled to the benefits of the Notes Registration
Rights  Agreements,  dated as of April 8, 1998 (the  "Notes  Registration  Right
Agreement"), between the Company and the Initial Purchasers named therein.

   Reference is hereby made to the further  provisions of this Note set forth on
the reverse  hereof,  which further  provisions  shall for all purposes have the
same effect as if set forth at this place.

   Unless the certificate of authentication hereon has been duly executed by the
Trustee referred to on the reverse hereof by manual  signature,  this Note shall
not  be  entitled  to  any  benefit  under  the  Indenture,  as  amended  by the
Supplemental  Indenture,  or the  Guarantee  or be valid or  obligatory  for any
purpose.

   IN WITNESS  WHEREOF,  the  Company  has  caused  this  instrument  to be duly
executed.

   Dated:                                PATHNET, INC.

                                         By_____________________________________

                  Attest:

                  ---------------------
________________Authorized Signature

SECTION  106.______AMENDMENT  TO SECTION  203.  Section 203 of the  Indenture is
hereby  amended  by  deleting  the  existing  Section  203 in its  entirety  and
replacing it with the following:

         Section 203. FORM OF REVERSE NOTE.
                      --------------------

              This Note is one of a duly  authorized  issue of securities of the
Company  designated  as its 12 1/4%  Senior  Notes due 2008  (herein  called the
"Notes"),  limited (except as otherwise provided in the Indenture, as amended by
the Supplemental Indenture) in aggregate principal amount to $350,000,000, which
may be issued under an  indenture  dated as of April 8, 1998 between the Company
and The Bank of New York, as trustee,  as amended by the Supplemental  Indenture
dated as of March 30, 2000  between  the  Company,  Pathnet  Telecommunications,
Inc.,  and The Bank of New  York,  as  trustee.  References  in this Note to the
Indenture  shall be deemed to be  references  to the Indenture as amended by the
Supplemental  Indenture.  The Bank of New York,  as trustee is herein called the
"Trustee",  which term  includes  any  successor  trustee  under the  Indenture.
Reference  is  hereby  made to the  Indenture  and all  indentures  supplemental
thereto for a statement of the respective rights, limitations of rights, duties,
obligations and immunities  thereunder of the Company,  the Parent,  the Trustee
and the Holders of the Notes, and of the terms upon which the Notes are, and are
to be, authenticated and delivered.

              The Notes are subject to redemption upon not less than 30 nor more
than 60 days notice,  at any time after April 15, 2003 as a whole or in part, at
the election of the Company,  at a Redemption Price (expressed as percentages of
the  principal  amount) set forth below if redeemed  during the 12-month  period
beginning April 15, of the years  indicated  (subject to the right of Holders of
record on the  relevant  Regular  Record  Dates to  receive  interest  due on an
interest payment date):

                                   YEAR                     REDEMPTION PRICE
                                   ----                     ----------------
                      2003                                      106.125%
                      2004                                      104.083%
                      2005                                      102.042%
                      2006 and thereafter                       100.00%

              together in the case of any such redemption with accrued interest,
if any, to the Redemption Date, all as provided in the Indenture.

   Notwithstanding the foregoing, at any time on or prior to April 15, 2001, the
Company may redeem within 60 days of one or more Public  Equity  Offerings up to
35% of the aggregate principal amount of the Notes issued on the Issue Date at a
redemption price equal to 112.25% of the principal amount thereof,  plus accrued
and unpaid  interest and  Liquidated  Damages,  if any thereon to the Redemption
Date (subject to the right of Holders of record on the relevant  Regular  Record
Date to receive  interest  due on an  Interest  Payment  Date) with the Net Cash
Proceeds of one or more Public Equity  Offerings;  PROVIDED that at least 65% of
the principal amount of the Notes issued on the Issue Date remain Outstanding.

   If less than all the Notes are to be  redeemed,  the Trustee  will select the
particular  Notes to be redeemed  not more than 60 days prior to the  redemption
date by such method as the Trustee deems fair and appropriate;  PROVIDED that no
such partial  redemption will reduce the principal amount of a Note not redeemed
to less than $1,000.  Notice of redemption will be mailed,  first-class  postage
prepaid,  at least 30 but not more than 60 days  before the  redemption  date to
each holder of Notes to be redeemed at its registered  address. On and after the
date of  redemption,  interest  will cease to accrue on Notes  portions  thereof
called for redemption and accepted for payment.

   Upon the  occurrence  of a Change  of  Control,  the  Holder of this Note may
require the Company,  subject to certain limitations provided in Section 1010 of
the  Indenture  and otherwise in this  Indenture,  to repurchase  this Note at a
purchase  price  in cash in an  amount  equal  to 101% of the  principal  amount
thereof,  plus  accrued  and  unpaid  interest  thereon to the Change of Control
Purchase Date (as defined in Section 1010 of the Indenture).

   In the case of any redemption of Notes,  interest  installments  whose Stated
Maturity is on or prior to the Redemption Date will be payable to the Holders of
record of such Notes, or one or more Predecessor Notes, at the close of business
on the relevant  Record Date referred to on the face hereof.  Notes (or portions
thereof) for whose  redemption and payment  provision is made in accordance with
the Indenture shall cease to bear interest from and after the Redemption Date.

   In the event of redemption of this Note in part only, a new Note or Notes for
the  unredeemed  portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.

   If an Event of Default  shall occur and be  continuing,  the principal of all
the Notes may be  declared  due and  payable  in the  manner and with the effect
provided in the Indenture.

   The  Indenture  contains  provisions  for  defeasance  at any time of (a) the
entire  indebtedness  of the  Company on this Note and (b)  certain  restrictive
covenants and the related  Defaults and Events of Defaults,  upon  compliance by
the Company with certain conditions set forth therein, which provisions apply to
this Notice.

   The  Indenture  permits,  with certain  exceptions as therein  provided,  the
amendment  thereof and the  modifications  of the rights and  obligations of the
Company,  the Parent and the rights of the Holders  under the  Indenture  at any
time by the  Company  and the  Trustee  with the  consent  of the  Holders  of a
majority in aggregate principal amount of the Notes at the time Outstanding. The
Indenture  also  contains   provisions   permitting  the  Holders  of  specified
percentages in aggregate  principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all Notes,  to waive  compliance  by the Company and
the Parent with certain  provisions  of the  Indenture and certain past defaults
under the Indenture and their consequences.  Any such consent or waiver by or on
behalf of the  Holder of this Note shall be  conclusive  and  binding  upon such
Holder and upon all future  Holders of this Note and of any Note issued upon the
registration  of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note.

   No reference herein to the Indenture and no provisions of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional,  to pay the principal of (and premium and Liquidated Damages,
if any) and interest on this Note at the times, place, and rate, and in the coin
or currency, herein prescribed.

   As provided in the Indenture and subject to certain  limitations  therein set
forth,  the transfer of this Note is  registerable  on the Note  Register of the
Company,  upon surrender of this Note for registration of transfer at the office
or agency of the Company and the Parent  maintained for such purpose in The City
of New York,  duly  endorsed  by, or  accompanied  by a  written  instrument  of
transfer in form satisfactory to the Company,  the Parent and the Note Registrar
duly executed by, the Holder hereof or his attorney duly  authorized in writing,
and thereupon one or more new Notes,  of  authorized  denominations  and for the
same aggregate principal amount, will be issued to the designated transferee and
transferees.

   The  Notes  are  issuable  only  in  registered   form  without   coupons  in
denominations of $1,000 and any integral  multiple  thereof.  As provided in the
Indenture and subject to certain  limitations  therein set forth,  the Notes are
exchangeable  for  alike  aggregate  principal  amount  of Notes of a  different
authorized denomination, as requested by the Holder surrendering the same.

   No service charge shall be made for any  registration of transfer or exchange
of Notes,  but the Company may require  payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

   Prior  to the  time of due  presentment  of this  Note  for  registration  of
transfer,  the Company,  the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is  registered  as the owner hereof
for all purposes,  whether or not this Note be overdue, and neither the Company,
the Trustee nor any agent shall be affected by notice to the contrary.

   THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK,  WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF.

   All terms used in this Note which are defined in the Indenture shall have the
meanings assigned to them in the Indenture.

SECTION 107.______ADDITION OF SECTION 203A. The following Section 203A is hereby
added to the Indenture:

         SECTION 203A.  GUARANTEE OF NOTE.  Each of the Notes shall have the
                        ------------------
following Guarantee endorsed upon it:

         1._______GUARANTEE OF PAYMENT AND PERFORMANCE OF OBLIGATIONS.

(a)      For value received,  Pathnet  Telecommunications,  Inc. (the "Parent")
                            unconditionally  guarantees  to  the  holder  of any
                            Outstanding  Note or Notes (a "Holder") the full and
                            punctual  payment and performance of the Obligations
                            (as defined in subsection (b) below). This Guarantee
                            is  an  absolute,   unconditional   and   continuing
                            guarantee  of the  full  and  punctual  payment  and
                            performance   by  the   Company   of   each  of  the
                            Obligations,  and not of collectability only, and is
                            no way  conditioned  upon any  requirement  that any
                            Holder first attempt to seek payment or  performance
                            from the Company or any other guarantor or surety or
                            resort to any  security or other means of  obtaining
                            payment of all or any of the Obligations or upon any
                            other  contingency.  Upon any default by the Company
                            in the full and punctual  payment or  performance of
                            any of the  Obligations,  if  such  default  remains
                            uncured after the giving of any required  notice and
                            after any applicable period of cure, the liabilities
                            and obligations of the Parent hereunder shall at the
                            option of any  Holder  become  forthwith  effective,
                            matured,  due and payable  without further demand or
                            notice of any nature,  all such  demands and notices
                            being expressly waived by the Parent.

(b)      As  used  herein,  the   term  "Obligations"  means   all  obligations,
                            covenants, liabilities,  undertakings and agreements
                            of  any  kind  of the  Company  to all or any of the
                            Holders contained in the Indenture,  to be performed
                            after the date hereof, howsoever,  incurred, arising
                            or evidenced, whether now or hereafter existing, due
                            or to become due or of payment  or  performance  and
                            including,   without  limitation:   (i)  the  prompt
                            payment in full, in United States currency, when due
                            (whether at stated  maturity,  by  acceleration,  by
                            mandatory or optional  prepayment  or  otherwise) of
                            the   principal   of  and   interest  on  the  Notes
                            (including  interest on any overdue principal,  and,
                            to the extent  permitted by  applicable  law, on any
                            overdue interest) and all other amounts from time to
                            time owing by the Company  under the  Indenture  and
                            under  the  Notes  (including  costs,  expenses  and
                            taxes);   and  (ii)  the  prompt   performance   and
                            observance   by  the   Company  of  all   covenants,
                            agreements   and   conditions  on  its  part  to  be
                            performed and observed under the Indenture,  in each
                            case strictly in  accordance  with the terms thereof
                            (such  payments and other  obligations  being herein
                            collectively referred to as the "Obligations").

2.       GUARANTEE CONTINUING AND LIABILITY UNAFFECTED.

(a)                        Subject  to  Section  2  (c),  this  is a  continuing
                           guarantee  and  shall  be  binding  upon  the  Parent
                           regardless  of how  long  before  or  after  the date
                           hereof any part of the Obligations was or is incurred
                           by the  Company.  Subject  to  Section  2  (c),  this
                           Guarantee  may  be  enforced  by  any  or  all of the
                           Holders  from  time to time and as often as  occasion
                           for such enforcement may arise.

(b)      If after  receipt  of any  payment  from the  Parent  made  hereunder
                            the  Holders,  or  any of  them,  are  compelled  to
                            surrender or  voluntarily  surrender such payment or
                            proceeds  to any  person  because  such  payment  or
                            application  of  proceeds  is  or  may  be  avoided,
                            invalidated,   recaptured,   or  set   aside   as  a
                            preference,  fraudulent  conveyance,   impermissible
                            setoff or for any other reason,  whether or not such
                            surrender is the result of (i) any judgment,  decree
                            or order of any court or administrative  body having
                            jurisdiction   over   the   Holders,   or  (ii)  any
                            settlement or compromise by the Holders of any claim
                            as  to  any  of  the   foregoing   with  any  person
                            (including  the Company),  then the  Obligations  or
                            part  thereof   affected  shall  be  reinstated  and
                            continue and this Guarantee  shall be reinstated and
                            continue  in full  force as to such  Obligations  or
                            part  thereof as if such payment or proceeds had not
                            been  received.  The provisions of this Section 2(b)
                            shall survive the  termination of this Guarantee and
                            any  satisfaction  and  discharge  of the Company by
                            virtue of any payment, court order or any federal or
                            state law.

(c)                        The Parent shall be  subrogated  to all rights of the
                           Holders in respect of any amounts  paid by the Parent
                           pursuant  to  the   provisions  of  this   Guarantee;
                           provided,  however,  that Parent shall be entitled to
                           enforce, or to receive any payments arising out of or
                           based upon, such right of subrogation with respect to
                           any Obligation  only after the payment of all amounts
                           owed by the  Company to the Holders  with  respect to
                           all of the Obligations have been paid in full.

(d)                        This Guarantee  shall  terminate and be of no further
                           force and effect as to any Note upon full  payment of
                           the  Redemption  Price  with  respect  to such  Note,
                           PROVIDED, however, that this Guarantee shall continue
                           to be effective or shall be  reinstated,  as the case
                           may be,  if at any  time  the  Company  must  restore
                           payment  of any sums  paid  under  such Note or under
                           this Guarantee for any reason whatsoever.

