SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 10, 1997
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WINSTAR COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10726 13-3585278
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
230 Park Avenue, New York, New York 10169
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 687-7577
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index -- Page 5
Page 1 of Pages
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Item 5. Other Events.
On February 6, 1997, WinStar Communications, Inc. and its wholly owned
subsidiary WinStar Credit Corp. ("WCC" and, together with WinStar
Communications, Inc., the "Company") entered into a Securities Purchase
Agreement ("Securities Purchase Agreement") with certain purchasers, pursuant to
which the Company agreed to sell to such purchasers an aggregate of 4,000,000
shares of the Company's 6% Series A Cumulative Convertible Preferred Stock
("Preferred Shares") and warrants to purchase 1,600,000 shares of the Company's
common stock ("Warrants" and, together with the Preferred Shares, the
"Securities") for an aggregate purchase price of $100 million. The sale of the
Securities was consummated on February 11, 1997. The sale of the Securities was
conducted as an institutional private placement ("Preferred Stock Placement")
through Credit Suisse First Boston Corporation, which acted as placement agent
and received fees equal to 4% of the aggregate purchase price of the Securities
for acting in this capacity. The principal purpose of the Preferred Stock
Placement was to raise proceeds to fund the expansion of the Company's
telecommunications and other operations.
Each Preferred Share has a stated value of $25 ("Stated Value") and
entitles the holder thereof to receive from the Company dividends at a rate per
annum equal to 6% of the Stated Value. Dividends accrue and are cumulative from
the date of issuance and are payable in arrears quarterly as of March 31, June
30, September 30 and December 31 of each year to the record holders of the
Preferred Shares as of March 15, June 15, September 15 and December 15,
respectively, of each year. The Company may pay such dividends in either cash or
through the issuance of additional Preferred Shares, at its election.
The Preferred Shares are convertible into shares of Common Stock
commencing August 11, 1997 by dividing the aggregate Stated Value of the
Preferred Shares being converted by the "Conversion Price;" provided, however,
that from August 11, 1997 through November 10, 1997, only 50% of the Preferred
Shares may be converted. Subject to certain adjustments, the "Conversion Price"
will be: (i) with respect to any conversion of Preferred Shares occurring prior
to February 11, 1998, the lesser of (x) $25 and (y) the average of the closing
bid prices for the Company's common stock for the 20 consecutive trading days
immediately preceding the date of conversion, and (ii) with respect to any
conversion of Preferred Shares occurring on or after February 11, 1998, the
lesser of (x) $25 and (y) the average of the closing bid prices for the 20
consecutive trading days immediately preceding February 11, 1998.
Notwithstanding the foregoing, if a holder of Preferred Stock requests
conversion at a time when the Conversion Price is less than $15.00, then the
Company may (subject to certain notice requirements), in lieu of converting such
shares of Preferred Stock into shares of Common Stock, pay such holder in cash,
an amount equal to 110% of the Liquidation Preference (as defined below), for
each share of Preferred Stock requested to be converted. On February 11, 2002
("Mandatory Conversion Date"), any Preferred Shares still outstanding shall be
automatically converted into shares of the Company's common stock, unless the
Company deermines to pay cash therefor, in an amount equal to the Stated Value
thereof, plus all accrued and unpaid dividends thereon (the "Liquidation
Preference"). Unless paid for in cash, such mandatory conversion will be
effected by delivery of shares of Common Stock to the holders of Preferred Stock
having a value, based upon the closing bid prices for the Common Stock for the
20 consecutive trading days ending one trading day prior to such conversion
date, equal to the Liquidation Preference.
The Warrants entitle the holders thereof to purchase an aggregate of
1,600,000 shares of the Company's common stock for $25 per share at any time
commencing February 11, 1998 and ending February 11, 2002. The Company may
accelerate the expiration date at any time after February 11, 2000 if the
Company's Common Stock trades at $40 or more for a period of 20 consecutive
days.
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The Company and the purchasers also entered into a Registration Rights
Agreement, dated February 6, 1997, pursuant to which the Company is obligated to
file a registration statement under the Securities Act of 1933, as amended (the
"Act"), registering the (i) resale of the Preferred Shares and Warrants and (ii)
the issuance by the Company of the shares of Common Stock upon exercise of the
Warrants, and to have such registration statement declared effective by the
Securities and Exchange Commission ("SEC") on or prior to August 15, 1997. If
such registration statement is not declared effective by the SEC by August 15,
1997, the dividend rate of the Preferred Shares shall increase to 6.5% per annum
until the default under the Registration Rights Agreement is cured.
Additionally, under the Registration Rights Agreement, at any time after May 11,
1997, each holder of the Preferred Shares may demand that the Company file and
have declared effective within 90 days of such demand a registration statement
registering the resale of the shares of Common Stock issuable upon conversion of
the Preferred Shares by the holders thereof; provided that the Company will not
be required to file more than two such registration statements. If any such
latter registration statement is not declared effective by the SEC within the
applicable 90-day period, the Company will be required to pay to the holders of
the Preferred Stock who gave the demand an amount equal to 2% of the Liquidation
Preference of their Preferred Shares for each month until the default under the
Registration Rights Agreement is cured. Such penalty is payable in cash or
additional shares of Preferred Stock, at the Company's election.
On February 10, 1997, the Company issued a press release announcing the
execution of the Securities Purchase Agreement and the transactions contemplated
thereby. A copy of such press is annexed hereto as an exhibit.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: February 14, 1997 WINSTAR COMMUNICATIONS, INC.
(Registrant)
By: /s/ Timothy R. Graham
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Timothy R. Graham
Executive Vice President
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EXHIBIT INDEX
Exhibit Number Description
2.7 Securities Purchase Agreement
3.6 Certificate of Elimination of Series A,B,C,D,E
Preferred Stock
3.7 Certificate of Designations, Rights and Preferences of
6% Series A Cumulative Convertible Preferred Stock
4.9 Form of Series A Preferred Stock Certificate
4.10 Form of Warrant
10.85 Registration Rights Agreement
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
February 6, 1997, by and among WinStar Communications, Inc., a Delaware
corporation (the "Company"), WinStar Credit Corp., a Delaware corporation and
wholly owned subsidiary of the Company ("WCC" and, together with the Company,
the "Sellers"), and each of the purchasers (individually, a "Purchaser" and,
collectively, the "Purchasers") set forth on the execution pages hereof (the
"Execution Pages").
WHEREAS, the Company, WCC and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation D"), as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, each of the Purchasers desires to purchase, upon the
terms and conditions stated in this Agreement, the number of units (the "Units")
set forth on Schedule 1(a) hereto, each Unit consisting of (a) one thousand
shares of the Company's 6% Series A Cumulative Convertible Preferred Stock, par
value $0.01 per share (the "Preferred Stock"), and (b) warrants (the
"Warrants"), in the form attached hereto as Exhibit B, to purchase 400 shares of
the Company's common stock, par value $0.01 per share (the Common Stock), at an
exercise price of $25.00 per share, subject to adjustment as provided therein.
The rights, preferences and privileges of the Preferred Stock, including the
terms upon which such Preferred Stock is convertible into shares of Common Stock
are set forth in the form of Certificate of Designations, Preferences and Rights
attached hereto as Exhibit A (the "Certificate of Designation"). The shares of
Preferred Stock to be issued and sold hereunder are hereinafter referred to as
the "Preferred Shares";
WHEREAS, immediately prior to the Closing Date the Company
will make a contribution to the capital of WCC consisting of 416,670 shares of
Preferred Stock and 166,668 Warrants to provide for WCC's sale of such Preferred
Stock and Warrants to the Purchasers pursuant to this Agreement;
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WHEREAS, contemporaneous with the execution and delivery of
this Agreement the parties hereto are executing and delivering a Registration
Rights Agreement, in the form attached hereto as Exhibit C (the "Registration
Rights Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws;
NOW, THEREFORE, the Company, WCC and the Purchasers hereby
agree as follows:
1. Purchase and Sale of the Units.
(a) Purchase of the Units. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, on February 11,
1997 (the "Closing Date") the Company shall issue and the Sellers shall sell to
each Purchaser and each Purchaser shall purchase from the Sellers that number of
Units set forth next to such Purchaser's name on Schedule 1(a) attached hereto.
The purchase price for each Unit shall be $25,000.
(b) Form of Payment. On the Closing Date each Purchaser shall pay the
aggregate purchase price for the Units purchased by such Purchaser by wire
transfer to the Company or WCC, as the case may be, in accordance with the
appropriate Seller's written wiring instructions, against delivery of duly
executed certificates representing the Preferred Shares and the Warrants
comprising the Units, and the Sellers shall deliver such certificates against
delivery of such aggregate purchase price.
2. Purchasers' Representations and Warranties. Each Purchaser, solely with
respect to such Purchaser, represents and warrants to the Sellers that:
(a) Investment Purpose. Purchaser is purchasing the Preferred Shares, the
shares of Common Stock issuable upon conversion of the Preferred Shares or
otherwise pursuant to the Certificate of Designation (the "Conversion Shares"),
the Warrants and the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares" and, collectively with the Preferred Shares, the
Conversion Shares and the Warrants, the "Securities")) for Purchaser's own
account, for investment purposes only and not with a view towards the public
sale or distribution thereof, except pursuant to sales that are exempt from the
registration
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requirements of the Securities Act or sales registered under the Securities Act.
Purchaser understands that Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered pursuant to the
Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the Registration Rights Agreement.
(b) Accredited Investor Status. Purchaser is an "Accredited Investor" as
that term is defined in Rule 501(a)(1), (2), (3) (5) or (7) of Regulation D.
(c) Reliance on Exemptions. Purchaser understands that the Units are being
offered and sold to Purchaser in reliance upon specific exemptions from the
registration requirements of United States Federal and state securities laws and
that the Sellers are relying upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Preferred Shares and the Warrants.
(d) Information. Purchaser and its counsel, if any, have been furnished all
materials relating to the business, finances and operations of the Company
(including without limitation, the SEC Documents (as hereinafter defined))and
materials relating to the offer and sale of the Securities which have been
requested by Purchaser or its counsel. Purchaser and its counsel, if any, have
been afforded the opportunity to ask questions of the Company and have received
what Purchaser believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
Purchaser or its counsel or any of its representatives shall modify, amend or
affect Purchaser's right to rely on the Sellers'
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representations and warranties contained in Section 3 below. Purchaser
understands that Purchaser's investment in the Securities involves a high degree
of risk.
(e) Governmental Review. Purchaser understands that no United States
Federal or state agency or any other government or governmental agency has
passed upon the merits of or made any recommendation or endorsement of the
Securities.
(f) Transfer or Resale. Purchaser understands that (i) the Securities have
not been and, except as provided in the Registration Rights Agreement, are not
being registered under the Securities Act or any state securities laws, and may
not be offered, sold, pledged or otherwise transferred unless (a) subsequently
registered thereunder, or (b) Purchaser shall have delivered to the Company an
opinion of counsel (which opinion and counsel shall be reasonably acceptable to
the Company) to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration (together
with, if requested by the Company, a certificate from the transferee containing
representations consistent with the conclusions contained in such opinion in
form and substance reasonably acceptable to the Company) or (c) sold pursuant to
Rule 144 promulgated under the Securities Act (or a successor rule) ("Rule
144"); (ii) any sale of such Securities made in reliance on Rule 144 may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder, in each case, other than pursuant to the Registration
Rights Agreement.
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(g) Legends. Purchaser understands that the Preferred Shares, the Warrants
and the certificates for the Conversion Shares and Warrant Shares (until such
time as the Conversion Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser pursuant to Rule 144 without any restriction as to the
public resale thereof) shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
(A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAW, (B) AN OPINION OF COUNSEL, IN
FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAW OR (C) RULE 144 UNDER THE SECURITIES ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
reasonably acceptable to the Company, to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act or (c) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144 without any restriction as to the
number of Securities acquired as of a particular date that can then be
immediately sold. Purchaser agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, pursuant
to an effective registration statement and in accordance with the prospectus
delivery requirements set forth in the rules promulgated by the SEC or in
compliance with an exemption from the registration requirements of applicable
securities law. In the event the above legend is removed from any Security and
thereafter the effectiveness of a registration statement covering such Security
is suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance notice to
Purchaser the Company may require that the above legend be placed on any such
Security that cannot then be sold pursuant to an effective registration
statement or Rule 144 (without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold), which
legend shall be removed when such Security may again be sold pursuant to an
effective registration statement or Rule 144 (without the aforementioned
restriction).
<PAGE>
(h) Authorization; Enforcement. Purchaser has full right, power and
authority to enter into this Agreement and the Registration Rights Agreement and
to consummate the transactions contemplated hereunder and thereunder. This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of Purchaser and are valid and
binding agreements of Purchaser enforceable in accordance with their terms.
(i) Residency; Citizenship. Purchaser is a resident of the state and a
citizen of the country set forth next to Purchaser's name on Schedule 1(a).
(j) Acknowledgments Regarding Placement Agent. Purchaser acknowledges that
Credit Suisse First Boston Corporation is acting as placement agent (the
"Placement Agent") for the Securities being offered hereby and will be
compensated by the Company for acting in such capacity. Purchaser further
acknowledges that the Placement Agent has acted solely as placement agent in
connection with the offering of the Securities by the Sellers, that the
information and data provided to Purchaser and referred to in subsection (d)
above have not been subjected to independent verification by the Placement
Agent, and that the Placement Agent makes no representation or warranty with
respect to the accuracy or completeness of such information, data or other
related disclosure material. Purchaser further acknowledges that in making its
decision to enter into this Agreement and purchase the Securities it has relied
on its own examination of the Company and the terms of, and the risks and
consequences, of holding, the Securities.
(k) Acknowledgment of Use of Proceeds. The Purchaser acknowledges and
understands that the Company and WCC intend to use the proceeds derived from the
sale of the Securities for working capital for the Company's telecommunications
and non-telecommunications businesses and to make investments in, acquire, make
loans to, or otherwise enter into business arrangements with, companies which
may or may not be involved in the telecommunications business. In that
connection, the Company and/or WCC may contribute such proceeds to WinStar New
Media Company, Inc. and other subsidiaries of the Company which acquire, produce
and distribute information and entertainment content or engage in other
non-telecommunication businesses.
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(l) 10% Owner. After giving effect to the purchase of Preferred Stock and
Warrants hereunder, such Purchaser will not own 10% or more of the voting
securities of the Company.
3. Representations and Warranties of the Company. The Company represents
and warrants to each Purchaser that:
(a) Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on the
operations, properties, financial condition or prospects of the Company and its
direct and indirect subsidiaries on a consolidated basis or on the transactions
contemplated hereby.
