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) August 8, 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) 645-5000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index -- Page 6
Page 1 of 5 Pages
<PAGE>
Item 5. Other Events.
Private Placement of Debt Securities
On August 8, 1997, WinStar Equipment II Corp. (the "Company"), a newly
formed wholly owned subsidiary of WinStar Communications, Inc. ("WinStar"),
issued an aggregate of $50 million of New Senior Secured Notes (as defined
below) in an institutional private placement (the "August 1997 Debt Placement")
conducted through Credit Suisse First Boston Corporation ("CSFBC") and BT
Securities Corporation ("BT"), the initial purchasers of the New Senior Secured
Notes (the "Initial Purchasers"). The August 1997 Debt Placement was consummated
pursuant to a $150 million facility WinStar had obtained from affiliates of the
Initial Purchasers in March 1997 in conjunction with the issuance by WinStar and
WinStar Equipment Corp., a wholly owned subsidiary of WinStar ("WEC"), of $300
million of notes in an institutional private placement conducted through the
Initial Purchasers ("March 1997 Debt Placement"). WinStar continues to have
available $100 million of such facility (the issuance of the New Senior Secured
Notes reducing availability by $50 million), which, subject to WinStar
satisfying various operating and financial criteria, may be drawn by WinStar on
March 31, 1999. The amount of this commitment may be further reduced in certain
circumstances, including as a result of the issuance of additional securities by
WinStar prior to March 31, 1999.
The August 1997 Debt Placement consisted of $50 million of the
Company's 12 1/2% Senior Secured Notes due 2004 (the "New Senior Secured
Notes"), unconditionally guaranteed on a senior basis by WinStar ("Note
Guarantee"). The Note Guarantee is an unsecured, senior obligation of WinStar,
ranking pari passu in right of payment with all existing and future senior
indebtedness of WinStar, and will be senior in right of payment to all existing
and future subordinated indebtedness of WinStar. The New Senior Secured Notes
will be secured by liens on Designated Equipment (as defined below) purchased
with proceeds of the August 1997 Debt Placement.
Interest on the New Senior Secured Notes will accrue at a rate of 12
1/2% per annum and be payable semiannually on March 15 and September 15 of each
year, commencing September 15, 1997. The New Senior Secured Notes will mature on
March 15, 2004 and are redeemable on or after March 15, 2002 at the option of
the Company.
The proceeds of the New Senior Secured Notes will be used by the
Company to acquire telecommunications equipment, inventory and related software
and other property ("Designated Equipment"), including radios, antennae,
switches, cable, service vehicles and related equipment and software, used in
WinStar's business and for the buildout of its telecommunications operations for
lease to WinStar's operating subsidiaries and others and to pay certain costs,
including installation costs, related thereto ("Acquisition Costs").
The New Senior Secured Notes were issued pursuant to, and are governed
by, the terms of an indenture (the "Indenture") among the Company, as issuer of
the New Senior Secured Notes, WinStar, as guarantor, and United States Trust
Company of New York ("Trustee"), as trustee. Under the Indenture, the Company
and WinStar are subject to restrictions substantially similar to the
restrictions on WinStar contained in an indenture between WinStar and the
Trustee with respect to certain notes issued in October 1995 (the "1995 Notes")
and indentures among WinStar, WEC and the Trustee with respect to certain notes
issued in the March 1997 Debt Placement. Such restrictions include, among
others, restrictions with respect to the incurrence of additional indebtedness,
the creation of liens or encumbrances, the making of certain restricted
payments, including investments outside WinStar's telecommunications operations,
and sales of assets, in each case, of WinStar and certain of its subsidiaries,
and changes of control of WinStar.
Upon consummation of the August 1997 Debt Placement, the Company and
WinStar entered into a Registration Rights Agreement (the "Registration Rights
Agreement") with the Initial Purchasers, which requires the Company and WinStar
to effect a registered exchange offer pursuant to which the
2
<PAGE>
New Senior Secured Notes may be exchanged by the holders thereof for notes (the
"Exchange Notes") having terms substantially identical to such exchanged New
Senior Secured Notes (except with respect to transfer restrictions). Each of the
Company and WinStar has agreed to its best efforts to have the registration
statement in connection with such exchange offer filed by September 22, 1997,
declared effective by the Securities and Exchange Commission ("SEC") by January
5, 1998 and to keep the exchange offer open for not less than 30 days (or longer
if required by applicable law) after the date that notice thereof is mailed to
the holders of the New Senior Secured Notes. Each of the Company and WinStar has
further agreed, under certain circumstances, including, among others, their
failure to consummate such exchange offer by February 4, 1998, to file a shelf
registration statement (a "Shelf Registration Statement") covering resales of
the New Senior Secured Notes, and to keep the Shelf Registration Statement
effective until the time when the New Senior Secured Notes covered thereby can
be sold without an effective registration statement. In the event of a default
by the Company or WinStar under the Registration Rights Agreement, interest will
accrue on the New Senior Secured Notes from and including the date on which any
such default shall occur, but excluding the date on which all defaults with
respect to such New Senior Secured Notes have been cured. Such additional
interest will be payable in cash, semiannually in arrears, at a rate per annum
equal to .50% of the principal amount of the New Senior Secured Notes.
