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Exhibit 4.43
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SECURITIES PURCHASE AGREEMENT
dated as of September 29, 2000,
among
WAM!NET INC.,
WINSTAR COMMUNICATIONS, INC.,
and
WINSTAR CREDIT CORP.
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TABLE OF CONTENTS
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SECTION 1. AUTHORIZATION......................................................1
SECTION 2. CLOSING............................................................1
SECTION 3. SALE AND PURCHASE OF SHARES........................................1
3.1. Number of Shares..........................................1
3.2. Exercise of Sale Right....................................2
3.3. Warrants..................................................2
3.4. Assignment................................................3
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION..................3
4.1. Organization; Subsidiaries................................3
4.2. [Intentionally Omitted.]..................................4
4.3. Corporate Authorization; Enforceability...................4
4.4. No Conflict...............................................4
4.5. Capitalization............................................4
4.6. Securities Laws; Applicable Corporation Laws..............7
4.7. Financial Information.....................................7
4.8. Absence of Changes; Review of Interim Financials..........7
4.9. Initial Budget............................................9
4.10. Agreements................................................9
4.11. Title to Assets..........................................11
4.12. Real Property............................................11
4.13. Intellectual Property Rights; Proprietary Information
of Third Parties.........................................11
4.14. Compliance with Laws; Governmental Authorizations........12
4.15. Litigation...............................................13
4.16. Environmental Matters....................................13
4.17. Tax Matters..............................................13
4.18. Employee Benefit Plans...................................14
4.19. Insurance................................................15
4.20. Related Transactions.....................................15
4.21. Offering of the Shares...................................15
4.22. Disclosure...............................................15
4.23. [Intentionally Omitted.].................................16
4.24. [Intentionally Omitted.].................................16
4.25. Brokers and Finders......................................16
4.26. Year 2000 Compliance.....................................16
4.27. Minnesota Business Corporation Act.......................17
SECTION 5. REPRESENTATIONS AND WARRANTIES OF WINSTAR AND WINSTAR
SUB AND ANY ASSIGNEE THEREOF......................................17
5.1. Due Authorization........................................17
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5.2. Investment Representations...............................18
5.3. Brokers and Finders......................................19
5.4. Investor Sophistication..................................19
SECTION 6. COVENANTS OF THE CORPORATION AND WINSTAR SUB......................19
6.1. Regulatory Approvals; Reasonable Best Efforts;
Further Assurances.......................................19
6.2. Certain Filings..........................................19
6.3. Confidentiality..........................................20
6.4. Public Announcements.....................................20
SECTION 7. COVENANTS OF THE CORPORATION......................................20
7.1. Certificate of Designation...............................20
7.2. Restrictions Pending the Last Closing....................20
7.3. Reservation of Shares....................................21
7.4. Use of Proceeds..........................................21
7.5. Access to Records........................................21
7.6. Budget...................................................21
7.7. Financial Reporting and other Information................22
7.8. Payment of Obligations...................................23
7.9. Insurance................................................23
7.10. Certain Notices..........................................23
7.11. Conduct of Business......................................23
7.12. Related Transactions.....................................23
7.13. Internal Controls........................................24
7.14. Winstar Directors........................................24
7.15. Assignee Director........................................25
7.16. Indenture................................................26
7.17. Tag-Along Agreements.....................................26
7.18. Board of Directors.......................................26
7.19. Consents.................................................26
7.20. Use of Proceeds..........................................26
7.21. Corporate Documents......................................26
7.22. Sale of Winstar Shares...................................27
SECTION 8. REGISTRATION RIGHTS OF WINSTAR AND WINSTAR SUB....................27
8.1. Demand Registration......................................27
8.2. "Piggy-Back" Registration................................27
8.3. General Terms............................................28
8.4. Underwriting Agreement...................................29
8.5. Road Show................................................30
8.6. Rights and Obligations of Assignee.......................30
SECTION 9. CONDITIONS TO EACH CLOSING........................................30
9.1. Conditions of Each Party.................................30
9.2. Conditions to Obligations of Winstar and Winstar Sub.....31
9.3. Conditions to Obligations of the Corporation.............33
(ii)
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SECTION 10. TERMINATION.......................................................33
10.1. Effect of Termination....................................34
SECTION 11. MISCELLANEOUS.....................................................34
11.1. Survival.................................................34
11.2. Indemnification..........................................34
11.3. Fees and Expenses........................................35
11.4. Assignment; Parties in Interest..........................35
11.5. Entire Agreement.........................................36
11.6. Notices..................................................36
11.7. Amendments...............................................37
11.8. Counterparts.............................................37
11.9. Headings.................................................37
11.10. Governing Law............................................37
11.11. Jurisdiction.............................................37
11.12. No Waiver................................................38
11.13. Binding Effect...........................................38
11.14. Cumulative Powers........................................38
(iii)
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SECURITIES PURCHASE AGREEMENT, dated as of September 29, 2000, among
WAM!NET INC., a Minnesota corporation (the "Corporation"), Winstar
Communications, Inc., a Delaware corporation ("Winstar"), and Winstar Credit
Corp., a Delaware corporation and a wholly-owned subsidiary of Winstar ("Winstar
Sub").
WHEREAS, the Corporation desires to have the ability to require Winstar
Sub to purchase up to 60,000 shares (the "Shares") of its Class H Convertible
Preferred Stock, $.01 par value (the "Class H Preferred Stock"), from the
Corporation and Winstar and Winstar Sub are willing to commit to such
arrangement, all upon the terms and subject to the conditions set forth below.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Authorization.
The Corporation has authorized the issuance and sale, at the option of
the Corporation and upon the terms and subject to the conditions set forth in
this Agreement, of the Shares for a purchase price of $1,000 per Share ("Per
Share Price"). The Class H Preferred Stock shall have the powers, designations,
preferences and relative, participating, optional or other rights, and the
qualifications, limitations, and restrictions set forth in the Certificate of
Designation of Rights and Preferences of Class H Preferred Stock ("Class H
Certificate of Designation") attached hereto as Exhibit A, which shall be filed
by the Corporation in the office of the Secretary of State of the State of
Minnesota promptly after the execution of this Agreement.
Section 2. Closing.
Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned in accordance with this Agreement,
and subject to the prior fulfillment of the conditions specified in Section 9,
closings of sales and purchases of Shares and the other transactions
contemplated hereby (each a "Closing") shall be held at 10:00 a.m. on the dates
and with respect to the number of Shares determined pursuant to Section 3.2 at
the office of Graubard Mollen & Miller, 600 Third Avenue, New York, New York
10016 (or at such other time, date and place as the parties may mutually agree).
The date on which a Closing actually occurs is hereinafter referred to as a
"Closing Date."
Section 3. Sale and Purchase of Shares.
3.1. Number of Shares.
Subject to the other provisions of this Section 3, the Corporation
shall have the right to sell 60,000 Shares to Winstar Sub pursuant to this
Agreement. Notwithstanding anything to the contrary in this Agreement, in no
event shall Winstar Sub be required to purchase Shares in the event of any of
the following: (a) if such purchase would, in Winstar's reasonable good faith
determination, upon consultation with Winstar's independent auditors, require
Winstar to include the assets, liabilities, shareholders' equity and results of
operations of the Corporation in Winstar's financial statements on a
consolidated basis in accordance with generally accepted accounting principles;
(b) if the Corporation has raised $100,000,000 from the sale of its
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securities after the date hereof, not including the investment contemplated
hereby ("Qualified Financing"); and (c) an event contemplated by subsection
9.2(p).
3.2. Exercise of Sale Right.
If the Corporation desires to sell Shares to Winstar Sub on a Closing
Date the following procedure must be followed: (a) it shall deliver to Winstar
and Winstar Sub written notice thereof no later than ten Business Days prior to
such Closing Date, which notice shall state the desired Closing Date and the
number of Shares it desires to sell (in increments of 1,000 Shares or whole
number multiples thereof), which number shall not exceed the aggregate number of
Shares as indicated on Schedule I for such Closing Date; and (b) an officer of
the Corporation shall present a certificate to Winstar and Winstar Sub that all
conditions set forth in Section 9.2 hereof shall have been satisfied. At the
Closing scheduled for such Closing Date, the Corporation shall issue and deliver
to Winstar Sub the number of Shares stated in the notice for such Closing
(registered in the name of Winstar Sub or its designee) and Winstar Sub shall
deliver to the Corporation, as payment therefor, cash equal to the aggregate
purchase price of such Shares (by wire transfer to an account specified by the
Corporation in the notice). The Corporation's right to sell Shares to Winstar
Sub shall terminate on the earlier of January 31, 2001 and the date on which the
Corporation consummates an offering of its common stock or other equity
securities resulting in aggregate gross proceeds of $100,000,000 or more to the
Corporation.
3.3. Warrants.
(a) Upon execution of this Agreement, the Corporation shall issue and
deliver to Winstar Sub, for no additional consideration, a warrant ("Warrant")
to purchase 3,000,000 shares of common stock of the Corporation ("Warrant
Shares") at a price of $.01 per share during the period from the date of this
Agreement until December 31, 2005; provided, however, that to the extent that
the Corporation does not sell Shares to Winstar Sub in the amounts set forth in
Schedule I, the right of Winstar Sub to exercise Warrants corresponding to the
number of Shares not so sold as set forth in Schedule I (prorated within the
specified amounts in any case in which the total number of Shares sold is less
than a whole multiple of 10,000 Shares) shall terminate and be cancelled. The
Warrant shall be in the form of Exhibit B attached hereto.
(b) Upon the occurrence of an event giving rise to an adjustment in the
number of shares of common stock of the Corporation into which the Shares sold
to Winstar Sub are convertible pursuant to Section 7 of the Series H Certificate
of Designation and in which the shares of common stock or other securities
issued or sold by the Corporation are issued or sold at a price equivalent to
less than $2.50 per share of common stock, the Corporation shall promptly issue
to Winstar Sub additional Warrants in an amount which bears the same proportion
to the number of Warrants theretofore issued to Winstar Sub (including any
Warrants issued pursuant to this Section 3.3(b)) as the number of additional
shares of common stock of the Corporation issuable upon conversion of the Shares
as a result of such event bears to the number of shares of common stock of the
Corporation into which the Shares are convertible immediately before the
occurrence of such event.
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3.4. Assignment.
Winstar Sub may assign all or any part of its obligation to purchase
Shares ("Assigned Shares") to one or more third parties and such assignment
shall relieve Winstar Sub of its obligations with respect to such purchase to
the extent that an assignee has made an actual purchase of Shares or has
tendered to the Corporation the cash amount equal to the purchase price. No
Voting Limitation (as described in Section 5 of the Class H Certificate of
Designation) shall apply to any Assigned Shares.
Section 4. Representations and Warranties of the Corporation.
The Corporation hereby represents and warrants to Winstar and Winstar
Sub as of the date hereof and as of each Closing Date, if any, that:
4.1. Organization; Subsidiaries.
(a) Organization. The Corporation and each Subsidiary (as defined
below) is a corporation duly organized and validly existing under the laws of
the jurisdiction of its incorporation, is duly qualified and in good standing as
a foreign corporation, and is authorized to do business, in all jurisdictions in
which the character of its properties or the nature of its businesses requires
such qualification or authorization, except for qualifications and
authorizations the lack of which, individually or in the aggregate, would not
reasonably be expected to result in a material adverse effect upon the business,
prospects, properties, liabilities, assets, operations, results of operations,
condition (financial or otherwise), or affairs of the Corporation or result in
the loss of employment of any Principal Executive Officer as such term is
defined on Schedule II (a "Material Adverse Effect"), and has all requisite
corporate power and authority to own, lease and operate the assets used in its
business, to carry on its business as presently conducted, to enter into the
Documents (as hereinafter defined), to perform its obligations thereunder, and
to consummate the transactions contemplated thereby. Attached as Schedule 4.1(a)
are correct and complete copies of the Articles of Incorporation of the
Corporation, including all amendments and Certificates of Designation, and the
By-laws of the Corporation, each as in effect on the date hereof (collectively,
the "Organizational Documents"). For purposes of this Agreement, "Documents"
collectively means (i) this Agreement and (ii) the Class H Certificate of
Designation.