(b) Authorization; Enforcement. (i)(a) The Sellers have the requisite
corporate power and authority to enter into and perform this Agreement, and the
Company has the requisite corporate power and authority to enter into and
perform the Registration Rights Agreement and the Warrants and (b) the Company
has the requisite corporate power and authority to issue and the Sellers have
the requisite corporate power and authority to sell the Preferred Shares and the
Warrants in accordance with the terms hereof and the Company has the requisite
corporate power and authority to issue the Conversion Shares and Warrant Shares
upon conversion of the Preferred Shares and exercise of the Warrants,
respectively, in accordance with the terms thereof; (ii) the execution and
delivery of this Agreement by the Sellers and the execution and delivery by the
Company of the Registration Rights Agreement and the Warrants and the
consummation by the Sellers of the transactions contemplated hereby and thereby
(including without limitation the issuance by the Company of the Preferred
Shares and the Warrants and the issuance and reservation for issuance by the
Company of the Conversion Shares and Warrant Shares issuable upon conversion and
exercise thereof) have been duly authorized by the Company's or WCC's Board of
Directors, as the case may be, and no further consent or authorization of the
Sellers, each of their Board or Directors or its stockholders is required (under
Rule 4460(i) promulgated by the National Association of Securities Dealers (the
"NASD") or otherwise); (iii) this Agreement has been duly executed and delivered
by the Sellers; and (iv) this Agreement constitutes, and, upon execution and
delivery by the Company of the Registration Rights Agreement and the Warrants
such agreements will constitute, valid and binding obligations of the Company
and/or WCC, as the case may be, and will be enforceable against the Company or
WCC, as the case may be, in accordance with their terms.
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(c) Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock and the number of shares issued
and outstanding (including the number of shares reserved for issuance pursuant
to the Company's stock option plans and the number of shares reserved for
issuance pursuant to securities (other than the Preferred Shares and the
Warrants) exercisable for, or convertible into or exchangeable for any shares of
Common Stock) is set forth on Schedule 3(c). All of such outstanding shares of
capital stock have been, or upon issuance will be, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company (including the
Preferred Shares, the Conversion Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except as disclosed in Schedule 3(c) or as
contemplated herein, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities under the Securities Act
(except the Registration Rights Agreement and agreements pursuant to which the
Company has already filed registration statements). The Company has furnished to
counsel for the Purchasers true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("Certificate of
Incorporation") and the Company's By-laws as in effect on the date hereof (the
"By-laws"). Prior to the Closing Date, the Certificate of Designation, in the
form attached as Exhibit A hereto, will have been duly filed with the Secretary
of State of Delaware and, on and after the Closing Date, the Purchasers will be
entitled to the rights set forth therein. The Sellers shall provide Purchasers
with a written update of this representation signed by the Seller's Chief
Executive Officer, Chief Financial Officer or Executive Vice President on behalf
of the Company as of the Closing Date.
(d) Issuance of Shares. The Preferred Shares are duly authorized and, upon
issuance in accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances and will not be subject to or in violation of preemptive rights or
other similar rights of stockholders of the Company. The Conversion Shares and
Warrant Shares are duly authorized and reserved for issuance, and, upon
conversion of the Preferred Shares and exercise of the Warrants in accordance
with the terms thereof, will be validly issued, fully paid and non-assessable,
and free from all taxes, liens, claims and encumbrances and will not be subject
to or in violation of preemptive rights or other similar rights of stockholders
of the Company.
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(e) No Conflicts. The execution, delivery and performance of this Agreement
by the Sellers, the execution, delivery and performance of the Registration
Rights Agreement and the Warrants by the Company, the performance by the Company
of its obligations under the Certificate of Designation, and the consummation by
the Sellers of the transactions contemplated hereby and thereby (including
without limitation the issuance by the Company of the Preferred Shares and the
Warrants and the issuance and reservation for issuance by the Company of the
Preferred Shares (as payment of a dividend or otherwise), Conversion Shares and
Warrant Shares) will not (i) conflict with or result in a violation of the
Certificate of Incorporation or By-laws (although Purchaser understands that the
Company currently has 75,000,000 shares of Common Stock authorized and
49,505,119 shares of Common Stock outstanding after giving effect to the
exercise of all outstanding options and warrants and conversion of all
convertible securities as of the date hereof and that, accordingly, if the
market price of the Common Stock decreases significantly, the Company may not
have a sufficient number of shares of Common Stock authorized to issue upon
conversion of the Preferred Stock or exercise of the Warrants, in which case the
Company shall use its best efforts to promptly increase its authorized Common
Stock to accommodate such issuances), (ii) conflict with or result in a breach
or violation of any terms or provisions of, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or other instrument to which the
Company or any of its subsidiaries is a party, or (iii) result in a violation of
any law or any rule, regulation, order, judgment or decree of any court or
governmental agency (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for, in the case of both (ii) and (iii) above, such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its subsidiaries is in default (and no event has
occurred which, with notice or lapse of time or both, would put the Company or
any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for possible defaults or rights as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws,
neither of the Sellers is required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants or to perform its obligations under the Certificate of
Designation, in each case in accordance with the terms hereof or thereof. The
Company is not in violation of the listing requirements of the Nasdaq National
Market ("NASDAQ") and does not reasonably anticipate that the Common Stock will
be delisted from NASDAQ for the foreseeable future.
<PAGE>
(f) SEC Documents, Financial Statements. Since December 31, 1995, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
(other than exhibits) incorporated by reference therein, taken together with,
and as supplemented by, the Company's preliminary prospectus dated December 20,
1996) being hereinafter referred to herein as the "SEC Documents"). The Sellers
have delivered to counsel for the Purchasers true and complete copies of the SEC
Documents, except for such exhibits, schedules and incorporated documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents at the time they were filed with the SEC contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents or except as set forth
on Schedule 3(f), the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company. The Sellers have not
provided to any Purchaser any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Sellers but which
has not been so disclosed; provided; however, that the Purchasers acknowledge
that the Company has disclosed to them preliminary estimates of its operating
results for the year ended December 31, 1996 ("96 Results").
(g) Absence of Certain Changes. Since September 30, 1996, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in the SEC Documents. Purchaser acknowledges
that the 96 Results do not constitute such a material adverse change or
development.
(h) Absence of Litigation. Except as disclosed in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation (collectively,
"Proceedings") before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company, any of
its subsidiaries, or any of their respective directors or officers in their
capacities as such, except for such Proceedings which, if determined adversely
to the Company, would not, singly or in the aggregate, have a Material Adverse
Effect.
<PAGE>
(i) Disclosure. All information relating to or concerning the Sellers set
forth in this Agreement, taken together with, and as supplemented by, the SEC
Documents, is true and correct in all material respects and the Sellers have not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to the Company or any of its subsidiaries or their respective
businesses, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(j) Acknowledgment Regarding Purchasers' Purchase of the Securities. The
Sellers acknowledges and agree that the Purchasers are not acting as financial
advisors or fiduciaries of the Sellers (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby, and any advice given
by Purchasers, or any of their respective representatives or agents, in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to the Purchasers' purchase of the Preferred Shares and the
Warrants. The Sellers further represent to the Purchasers that the Sellers'
decision to enter into this Agreement has been based solely on the independent
evaluation of the Sellers and their representatives.
(k) Current Public Information. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the Securities Act.
(l) No General Solicitation. Neither of the Sellers nor, to either of the
Seller's knowledge, any distributor participating on the Sellers' behalf in the
transactions contemplated hereby (if any), nor to either of the Seller's
knowledge any person acting for the Sellers or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
(m) No Integrated Offering. Neither the Sellers, nor any of their
affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act.
<PAGE>
(n) No Brokers. Neither of the Sellers has taken any action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with the Placement Agent, whose
customary fee and certain expenses will be paid by the Company.
4. Covenants.
(a) Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this Agreement.
(b) Form D; Blue Sky Laws. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to each Purchaser promptly after such filing. The Company shall, on or before
the Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Preferred Stock and the Warrants for sale to the
Purchasers pursuant to this Agreement under any applicable securities or "blue
sky" laws of the states of the United States or obtain exemption therefrom, and
shall provide evidence of any such action so taken to each Purchaser on or prior
to such Closing Date.
(c) Reporting Status. So long as the Purchasers beneficially own any of the
Securities and such Securities represent more than the right to receive only
cash from the Company (or its successor) upon exercise thereof, the Company
shall timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
(d) Use of Proceeds. The Sellers shall use the proceeds from the sale of
the Units for general corporate purposes.
(e) Financial Information. The Company agrees to send the following reports
to each Purchaser until such Purchaser transfers, assigns or sells all of its
interest in the Securities: (i) within ten days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its proxy statements, its Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii) within two
days after their release, copies of all press releases issued by the Company.
(f) Reservation of Shares. Except as set forth in Section (3)(e)(i), the
Company shall at all times have authorized and reserved for the purpose of
issuance a sufficient number of shares of Common Stock to provide for the full
conversion of the outstanding Preferred Shares and issuance of the Conversion
Shares in connection therewith and the full exercise of the Warrants and the
issuance of the Warrant Shares in connection therewith. In that regard, a
"sufficient number of shares" with respect to the Preferred Shares shall be
deemed to be equal to such number of Conversion Shares issuable upon conversion
of the outstanding Preferred Shares if the Conversion Price (as defined in the
Certificate of Designation) were 50% of the Conversion Price then in effect. The
Company shall not reduce the number of shares reserved for issuance of the
Conversion Shares and the Warrant Shares without the consent of each of the
Purchasers, which consent will not be unreasonably withheld.
<PAGE>
(g) Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which the shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Preferred
Shares and Warrant Shares from time to time issuable upon exercise of the
Warrants.
(h) Corporate Existence. So long as any Purchaser beneficially owns any
Preferred Shares or Warrants and such Securities represent more than the right
to receive only cash from the Company (or its successor) upon exercise thereof,
the Company shall maintain its corporate existence, except in the event of a
merger, consolidation or sale of all or substantially all of the Company's
assets where the surviving or successor entity in such transaction or the parent
thereof assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith regardless of whether or not the
Company would have had a sufficient number of shares of Common Stock authorized
and available for issuance in order to affect the conversion of all Preferred
Shares and exercise in full of all Warrants outstanding as of the date of such
transaction.
(i) Expenses. The Company shall pay all expenses incurred in connection
with the negotiation, execution, delivery and performance of this Agreement,
including the fees and expenses of Cravath, Swaine & Moore, special counsel for
the Purchasers.
5. Transfer Agent Instructions. The Company shall instruct its transfer
agent to issue certificates, registered in the name of the appropriate Purchaser
or its nominee, for the Conversion Shares and Warrant Shares in such amounts as
specified from time to time by such Purchaser to the Company upon conversion of
the Preferred Shares or exercise of the Warrants. Prior to registration of the
Conversion Shares and Warrant Shares under the Securities Act or resale of such
Securities under Rule 144, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than such instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 2(f) hereof, in the case of the
Conversion Shares and Warrant Shares prior to registration of the Conversion
Shares and Warrant Shares under the Securities Act, will be given by the Company
to its transfer agent and that the Securities shall, except as may be limited by
applicable securities laws, otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Purchasers' obligation as set forth in Section 2(f) hereof to resell the
Securities pursuant to an effective registration statement and in accordance
with the prospectus delivery requirements set forth in the rules promulgated by
the SEC or in compliance with an exemption from the registration requirements of
any applicable securities laws. If a Purchaser provides the Company with an
opinion of counsel, which opinion of counsel shall be reasonably acceptable to
the Company, to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from registration, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, shall promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser.
<PAGE>
6. Conditions to the Company's Obligation to Sell. The obligation of the
Company hereunder to issue and the obligation of each of the Sellers to sell the
Units to each of the Purchasers on the Closing Date is subject to the
satisfaction, or the waiver by the applicable Seller, on or before such Closing
Date, of each of the following conditions:
(a) Purchaser shall have executed the signature page to this Agreement and
the Registration Rights Agreement, and delivered the same to the Sellers;
(b) Purchaser shall have delivered the aggregate purchase price for the
Units purchased in accordance with Section 1(b) above;
(c) Each representation and warranty of the Purchaser, on and as of the
Closing Date, shall be true and correct in all material respects with the same
effect as though made on and as of the Closing Date (except for representations
and warranties that speak as of a specific date) and Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by Purchaser on or prior to the Closing Date;
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. Conditions to each Purchaser's Obligation to Purchase. The obligation of
each of the Purchasers hereunder to purchase the Units on the Closing Date is
subject to the satisfaction, or waiver by each of the Purchasers, on or before
the Closing Date, of each of the following conditions:
(a) Each of the Sellers shall have executed this Agreement and the Company
shall have executed the Registration Rights Agreement, and delivered the same to
the Purchasers;
(b) The Certificate of Designation shall have been accepted for filing with
the Secretary of State of Delaware, and a copy thereof certified by the
Secretary of State shall have been delivered to counsel for the Purchasers;
<PAGE>
(c) The Sellers shall have delivered to each Purchaser duly executed
certificates representing the Preferred Shares and Warrants being purchased in
accordance with Section 1(b) above;
(d) The Common Stock shall continue to be authorized for quotation on
NASDAQ and trading in the Common Stock (or NASDAQ generally) shall not have been
suspended by the SEC or NASD;
(e) (i) Each representation and warranty of the Sellers shall be, on and as
of the Closing Date, true and correct in all material respects with the same
effect as though made on and as of the Closing Date (except for representations
and warranties that speak as of a specific date other than the Closing Date),
(ii) the Sellers shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Sellers on or prior
to the Closing Date and (iii) the Purchasers shall have received a certificate,
executed by an appropriate executive officer of the respective Seller and dated
as of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Purchasers;
(f) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby, which
prohibits the consummation of any of the transactions contemplated by this
Agreement;
(g) The Purchasers shall have received the officer's certificate described
in Section 3(c) above, dated as of the Closing Date; and
(h) The Purchasers shall have received opinions of the Company's counsel,
dated as of the Closing Date, (i) with respect to Federal telecommunications
matters, in form, scope and substance reasonably satisfactory to the Purchasers,
and (ii) with respect to other matters, in substantially the form of Exhibit D-1
attached hereto.
8. Governing Law; Miscellaneous. (a) Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN NEW YORK CITY WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
<PAGE>
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither of the Sellers or the Purchasers make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
each of the Sellers and all of the Purchasers.
<PAGE>
(f) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective three days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed as follows:
If to either of the Sellers:
WinStar Communications, Inc.
230 Park Avenue
New York, NY 10169
Attn: Timothy Graham, Executive
Vice President and General Counsel
with copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016
Attn: David Alan Miller, Esq.
If to a Purchaser, to the address set forth immediately below
such Purchaser's name on the Execution Pages.
Each party shall provide notice to the other parties of any
change in address.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Neither of the
Sellers or the Purchasers shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, each of the Purchasers may assign its rights
hereunder to any of such Purchaser's "affiliates", as that term is defined under
the Exchange Act, to the extent such affiliate acquires the Preferred Stock and
Warrants from such Purchaser, without the consent of the appropriate Seller.
This provision shall not limit a Purchaser's right to transfer the Securities
pursuant to the terms of the Certificate of Designation, the Warrants and this
Agreement or to assign such Purchaser's rights under the Certificate of
Designation, the Warrants and the Registration Rights Agreement (but not this 4
Agreement) to any such transferee.