Except as otherwise described in the Indenture, the New Senior Secured
Notes are not redeemable prior to March 15, 2002. Thereafter, the New Senior
Secured Notes will be redeemable, at the Company's option, in whole or in part,
at the following redemption prices (expressed as a percentage of the principal
amount of the New Senior Notes at the time of redemption) plus accrued and
unpaid interest, if any:
Redemption
Year Price
2002 106.250%
2003 and thereafter 103.125%
In the event that by August 8, 1999, the Company shall not have applied
at least $50.0 million to fund the Acquisition Costs of Designated Equipment
($50.0 million less the amount so applied being herein called the "Unused
Equipment Amount"), the Company shall redeem the New Senior Secured Notes in an
aggregate principal amount equal to the Unused Equipment Amount at a redemption
price of 112.50% of such principal amount, plus, in each case accrued and unpaid
interest (if any) to the date of such redemption price. The mandatory redemption
described herein shall occur no later than August 23, 1999.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Financial Statements.
None.
Pro Forma Financial Information.
None.
3
<PAGE>
Exhibits.
<TABLE>
<CAPTION>
<S> <C>
10.1 Purchase Agreement between WinStar, the Company and the Initial
Purchasers, dated August 8, 1997
10.2 Form of 12 1/2% Senior Secured Note due 2004
10.3 Guaranteed Senior Secured Notes Indenture, including form of
Guaranteed Senior Secured Note, dated as of August 1, 1997
10.4 Registration Rights Agreement, dated August 8, 1997
10.5 Security Agreement, dated August 1, 1997
</TABLE>
4
<PAGE>
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: September 11, 1997 WINSTAR COMMUNICATIONS, INC.
----------------------------
(Registrant)
/s/Timothy R. Graham
----------------------------
Timothy R. Graham,
Executive Vice President
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
<S> <C>
10.1 Purchase Agreement between WinStar, the Company and the Initial
Purchasers, dated August 8, 1997
10.2 Form of 12 1/2% Senior Secured Note due 2004
10.3 Guaranteed Senior Secured Notes Indenture, including form of
Guaranteed Senior Secured Note, dated as of August 1, 1997
10.4 Registration Rights Agreement, dated August 8, 1997
10.5 Security Agreement, dated August 1, 1997
</TABLE>
6
<PAGE>
EXECUTION COPY
$50,000,000
WINSTAR EQUIPMENT II CORP.
$50,000,000 12 1/2% Guaranteed Senior Secured Notes Due 2004
PURCHASE AGREEMENT
August 8, 1997
CREDIT SUISSE FIRST BOSTON CORPORATION
BT SECURITIES CORPORATION
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue
New York, N.Y. 10010
Ladies and Gentlemen:
1. Introductory. WinStar Equipment II Corp., a Delaware corporation (the
"Issuer"), has agreed, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto (the
"Purchasers") U.S.$50,000,000 principal amount of the Issuer's 12 1/2%
Guaranteed Senior Secured Notes Due 2004 (the "Offered Securities"). The Offered
Securities will be unconditionally guaranteed on a senior basis (the
"Guarantee") by WinStar Communications, Inc., a Delaware corporation (the
"Guarantor"). The Offered Securities are being issued under an indenture, dated
as of August 1, 1997 (the "Indenture"), between the Issuer, the Guarantor, and
United States Trust Company of New York, as Trustee. The United States
Securities Act of 1933 is herein referred to as the "Securities Act."
As provided in Section 5(a) of this Agreement, the Issuer and the
Guarantor have agreed to prepare and deliver to the Purchasers an offering
circular relating to the Offered Securities being purchased by the Purchasers
for use by the Purchasers in connection with the resale of the Offered
Securities. Such offering circular is herein referred to as the "Offering
Document".