(b) Subsidiaries. Set forth on Schedule 4.1(b) hereto is a complete
list of all of the subsidiaries of the Corporation (each a "Subsidiary"). Except
as set forth on Schedule 4.1(b) hereto, the Corporation does not own, directly
or indirectly, any capital stock or other equity securities of any corporation,
nor does the Corporation have any direct or indirect ownership interest,
including interests in limited liability companies, partnerships and joint
ventures, in any other entity or business and there are no agreements to acquire
such interests. Except as disclosed on Schedule 4.1(b) hereto: (i) all of the
outstanding shares of capital stock of each Subsidiary are owned beneficially
and of record by the Corporation, another Subsidiary or any combination thereof,
in each case free and clear of any liens, charges, restrictions, claims or
encumbrances other than restrictions on transfer imposed by the Securities Act
of 1933, as amended (the "Securities Act"); and (ii) there are no outstanding
subscriptions, warrants,
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options, convertible securities or other rights (contingent or other) pursuant
to which any Subsidiary is or may become obligated to issue any shares of its
capital stock to any person other than the Corporation or a Subsidiary.
4.2. [Intentionally Omitted.]
4.3. Corporate Authorization; Enforceability.
The Corporation has taken all corporate action necessary to authorize
its execution and delivery of the Documents, the performance of its obligations
thereunder, and its consummation of the transactions contemplated thereby. Each
Document has been executed and delivered by an officer of the Corporation in
accordance with such authorization. Each Document constitutes a valid and
binding obligation of the Corporation, enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, fraudulent conveyance,
insolvency, moratorium, and similar laws now or hereafter in effect affecting
creditors' rights generally and to general principles of equity.
4.4. No Conflict.
The execution and delivery by the Corporation of the Documents, its
consummation of the transactions contemplated thereby, and its compliance with
the provisions thereof, will not, other than in instances which could not
reasonably be expected to have a Material Adverse Effect, (i) violate or
conflict with any of the Organizational Documents, (ii) violate, conflict with,
result in a breach of, constitute a default under, or give rise to any right of
termination, cancellation, or acceleration (with or without notice or lapse of
time, or both) under any agreement, lease, security, license, permit, or
instrument to which the Corporation or any Subsidiary is a party, or to which it
or any of them or any of their respective assets or businesses are subject,
(iii) result in the imposition of any Encumbrance (as hereinafter defined) on
any asset of the Corporation, (iv) violate or conflict with any Laws applicable
to the Corporation or its properties or assets, or (v) require any consent,
approval or other action of, notice to, or filing with any entity or person
(governmental or private), except for the filing of the Class H Certificate of
Designation and those that have been obtained or made. For purposes of this
Agreement, "Encumbrance" means any security interest, mortgage, lien, pledge,
charge, easement, reservation, clouds, equities, rights of way, options, rights
of first refusal and any other encumbrances, whether or not relating to the
extension of credit or the borrowing of money. For purposes of this Agreement,
"Laws" means all laws, statutes, rules, regulations, ordinances, bylaws, writs,
Permits, Orders and other legislative, administrative or judicial restrictions.
4.5. Capitalization.
(a) Capitalization.
(i) As of the date hereof, the authorized capital stock of the
Corporation consists of 500,000,000 shares, the designations and
classes of which are set forth on Schedule 4.5(a)(i) hereto. The
Corporation does not hold any of its shares in treasury.
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(ii) As of the date hereof, 10,869,905 shares of the
Corporation's common stock, par value $.01 per share ("Common Stock"),
115,206 shares of the Corporation's Class A Preferred Stock par value
$10.00 per share (the "Class A Preferred Stock"), 5,710,428 shares of
the Corporation's Class B Preferred Stock par value $.01 per share (the
"Class B Preferred Stock"), 878,527 shares of the Corporation's Class C
Preferred Stock, par value $.01 per share (the "Class C Preferred
Stock"), 2,196,317 shares of the Corporation's Class D Preferred Stock,
par value $.01 per share (the "Class D Preferred Stock"), 101,725
shares of the Corporation's Class E Preferred Stock, par value $.01 per
share (the "Class E Preferred Stock"), 10,000 shares of the
Corporation's Class F Preferred Stock, par value $.01 per share (the
"Class F Preferred Stock") and 10,000 shares of the Corporation's Class
G Preferred Stock, par value $.01 per share (the "Class G Preferred
Stock") are issued and outstanding and have been validly issued and are
fully paid and non-assessable and are not subject to preemptive rights.
Except as set forth above, there are no other shares of capital stock
of the Corporation outstanding. As of the date hereof, the Class B
Preferred Stock, Class C Preferred Stock, Class D Preferred Stock,
Class E Preferred Stock, Class F Preferred Stock and Class G Preferred
Stock are convertible into 5,710,428, 878,527, 2,196,317, 101,725,
10,000 and 10,000 shares of Common Stock, respectively. Upon issuance
of the Common Stock underlying such preferred shares, in accordance
with their respective certificates of designations, preferences and
rights, such Common Stock will be validly issued, fully paid and
non-assessable. Schedule 4.5(a)(ii) sets forth, for the Common Stock
and each class of Preferred Stock, the names of all holders thereof and
the number of shares and voting power thereof held by each such holder
and, to the extent that voting power is held by a person who is not a
holder of shares of capital stock, also sets forth the name and address
of each such person and the voting power held by such person.
(b) Options, Warrants, Convertible Securities. Except as set forth on
Schedule 4.5(b) hereto, as of the date hereof there are no outstanding
subscriptions, options, warrants or other agreements or rights of any kind to
acquire any additional shares of capital stock of the Corporation or other
instruments or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any such additional
shares of capital stock, nor is the Corporation committed to issue any such
option, warrant, right or security. Except as set forth on Schedule 4.5(b)
hereto, the Corporation has no obligation (contingent or other) to purchase,
redeem or otherwise acquire any of its equity securities or any interest therein
or to pay any dividend or make any other distribution in respect thereof.
Schedule 4.5(b) additionally sets forth for each subscription, option, warrant,
agreement and other right listed therein, the name of each holder thereof, the
number of securities held by such holder, the number of shares of common stock
or other class of capital stock into which such securities are convertible or
exchangeable and the exercise periods and exercise prices thereof. As of August
31, 2000, 116,001,542 shares of Common Stock are issuable upon exercise or
conversion of all of the Corporation's outstanding options, warrants, and other
rights of any kind to acquire shares of the Corporation's Common Stock including
additional shares of common stock issuable to the holders of the Class B, Class
C and Class D Preferred Stock of the Corporation as a result of anti-dilution
adjustments.
(c) Agreements.
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(i) Except as set forth in Schedule 4.5(c)(i), as of the date
hereof, there are no agreements relating to the purchase or sale of
capital stock between the Corporation and any of its shareholders or
affiliates, and to the best of the Corporation's knowledge, there are
no such agreements among any of its shareholders and other parties.
(ii) Except as contemplated hereby and as set forth in
Schedule 4.5(c)(ii), there are no agreements or understandings granting
to any person or entity any right to cause the Corporation or any
Subsidiary to effect a registration under the Securities Act of 1933,
as amended ("Securities Act"), of any shares of the Corporation's
capital stock.
(iii) Except as set forth on Schedule 4.5(c)(iii), there are
no (A) voting trusts, voting agreements, proxies or other agreements,
instruments or understandings with respect to the voting of the capital
stock of the Corporation between the Corporation and any of its
shareholders or affiliates or (B) forfeitures or waivers of voting
rights by any of the Corporation's shareholders or agreements to
provide any such forfeiture or waiver, and to the best of the
Corporation's knowledge, there are no such agreements among any of its
shareholders and any other parties.
(d) Due Authorization. Upon filing of the Class H Certificate of
Designation, the Shares and Warrant Shares will be duly authorized and, when
issued and paid for pursuant to the terms of this Agreement, will be validly
issued, fully paid and non-assessable and will have the rights, preferences and
privileges specified in the Class H Certificate of Designation. The shares of
the Corporation's Common Stock issuable upon conversion of the Shares
("Conversion Shares") and the Warrant Shares are duly authorized and have been
reserved for issuance and, when issued upon conversion in accordance with the
terms of the Class H Certificate of Designation or the exercise of the Warrants,
as the case may be, will be validly issued, fully paid and non-assessable, and
will be free and clear of all liens, encumbrances and restrictions (other than
the restrictions on transfer imposed by the Securities Act or any other
applicable federal or state securities laws, and the rules and regulations
promulgated thereunder). Neither the issuance, sale or delivery of the Shares or
Warrant Shares nor the contemplated issuance or delivery of the Conversion
Shares is subject to or will effectuate any preemptive or other similar right of
shareholders of the Corporation, any anti-dilution right or right of first
refusal or other preemptive or similar right in favor of any person, in each
case except for rights that have been listed on Schedule 4.5(d).
(e) Reservation of Shares. The Corporation has reserved, and at all
times from and after the date hereof will keep reserved, free from preemptive
rights, out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of all shares of Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock, Class D Preferred
Stock, Class E Preferred Stock, Class F Preferred Stock, Class G Preferred Stock
and Class H Preferred Stock, sufficient shares of Common Stock to provide for
the conversion of all such shares of Preferred Stock.
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4.6. Securities Laws; Applicable Corporation Laws.
(a) The sale of the Shares and Warrant Shares contemplated hereby is
exempt from registration under the Securities Act. The issuance of all other
shares of capital stock of the Corporation on or before the date hereof has been
made in compliance with the Securities Act and all applicable state securities
or blue sky laws.
(b) The sale of the Shares and Warrant Shares contemplated hereby and
the other transactions contemplated hereby are in compliance with all applicable
laws, including the Minnesota Business Corporation Act, and any consents which
are required to be obtained pursuant to such laws have either been obtained or
waived in writing.
4.7. Financial Information.
(a) Schedule 4.7. sets forth (i) the Corporation's Report on Form 10-K
for the year ended December 31, 1999, which includes the audited consolidated
balance sheet of the Corporation at December 31, 1999 (the "Balance Sheet") and
the related statements of operations, shareholders' equity and cash flows of the
Corporation for the 12 months then ended and (ii) the Corporation's Report on
Form 10-Q for the six months ended June 30, 2000, which includes the unaudited
consolidated balance sheet of the Corporation at June 30, 2000 (the "Interim
Balance Sheet") and the related unaudited consolidated statements of operations,
shareholders' equity and cash flows for the Corporation for the 6 months then
ended (collectively, with the Balance Sheet and the Interim Balance Sheet, the
"Financial Statements").
(b) The Financial Statements: (i) present fairly the financial position
of the Corporation and the results of operations, shareholders' equity and cash
flows of the Corporation at the dates and for the periods indicated, (ii) are in
accordance with the books and records of the Corporation which books and records
are complete and correct and fairly reflect all material transactions of the
Corporation's business, and (iii) have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied (except
as set forth in the notes thereto and subject, in the case of unaudited
Financial Statements, to normal year-end adjustments, and the absence of notes
thereto). Except as incurred under agreements listed on Schedule 4.10(a) or as
set forth on Schedule 4.7, at the date of the Interim Balance Sheet, the
Corporation did not have any material Liability of any nature or any loss
contingency (as such term is used in the Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) that was not adequately disclosed or provided for on the Interim Balance
Sheet, including the notes thereto. For purposes of this Agreement, "Liability"
means any liability or obligation, whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated and whether due or to become due, regardless of when asserted.