         3. UNCONDITIONAL  NATURE OF PARENT'S  OBLIGATIONS AND LIABILITIES.  The
         obligations and  liabilities of the Parent  hereunder shall be absolute
         and  unconditional,  and  shall  not be  subject  to any  counterclaim,
         set-off,  deduction or defense based upon any claim the Parent may have
         against the Company or any other person or entity. Such obligations and
         liabilities  shall  remain in full  force and effect for the period set
         forth in Section 2 above without regard to any event,  circumstance  or
         condition  (whether or not the Parent  shall have  knowledge  or notice
         thereof) which but for the provisions of this Section might  constitute
         a legal or  equitable  defense or discharge of a guarantor or surety or
         which might in any way limit recourse against the Parent, including:

                  (a)      any  amendment or  modification  or supplement to the
                           terms of the Indenture,  this Guarantee or any of the
                           Notes, including the renewal or extension of the time
                           for  payment of the Notes or the  granting of time in
                           respect of the payment thereof;

                  (b)      any  waiver,  consent,  extension,  granting of time,
                           forbearance,  indulgence  or other action or inaction
                           under or in respect of the Indenture or the Notes, or
                           any exercise or non-exercise of any right,  remedy or
                           power in respect thereof;

                  (c)      the  invalidity or  unenforceability,  in whole or in
                           part of the  Indenture  or this  Guarantee  resulting
                           from the  Company's or the Parent's lack of authority
                           to enter  into the  Indenture  and/or to incur any or
                           all of the Obligations,  by any person acting for the
                           Company  or  the  Parent  without  or  in  excess  of
                           authority;

                  (d)      any actual,  purported or attempted sale,  assignment
                           or other  transfer by any or all of the Holders or by
                           the  Company  or the Parent of the  Indenture  or the
                           Notes  or  of  any  of  their  rights,  interests  or
                           obligations thereunder;

                  (e)      the   addition   of  any  party  as  a guarantor  or
                           surety  of  all  or  any  part  of  the  Obligations
                           or any limitation of the liability of any additional
                           guarantor  or  surety  of  all or  any  part  of the
                           Obligations under any other agreement;

                  (f)      any merger or  consolidation of the Company or of the
                           Parent  into or with any other  entity,  or any sale,
                           lease, transfer or other disposition of any or all of
                           any  Company's  or the  Parent's  assets or any sale,
                           transfer  or other  disposition  of any or all of the
                           economic  interests  in the  Company or the Parent to
                           any other person or entity;

                  (g)      the recovery of any judgment against the Company or
                           any action to enforce the same; or

                  (h)      any change in the financial  condition of the Company
                           or the  Company's  entry into an  assignment  for the
                           benefit of  creditors,  an  arrangement  or any other
                           agreement or procedure for the  restructuring  of its
                           liabilities, or the Company's insolvency, bankruptcy,
                           reorganization,   dissolution,   liquidation  or  any
                           similar  action by or occurrence  with respect to the
                           Company.

         4.       PARENT'S WAIVER.  The Parent unconditionally waives, to the
                  ---------------
fullest extent permitted by law:

(a)     notice of any of the matters referred to in Section 3 hereof;

(b)     diligence,  presentment,  demand of payment  and filing of claims with a
        court in the event of bankruptcy or insolvency of the Company;

(c)     any right to the enforcement, assertion or exercise by any or all of the
        Holders of any of their  rights,  powers or remedies  under,  against or
        with respect to the Company (i) any other  guarantor or surety,  or (ii)
        any security for all or any part of the Obligations;

(d)     any  requirement  that the  Parent be joined as a party in any action or
        proceeding  against the Company to enforce any of the  provisions of the
        Indenture;

(e)     acceptance of this Guarantee by any Holder;

and covenants  that this  Guarantee  will not be  discharged  except by complete
performance of the obligations contained in this Guarantee.

         5.       REPRESENTATIONS AND WARRANTIES.  The Parent represents and
                  ------------------------------
warrants that:

(a)                        the  Parent  is  a  corporation  duly  organized  and
                           validly  existing in good standing  under the laws of
                           the  State  of  Delaware  and  has  the  full  power,
                           authority  and legal  right to enter into and perform
                           its obligations under this Guarantee;

(b)                        this Guarantee has been duly authorized, executed and
                           delivered  by the Parent and  constitutes  the legal,
                           valid  and   binding   obligation   of  the   Parent,
                           enforceable against the Parent in accordance with its
                           terms,   except   for  the   effect  of   bankruptcy,
                           insolvency, reorganization,  moratorium, receivership
                           or  similar  laws   affecting  the   enforcement   of
                           creditors' rights generally;

(c)                        the execution, delivery and performance by the Parent
                           of this  Guarantee do not and will not contravene any
                           applicable law, rule,  regulation,  judgment or order
                           and do not and will not contravene the provisions of,
                           constitute a breach of or default under, or result in
                           the  creation  of  any  security  interest,  lien  or
                           encumbrance  on  any of the  property  of the  Parent
                           pursuant to, the Parent's  articles of  incorporation
                           or by-laws  or any  indenture,  mortgage,  license or
                           other contract,  agreement or instrument to which the
                           Parent is a party or by which it is bound.

         6.       ATTORNEY'S  COSTS.  The Parent agrees to pay all  reasonable
                  -----------------
attorney's fees and  disbursements and all other reasonable and actual costs and
expenses  which  may be  incurred  by the  Holders  in the  enforcement  of this
Guarantee.

         7.       SUCCESSORS  AND  ASSIGNS.  This  Guarantee  shall be binding
                  ------------------------
upon the Parent and its respective  successors  and assigns,  and shall inure to
the benefit of and be enforceable by the Holders and their respective successors
and assigns.

         8.       GOVERNING  LAW. This  Guarantee  shall be governed by and
                  --------------
construed in accordance  with the laws of the State of New York.

         9. SEVERABILITY.  Wherever  possible,  each provision of this Guarantee
shall be  construed  in such manner as to be valid and  enforceable  against the
Parent under applicable law, but if any provision hereof shall be deemed invalid
or  unenforceable  to any extent  against the Parent in any  jurisdiction,  such
provision  shall  be  ineffective  only  to the  extent  of such  invalidity  or
unenforceability  without invalidating or rendering  unenforceable the remainder
of such provision or any of the other provisions hereof, and any such invalidity
or unenforceability against the Parent in one jurisdiction shall not render such
provision ineffective in any other jurisdiction.

         10.      NOTICES.
                  -------

                  Any  notice,   request  or  other  communication  required  or
permitted to be given  hereunder to the Holders  shall be given by the Parent in
the same manner as set forth in Section 106 of the Indenture.

         11.      TRANSFERABILITY.  This  Guarantee is solely for the benefit of
                  ---------------
 the Holders and is not separately transferable from the Notes.

         12.      HEADINGS.  Section  headings  appearing in this  Guarantee are
                  --------
for  convenience  of  reference  only and shall not  define,  limit,  amplify or
otherwise modify any provision  hereof.  Capitalized  terms used herein have the
meanings given to them in the Indenture.

                  This Guarantee shall not be valid or obligatory to any purpose
until the certificate of  authentication on the Note on which this Guarantee has
been endorsed shall have been executed by the Trustee under the Indenture by the
signature of one of its authorized officers.

IN WITNESS  WHEREOF,  the Parent has caused this Guarantee to be executed on its
behalf by an officer or other person  thereunto  duly  authorized as of the date
first above written.

                                            PATHNET TELECOMMUNICATIONS, INC.

                                            By:
                                            Name:
                                            Title:

                             AMENDMENT TO "REMEDIES"

SECTION 108.  AMENDMENT TO SECTION 501.  Section 501 of the  Indenture is hereby
amended by deleting  the existing  Section 501 in its entirety and  replacing it
(i) with the  definition  of "Event of Default" set forth in Section 103 for the
purposes of  interpretation  of Section  1017(a) and (ii) with the definition of
"Event of Default" set forth in Section 102 for all other purposes.

        AMENDMENTS TO "CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE"

SECTION 109.      AMENDMENT TO ARTICLE EIGHT. Article Eight of the Indenture is
                  --------------------------
hereby  amended by deleting  the  existing  Article  Eight in its  entirety  and
replacing it with the following:

SECTION 801.   COMPANY AND PARENT MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
               ---------------------------------------------------------------

                  Neither  the  Company  nor  the  Parent  will,   in  a  single
transaction or a series of transactions,  consolidate with or merge with or into
any other Person or sell, assign, convey,  transfer,  lease or otherwise dispose
of all or substantially  all of its properties and assets to any other Person or
Persons,  and  neither  will the  Company  or the Parent  permit any  Restricted
Subsidiary to enter into any such transaction or series of transactions, if such
transaction or series of  transactions,  in the  aggregate,  would result in the
sale,  assignment,  conveyance,  transfer,  lease or other disposition of all or
substantially  all of the properties and assets of the Restricted  Entities on a
consolidated  basis to any  other  Person  or  Persons,  unless  at the time and
immediately  after giving effect thereto and subject always to the provisions of
Section 1010 and Section 1017:

(1)      either (A) the  Company or the Parent (as the case may be) shall be the
         continuing  corporation or (B) the Person (if other than the Company or
         the Parent) formed by such consolidation or into which the Company, the
         Parent or such  Restricted  Subsidiary  is merged  or the  Person  that
         acquires  by  sale,   assignment,   conveyance,   transfer,   lease  or
         disposition all or  substantially  all the properties and assets of the
         Restricted  Entities on a consolidated  basis,  as the case may be (the
         "Surviving Entity"),  (i) shall be a corporation  organized and validly
         existing  under the laws of the  United  States of  America,  any state
         thereof or the District of Columbia and (ii) shall expressly assume, by
         a supplemental  indenture to this Indenture in form satisfactory to the
         Trustee,  the  obligations of the Company or the Parent pursuant to the
         Notes or the  Guarantee,  as the case may be, for the due and  punctual
         payment of the principal of,  premium,  if any, and interest on all the
         Notes and the  performance  and observance of every covenant  herein on
         the part of the Company or the Parent to be performed or observed;

(2)      immediately   before  and  immediately  after  giving  effect  to  such
         transaction  or  series  of  transactions  on a pro  forma  basis  (and
         treating any obligation of any Restricted Entity incurred in connection
         with or as a result of such  transaction or series of  transactions  as
         having been  incurred at the time of such  transaction),  no Default or
         Event of Default shall have occurred and be continuing;

(3)      immediately  after  giving  effect  to such  transaction  or  series of
         transactions  on  a  pro  forma  basis  (on  the  assumption  that  the
         transaction or series of transactions  occurred on the first day of the
         two fiscal quarter period ending  immediately prior to the consummation
         of such  transaction or series of  transactions,  with the  appropriate
         adjustments  with respect to the  transaction or series of transactions
         being  included  in such pro forma  calculation),  the  Company  or the
         Parent (as the case may be) (or the Surviving  Entity if the Company or
         the Parent is not the  continuing  obligor  hereunder)  could  incur at
         least  $1.00  of   additional   Indebtedness   (other  than   Permitted
         Indebtedness) under Section 1011; and

(4)      the  Company,  the Parent or such Person  shall have  delivered  to the
         Trustee, in form and substance reasonably  satisfactory to the Trustee,
         an Officers'  Certificate  (attaching the  computations  to demonstrate
         compliance  with  clause (3) above)  and an  Opinion of  Counsel,  each
         stating that such consolidation,  merger, sale, assignment, conveyance,
         transfer or lease or other disposition and, if a supplemental indenture
         is required in  connection  with such  transaction,  such  supplemental
         indenture,  comply with this Article and that all conditions  precedent
         herein  provided for relating to such  transaction  have been  complied
         with.

                  Any merger or consolidation  of a Restricted  Subsidiary or of
the  Company  with and into the  Company or the Parent  (with the Company or the
Parent (as the case may be) being the  surviving  entity) or another  Restricted
Subsidiary  need only  comply  with  clauses  (3) and (4) above.  Further,  this
section shall not apply to any  reincorporation  of any Restricted  Entity under
the laws of the United  States of America,  any state thereof or the District of
Columbia.

                  SECTION 802.  SUCCESSOR SUBSTITUTED.
                                ---------------------

                  Upon any  consolidation  of the  Company or the Parent with or
merger of the  Company or the Parent with or into any other  corporation  or any
sale, assignment,  conveyance,  transfer, lease or disposition of the properties
and assets of the  Company or the Parent  substantially  as an  entirety  to any
Person in accordance  with Section 801 in which the Company or the Parent is not
the continuing obligor hereunder,  the Surviving Entity shall succeed to, and be
substituted  for, and may exercise  every right and power of, the Company or the
Parent (as the case may be) hereunder  with the same effect as if such successor
Person had been named as the  Company or the Parent (as the case may be) herein.
When a successor  assumes all of the  obligations of its  predecessor  under the
Indenture,  the predecessor  shall be released from such  obligations;  PROVIDED
that, in the case of a transfer by lease, the predecessor  shall not be released
from the payment of principal of, premium, if any, and interest on the Notes or,
in the case where the predecessor is the Parent,  from the obligations under the
Guarantees  in respect of the payment of  principal  of,  premium,  if any,  and
interest on the Notes.

                  SECTION 803.  NOTES TO BE SECURED IN CERTAIN EVENTS.
                                -------------------------------------

                  If, upon any such  consolidation  of the Company or the Parent
with or merger of the Company or the Parent into any other corporation,  or upon
any sale,  assignment,  conveyance,  lease or  transfer  of the  property of the
Company or the Parent  substantially  as an  entirety to any other  Person,  any
property  or  assets of the  Company  or the  Parent  (as the case may be) would
thereupon  become  subject to any Lien,  then  unless such Lien could be created
pursuant to Section 1015  without  equally and ratably  securing the Notes,  the
Company or the Parent (as the case may be), prior to or simultaneously with such
consolidation, merger, sale, assignment, conveyance, lease or transfer, shall as
to such property or assets,  secure the Notes  Outstanding or the Guarantees (as
the case may be)  (together  with, if the Company or the Parent (as the case may
be) shall so determine,  any other Indebtedness of the Company or the Parent (as
the case may be) now existing or hereinafter created which is not subordinate in
right of payment to the Notes or the  Guarantees,  as the case may be))  equally
and ratably with (or prior to) the Indebtedness  which upon such  consolidation,
merger,  conveyance,  lease or transfer is to become secured as to such property
or assets  by such  Lien,  or shall  cause  such  Notes or  Guarantees  to be so
secured.