<PAGE>
2
The Issuer and the Guarantor hereby agree with the several Purchasers as
follows:
2. Representations and Warranties of the Issuer and the Guarantor. The
Issuer and the Guarantor represent and warrant to, and agree with, the several
Purchasers that:
(a) As of its date, the Offering Document will not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written
information furnished to the Issuer by any Purchaser through Credit Suisse First
Boston Corporation ("CSFBC") specifically for use therein. The Guarantor's
Annual Report on Form 10-K most recently filed with the Securities and Exchange
Commission (the "Commission") and all subsequent reports (collectively, the
"Exchange Act Reports") which have been filed by the Guarantor with the
Commission or sent to stockholders pursuant to the Securities Exchange Act of
1934 (the "Exchange Act"), when they were filed with the Commission, conformed
in all material respects to the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder. Each of (i) the registration
statement on Form S-4 under the Securities Act (Registration No. 333- 26367)
filed by the Issuer and the Guarantor on May 2, 1997, as amended pursuant to
Amendment No. 1 on July 22, 1997, and Amendment No. 2 on August 5, 1997 (as so
amended, the "S-4 Registration Statement") and (ii) the registration statement
on Form S-3 under the Securities Act (Registration No. 333-18465) filed by the
Guarantor on December 20, 1996, as amended pursuant to Amendment No. 1 on June
10, 1997, and Amendment No. 2 on August 5, 1997 (as so amended, the "S-3
Registration Statement" and, together with the S-4 Registration Statement and
the Exchange Act Reports, the "SEC Filings"), as of the date hereof, conforms in
all material respects to the requirements of the Securities Act and the rules
and regulations of the Commission thereunder, and neither such registration
statement (as amended) includes any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading (except that neither the S-4 Registration
Statement nor the S-3 Registration Statement includes the Guarantor's quarterly
financial information for the period ended June 30, 1997, and neither such
registration statement includes a description of the Offered Securities).
(b) Each of the Issuer and the Guarantor has been duly incorporated and is
an existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and conduct
its business as described in the March Offering Document (as defined in Section
5(a)) or the SEC Filings; and each of the Issuer and the Guarantor is duly
qualified to do business as a
<PAGE>
3
foreign corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the condition
(financial or other), business, properties or results of operations of each of
the Issuer and the Guarantor and their respective subsidiaries, taken as a whole
(a "Material Adverse Effect"). The Guarantor is qualified to do business as a
foreign corporation in the State of New York. The Issuer is qualified to do
business as a foreign corporation in the State of New York.
(c) Each subsidiary of the Issuer and the Guarantor has been duly
incorporated and is an existing corporation in good standing under the laws of
the jurisdiction of its incorporation, with corporate power and authority to own
its properties and conduct its business as described in the March Offering
Document or the SEC Filings; and each subsidiary of the Issuer and the Guarantor
is duly qualified to do business as a foreign corporation in good standing in
all other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect; all of the issued and outstanding capital stock of each
subsidiary of the Issuer and the Guarantor has been duly authorized and validly
issued and is fully paid and nonassessable; and the capital stock of each
subsidiary owned by the Issuer and the Guarantor, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.
(d) Each of the Indenture and the Registration Rights Agreement (as defined
herein) has been duly authorized, executed and delivered; the Offered Securities
have been duly authorized; and when the Offered Securities are delivered and
paid for pursuant to this Agreement on the Closing Date (as defined below), such
Offered Securities will have been duly executed, authenticated, issued and
delivered; and the Indenture and the Registration Rights Agreement constitute,
and such Offered Securities will constitute, valid and legally binding
obligations of the Issuer, enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles; and, with respect to the Registration Rights
Agreement, except that rights to indemnity and contribution may be limited by
federal and state securities laws and public policy considerations.
(e) Except as contemplated by this Agreement or as disclosed in the March
Offering Document or the SEC Filings, there are no contracts, agreements or
understandings between the Issuer or the Guarantor and any person that would
give rise to a valid claim against the Issuer or the Guarantor or any Purchaser
for a brokerage commission, finder's fee or other like payment in connection
with the transactions contemplated by this Agreement.
<PAGE>
4
(f) No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required for the consummation of the
transactions contemplated by this Agreement in connection with the issuance and
sale of the Offered Securities by the Issuer or the giving of the Guarantee by
the Guarantor, other than as may be required under the Securities Act and the
Rules and Regulations of the Commission thereunder with respect to the
Registration Rights Agreement among the Issuer or the giving of the Guarantee by
the Guarantor and the Purchasers dated the date hereof (the "Registration Rights
Agreement") and the transactions contemplated thereunder, and such as may be
required by securities or blue sky laws of any state of the United States or of
any foreign jurisdiction in connection with the offer and sale of the Offered
Securities.