(h) Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
(i) Survival. The representations and warranties of the Sellers and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
Closing Date hereunder notwithstanding any due diligence investigation conducted
by or on behalf of the Purchasers. The Company agrees to indemnify and hold
harmless each of the Purchasers and each of such Purchaser's officers,
directors, employees, partners, agents and affiliates and each of the Purchasers
agrees to indemnify and hold harmless each of the Sellers and each of such
Seller's officers, directors, employees, partners, agents and affiliates for
loss or damage arising as a result of or related to any breach (or, in the case
of a claim by anyone against any such person, any alleged breach) by the Sellers
(for purposes of the Sellers' indemnification) or such Purchaser (for purposes
of such Purchaser's indemnification) of any of its representations or covenants
set forth herein, including advancement of expenses as they are incurred.
<PAGE>
(j) Publicity. The Company and each of the Purchasers shall have the right
to approve before issuance any press releases, SEC, NASDAQ, NASD or other
regulatory filings, or any other public statements with respect to the
transactions contemplated hereby or the identity of the Purchasers; provided,
however, that the Company shall be entitled, without the prior approval of the
Purchasers, to make any press release or SEC, NASDAQ, NASD or other regulatory
filings with respect to such transactions as is required by applicable law and
regulations. The parties hereto agree that the press release in the form of
Exhibit E hereto shall be released promptly after execution hereof.
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Personal and Other Liability. The Purchasers understand and acknowledge
that no recourse under or upon any obligation, covenant, representation,
warranty or agreement of the Company hereunder, or in the Warrant, Certificate
of Designations or Registration Rights Agreement, shall be had against WCC or
against any incorporator, shareholder, officer, director, employee or
controlling person of the Company or WCC or of any successor person thereof.
Each Purchaser, by accepting the Preferred Stock and Warrant, waives and
releases all such liability.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
WINSTAR COMMUNICATIONS, INC.,
by: /s/
-------------------------
Name:
Title:
WINSTAR CREDIT CORP.
by: /s/
--------------------------
Name:
Title:
THE PURCHASERS:
BY CREDIT SUISSE FIRST BOSTON CORPORATION
by: /s/
-------------------------
Name:
Title:
<PAGE>
WINSTAR COMMUNICATIONS, INC.
CERTIFICATE OF ELIMINATION OF
SERIES A, SERIES B, SERIES C, SERIES D
AND SERIES E PREFERRED STOCK
-----------------------------------------------------
Pursuant to Section 151 of the
Delaware General Corporation Law
-----------------------------------------------------
WinStar Communications, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware
("Corporation"),
DOES HEREBY CERTIFY:
FIRST: The name of the Corporation is: WinStar Communications, Inc.
SECOND: That the Corporation was originally incorporated in Delaware on
September 28, 1990 under the name Robern Apparel, Inc. and changed its name to
"Robern Industries, Inc." on October 9, 1992 and again to "WinStar
Communications, Inc." on December 2, 1993.
THIRD: That a class of Series A Preferred Stock, par value $.01 per share
("Series A Preferred Stock"), was established by the Corporation's Certificate
of Incorporation as filed with the Delaware Secretary of State on September 28,
1990, with such terms and conditions as set forth in such Certificate.
FOURTH: That a class of Series B Preferred Stock, par value $.01 per share
("Series B Preferred Stock"), was established by the Corporation's Restated
Certificate of Incorporation as filed with the Delaware Secretary of State on
April 2, 1991, with such terms and conditions as set forth in such Certificate.
FIFTH: That a class of Series C Preferred Stock, par value $.01 per share
("Series C Preferred Stock"), was established by the Corporation's Certificate
of Designations, Preferences and Rights of 6% Series C Convertible Preferred
Stock as filed with the Delaware Secretary of State on August 27, 1991, with
such terms and conditions as set forth in such Certificate.
SIXTH: That a class of Series D Preferred Stock, par value $.01 per share
("Series D Preferred Stock"), was established by the Corporation's Certificate
of Designations, Preferences and Rights of Series D Convertible Preferred Stock
as filed with the Delaware Secretary of State on February 15, 1994, with such
terms and conditions as set forth in such Certificate.
SEVENTH: That a class of Series E Preferred Stock, par value $.01 per share
("Series E Preferred Stock"), was established by the Corporation's Certificate
of Designations, Preferences and Rights of Series E Convertible Preferred Stock
as filed with the Delaware Secretary of State on September 21, 1994, with such
terms and conditions as set forth in such Certificate.
EIGHTH: That no issued shares of the Series A, Series B, Series C, Series D
or Series E Preferred Stock remain outstanding and the Corporation no longer
desires to issue any shares of such Preferred Stock.
NINTH: That pursuant to the authority so vested in the board of directors
pursuant to Section 151(g) of the Delaware General Corporation Law, the board of
directors by unanimous written consent dated February 4, 1997, duly adopted the
following resolution:
RESOLVED, that, since none of the previously designated Series A, Series B,
Series C, Series D or Series E Preferred Stock are outstanding and none will be
issued in accordance with the Corporation's Certificate of Incorporation
previously
<PAGE>
filed and supplemented by Certificates of Designations, Rights and Preferences,
which established the Series A, Series B, Series C, Series D or Series E
Preferred Stock, the Corporation's Board of Directors, pursuant to the authority
vested in it by the provisions of Section 151(g) of the Delaware General
Corporation Law, hereby eliminates from the Corporation's Certificate of
Incorporation, as amended and supplemented, all matters set forth therein with
respect to the previously designated Series A, Series B, Series C, Series D or
Series E Preferred Stock and the Corporation, by its Board of Directors, deems
such previously designated Series A, Series B, Series C, Series D or Series E
Preferred Stock to be cancelled.
IN WITNESS WHEREOF, we have executed this Certificate on behalf of the
Corporation, under penalties of perjury, and believe the facts stated herein to
be true, this 5th day of February 1997.
WINSTAR COMMUNICATIONS, INC.
By: /s/ Timothy R. Graham
--------------------------
Timothy R. Graham
Executive Vice President
By: /s/ Kenneth J. Zinghini
--------------------------
Kenneth J. Zinghini
Assistant Secretary
<PAGE>
CORPORATE ACKNOWLEDGEMENTS
STATE OF New York)
: ss.:
COUNTY OF New York)
On the 5th day of February 1997, before me personally came
Timothy R. Graham, to me known, who, being by me duly sworn, did depose and say
that he believes the facts stated in the Certificate of Elimination to be true;
that he is the Executive Vice President of WinStar Communications, Inc., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
- ----------------------------- ---------------------------
Notary Public Commission Expiration Date
STATE OF New York)
: ss.:
COUNTY OF New York)
On the 5th day of February 1997, before me personally came
Kenneth J. Zinghini, to me known, who, being by me duly sworn, did depose and
say that he believes the facts stated in the Certificate of Elimination to be
true; that he is the Assistant Secretary of WinStar Communications, Inc., the
corporation described in and which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.
- ----------------------------- ---------------------------
Notary Public Commission Expiration Date
Pursuant to Section 151(g) of the Delaware General Corporation Law, at such time
as the above Certificate is filed and accepted by the Delaware Secretary of
State, the Certificate will automatically become effective and will have the
effect of eliminating from the Corporation's Restated Certificate of
Incorporation, as amended, all matters set forth therein with respect to the
Series A, Series B, Series C, Series D and Series E Preferred Stock.
<PAGE>
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
6% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
of
WINSTAR COMMUNICATIONS, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
WinStar Communications, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that, pursuant to the authority vested in the
Board of Directors of the Corporation (the "Board of Directors") under its
Articles of Incorporation, and in accordance with Section 151 of the Delaware
General Corporation Law, the Board of Directors has adopted the following
resolution:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation in accordance with the provisions
of its Articles of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of a series of the Corporation's
preferred stock, par value $0.01 per share, and hereby states the designation
and number of shares, and fixes the relative rights, preferences, privileges,
powers and restrictions thereof as follows:
6% Series A Cumulative Convertible Preferred Stock:
Designation and Amount. The designation of this series,
which consists of 6,000,000 shares of Preferred Stock, is the 6% Series A
Cumulative Convertible Preferred Stock (the "Preferred Stock") and the stated
value shall be Twenty-Five Dollars ($25.00) per share (the "Stated Value").
Rank. All shares of the Preferred Stock shall rank (i)
senior to the Corporation's common stock, par value $0.01 per share (the "Common
Stock") and to any other class of capital stock or series of preferred stock
established hereafter by the Board of Directors, the terms of which do not
expressly provide that it ranks senior to or pari passu with the Preferred Stock
(collectively, the "Junior Securities"), (ii) pari passu with any class or
series of preferred stock established hereafter by the Board of Directors, the
terms of which expressly provide that it ranks pari passu with the Preferred
Stock (the "Pari Passu Securities"), and (iii) junior to any class or series of
<PAGE>
Preferred Stock of the Corporation established hereafter by the Board of
Directors, the terms of which expressly provide that such class or series will
rank senior to the Preferred Stock (the "Senior Securities"), in each case, as
to the distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary or, with respect to the payment of
dividends.
Dividends. (a) The Corporation shall pay out of funds
legally available therefor a fixed dividend on each outstanding share of
Preferred Stock at a rate per annum equal to 6.0% of the Stated Value (or 6.5%
during the occurrence of a Registration Default (as such term is defined in and
according to the terms of, the Registration Rights Agreement, dated February 6,
1997, between the Corporation and the parties thereto)). Dividends on shares of
Preferred Stock shall accrue and be cumulative from the date of issuance of such
shares. Dividends shall be payable in arrears quarterly as of March 31, June 30,
September 30 and December 31 of each year (each a "Dividend Payment Date") to
the holders of record of the Preferred Stock on the preceding March 15, June 15,
September 15 and December 15 (each a "Regular Dividend Date"). Dividends
accruing for any period less than a full dividend period will be computed on the
basis of a 360-day year comprised of 12 30-day months. Dividends shall be
payable, on a cumulative basis, such that any unpaid dividends will accumulate
and the arrearage shall be paid in full prior to any dividends being paid to the
holders of Junior Securities.
(b) Any dividend on the Preferred Stock pursuant to Section
3(a) shall be, at the option of the Corporation, payable (i) in cash or (ii)
through the issuance of a number of additional shares (rounded to the nearest
whole share) of Preferred Stock (the "Additional Shares") equal to the dividend
amount divided by the Stated Value of such Additional Shares.
(c) All dividends paid with respect to shares of the Preferred
Stock pursuant to Section 3(a) shall be paid pro rata to the holders entitled
thereto.
(d) In the event that full dividends are not paid or made
available to the holders of all outstanding shares of Preferred Stock and of any
Pari Passu Securities and funds available for payment of dividends shall be
insufficient to permit payment in full to holders of all such stock of the full
preferential amounts to which they are then entitled, then the entire amount
available for payment of dividends shall be distributed ratably among all such
holders of Preferred Stock and of any Pari Passu Securities in proportion to the
full amount to which they would otherwise be respectively entitled.
(e) Preferred Stock surrendered for conversion during the
period from the close of business on any Regular Dividend Date next preceding
any Dividend Payment Date must be accompanied by payment in cash or Additional
Shares, as the case may be, in an amount equal to the accrued and
<PAGE>
unpaid dividend thereon which the holder thereof is to receive on such Dividend
Payment Date in respect of the Preferred Stock so surrendered.
Liquidation Preference. (a) If the Corporation shall commence
a voluntary case under the Federal bankruptcy laws or any other applicable
Federal or State bankruptcy, insolvency or similar law, or consent to the entry
of an order for relief in an involuntary case under any law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Corpora-
tion shall be entered by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws or any other applicable
Federal or State bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 60 consecutive days and, on account of any such event (a "Liquidation
Event"), the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no distribution
shall be made to the holders of any shares of Common Stock or Junior Securities
upon liquidation, dissolution or winding up unless prior thereto the holders of
shares of the Preferred Stock shall have received the Liquidation Preference (as
defined in Section 4(b)) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Preferred Stock and holders of Pari Passu Securities shall be
insufficient to permit the payment to such holders of the Liquidation Preference
(as defined below) payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Preferred Stock and the
Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the Liquidation Preference payable on each such
share bears to the aggregate Liquidation Preference payable on all such shares.
(b) For purposes hereof, "Liquidation Preference" means (i)
with respect to a share of Preferred Stock, the Stated Value thereof plus the
amount of any accrued and unpaid dividends as of the date of final distribution
to the holder thereof or with respect to any other event as of the date the
measurement of such Liquidation Preference is relevant to such event and (ii)
with respect to any Pari Passu Securities, as set forth in the Certificate of
Designation filed in respect thereof.
Conversion Rights. (a) (i) Subject to the limitations
contained in Section 5(a)(ii) below, each holder of shares of the Preferred
Stock may, at any time and from time to time upon surrender of the certificates
therefor,
<PAGE>
convert any or all of its shares of Preferred Stock into shares of Common Stock.
Each share of Preferred Stock shall be convertible into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing (x)
the Liquidation Preference thereof by (y) the Conversion Price (as defined
below) then in effect.
(ii) Conversion of shares of the Preferred Stock
shall be subject to the following limitations:
(a) Prior to August 11, 1997, holders of the
Preferred Stock may not convert any shares of Preferred Stock and any Notice of
Conversion (as defined below) delivered to the Corporation prior to such time
will be void and of no effect.
(b) On and after August 11, 1997 and prior
to November 11, 1997, holders of the Preferred Stock may convert shares of
Preferred Stock in accordance with the procedures set forth in Section 5(f)
below subject, however, to the following additional conditions:
(1) any holder electing to convert any such shares of
Preferred Stock shall be required to surrender Preferred Stock
Certificates (as defined in Section 5(f) below) constituting 200% of
the number of shares of Preferred Stock to be converted as set forth in
the related Notice of Conversion (as defined in Section 5(f) below);
and
(2) upon honoring any such Notice of Conversion, the
Corporation shall place a legend upon the share certificate
representing the balance of such shares prior to returning such share
certificate to such holder, which legend will prohibit the conversion
of the shares of Preferred Stock represented thereby prior to November
11, 1997, and thereupon the balance of such shares may not be converted
prior to such date and any Notice of Conversion delivered to the
Corporation with respect to such shares prior to such date will be void
and of no effect.
(C) Notwithstanding clauses (A) and (B)
above, on and after the Change of Control Date (as defined in Section 6(b)
below), all of the shares of Preferred Stock may be converted without limitation
as to date or amount; provided, however, that for purposes of this paragraph
(C), the definition of "Change of Control" shall be deemed to not include the
exception for the Permitted Investor.