                     AMENDMENTS TO "SUPPLEMENTAL INDENTURES"

SECTION 110.  AMENDMENT TO SECTION 901.  Section 901 of the  Indenture is hereby
amended by deleting  the existing  Section 901 in its entirety and  replacing it
with the following:

   SECTION 901.  SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
                 --------------------------------------------------

                  Without  the  consent  of any  Holders,  the  Company  and the
Parent, when authorized by a Board Resolution,  and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:

(1)      to evidence the succession of another Person to the Company, the Parent
         or any other  obligor  on the  Notes,  and the  assumption  by any such
         successor of the covenants of the Company or the Parent or such obligor
         contained  herein and in the Notes in accordance  with Article Eight of
         this Indenture;

(2)      to add to the covenants of the Company, the Parent or any other obligor
         upon the Notes or the  Guarantees  for the benefit of the Holders or to
         surrender  any right or power herein  conferred  upon the Company,  the
         Parent  or any  other  obligor  upon the  Notes or the  Guarantees,  as
         applicable, in this Indenture or the Notes;

(3)      to cure any ambiguity, to correct or supplement any provision herein or
         in the Notes or the  Guarantees  that may be defective or  inconsistent
         with any other provision  herein or in the Notes or the Guarantees,  or
         to make any other  provisions  with  respect to  matters  or  questions
         arising under this Indenture or the Notes or the  Guarantees;  PROVIDED
         that, in each case, such action shall not adversely affect the interest
         of the Holders;

(4)      to comply with the requirements of the Commission in order to effect or
         maintain the  qualification,  if any, of the Indenture  under the Trust
         Indenture Act;

(5)      to  evidence  and  provide  the  acceptance  of  the  appointment  of a
         successor Trustee under this Indenture;

(6)      to mortgage,  pledge, hypothecate or grant a security interest in favor
         of the Trustee for the  benefit of the Holders as  additional  security
         for the  payment  and  performance  of the  Company's  or the  Parent's
         obligations  hereunder,  in any  property or assets,  including  any of
         which are  required to be  mortgaged,  pledged or  hypothecated,  or in
         which a security  interest  is  required  to be granted to the  Trustee
         pursuant to this Indenture or otherwise;

(7)      to add a further guarantor of the Notes under the Indenture;

(8)      to secure the Notes  pursuant  to the  requirements  of Section  803 or
         Section 1015 or otherwise;

(9)      to add any additional Events of Default; or

(10)     to evidence and provide for the acceptance of appointment  hereunder by
         a successor Trustee pursuant to the requirements of Section 609.

SECTION 111.  AMENDMENT TO SECTION 902.  Section 902 of the  Indenture is hereby
amended by deleting  the existing  Section 902 in its entirety and  replacing it
with the following:

         SECTION 902.  SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
                       -----------------------------------------------

              With the  consent of the  Holders  of not less than a majority  in
         aggregate  principal  amount of the  Outstanding  Notes, by Act of said
         Holders  delivered  to the  Company,  the Parent and the  Trustee,  the
         Company and the Parent, when authorized by a Board Resolution,  and the
         Trustee may enter into an indenture or indentures  supplemental  hereto
         for the purpose of adding any  provisions  to or changing in any manner
         or eliminating  any of the provisions of this Indenture or of modifying
         in any manner the rights of the Holders under this Indenture  PROVIDED,
         HOWEVER, that no such supplemental indenture shall, without the consent
         of the Holder of each Outstanding Note affected thereby:

(1)      change the Stated  Maturity of the principal of or any  installment  of
         interest  on, any Note,  or reduce the  principal  amount  thereof  (or
         premium or Liquidated Damages, if any) or the rate of interest thereon,
         alter any  redemption  provision with respect to any Note or change the
         coin or currency in which any Note or any premium or Liquidate  Damages
         or the  interest  thereon is payable,  or impair the right to institute
         suit for the  enforcement of any such payment after the Stated Maturity
         thereof  (or,  in the case of  redemption,  on or after the  Redemption
         Date);

(2)      amend,  change or modify  the  obligation  of the  Company  to make and
         consummate an Excess  Proceeds  Offer with respect to any Asset Sale in
         accordance  with Section 1017 or the  obligation of the Company to make
         and  consummate  a Change of Control  Offer in the event of a Change of
         Control  in  accordance  with  Section  1010,  including,  in each case
         amending, changing or modifying any definition relating thereto;

(3)      reduce the percentage of the principal amount of the Outstanding Notes,
         the  consent of whose  Holders is  required  for any such  supplemental
         indenture,  or the consent of whose  Holders is required for any waiver
         of compliance  with certain  provisions  and defaults of this Indenture
         and their consequences provided for in this Indenture;

(4)      modify  any of the  provisions  of this  Section  or  Sections  513 and
         Section  1019,  except to  increase  the  percentage  of the  aggregate
         principal  amount  of  Outstanding  Notes  required  for  such  actions
         thereunder  or  to  provide  that  certain  other  provisions  of  this
         Indenture  cannot be  modified  or waived  without  the  consent of the
         Holder of each Outstanding Note affected thereby;

(5)      except as  otherwise  permitted  under  Article  Eight  consent  to the
         assignment  or  transfer  by the  Company  of any of  their  rights  or
         obligations under the Indenture; or

(6)      release any Lien created by the Amended and Restated Pledge  Agreement,
         except in accordance  with the terms of the Amended and Restated Pledge
         Agreement

(7)      modify the provisions of this Indenture  relating to the Guarantee in a
         manner adverse to the Holders.

   It shall not be  necessary  for any Act of  Holders  under  this  Section  to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.

                            AMENDMENTS TO "COVENANTS"

SECTION 112.      AMENDMENT TO SECTION 1002.

Section 1002 of the Indenture is hereby amended by deleting the existing Section
1002 in its entirety and replacing it with the following:

                  SECTION 1002.  MAINTENANCE OF OFFICE OR AGENCY:
                                 -------------------------------

                  The Company and the Parent  shall  maintain in The City of New
York,  an office or agency  where  Notes may be  presented  or  surrendered  for
payment, where Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company or the Parent in respect of
the Notes,  this Indenture or the Guarantees may be served.  The Corporate Trust
Office of the  Trustee  shall be such  office or agency of the  Company  and the
Parent unless the Company or the Parent shall  designate and maintain some other
office or agency for one or more of such  purposes.  The  Company and the Parent
will give prompt  written notice to the Trustee of any change in the location of
any such office or agency.  If at any time the Company or the Parent  shall fail
to  maintain  any such  required  office or agency or shall fail to furnish  the
Trustee with the address thereof,  such presentations,  surrenders,  notices and
demand may be made or served at the Corporate Trust Administration office of the
Trustee,  and the  Company  and the Parent  hereby  appoint the Trustee as their
agent to receive all such presentations, surrenders, notices and demands.

                  The  Company  and  the  Parent  may  also  from  time  to time
designate  one or more other  offices or agencies  (in or outside of The City of
New York) where the Notes may be  presented or  surrendered  for any or all such
purposes and may from time to time rescind any such designation;  PROVIDED, that
such  designation  or rescission  shall not in any manner relieve the Company or
the Parent of their  obligation  to  maintain an office or agency in The City of
New York for such purposes.  The Company and the Parent will give prompt written
notice to the Trustee of any such  designation  or rescission  and any change in
the location of any such other office or agency.

SECTION 113.  AMENDMENT TO SECTION 1003. Section 1003 of the Indenture is hereby
amended by deleting the existing  Section 1003 in its entirety and  replacing it
with the following:

                      SECTION 1003. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST
                                    -------------------------------------------

                  If the  Company or the  Parent  shall at any time act as their
own Paying Agent,  they will, on or before each due date of the principal of (or
premium,  if any) or interest on any of the Notes,  segregate  and hold in trust
for the  benefit of the Persons  entitled  thereto a sum  sufficient  to pay the
principal  of (or  premium,  if any) or interest so becoming due until such sums
shall be paid to such  Persons or otherwise  disposed of as herein  provided and
will promptly notify the Trustee of their action or failure so to act.

                  Whenever  the  Company  and the Parent  shall have one or more
Paying  Agents for the Notes,  the Company  and/or the Parent will, on or before
10:00 a.m. on each due date of the principal of (or premium, if any) or interest
on any Notes,  deposit with a Paying Agent a sum sufficient to pay the principal
(and premium,  if any) or interest so becoming due, such sum to be held in trust
for the benefit of the Persons entitled to such principal,  premium or interest,
and (unless such Paying Agent is the Trustee) the Company and/or the Parent will
promptly notify the Trustee of such action or any failure so to act.

         The Company and the Parent  shall cause each Paying  Agent  (other than
the Trustee) to execute and deliver to the Trustee an  instrument  in which such
Paying Agent shall agree with the  Trustee,  subject to the  provisions  of this
Section, that such Paying Agent will:

(1)      hold all  sums  held by it for the  payment  of the  principal  of (and
         premium,  if any) or  interest on Notes in trust for the benefit of the
         Persons  entitled thereto until such sums shall be paid to such Persons
         or otherwise disposed of as herein provided;

(2)      give the Trustee notice of any default by the Company or the Parent (or
         any other  obligor  upon the  Notes) in the  making of any  payment  of
         principal (and premium, if any) or interest; and

(3)      at any  time  during  the  continuance  of any such  default,  upon the
         written  request of the Trustee,  forthwith pay to the Trustee all sums
         so held in trust by such Paying Agent.

         The Company or the Parent may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose,  pay,
or by Company  Order or Parent  Order  direct any  Paying  Agent to pay,  to the
Trustee all sums held in trust by the Company,  the Parent or such Paying Agent,
such sums to be held by the  Trustee  upon the same  trusts as those  upon which
such sums where held by the Company,  the Parent or such Paying Agent; and, upon
such  payment by any Paying  Agent to the  Trustee,  such Paying  Agent shall be
released from all further liability with respect to such sums.

         Any money  deposited with the Trustee or any Paying Agent, or then held
by the Company or the Parent,  in trust for the payment of the  principal of (or
premium,  if any) or interest on any Note and remaining  unclaimed for two years
after such principal, premium, interest has become due and payable shall be paid
to the  Company on Company  Request or to the Parent on Parent  Request,  or (if
then held by the Company or the Parent) shall be discharged from such trust. The
Holder of such Note, as an unsecured  general  creditor,  shall look  thereafter
only to the Company and the Parent for the payment thereof, and all liability of
the  Trustee or such  Paying  Agent with  respect to such trust  money,  and all
liability  of the  Company  or the Parent as trustee  thereof,  shall  thereupon
cease;  PROVIDED,  HOWEVER,  that the Trustee or such Paying Agent, before being
required to make any such  repayment,  may at the expense of the Company and the
Parent  cause to be  published  once,  in a newspaper  published  in the English
language,  customarily published on each Business Day and of general circulation
in the  Borough  of  Manhattan,  The City of New York,  notice  that such  money
remains unclaimed and that, after a date specified  therein,  which shall not be
less than 30 days from the date of such  publication,  any unclaimed  balance of
such money then  remaining  will be repaid to the Company or the Parent,  as the
case may be.

SECTION 114.  AMENDMENT TO SECTION 1004. Section 1004 of the Indenture is hereby
amended by deleting the existing  Section 1004 in its entirety and  replacing it
with the following:

                  SECTION 1004.  CORPORATE EXISTENCE.
                                 -------------------

                  Subject to Article Eight, (a) the Company shall do or cause to
be done all things  necessary  to preserve and keep in full force and effect the
corporate  existence,  rights  (charter and  statutory)  and  franchises  of the
Company and each of its Subsidiaries, and (b) the Parent shall do or cause to be
done all  things  necessary  to  preserve  and keep in full force and effect the
corporate existence, rights (charter and statutory) and franchises of the Parent
and each of its  Subsidiaries;  PROVIDED,  as the case may be, that  neither the
Company nor the Parent,  as the case may be,  shall be required to preserve  any
such right or  franchise if the Board of Directors of the Company or the Parent,
as the case may be, shall determine that the  preservation  thereof is no longer
desirable  in the  conduct of the  business of the Company or the Parent and its
respective Subsidiaries as a whole.

SECTION 115.  AMENDMENT TO SECTION 1005. Section 1005 of the Indenture is hereby
amended by deleting the existing  Section 1005 in its entirety and  replacing it
with the following:

                  SECTION 1005.  PAYMENT OF TAXES AND OTHER CLAIMS.
                                 ---------------------------------

                  (a) The Company  shall pay or discharge or cause to be paid or
discharged,  before the same shall become  delinquent,  (i) all material  taxes,
assessments and  governmental  charges levied or imposed upon the Company or any
of its  Subsidiaries  or upon the income,  profits or property of the Company or
any Restricted Company Subsidiary and (ii) all material lawful claims for labor,
materials and supplies,  which,  if unpaid,  might by law become a lien upon the
property of the Company or any of its Subsidiaries; and (b) the Parent shall pay
or  discharge  or cause to be paid or  discharged,  before the same shall become
delinquent,  (i) all material taxes, assessments and governmental charges levied
or  imposed  upon the  Parent  or any of its  Subsidiaries  or upon the  income,
profits or  property  of the Parent or any  Restricted  Subsidiary  and (ii) all
material  lawful claims for labor,  materials and  supplies,  which,  if unpaid,
might  by law  become a lien  upon  the  property  of the  Parent  or any of its
Subsidiaries PROVIDED, that neither the Company nor the Parent shall be required
to pay or discharge or cause to be paid or discharged any such tax,  assessment,
charge or claim whose amount,  applicability  or validity is being  contested in
good faith by appropriate proceedings.