(g) The execution, delivery and performance of the Indenture, the
Registration Rights Agreement and this Agreement, and the issuance and sale of
the Offered Securities and compliance with the terms and provisions thereof will
not result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Issuer, the Guarantor or any subsidiary of the Issuer or
the Guarantor or any of their properties, (ii) any agreement or instrument to
which the Issuer, the Guarantor or any such subsidiary is a party or by which
the Issuer, the Guarantor or any such subsidiary is bound or to which any of the
properties of the Issuer, the Guarantor or any such subsidiary is subject, or
(iii) the charter or by-laws of the Issuer, the Guarantor or any such
subsidiary, except, in the case of clause (i) or (ii), such breaches, violations
or defaults that individually or in the aggregate would not have a Material
Adverse Effect; and the Issuer has full corporate power and authority to
authorize, issue and sell the Offered Securities to be sold by the Issuer as
contemplated by this Agreement.
(h) This Agreement has been duly authorized, executed and delivered by the
Issuer and the Guarantor.
(i) Except as disclosed in the March Offering Document or the SEC Filings,
the Issuer, the Guarantor and their subsidiaries have good and marketable title
to all real properties and all other properties and assets owned by them, in
each case free from liens, encumbrances and defects that would materially affect
the value thereof or materially interfere with the use made or to be made
thereof by them; and except as disclosed in the March Offering Document or the
SEC Filings, the Issuer, the Guarantor and their subsidiaries hold any leased
real or personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof by them.
<PAGE>
5
(j) The Issuer, the Guarantor and their subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(k) No labor dispute with the employees of the Issuer, the Guarantor or any
of their subsidiaries exists or, to the knowledge of the Issuer or the
Guarantor, is imminent that could reasonably be expected to have a Material
Adverse Effect.
(l) The Issuer, the Guarantor and their subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other rights
to inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "intellectual property rights") necessary
to conduct the business as now operated by them, or used in the conduct of the
business as now operated by them, except to the extent that the failure to own
or possess or the inability to acquire such intellectual property rights would
not individually or in the aggregate have a Material Adverse Effect; and the
Issuer and the Guarantor have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Issuer, the Guarantor or
any of their subsidiaries, would individually or in the aggregate have a
Material Adverse Effect.
(m) Except as disclosed in the March Offering Document or the SEC Filings,
neither the Issuer, the Guarantor nor any of their subsidiaries is in violation
of any statute, rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "environmental laws"), owns or operates any real
property contaminated with any substance that is subject to any environmental
laws, is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any environmental
laws, which violation, contamination, liability or claim would individually or
in the aggregate have a Material Adverse Effect; and the Issuer and the
Guarantor are not aware of any pending investigation which might lead to such a
claim.
(n) Except as disclosed in the March Offering Document or the SEC Filings,
there are no pending actions, suits or proceedings against or affecting the
Issuer, the Guarantor, any of their subsidiaries or any of their respective
properties that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect, or to materially and adversely affect the
ability of either of the Issuer or the Guarantor to perform its obligations
under the Indenture, the Registration Rights
<PAGE>
6
Agreement or this Agreement, or which are otherwise material in the context of
the sale of the Offered Securities; and to the Issuers' and Guarantor's
knowledge, no such actions, suits or proceedings are threatened or contemplated.
(o) The financial statements included or incorporated by reference in the
S-3 Registration Statement present fairly the financial position of the
Guarantor and its consolidated subsidiaries as of the dates shown and their
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with generally accepted accounting
principles in the United States applied on a consistent basis; and the
assumptions used in preparing the pro forma financial statements included or
incorporated by reference in the S-3 Registration Statement provide a reasonable
basis for presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma columns therein
reflect the proper application of those adjustments to the corresponding
historical financial statement amounts. The financial statement data set forth
in the Company's press release dated August 5, 1997 (the "Release"), accurately
reflect in all material respects the Company's results purported to be shown in
such press release.
(p) Except as disclosed in the March Offering Document or the SEC Filings
or the Release, since the date of the latest audited financial statements
included in the S-3 Registration Statement, there has been no material adverse
change, nor any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties or results
of operations of either of the Issuer or the Guarantor and their respective
subsidiaries taken as a whole (it being understood that a change in the
Guarantor's stock price or the continuation of operating losses consistent with
the Guarantor's historical results shall be deemed not to be, in and of itself,
such a material adverse change), and, except as disclosed in or contemplated by
the March Offering Document or the SEC Filings, there has been no dividend or
distribution of any kind declared, paid or made by the Issuer or the Guarantor
on any class of their capital stock.
(q) Neither of the Issuer or the Guarantor is an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States Investment
Company Act of 1940 (the "Investment Company Act"), nor are either of them a
closed-end investment company required to be registered, but not registered,
thereunder; and neither of the Issuer or the Guarantor is and, after giving
effect to the offering and sale of the Offered Securities and the application of
the proceeds thereof, will be an "investment company" as defined in the
Investment Company Act.
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7
(r) No securities of the same class (within the meaning of Rule 144A(d)(3)
under the Securities Act) as the Offered Securities are listed on any national
securities exchange registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system.