4.8. Absence of Changes; Review of Interim Financials.
(a) Since the date of the Interim Balance Sheet there has not been:
(i) any change in the assets, liabilities or financial
condition of the Corporation (on a consolidated basis), except for
changes (i) in the ordinary course of
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business or (ii) which in the aggregate have not resulted in and would
not reasonably be expected to result in a Material Adverse Effect;
(ii) any event or change that would reasonably be expected to
result in a Material Adverse Effect, individually or in the aggregate,
whether or not insured against;
(iii) to the best of the Corporation's knowledge, any damage,
destruction or loss (whether or not covered by insurance) affecting any
asset of the Corporation in excess of $100,000;
(iv) any liability or loss contingency incurred by the
Corporation that would have to be disclosed on financial statements
(including the notes thereto) (on a consolidated basis) in accordance
with GAAP, other than liabilities incurred in the ordinary course of
business consistent with past practice;
(v) to the best of the Corporation's knowledge, any commitment
to borrow money from or provide financial support to any person or
entity entered into by the Corporation;
(vi) any payment or discharge of any Liability by the
Corporation outside the ordinary course of business consistent with
past practice to the best of the Corporation's knowledge;
(vii) any sale, assignment, license, or other disposition of
any asset or right of the Corporation or any Subsidiary outside the
ordinary course of business consistent with past practice;
(viii) any declaration or payment of any dividend or other
distribution with respect to any shares of capital stock of the
Corporation, or the direct or indirect acquisition of any equity
securities by the Corporation;
(ix) any labor trouble, problem or grievance affecting the
business of the Corporation other than such matters which would not
reasonably be expected to have a Material Adverse Effect;
(x) any write-down of the value of any inventory, fixed assets
or intangibles of the Corporation, or any write-off as uncollectible of
any accounts or notes receivable of the Corporation, which could
reasonably be expected to result in a Material Adverse Effect;
(xi) any increase in the direct or indirect compensation of
senior officers of the Corporation or any Subsidiary (including,
without limitation, any increase pursuant to any bonus, pension,
profit-sharing, deferred compensation, or other plan or commitment), in
excess of 20% above the prior year, except as set forth on Schedule
4.8(a)(xi);
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(xii) any capital expenditure or commitment therefor by the
Corporation or any Subsidiary for additions to property, plant or
equipment in excess of $250,000, except as set forth on Schedule
4.8(a)(xii);
(xiii) any change in the accounting or tax methods, practices,
or assumptions followed by the Corporation or any Subsidiary; or
(xiv) any other transaction or event not in the ordinary
course of business consistent with past practice.
(b) The Corporation's independent accountants have not advised the
Corporation that the Interim Balance Sheet and the related unaudited financial
statements (i) do not comply in all material respects with the applicable
accounting requirements of the Securities Act and the related published rules
and regulations thereunder and (ii) are not in conformity with GAAP.
4.9. Initial Budget.
The Corporation has delivered to Winstar a copy of the Corporation's
current budget for the twelve month period beginning July 1, 2000 (the "Initial
Budget"). The projections of future financial and operating performance
contained in the Initial Budget, and the assumptions upon which such projections
are based, are believed by the Corporation to be reasonable as of the date
hereof. In addition, the Corporation is not aware of any facts or circumstances
which would render such projections or assumptions unreasonable or unattainable.
Without limiting the generality of the foregoing, Winstar and Winstar Sub
acknowledge that no assurances can be given that the Corporation will achieve
the projections set forth in the Initial Budget. If, at the time of a Closing,
there have been material changes to any item reflected in the Initial Budget,
the Corporation shall deliver to Winstar at such closing a revised budget and
detailed description of such changes.
4.10. Agreements.
(a) Schedule 4.10(a) sets forth a list of all material written and oral
contracts, agreements, licenses, commitments, instruments and understandings
("Agreements"), and all Agreements of the following types regardless of
materiality, to which the Corporation or any Subsidiary is a party ("Disclosed
Agreements"), which:
(i) individually provide for the future purchase by the
Corporation or any Subsidiary of products or services in excess of
$100,000 or call for expenditures of the Corporation or any Subsidiary
in excess of $100,000, which expenditures or commitments have not been
disclosed in the Initial Budget;
(ii) provide for the employment by the Corporation or any
Subsidiary of any director or officer or consultant (other than for
legal or accounting services) earning $100,000 or more for any
engagement or provide for any payments or benefits (including severance
payments or benefits) to any director, officer or employee;
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(iii) provide for the borrowing of money or a line of credit
by the Corporation or any Subsidiary, or a leasing transaction of a
type required to be capitalized by the Corporation in accordance with
GAAP;
(iv) provide for a significant strategic relationship
regarding the Corporation or any Subsidiary and a third party,
including any joint venture, partnership or similar arrangement;
(v) provide for the sale, assignment, license, or other
disposition of any asset or any material right of the Corporation with
a value in excess of $100,000;
(vi) provide for the lease by the Corporation or any
Subsidiary of any real property;
(vii) provide for the lease by the Corporation or any
Subsidiary of any personal property with a value, or reflecting
replacement costs, in excess of $100,000 or involving lease payments in
excess of $100,000 per year;
(viii) were entered into with any labor union;
(ix) provide for a tax sharing;
(x) provide for any significant distribution, agency, or
licensing arrangement with the Corporation or any Subsidiary;
(xi) require the Corporation to issue dividends or shares of
its Common Stock upon exercise of warrants;
(xii) restrict the Corporation or any Subsidiary, or any of
the officers or employees listed on Schedule 4.10(a)(ii), from engaging
in any business activity in any way related to the business of the
Corporation anywhere in the world, restrict any such person in the
performance of his or her obligations and responsibilities to the
Corporation or any Subsidiary, or create any other obligation or
liability of any such person, in any way related to the business of the
Corporation, arising from his or her prior employment;
(xiii) grant to any person or entity, other than the
Corporation or any Subsidiary, any right, title, or interest in any
invention or know-how conceived by employees of the Corporation or any
Subsidiary and related to the business of the Corporation;
(xiv) provide for a loan guaranty, surety, indemnity, or other
financial support by the Corporation or any Subsidiary to any person or
entity; or
(xv) grant to any person or entity a security interest in any
asset or right of the Corporation or any Subsidiary.
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(b) Each Disclosed Agreement or understanding required to be set forth
on Schedule 4.10. (a) is in full force and effect and constitutes a valid and
binding obligation of all parties thereto. Except as set forth on Schedule 4.10.
(a), the Corporation and, to the extent a Subsidiary is a party, the Subsidiary
has performed in all material respects the obligations required to be performed
by it and is not in material default and has not received notice alleging it to
be in default under any such Disclosed Agreement. To the knowledge of the
Corporation, there exists no event or condition which, after notice or lapse of
time, or both, would constitute such a material default under any Disclosed
Agreement. To the knowledge of the Corporation, there are no material defaults
by any other party to any such Disclosed Agreement. The Corporation has made
available to Winstar and Winstar Sub correct and complete copies of all
Disclosed Agreements set forth on Schedule 4.10(a).
4.11. Title to Assets.
Except for properties leased by the Corporation or any Subsidiary, the
Corporation and each Subsidiary has good and marketable title to all assets
reflected on the Interim Balance Sheet as being owned by it, or acquired by it
after the date of the Interim Balance Sheet (except for inventory sold or
otherwise disposed of in the ordinary course of business, and accounts and notes
receivable paid in full, since the date of the Interim Balance Sheet), free and
clear of all Encumbrances, other than Permitted Liens (as defined below) and
other than those which would not reasonably be expected to result in a Material
Adverse Effect. Such assets are in good operating condition and repair, are
adequate and suitable for their intended use in the business of the Corporation
and are sufficient for the conduct of the business except as would not
reasonably be expected to result in a Material Adverse Effect. There does not
exist any condition which interferes with the economic value or use of such
assets except as would not reasonably be expected to result in a Material
Adverse Effect. The term "Permitted Liens" means (i) liens arising by operation
of law in the ordinary course of business that, individually and in the
aggregate, do not in any respect interfere with the use or value of any of the
assets subject thereto, (ii) minor imperfections of title which do not detract
from the value of the property affected or impair the operations of the
Corporation, (iii) liens for taxes not yet due and payable, (iv) liens arising
in connection with debt incurred pursuant to and in accordance with the covenant
section, and (v) liens relating to monies borrowed by the Corporation or any
Subsidiary.
4.12. Real Property.
Except as disclosed on Schedule 4.12, neither the Corporation nor any
Subsidiary owns or holds, directly or indirectly, any real property. Neither the
Corporation nor any Subsidiary leases, directly or indirectly, any real property
other than as listed on Schedule 4.12.
4.13. Intellectual Property Rights; Proprietary Information of Third
Parties.
(a) Each of the Corporation and each Subsidiary owns or is licensed to
use all patents, trademarks, copyrights, service marks, and applications and
registrations therefor, and all trade names (including WAM!NET, WAM!BASE and
WAM!PROOF), domain names, URLs, customer lists, trade secrets, proprietary
processes and formulae, inventions, know-how,
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other confidential and proprietary information, and other industrial and
intellectual property rights necessary to permit such entities to carry on their
respective business as presently conducted. Schedule 4.13. sets forth a list of
all patents, trademarks, copyrights, service marks, and applications and
registrations therefor, and all trade names, domain names or URLs held or owned
by the Corporation and each Subsidiary and all other proprietary intellectual
property rights of the Corporation and each Subsidiary. All registered patents,
copyrights, trademarks, domain name and URL rights and service marks listed on
Schedule 4.13. are in full force and effect and are not subject to any taxes or
maintenance fees and the Corporation or a Subsidiary has the right to bring
infringement Proceedings with respect thereto. Neither the Corporation nor any
Subsidiary (i) licenses or grants to anyone other than to the Corporation or any
Subsidiary rights of any nature to use any intellectual property right that is
material to its business, other than certain software and equipment which is
provided to the Corporation's clients which enable them to access the
Corporation's network and avail themselves of the Corporation's services, (ii)
is not obligated to and does not pay royalties to anyone for use of its
intellectual property rights, and (iii) does not market or sell any product or
service that violates any intellectual property right of a third party. Except
as set forth on such Schedule, there is no pending or, to the knowledge of the
Corporation, threatened claim or litigation against the Corporation or any
Subsidiary contesting the right to use its intellectual property rights,
asserting the misuse of any thereof, or asserting the infringement or other
violation of any intellectual property rights of a third party.
(b) All inventions and know-how conceived by employees of the
Corporation and each Subsidiary, while in the employ of the Corporation or such
Subsidiary, and related to the business of the Corporation or any Subsidiary
were "works for hire," and all right, title, and interest therein were
transferred and assigned to the Corporation or a Subsidiary and the Corporation
or a Subsidiary has maintained all right, title and interest therein without any
Encumbrances thereon. The Corporation has taken all reasonable security measures
to protect the secrecy, confidentiality, and value of its trade secrets,
proprietary processes and formulae, inventions, know-how and other confidential
and proprietary information.
(c) No third party has claimed or, to the Company's knowledge, has
reason to claim that the Corporation or any Subsidiary has (i) violated or may
be violating any of the terms or conditions of any non-competition or
non-disclosure agreement with such third party, (ii) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (iii) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. Neither the Corporation or any Subsidiary has
utilized nor proposes to utilize any trade secret or any information or
documentation proprietary to any other person in violation of existing
arrangements with such person, and neither the Corporation or any Subsidiary has
violated any confidential relationship which any such person may have had with
any third party, in connection with the development, manufacture or sale of any
product or the development or sale of any service of the Corporation or any
Subsidiary.