SECTION 116.  AMENDMENT TO SECTION 1006. Section 1006 of the Indenture is hereby
amended by deleting the existing  Section 1006 in its entirety and  replacing it
with the following:

                  SECTION 1006. MAINTENANCE OF PROPERTIES.
                                -------------------------

                  (a) The Company shall,  or shall cause its Restricted  Company
Subsidiaries  to,  cause all  material  properties  owned by the  Company or any
Restricted  Company  Subsidiary  or used or held for use in the  conduct  of its
business or the business of any Restricted  Company  Subsidiary to be maintained
and kept in good condition,  repair and working order  (reasonable wear and tear
excepted) and supplied  with all  necessary  equipment and will cause to be made
all necessary  repairs,  renewals,  replacements,  betterments and  improvements
thereof,  all as in the  judgment of the Company  may be  necessary  so that the
business carried on in connection  therewith may be properly and  advantageously
conducted at all times,  and (b) the Parent shall, or shall cause the Restricted
Subsidiaries  to,  cause  all  material  properties  owned by the  Parent or any
Restricted  Subsidiary or used or held for use in the conduct of its business or
the business of any  Restricted  Subsidiary  to be  maintained  and kept in good
condition,  repair and working  order  (reasonable  wear and tear  excepted) and
supplied  with all  necessary  equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Parent may be  necessary so that the business  carried on in
connection therewith may be properly and advantageously  conducted at all times;
PROVIDED,  that nothing in this Section 1006 shall  prevent a Restricted  Entity
from  discontinuing  the  maintenance of any of such  properties or disposing of
them as otherwise  permitted herein if such discontinuance or disposition is, in
the  judgment of the  Parent,  desirable  in the conduct of its  business or the
business  of such  Restricted  Entity and not  disadvantageous  in any  material
respect to the Holders.

SECTION 117.  AMENDMENT TO SECTION 1007. Section 1007 of the Indenture is hereby
amended by deleting the existing  Section 1007 in its entirety and  replacing it
with the following:

                  SECTION 1007.  INSURANCE.
                                 ---------

(a) The Company  shall at all times keep all of its and its  Restricted  Company
Subsidiaries'  properties which are of an insurable nature insured,  and (b) the
Parent  shall  at all  times  keep all of its and the  Restricted  Subsidiaries'
properties, which are of an insurable nature insured, in each case with insurers
believed  by the  Company or the  Parent (as the case may be) to be  responsible
against  loss or damage to the extent  that  property  of similar  character  is
usually  so  insured  by  corporations   similarly   situated  and  owning  like
properties.

SECTION 118.  AMENDMENT TO SECTION 1008. Section 1008 of the Indenture is hereby
amended by deleting the existing  Section 1008 in its entirety and  replacing it
with the following:

                  SECTION 1008.  STATEMENT BY OFFICERS AS TO DEFAULT.
                                 -----------------------------------

(a) The  Company and the Parent  shall  deliver to the  Trustee,  within 50 days
after the end of each  fiscal  quarter and within 120 days after the end of each
fiscal year, a brief certificate from the principal executive officer, principal
financial officer or principal accounting officer of each of the Company and the
Parent as to his or her knowledge of the compliance of the Company or the Parent
(as the case may be) with all  conditions  and  covenants  under this  Indenture
since the beginning of such quarter or year, as the case may be. For purposes of
this Section 1008(a),  such compliance shall be determined without regard to any
period of grace or requirement of notice under this Indenture.

(b) When any Default has occurred and is continuing under this Indenture,  or if
the  trustee  for or the holder of any other  evidence  of  Indebtedness  of any
Restricted  Entity  gives any notice or takes any other action with respect to a
claimed default (other than with respect to Indebtedness in the principal amount
of less  than  $7,500,000  (or the  equivalent  thereof  in one or more  foreign
currencies)),  the  Company or the Parent (as the case may be) shall  deliver to
the Trustee by  registered  or certified  mail or by facsimile  transmission  an
Officers' Certificate  specifying such event, notice or other action within five
Business  Days of an officer  of the  Company or the Parent (as the case may be)
becoming aware of its occurrence.

SECTION 119.  AMENDMENT TO SECTION 1009. Section 1009 of the Indenture is hereby
amended by deleting the existing  Section 1009 in its entirety and  replacing it
with the following:

                  SECTION 1009.  PROVISION OF FINANCIAL STATEMENTS.
                                 ----------------------------------

(a) Subject to Section  1009(b) below the Company and the Parent shall file on a
timely basis with the Commission, to the extent such filings are accepted by the
Commission and whether or not the Company or the Parent (as the case may be) has
a class of securities  registered  under the Exchange  Act, the annual  reports,
quarterly  reports  and other  documents  that the Company or the Parent (as the
case may be) would be required to file if it were subject to Section 13 or 15(d)
of the Exchange Act.

(b) Provided always that the Parent  complies fully with its filing  obligations
pursuant to Section  1009(a)  above,  the Company  shall be entitled in its sole
discretion  to rely on any  applicable  law,  rule,  regulation  or SEC approval
(together  "Relevant   Saving"),   whether  in  force  at  the  date  hereof  or
subsequently  promulgated,  to limit the  scope of or cease to  comply  with its
filing  obligations  pursuant to Section 1009(a) to the maximum extent permitted
by such Relevant Saving.

(c) The Parent shall also be required (i) to file with the Trustee,  and provide
to each Holder of Notes, without cost to such Holder, copies of such reports and
documents  within 15 days after the date on which the Parent  files such reports
and  documents  with the  Commission  or the date on which the  Parent  would be
required to file such reports and documents if the Parent were so required,  and
(ii) if filing such reports and documents with the Commission is not accepted by
the  Commission  or is  prohibited  under  the  Exchange  Act,  to supply at the
Parent's  cost copies of such reports and  documents to any  prospective  holder
promptly upon request.  Delivery of such reports,  information  and documents to
the Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable  from  information   contained  therein,   including  the  Parent's
compliance  with any of its  covenants  hereunder  (as to which the  Trustee  is
entitled to rely exclusively on Officers' Certificates).

SECTION 120.  AMENDMENT TO SECTION 1010. Section 1010 of the Indenture is hereby
amended by deleting the existing  Section 1010 in its entirety and  replacing it
with the following:

                  SECTION 1010.  PURCHASE OF NOTES UPON CHANGE OF CONTROL.
                                 ----------------------------------------

(a) Upon the  occurrence  of a Change of Control at any time and  subject to the
compliance  by the  Company  or the  Parent  (as  the  case  may  be)  with  the
requirements  of paragraph (b) of this Section 1010,  each Holder shall have the
right to require that the Company  repurchase  all of such  Holder's  Notes,  in
whole or in part in  integral  multiples  of $1,000,  at a  purchase  price (the
"Change of Control  Purchase  Price") in cash in an amount  equal to 101% of the
principal  amount thereof,  plus accrued and unpaid interest thereon to the date
of purchase,  in accordance  with the procedures set forth in paragraphs (b) and
(c) of this Section 1010 (the "Change of Control Offer").

(b) Within 15 days  following any Change of Control,  the Company (if the Change
of  Control  relates  to the  Company)  or the  Parent (if the Change of Control
relates to the Parent) shall notify the Trustee  thereof and give to each Holder
of the Notes in the manner provided in Section 105 a notice stating:

(1)      that a Change of  Control  has  occurred  and that such  Holder has the
         right to require the Company to repurchase  such Holder's  Notes at the
         Change of Control Purchase Price;

(2)      the  circumstances  and relevant facts regarding such Change of Control
         (including  information  with respect to pro forma  historical  income,
         cash flow and  capitalization  after  giving  effect to such  Change of
         Control);

(3)      the Change of Control  Purchase  Price and a purchase date (the "Change
         of Control  Purchase  Date")  which shall be a Business  Day no earlier
         than 30 days  nor  later  than 60 days  from the date  such  notice  is
         mailed,  or such later date as is necessary to comply with requirements
         under  the  Exchange  Act  or  any   applicable   securities   laws  or
         regulations;

(4)      that any Note not tendered will continue to accrue interest;

(5)      that,  unless  the  Company  defaults  in the  payment of the Change of
         Control  Purchase Price, any Notes accepted for payment pursuant to the
         Change of Control Offer will cease to accrue  interest on and after the
         Change of Control Purchase Date; and

(6)      the  instructions  a Holder  must  follow  in  order to have its  Notes
         repurchased in accordance with paragraph (c) of this Section.

(c) Holders electing to have Notes purchased shall be required to surrender such
Notes to the  Company  at the  address  specified  in the  notice at least  five
Business  Days prior to the Change of Control  Purchase  Date.  Holders shall be
entitled to withdraw  their  election  if the Company  receives,  not later than
three  Business Days prior to the Change of Control  Purchase  Date, a facsimile
transmission  or letter  setting  forth the name of the  Holder,  the  principal
amount  of the  Notes  delivered  for  purchase  by the  Holder  as to which his
election is to be withdrawn and a statement that such Holder is withdrawing  his
election to have such Notes purchased. Holders whose Notes are purchased only in
part shall be issued new Notes and Guarantees  equal in principal  amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion shall be
equal to $1,000 in principal amount or integral multiples thereof.

SECTION 121.  AMENDMENT TO SECTION 1011. Section 1011 of the Indenture is hereby
amended by deleting the existing  Section 1011 in its entirety and  replacing it
with the following:

                  SECTION 1011.  LIMITATION ON INDEBTEDNESS.
                                 --------------------------

                  Neither the Company nor the Parent  shall , and neither  shall
they permit any Restricted Subsidiary to, incur any Indebtedness  (including any
Acquired  Indebtedness)  other than  Permitted  Indebtedness;  PROVIDED that the
Company  or the Parent  (as the case may be) may Incur  Indebtedness  if, at the
time of such incurrence, the Consolidated Indebtedness to Consolidated Operating
Cash Flow Ratio of the  Company or the  Parent,  as the case may be,  would have
been  less  than  or  equal  to (i)  6.0 to  1.0  but  greater  than  zero,  for
Indebtedness  incurred on or prior to December 31, 2001,  or (ii) 5.0 to 1.0 but
greater than zero, for  Indebtedness  incurred  thereafter.  For the purposes of
determining  compliance  with this  Section  1011,  in the event that an item of
Indebtedness  or any portion  thereof meets the criteria of more than one of the
type of  Indebtedness  that any  Restricted  Entity is permitted  to Incur,  the
Parent will have the right,  in its sole  discretion,  to classify  such item of
Indebtedness or portion thereof at the time of its incurrence and the Company or
the Parent,  as the case may be, will only be required to include the amount and
type of such  Indebtedness  or portion  thereof under the clause  permitting the
Indebtedness as so classified.

SECTION 122.  AMENDMENT TO SECTION 1012. Section 1012 of the Indenture is hereby
amended by deleting the existing  Section 1012 in its entirety and  replacing it
with the following:

                  SECTION 1012.  LIMITATION ON RESTRICTED PAYMENTS.
                                 ---------------------------------

                  The  Parent  shall not,  and shall not  permit any  Restricted
Subsidiary or, in the case of paragraphs (3) and (4) below, the Company to take,
directly or indirectly, any of the following actions:

(a)      (1)      declare or pay any dividend  on, or make any  distribution
                  to holders of, any shares of the  Capital  Stock of the Parent
                  (other  than  dividends  or  distributions  payable  solely in
                  shares of its Qualified Capital Stock or in options,  warrants
                  or other rights to acquire  such shares of  Qualified  Capital
                  Stock);

         (2)      purchase,  redeem or  otherwise  acquire  or retire for value,
                  directly  or  indirectly,  any shares of Capital  Stock of the
                  Parent or any Capital  Stock of any of its  Affiliates  (other
                  than  Capital  Stock  of  the  Company  or  any  Wholly  Owned
                  Restricted  Subsidiary)  or any  options,  warrants  or  other
                  rights to acquire such shares of Capital Stock;

         (3)      make any principal payment on, or repurchase,  redeem, defease
                  or otherwise acquire or retire for value,  prior to the Stated
                  Maturity of any principal payment or any sinking fund payment,
                  any  Indebtedness  of the  Parent  or of the  Company  that is
                  expressly  subordinated in right of payment to the Notes or to
                  the Guarantees, as the case may be; or

         (4)      make any Investment  (other than any Permitted  Investment) in
                  any Person;

(such payments or other actions described in (but not excluded from) clauses (1)
through (4) are collectively  referred to as "Restricted  Payments");  unless at
the time of, and  immediately  after giving  effect to, the proposed  Restricted
Payment  (the  amount of any such  Restricted  Payment,  if other than cash,  as
determined by the Board of Directors of the Parent, whose determination shall be
conclusive  and  evidenced  by a Board  Resolution),  (A) no Default or Event of
Default  shall have  occurred and be  continuing,  (B) the Parent could incur at
least  $1.00 of  additional  Indebtedness  (other than  Permitted  Indebtedness)
pursuant to Section 1011 and (C) the aggregate amount of all Restricted Payments
declared or made after the Issue Date shall not exceed the sum of:

(i)               100% of  Consolidated  Operating  Cash Flow of the Parent less
                  1.5 times Consolidated  Interest Expense of the Parent or (ii)
                  if  Consolidated  Operating  Cash  Flow  of  the  Parent  is a
                  negative,  minus 100% of such negative amount, in each case on
                  a cumulative  basis for the period  beginning on the first day
                  of the Parent's  first fiscal quarter after the Issue Date and
                  ending on the last day of the  Parent's  last  fiscal  quarter
                  ending prior to the date of such proposed  Restricted Payment;
                  plus