(D) If a holder of Preferred Stock requests
a conversion of such shares and the Conversion Price (as defined below)
applicable to such conversion is less than $15.00 (as such amount may be
adjusted from time to time pursuant to Section 5(e) below, the "Minimum Price"),
the Corporation may, in lieu of converting such shares of Preferred Stock into
shares of Common Stock, pay such holder in cash an amount equal to 110% of the
Liquidation Preference for each such share of Preferred Stock requested to be
converted; provided, however, that the Corporation may
<PAGE>
not exercise such cash payment option after February 11, 1998 unless (1) at
least 30 days and not more than 60 days prior thereto the Corporation shall have
notified the holders of the Preferred Stock in good faith that the Corporation
intends to exercise such option with respect to any such conversion within the
applicable period; provided further, however, that the giving of such notice
will not obligate the Corporation to exercise such option at any time and (2)
during the applicable period the conversion of the Preferred Stock and resale of
the Common Stock issued upon such conversion does not require the delivery of a
statutory prospectus under the Securities Act or, if it does, such a prospectus
is then available. Notwithstanding the foregoing, in order for the Corporation
to exercise any such cash payment option at any time, the Corporation must
notify the holder of such Preferred Stock (to the fax number set forth on the
related Notice of Conversion) of such election not later than 10:00 p.m. on the
next Trading Date following receipt of such Notice of Conversion. In the event
that the Corporation receives a notice by 8:30 a.m. on any day from a holder
indicating an interest in converting Preferred Stock, the Corporation may not
elect to utilize the cash pay option referred to in the preceding sentence in
connection with any conversion of such holder's Preferred Stock on such day
unless the Corporation notifies such holder by 9:30 a.m. that the Corporation
intends to elect to utilize such option with respect to such Preferred Stock.
The notice to the Corporation shall be made by fax to a number specified by the
Corporation in writing prior to the initial conversion date to all the holders
of the Preferred Stock, and such notice to any such holder shall be made by
telephone to the number specified by such holder in its notice to the
Corporation.
(b) Conversion Price. Subject to Section 5(c) below, the
"Conversion Price" shall be (i) with respect to any conversion of Preferred
Stock occurring on a Conversion Date (as defined in Section 5(f)(iv) below)
prior to February 11, 1998, the lesser of (x) $25.00 (as such amount may be
adjusted from time to time pursuant to Section 5(c), the "Initial Maximum
Price") and (y) the average of the closing bid prices (subject to adjustment
pursuant to Section 5(d)) for the Common Stock as reported by the Nasdaq
National Market, or the principal securities exchange or other securities market
on which the Common Stock is then being traded (the "Closing Bid Price"), for
the Trading Period (as defined below) ending on the last Trading Day immediately
preceding the Conversion Date, and (ii) with respect to any conversion of
Preferred Stock occurring on a Conversion Date that is on or after February 11,
1998 the lesser of (x) the Initial Maximum Price on the Trading Day immediately
preceding February 11, 1998 and (y) the average of the Closing Bid Prices for
the Trading Period ending on the last Trading Day immediately preceding February
11, 1998 (the Conversion Price determined in accordance with clause (ii), as the
same may be adjusted from time to time pursuant to Section 5(c), being herein
called the "Final Conversion Price"). For purposes of this Agreement, "Trading
Day" shall mean any day on which the Common Stock is traded for any period on
the Nasdaq National Market or on the principal
<PAGE>
securities exchange or other securities market on which the Common Stock is then
being traded and "Trading Period" shall mean 20 consecutive Trading Days. The
Corporation will promptly notify the holders of the Preferred Stock of the
Final Conversion Price.
(c) Conversion Price Adjustments. The then Applicable
Conversion Price (as defined below) shall be subject to adjustment from time to
time as follows:
(i) Adjustment Due to Stock Split, Stock Dividend, Etc. If at any time when
any shares of Preferred Stock are issued and outstanding, the number of
outstanding shares of Common Stock is increased by a stock split, stock
dividend, combination, reclassification or other similar event, the Applicable
Conversion Price shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Applicable Conversion Price shall be proportionately increased. In such event,
the Corporation shall notify the Transfer Agent of such change on or before the
effective date thereof. The "Applicable Conversion Price" shall mean, (i) during
the period prior to February 11, 1998, the Initial Maximum Price (as such price
may be adjusted from time to time) and (ii) during the period on or after
February 11, 1998, the Final Conversion Price (as such price may be adjusted
from time to time).
(ii) Adjustment Due to Merger, Consolidation, Etc. If, at any time when any
shares of Preferred Stock are issued and outstanding, there shall be (i) any
reclassifica- tion or change of the outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination described in
Section 5(c)(i) above), (ii) any consolidation or merger of the Corporation with
any other corporation (other than a merger in which the Corporation is the
surviving or continuing entity and its capital stock is unchanged), (iii) any
sale or transfer of all or substantially all of the assets of the Corporation or
(iv) any share exchange pursuant to which all of the out- standing shares of
Common Stock are converted into other securities or property, then the holders
of Preferred Stock shall thereafter have the right to receive upon conversion of
their Preferred Stock, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conver- sion, such shares of stock, securities and
other property as may be issued or payable with respect to or in exchange for
the number of shares of Common Stock immediately theretofore issuable and
receivable upon the conversion of the Preferred Stock held by such holders had
such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holders
of the Preferred Stock to the effect that the provisions hereof (including,
without limitation, provisions for adjustment of the Applicable Conversion Price
and the corresponding number of shares of
<PAGE>
Common Stock issuable upon conversion of the Preferred Stock) shall thereafter
be applicable, as nearly as may be practicable in relation to any shares of
stock or securities thereafter deliverable upon the conversion thereof. The
Corporation shall not effect any transaction described in this subsection (ii)
unless (x) each holder of the Preferred Stock has been mailed written notice of
such transaction at least 20 days prior thereto and in no event later than 10
days prior to the record date for the determination of shareholders entitled to
vote with respect thereto, and (y) the resulting successor or acquiring entity
(if not the Corporation) assumes by written instrument the obligations of this
subsection (ii). The above provisions shall apply regardless of whether or not
there would have been a sufficient number of shares of Common Stock authorized
and available for issuance upon conversion of the shares of Preferred Stock
outstanding as of the date of such trans- action, and shall similarly apply to
successive reclassi- fications, consolidations, mergers, sales, transfers or
share exchanges.
(iii) Adjustment Due to Distribution. In the event that at any time or from
time to time the Corporation shall distribute to all holders of Common Stock (i)
any dividend or other distribution of cash, evidences of its indebtedness,
shares of its capital stock or any other properties or securities or (ii) any
options, warrants or other rights to subscribe for or purchase any of the fore-
going (other than, in each case, (w) the issuance of any rights under a
shareholder rights plan, (x) any dividend or distribution described in Section
5(c)(i), (y) any rights, options, warrants or securities described in Section
5(c)(iv) and (z) any cash dividends or other cash distributions from current or
retained earnings) (a "Distribution"), then, in each such case, after the date
of record for determining shareholders entitled to such Distribution, but prior
to the date of Distribution, the holders of Preferred Stock shall be entitled,
upon conversion of shares of Preferred Stock, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution. The Applicable Conversion Price
for shares of Preferred Stock not converted prior to the date of Distribution
will be reduced to a price determined by decreasing the Applicable Conversion
Price in effect immediately prior to the record date of the Distribu- tion by an
amount equal to the fair market value of the assets so distributed per share of
Common Stock (calculated as if all shares of Common Stock issuable upon
conversion of outstanding shares of Preferred Stock had been converted as of the
record date of the Distribution). For purposes of determining the fair market
value of any assets so distributed, the fair market value of any cash
distributed shall be the amount of such cash and the fair value of any other
assets so distributed shall be determined in good faith by the Board of
Directors of the Corporation, whose determination shall be evidenced by a board
resolution, a copy of which will be sent to the holders of the Preferred Stock
upon request.
<PAGE>
(iv) Adjustment Due to Rights Issue. If, at any time when shares of
Preferred Stock are issued and outstanding, the Corporation shall distribute to
all holders of its Common Stock any rights, options or warrants entitling the
holders thereof to subscribe for shares of Common Stock, or securities
convertible into or exchangeable or exercisable for Common Stock (collectively,
"Rights") at a price per share that is less than the Current Market Value (as
defined in Section 5(g)) as of the date such Right first becomes exercisable
(the "Exercisability Date"), then the Applicable Conversion Price for shares of
Preferred Stock not converted prior to such Exercisability Date shall be reduced
to a price determined by multiplying the Applicable Conversion Price in effect
immediately prior to the Exercisability Date by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Exercisability Date plus (y) the
quotient (expressed as a number) obtained by dividing (A) the aggregate minimum
consideration receivable by the Corporation upon the exercise of all such
Rights, by (B) the Current Market Value in effect immediately prior to the
Exercisability Date and (ii) the denominator of which is the total number of
shares of Common Stock Deemed Outstanding (as defined below) immediately after
the Exercisability Date. For purposes of this Section 5(c)(iv), "Common Stock
Deemed Outstanding" shall mean the number of shares of Common Stock actually
outstanding plus the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all Rights or securities issuable
upon exercise of Rights.
(v) Other Events. If any event occurs as to which the foregoing provisions
of this Section 5(c) are not strictly applicable or, if strictly applicable,
would not, in the good faith judgment of the Board of Directors of the
Corporation, fairly and adequately protect the conversion rights of the
Preferred Stock in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustments in the
application of such provisions, in accordance with such essential intent and
principles, as shall be reasonably necessary, in the good faith opinion of the
Board of Directors, to protect such conversion rights as aforesaid, but in no
event shall any such adjustment have the effect of increasing the Applicable
Conversion Price or decreasing the number of shares of Common Stock issuable
upon conversion of any shares of Preferred Stock.
(d) Adjustment of Closing Bid Prices. In the event that the
Applicable Conversion Price is adjusted pursuant to Section 5(c) during any
Trading Period being utilized to calculate the Conversion Price pursuant to
Section 5(b) or during any period of 10 consecutive Trading Days being utilized
to calculate Current Market Value, the Closing Bid Price for each Trading Day
being utilized for such calculation and ending prior to the date of such
Applicable Conversion Price adjustment shall be adjusted upward or downward, as
appropriate, in an amount
<PAGE>
proportionate to such Applicable Conversion Price adjustment.
(e) Adjustment of the Minimum Price. In the event that the
Applicable Conversion Price is adjusted pursuant to Section 5(c), the Minimum
Price shall be adjusted upward or downward, as appropriate, in an amount
proportionate to such Applicable Conversion Price
adjustment.
(f) Conversion Procedures. In order to convert shares of Preferred Stock
into full shares of Common Stock, a holder shall: (i) prior to 10:00 p.m., New
York City time (the "Conversion Notice Deadline") on the Conversion Date, fax or
otherwise deliver a copy of the fully executed notice of conversion in the form
attached hereto as Exhibit 1 ("Notice of Conversion") to the Corporation at the
office of the Corporation that the holder elects to convert the same, which
notice shall specify the number of shares of Preferred Stock to be converted,
the applicable Conversion Price and a calculation of the number of shares of
Common Stock issuable upon such conversion and (ii) surrender the original
certificates representing the Preferred Stock being converted (the "Preferred
Stock Certificates"), duly endorsed, along with a copy of the Notice of
Conversion within three Trading Days thereafter to the office of the Corporation
or the Transfer Agent, if any, for the Preferred Stock. The Corporation shall
not be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless either the Preferred Stock Certificates are
delivered to the Corporation or its Transfer Agent as provided above, or the
holder notifies the Corporation or its Transfer Agent that such certificates
have been lost, stolen or destroyed (subject to the require- ments of
subparagraph (i) below). In the case of a dispute as to the calculation of the
Conversion Price other than manifest error by a holder, the Corporation shall
promptly issue such number of shares of Common Stock that are not disputed in
accordance with subparagraph (ii) below. The Corporation shall submit the
disputed calculations to its outside accountant via facsimile within two
business days of receipt of the Notice of Conversion. The accountant shall audit
the calculations and notify the Corporation and the holder of the results no
later than two business days from the time it receives the disputed
calculations. The accountant's calculation shall be deemed conclusive, absent
manifest error.
(i) Lost or Stolen Certificates. Upon
receipt by the Corporation of evidence of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing shares of Preferred
Stock, and (in the case of loss, theft or destruction) of indemnity or security
reasonably satisfactory to the Corporation, and upon surrender and cancelation
of the Preferred Stock Certificate(s), if mutilated, the Corporation shall
execute and deliver new Preferred Stock Certificate(s) of like tenor and date.
However, the Corporation shall not be obligated to reissue such lost or stolen
Preferred Stock Certificate(s) if the holder contemporaneously delivers to
<PAGE>
the Corporation a Notice of Conversion electing to convert such shares of
Preferred Stock.
(ii) Delivery of Common Stock Upon Conversion. Upon the surrender of
Preferred Stock Certificates as described above by a holder of Preferred Stock
accompanied by a Notice of Conversion, the Corporation shall issue and, within
three business days after the later of the Conversion Date and the date of such
surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of agreement and indemnification pursuant to subparagraph (i) above)
(the "Delivery Period"), deliver to or upon the order of the holder (i) that
number of shares of Common Stock applicable to that portion of shares of
Preferred Stock converted as shall be determined in accor- dance herewith and
(ii) a certificate representing the balance of the shares of Preferred Stock not
converted, if any or, if the Corporation has validly elected, in connection with
such conversion and in accordance with Section 5(a)(ii)(D) to pay cash in lieu
of delivery shares of Common Stock, the Corporation shall pay the appropriate
cash amount. Upon delivery of a Notice of Conversion and surrender of the
Preferred Stock Certificate related thereto (or an indemnification agreement if
required pursuant to paragraph (i) above), the Corporation's obligation to
deliver shares of Common Stock shall be absolute and unconditional and the
Corporation agrees not to assert (and hereby waives to the fullest extent
permitted by law) any defenses against its obligation to so deliver such shares.
In the event the Corporation fails to deliver such shares, the Corporation
understands that the holder will be entitled to pursue actual damages (whether
or not such failure is caused by the Corporation's failure to maintain a
sufficient number of authorized shares of Common Stock as required pursuant to
the terms of Section 5(g) hereof), and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance or injunctive relief).
(iii) No Fractional Shares. If any conversion of Preferred Stock would
result in a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon the
conversion of the Preferred Stock shall be rounded to the nearest whole number
of shares.
(iv) Conversion Date. The "Conversion Date" shall be the date specified in
the Notice of Conversion; provided, however, that if the copy of the Notice of
Conversion is not submitted by facsimile (or by other means resulting in notice)
to the Corporation before 10:00 p.m., New York City time, on the Conversion Date
indicated in the Notice of Conversion, then the Conversion Date shall be the
next day. Upon submission by a holder of the Preferred Stock of a Notice of
Conversion with respect to shares of Preferred Stock, such shares shall be
irrevocably deemed converted into shares of Common Stock and the holder's rights
as a holder of such converted shares of Preferred
<PAGE>
Stock shall cease and terminate, excepting only the right to receive
certificates for such shares of Common Stock in accordance with and subject to
this Section 5(f). Notwithstanding the foregoing, if the holder has not received
certificates for such shares of Common Stock prior to the tenth day after the
later of the Conversion Date and the delivery by the holder of the Preferred
Stock Certificates and any agreement and indemnity required by Section 5(f)(ii)
above, then the holder may notify the Corporation in writing of such failure and
if the holder has not received certificates for such shares of Common Stock
prior to the tenth day after the date of such notice, then (x) the holder shall
regain the rights of a holder of Preferred Stock with respect to the shares to
which the Notice of Conversion relates and shall retain all of such holder's
rights and remedies with respect to the Corporation's failure to deliver such
shares of Common Stock and (y) the Conversion Price in respect of each of the
shares identified in the Notice of Conversion shall thereafter be the lesser of
(i) the Conversion Price on the Conversion Date set forth in the initial Notice
of Conversion and (ii) the Conversion Price on the Conversion Date subsequently
selected by the holder in respect thereof by submission to the Corporation of a
subsequent Notice of Conversion.