4.14. Compliance with Laws; Governmental Authorizations.
Each of the Corporation and each Subsidiary is in compliance in all
respects with all Laws, except for such instances where non-compliance would not
result in a Material
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Adverse Effect. Each of the Corporation and each Subsidiary has all permits,
licenses, authorizations, registrations, franchises, approvals, certificates or
variances (collectively, "Permits") from each Governmental Authority that is
necessary or advisable in the conduct of its business as presently conducted and
as contemplated in the Initial Budget and no further Permits are necessary
except in such cases where not having such Permits would not reasonably be
expected to result in a Material Adverse Effect. No action by Governmental
Authority is required for the Corporation to enter into this Agreement or to
perform its obligations hereunder. For purposes of this Agreement, "Governmental
Authority" means any federal, state, municipal, local or foreign government and
any court, tribunal, administrative agency, commission, board, agency or other
governmental or regulatory authority or agency, whether domestic or foreign.
Neither the Corporation nor any Subsidiary is licensed to provide communication
services under any state, federal or foreign laws nor is any one of them
required to be so licensed.
4.15. Litigation.
Except as set forth on Schedule 4.15, there are no (i) actions, suits,
claims, investigations or other proceedings (collectively, "Proceedings") by or
before any Governmental Authority or other arbitration or mediation body,
pending or, to the knowledge of the Corporation, threatened against the
Corporation or any Subsidiary or any of the five most senior executive officers
of the Corporation (the "Senior Officers"), or (ii) judgments, writs, decrees,
injunctions, compliance agreements, or orders of any Governmental Authority or
other arbitration or mediation body, against the Corporation or any Subsidiary
or any of the Senior Officers.
4.16. Environmental Matters.
Each of the Corporation and each Subsidiary is in compliance with all
Laws relating to the protection of the environment (the "Environmental Laws").
Except for the operation of machinery and equipment in the ordinary course of
business in compliance with applicable Environmental Laws, neither the
Corporation nor any Subsidiary has handled, stored or released, or exposed any
person to, any hazardous substance, as defined in 42 U.S.C.A. Section 9601(14)
or any other applicable Environmental Laws (a "Hazardous Substance"). Neither
the Corporation nor any Subsidiary is liable or responsible for clean-up costs,
remedial work or damages in connection with the handling, storage, release, or
exposure by it of any Hazardous Substance except in cases which would not
reasonably be expected to result in a Material Adverse Effect. No claims for
clean-up costs, remedial work or damages have been made by any person or entity
in connection with the handling, storage, release, or exposure by the
Corporation and/or any Subsidiary of any Hazardous Substance.
4.17. Tax Matters.
(a) (i) The Corporation has timely filed or been included in all
required returns, declarations of estimated tax, reports, and statements
relating to any Taxes due and payable by it (collectively, the "Returns"); (ii)
all Returns were correct and complete as of the time of filing; (iii) the
Corporation has timely paid all Taxes required to be paid by it through the date
hereof; (iv) the Corporation has made provision on its most recent interim
balance sheet for
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all Taxes payable by it for all periods prior to the date of such interim
balance sheet for which no Returns have yet been filed; (v) the Corporation has
made provision on its books for all Taxes payable by it for all periods
beginning on or after the date of its most recent interim balance sheet for
which no Returns have yet been filed; (vi) the Corporation has no knowledge of
any pending tax audits of any Returns; (vii) the Corporation has no knowledge
that any deficiency or addition to any Taxes has been proposed, asserted or
assessed in writing against the Corporation; and (viii) the Corporation has not
granted any extension of the statute of limitations applicable to any Return or
other claim for Taxes.
(b) "Taxes" means, with respect to any person or entity, (i) all
material Federal, state, local, and foreign taxes, including, without
limitation, all taxes on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings, or
profits, and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, or windfall profits taxes, alternative or add-on minimum
taxes, customs duties, or other taxes, fees, assessments or charges of any kind,
together with any interest, penalties, additions to tax or additional amounts
imposed by any taxing authority on such person or entity, and (ii) any material
liability for the payment of any amount of the type described in the preceding
clause (i) as a result of being a "transferee" (within the meaning of Section
6901 of the Internal Revenue Code of 1986, as amended (the "Code"), or any other
applicable Laws) of another person or entity.
4.18. Employee Benefit Plans.
(a) Schedule 4.18 sets forth a list of all "employee pension benefit
plans" and "employee benefit plans," as defined in Section 3(2) and (3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), and other written or
formal plans or group arrangements involving direct or indirect compensation
(not including any government-mandated programs) currently or previously
maintained or contributed by the Corporation or any ERISA Affiliate for the
benefit of any employee or former employee thereof under which the Corporation
and/or any Subsidiary has or may have any present or future obligation or
liability (collectively, the "Employee Plans"). "ERISA Affiliate" means any
entity which is a member of (i) a "controlled group of corporations," as defined
in Section 414(b) of the Code, (ii) a group of entities under "common control,"
as defined in Section 414(c) of the Code, or (iii) an "affiliated service
group," as defined in Section 414(m) of the Code, any of which includes the
Corporation.
(b) Schedule 4.18 further sets forth a list of all plans, trusts, or
arrangements (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, medical benefits, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation, or other forms of incentive compensation, insurance or benefits
(collectively, the "Benefit Arrangements") that (i) are not Employee Plans, (ii)
are maintained or contributed to by the Corporation or any Subsidiary, and (iii)
cover any director, officer, employee, or former employee of the Corporation or
any Subsidiary.
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(c) Each Employee Plan and Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
applicable Laws. There has not been any "accumulated funding deficiency," as
defined in Section 412 of the Code, with respect to any Employee Plan. There has
not been any partial or complete withdrawal by the Corporation or any Subsidiary
with respect to any Employee Plan which is a "multiemployer plan," as defined in
Section 3(37) of ERISA, and the Corporation has any current plans to withdraw
from any such Employee Plan. Except as set forth on Schedule 4.18, neither the
Corporation or any Subsidiary is in default or alleged to be in default in the
payment or other provision of any benefit under any Employee Plan or Benefit
Arrangement. Except as set forth on Schedule 4.18, no actions have been taken or
are currently planned with respect to any Employee Plan or Benefit Arrangement
that would increase the expense of maintaining or the benefits provided under
such Employee Plan or Benefit Arrangement above the level of the expense
incurred or benefits provided in respect thereof for each of the years 1999 and
1998.
(d) The execution and delivery by the Corporation of the Documents and
its consummation of the transactions contemplated thereby will not constitute a
triggering event under any Employee Plan or Benefit Arrangement that will, or
upon the occurrence of subsequent events would, accelerate the time of payment
or vesting, or increase the amount of compensation or benefits, for any
director, officer, employee, or former employee of the Corporation.
4.19. Insurance.
The Corporation maintains valid and effective insurance policies,
issued by financially sound and reputable insurers, to insure it against all
risks usually insured against by persons or entities conducting businesses
similar to that of the Corporation or such Subsidiary in the locality in which
such businesses are conducted. The Corporation has paid all due premiums with
respect to all policies of insurance currently maintained by the Corporation.
4.20. Related Transactions.
(a) Except as set forth on Schedule 4.20, and except for compensation
to regular employees, since January 1, 1998, no current director or executive
officer of the Corporation or holder of at least 5% of the outstanding capital
stock of the Corporation has been (i) a party to any transaction with the
Corporation valued in excess of $60,000 during any twelve-month period, or (ii)
the direct or indirect owner of an interest in any business organization that is
or was a competitor, supplier or customer of the Corporation (other than
interests in non-affiliated publicly held companies).
(b) The Corporation acknowledges and agrees that Winstar Sub and
Winstar, by reason of, being a purchaser or holder of Shares or, appointing a
director to the Corporation's Board of Directors, is not prohibited from, nor is
any Winstar Affiliate prohibited from, engaging, investing or otherwise being
involved in any activity, including businesses, investments or other activities
which may be competitive or in conflict with the Corporation.
4.21. Offering of the Shares. The Corporation has not, directly or
indirectly, solicited any other offer to buy or offer to sell, and will not,
directly or indirectly, solicit any other offer to
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buy or offer to sell, any security which is or would be integrated with the sale
of the Shares or Warrant Shares in a manner that would require the Shares or
Warrant Shares to be registered under the Securities Act.
4.22. Disclosure.
The Corporation has filed all required registration statements, reports
and proxy statements with the Securities and Exchange Commission ("SEC Reports")
when due (or within permitted extension periods) in accordance with the
Securities Act and the Securities Exchange Act of 1934, as amended ("Exchange
Act"), as the case may be. As of their respective dates (or, in the case of any
amended SEC Report, as of the date of the amendment), the SEC Reports complied
in all material respects with all applicable requirements of the Securities Act
or the Exchange Act, as the case may be. As of their respective dates (or, in
the case of any amended SEC Report, as of the date of the amendment), none of
the SEC Reports contained any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. This Agreement does
not contain an untrue statement of a material fact nor does it omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. None of the statements, documents, certificates or other items
prepared by the Corporation and supplied to Winstar or its counsel in connection
with the transactions contemplated hereby (other than those relating to (i)
projected financial information, (ii) plans and objectives regarding the
Corporation's future operations, (iii) future economic performance and (iv)
assumptions underlying any of the matters described in (i) through (iii), each
as to which no representation or warranty is given other than, however, that
such representations are reasonable in light of existing or known facts or
trends and were prepared in good faith) contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
4.23. [Intentionally Omitted.]
4.24. [Intentionally Omitted.]
4.25. Brokers and Finders.
No person or entity acting on behalf or under the authority of the
Corporation is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the sale of the Shares.
4.26. Year 2000 Compliance.
All electronic data, communications and other systems utilizing
computer hardware, computer software, computer firmware and other similar or
related items including source codes, operating coders, programs, utilities and
other software (collectively, "Information Technology") utilized by the
Corporation records, stores, processes and presents date/time data (including
without limitation, calculating, comparing and sequencing) from, into and
between the
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twentieth and twenty-first centuries, including the years 1999 and 2000 and leap
year calculations, and is designed not to malfunction, cease to function or
provide invalid or incorrect results or degrade in performance as a result of
date/time data, including to the extent that other Information Technology, when
used in combination with the Corporation's Information Technology, properly
exchanges date/time data with it.
4.27. Minnesota Business Corporation Act.
(a) A committee of all "disinterested members" of the Corporation's
Board of Directors (as such term is defined for purposes of Section 302A.673 of
the Minnesota Business Corporation Act ("MBCA")) has approved this Agreement and
the transactions contemplated hereby and the Corporation has completed all other
actions and satisfied all other conditions necessary and sufficient to negate
any application of Section 302A.673 to Winstar or any of its affiliates (as such
term is defined by Rule 13(e)-3(a)(1) of the Securities Exchange Act of 1934, as
amended ("Affiliate")).
(b) Sections 302A.671 and 302A.673 of the MBCA do not and will not
apply to the Corporation or Winstar or any of its Affiliates as a result of the
transactions contemplated by this Agreement. Both Winstar and the Corporation
are excluded from such Sections, and accordingly, Winstar and its Affiliates may
purchase more than 10% of the Corporation's voting stock pursuant to this
Agreement and will not further be restricted from purchasing additional capital
stock of the Corporation thereafter by virtue of such provisions. In addition,
an exception applies to Section 302A.671 of the MBCA such that the acquisition
of twenty percent or more of the outstanding voting stock of the Corporation by
Winstar Sub (or any other purchaser) in this transaction and in the transaction
pursuant to which an Affiliate of Winstar acquired Shares of Class E Preferred
Stock may be accomplished without approval of the shareholders of the
Corporation.
Section 5. Representations and Warranties of Winstar and Winstar Sub and any
Assignee thereof.