(ii)              the  aggregate  Net Cash Proceeds and the Fair Market Value of
                  Telecommunications  Assets  or Voting  Stock of a Person  that
                  becomes a Restricted  Subsidiary,  the assets of which consist
                  primarily of Telecommunications Assets, received by the Parent
                  after  the Issue  Date as  capital  contributions  or from the
                  issuance or sale (other than to any  Subsidiary)  of shares of
                  Qualified  Capital  Stock of the  Parent  (including  upon the
                  exercise of options, warrants or rights) or warrants,  options
                  or rights to purchase shares of Qualified Capital Stock of the
                  Parent; plus

(iii)             the  aggregate  Net Cash Proceeds and the Fair Market Value of
                  Telecommunications  Assets  or Voting  Stock of a Person  that
                  becomes a Restricted  Subsidiary,  the assets of which consist
                  primarily of Telecommunications Assets, received by the Parent
                  after the Issue Date from the  issuance or sale (other than to
                  any Subsidiary) of debt securities or Redeemable Capital Stock
                  that have  been  converted  into or  exchanged  for  Qualified
                  Capital  Stock of the Parent,  together with the aggregate Net
                  Cash Proceeds and the Fair Market Value of  Telecommunications
                  Assets or Voting  Stock of a Person that  becomes a Restricted
                  Subsidiary,   the  assets  of  which   consist   primarily  of
                  Telecommunications  Assets, received by the Parent at the time
                  of such conversion or exchange; plus

(iv)              to the extent not otherwise included in Consolidated Operating
                  Cash Flow of the Parent, an amount equal to the sum of (a) the
                  net   reduction   in   Investments   (other   than   Permitted
                  Investments)   in  any  Person   (other   than  a   Restricted
                  Subsidiary)  resulting  from the payment in cash of dividends,
                  repayments of loans or advances or other  transfers of assets,
                  in each case to the Parent or any Restricted  Subsidiary after
                  the Issue Date from such  Person and (b) the amount of any net
                  reduction in Investments  resulting from the  redesignation of
                  an Unrestricted  Subsidiary as a Restricted Subsidiary (valued
                  as provided in the definition of  "Investment") at the time of
                  such  redesignation;  PROVIDED that, in the case of (a) or (b)
                  above,  the foregoing sum shall not exceed the total amount of
                  Investments (other than Permitted Investments) previously made
                  in such Person or  Unrestricted  Subsidiary  by the Parent and
                  its Restricted Subsidiaries.

(b)  Notwithstanding   paragraph  (a)  above,  the  Parent  and  any  Restricted
Subsidiary  may take the  following  actions so long as (with respect to clauses
(2) through (6) below) no Default or Event of Default shall have occurred and be
continuing:

(1)      the  payment  of  any  dividend  within  60  days  after  the  date  of
         declaration thereof, if at such date of declaration the payment of such
         dividend would have complied with the provisions of paragraph (a) above
         and such  payment  will be  deemed  to have  been  paid on such date of
         declaration for purposes of the  calculation  required by paragraph (a)
         above;

(2)      the purchase,  redemption or other  acquisition or retirement for value
         of any shares of Capital  Stock of the Parent (x) in  exchange  for, or
         out of the Net Cash Proceeds of a substantially concurrent issuance and
         sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
         of the Parent;  or (y) that are held by former  officers,  employees or
         directors (or their estates or  beneficiaries  under their  estates) of
         the  Parent or any of its  Subsidiaries;  PROVIDED  that the  aggregate
         amount of such purchase,  redemption or other acquisition or retirement
         for value  under  this  clause  (y) will not  exceed  $250,000  (or the
         equivalent  thereof  in one or more  foreign  currencies)  in any given
         fiscal year;

(3)      the purchase, redemption, defeasance or other acquisition or retirement
         for  value  of  any  Indebtedness  of  the  Parent  that  is  expressly
         subordinated  in right of payment to the Notes in exchange  for, or out
         of the Net Cash  Proceeds of a  substantially  concurrent  issuance and
         sale (other than to a Subsidiary) of, shares of Qualified Capital Stock
         of the Parent;

(4)      the  purchase  of any  Indebtedness  of the Company  that is  expressly
         subordinated  in right of payment to the Notes or the  purchase  of any
         Indebtedness  of the Parent that is expressly  subordinated in right of
         payment to the Guarantees, in each case at a purchase price not greater
         than 101% of the principal  amount  thereof in the event of a Change of
         Control in accordance with provisions similar to Section 1010; PROVIDED
         that prior to such  purchase the Company has made the Change of Control
         Offer as provided in such  covenant  with  respect to the Notes and has
         purchased  all Notes validly  tendered for payment in  connection  with
         such Change of Control Offer;

(5)      the purchase, redemption, defeasance or other acquisition or retirement
         for value of Indebtedness  (other than Redeemable Capital Stock) of the
         Parent that is expressly  subordinated in right of payment to the Notes
         in  exchange  for, or out of the Net Cash  Proceeds of a  substantially
         concurrent incurrence (other than to a Subsidiary) of, new Indebtedness
         of the Parent that is expressly subordinated in right of payment to the
         Notes,  so long as (A) the  principal  amount of such new  Indebtedness
         does not exceed the principal  amount (or, if such  Indebtedness  being
         refinanced  provides  for an  amount  less  than the  principal  amount
         thereof  to be due  and  payable  upon a  declaration  of  acceleration
         thereof,  such lesser  amount as of the date of  determination)  of the
         Indebtedness  being  so  purchased,  redeemed,  defeased,  acquired  or
         retired,  plus the lesser of (x) the amount of any premium  required to
         be paid in connection  with such  refinancing  pursuant to the terms of
         the  Indebtedness  being  refinanced  or (y) the amount of any  premium
         reasonably  determined  by the Parent as necessary to  accomplish  such
         refinancing, plus, in either case, the amount of expenses of the Parent
         incurred in connection with such refinancing; (B) such new Indebtedness
         is subordinated to the Notes to the same extent as such Indebtedness so
         purchased,  redeemed,  defeased,  acquired or retired; and (C) such new
         Indebtedness  has an Average  Life longer than the Average  Life of the
         Indebtedness  being refinanced and a final Stated Maturity of principal
         later  than  the  final  Stated  Maturity  of  the  Indebtedness  being
         refinanced; and

(6)      the  payment  of cash in lieu of  fractional  shares  of  Common  Stock
         pursuant to the Warrant Agreement.

The actions  described in clauses (1) through (4) and (6) of this  paragraph (b)
shall be Restricted  Payments  that shall be permitted in  accordance  with this
paragraph (b) but shall reduce the amount that would  otherwise be available for
Restricted  Payments  under  clause  (C) of  paragraph  (a) above.  The  actions
described in clause (5) of this paragraph (b) shall be Restricted  Payments that
shall be permitted in  accordance  with this  paragraph (b) and shall not reduce
the amount that would  otherwise  be available  for  Restricted  Payments  under
clause (C) of paragraph (a).

SECTION 123.  AMENDMENT TO SECTION 1013. Section 1013 of the Indenture is hereby
amended by deleting the existing  Section 1013 in its entirety and  replacing it
with the following:

    SECTION 1013.  LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF THE
                   -------------------------------------------------------
                   COMPANY AND RESTRICTED SUBSIDIARIES.
                   -----------------------------------

                  Neither the Company nor the Parent  shall , and neither  shall
they permit any Restricted Subsidiary to, issue or sell any Capital Stock of the
Company or of a  Restricted  Subsidiary  (other than to a  Restricted  Entity );
PROVIDED,  that this  covenant  shall not  prohibit  (i)  issuances  or sales of
Capital Stock of the Company or a Restricted  Subsidiary if,  immediately  after
giving  effect to such  issuance or sale,  the Company would no longer be Wholly
Owned  by the  Parent  or  such  Restricted  Subsidiary  would  no  longer  be a
Restricted  Subsidiary and any Investment in such Person  remaining after giving
effect to such  issuance  or sale  would  have been  permitted  to be made under
Section 1012 if made on the date of such  issuance and sale,  (ii) the ownership
by  directors  of  directors'  qualifying  shares or the  ownership  by  foreign
nationals of Capital Stock of the Company or of any  Restricted  Subsidiary,  to
the extent  mandated by applicable  law,  (iii) the issuance and sale of Capital
Stock of the Company or any Restricted Subsidiary owned by any Restricted Entity
in compliance with Section 1017; PROVIDED that such Restricted  Subsidiary would
remain a Restricted  Subsidiary  after such transaction or (iv) the issuance and
sale of Capital Stock of the Company or any Restricted  Subsidiary to any Person
that  transfers,  leases,  licenses or grants a right to use  Telecommunications
Assets  to the  Parent  or the  Company  (as the  case  may be)  pursuant  to an
Incumbent  Agreement;   PROVIDED  that,  after  such  issuance  and  sale,  such
subsidiary remains a Restricted  Subsidiary and, in the good faith determination
of the Board of  Directors  of the  Parent,  the Fair  Market  Value of any such
transfer,  lease, license or grant is not less than the Fair Market Value of the
Capital Stock of such Restricted Subsidiary issued and sold in respect thereof.

SECTION 124.  AMENDMENT TO SECTION 1014. Section 1014 of the Indenture is hereby
amended by deleting the existing  Section 1014 in its entirety and  replacing it
with the following:

                  SECTION 1014.  LIMITATION ON TRANSACTIONS WITH AFFILIATES.
                                 ------------------------------------------

                  Neither the Company nor the Parent  shall,  and neither  shall
they  permit  any  Restricted  Subsidiary  to,  enter  into or  suffer to exist,
directly  or  indirectly,  any  transaction  or series of  related  transactions
(including,  the  sale,  purchase,  exchange  or lease of  assets,  property  or
services) with, or for the benefit of, any Affiliate of the Parent,  the Company
or any  Restricted  Subsidiary  (other  than a  Restricted  Entity so long as no
Affiliate of the Parent (other than a Restricted  Entity) shall beneficially own
Capital Stock in such Restricted  Entity) unless (i) such  transaction or series
of  related  transactions  are on  terms,  taken  as a  whole,  that are no less
favorable to the Company, the Parent, or such Restricted Subsidiary, as the case
may be, than those that could have been obtained in an arm's length  transaction
with unrelated third parties that are not  Affiliates;  (ii) with respect to any
transaction or series of related transactions involving aggregate  consideration
equal to or greater than  $5,000,000 (or the  equivalent  thereof in one or more
foreign  currencies),  the Parent will deliver an Officers'  Certificate  to the
Trustee  certifying  that such  transaction  or series of  related  transactions
complies  with clause (i) above;  and (iii) with respect to any  transaction  or
series of related  transactions  involving aggregate  consideration in excess of
$10,000,000 (or the equivalent thereof in one or more foreign  currencies),  the
Parent will deliver the Officers'  Certificates  described in clause (ii) above,
which will also certify that such  transaction or series of related  transaction
has been approved by a majority of the  Disinterested  Directors of the Board of
Directors of the Parent,  or that the Parent has obtained a written opinion from
an independent  financial  expert  certifying  that the financial  terms of such
transaction or series of related transactions, taken as a whole, are fair to the
Company,  the Parent, or the Restricted  Subsidiary,  as the case may be, from a
financial point of view: PROVIDED, that this covenant shall not restrict (1) any
transaction  or series of  related  transactions  between  the  Company  and the
Parent, (2) any transaction or series of related transactions between either the
Company  or the  Parent  (as the case may be) and one or more of the  Restricted
Subsidiaries  or between  the  Restricted  Subsidiaries,  (3) the Company or the
Parent from paying  reasonable and customary  regular  compensation  and fees to
directors  of any  Restricted  Entity who are not  employees  of any  Restricted
Entity, (4) the performance of the Parent's  obligations under the Stockholders'
Agreement,  dated as of March 30, 2000, among the Parent and the Investors named
therein, as amended and supplemented from time to time or (5) the performance of
the Company's  obligations  under the  Investment and  Stockholders'  Agreement,
dated as of  October  31,  1997,  among the  Company,  David  Schaeffer  and the
Investors named therein, as amended; the Investment and Stockholders' Agreement,
dated as of August 28, 1995,  by and among the Company and the  Investors  named
therein; the Non-Qualified Stock Option Agreement, dated August 4, 1997, between
the Company and Richard Jalkut;  and the Employment  Agreement,  dated August 4,
1997,  between the Company and Richard  Jalkut,  in each case as amended through
the Issue Date;  PROVIDED that any amendments or  modifications  to the terms of
transactions  described in this clause (5) will be (x) no less  favorable to the
Parent or the  Company,  as the case may be,  than  those  that  could have been
obtained in an arm's length transaction with unrelated third parties who are not
Affiliates  and (y)  approved  by the Board of  Directors  of the  Parent or the
Company,  as the  case  may  be,  (including  a  majority  of the  Disinterested
Directors of the relevant  Board of Directors)  (6) the making of any Restricted
Payment  not  prohibited  by  Section  1012 and (7)  loans or  advances  made to
directors,  officers or employees of any  Restricted  Entity,  or  guarantees in
respect  thereof or  otherwise  made on their  behalf,  in  respect of  expenses
incurred in the ordinary course of business,  in an aggregate  principal  amount
not to  exceed  $500,000  (or the  equivalent  thereof  in one or  more  foreign
currencies in any calendar year.)