(g) Reservation of Shares. A number of shares of the authorized but
unissued Common Stock sufficient to provide for the conversion of the Preferred
Stock outstanding at the then current Conversion Price shall at all times be
reserved by the Corporation, free from preemptive rights, for such conversion.
If the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Preferred Stock shall be convertible at the then current
Conversion Price, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the out- standing Preferred Stock on such new basis. If, at any
time, a holder of shares of Preferred Stock submits a Notice of Conversion and
the Corporation does not have sufficient authorized but unissued shares of
Common Stock available to effect such conversion in accordance with the
provisions of this Section, the Corporation shall issue to the holder all of the
shares of Common Stock which are available to effect such conversion and shall
thereafter use its best efforts to obtain, as soon as practicable, shareholder
approval to authorize the issuance of sufficient shares of Common Stock to
effect conversion of the Preferred Stock outstanding.
(h) Calculation of Adjustment. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 5,
the Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such
<PAGE>
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
properties which at the time should be received upon conversion of a share of
Preferred Stock.
(i) Current Market Value. For purposes of this Certificate of
Designation, "Current Market Value" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
Board of Directors and certified in a board resolution, based on the most
recently completed arm's-length transaction between the Corporation and a Person
other than an affiliate of the Corporation (or between any two such Persons) and
the closing of which occurs on such date or shall have occurred within the
six-month period preceding such date, or (b) if no such transaction shall have
occurred on such date or within such six-month period, the value of the security
as determined by an independent financial expert or (ii) if the security is
registered under the Exchange Act, the average of the Closing Bid Prices for
each Trading Day during the period commencing 10 Trading Days before such date
and ending on the date one day prior to such date, or if the security has been
registered under the Exchange Act for less than 10 consecutive Trading Days
before such date, the average of the Closing Bid Prices for all of the Trading
Days before such date for which daily Closing Bid Prices are available;
provided, however, that if the Closing Bid Price is not determinable for at
least five Trading Days in such period, the "Current Market Value" of the
security, shall be determined as if the security were not registered under the
Exchange Act.
6. Mandatory Conversion.(a) All outstanding shares of the Preferred Stock
will be subject to mandatory conversion on February 11, 2002 (the "Maturity
Date"), at a price (the "Mandatory Conversion Price") equal to the then current
Liquidation Preference of such Preferred Stock. The Mandatory Conversion Price
shall be paid by issuance of such number of shares of Common Stock with a value,
based upon the average of the Closing Bid Prices for such Common Stock during
the Trading Period ending one Trading Day prior to the Maturity Date, equal to
the Mandatory Conversion Price; provided, however, that in lieu of issuance of
Common Stock, the Corporation may at its option make payment of all or a portion
of the Mandatory Conversion Price in cash.
(b) If a Change of Control occurs (the date of such occurrence being the
"Change of Control Date"), then the Corporation shall notify the holders of the
Preferred Stock in writing of such occurrence and shall make an offer to convert
all or any part of such holders shares of Preferred Stock pursuant to the
provisions of this Section 6(b) (the "Change of Control Offer") at an offer
<PAGE>
price, payable in Common Stock, equal to 101% of the Stated Value of the
Preferred Stock plus accrued and unpaid dividends, if any, thereon to the date
of conversion (the "Change of Control Conversion"). The Change of Control
Conversion shall be made by issuance of such number of shares of Common Stock
with a value, based upon the average of the Closing Bid Prices for such Common
Stock during the Trading Period ending one Trading Day prior to the date of
purchase, equal to the Change of Control Conversion; provided, however, that in
lieu of issuance of Common Stock, the Corporation may at its option make payment
of all or a portion of the Change of Control Conversion in cash.
Within 30 days following any Change of Control, the
Corporation will mail a notice to each holder of Preferred Stock at such holders
last registered address, which notice shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 6(b) and that all shares of Preferred Stock properly
tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which will be
no earlier than 45 days nor later than 60 days from the date of such
notice is mailed (the "Change of Control Conversion Date");
(iii) that any shares of Preferred Stock not properly tendered
(unless the Corporation determines, at its option, to accept such
tender) will continue to accrue dividends;
(iv) that, unless the Corporation defaults in the payment of
the Change of Control Conversion, all shares of Preferred Stock
accepted for payment pursuant to the Change of Control Offer will cease
to accrue dividends after the Change of Control Conversion Date;
(v) that holders electing to have any shares of Preferred
Stock purchased pursuant to a Change of Control Offer will be required
to surrender the shares of Preferred Stock or transfer the shares of
Preferred Stock to the Corporation at the address specified in the
notice prior to the close of business on the third Business day
preceding the Change of Control Conversion Date;
(vi) that holders will be entitled to withdraw their election
if the Corporation receives, not later than the close of business on
the second Business Day preceding the Change of Control Conversion
Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the holder, the amount of Preferred Stock delivered for
purchase, and a statement that such holder is withdrawing its election
to have such shares of Preferred Stock purchased; and
(vii) that holders whose shares of Preferred Stock are being
purchased only in part will be issued new
<PAGE>
certificates of Preferred Stock equal in amount to the unpurchased
portion of the Preferred Stock surrendered (or transferred by
book-entry).
On the Change of Control Conversion Date, the Corporation
shall, to the extent lawful: (1) accept for payment all shares of Preferred
Stock or portions thereof properly tendered pursuant to the Change of Control
Offer, (2) pay to the holders an amount equal to the Change of Control
Conversion in respect of all shares of their Preferred Stock or portions thereof
so tendered and (3) deliver or cause to be delivered to the holders of Preferred
Stock so accepted an officers' certificate stating the aggregate amount of
Preferred Stock or portions thereof being purchased by the Corporation.
The Corporation will comply with any tender offer rules under
the Exchange Act which may then be applicable, including Rules 13e-4 and 14e-1,
in connection with any offer required to be made by the Corporation to
repurchase the Preferred Stock as a result of a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Certificate of Designations, the Corporation shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations hereunder by virtue thereof.
On the Change of Control Conversion Date, unless the
Corporation defaults in the payment for the shares of Preferred Stock tendered
and not withdrawn pursuant to the Change of Control Offer, all rights with
respect to such shares shall forthwith cease and terminate, except the right of
the holder thereof to receive payment therefor, on the Change of Control
Conversion Date.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended ("Exchange Act")), other than the Permitted
Investor, becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of voting stock representing more than 50% of the total
voting power of the voting stock of the Company on a fully diluted basis or (ii)
individuals who on February 11, 1997 constitute the Board of Directors of the
Corporation (together with any new directors whose election by the Board of
Directors of the Corporation or whose nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors of the Corporation then in office who either
were members of the Board of Directors of the Corporation on February 11, 1997
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of Directors
of the Corporation then in office.
(c) If at any time when the Corporation is obligated under
this Section 6 to pay any amount by issuing shares of Common Stock in payment of
such amount the
<PAGE>
Corporation is unable to satisfy such obligation with the delivery of such
shares, the Corporation will be required to make such payment in cash.
"Permitted Investor" means Mr. William J. Rouhana, Jr.
7. Voting Rights. The holders of record of shares of Preferred Stock shall
be entitled to the following voting rights:
(i) those voting rights required by applicable
law; and
(ii) the right to vote together with the holders of the Common
Stock upon any matter submitted to such holders for a vote (but the
Preferred Stock shall not be entitled to vote as a separate class)
except as otherwise expressly required by the General Corporation Law
of the State of Delaware.
Each issued and outstanding share of Preferred Stock shall be
entitled to one vote when voting together with the Common Stock and if entitled
to vote as a separate class. If for any reason holders of Preferred Stock shall
be entitled to vote as a separate class, the holders of a majority in interest
of the Preferred Stock entitled to vote shall bind the entire class of Preferred
Stock. The Corporation shall give the holders of the Preferred Stock at least 30
days' prior notice of any matter to be submitted to such holders for a vote.
8. Cancelation of Preferred Stock. In the event any shares of Preferred
Stock shall be converted pursuant to Section 5, the shares so converted shall be
canceled, shall return to the status of unauthorized, but unissued preferred
stock of no designated series, and shall not be issuable by the Corporation as
Preferred Stock.
9. Amendments and Other Actions. So long as shares of Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval (by
vote or written consent) of the holders of at least 66 2/3% of the then
outstanding shares of Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Preferred Stock or any other capital stock of the Corporation so as to
affect adversely the Preferred Stock;
(b) create any new class or series of Senior Securities;
(c) increase the authorized number of shares of Preferred
Stock (except where necessary to satisfy obligations to the holders of the
outstanding shares of Preferred Stock); or
(d) issue any shares of Preferred Stock other
than pursuant to the Securities Purchase Agreement dated as
<PAGE>
of February 6, 1997, by and among the Corporation and the initial purchasers of
the Preferred Stock, pursuant to Section 3 hereof or as required by the
Registration Rights Agreement dated February 6, 1997, by and among the
Corporation and the initial purchasers of the Preferred Stock.
In the event holders of at least 66 2/3% of the then
outstanding shares of Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Preferred Stock,
pursuant to subsection (a) above, so as to affect the Preferred Stock, then the
Corporation will deliver notice of such approved change to the holders of the
Preferred Stock that did not agree to such alteration or change (the "Dissenting
Holders") and Dissenting Holders shall have the right for a period of 30 days to
convert pursuant to the terms of this Certificate of Designation as they exist
prior to such alteration or change or continue to hold their shares of Preferred
Stock.
Notwithstanding the foregoing, the Corporation when authorized
by resolutions of its Board of Directors may amend or supplement this
Certificate without the consent of, any Holder to cure any ambiguity, defect or
inconsistency or make any other change provided that such amendments or
supplements shall not adversely affect the interests of the Holders.
10. Registration and Transfer. The Corporation shall maintain
at its principal executive offices (or at the principal executive offices of its
transfer agent or such other office or agency of the Corporation as it may
designate by notice to the holders of the Preferred Stock) a stock register for
the Preferred Stock in which the Corporation shall record the names and
addresses of person in whose name the shares of Preferred Stock are issued, as
well as the name and address of each transferee. Holders of share certificates
for the Preferred Stock may present such certificates for transfer and exchange
at such offices.
Prior to due presentment for registration of transfer of any
Preferred Stock, the Corporation may deem and treat the person in whose name any
Preferred Stock is registered as the absolute owner of such Preferred Stock and
the Corporation shall not be affected by notice to the contrary.
No service charge shall be made to a holder of Preferred Stock
for any registration, transfer or exchange.
11. Transfer Without Registration. If, at the time of the
surrender of any share certificate in connection with any transfer or exchange
of shares of Preferred Stock, such shares shall not be registered under the
Securities Act of 1933, as amended (the "Securities Act") and under applicable
state securities or blue sky laws, the Corporation may require, as a condition
of allowing such transfer or exchange (i) that the holder or transferee, as the
case may be, furnish to the Corporation a written
<PAGE>
opinion of counsel (which opinion and counsel shall be reasonably acceptable to
the Corporation) to the effect that such transfer or exchange may be made
without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Corporation a letter in form and substance acceptable to the
Corporation stating that the transferee is acquiring such shares for investment
purposes only and not with a view towards distribution thereof and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act; provided, however, that no such opinion, letter or
status as an "accredited investor" shall be required in connection with a
transfer pursuant to Rule 144 under the Securities Act (but such other customary
documentation reasonably requested by the Corporation shall be required).
12. Method of Payment. The Preferred Stock will be payable (if
cash payment is elected by the Corporation) as to dividends, Mandatory
Conversion payments, Change of Control Conversions, Liquidation Preference and
all other payments by wire transfer of immediately available funds to the
accounts specified by the holders thereof or, if no such account is specified by
a holder, by mailing a check to such holder's registered address.
The Corporation may satisfy its obligations to make cash
payments under Section 5(a)(ii)(D), 6(a) and 6(b) by causing a subsidiary of the
Corporation to make such payment.
IN WITNESS WHEREOF, WINSTAR COMMUNICATIONS, INC. has caused
this Certificate of Designations to be duly executed by its Executive Vice
President, who affirms that the information contained in the foregoing
Certificate of Designations is true under the penalties of perjury this tenth
day of February, 1997.
WinStar Communications, Inc.,
by: /s/ Timothy R. Graham
------------------------
Name: Timothy R. Graham
Title: Executive Vice President
<PAGE>
EXHIBIT 1
to
Certificate
of Designation
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of 6% Series A Cumulative Convertible Preferred Stock (the "Preferred Stock"),
represented by stock certificate Nos(s). ______________ (the "Preferred Stock
Certificates") into shares of common stock ("Common Stock") of WinStar
Communications, Inc. (the "Corporation") according to the conditions of the
Certificate of Designations, Preferences and Rights of the Preferred Stock (the
"Certificate of Designation"), as of the date written below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates. No fee will be charged to the holder for any conversion,
except for transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Preferred Stock shall be made pursuant to registration of the
Common Stock under the Securities Act of 1933, as amended (the "Act"), or
pursuant to an exemption from registration under the Act.
Date of Conversion:_____________________
Applicable Conversion Price:____________
Number of shares of
Common Stock to be Issued:______________
Signature:______________________________
Name:___________________________________
Address:________________________________
Fax No.:________________________________
* The Corporation is not required to issue shares of Common Stock until the
original Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than three business days following receipt of
the original Preferred Stock Certificate(s) to be converted.
<PAGE>
Number 6% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK Shares
================================================================================
WINSTAR COMMUNICATIONS, INC.
================================================================================
Incorporated Under The Laws Of The See Reverse Side For Certain Definitions
State of Delaware
TOTAL AUTHORIZED ISSUE 90,000,000 SHARES
75,000,000 SHARES, $.01 PAR VALUE EACH, 15,000,000 SHARES, PAR VALUE $.01 EACH,
COMMON STOCK PREFERRED STOCK
6,000,000 SHARES DESIGNATED AS
6% SERIES A CUMULATIVE PREFERRED STOCK
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE, "SECURITIES ACT").
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT
TO (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW, (B) AN OPINION
OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO
WINSTAR COMMUNICATIONS, INC., THAT REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS OR (C) RULE
144 UNDER THE SECURITIES ACT.
This is to Certify that is the owner of
------------------------------------
---------
FULLY PAID AND NON-ASSESSABLE SHARES OF 6% SERIES A CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF WINSTAR COMMUNICATIONS, INC. (the "Corporation")
transferable on the books of the Corporation by the holder hereof, in person or
by duly authorized attorney, upon surrender of this Certificate, properly
endorsed.