Winstar, Winstar Sub and any assignee thereof represent and warrant to
the Corporation as of the date hereof and as of each Closing Date, if any, that
for itself only:
5.1. Due Authorization.
Each of Winstar, Winstar Sub and any assignee thereof have taken all
action necessary to authorize its execution and delivery of this Agreement, the
performance of its obligations hereunder, and its consummation of the
transactions contemplated hereby. This Agreement has been executed and delivered
by an officer of the Winstar, Winstar Sub and any assignee thereof in accordance
with such authorization or by Winstar or Winstar Sub. This Agreement constitutes
the valid and binding obligation of each of Winstar, Winstar Sub and any
assignee thereof, enforceable in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium, and similar laws
affecting creditors' rights generally and to general principles of equity.
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5.2. Investment Representations.
(a) Each of Winstar Sub and any assignee thereof is acquiring the
Shares or Warrant Shares, as the case may be, for its own account, for
investment and not with a view to the distribution thereof, nor with any present
intention of distributing the same in the absence of an effective registration
statement or a suitable exemption from the applicable registration requirements.
(b) Each of Winstar Sub and any assignee thereof understands that the
Shares or Warrant Shares, as the case may be, have not been, and the Conversion
Shares will not be, registered under the Securities Act or applicable state
securities laws, by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act, and such shares must be held
indefinitely unless subsequent disposition thereof is registered under
applicable securities laws or is exempt from registration.
(c) Each of Winstar Sub and any assignee thereof understands that the
exemption from registration afforded by Rule 144 (the provisions of which are
known to Winstar Sub) promulgated under the Securities Act depends on the
satisfaction of various conditions and that, if applicable, Rule 144 may only
afford the basis for sales under certain circumstances and only in limited
amounts.
(d) Each of Winstar Sub and any assignee thereof is an "accredited
investor," as such term is defined in Rule 501 (the provisions of which are
known to Winstar and Winstar Sub) promulgated under the Securities Act.
(e) Each of Winstar Sub and any assignee thereof has such knowledge and
experience in financial, tax and business matters so as to enable Winstar,
Winstar Sub and any assignee thereof to utilize the information made available
to Winstar, Winstar Sub and any assignee thereof in connection with the
investment in the Shares or the Warrant Shares, as the case may be, to evaluate
the merits and risks of an investment in the Shares or the Warrant Shares, as
the case may be, and to make an informed investment decision with respect
thereto; provided, however, that the foregoing shall in no way affect, diminish
or derogate from the representations and warranties made by the Corporation
hereunder or the right of Winstar, Winstar Sub and any assignee thereof to rely
thereon and to seek indemnification hereunder.
(f) Each of Winstar Sub and any assignee thereof has not been formed
for the specific purpose of acquiring the Shares or the Warrant Shares, as the
case may be.
(g) Winstar, Winstar Sub and any assignee thereof hereby acknowledge
that the purchase and sale of the Shares and the Warrant Shares, if any, is
intended to be exempt from registration under the Securities Act by virtue of
Section 4(2) and/or Section 3(b) of the Securities Act and, if applicable, in
the sole judgment of the Corporation, the provisions of Regulation D thereunder,
which exemption is dependent upon the truth, completeness and accuracy of the
statements made by Winstar, Winstar Sub and any assignee thereof herein and in
any other documents furnished by Winstar and Winstar Sub to the Corporation.
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5.3. Brokers and Finders.
No person or entity acting on behalf or under the authority of Winstar
Sub or any assignee thereof is or will be entitled to any broker's, finder's, or
similar fee or commission in connection with the transactions contemplated
hereby.
5.4. Investor Sophistication.
Each of Winstar Sub and any assignee thereof has sufficient knowledge
and experience and is capable of evaluating the merit and risks of its
investment in the Corporation as contemplated by this Agreement and is able to
bear the economic risk of such investment for an indefinite period of time.
Winstar Sub has been given access to SEC Reports. Winstar, Winstar Sub and any
assignee thereof have had the opportunity to ask questions of and receive
answers from representatives of the Corporation concerning the terms and
conditions of this Agreement, to discuss the Corporation's business, management
and financial affairs with the Corporation's management and to obtain any other
additional information they desire or deem relevant.
Section 6. Covenants of the Corporation and Winstar Sub.
6.1. Regulatory Approvals; Reasonable Best Efforts; Further Assurances.
Subject to the terms and conditions of this Agreement, each of the
Corporation, Winstar and Winstar Sub will, and will cause its Affiliates to, use
its reasonable best efforts, to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary or desirable under applicable laws
and regulations to consummate the transactions contemplated by this Agreement.
Each of the Corporation, Winstar and Winstar Sub agrees to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
6.2. Certain Filings.
Subject to the terms and conditions of this Agreement, each of the
Corporation, Winstar and Winstar Sub will, and will cause its Affiliates to, (i)
in determine whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement or the conversion by Winstar Sub and any assignee
thereof of the Shares or Warrant Shares, as the case may be, and (ii) in taking
any of such actions contemplated by the preceding subsection (i), furnish
information required in connection therewith and seeking, in a timely manner, to
obtain any such actions, consents, approvals or waivers. Each of the
Corporation, Winstar and Winstar Sub shall (a) give the other parties hereto
prompt notice of the commencement of any action, suit, litigation, arbitration,
preceding or investigation by or before any governmental body with respect to
the transactions contemplated by this Agreement, (b) keep the other parties
hereto informed as to the status of any such action, suit, litigation,
arbitration, preceding or investigation, and (c) promptly inform the other
parties hereto of any
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communication to or from the Federal Trade Commission, the Department of Justice
or any other governmental body regarding the transactions contemplated by this
Agreement.
6.3. Confidentiality.
Except as set forth in Section 6.4 below and as required by applicable
securities laws upon the advice of counsel, without the consent of the other
party, neither the Corporation nor Winstar, Winstar Sub and any assignee thereof
shall make any public comment, statement or communication with respect to, or
otherwise disclose or permit the disclosure of the terms of this Agreement and
the transactions contemplated hereby, and each party shall cause its authorized
officers, directors, partners, employees, counsel, accountants, agents and other
representatives to strictly comply with the foregoing.
6.4. Public Announcements.
Neither party to this Agreement may publicly disseminate a press
release or file a public report (on Form 8-K or otherwise) with the Securities
and Exchange Commission or otherwise publicly announce the transactions
contemplated by this Agreement, unless the other parties consent, except as
otherwise required by applicable securities law, upon the opinion of counsel,
and upon reasonable notice to the other parties to afford them time to comment.
Such parties shall not unreasonably withhold or delay their approval to any such
proposed announcements.
Section 7. Covenants of the Corporation.
Unless otherwise indicated, and as long as any of the Shares, Warrant
Shares or Conversion Shares remain outstanding, the Corporation shall and shall
cause each Subsidiary to abide and perform with respect to the following
covenants:
7.1. Certificate of Designation.
Immediately after the execution of this Agreement, the Corporation
shall cause to be filed the Class H Certificate of Designation as required
pursuant to the law of the State of Minnesota.
7.2. Restrictions Pending the Last Closing
Without limiting the rights set forth in the Class H Preferred Stock
Certificate of Designation, after the date hereof and prior to the last Closing
Date, except as expressly provided for in this Agreement, or as consented to in
writing by Winstar and Winstar Sub, the Corporation will not:
(i) amend its certificate of incorporation or bylaws, except
to file the Class H Certificate of Designation;
(ii) split, combine or reclassify any shares of its capital
stock without appropriately adjusting the conversion price and/or ratio
applicable to the Shares prior to
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their issuance at the Closing;
(iii) declare or pay any dividend or distribution (whether in
cash, stock or property) in respect of its Common Stock;
(iv) take any action, or knowingly omit to take any action,
that could reasonably be expected to result in (A) any of the
representations and warranties of the Corporation set forth in Article
4 becoming untrue or (B) any of the conditions to the obligations of
Winstar Sub set forth in Section 8.1 or 8.2 not being satisfied; or
(v) enter into any agreement or commitment to do any of the
foregoing.
7.3. Reservation of Shares.
For so long as any of the Shares or Warrants are outstanding, the
Corporation shall keep reserved for issuance a sufficient number of shares of
Common Stock to satisfy its conversion obligations under the Class H Certificate
of Designation and its obligation to issue Warrant Shares upon exercise of the
Warrants..
7.4. Use of Proceeds.
The Corporation shall use the cash proceeds received by it upon the
sale of the Shares for general working capital purposes, including regularly
scheduled debt payments, except that if the Corporation advises Winstar of its
intention to repay Indebtedness to Bank One pursuant to the last sentence of
Section 3.2, it shall use such proceeds to pay such Indebtedness.
7.5. Access to Records.
The Corporation shall, and shall cause each Subsidiary to, afford to
Winstar and Winstar Sub and its authorized employees, counsel, accountants and
other representatives, upon reasonable notice and during ordinary business
hours, (i) full access to all books, records and properties of the Corporation
and such Subsidiary, and (ii) the opportunity to interview any officer of the
Corporation or such Subsidiary regarding its affairs; any investigation pursuant
to this Section shall be conducted in a manner that does not interfere
unreasonably with the conduct of the business of the Corporation and such
Subsidiary.
7.6. Budget.
Promptly following final preparation thereof, the Corporation shall
deliver to Winstar and Winstar Sub all budgets and revisions thereof prepared by
the Corporation, all of which shall be consistent with the Initial Budget in
form, methodology, and level of detail. Each of the Initial Budget and the
budgets referred to in this Section 7.6 is referred to herein as a "Budget."
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7.7. Financial Reporting and other Information.
(a) So long as Winstar Sub or any of its Affiliates beneficially owns
Shares, Warrants, Warrant Shares or Conversion Shares, the Corporation shall
deliver to Winstar the following:
(i) within 30 days after the end of each month, commencing
with the month of September 2000, (A) the unaudited balance sheet of
the Corporation at the end of such month, (B) the unaudited statements
of income and cash flows of the Corporation for such month, (C)
comparative statements of income of the Corporation for the year to
date, the comparable figures for the prior year, the current Budget for
the year to date and projected figures for the year, (D) textual
discussion describing changes from prior periods and describing
operating trends and (E) a report consisting of a beginning balance of
the outstanding securities by type from the prior monthly period,
adding to that beginning balance all securities that have been issued,
sold or exercised and deleting all securities that have expired, been
redeemed, cancelled, etc., during that month;
(ii) within 15 days after the end of each fiscal quarter, such
information as is reasonably required to enable Winstar to make
calculations under its then current level of accounting;
(iii) within 45 days after the end of each fiscal quarter,
commencing with the quarterly period ending September 30, 2000, its
Report on Form 10-Q for such quarter, including (A) an unaudited
balance sheet of the Corporation at the end of such fiscal quarter, (B)
the unaudited statements of income and cash flows of the Corporation
for such fiscal quarter, (C) comparative statements of income of the
Corporation for such fiscal quarter and the year to date, the
comparable figures for the corresponding fiscal quarter and the year to
date period of the prior year and also the current Budget for such
fiscal quarter and for the year to date; and (D) updated Schedules
4.5(a)(i), 4.5(a)(ii) and 4.5(b) (which shall reflect all shares,
options and other rights issued, exercised and expired since the date
of the last submission of Schedule 4.5(b));
(iv) within 90 days after the end of each fiscal year
commencing with the current fiscal year of the Corporation, its Report
on Form 10-K for such fiscal year, including (A) the audited balance
sheet of the Corporation at the end of such fiscal year, together with
comparisons to the balance sheet of the Corporation at the end of the
prior fiscal year and to the current Budget, (B) the audited statements
of income and cash flows of the Corporation for such fiscal year,
together with comparisons to the statements of income and cash flows of
the Corporation for the prior fiscal year and to the current Budget,
and (C) an audit report of Ernst & Young, independent certified public
accountants, on such balance sheets and statements; and
(v) any other financial and operating data and other
information relating to the Corporation and each Subsidiary as Winstar
may reasonably request;
(vi) all information made available to the Corporation's
shareholders or directors, at the same time as such information is
delivered to such persons; and
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(vii) monthly management reports in a form reasonably
acceptable to Winstar.