SECTION 125.  AMENDMENT TO SECTION 1015. Section 1015 of the Indenture is hereby
amended by deleting the existing  Section 1015 in its entirety and  replacing it
with the following:

                  SECTION 1015.  LIMITATION ON LIENS.
                                 -------------------

                  Neither the Company nor the Parent  shall,  and neither  shall
they permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume  or  suffer to exist any Lien  (other  than  Permitted  Liens) on or with
respect to any of its property or assets  (including any shares of Capital Stock
or  Indebtedness of the Company or any Restricted  Subsidiary)  whether owned at
the Issue Date (in the case of the Company) or the  Amendment  Date (in the case
of the  Parent) or  thereafter  acquired,  or any  income,  profits or  proceeds
therefrom,  or assign or otherwise  convey any right to receive income  thereon,
unless (x) in the case of any Lien securing  Indebtedness  of the Company or the
Parent (as the case may be) that is expressly  subordinated  in right of payment
to the  Notes,  the  Notes are  secured  by a Lien on such  property,  assets or
proceeds  that is  senior  in  priority  to such Lien and (y) in the case of any
other Lien, the Notes are secured by a Lien on such property, assets or proceeds
that is  senior in  priority  to, or  equally  and  ratably  secured  with,  the
obligation or liability secured by such Lien.

SECTION 126.  AMENDMENT TO SECTION 1016. Section 1016 of the Indenture is hereby
amended by deleting the existing  Section 1016 in its entirety and  replacing it
with the following:

                  SECTION 1016.  LIMITATIONS ON ISSUANCE OF CERTAIN GUARANTEES
                                 ---------------------------------------------
                                 AND DEBT SECURITIES.
                                 --------------------
                  Neither the Company nor the Parent shall permit any Restricted
Subsidiary  to (i)  directly  or  indirectly  guarantee,  assume or in any other
manner  become  liable  with  respect  to  any  Debt   Securities   ("Guaranteed
Indebtedness")  or (ii) issue any Debt Securities,  unless, in either such case,
such Restricted Subsidiary  simultaneously  executes and delivers a supplemental
indenture  providing for the guarantee (a "Subsidiary  Guarantee") of payment of
the Notes. If the Guaranteed  Indebtedness (A) ranks equally in right of payment
with the Notes,  then the guarantee of such  Guaranteed  Indebtedness  will rank
equally in right of payment with, or be subordinated in right of payment to, the
Subsidiary  Guarantee or (B) is  subordinated  in right of payment to the Notes,
then the guarantee of such Guaranteed Indebtedness will be subordinated in right
of  payment  to the  Subsidiary  Guarantee  at  least  to the  extent  that  the
Guaranteed  Indebtedness is  subordinated in right of payment to the Notes.  The
obligations of each Restricted  Subsidiary under a Subsidiary  Guarantee will be
limited  to the  maximum  amount  as will,  after  giving  effect  to all  other
contingent and fixed  liabilities of such Restricted  Subsidiary,  result in the
obligations of such  Restricted  Subsidiary  under the Subsidiary  Guarantee not
constituting a fraudulent  conveyance or fraudulent  transfer  under  applicable
law.

                  Notwithstanding the foregoing,  any Subsidiary  Guarantee by a
Restricted  Subsidiary  of the Notes shall provide by its terms that it shall be
automatically and  unconditionally  released and discharged upon (i) the sale or
other disposition, by way of merger or otherwise, to any Person not an Affiliate
of the  Parent,  of all  of the  Restricted  Entities'  Capital  Stock  in  such
Restricted  Subsidiary,  (ii) the  merger  or  consolidation  of the  applicable
Restricted   Subsidiary  with  and  into  another  Restricted  Entity  that  has
guaranteed  the  Notes  and  that is the  surviving  Person  in such  merger  or
consolidation  and (iii) the release by all of the holders of Debt Securities of
the  Company  or of  the  Parent  (as  the  case  may  be)  of  such  Restricted
Subsidiary's  obligations under all of its Guarantees in respect thereof and the
release by all of the holders of Debt Securities of such  Restricted  Subsidiary
of its obligations thereunder.

SECTION 127.  AMENDMENT TO SECTION 1017. Section 1017 of the Indenture is hereby
amended by deleting the existing  Section 1017 in its entirety and  replacing it
with the following:

                  SECTION 1017.  LIMITATION ON SALE OF ASSETS.
                                 ----------------------------

(A)LIMITATION ON ASSET SALES BY THE COMPANY AND RESTRICTED COMPANY SUBSIDIARIEs.
   ----------------------------------------------------------------------------

(i)      The  Company  shall not,  and shall not permit any  Restricted  Company
         Subsidiary to, directly or indirectly,  engage in any Asset Sale unless
         (A) the  consideration  received  by the  Company  or  such  Restricted
         Company Subsidiary for such Asset Sale is not less than the Fair Market
         Value of the shares or other assets sold (as determined by the Board of
         Directors of the Company,  whose  determination shall be conclusive and
         evidenced by a resolution  thereof) and (B) the consideration  received
         by the Company or the relevant Restricted Company Subsidiary in respect
         of such Asset Sale  consists of at least 75% cash or Cash  Equivalents;
         PROVIDED,  that for purposes of this Section 1017(a) "Cash Equivalents"
         shall include (X) the amount of any liabilities (other than liabilities
         that are by their  terms  subordinated  to the Notes) of the Company or
         such Restricted  Company  Subsidiary (as shown on the Company's or such
         Restricted  Company  Subsidiary's  most recent  balance sheet or in the
         notes thereto) that are assumed by the transferee of any such assets or
         other  property in such Asset Sale or are no longer a liability  of the
         Company  or  any  Restricted  Company  Subsidiary  (and  excluding  any
         liabilities  that are incurred in connection with or in anticipation of
         such  Asset  Sale),  but only to the  extent  that such  assumption  is
         effected on a basis  under  which  there is no further  recourse to the
         Company or any of its Restricted  Company  Subsidiaries with respect to
         such  liabilities  and (Y) any securities,  notes or other  obligations
         received by the Company or any such  Restricted  Company  Subsidiary in
         connection  with such Asset Sale that are  converted  by the Company or
         such Restricted Company Subsidiary into cash within 60 days of receipt.

(ii)     If the Company or any Restricted Company Subsidiary engages in an Asset
         Sale,  the Company  may use the Net Cash  Proceeds  thereof,  within 12
         months after such Asset Sale,  to (A)  permanently  repay or prepay the
         Notes or any then  outstanding  Indebtedness  of the Company that ranks
         equally  with  the  Notes or  Indebtedness  of any  Restricted  Company
         Subsidiary or permanently  reduce  (without  making any prepayment) any
         Indebtedness  of the  Company  ranking  equally  with the  Notes or any
         Indebtedness of a Restricted Company Subsidiary or (B) invest (or enter
         into a legally binding agreement to invest) in properties and assets to
         replace  the  properties  and assets that were the subject of the Asset
         Sale  or in  properties  and  assets  that  are or  will be used in the
         Telecommunications  Business  of the  Company or a  Restricted  Company
         Subsidiary,  as the case may be. If any such legally binding  agreement
         to invest such Net Cash Proceeds is  terminated,  then the Company may,
         within 60 days of such  termination  or within 12 months of such  Asset
         Sale,  whichever  is later,  apply or invest such Net Cash  Proceeds as
         provided  in clause  (A) or (B)  (without  regard to the  parenthetical
         contained  in such  clause  (B)  above.  The  amount  of such  Net Cash
         Proceeds  not so  used  as set  forth  above  in  this  paragraph  (ii)
         constitutes "Company Excess Proceeds."

(iii)    When  the  aggregate   amount  of  Company  Excess   Proceeds   exceeds
         $10,000,000  (or  the  equivalent   thereof  in  one  or  more  foreign
         currencies  after  deducting  fees that would be incurred in converting
         such funds to US dollars),  the Company shall, within 15 Business Days,
         make an offer to purchase (a "Company  Excess  Proceeds  Offer"),  on a
         proportional basis, the Notes and Indebtedness  described in the second
         succeeding sentence, in accordance with the procedures set forth below,
         the  maximum  principal  amount of Notes  (expressed  as a multiple  of
         $1,000)  and such other  Indebtedness  that may be  purchased  with the
         Company  Excess  Proceeds.  Any  Company  Excess  Proceeds  Offer shall
         include a pro rata offer under  similar  circumstances  to purchase all
         other  Indebtedness of the Company ranking equally with the Notes which
         Indebtedness  contains  similar  provisions  requiring  the  Company to
         purchase  such  Indebtedness.  The  offer  price as to each  Note  (the
         "Company  Excess  Proceeds  Offer Price") will be payable in cash in an
         amount equal to 100% of the principal amount of such Note, plus accrued
         and unpaid interest,  if any,  thereon to the date of purchase.  To the
         extent that the aggregate  principal  amount of Notes validly  tendered
         and not  withdrawn  by holders  thereof  pursuant  to a Company  Excess
         Proceeds  Offer is less than the Company Excess  Proceeds,  the Company
         may  use  such  deficiency  for  general  corporate  purposes.  If  the
         aggregate  principal amount of Notes validly tendered and not withdrawn
         by holders thereof  pursuant to a Company Excess Proceeds Offer exceeds
         the  Excess  Proceeds,  Notes to be  purchased  will be  selected  on a
         proportional  basis.  Upon completion of such Company Exceeds  Proceeds
         Offer, the amount of Company Excess Proceeds shall be reset to zero.

(B)      LIMITATION ON ASSET SALES BY PARENT AND RESTRICTED PARENT SUBSIDIARIES.
(i)      The  Parent  shall not, and shall not permit any  Restricted  Parent
         Subsidiary to, directly or indirectly,  engage in any Asset Sale unless
         (A) the consideration  received by the Parent or such Restricted Parent
         Subsidiary  for such Asset Sale is not less than the Fair Market  Value
         of the  shares  or other  assets  sold (as  determined  by the Board of
         Directors of the Parent,  whose  determination  shall be conclusive and
         evidenced by a resolution  thereof) and (B) the consideration  received
         by the Parent or the relevant  Restricted  Parent Subsidiary in respect
         of such Asset Sale  consists of at least 75% cash or Cash  Equivalents;
         PROVIDED, that for purposes of this Section 1017(b), "Cash Equivalents"
         shall include (X) the amount of any liabilities (other than liabilities
         that are by their  terms  subordinated  to the  Notes) of the Parent or
         such  Restricted  Parent  Subsidiary  (as shown on the Parent's or such
         Restricted  Parent  Subsidiary's  most recent  balance  sheet or in the
         notes thereto) that are assumed by the transferee of any such assets or
         other  property in such Asset Sale or are no longer a liability  of the
         Parent  or  any  Restricted   Parent   Subsidiary  (and  excluding  any
         liabilities  that are incurred in connection with or in anticipation of
         such  Asset  Sale),  but only to the  extent  that such  assumption  is
         effected on a basis  under  which  there is no further  recourse to the
         Parent or any of the  Restricted  Parent  Subsidiaries  with respect to
         such  liabilities  and (Y) and securities,  notes or other  obligations
         received by the Parent or any of its Restricted Parent  Subsidiaries in
         connection  with such  Asset Sale that are  converted  by the Parent or
         such Restricted Parent Subsidiary into cash within 60 days of receipt.

(ii)     If the Parent or any Restricted Parent  Subsidiary  engages in an Asset
         Sale,  the  Parent  may use the Net Cash  Proceeds  thereof,  within 12
         months after such Asset Sale,  to (A) commence an offer to purchase the
         Notes or any then  outstanding  Indebtedness  of the Parent  that ranks
         equally  with  the  Notes  or  Indebtedness  of any  Restricted  Parent
         Subsidiary or permanently  reduce  (without  making any prepayment) any
         Indebtedness  of the Parent  ranking  equally with the Guarantee or any
         Indebtedness of a Restricted Parent  Subsidiary,  (B) cause the Company
         to repay or prepay the Notes or any then  outstanding  Indebtedness  of
         the Company that ranks  equally with the Notes or  Indebtedness  of any
         Restricted Company Subsidiary or permanently reduce (without making any
         prepayment)  any  Indebtedness  of the Company ranking equally with the
         Notes or  Indebtedness  of any Restricted  Company  Subsidiary,  or (C)
         invest  (or enter  into a  legally  binding  agreement  to  invest)  in
         properties  and assets to replace the  properties  and assets that were
         the subject of the Asset Sale or in  properties  and assets that are or
         will be used in the  Telecommunications  Business.  If any such legally
         binding agreement to invest such Net Cash Proceeds is terminated,  then
         the Parent may, within 60 days of such  termination or within 12 months
         of such Asset Sale,  whichever is later,  apply or invest such Net Cash
         Proceeds as provided  in clause (A), or (B) or (C)  (without  regard to
         the  parenthetical  contained in such clause (C)) above.  The amount of
         such Net Cash Proceeds not so used as set forth above in this paragraph
         (c) constitutes "Parent Excess Proceeds."

(iii)    When  the   aggregate   amount  of  Parent  Excess   Proceeds   exceeds
         $10,000,000,  the Parent shall,  within 15 business days, make an offer
         to purchase (a "Parent Proceeds Offer"),  on a proportional  basis, the
         Notes and Indebtedness  described in the second succeeding sentence, in
         accordance with the procedures set forth below,  the maximum  principal
         amount of Notes  (expressed  as a multiple  of  $1,000)  and such other
         Indebtedness that may be purchased with the Parent Excess Proceeds. Any
         Parent  Excess  Proceeds  Offer made by the Parent shall  include a pro
         rata  offer  under   similar   circumstances   to  purchase  all  other
         Indebtedness  of the  Parent  ranking  equally  with  the  Notes  which
         Indebtedness  contains  similar  provisions  requiring  the  Parent  to
         purchase  such  Indebtedness.  The  offer  price as to each  Note  (the
         "Parent  Excess  Proceeds  Offer  Price") will be payable in cash in an
         amount equal to 100% of the principal amount of such Note, plus accrued
         and unpaid interest,  if any,  thereon to the date of purchase.  To the
         extent that the aggregate  principal  amount of Notes validly  tendered
         and not  withdrawn  by holders  thereof  pursuant  to an Parent  Excess
         Proceeds Offer is less than the Parent Excess Proceeds,  the Parent may
         use such deficiency for general  corporate  purposes.  If the aggregate
         principal amount of Notes validly tendered and not withdrawn by holders
         thereof  pursuant to a Parent Excess  Proceeds Offer exceeds the Parent
         Excess  Proceeds,   Notes  to  be  purchased  will  be  selected  on  a
         proportional  basis.  Upon  completion of such Parent  Excess  Proceeds
         Offer, the amount of Excess Proceeds shall be reset to zero.