The Corporation will furnish without charge to each stockholder who so
requests, the powers, designations, preferences and relative, participating,
optional, or other special rights of the 6% Series A Cumulative Convertible
Preferred Stock and of any other series of preferred stock which the Corporation
may establish, and the qualifications, limitations or restrictions of such
preferences and/or rights.
IN WITNESS WHEREOF, the seal of the Corporation and the signatures of its duly
authorized officers.
Dated: February 11, 1997
--------------------- ---------------------------
Kenneth Zinghini Fredric E. von Stange
Assistant Secratary Executive Vice President
<PAGE>
THIS WARRANT, AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAW, (B) AN OPINION OF COUNSEL, IN FORM,
SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS
NOT REQUIRED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR
(C) RULE 144 UNDER THE SECURITIES ACT.
Right to
Purchase
-------------
Shares of
Common Stock
$0.01 par value
Date: February 11, 1997
WINSTAR COMMUNICATIONS, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _________________ or
its registered assigns, is entitled to purchase from WINSTAR COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), at any time or from time to time
during the period specified in Section 2 hereof ________________________________
(____________) fully, paid and non-assessable shares of the Company's Common
Stock, par value $0.01 per share (the "Common Stock"), at an exercise price (the
"Exercise Price") of $25.00 per share. The number of shares of Common Stock
issuable upon exercise hereunder (the "Warrant Shares") and the Exercise Price
are subject to adjustment as provided in Section 4 hereof. The term "Warrants"
means this Warrant and the other warrants of the Company issued pursuant to the
Securities Purchase Agreement, dated as of February 6, 1997, by and between the
Company and the Purchasers listed on the execution pages thereof (the
"Securities Purchase Agreement"). The term "Warrant Period" as used herein means
the period commencing on the date this Warrant is issued and delivered pursuant
to the terms of the Securities Purchase Agreement and ending at the Expiration
Time (as defined herein).
<PAGE>
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for
Shares. Subject to the provisions hereof, including without limitation, the
limitations contained in Section 7 hereof, this Warrant may be exercised by the
holder hereof, in whole or in part, by the surrender of this Warrant, together
with a completed election to purchase in the form attached hereto as Exhibit 1
(the "Election to Exercise"), to the Company on or before 10:00 p.m. on any
Business Day at the Company's principal executive offices or such other office
or agency of the Company as it may designate by notice to the holder hereof) and
upon (i) payment to the Company in cash, by certified or official bank check or
by wire transfer for the account of the Company, of the Exercise Price for each
of the Warrant Shares specified in the Election to Exercise or (ii) delivery to
the Company of a written notice of an election to effect a Cashless Exercise (as
defined in Section 12(c) below) for the Warrant Shares specified in the Election
to Exercise. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof or such holder's designee, as the record owner of such shares, as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Election to Exercise shall have been delivered and
payment shall have been made for such shares as set forth above. Certificates
for the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Election to Exercise, shall be delivered to the holder hereof
within a reasonable time, not exceeding five business days, after this Warrant
shall have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
Upon delivery of an Election to Exercise and payment for the
Warrant Shares to be purchased thereby, the Company's obligation to deliver
certificates for such Warrant Shares shall be absolute and unconditional and the
Company agrees not to assert (and hereby waives to the fullest extent permitted
by law) any defenses against its obligation to so deliver such certificates. In
the event the Company fails to deliver such certificates, the Company
understands that the holder will be entitled to pursue actual damages (whether
or not such failure is caused by the Company's failure to maintain a sufficient
number of authorized shares of Common Stock as required pursuant to the terms of
Section 4(f) of the Securities Purchase Agreement and Section 3(b) hereof), and
each holder shall have the right to pursue all remedies available at law or in
equity (including a decree of specific performance or injunctive relief).
<PAGE>
2. Period of Exercise. This Warrant shall be exercisable at
any time on or after February 11, 1998 (or earlier upon a Change of Control as
defined in Section 11 hereof) and prior to the Expiration Time. The "Expiration
Time" shall initially be 5:00 p.m. New York City time on the Expiration Date,
which initially shall be February 11, 2002. The Expiration Date can be changed
by the Company to any date prior to such date if
(i) after February 11, 2000, the closing bid price for the
Common Stock on the NASDAQ National Market (or the last sale price of
the Common Stock on the principal exchange on which the Common Stock is
then traded) has exceeded the Specified Price (as defined below) per
share for 20 consecutive trading days (which 20 days may commence prior
to February 11, 2000); provided, however, that the Specified Price
shall initially be $40.00 but the Specified Price shall be adjusted,
from time to time upon the occurrence of each event requiring an
adjustment under Section 4, in the same relative proportion as the
number of Warrant Shares issuable upon exercise of this Warrant is
adjusted under Section 4;
(ii) the Company notifies the holders of the Warrant of its
election to change the Expiration Date and of the new Expiration Date
(which shall not be earlier than the fifteenth Business Day following
the date of such notice);
(iii) the notice described in clause (ii) is given within
three Business Days of a period when the condition in clause (i) is
satisfied; and
(iv) during the 20 consecutive Trading Days prior to the new
Expiration Date, the exercise of this Warrant and resale of the Warrant
Shares issued upon such exercise does not require the delivery of a
statutory prospectus under the Securities Act or, if it does, such a
prospectus is available therefor.
3. Certain Agreements of the Company. The Company hereby
covenants and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and non-assessable and free from all taxes, liens, claims and
encumbrances.
(b) Reservation of Shares. During the Warrant Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) Listing. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of this Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed or become listed
<PAGE>
(subject to official notice of issuance upon exercise of this Warrant) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and shall
maintain such listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any shares of the
same class shall be listed on such national securities exchange or automated
quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment of its
charter or through a reorganiza- tion, transfer of assets, consolidation,
merger, dissolu- tion, issuance or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed by it here- under, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger or consolidation.
4. Antidilution Provisions. During the Warrant Period, the
Exercise Price and the number of Warrant Shares issuable upon exercise of this
Warrant shall be subject to adjustment from time to time as provided in this
Section 4.
(a) Changes in Common Stock. In the event that at any time or from time to
time the Company shall (i) pay a dividend or make a distribution on its Common
Stock in shares of its Common Stock (ii) subdivide its outstanding shares of
Common Stock into a larger number of shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock or (iv) increase or decrease the number of shares of Common Stock
outstanding by reclassification of its Common Stock, then the number of shares
of Common Stock issuable upon exercise of each Warrant immediately after the
happening of such event shall be adjusted to a number determined by multiplying
the number of shares of Common Stock that such holder would have owned or have
been entitled to receive upon exercise had such Warrants been exercised
immediately prior to the happening of the events described above (or, in the
case of a dividend or distribution of Common Stock immediately prior to the
record date therefor) by a
<PAGE>
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding immediately after the happening of the events described above,
and the denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the happening of the events described above;
and subject to Section 4(g) the Exercise Price for each Warrant shall be
adjusted to a number determined by dividing the Exercise Price immediately prior
to such event by such fraction. An adjustment made pursuant to this Section 4(a)
shall become effective immediately after the effective date of such event,
retroactive to the record date therefor in the case of a dividend or distribu-
tion in shares of Common Stock or other shares of the
Company's capital stock.
(b) Cash Dividends and Other Distributions. In the event that at any time
or from time to time the Company shall distribute to all holders of Common Stock
(i) any dividend or other distribution of cash, evidences of its indebtedness,
shares of its capital stock or any other properties or securities or (ii) any
options, warrants or other rights to subscribe for or purchase any of the
foregoing (other than, in each case, (w) the issuance of any rights under a
shareholder rights plan, (x) any dividend or distribution described in Section
4(a), (y) any rights, options, warrants or securities described in Section 4(c)
and (z) any cash dividends or other cash distributions from current or retained
earnings), then the number of shares of Common Stock issuable upon the exercise
of each Warrant shall be increased to a number determined by multiplying the
number of shares of Common Stock issuable upon the exercise of such Warrant
immediately prior to the record date for any such dividend or distribution by a
fraction, the numerator of which shall be the Current Market Value (as
hereinafter defined) per share of Common Stock on the record date for such
dividend or distribution, and the denominator of which shall be such Current
Market Value per share of Common Stock on the record date for such dividend or
distribution less the sum of (x) the amount of cash, if any, distributed per
share of Common Stock and (y) the fair value (as determined in good faith by the
Board of Directors, whose determination shall be evidenced by a board
resolution, a copy of which will be sent to the holders of Warrants upon
request) of the portion, if any, of the distribution applicable to one share of
Common Stock consisting of evidences of indebtedness, shares of stock,
securities, other property, warrants, options or subscription or purchase
rights; and subject to Section 4(g) the Exercise Price shall be adjusted to a
number determined by dividing the Exercise Price immediately prior to such
record date by the above fraction. Such adjustments shall be made whenever any
distribution is made and shall become effective as of the date of distribution,
retroactive to the record date for any such distribution. Except as set forth in
Section 4(f), no adjustment shall be made pursuant to this Section 4(b) which
shall have the effect of decreasing the number of shares of Common Stock
issuable upon exercise of each Warrant or increasing the Exercise Price.
<PAGE>
(c) Rights Issue. In the event that at any time or from time to time the
Company shall issue rights, options or warrants entitling the holders thereof to
subscribe for shares of Common Stock, or securities convertible into or
exchangeable or exercisable for Common Stock to all holders of Common Stock
(other than in connection with the adoption of a shareholder rights plan by the
Company) without any charge, entitling such holders to subscribe for or purchase
shares of Common Stock at a price per share that as of the record date for such
issuance is less than the then Current Market Value per share of Common Stock,
the number of shares of Common Stock issuable upon the exercise of each Warrant
shall be increased to a number determined by multiplying the number of shares of
Common Stock theretofore issuable upon exercise of each Warrant by a fraction,
the numerator of which shall be the number of shares of Common Stock out-
standing on the date of issuance of such rights, options, warrants or securities
plus the number of additional shares of Common Stock offered for subscription or
purchase or into or for which such securities that are issued are conver- tible,
exchangeable or exercisable, and the denominator of which shall be the number of
shares of Common Stock out- standing on the date of issuance of such rights,
options, warrants or securities plus the total number of shares of Common Stock
which the aggregate consideration expected to be received by the Company
(assuming the exercise or conver- sion of all such rights, options, warrants or
securities) would purchase at the then Current Market Value per share of Common
Stock. Subject to Section 4(g), in the event of any such adjustment, the
Exercise Price shall be adjusted to a number determined by dividing the Exercise
Price immediately prior to such date of issuance by the aforementioned frac-
tion. Such adjustment shall be made immediately after such rights, options or
warrants are issued and shall become effective, retroactive to the record date
for the determina- tion of stockholders entitled to receive such rights,
options, warrants or securities. Except as set forth in Section 4(f), no
adjustment shall be made pursuant to this Section 4(c) which shall have the
effect of decreasing the number of shares of Common Stock purchasable upon
exercise of each Warrant or of increasing the Exercise Price.
(d) Combination; Liquidation. (i) Except as provided in Section 4(d)(ii)
below, in the event of a Combination (as defined below), each holder of the
Warrants shall have the right to receive upon exercise of the War- rants the
kind and amount of shares of capital stock or other securities or property which
such holder would have been entitled to receive upon or as a result of such
Combination had such Warrant been exercised immediately prior to such event.
Unless paragraph (ii) is applicable to a Combination, the Company shall provide
that the surviving or acquiring Person (the "Successor Company") in such
Combination will assume by written instrument the obliga- tions under this
Section 4 and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire. The provisions of this
Section 4(d)(i) shall similarly apply to successive Combinations involving any
Successor Company. "Combination"
<PAGE>
means an event in which the Company consolidates with, merges with or into, or
sells all or substantially all of its assets to another Person, where "Person"
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
(ii) In the event of (x) a Combination where consideration to the holders
of Common Stock in exchange for their shares is payable solely in cash or (y)
the dissolu- tion, liquidation or winding-up of the Company, the holders of the
Warrants shall be entitled to receive, upon surrender of their Warrants,
distributions on an equal basis with the holders of Common Stock or other
securities issuable upon exercise of the Warrants, as if the Warrants had been
exercised immediately prior to such event, less the Exercise Price. In case of
any Combination described in this Section 4(d)(ii), the surviving or acquiring
Person and, in the event of any dissolution, liquidation or winding-up of the
Company, the Company, shall deposit promptly with an agent or trustee for the
benefit of the holders of the Warrants the funds, if any, necessary to pay to
the holders of the Warrants the amounts to which they are entitled as described
above. After such funds and the surrendered Warrants are received, the Company
is required to deliver a check in such amount as is appropriate (or, in the case
of consideration other than cash, such other consideration as is appropriate) to
such Person or Persons as it may be directed in writing by the holders
surrendering such Warrants.
(e) Other Events. If any event occurs as to which the
foregoing provisions of this Section 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors, fairly and adequately protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions, then
such Board shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board of Directors, to protect such
purchase rights as aforesaid, but in no event shall any such adjustment have the
effect of increasing the Exercise Price or decreasing the number of shares of
Common Stock issuable upon exercise of any Warrant.
(f) Superseding Adjustment. Upon the expiration of any rights,
options, warrants or conversion or exchange privileges which resulted in
adjustments pursuant to this Section 4, if any thereof shall not have been
exercised, the number of Warrant Shares issuable upon the exercise of each
Warrant shall be readjusted pursuant to the applicable section of Section 4 as
if (i) the only shares of Common Stock issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the shares of Common
Stock, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (ii) shares of Common Stock
actually issued,
<PAGE>
if any, were issuable for the consideration actually received by the Company
upon such exercise plus the aggregate consideration, if any, actually received
by the Company for the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange privileges whether or not exercised and the
Exercise Price shall be readjusted inversely; provided, however, that no such
readjustment shall have the effect of decreasing the number of Warrant Shares
purchasable upon the exercise of each Warrant or increasing the Exercise Price
by an amount in excess of the amount of the adjustment initially made in respect
of the issuance, sale or grant of such rights, options, warrants or conversion
or exchange privileges.
(g) Minimum Adjustment. The adjustments required by the
preceding Sections of this Section 4 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the Exercise Price or the number of shares of Common Stock issuable upon
exercise of Warrants that would otherwise be required shall be made unless and
until such adjustment either by itself or with other adjustments not previously
made increases or decreases by at least 1% the Exercise Price or the number of
shares of Common Stock issuable upon exercise of the Warrants immediately prior
to the making of such adjustment. Any adjustment representing a change of less
than such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close
of business on the date of its occurrence. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest one-hundredth of a share (but, upon exercise, the Company shall
round to the nearest whole number of shares)and any adjustments to the Exercise
Price resulting in a fraction of a cent shall be rounded to the nearest cent.