(b) All financial information to be delivered under this Section shall
be in accordance with the books and records of the Corporation and shall have
been prepared in accordance with GAAP, subject to year-end and audit
adjustments.
7.8. Payment of Obligations.
The Corporation shall, and shall cause each Subsidiary to, pay or
discharge or cause to be paid or discharged all material claims or demands, and
all Taxes levied or imposed upon the Corporation or its Subsidiaries or upon the
income, profits or property of the Corporation or its Subsidiaries; provided,
however, that the Corporation or such Subsidiary shall not be required to pay or
discharge or cause to be paid or discharged any such claim, demand, or Tax the
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made.
7.9. Insurance.
The Corporation shall, and shall cause each Subsidiary to, maintain
with financially sound and reputable insurers such insurance as may be required
by law and such other insurance, to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly situated and
exercising sound business practice.
7.10. Certain Notices.
The Corporation shall promptly notify Winstar and Winstar Sub of (i)
the commencement or notice of any threat of any Proceeding, dispute or grievance
against or affecting the Corporation, which, if adversely determined, might
reasonably be expected to have a Material Adverse Effect, (ii) any material
default under any indebtedness of the Corporation and (iii) any material default
or breach under any of the items required to be listed on Schedule 4.10. (a) or
any of the items which would have been required to be listed on Schedule 4.10.
(a) if such item were effective prior to the date hereof.
7.11. Conduct of Business.
The Corporation shall (i) take all actions required to assure that the
Corporation remains duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (ii) take all actions
required to assure that the Corporation maintains all Permits to conduct its
business, and (iii) conduct its business in compliance with all Laws.
7.12. Related Transactions.
Excluding any existing arrangements between Silicon Graphics, Inc. and
MCI WorldCom, Inc., the Corporation shall not directly or indirectly enter into
any transaction with any Related Party, other than (a) any transaction with
Winstar or any of its Affiliates and (b) any transaction entered into in the
ordinary course of business and on terms and conditions not less
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favorable to the Corporation as the terms and conditions which would apply in a
similar transaction negotiated on an arms-length basis with a party that is not
a Related Party. "Related Party" means (a) each current or future director or
executive officer of the Corporation, (b) each parent, sibling, spouse, or
descendant of any of the foregoing, (c) each entity of which any of the
foregoing is a director, officer, partner or holder of more than 10% of the
outstanding voting power of any class of capital stock and (d) any person or
entity which is the beneficial owner of 5% or more of the outstanding voting
power of the Corporation.
7.13. Internal Controls.
The Corporation maintains and will continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances that:
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets and (iii) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
7.14. Winstar Directors.
(a) Subject to subsection 7.15 below, so long as Winstar or any of its
subsidiaries (collectively, "Winstar Holders") continues to own at least 24,000
shares of Class H Preferred Stock and/or such number of shares of Common Stock
into which such shares of Class H Preferred Stock are convertible, Winstar
Holders shall collectively have the right to appoint two persons to serve as
directors of the Corporation ("Winstar Directors") which may, individually or
collectively, at the sole discretion of the Winstar Holders serve as a
non-voting observer of the Corporation; provided, however, (i) that so long as
the Voting Limitation is in effect pursuant to Section 5(a) of the Class H
Certificate of Designation, the Winstar Holders of the Class H Preferred Stock
and Class E Preferred Stock shall collectively be entitled to appoint only one
person to serve as a Winstar Director who, at the sole discretion of the Winstar
Holders, may be a non-voting observer and (ii) if the Corporation consummates an
initial public offering of its securities, the Winstar Holders shall
collectively only be entitled to appoint one person to serve as a Winstar
Director, who at the sole discretion of the Winstar Holders, may be a non-voting
observer. Notwithstanding the foregoing, in the event the Winstar Holders own
collectively less than 24,000 but more than 12,000 shares of Class H Preferred
Stock and/or such number of shares of Common Stock into which such shares of
Class H Preferred Stock are convertible, the Winstar Holders shall collectively
have the right to appoint only one person to serve as a director of the
Corporation who may, at the sole discretion of Winstar, serve as a non-voting
observer of the Corporation. In the event the Winstar Holders own collectively,
12,000 or less than 12,000 shares of Class H Preferred Stock and/or such number
of shares of Common Stock into which such shares of Class H Preferred Stock are
convertible, the Winstar Holders shall have no right to appoint anyone to serve
as a director of the Corporation and no right to appoint anyone as a non-voting
observer. Any vacancy in the position of a Winstar Director or the observer may
be filled by and only by the Winstar Holders. Any Winstar Director may, during
his or her term of office, be removed at any time, with or without cause, by and
only by the Winstar Holders.
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(b) One of the Winstar Directors, or if no Winstar Director has been
designated, an observer designated by the Winstar Holders, shall be entitled to
serve on, or observe meetings of, each of the Audit, Compensation and Nominating
Committees and any other committee created by the Board of Directors of the
Corporation ("Board"); provided, however, that in the event any such committee
fails to satisfy specific requirements under the rules and regulations of the
Securities and Exchange Commission any exchange or trading system due to such
persons affiliations, such person, if a director will agree to serve solely as
an observer of such committee. The Winstar Directors or an observer appointed by
the Winstar Holders shall be entitled to receive the same compensation that is
paid to other non-management Board members and committee members and shall be
entitled to receive reimbursement for all reasonable costs incurred in attending
such meetings, including, but not limited to, food, lodging and transportation.
To the extent permitted by law, the Corporation will indemnify each person
serving as a Winstar Director, Winstar and Winstar Sub for the actions of such
persons as members of the Board and/or any committee thereof, unless such
actions are found by a court of law to have been grossly and intentionally
negligent. As long as any such person remains as a member of the Board, the
Corporation will maintain director and officer insurance policies in amounts and
on terms which are reasonable for companies similarly situated to the
Corporation and reasonably acceptable to Winstar.
(c) The Corporation shall give written notice to the Winstar Directors
and Winstar of each Board and committee meeting and shall provide them with an
agenda and minutes of each such meeting no later than it gives such notice and
provides such items to the other Board members.
7.15. Assignee Director.
Winstar Sub may transfer its right to appoint Winstar Director(s) to
any assignee of Winstar Sub pursuant to Section 3.4 who purchases at least
15,000 shares of Class H Preferred Stock and/or such number of shares of Common
Stock into which such shares are convertible pursuant to this Agreement (an
"Assignee Director"). No more than one director seat may be assigned to any one
assignee unless such assignee purchased at least 30,000 shares of Class H
Preferred Stock and/or such number of shares of Common Stock into which such
shares are convertible. Winstar Sub also has the right to provide up to two
observer rights to the Corporation's Board of Directors. Observer rights may
only be granted to assignees who have purchased at least 15,000 shares of Class
H Preferred Stock and/or such number of shares of Common Stock into which such
shares are convertible. Any vacancy in the position of the Assignee Director or
observer may be filled by and only by such assignee. Any Assignee Director may,
during his or her term in office, be removed at any time, with or without cause,
by and only by such assignee. Any Assignee who has been granted the right to
appoint director(s) and/or observer(s) to the Corporation shall only be able to
exercise such right if (i) with respect to the right to appoint an Assignee
Director, only if such assignee owns at least 15,000 shares of Class H Preferred
Stock and/or such number of shares of Common Stock into which such shares are
convertible and (ii) with respect to the right to appoint an observer to the
Company's Board of Directors, only if such assignee owns at least 10,000 shares
of the Class H Preferred Stock and/or such number of shares of Common Stock into
which such shares are convertible. The
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provisions of subsections 7.14(b) and (c) above shall apply with respect to the
Assignee Director or observer to the same extent that they apply to any Winstar
Director.
7.16. Indenture.
The Corporation will not amend, waive, or modify, or seek to amend,
waive, or modify, any provision of the Indenture dated as of March 5, 1998,
which regards the Corporation's 13 1/4% Senior Discount Notes due 2005, without
the prior written consent of Winstar which consent will not be unreasonably
withheld.
7.17. Tag-Along Agreements.
The Corporation will use its best efforts to cause Winstar and Winstar
Sub to be joined as parties to, or the Class H Preferred Stock to be included
in, as appropriate, (i) the Tag-Along Rights Agreements entered into among the
Corporation, Silicon Graphics, Inc. and MCI WorldCom, Inc. dated March 4, 1999
and (ii) the Stockholders Agreement, dated March 4, 1999, as amended on March
14, 2000 (collectively "Restricted Stock Agreements").
7.18. Board of Directors.
Without the consent of Winstar, so long as any Affiliate of Winstar is
entitled to appoint a member to the Corporation's Board of Directors pursuant to
this Agreement, the Corporation will not change the number of members that
comprise the Board of Directors of the Corporation to fewer than six nor more
than thirteen.
7.19. Consents.
Prior to the Closing, the Corporation shall use its commercially
reasonable best efforts to obtain all consents and approvals of third parties,
if any, required to consummate the transactions contemplated by this Agreement
so that such consummation shall not conflict with or cause a breach of or
default under any agreement or other obligation binding upon the Corporation,
including without limitation all such consents and approvals required with
respect to its obligations for borrowed money and under its Articles of
Incorporation and Certificates of Designation..
7.20. Use of Proceeds.
The Corporation covenants that the proceeds it will receive from the
sale of the Shares will be applied in the manner described with respect to such
proceeds indicated on Schedule I attached hereto.
7.21. Corporate Documents.
Within sixty-days of the date hereof, the Corporation shall deliver to
Winstar, attention Charles Persing, correct and complete copies of the Articles
of Incorporation of each Subsidiary of the Corporation, including all amendments
and Certificates of Designation, and the By-laws of each Subsidiary of the
Corporation each as in effect on the date of delivery.
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7.22. Sale of Winstar Shares.
The Corporation covenants to sell the shares of common stock of Winstar
acquired by the Corporation pursuant to the Securities Purchase Agreement dated
as of December 31, 1999 among the Corporation, Winstar and Winstar Sub in a
manner consistent with an orderly market.
Section 8. Registration Rights of Winstar and Winstar Sub.
8.1. Demand Registration.
(a) Grant of Right. The Corporation agrees to register on three
occasions, upon written demand ("Initial Demand Notice") of Winstar or Winstar
Sub, all or any portion of the Conversion Shares, the Warrant Shares and Shares
of the Corporation's Common Stock issuable upon conversion of the Class E
Preferred Stock, regardless of whether the Shares, Warrants or shares of Class E
Preferred Stock have been converted or exercised (the "Registrable Securities").
The Corporation will file a registration statement covering the Registrable
Securities within 60 days after receipt of the Initial Demand Notice and use its
best efforts to have such registration statement declared effective promptly
thereafter. The demand for registration may be made at any time during a period
commencing on the earlier of (i) the six month anniversary of the consummation
of the Corporation's initial public offering of its Common Stock, and (ii) the
one year anniversary of the date Shares are first issued. The provisions of this
Section 8.1(a) shall supersede the provisions of Section 8.1(a) of the
Securities Purchase Agreement dated December 31, 1999 among the Corporation,
Winstar and Winstar Credit Corp.
(b) Terms. The Corporation shall bear all reasonable fees and expenses
attendant to registering the Registrable Securities, including the expenses of
one legal counsel selected by Winstar and Winstar Sub to represent them in
connection with the sale of the Registrable Securities but not including any and
all underwriting commissions and discounts which will be the responsibility of
Winstar and Winstar Sub to the extent they participate in the underwriting. The
Corporation will qualify or register the Registrable Securities in such states
as are reasonably requested by Winstar and Winstar Sub. The Corporation shall
cause any registration statement filed pursuant to the demand rights granted
under this Section to remain effective with respect to the Registrable
Securities covered by such registration statement until all such securities have
been sold.
8.2. "Piggy-Back" Registration.