(s) The offer and sale of the Offered Securities in the manner contemplated
by this Agreement will be exempt from the registration requirements of the
Securities Act; and it is not necessary to qualify an indenture in respect of
the Offered Securities under the United States Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), other than in connection with the Issuer's
and the Guarantor's obligations under the Registration Rights Agreement.
(t) Neither the Issuer, the Guarantor, nor any of their affiliates, nor any
person acting on its or their behalf (i) has, within the six-month period prior
to the date hereof, offered or sold in the United States or to any U.S. person
(as such terms are defined in Regulation S under the Securities Act) the Offered
Securities or any security of the same class or series as the Offered Securities
or (ii) has offered or will offer or sell the Offered Securities (A) in the
United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act or (B)
with respect to any such securities sold in reliance on Rule 903 of Regulation S
("Regulation S") under the Securities Act, by means of any directed selling
efforts within the meaning of Rule 902(b) of Regulation S. The Issuer, the
Guarantor, their affiliates and any person acting on their behalf have complied
and will comply with the offering restrictions requirement of Regulation S. The
Issuer and the Guarantor have not entered and will not enter into any
contractual arrangement with respect to the distribution of the Offered
Securities except for this Agreement.
(u) The Guarantor is subject to Section 13 or 15(d) of the Exchange Act.
(v) The use of the proceeds by the Issuer from the offering of the Offered
Securities, as contemplated by Section 4.21 of the Indenture governing the
Offered Securities, is specifically permitted by the indentures each dated as of
October 23, 1995, between the Guarantor and the United States Trust Company of
New York, as trustee, in respect of the Guarantor's $150,000,577 14% Senior
Discount Notes due 2005 and $75,000,289 14% Convertible Senior Subordinated
Discount Notes due 2005 (together, the "Old Indentures").
(w) The Issuer, the Guarantor and their subsidiaries are in compliance in
all material respects with the Communications Act of 1934, as amended by the
Telecommunications Act of 1996 (the "Communications Act") and with all
applicable rules, regulations and policies of the Federal Communications
Commission (the "FCC").
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8
(x) The Issuer and the Guarantor have provided to the Purchasers a complete
and accurate list of all licenses granted to the Issuer, the Guarantor and their
subsidiaries (other than experimental licenses in the 31 GHz and 38 GHz portion
of the radio spectrum and licenses acquired from Local Area Telecommunications,
Inc. that are not in the 38 GHz portion of the radio spectrum) by the FCC (the
"Licenses"). All of the Licenses are currently valid and in full force and
effect. Neither of the Issuer and the Guarantor nor any of their subsidiaries
have any knowledge of any investigation, notice of apparent liability,
violation, forfeiture or other order or complaint issued by or before any court
or regulatory body, including the FCC, or of any other proceedings (other than
proceedings relating to the wireless communications industries generally) which
could in any manner materially threaten or adversely affect the validity or
continued effectiveness of any of the Licenses.
(y) No event has occurred which (i) results in, or after notice or lapse of
time or both would result in, revocation, suspension, adverse modification,
non-renewal, impairment, restriction or termination of, or order of forfeiture
with respect to, any License or (ii) materially and adversely affects or could
reasonably be expected in the future to materially adversely affect any of the
rights of the Issuer, the Guarantor or any of their subsidiaries thereunder.
(z) The Issuer, the Guarantor and their subsidiaries have duly filed in a
timely manner all material filings, reports, applications, documents,
instruments and information required to be filed by them under the
Communications Act, and all such filings are true, correct and complete in all
material respects.
(aa) Neither of the Issuer and the Guarantor nor any of their
subsidiaries have any reason to believe that any of the Licenses will not be
renewed in the ordinary course.
3. Purchase, Sale and Delivery of Offered Securities; Payment of
Underwriting Discount. On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Issuer hereby agrees to sell to the Purchasers, and the Purchasers
hereby agree, severally and not jointly, to purchase from the Issuer, the
respective principal amounts of Offered Securities set forth opposite the names
of the Purchasers in Schedule A hereto, at an aggregate purchase price of
$50,000,000.
The Issuer hereby agrees to deliver against payment of the purchase
price the Offered Securities in the form of one or more permanent global
securities in definitive form (the "Global Securities") deposited with the
Trustee as custodian for The Depository Trust Company ("DTC") and registered in
the name of Cede & Co., as nominee for DTC. Interests in any permanent Global
Securities will be held only in
<PAGE>
9
book-entry form through DTC, except in limited circumstances (which are
described in the March Offering Document). Payment for the Offered Securities
shall be made by the Purchasers in Federal (same day) funds by wire transfer to
an account previously designated to CSFBC by the Guarantor at a bank acceptable
to CSFBC, at the office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth
Avenue, New York, N.Y. 10019-7475 at 10:00 A.M. (New York time), on the date
hereof (the "Closing Date"), against delivery to the Trustee as custodian for
DTC of the Global Securities representing all of the Offered Securities. As
payment of an underwriting discount in connection with such purchase, the
Guarantor hereby agrees to pay to the Purchasers, in Federal (same day) funds by
wire transfer to an account previously designated to the Guarantor by CSFBC,
$1,518,524.38, such payment to be made concurrently with the Purchasers'
purchase of the Offered Securities.