(h) Notice of Adjustment. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, issuable upon
exercise of the Warrants is adjusted, as herein provided, the Company shall
deliver to the holders of the Warrants in accordance with Section 9 a
certificate of the Company's Chief Financial Officer setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
(i) the Board of Directors determined the fair value of any evidences of
indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of the Common
Stock was determined, if either of such determinations were required), and
specifying the Exercise Price and the number of shares of Common Stock issuable
upon exercise of Warrants after giving effect to such adjustment.
(i) Notice of Certain Transactions. In the event
that the Company shall propose (a) to pay any dividend
<PAGE>
payable in securities of any class to the holders of its Common Stock or to make
any other non-cash dividend or distribution to the holders of its Common Stock,
(b) to offer the holders of its Common Stock rights to subscribe for or to
purchase any securities convertible into shares of Common Stock or shares of
stock of any class or any other securities, rights or options, (c) to effect any
capital reorganization, reclassification, consolidation or merger affecting the
class of Common Stock, as a whole, or (d) to effect the voluntary or involuntary
dissolution, liquidation or winding-up of the Company, the Company shall, within
the time limits specified below, send to each holder of the Warrants a notice of
such proposed action or offer. Such notice shall be mailed to the holders of the
Warrants at their addresses as they appear in the Warrant Register (as defined
in Section 7(e)), which shall specify the record date for the purposes of such
dividend, distribution or rights, or the date such issuance or event is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed, and shall briefly indicate the effect of such
action on the Common Stock and on the number and kind of any other shares of
stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, issuable upon exercise of each Warrant and the
Exercise Price after giving effect to any adjustment pursuant to Section 4 which
will be required as a result of such action. Such notice shall be given as
promptly as possible and (x) in the case of any action covered by clause (a) or
(b) above, at least 10 days prior to the record date for determining holders of
the Common Stock for purposes of such action or (y) in the case of any other
such action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of Common Stock,
whichever shall be the earlier.
(j) Adjustment to Warrant Certificate. The face of this Warrant need not be
changed because of any adjust- ment made pursuant to this Section 4, and
Warrants issued after such adjustment may state the same Exercise Price and the
same number of shares of Common Stock issuable upon exercise of this Warrant as
are stated on the face of this Warrant when initially issued pursuant to the
Securities Purchase Agreement. The Company, however, may at any time in its sole
discretion make any change in the form of this Warrant that it may deem
appropriate to give effect to such adjustments and that does not affect the
substance of this Warrant, and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
(k) Current Market Value. "Current Market Value" per share of
Common Stock or any other security at any date means (i) if the security is not
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (a) the value of the security, determined in good faith by the Board of
Directors and certified in a board resolution, based on the most recently
completed arm's-length transaction between the Company and a Person other than
an affiliate of the Company or between any two
<PAGE>
such Persons and the closing of which occurs on such date or shall have occurred
within the six-month period preceding such date, or (b) if no such transaction
shall have occurred on such date or within such six-month period, the value of
the security as determined by an independent financial expert or (ii) if the
security is registered under the Exchange Act, the average of the daily closing
bid prices (or the equivalent in an over-the-counter market) for each Trading
Day during the period commencing 10 Trading Days before such date and ending on
the date one day prior to such date, or if the security has been registered
under the Exchange Act for less than 10 consecutive Trading Days before such
date, the average of the daily closing bid prices (or such equivalent) for all
of the Trading Days before such date for which daily closing bid prices are
available; provided, however, that if the closing bid price is not determinable
for at least five Trading Days in such period, the "Current Market Value" of the
security, shall be determined as if the security were not registered under the
Exchange Act.
5. Issue Tax. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as Shareholder. The holders of unexercised
Warrants are not entitled, by virtue of being such holders, to receive
dividends, to vote, to receive notice of shareholders' meetings or to exercise
any other rights whatsoever as shareholders of the Company. No provision of this
Warrant, in the absence of affirmative action by the holder hereof to exercise
this Warrant for Warrant Shares, and no mere enumeration herein of the rights or
privileges of the holder hereof, shall give rise to any liability of such holder
for the Exercise Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to the
holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below; provided, however, that any transfer or assignment shall be subject to
the conditions set forth in this Section 7 and to the applicable provisions of
the Securities Purchase Agreement. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes, and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary contained herein,
<PAGE>
the registration rights described in Section 8 are assign able only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of February 6, 1997, by and among the Company and the other signatories
thereto (the "Registration Rights Agreement").
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant
in connection with any transfer, exchange or replacement as provided in this
Section 7, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution
and delivery of Warrants pursuant to this Section 7.
(e) Warrant Register. The Company shall main- tain, at its principal
executive offices (or at the offices of the transfer agent for the Warrants or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant (the "Warrant Register"), in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
surrender of this Warrant in connec- tion with any exercise, transfer or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion and counsel shall be
reasonably acceptable to the Company) to the effect that such exercise, transfer
or exchange may be made without registration under
<PAGE>
the Securities Act and under applicable state securities or blue sky laws, (ii)
that the holder or transferee execute and deliver to the Company a letter in
form and substance acceptable to the Company stating that the transferee is
acquiring this Warrant for investment purposes only and not with a view towards
distribution thereof and (iii) that the transferee be an "accredited investor"
as defined in Rule 501(a) promulgated under the Securities Act; provided,
however, that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act (but such other customary documentation reasonably requested by
the Company shall be required).
8. Registration Rights. The holder of this Warrant is entitled to the
benefit of such registration rights in respect of the Warrant Shares as are set
forth in the Registration Rights Agreement.
9. Notices. Any notices required or permitted to be given
under the terms of this Warrant shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective three days after being placed in the mail if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
WinStar Communications, Inc.
230 Park Avenue
New York, NY 10169
Attn: Timothy Graham, Executive Vice
President and General Counsel
Telecopy: (212) 922-1637
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016
Attn: David Alan Miller, Esq.
Telecopy: (212) 687-6989
and if to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 9.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. THE UNITED
STATES FEDERAL COURTS LOCATED IN NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION
WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT.
<PAGE>
11. Certain Definitions.
"Business Day" means each day that is not a Saturday, a Sunday
or a day on which banking institutions are not required to be open in the State
of New York.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended ("Exchange Act")), other than the Permitted
Investor, becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of voting stock representing more than 50% of the total
voting power of the voting stock of the Company on a fully diluted basis or (ii)
individuals who on February 11, 1997 constitute the Board of Directors of the
Corporation (together with any new directors whose election by the Board of
Directors of the Corporation or whose nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors of the Corporation then in office who either
were members of the Board of Directors of the Corporation on February 11, 1997
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the members of the Board of Directors
of the Corporation then in office.
"Permitted Investor" means Mr. William J. Rouhana, Jr.
"Trading Day" means any day on which the Common Stock is
traded for any period on the Nasdaq National Market or on the principal
securities exchange or other securities market on which the Common Stock is
being traded.
12. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be amended
by an instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several Sections
of this Warrant are inserted for purposes of reference only and shall not affect
the meaning of construction of any of the provision hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained
in this Warrant, to the extent permitted by Section 1 hereof, this Warrant may
be exercised by presentation and surrender of this Warrant to the Company at its
principal executive offices with a written notice of the holder's intention to
effect a cashless exercise, including a calculation of the number of Warrant
Shares specified by the holder as subject to such cashless exercise and the
number of shares of Common stock to be issued upon such exercise in accordance
with the terms hereof (a "Cashless Exercise"). In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash and issuing all Warrant
Shares specified by the holder as subject to such exercise, the holder shall
surrender this Warrant for that
<PAGE>
number of shares of Common Stock determined by multiplying the number of Warrant
Shares specified by the holder as subject to such Cashless Exercise by a
fraction, the numerator of which shall be the difference between the Current
Market Value per share of Common Stock and the Exercise Price, and the
denominator of which shall be the Current Market Value per share of Common
Stock. If the holder at any time effects a Cashless Exercise with respect to
less than all the remaining Warrant Shares, a new Warrant representing all
Warrant Shares that have not been specified as subject to exercise shall be
issued.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.
WINSTAR COMMUNICATIONS, INC.
By:
--------------------
Name:
Title:
<PAGE>
EXHIBIT 1
to the Warrant
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder
in order to exercise the Warrant)
The undersigned hereby irrevocably exercises the right to
purchase _______ of the shares of Common Stock of WinStar Communications, Inc.,
a Delaware corporation (the "Company"), evidenced by the attached Warrant, and
herewith makes payment of the Exercise Price with respect to such shares in
full, all in accordance with the conditions and provisions of said Warrant.
i. The Undersigned agrees not to offer, sell, transfer, or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144(k) is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAW, (B) AN OPINION OF
COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO
THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR (C)
RULE 144 UNDER THE SECURITIES ACT.
ii. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:_______________ -------------------------
Signature of Holder
--------------------------
Name of Holder (Print)
Address:
==========================
==========================
==========================
<PAGE>
WinStar Communications, Inc.
6% Cumulative Convertible Preferred Stock and
Warrants to Purchase Common Stock
REGISTRATION RIGHTS AGREEMENT
February 6, 1997
The Purchasers
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
WinStar Communications, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Credit Suisse First Boston Corporation
and such other purchasers as are set forth on the signature pages hereto
(collectively, the "Purchasers"), upon the terms set forth in a securities
purchase agreement of even date herewith (the "Purchase Agreement"), shares of
6% Series A Cumulative Convertible Preferred Stock (the "Preferred Stock", which
term includes any Other Shares (as defined herein) and any Additional Shares (as
defined in the Certificate of Designation with respect to the Preferred Stock))
of the Company and Warrants (the "Warrants") to purchase shares of Common Stock,
par value $0.01 per share, of the Company (the "Common Stock"). The Preferred
Stock will be issued to the Purchasers upon the terms and subject to the
limitations set forth in the Certificate of Designations, Rights and Preferences
of such Preferred Stock (the "Certificate of Designation"). As an inducement to
the Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the Purchasers' obligations thereunder, the Company agrees with the
Purchasers, (i) for the benefit of the Purchasers and (ii) for the benefit of
the registered holders of the Preferred Stock and the Common Stock issuable upon
conversion of, or pursuant to a Change of Control Offer (as defined in the
Certificate of Designation) with respect to, the Preferred Stock (the
"Conversion Shares") and for the benefit of the registered holders of the
Warrants and the Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares" and, collectively with the aforementioned securities, the
"Securities") from time to time until such time as such
<PAGE>
Securities have been sold pursuant to a Registration Statement (as defined
below) (each of the foregoing a "Holder" and together the "Holders") or as
otherwise set forth herein, as follows:
1. Filing of Registration Statements. (a) Initial
Registration. Following the Closing Date, the Company shall, at its own cost, be
required to use its best reasonable efforts to file with the Securities and
Exchange Commission (the "Commission"), promptly, and to have declared effective
by August 15, 1997 (i) a registration statement covering the resale of shares of
Preferred Stock from time to time (the "Preferred Stock Registration Statement")
and (ii) a registration statement covering the resale of the Warrants from time
to time and the issuance of Warrant Shares as such Warrants are exercised from
time to time (the "Warrant Registration Statement"). In the Company's
discretion, the Preferred Stock Registration Statement and the Warrant
Registration Statement may be combined into one Registration Statement.
(b) Demand Registration. At any time after May 11, 1997, each
Holder of the Preferred Stock shall have the right, upon written demand given to
the Company (the "Demand Notice"), to request the Company to register such
Holder's Conversion Shares other than Conversion Shares underlying Preferred
Stock which has been sold by means of the Preferred Stock Registration Statement
("Registered Preferred Stock"). Upon receipt of a Demand Notice, the Company
shall, at its cost and within 30 days, prepare and file with the Commission and
thereafter shall use its best efforts to cause to be declared effective within
90 days following the date of such Demand Notice, a registration statement (a
"Common Stock Registration Statement") covering the resale of the Conversion
Shares by such Holder from time to time in accordance with the methods of
distribution set forth in the Common Stock Registration Statement and Rule 415
under the Securities Act of 1933, as amended (the "Securities Act"). Not later
than 30 days prior to the effectiveness of any Common Stock Registration
Statement, the Company will notify the Holders of the Preferred Stock of the
pending Registration Statement and will include in such Registration Statement
the shares of Preferred Stock of each Holder who elects to join therein within
10 days by motion to the Company. Notwithstanding anything else contained
herein, the Company will not be obligated to file more than two Common Stock
Registration Statements.
<PAGE>
(c) Maintain Effectiveness. The Company shall use its best
efforts to keep the Preferred Stock Registration Statement, the Warrant
Registration Statement and the Common Stock Registration Statement (each, a
"Registration Statement", and, collectively, the "Registration Statements")
continuously effective, in order to permit the prospectus included in each of
the Registration Statements to be lawfully delivered by or to the Holders of the
relevant Securities, until such time as all the Securities covered by the
Registration Statements have been sold pursuant thereto or may be sold without
limitation pursuant to Rule 144 under the Securities Act (or any successor rule
thereof), assuming for this purpose that the Holders thereof are not affiliates
of the Company (in any such case, such period being called the "Registration
Period"); provided, however, that no Holder (other than a Purchaser) shall be
entitled to have the Securities held by it covered by such any of the
Registration Statements unless such Holder agrees in writing to be bound by all
the provisions of this Agreement applicable to such Holder. The Company shall be
deemed not to have used its best efforts to keep any of the Registration
Statements effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered thereby not being able
to offer and sell such Securities during that period, unless (i) such action is
required by applicable law or (ii) upon the occurrence of any event contemplated
by paragraph 2(b)(iv) below, such action is taken by the Company in good faith
and for valid business reasons and the Company thereafter promptly complies with
the requirements of paragraph 2(h) below if the Company has determined in good
faith that there are no material legal or commercial impediments in so doing.
(d) Comply with SEC Rules. Notwithstanding any other
provisions of this Agreement to the contrary, the Company shall cause (other
than with respect to information required to be supplied by the selling Holders
pursuant to this Agreement) (i) each of the Registration Statements and the
prospectus related thereto and any amendment or supplement thereto to comply in
all material respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission thereunder, (ii) each of the
Registration Statements and any amendment thereto not to contain, when it
becomes effective, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus
<PAGE>
forming a part of any of the Registration Statements, and any amendment or
supplement to such prospectus, not to contain, as of the date of such prospectus
or amendment or supplement, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
2. Registration Procedures. In connection with the
Registration Statements contemplated by Section 1 hereof the following
provisions shall apply to each of the Registration Statements:
(a) The Company shall (i) furnish to each Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each amendment or supplement, if any, to the
prospectus included therein and, in the event that a Purchaser (with respect to
any portion of an unsold allotment from the original offering) is participating
in the Registration Statement, shall consider in good faith reflecting in each
such document, when so filed with the Commission, such comments as such
Purchaser reasonably may propose through Designated Counsel and (ii) from time
to time include the names of the Holders, who propose to sell Securities
pursuant to such Registration Statement, as selling security holders.