(a) Grant of Right. Winstar Sub shall have the right at any time and
from time to time to include the Registrable Securities as part of any other
registration of securities filed by the Corporation (other than pursuant to Form
S-4, Form S-8 or any equivalent forms or in connection with the Corporation's
initial public offering to the extent that no other selling shareholder is
included in the registration statement). Notwithstanding the foregoing, if, in
the written opinion of the managing underwriter or underwriters of a public
offering by the Corporation of its shares of Common Stock, the inclusion of the
Registrable Securities, when added to the securities being registered by the
Corporation, will exceed the maximum amount of
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the Corporation's securities that can be marketed without materially and
adversely affecting the entire offering, then (i) the Corporation will include
in such registration first, only those securities, the holders of which as of
the date hereof have priority piggy-back registration rights (as listed on
Schedule 8.2), second, the Registrable Securities allocated (if necessary) among
the holders thereof on a pro rata basis based on the number of Registrable
Securities requested to be included in such registration statement, and third,
capital stock of the Corporation to be sold for the account of others with
applicable piggy-back registration rights, with such priorities among them as
the Corporation shall decide. If, subsequent to the exercise of all of the
demand registration rights referred to in Section 8.1, any Registrable
Securities requested to be included in an offering ("Other Offering") pursuant
to the "piggy-back" rights described in this Section 8.2. are not so included
because of the operation of the first proviso of the preceding sentence, then
the holders of the Registrable Securities shall have the right to require the
Corporation, at its expense, to prepare and file a registration statement under
the Securities Act covering such Registrable Securities.
(b) Terms. The Corporation shall bear all reasonable fees and expenses
attendant to registering the Registrable Securities, including the expenses of
any legal counsel selected by the Holders to represent them in connection with
the sale of the Registrable Securities, but Winstar Sub shall pay any and all
discounts and underwriting commissions. In the event of such a proposed
registration, the Corporation shall furnish the owners of the Registrable
Securities with not less than 30 days written notice prior to the proposed date
of filing of such registration statement. Such notice shall continue to be given
for each registration statement filed by the Corporation until such time as all
of the Registrable Securities have been sold by Winstar and Winstar Sub. The
owners of the Registrable Securities shall exercise the "piggy-back" rights
provided for herein by giving written notice within 15 days of the receipt of
the Corporation's notice of its intention to file a registration statement. The
Corporation shall cause any registration statement filed pursuant to the
"piggyback" rights granted under this Section to remain effective with respect
to the Registrable Securities covered by such registration statement until all
of such securities have been sold by Winstar Sub. Notwithstanding the foregoing,
in no event shall the Corporation be obligated to maintain the effectiveness of
any registration statement filed pursuant to Sections 8.1 and 8.2 for a period
in excess of seven years from the initial date of issuance of the Shares.
8.3. General Terms.
(a) Indemnification. The Corporation shall indemnify the owner(s) of
the Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such person within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against all loss,
claim, damage, expense or liability (including all reasonable attorneys' fees
and other expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, arising from such registration
statement, except to the extent that any loss, claim, damage, expense or
liability arises out of or relates to written information furnished by or on
behalf of Winstar or any of its Affiliates for inclusion in such registration
statement ("Winstar Information"). The owner(s) of the Registrable Securities to
be sold pursuant to such registration statement, and their successors and
assigns, shall severally, and
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not jointly, indemnify the Corporation against all loss, claim, damage, expense
or liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which it may become subject under the Securities Act, the
Exchange Act or otherwise, arising from Winstar Information furnished by or on
behalf of such owner(s).
(b) Exercise of Shares. Nothing contained in this Section 8 shall be
construed as requiring Winstar, Winstar Sub or any of their Affiliates to
convert their Shares or Warrant Shares, as the case may be, prior to or after
the filing of any registration statement or the effectiveness thereof.
(c) Documents Delivered to Holders. The Corporation shall deliver
promptly to Winstar and Winstar Sub upon request, all correspondence between the
Securities and Exchange Commission and the Corporation, its counsel or auditors
and all memoranda relating to discussions with the Securities and Exchange
Commission or its staff with respect to the registration statement. The
Corporation also shall furnish to Winstar and Winstar Sub and to each
underwriter of any such offering, a signed counterpart, addressed to Winstar and
Winstar Sub and underwriter, of (i) an opinion of counsel to the Corporation,
dated the effective date of such registration statement (and an opinion dated
the date of the closing under the underwriting agreement relating to such
offering), and (ii) a "cold comfort" letter dated the effective date of such
registration statement (and a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Corporation's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities. In the event that
Winstar or Winstar Sub requests information pursuant to this Section (c), then,
prior to furnishing such information, the Corporation shall have the right to
require Winstar and Winstar Sub to enter into a confidentiality agreement with
the Corporation with respect to any information to be provided to Winstar and
Winstar Sub that the Corporation reasonably considers to be proprietary,
non-public or otherwise confidential.
8.4. Underwriting Agreement.
In the event that the demand registration filed by Winstar Sub pursuant
to Section 8.1(a) is for an underwritten offering, the Corporation shall have
the right to select the underwriters of the offering, which underwriters shall
be acceptable to Winstar in its sole and absolute discretion. The Corporation
shall enter into an underwriting agreement with the managing underwriter
selected by Winstar Sub. Such agreement shall be reasonably satisfactory in form
and substance to the Corporation, each such person and such managing
underwriter, and shall contain such representations, warranties and covenants by
the Corporation and such other terms as are customarily contained in agreements
of that type used by the underwriter. Such persons shall be parties to any
underwriting agreement relating to an underwritten sale of their Registrable
Securities and may, at their option, require that any or all of the
representations, warranties and covenants of the Corporation to or for the
benefit of such underwriter shall also
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be made to and for the benefit of such persons. Such persons shall not be
required to make any representations or warranties to or agreements with the
Corporation or the underwriter except as they may relate to such persons, their
shares and their intended methods of distribution.
8.5. Road Show.
In connection with any underwritten public offering in which
Registrable Securities are included, the Corporation and the Senior Officers
will participate in person or via telephone, as requested by Winstar, in
road-shows regarding such offering and attendance at due diligence meetings.
8.6. Rights and Obligations of Assignee.
In addition to the foregoing registration rights granted to Winstar and
Winstar Sub hereunder (i) one demand registration right as contemplated by
Section 8.1 shall be granted to each of (a) the holders of the Assigned Shares
as a group and (b) the holders of the largest portion of the Assigned Shares, if
any, and (ii) the holders of the Assigned Shares shall be entitled to the same
"piggy back" registration rights under Section 8.2 with respect to such Assigned
Shares as Winstar Sub has with respect to the Shares purchased by it, including
a "piggy back" right with respect to one of the registrations that Winstar or
Winstar Sub may demand pursuant to Section 8.1. The provisions of Section 8
shall apply to such assignee in all respects and the Shares purchased by such
assignee shall be deemed to be Registrable Securities for all purposes of
Section 8. In addition, any assignee of Winstar Sub shall be required to make
all representations and warranties as provided in Section 5 and shall be
obligated to perform all of the covenants required to be preformed as provided
in Section 6.
Section 9. Conditions to Each Closing.
9.1. Conditions of Each Party.
The respective obligations of each of the Corporation and Winstar and
Winstar Sub to consummate the transactions contemplated hereby are subject to
the fulfillment, at or prior to each Closing, of each of the following
conditions, any or all of which may be waived in whole or in part to the extent
permitted by applicable law;
(a) All filings required to be made, and all consents, approvals,
permits and authorizations required to be obtained, prior to each of the
Closing, if any, from any Governmental Authorities in connection with the
execution and delivery by the parties of the Documents and the consummation of
the transactions contemplated thereby shall have been made or obtained; and
(b) No court or governmental or regulatory authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) or taken any action that prohibits the
consummation of the transactions contemplated by this Agreement; provided,
however, that any party invoking this condition shall use its reasonable best
efforts to have any such judgment, decree, injunction or order vacated.
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<PAGE>
9.2. Conditions to Obligations of Winstar and Winstar Sub.
The obligations to be performed by Winstar and Winstar Sub under this
Agreement at each Closing are subject to the satisfaction, at or prior to each
such Closing, of the following conditions, unless waived in writing by Winstar
and Winstar Sub:
(a) Intentionally omitted.
(b) Material Adverse Effect. There shall not have been any event which
has or is reasonably likely to have a Material Adverse Effect.
(c) Accuracy of Representations and Warranties. Each of the
representations and warranties of the Corporation contained in this Agreement
and in any certificate or other writing delivered by the Corporation pursuant
hereto qualified as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects, in each case at
and as of the Closing Date, as if made at and as of such respective times
(except to the extent it relates to a particular date).
(d) Performance of Covenants. The Corporation shall have performed in
all material respects all covenants and agreements required to be performed by
it under this Agreement and the Class H Certificate of Designation.
(e) Class H Certificate of Designation. Prior to the Closing, the Class
H Certificate of Designation shall have been filed with and accepted by the
Secretary of State of the State of Minnesota and shall have become effective.
(f) Stock Certificates. At each of the Closings, Stock certificates
representing the Class H Preferred Stock sold at such closing shall have been
delivered by the Corporation to Winstar Sub.
(g) Use of Proceeds. At each of the Closings, Winstar and Winstar Sub
shall have received a certificate of the Corporation describing in reasonable
detail the proposed use of proceeds received by the Corporation upon the sale of
the Shares.
(h) Legal Opinion. Winstar shall have received an opinion dated as of
the Closing Date, of Willkie Farr & Gallagher, in a form and substance attached
hereto as Exhibit C.
(i) Officer's Certificate. At each of the Closings, Winstar and Winstar
Sub shall receive a certificate from an officer of the Corporation to the effect
that all conditions set forth in this Section 9.2. shall have been satisfied and
that no material changes have occurred with respect to the disclosures set forth
in the Schedules attached to this Agreement.
(j) Required Consents and Approvals. Prior to the Closing Date, the
Corporation shall have received all consents and approvals of third parties, if
any, required to consummate the transactions contemplated by this Agreement so
that such consummation shall not conflict with or cause a breach of or default
under any agreement or other obligation binding upon the Corporation, including
without limitation all such consents and approvals required with
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respect to its obligations for borrowed money and under its Articles of
Incorporation and Certificates of Designation.
(k) Commercial Agreements. The Corporation shall not be in material
default of any of its obligations under any material agreement to which it or
any of its Affiliates is a party, and shall not have failed to make any timely
payment under any agreement between the Corporation and Winstar or any of
Winstar's Affiliates. Timely payments for purposes of this subsection 9.2(k)
shall be exclusive of any grace periods in excess of fifteen days. Without
limiting the foregoing, the Corporation shall have paid (i) the $5,000,000
payable to Winstar or its Affiliates due September 15, 2000, by October 22, 2000
and (ii) the $5,000,000 payable to Winstar or its Affiliates due December 15,
2000, by December 27, 2000.
(l) Bank One. The maturity of the Corporation's indebtedness to Bank
One shall have been extended to no earlier than January 10, 2001.
(m) No Consolidation. Winstar shall not have determined, in its
reasonable good faith, upon consultation with its independent auditors, that the
transactions contemplated by such Closing would require Winstar to include the
assets, liabilities, shareholders' equity and results of operations of the
Corporation in Winstar's financial statements on a consolidated basis in
accordance with generally accepted accounting principles.
(n) Initial Budget. The Chief Financial Officer of the Corporation
shall furnish to Winstar Sub a certification that the Corporation's operating
results as of the end of most recent monthly period are in material compliance
with the Initial Budget and such certification shall contain a reaffirmation by
such officer on behalf of the Corporation that it can and will continue to
operate in material compliance with the Initial Budget. Alternatively, upon the
furnishing to Winstar Sub by the Corporation of a description of any material
change to the Initial Budget, Winstar Sub and Winstar may waive this condition.