4. Representations and Agreements by Purchasers; Resale by Purchasers.
(a) Each Purchaser severally represents and warrants to the Issuer and the
Guarantor that it is an "accredited investor" within the meaning of Regulation D
under the Securities Act.
(b) Each Purchaser severally acknowledges that the Offered Securities have
not been registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons
except in accordance with Regulation S or pursuant to an exemption from the
registration requirements of the Securities Act. Each Purchaser severally
represents and agrees that it has offered and sold the Offered Securities, and
will offer and sell the Offered Securities (i) as part of its distribution at
any time and (ii) otherwise until 40 days after the later of the commencement of
the offering and the Closing Date, only in accordance with Rule 903 or Rule 144A
under the Securities Act ("Rule 144A"). Accordingly, neither such Purchaser nor
its affiliates, nor any persons acting on its or their behalf, have engaged or
will engage in any directed selling efforts with respect to the Offered
Securities, and such Purchaser, its affiliates and all persons acting on its or
their behalf have complied and will comply with the offering restrictions
requirement of Regulation S. Each Purchaser severally agrees that, at or prior
to confirmation of sale of the Offered Securities, other than a sale pursuant to
Rule 144A, such Purchaser will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases the
Offered Securities from it during the restricted period a confirmation or notice
to substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered
or sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after
<PAGE>
10
the later of the date of the commencement of the offering and the
closing date, except in either case in accordance with Regulation S
(or Rule 144A if available) under the Securities Act."
Unless otherwise defined herein, terms used in this subsection (b) have the
meanings given to them by Regulation S.
(c) Each Purchaser severally agrees that it and each of its affiliates has
not entered and will not enter into any contractual arrangement with respect to
the distribution of the Offered Securities except for any such arrangements with
the other Purchasers or affiliates of the other Purchasers or with the prior
written consent of the Issuer and the Guarantor.
(d) Each Purchaser severally agrees that it and each of its affiliates will
not offer or sell the Offered Securities in the United States by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act, including, but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each Purchaser severally agrees, with
respect to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or otherwise
prior to settlement of such resale a notice to the effect that the resale of
such Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each of the Purchasers severally represents and agrees that (i) it has
not offered or sold and prior to the date six months after the date of issue of
the Offered Securities will not offer or sell any Offered Securities to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995;
(ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Offered Securities in, from or otherwise involving the United Kingdom; and
(iii) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue of the
Offered Securities to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom such document may otherwise lawfully be issued or
passed on.
<PAGE>
11
(f) Each Purchaser agrees that promptly following the completion of its
initial resale of all the Offered Securities purchased by such Purchaser
pursuant to this Agreement, it will notify the Issuer and the Guarantor in
writing thereof.
5. Certain Agreements of the Issuer and the Guarantor. The Issuer and the
Guarantor agree with the several Purchasers that:
(a) The Issuer and the Guarantor will prepare and deliver to the
Purchasers, as soon as reasonably practicable after the date hereof, the
Offering Document, which shall be in a form substantially similar to the
Confidential Offering Circular dated March 13, 1997 of the Issuer and the
Guarantor (the "March Offering Document"), with such changes as are necessary so
that such document does not include material misstatements or omissions. The
Issuer and the Guarantor will advise CSFBC promptly of any proposal to amend or
supplement the Offering Document and will not effect such amendment or
supplementation without CSFBC's consent (which consent shall not be unreasonably
withheld). If, at any time prior to the completion of the resale of the Offered
Securities by the Purchasers, any event occurs as a result of which the Offering
Document as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any such time to amend or
supplement the Offering Document to comply with any applicable law, the Issuer
and the Guarantor promptly will notify CSFBC of such event and promptly will
prepare, at their own expense, an amendment or supplement which will correct
such statement or omission or effect such compliance. Neither CSFBC's consent
to, nor the Purchasers' delivery to offerees or investors of, any such amendment
or supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(b) The Issuer and the Guarantor will furnish to CSFBC copies of the
Offering Document and all amendments and supplements to such document, in each
case as soon as available and in such quantities as CSFBC reasonably requests,
and the Issuer and the Guarantor will furnish to CSFBC as soon as available
three copies of the Offering Document signed by a duly authorized officer of
each of the Issuer and the Guarantor, one of which will include the independent
accountants' reports therein manually signed by such independent accountants. At
any time when either of the Issuer or the Guarantor is not subject to Section 13
or 15(d) of the Exchange Act, such Issuer or Guarantor, as the case may be, will
promptly furnish or cause to be furnished to CSFBC (and, upon request, to each
of the other Purchasers) and, upon request of holders and prospective purchasers
of the Offered Securities, to such holders and purchasers, copies of the
information required to be delivered to holders and prospective purchasers of
the Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto) in order to permit compliance with
<PAGE>
12
Rule 144A in connection with resales by such holders of the Offered Securities.