(b) The Company shall give written notice to the Purchasers
and the Holders (which notice pursuant to clauses (ii)-(iv) hereof shall be
accompanied by an instruction to suspend the use of the prospectus until the
requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has been filed
with the Commission and when the Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose;
(iii) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the
<PAGE>
qualification of the Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(iv) of the happening of any event that the Company has in good faith
determined requires it to make changes in the Registration Statement or the
prospectus in order that the Registration Statement or the prospectus do not
contain an untrue statement of a material fact nor omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in light of the circumstances under which they were
made) not misleading, which written notice need not provide any detail as to the
nature of such event.
(c) The Company shall use reasonable commercial efforts to
obtain the withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Registration, without charge, one copy of
the Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits thereto (other than those, if any, incorporated by reference).
(e) The Company shall, during the Registration Period, deliver
to each Holder of Securities included within the coverage of the Registration
Statement, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in the Registration Statement and any amendment
or supplement thereto as such Holder may reasonably request. The Company
consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
in connection with the offering and sale of the Securities covered by the
prospectus, or any amendment or supplement thereto, included in the Registration
Statement.
(f) Prior to any public offering of the Securities, pursuant
to the Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in
<PAGE>
connection with the registration or qualification of such Securities for offer
and sale under the securities or "blue sky" laws of such states of the United
States as any such Holder reasonably requests in writing and do any and all
other acts or things reasonably necessary or advisable to enable the offer and
sale in such jurisdictions of the Securities covered by the Registration
Statement; provided, however, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action which would subject it to general service of
process or to taxation in any jurisdiction where it is not then so subject.
(g) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to the Registration Statements
free of any restrictive legends and in such denominations and registered in such
names as the Holders may request a reasonable period of time prior to sales of
the Securities pursuant to the Registration Statements.
(h) Upon the occurrence of any event contemplated by
paragraphs (ii) through (iv) of Section 2(b) above during the period for which
the Company is required to maintain an effective Registration Statement, the
Company shall promptly prepare and file post-effective amendments to the
Registration Statements or an amendment or supplement to the related prospectus
and any other required document or file the appropriate document under the
Exchange Act which is deemed to so amend or supplement, so that, as thereafter
delivered to Holders or purchasers of Securities, the prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. If the
Company notifies the Purchasers or the Holders in accordance with paragraphs
(ii) through (iv) of Section 2(b) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the
Purchasers and the Holders shall immediately suspend use of such prospectus.
(i) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the
Registrations.
<PAGE>
(j) The Company may require each Holder of Securities to be
sold pursuant to the Registration Statements to furnish to the Company such
information regarding the Holder and the distribution of the Securities as the
Company may from time to time reasonably require for inclusion in the
Registration Statements, and the Company may exclude from such registration the
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
(k) The Company shall (i) make reasonably available for
inspection by the Holders of the Securities and any attorney, accountant or
other agent retained by the Holders of the Securities all relevant financial and
other records, pertinent corporate documents and properties of the Company and
(ii) cause the Company's officers, directors, employees, accountants and
auditors to supply all relevant information reasonably requested by the Holders
of the Securities or any such attorney, accountant or agent in connection with a
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering (i) shall be coordinated on behalf of the
Purchasers by Cravath, Swaine & Moore (the "Designated Counsel"), (ii) shall not
be available for any such Holder that is a competitor of the Company and (iii)
shall be maintained as confidential by the Holders and the Designated Counsel
pursuant to customary confidentiality agreements.
(l) The Company, if requested by the Designated Counsel, shall
cause (i) its counsel to deliver an opinion and updates thereof relating to the
Securities in customary form, including customary and reasonable qualifications,
assumptions and limitations, addressed to such Holders, and dated, in the case
of the initial opinion, the effective date of such Registration Statement (it
being agreed that the matters to be covered by such opinion shall include,
without limitation, the due incorporation and good standing of the Company and
its subsidiaries; the qualification of the Company and its subsidiaries to
transact business as foreign corporations; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal or governmental proceedings
<PAGE>
involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Registration Statement,
or the offering and sale of the applicable Securities; the compliance as to form
of such Registration Statement and any documents incorporated by reference
therein; and, as of the date of the opinion and as of the effective date of the
Registration Statement or most recent post-effective amendment thereto, as the
case may be, the absence from such Registration Statement and the prospectus
included therein, as then amended or supplemented, and from any documents
incorporated by reference therein of an untrue statement of a material fact or
the omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading (in the case of any such
documents, in the light of the circumstances existing at the time that such
documents were filed with the Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), (ii) its officers to execute and deliver
all customary documents and certificates and updates thereof requested by the
Designated Counsel and (iii) its independent public accountants and the
independent public accountants with respect to any other entity for which
financial information is provided in the Registration Statement to provide to
the selling Holders of the applicable Securities a comfort letter in customary
form and covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
(m) The Company shall use reasonable commercial efforts to
take all other steps necessary to effect the registration of the Securities
covered by the Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 2 hereof, whether or not the applicable Registration
Statement is filed or becomes effective, and shall bear or reimburse the Holders
of the Securities covered by such Registration Statement for the reasonable fees
and disbursements of the Designated Counsel (provided that Holders of Conversion
Shares issued upon the conversion of the Preferred Stock shall be deemed to be
Holders of the Preferred Stock from which such Conversion Shares were
<PAGE>
converted) to act as counsel for the Holders in connection
therewith.
4. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Holder and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (each Holder and
such controlling persons are referred to collectively as the "Indemnified
Parties") from and against any losses, claims, damages or liabilities, joint or
several, or any actions in respect thereof (including, but not limited to, any
losses, claims, damages, liabilities or actions relating to purchases and sales
of the Securities) to which each Indemnified Party becomes subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
applicable Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to such
Registration Statement, or arise out of, or are based upon, the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and subject to
subsection (c) below, shall reimburse, as incurred, the Indemnified Parties for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action in
respect thereof; provided, however, that (i) the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of or is based upon (x) the use of any prospectus in violation of the last
sentence of Section 2(h), or (y) any untrue statement or alleged untrue
statement or omission or alleged omission made in the applicable Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to such Registration Statement in reliance upon
and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to the applicable Registration Statement, the indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any Holder from whom the
person asserting any such losses, claims, damages or liabilities purchased the
Securities
<PAGE>
concerned, to the extent that a prospectus relating to such Securities was
required to be delivered by such Holder under the Securities Act in connection
with such purchase and any such loss, claim, damage or liability of such Holder
results from the fact that there was not sent or given to such person, at or
prior to the written confirmation of the sale of such Securities to such person,
a copy of the final prospectus if the Company had previously furnished copies
thereof to such Holder; provided further, however, that this indemnity agreement
will be in addition to any liability which the Company may otherwise have to
such Indemnified Party.
(b) Each Holder, severally and not jointly, will indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act from and against any
losses, claims, damages or liabilities or any actions in respect thereof, to
which the Company or any such controlling person becomes subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, and to subsection (c)
below, shall reimburse, as incurred, the Company for any legal or other expenses
reasonably incurred by the Company or any such controlling person in connection
with investigating or defending any loss, claim, damage, liability or action in
respect thereof; provided, however, that no such Holder shall be required to pay
any amount pursuant to this subsection (b) in excess of the amount by which the
net proceeds received by such Holder from the sale of the Securities pursuant to
the applicable Registration Statement exceeds the amount of damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. This
<PAGE>
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this
Section 4 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 4,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in subsections (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party if the representation of both such parties by the same
counsel would constitute a conflict of interest), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof the indemnifying party will not be liable to such indemnified
party under this Section 4 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred
<PAGE>
to in subsections (a) or (b) above (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party or parties on
the one hand and the indemnified party on the other from the registration of the
Securities, pursuant to the applicable Registration Statement, or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and the indemnified party on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof) as well
as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or such Holder or such other indemnified party, as the case may
be, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this subsection (d)
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any action
or claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 4(d), no Holder shall be required to contribute any
amount in excess of the amount by which the net proceeds received by such Holder
from the sale of the Securities pursuant to the applicable Registration
Statement exceeds the amount of damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls such indemnified party within the meaning of the Securities Act or the
Exchange Act shall have the same rights to contribution as such indemnified
party and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
<PAGE>
(e) The agreements contained in this Section 4 shall survive
the sale of the Securities pursuant to the applicable Registration Statement and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.
5. Registration Defaults. (a) The occurrence of any
of the following events constitutes a "Registration Default":
(i) if by August 15, 1997 either the Preferred Stock
Registration Statement or the Warrant Registration Statement has not
been declared effective by the Commission;
(ii) if on the date 90 days following the receipt by the Company
of a Demand Notice, the applicable Common Stock Registration Statement
has not been declared effective by the Commission; or
(iii) with respect to any of the Registration Statements, if after
a Registration Statement is declared effective (A) such Registration
Statement thereafter ceases to be effective; or (B) such Registration
Statement or the related prospectus ceases to be usable (in each case
except as permitted in paragraph (c) below) in connection with the
issuance or resales of the Securities covered thereby in accordance
with and during the periods specified herein because either (1) any
event occurs as a result of which the related prospectus forming part
of such Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they
were made not misleading, or (2) it shall be necessary to amend such
Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
(b) Upon the occurrence of a Registration Default
(i) with respect to the Preferred Stock Registration Statement
or the Warrant Registration Statement, the dividend rate payable on the
Preferred Stock as set forth in Section 3(a) of the Certificate of Designation
will increase to 6.5% until
<PAGE>
such time as the Registration Default has been cured (or such Registration
Statement is no longer required to be effective pursuant to the terms hereof);
and
(ii) with respect to a Common Stock Registration Statement the
Company will be required to pay to the holders of the Preferred Stock that gave
the Demand Notice with respect thereto or that joined therein pursuant to
Section 1(b), on each share of Preferred Stock then owned by such holder (other
than Registered Preferred Stock), an amount equal to 2% of the Liquidation
Preference of such Preferred Stock (as defined in the Certificate of Designation
with respect thereto) (the "Registration Default Amount"), payable for each
month during which there has occurred a Registration Default for at least 15
days until such time as such Registration Default has been cured (or such
Registration Statement is no longer required to be effective pursuant to the
terms hereof). With respect to each month for which the Registration Default
Amount is payable, such payment will be made within five business days following
the end of such month (i) by certified check or bank check or (ii) through the
issuance of a number of additional shares (or fractional shares) of Preferred
Stock (the "Other Shares") equal to the Registration Default Amount divided by
the Stated Value (as defined in the Certificate of Designation with respect
thereto) of the Preferred Stock, to the holders of Preferred Stock at such
address as appears for the holder on the record books of the Company (or at such
other address as such holder shall hereafter give to the Company by written
notice).
(c) A Registration Default referred to in Section 5(a)(iii)
shall be deemed not to have occurred and be continuing in relation to the
applicable Registration Statement or the related prospectus if (i) such
Registration Default has occurred solely as a result of (x) the filing of a
post-effective amendment to such Registration Statement to incorporate annual
audited financial information with respect to the Company where such
post-effective amendment is not yet effective and needs to be declared effective
to permit Holders to use the related prospectus or (y) other material events,
with respect to the Company that would need to be described in such Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company proceeds promptly and in good faith to amend or supplement such
Registration Statement and related prospectus to describe such events if the
Company has determined
<PAGE>
in good faith that there are no material legal or commercial impediments in so
doing; provided, however, that in any case if such Registration Default occurs
for a continuous period in excess of 45 days, a Registration Default shall be
deemed to have occurred and the applicable dividend rate or Registration Default
Amount shall be payable in accordance with the above paragraph following such
date.
(d) A Registration Default with respect to the Common Stock
Registration Statement shall be deemed not to have occurred and be continuing if
(i) such Registration Default consists of the failure of the Common Stock
Registration Statement to be declared effective by the Commission due to the
refusal of the Commission to allow the Company to use the Common Stock
Registration Statement for its intended purposes and (ii) at such time the
Preferred Stock Registration Statement is effective and there is no Registration
Default referred to in Section 5(a)(iii) with respect to the Preferred Stock
Registration Statement; provided, however, if the failure described in cause (i)
continues beyond 90 days, a Registration Default shall be deemed to have
occurred and the Registration Default Amount shall be payable in accordance with
paragraph (b) above following such date.
6. Rule 144. The Company shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required to file
such reports, it will, upon the request of any Holder of Securities, make
publicly available other information so long as necessary to permit sales of
their securities pursuant to Rule 144. The Company covenants that, if in the
event the Company is no longer subject to Sections 13 or 15(d) of the Exchange
Act and the Securities represent more than the right to receive cash upon
exercise and conversion thereof, it will take such further action as any Holder
of Securities may reasonably request, all to the extent required from time to
time to enable such Holder to sell Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144. The
Company will provide a copy of this Agreement to prospective purchasers of
Securities identified to the Company by the Purchasers upon request.
Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
<PAGE>
7. Miscellaneous. (a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, except by the Company
and upon the written consent of the Holders of a majority of shares of Preferred
Stock (provided that Holders of Conversion Shares issued upon conversion of the
Preferred Stock shall be deemed to be Holders of the number of shares of
Preferred Stock from which such Common Stock was converted) affected by such
amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
if to the Company, at its address as follows:
WinStar Communications, Inc.
230 Park Avenue
New York, NY 10169
Fax No.: (212) 922-1637
Attention: Timothy R. Graham,
Executive Vice President
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10116
Fax No.: (212) 687-6989
Attention: David Alan Miller, Esq.
if to one of the Purchasers, at the addresses set forth
on the applicable signature page of the Purchase Agreement;
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
<PAGE>
(c) No Inconsistent Agreements; Damages. The Company has not,
as of the date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its securities that violates the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof. Notwithstanding anything to the contrary contained in this Agreement, it
is hereby acknowledged and agreed that the Company shall have no liability for
monetary damages to the Purchasers or any Holder for any breaches, failures to
comply or violations by it of Section 1 or 2 of this Agreement except as
expressly provided in Section 4 or 5 hereof; provided, however, in the event
that the Company breaches, fails to comply or violates the provisions of Section
1 or 2 hereof, the Holders shall be entitled to, and the Company shall not
oppose the granting of, equitable relief, including injunction and specific
performance.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Securities. The Company hereby agrees
to extend the benefits of this Agreement to any Holder of Securities and any
such Holder may specifically enforce the provisions of this Agreement as if an
original party hereto subject to its compliance with the provision of Section
2(j).
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
By the execution and delivery of this Agreement, the Company
submits to the nonexclusive jurisdiction of any federal or state court in the
State of New York.
<PAGE>
(h) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified percentage of the outstanding shares of
Preferred Stock is required hereunder, Preferred Stock held by the Company or
its affiliates (other than subsequent Holders of Preferred Stock if such
subsequent Holders are deemed to be affiliates solely by reason of their
holdings of such Preferred Stock) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the several Purchasers and the Company in accordance with its
terms.
Very truly yours,
WINSTAR COMMUNICATIONS, INC.
By: /s/
---------------------
Name:
Title:
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written.
CREDIT SUISSE FIRST BOSTON
CORPORATION
By: /s/
----------------------
Name:
Title:
<PAGE>