SECTION 128.  AMENDMENT TO SECTION 1018. Section 1018 of the Indenture is hereby
amended by deleting the existing  Section 1018 in its entirety and  replacing it
with the following:

                  SECTION 1018.  LIMITATIONS ON DIVIDEND RESTRICTIONS.
                                 ------------------------------------

                  Neither the Company nor the Parent  shall,  and neither  shall
they permit any  Restricted  Subsidiary to,  directly or  indirectly,  create or
otherwise  cause or suffer  to exist or  become  effective  any  encumbrance  or
restriction  of  any  kind  on the  ability  of the  Company  or any  Restricted
Subsidiary  to (a) pay  dividends,  in  cash or  otherwise,  or make  any  other
distributions  on or in  respect  of any  Capital  Stock of the  Company or such
Restricted  Subsidiary owned by any Restricted  Entity, (b) pay any Indebtedness
owed to any Restricted  Entity,  (c) make Investments in any Restricted  Entity,
(d)  transfer  any of its  property  or assets to any  Restricted  Entity or (e)
guarantee  any   indebtedness  of  any  Restricted   Entity,   except  for  such
encumbrances or restrictions existing under or by reason of (i) any agreement in
effect on the Issue Date, (ii)  applicable  law, (iii) customary  non-assignment
provisions in leases  entered into in the ordinary  course of business and other
agreements of any Restricted Entity, (iv) any agreement or other instrument of a
Person  acquired by the any  Restricted  Entity in existence at the time of such
acquisition (but not created in  contemplation  thereof),  which  encumbrance or
restriction is not applicable to any Person,  or the properties or assets of any
Person,  other than the Person,  or the  property  or assets of the  Person,  so
acquired,  (v) customary  restrictions on transfers of property contained in any
security agreement (including a capital lease obligation) securing  Indebtedness
of a Restricted Entity otherwise  permitted  hereunder,  (vi) any encumbrance or
restriction with respect to a Restricted Subsidiary entered into for the sale or
disposition of all or  substantially  all of the Capital Stock or assets of such
Restricted  Subsidiary  permitted  under Section  1017),  (vii) any agreement or
instrument  governing  or relating to  Indebtedness  under any senior  financing
facility permitted to be incurred under clause (g), (j) or (m) of the definition
of "Permitted  Indebtedness" if such encumbrance or restriction applies only (A)
to amounts  which at any point in time (other  than  during such  periods as are
described  in the  following  clause (B)) (1) exceed  scheduled  amounts due and
payable  (or which are to become due and  payable  within 30 days) in respect of
the Notes or this Indenture for interest,  premium and principal less the amount
of cash that is  otherwise  available  to the Company or the Parent (as the case
may be) at such time for the payment of interest,  premium and principal due and
payable in respect of the Notes or this  Indenture or (2) if paid,  would result
in an event  described  in the  following  clause (B) of this  sentence,  or (B)
during the pendency of any event that causes,  permits or, after notice or lapse
of time,  would  cause or permit the holder or holders of such  Indebtedness  to
declare such  Indebtedness  to be immediately due and payable or to require cash
collateralization  or cash cover for such  Indebtedness for so long as such cash
collateralization or cash cover has not been provided; (viii) any encumbrance or
restriction   under  the  Vendor  Credit  Facility;   (ix)  any  encumbrance  or
restriction  relating to transfer  of property or assets  comprising  an Initial
System  pursuant  to  an  Incumbent  Agreement,   and  (x)  any  encumbrance  or
restriction  under any agreement  that extends,  renews,  refinances or replaces
agreements  containing the encumbrances or restrictions in the foregoing clauses
(i) through  (vi) and (viii),  so long as the Board of  Directors  of the Parent
determines in good faith that the terms and conditions of any such  encumbrances
or  restrictions,  taken as a whole,  are no less  favorable  to any  Restricted
Entity and the holders of the Notes than those so extended,  renewed, refinanced
or replaced."

                            AMENDMENTS TO "SECURITY"
SECTION 129.      AMENDMENTS TO ARTICLE 12.  Article 12 of the Indenture is
---------------------------------------------
hereby amended by deleting the existing Article 12 in its entirety and replacing
it with the followin  `g:

SECTION 1201.  SECURITY
               --------

         (a) On the date  hereof,  the Company  shall  purchase  the New Pledged
Securities,  and at all  times,  subject  to the  Amended  and  Restated  Pledge
Agreement,  pledge to the  Trustee the Pledged  Securities  as security  for the
benefit of the Holders. The Pledged Securities must be in such amount as will be
sufficient upon receipt of scheduled  interest on and principal payments of such
Pledged  Securities,   in  the  opinion  of  a  nationally  recognized  firm  of
independent public accountants  selected by the Company,  to provide for payment
in  full  of  the  fourth  and  fifth  scheduled  interest  payments  due on the
Outstanding Notes. The Pledged Securities shall be pledged by the Company to the
Trustee  for the benefit of the  Holders  pursuant  to the Amended and  Restated
Pledge  Agreement and shall be held by the Trustee in the Escrow Account pending
disposition pursuant to the Amended and Restated Pledge Agreement.

         (b) Each Holder,  by its continued  acceptance of a Note,  consents and
agrees to the terms of the Pledge Agreement (including,  without limitation, the
provisions  providing for foreclosure and release of the Pledged  Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms,  and authorizes and directs the Trustee to enter into the Amended and
Restated Pledge Agreement and to perform its respective obligations and exercise
its respective rights thereunder in accordance  therewith.  The Company shall do
or cause to be done all such acts and things as may be  reasonably  necessary or
proper,  or as may be required  by the  provisions  of the Amended and  Restated
Pledge Agreement,  to assure and confirm to the Trustee the security interest in
the Pledged Securities  contemplated  hereby, by the Amended and Restated Pledge
Agreement or any part thereof, as from time to time constituted, so as to render
the same  available  for the security and benefit of this  Indenture  and of the
Notes secured hereby, according to the intent and purposes herein expressed. The
Company shall take, or shall cause to be taken,  any and all actions  reasonably
required  (and any action  reasonably  requested  by the  Trustee)  to cause the
Amended and Restated  Pledge  Agreement to create and maintain,  as security for
the  obligations  of the Company under this  Indenture and the Notes,  valid and
enforceable first priority liens in and on all the Pledged Securities,  in favor
of the  Trustee,  superior  to and prior to the rights of the third  Persons and
subject to no other Liens.

         (c) The release of any Pledged  Securities  pursuant to the Amended and
Restated  Pledge  Agreement will not be deemed to impair the security under this
Indenture in  contravention  of the  provisions  hereof if and to the extent the
Pledged  Securities are released  pursuant to this Indenture and the Amended and
Restated Pledge Agreement. To the extent applicable, the Company shall cause TIA
Section 314(d),  relating to the release of property or securities from the Lien
and security  interest of the Amended and Restated Pledge Agreement and relating
to the  substitution  therefor of any property or  securities to be subjected to
the Lien and security interest of the Amended and Restated Pledge Agreement,  to
be complied with. Any certificate or opinion  required by TIA Section 314(d) may
be made by an officer of the Company,  except in cases where TIA Section  314(d)
requires  that such  certificate  or opinion be made by an  independent  Person,
which Person  shall be an  independent  appraiser  or other  expert  selected or
approved by the Company in the exercise of reasonable care

         (d) The Company shall cause TIA Section 314(b), relating to opinions of
counsel regarding the Lien under the Amended and Restated Pledge  Agreement,  to
be complied  with.  The  Trustee  may,  to the extent  permitted  by Section 602
hereof,   accept  as  conclusive  evidence  of  compliance  with  the  foregoing
provisions the appropriate statements contained in such instruments.

         (e) The Trustee,  in its sole discretion and without the consent of the
Holders,  may,  and at the request of the  Holders of at least 25% in  aggregate
principal amount of Notes then Outstanding shall, on behalf of the Holders, take
all actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Amended and Restated Pledge  Agreement and (ii) collect and receive
any an  all  amounts  payable  in  respect  of the  obligations  of the  Company
thereunder. The Trustee shall have power to institute and to maintain such suits
and  proceedings  as the Trustee may deem  expedient  to preserve or protect its
interests and the interests of the Holders in the Pledged Securities  (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or other governmental  enactment,  rule or
order that may be  unconstitutional  or otherwise invalid if the enforcement of,
or  compliance  with,  such  enactment,  rule or order would impair the security
interest  hereunder  or be  prejudicial  to the  interest  of the Holders of the
Trustee).

               AMENDMENTS TO "DEFEASANCE AND COVENANT DEFEASANCE"
SECTION 130.  AMENDMENTS  TO ARTICLE 13.  Article 13 of the  Indenture is hereby
amended by deleting  the existing  Article 13 in its  entirety and  replacing it
with the following:

SECTION 1301.  COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
               -------------------------------------------------------------

                  The  Company  may, at its option by Board  Resolution,  at any
time,  with respect to the Notes,  elect to have either  Section 1302 or Section
1303 be applied to all Outstanding Notes upon compliance with the conditions set
forth below in this Article Thirteen.

SECTION 1302.  DEFEASANCE AND DISCHARGE.
               -------------------------

                  Upon the Company's  exercise  under Section 1301 of the option
applicable  to this  Section  1302,  each of the Company and the Parent shall be
deemed  to have  been  discharged  from  its  obligations  with  respect  to all
Outstanding  Notes on the date the  conditions  set  forth in  Section  1304 are
satisfied (hereinafter,  "defeasance").  For this purpose, such defeasance means
that the  Company  shall  be  deemed  to have  paid and  discharged  the  entire
indebtedness  represented by the Outstanding  Notes,  which shall  thereafter be
deemed to be  "Outstanding"  only for the purposes of Section 1305 and the other
Sections  of  this  Indenture  referred  to in (A) and  (B)  below,  and to have
satisfied all its other  obligations under such Notes and this Indenture insofar
as such Notes are  concerned  (and the  Trustee,  at the expense of the Company,
shall  execute  proper  instruments  acknowledging  the  same),  except  for the
following  which  shall  survive  until   otherwise   terminated  or  discharged
hereunder:  (A) the rights of Holders of  Outstanding  Notes to receive,  solely
from the trust fund  described  in  Section  1304 and as more fully set forth in
such Section,  payments in respect of the principal of (and premium, if any, on)
and interest and  Liquidated  Damages,  if any, on such Notes when such payments
are due, (B) the  Company's  and the Parent's  obligations  with respect to such
Notes under  Sections  304, 305,  306,  1002 and 1003,  (C) the rights,  powers,
trusts,  duties and  immunities  of the Trustee  hereunder  and (D) this Article
Thirteen.  Subject to  compliance  with this Article  Thirteen,  the Company may
exercise its option under this Section 1302  notwithstanding  the prior exercise
of its option  under  Section  1303 with  respect to the Notes.  Forthwith  upon
exercise by the Company of its option  under this  Section  1302 the  Guarantees
shall cease to be of further force and effect.

SECTION 1303.  COVENANT DEFEASANCE.
               --------------------

                  Upon the Company's  exercise  under Section 1301 of the option
applicable  to this Section  1303,  the Company and the Parent shall be released
from their respective obligations under any covenant contained in Section 801(2)
and (3) and Section 803 and in Sections  1007  through  1018 with respect to the
Outstanding  Notes on and after  the date the  conditions  set  forth  below are
satisfied (hereinafter,  "covenant defeasance"),  and the Notes shall thereafter
be deemed not to be  "Outstanding"  for the purposes of any  direction,  waiver,
consent or declaration or Act of Holders (and the  consequences  of any thereof)
in connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes  hereunder.  For this purpose,  such covenant  defeasance
means that,  with respect to the Outstanding  Notes,  the Company and the Parent
may omit to comply  with and shall  have no  liability  in  respect of any term,
condition or  limitation  set forth in any such  covenant,  whether  directly or
indirectly,  by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 501(4), but, except as specified above, the
remainder of this Indenture and such Notes shall be unaffected thereby.