The Guarantor will pay the expenses of printing and distributing to the
Purchasers all such documents.
(c) The Issuer and the Guarantor will use their best efforts to arrange for
the qualification of the Offered Securities for sale and the determination of
their eligibility for investment under the laws of such jurisdictions in the
United States and Canada as CSFBC reasonably designates and will continue such
qualifications in effect so long as required for the resale of the Offered
Securities by the Purchasers; provided, however, that the Issuer and the
Guarantor will not be required to qualify as foreign corporations or to file a
general consent to service of process in any such state.
(d) During the period of five years after the Closing Date, the Issuer and
the Guarantor will furnish to CSFBC and, upon request, to each of the other
Purchasers, as soon as practicable after the end of each fiscal year, a copy of
the Guarantor's annual report to stockholders for such year; and the Issuer and
the Guarantor will furnish to CSFBC and, upon request, to each of the other
Purchasers (i) as soon as available, a copy of each report and any definitive
proxy statement of either of the Issuer and the Guarantor filed with the
Commission under the Exchange Act or mailed to stockholders and (ii) from time
to time, such other publicly available information concerning the Issuer and the
Guarantor as CSFBC may reasonably request.
(e) During the period of two years after the Closing Date, the Issuer and
the Guarantor will, upon request, furnish to CSFBC, each of the other Purchasers
and any holder of Offered Securities a copy of the restrictions on transfer
applicable to the Offered Securities.
(f) During the period of two years after the Closing Date, the Issuer and
the Guarantor will not, and will not permit any of their affiliates (as defined
in Rule 144 under the Securities Act) to, resell any of the Offered Securities
that have been reacquired by any of them.
(g) During the period of two years after the Closing Date, neither of the
Issuer and the Guarantor will be or become, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act, and neither of the
Issuer and the Guarantor is, or will be or become, a closed-end investment
company required to be registered, but not registered, under the Investment
Company Act.
(h) The Guarantor will pay all expenses incidental to the performance of
the Issuer's and the Guarantor's obligations under this Agreement and the
Indenture, including (i) the fees and expenses of the Trustee and its
professional advisers; (ii) all
<PAGE>
13
expenses in connection with the execution, issue, authentication, packaging and
initial delivery of the Offered Securities, the preparation and printing of this
Agreement, the Offered Securities, the Indenture, the Offering Document and
amendments and supplements thereto, and any other document relating to the
issuance, offer, sale and delivery of the Offered Securities; (iii) the cost of
qualifying the Offered Securities for trading in the Private Offerings, Resale
and Trading through Automated Linkages (PORTAL) market and any expenses
incidental thereto; (iv) the cost of any advertising approved by the Issuer and
the Guarantor in connection with the issue of the Offered Securities; (v) any
expenses (including fees and disbursements of counsel) incurred in connection
with qualification of the Offered Securities for sale under the laws of such
jurisdictions in the United States and Canada as CSFBC designates and the
printing of memoranda relating thereto; (vi) any fees charged by investment
rating agencies for the rating of the Offered Securities; and (vii) all expenses
incurred in distributing the Offering Document (including any amendments and
supplements thereto) to the Purchasers. The Issuers will also pay or reimburse
the Purchasers for 50% of the reasonable fees and expenses of the Purchasers'
counsel, Cravath, Swaine & Moore, incurred in connection with the transactions
contemplated in this Agreement.
(i) In connection with the offering, until CSFBC shall have notified the
Issuer and the Guarantor and the other Purchasers of the completion of the
resale of the Offered Securities, neither the Issuer, the Guarantor nor any of
their affiliates has or will (unless required by the terms of the indenture
governing such Offered Securities), either alone or with one or more other
persons, bid for or purchase for any account in which it or any of its
affiliates has a beneficial interest any Offered Securities or attempt to induce
any person to purchase any Offered Securities; and neither they nor any of their
affiliates will make bids or purchases for the purpose of creating actual, or
apparent, active trading in, or of raising the price of, the Offered Securities.