(o) Current Schedules. At each of the Initial Closing and as of the
first Closing in December 2000, Winstar and Winstar Sub shall receive complete
schedules to this Agreement, true and correct as of that respective Closing
date. Without limiting the foregoing, at each of the Closings, Winstar and
Winstar Sub shall receive a list of any change to the Certificate of
Incorporation, Certificate of Designations and/or by-laws of the Corporation as
compared to the prior Closing date.
(p) No Bankruptcy. None of the following shall have occurred:
the entry of an order for relief under Title 11 of the United
States Code amended ("Bankruptcy Code"), (ii) the admission by the
Corporation of its inability to pay its debts as they mature, (iii) the
making by the Corporation of an assignment for the benefit of
creditors, (iv) the filing by the Corporation of a petition in
bankruptcy or a petition for relief under the Bankruptcy Code or any
other applicable federal or state bankruptcy or insolvency statute or
any similar law, (v) the expiration of sixty (60) days after the filing
of an involuntary petition by the Corporation for the appointment of a
receiver for the assets of the Corporation, (vii) the expiration of
sixty (60) days after the filing of an involuntary petition seeking
liquidation, reorganization, arrangement or readjustment of the
Corporation's debts under any
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other federal or state insolvency law, provided that the same shall not
have been vacated, set aside or stayed within sixty-day period or
(viii) the imposition of a judicial or statutory lien on all or a
substantial part of the Corporation's assets unless such lien is
discharged or vacated or the enforcement thereof stayed within sixty
(60) days after its effective date.
9.3. Conditions to Obligations of the Corporation.
The obligations to be performed by the Corporation under this Agreement
at each Closing are subject to the satisfaction, at or prior to such Closing, of
the following conditions, unless waived in writing by the Corporation:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of Winstar, Winstar Sub and any assignee thereof
contained in this Agreement and in any certificate or other writing delivered by
Winstar, Winstar Sub or any assignee thereof pursuant hereto qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, in each case at and as of the Closing
Date, if any, as if made at and as of such respective times (except to the
extent it relates to a particular date);
(b) Performance of Covenants. Winstar, Winstar Sub and any assignee
thereof shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement.
Section 10. Termination.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by joint written agreement of the Corporation and Winstar;
(b) by the Corporation, if Winstar or Winstar Sub has breached any
representation, warranty, covenant or agreement contained in this Agreement and
has not cured such breach within ten (10) business days after written notice to
Winstar (provided that the Corporation is not then in material breach of the
terms of this Agreement; and provided further that no cure period shall be
required for a breach which by its nature cannot be cured);
(c) by Winstar, if the Corporation has breached any representation,
warranty, covenant or agreement contained in this Agreement and has not cured
such breach within ten (10) business days after written notice to the
Corporation (provided that Winstar and Winstar Sub are not then in material
breach of the terms of this Agreement; and provided further that no cure period
shall be required for a breach which by its nature cannot be cured); or
(d) by any party if there shall be a change of law or regulation that
makes consummation of the transactions contemplated hereby illegal or otherwise
prohibited or if consummation of the transactions contemplated hereby would
violate any nonappealable, final order, decree or judgment of any court or
governmental body having competent jurisdiction.
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The party desiring to terminate this Agreement pursuant to the
above-referenced clauses shall give notice of such termination to the other
parties hereto.
10.1. Effect of Termination. If this Agreement is terminated, such
termination shall be without liability of either party (or any shareholder,
director, officer, employee, agent, consultant or representative of such party)
to the other parties to this Agreement; provided that if such termination shall
result from the (i) willful failure by any party to fulfill a condition to the
performance of the obligations of the other parties, (ii) failure by any party
to perform a covenant of this Agreement, or (iii) breach by any party hereto of
any representation, warranty, covenant or agreement contained herein.
Section 11. Miscellaneous
11.1. Survival.
The representations, warranties, covenants and other agreements
contained herein, shall survive each Closing, and the consummation of the
transactions contemplated hereby. No right of Winstar and Winstar Sub for
indemnification hereunder shall be affected by any examination made for or on
behalf of Winstar and Winstar Sub, the knowledge of any of Winstar and Winstar
Sub's officers, directors, shareholders, employees or agents, or the acceptance
by Winstar and Winstar Sub of any certificate or opinion.
11.2. Indemnification.
(a) The Corporation shall indemnify, defend and hold Winstar and
Winstar Sub and their officers, directors, employees, shareholders, partners,
members, affiliates and agents harmless against all Liability, loss or damage,
together with all reasonable costs and expenses related thereto (including
reasonable legal fees and expenses), relating to or arising from the untruth,
inaccuracy or breach of any of the representations, warranties or agreements of
the Corporation contained in this Agreement.
(b) Winstar and Winstar Sub shall indemnify, defend and hold the
Corporation and their respective officers, directors, employees, shareholders,
partners, members, affiliates and agents harmless against all Liability, loss or
damage, together with all reasonable costs and expenses related thereto
(including reasonable legal fees and expenses), relating to or arising from the
untruth, inaccuracy or breach of any of the representations, warranties or
agreements of Winstar and Winstar Sub contained in the Agreement.
(c) Promptly after receipt by any party entitled to indemnification
under either Section 11.2(a) or Section 11.2(b) (an "indemnified party") of
notice of the commencement of any action involving a claim which may give rise
to a claim for indemnity under the preceding paragraphs of this Section, the
indemnified party will give written notice to the party against whom
indemnification is sought (the "indemnifying party") of the commencement of such
action. In case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
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indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
it which are additional to or conflict with those available to the indemnifying
party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity agreement provided in this Section,
the indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party and the indemnifying party shall
reimburse the indemnified party and any person controlling the indemnified party
for that portion of the fees and expenses of any counsel retained by the
indemnified party which is reasonably related to the matters covered by the
indemnity agreement provided in this Section.
(d) If the indemnification provided for in this Section is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying the indemnified party hereunder,
shall contribute to the amounts paid or payable by the indemnified party as a
result of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions which resulted in such loss, claim, damage or liability as well as
any other relevant equitable considerations. The amount paid or payable to an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to above shall be deemed to include any legal or other
expenses reasonably incurred in connection with investigating or defending the
same.
(e) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of the
indemnified party and will survive the transfer of securities.
11.3. Fees and Expenses.
The Corporation shall pay or reimburse Winstar and Winstar Sub for all
out-of-pocket fees and expenses incurred by them in connection with the
transactions contemplated by this Agreement, including reasonable fees and
charges of Winstar's legal counsel and accountants. Such payment or
reimbursement shall be made at each Closing. The Corporation shall pay all fees
of any party with respect to the filing of notifications under the HSR Act.
11.4. Assignment; Parties in Interest.
This Agreement shall bind and inure to the benefit of the parties and
each of their respective successors and permitted assigns (it being understood
that this Agreement may be assigned by Winstar and Winstar Sub without the
consent of any person solely in connection with the transfer of Shares).
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11.5. Entire Agreement.
This Agreement (including all Schedules and Exhibits hereby) together
with the other Documents contain the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
11.6. Notices.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if sent by nationally-recognized overnight
courier, by telecopy, or by registered or certified mail, return receipt
requested and postage prepaid, addressed as follows:
(a) if to the Corporation:
WAM!NET INC.
655 Lone Oak Drive, Building A
Eagan, Minnesota 55121
Attention: Lisa A. Gray, Esq., General Counsel
Telephone: (651) 256-2165
Facsimile: (651) 994-9591
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Attention: Daniel D. Rubino, Esq.
Telephone: (212) 728-8000
Facsimile: (212) 728-8111
(b) if to Winstar and Winstar Sub:
Winstar Communications, Inc.
Winstar Credit Corp.
685 Third Avenue
New York, NY 10017
Telephone: (212) 792-9800
Telecopier: (212) 792-9348
Attention: Timothy R. Graham, Executive Vice President
In any case, with a copy to:
Graubard, Mollen & Miller
600 Third Avenue
New York, NY 10016
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Telephone: (212) 818-8661
Telecopier: (212) 818-8881
Attention: David Alan Miller, Esq.
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the date of receipt.
11.7. Amendments.
The terms and provisions of this Agreement may only be modified or
amended pursuant to an instrument signed by all of the parties hereto.
11.8. Counterparts.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
11.9. Headings.
The section and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.10. Governing Law.
Except as to matters governed by the MBCA, this Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
New York, without giving effect to any law or rule that would cause the laws of
any jurisdiction other than the State of New York to be applied.
11.11. Jurisdiction.
The parties hereto agree that any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may only be brought
in the United States District Court for the Southern District of New York or any
New York State court sitting in New York City, and each of the parties hereby
consents to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the
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foregoing, each party agrees that service of process on such party as provided
in the Section entitled "Notices" shall be deemed effective service of process
on such party.
11.12. No Waiver.
No delay by or on behalf of Winstar and Winstar Sub in exercising any
rights conferred hereunder, and no course of dealing between Winstar and Winstar
Sub and the Corporation shall operate as a waiver of any right granted
hereunder, unless expressly waived in writing by the party whose waiver is
alleged.
11.13. Binding Effect
All covenants, representations, warranties and other stipulations in
this Agreement and other documents referred to herein, given by or on behalf of
any of the parties hereto, shall bind and inure to the benefit of the respective
successors, heirs, personal representatives and assigns of the parties hereto.
11.14. Cumulative Powers.
No remedy herein conferred upon Winstar, Winstar Sub or any holder of
the Class H Preferred Stock is intended to be exclusive of any other remedy, and
each such remedy shall be cumulative and in addition to every other remedy given
hereunder or now or hereafter existing at law, or in equity or by statue or
otherwise.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Securities Purchase Agreement on the date first above written.
WAM!NET INC.
By: /s/ Edward J. Driscoll III
---------------------------------------
Name: Edward J. Driscoll III
Title: Chairman & CEO
Address: 655 Lone Oak Drive
Building A
Eagen, Minnesota 55121
WINSTAR COMMUNICATIONS, INC.
By: /s/ William J. Rouhana
---------------------------------------
Name: William J. Rouhana
Title: Chairman, CEO
Address: 685 Third Avenue
New York, New York 10017
WINSTAR CREDIT CORP.
By: /s/ Timothy R. Graham
---------------------------------------
Name: Timothy R. Graham
Title: President
Address: 685 Third Avenue
New York, New York 10017
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SCHEDULE I
Allowable Purchases
-------------------
<TABLE>
<CAPTION>
Use of
Purchase
Cum Price
Date Amount Warrants cum $ Warrants H shares Cum H shares Proceeds
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
Signing of the -- 500,000 $0 500,000 -- -- --
Agreement
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
General
working
10/02/2000 $5,000,000 50,000 $5,000,000 550,000 5,000 5,000 capital
("WC")
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
10/13/2000 $5,000,000 50,000 $10,000,000 600,000 5,000 10,000 WC
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
11/01/2000 $5,000,000 100,000 $15,000,000 700,000 5,000 15,000 WC
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
11/10/2000 $5,000,000 100,000 $20,000,000 800,000 5,000 20,000 Repay Bank
One
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
11/13/2000 $5,000,000 150,000 $25,000,000 950,000 5,000 25,000 WC
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
12/01/2000 $5,000,000 150,000 $30,000,000 1,100,000 5,000 30,000 WC
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
12/11/2000 $5,000,000 225,000 $35,000,000 1,325,000 5,000 35,000 WC
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
12/15/2000 $5,000,000 225,000 $40,000,000 1,550,000 5,000 40,000 Repay Bank
One
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
01/05/2001 $5,000,000 312,500 $45,000,000 1,862,500 5,000 45,000 WC
----------------- -------------- ------------- --------------- ------------- ----------- -------------- --------------
01/10/2001 $15,000,000 1,137,500 $60,000,000 3,000,000 15,000 60,000 Repay
aggregate
amount owed
to Bank One
</TABLE>
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