SECTION 1304.  CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
               ------------------------------------------------

                  The following shall be the conditions to application of either
Section 1302 or Section 1303 to the Outstanding Notes:

                  (1) The Company or the Parent  shall have  deposited or caused
to be deposited  irrevocably with the Trustee (or another trustee satisfying the
requirements  of Section 607 who shall agree to comply  with the  provisions  of
this Article Thirteen  applicable to it) as trust funds in trust for the purpose
of making the  following  payments,  specifically  pledged as security  for, and
dedicated  solely to,  the  benefit of the  Holders of such  Notes,  (A) cash in
United  States  dollars,  (B) U.S.  Government  Obligations  which  through  the
scheduled  payment of principal  and interest in respect  thereof in  accordance
with their terms will provide, not later than one day before the due date of any
payment,  money in an amount, or (C) a combination thereof,  sufficient,  in the
opinion  of a  nationally  recognized  firm of  independent  public  accountants
expressed in a written  certification  thereof delivered to the Trustee,  to pay
and  discharge,  and which shall be applied by the Trustee (or other  qualifying
trustee) to pay and  discharge,  (i) the principal of (and premium,  if any) and
interest and Liquidated  Damages,  if any, on,  Outstanding  Notes on the Stated
Maturity (or Redemption Date, if applicable) of such principal (and premium,  if
any) or  installment of interest and  Liquidated  Damages,  if any, and (ii) any
payments  applicable to the Outstanding  Notes on the day on which such payments
are due and payable in accordance  with the terms of this  Indenture and of such
Notes; provided that the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government  Obligations to said payments
with  respect to the Notes.  Before such a deposit,  the Company may give to the
Trustee,  in  accordance  with Section 1103 hereof,  a notice of its election to
redeem all of the Outstanding  Notes at a future date in accordance with Article
Eleven hereof,  which notice shall be irrevocable.  Such irrevocable  redemption
notice,  if given,  shall be given  effect in applying the  foregoing.  For this
purpose,  "U.S.  Government  Obligations"  means  securities that are (x) direct
obligations  of the United States of America for the timely payment of which its
full faith and credit is pledged or (y)  obligations  of a Person  controlled or
supervised by and acting as an agency or instrumentality of the United States of
America  the timely  payment of which is  unconditionally  guaranteed  as a full
faith and credit  obligation by the United States of America,  which,  in either
case,  are not callable or redeemable at the option of the issuer  thereof,  and
shall also include a depository  receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to
any such U.S.  Government  Obligation  or a specific  payment of principal of or
interest on any such U.S.  Government  Obligation held by such custodian for the
account of the  holder of such  depository  receipt,  provided  that  (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the  custodian in respect of the U.S.  Government  Obligation or the specific
payment of principal of or interest on the U.S. Government  Obligation evidenced
by such depository receipt.

                  (2) No Default or Event of Default  with  respect to the Notes
shall have occurred and be continuing on the date of such deposit or, insofar as
paragraphs (6) and (7) of Section 501 hereof are  concerned,  at any time during
the  period  ending on the 123rd  day after the date of such  deposit  (it being
understood  that  this  condition  shall  not  be  deemed  satisfied  until  the
expiration of such period).

                  (3) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or  constitute a default under any material  agreement
or instrument (other than the Indenture) to which the Company or the Parent is a
party or by which it is bound.

(4) In the case of an  election  under  Section  1302,  the  Company  shall have
delivered to the Trustee an Opinion of Counsel  stating that (x) the Company has
received  from, or there has been published by, the Internal  Revenue  Service a
ruling,  or (y) since April 1, 1998,  there has been a change in the  applicable
federal  income tax law, in either case to the effect  that,  and based  thereon
such opinion shall confirm that, the Holders of the  Outstanding  Notes will not
recognize  income,  gain or loss for federal  income tax purposes as a result of
such  defeasance  and will be subject to federal income tax on the same amounts,
in the same  manner  and at the same  times as would  have been the case if such
defeasance had not occurred.

                  (5) In the case of an election under Section 1303, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the  Outstanding  Notes will not recognize  income,  gain or loss for
U.S.  federal  income tax purposes as a result of such covenant  defeasance  and
will be subject to U.S.  federal  income  tax on the same  amounts,  in the same
manner  and at the  same  times  as would  have  been the case if such  covenant
defeasance had not occurred.

                  (6)  The  Company  shall  have  delivered  to the  Trustee  an
Officers'  Certificate  and  an  Opinion  of  Counsel,  each  stating  that  all
conditions  precedent  provided  for  relating  to either the  defeasance  under
Section 1302 or the covenant  defeasance under Section 1303 (as the case may be)
have been complied with.

SECTION 1305.  DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
               -------------------------------------------------------------
TRUST; OTHER MISCELLANEOUS PROVISIONS.
--------------------------------------

                  Subject to the  provisions  of the last  paragraph  of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited  with the  Trustee  (or other  qualifying  trustee,  collectively  for
purposes of this  Section  1305,  the  "Trustee")  pursuant  to Section  1304 in
respect  of the  Outstanding  Notes  shall be held in trust and  applied  by the
Trustee, in accordance with the provisions of such Notes and this Indenture,  to
the payment,  either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine,  to the Holders of
such  Notes of all sums due and to become due  thereon  in respect of  principal
(and premium,  if any) and interest,  but such money need not be segregated from
other funds except to the extent required by law.

                  The Company shall pay and  indemnify  the Trustee  against any
tax, fee or other charge  imposed on or assessed  against the U.S.  Governmental
Obligations  deposited  pursuant to Section 1304 or the  principal  and interest
received in respect  thereof  other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Notes.

                  Anything   in   this   Article   Thirteen   to  the   contrary
notwithstanding,  the Trustee shall deliver or pay to the or the Parent,  as the
case may be,  from time to time upon  Company  Request  or  Parent  Request,  as
applicable any money or U.S.  Government  Obligations  held by it as provided in
Section  1304  which,  in  the  opinion  of  a  nationally  recognized  firm  of
independent  public  accountants  expressed in a written  certification  thereof
delivered to the Trustee,  are in excess of the amount  thereof which would then
be required  to be  deposited  to effect an  equivalent  defeasance  or covenant
defeasance, as applicable, in accordance with this Article.

SECTION 1306.  REINSTATEMENT.
               --------------

                  If the  Trustee  or any  Paying  Agent is  unable to apply any
money in accordance  with Section 1305 by reason of any order or judgment of any
court or governmental authority enjoining,  restraining or otherwise prohibiting
such  application,  then the Company's and the Parent's  obligations  under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred  pursuant to Section 1302 or 1303,  as the case may be, until such time
as the  Trustee  or  Paying  Agent  is  permitted  to apply  all  such  money in
accordance  with Section  1305;  provided,  however,  that if the Company or the
Parent makes any payment of principal of (or premium, if any) or interest on any
Note following the reinstatement of its obligations,  the Company or the Parent,
as applicable, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.

                                PARENT GUARANTEE

SECTION 131.  GUARANTEE.  Parent agrees that  forthwith  upon  execution of this
Supplemental  Indenture  it  will  enter  into  a  guarantee  of  the  Company's
obligations under the Notes in the form attached hereto as Exhibit 1.

                                  MISCELLANEOUS

SECTION 132. WAIVER.  Without  limitation to Section 1019 of the Indenture,  the
Parent may omit in any particular  instance to comply with any term provision or
condition set forth in Section 803 or Sections 1005 through 1018, inclusive,  if
before or after the time for such  compliance the Holders of at least a majority
in aggregate  principal amount of the Outstanding Notes, by Act of such Holders,
waive such  compliance in such  instance with such term,  provision or condition
except to the extent so expressly  waived,  and, until such waivers shall become
effective,  the  obligations  of the  Parent  and the  duties of the  Trustee in
respect of any such term,  provision or condition shall remain in full force and
effect.

SECTION 133.      ACTS OF HOLDERS.
                  ---------------

(a) Any request, demand,  authorization,  direction,  notice, consent, waiver or
other  action  provided by this  Supplemental  Indenture to be given or taken by
Holders  may  be  embodied  in and  evidenced  by one  or  more  instruments  of
substantially  similar  tenor signed by such Holders in person or by agents duly
appointed in writing;  and, except as herein otherwise expressly provided,  such
action shall become  effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required,  to the Parent and/or
Company.  Such instrument or instruments  (and the action  embodied  therein and
evidenced  thereby) are herein sometimes referred to as the "Act" of the Holders
signing  such  instrument  or  instruments.  Proof  of  execution  of  any  such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this  Supplemental  Indenture and conclusive in favor of the Trustee,
the Parent and the Company, if made in the manner provided in this Section.

(b) The fact and date of the  execution by any Person of any such  instrument or
writing may be proved by the  affidavit  of a witness of such  execution or by a
certificate  of a notary  public  or  other  officer  authorized  by law to take
acknowledgements   of  deeds,   certifying  that  the  individual  signing  such
instrument  or writing  acknowledged  to him the execution  thereof.  Where such
execution  is by a  signer  acting  in a  capacity  other  than  his  individual
capacity,  such certificate or affidavit shall also constitute  sufficient proof
of  authority.  The fact and date of the  execution  of any such  instrument  or
writing,  or the authority of the Person  executing the same, may also be proved
in any other manner that the Trustee deems sufficient.

(c) The principal amount and serial numbers of Notes held by any Person, and the
date of holding the same, shall be proved by the Note Register.

(d) If the Parent and/or the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the  Company  or the  Parent  (as the  case may be) may,  at its  option,  by or
pursuant  to  a  Board  Resolution,  fix  in  advance  a  record  date  for  the
determination of Holders entitled to give such request,  demand,  authorization,
direction, notice, consent, waiver or other Act, but neither the Company nor the
Parent shall have no obligation to do so.  Notwithstanding  TIA Section  316(c),
such record date shall be the record date specified in or pursuant to such Board
Resolution, which shall be a date not earlier than the date 30 days prior to the
first  solicitation of Holders  generally in connection  therewith and not later
than the date such  solicitation  is completed.  If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or other
Act may be given  before or after  such  record  date,  but only the  Holders of
record  at the  close of  business  on such  record  date  shall be deemed to be
Holders  for the  purposes  of  determining  whether  Holders  of the  requisite
proportion of Outstanding  Notes have  authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the  Outstanding  Notes shall be computed as of such record
date; PROVIDED that no such  authorization,  agreement or consent by the Holders
on such record date shall be deemed  effective  unless it shall become effective
pursuant to the  provisions of this Indenture not later than eleven months after
the record date.

(e) Any request, demand,  authorization,  direction,  notice, consent, waiver or
other Act of the Holder of any Note shall bind every  future  Holder of the same
Note and the Holder of every  Note  issued  upon the  registration  of  transfer
thereof or in exchange  therefor or in lieu thereof in respect of anything done,
omitted or  suffered  to be done by the  Trustee,  the Parent or the  Company in
reliance thereon, whether or not notation of such action is made upon such Note.

SECTION 134.      NOTICE OF HOLDERS; WAIVER.
                  -------------------------

                  Where this Supplemental  Indenture  provides for notice of any
event to Holders by the Parent or the Trustee, such notice shall be sufficiently
given (unless  otherwise  herein  expressly  provided) if in writing and mailed,
first-class  postage  prepaid,  to each Holder  affected  by such event,  at its
address as it appears in the Note Register,  not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where  notice to Holders is given by mail,  neither the failure to mail
such notice,  nor any defect in any notice so mailed,  to any particular  Holder
shall affect the  sufficiency of such notice with respect to other Holders.  Any
notice mailed to a Holder in the manner herein  prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice.  Where this  Indenture  provides for notice in any manner,
such  notice may be waived in writing by the  Person  entitled  to receive  such
notice,  either  before  or  after  the  event,  and  such  waiver  shall be the
equivalent of such notice.  Waivers of notice by Holders shall be filed with the
Trustee,  but such filing shall not be a condition  precedent to the validity of
any action taken in reliance upon such waiver.

In case,  by reason of the  suspension  of or  irregularities  in  regular  mail
service  or by reason  of any other  cause,  it shall be  impracticable  to mail
notice of any event to Holders when such notice is required to be given pursuant
to any  provision  of this  Indenture,  then any manner of giving such notice as
shall be satisfactory  to the Trustee shall be deemed to be a sufficient  giving
of such  notice for every  purpose  hereunder.SECTION  135.  COUNTERPARTS.  This
Supplemental Indenture may be signed in any number of counterparts each of which
so  executed  shall be  deemed  to be an  original,  but all  such  counterparts
together constitute but one and the same Supplemental Indenture.

SECTION 136.      GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
                  -------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.

SECTION 137.      SEPARABILITY CLAUSE.In case any provision in this Supplemental
                  -------------------
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability  of the remaining  provisions shall not in any way be affected or
impaired thereby.

SECTION 138.      HEADINGS. The various headings of this Supplemental Indenture
                  --------
are  inserted  for  convenience  only  and  shall  not  affect  the  meaning  or
interpretation  of this  Supplemental  Indenture  or any  provisions  hereof  or
thereof.

SECTION 139.  EFFECT OF SUPPLEMENTAL  INDENTURE.  Pursuant to Section 902 of the
Indenture,  upon the  execution of this  Supplemental  Indenture,  the Indenture
shall be and be deemed to be modified and amended in accordance  therewith  with
respect to the Notes affected thereby, and the respective rights, limitations of
rights,  obligations,  duties and liabilities and immunities under the Indenture
of the Trustee shall thereafter be determined,  exercised and enforced hereunder
subject in all respects to such modifications and amendments,  and all the terms
and conditions of this Supplemental  Indenture shall be and be deemed to be part
of the terms and conditions of the Indenture for any and all purposes.

SECTION  140.  INDENTURE  IN FULL  FORCE AND EFFECT AS  SUPPLEMENTED.  Except as
specifically  stated  herein,  all of the terms and  conditions of the Indenture
shall remain in full force and effect.  All  references  to the Indenture in any
other  document  or  instrument  shall  be  deemed  to mean  the  Indenture,  as
supplemented by this Supplemental  Indenture.  This Supplemental Indenture shall
not  constitute a novation of the Indenture,  but shall  constitute an amendment
thereto.  The parties  hereby agree to be bound by the terms and  obligations of
the Indenture,  as supplemented by this  Supplemental  Indenture,  as though the
terms and obligations of the Indenture were set forth herein.

                           [Intentionally Left Blank]

<PAGE>

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Indenture to be duly executed as of the day and year first above written.

                                PATHNET, INC.

                                By: /s/ William. R. Smedberg V
                                   -----------------------------------------
                                    Name: William R. Smedberg, V
                                     Title: Executive Vice President, Corporate
                                       Development

                                PATHNET TELECOMMUNICATIONS, INC.

                                 By:  /s/ William. R. Smedberg V
                                     -----------------------------------------
                                    Name: William R. Smedberg, V
                                     Title: Executive Vice President, Corporate
                                        Development

                                THE BANK OF NEW YORK, TRUSTEE

                                 By:    /s/ Terence Rawlins
                                      -----------------------------------------
                                     Name:   Terence Rawlins
                                     Title:  Assistant Vice President

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