(j) The Issuer and the Guarantor will not at any time offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any securities
under circumstances where such offer, sale, pledge, contract or disposition
would cause the exemption afforded by Section 4(2) of the Securities Act or the
safe harbor of Regulation S thereunder to cease to be applicable to the offer
and sale of the Offered Securities.
(k) The Issuer and the Guarantor will cause each Offered Security to bear
the legend set forth in the form of Note attached as Exhibit 1 to the Rule 144A/
Regulation S Appendix to the relevant Indenture until such legend shall no
longer be necessary or advisable because the Offered Securities are no longer
subject to the restrictions on transfer described therein.
<PAGE>
14
(l) The proceeds to the Issuer from the offering of the Offered Securities
will be used only, as contemplated by Section 4.21 of the Indenture, to purchase
equipment or inventory specifically permitted to be purchased with such proceeds
by the Old Indentures.
6. Conditions of the Obligations of the Purchasers. The obligations of the
several Purchasers to purchase and pay for the Offered Securities will be
subject to the performance by the Issuer and the Guarantor of their obligations
hereunder and to the following additional conditions precedent:
(a) The Purchasers shall have received an opinion, dated the Closing
Date, of (i) Graubard Mollen & Miller, counsel for the Issuer and the Guarantor,
and (ii) Willkie Farr & Gallagher, counsel for the Issuer and the Guarantor on
FCC matters, in each case substantially to the effect set forth in Annex I and
Annex II, respectively.
(b) The Purchasers shall have received from Cravath, Swaine & Moore,
counsel for the Purchasers (or, if such counsel shall fail to deliver such
opinion, other counsel reasonably acceptable to the Purchasers), such opinion or
opinions, dated the Closing Date, with respect to the incorporation of the
Issuer and the Guarantor, the validity of the Offered Securities, the exemption
from registration for the offer and sale of the Offered Securities by the Issuer
and the Guarantor to the several Purchasers and the resales by the several
Purchasers as contemplated hereby and other related matters as CSFBC may
reasonably require, and the Issuer and the Guarantor shall have furnished to
such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(c) The Purchasers shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer or any Vice President and the Treasurer or
a principal financial or accounting officer of each of the Issuer and the
Guarantor in which such officers, to the best of their knowledge after
reasonable investigation, shall state that the Issuer and the Guarantor have
complied with all agreements and satisfied all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date.
The Issuer and the Guarantor will furnish the Purchasers with such
conformed copies of such opinions, certificates, letters and documents as the
Purchasers reasonably request. CSFBC may in its sole discretion waive on behalf
of the Purchasers compliance with any conditions to the obligations of the
Purchasers hereunder, whether in respect of the Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Issuer and the Guarantor will
jointly and severally indemnify and hold harmless each Purchaser against any
losses,
<PAGE>
15
claims, damages or liabilities, joint or several, to which such Purchaser may
become subject, under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any breach of any of the representations
and warranties of the Issuer and the Guarantor contained herein or any untrue
statement or alleged untrue statement of any material fact contained in the
Offering Document, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and will reimburse
each Purchaser for any legal or other expenses reasonably incurred by such
Purchaser in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Issuer and the Guarantor will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with
written information furnished to the Issuer and the Guarantor by any Purchaser
through CSFBC specifically for use therein.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Issuer and the Guarantor against any losses, claims, damages or
liabilities to which the Issuer or the Guarantor may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document, or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Issuer or the
Guarantor by such Purchaser through CSFBC specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Issuer and the
Guarantor in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying
<PAGE>
16
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 (which consent shall not be
unreasonably withheld), be counsel to the indemnifying party), 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 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the prior written consent of the indemnified party (which consent
shall not be unreasonably withheld), 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 is unavailable or
insufficient to hold harmless an indemnified party under subsection (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 referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Issuer and the
Guarantor on the one hand and the Purchasers on the other from the offering of
the Offered Securities or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Issuer and the Guarantor on the one hand and the
Purchasers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the Issuer
and the Guarantor on the one hand and the Purchasers on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses but after deducting the Purchasers' discounts and
commissions) received by the Issuer and the Guarantor bear to the total
discounts and commissions received by the Purchasers from the Issuer and the
Guarantor under this Agreement. The relative fault 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 Issuer and the Guarantor or the
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue 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
<PAGE>
17
by such indemnified party in connection with investigating or defending any
action or claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to contribute
any amount in excess of the amount by which the total price at which the Offered
Securities purchased by it were resold exceeds the amount of any damages which
such Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective purchase obligations and not joint.
(e) The obligations of the Issuer and the Guarantor under this Section
shall be in addition to any liability which the Issuer and the Guarantor may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Purchaser within the meaning of the Securities
Act or the Exchange Act; and the obligations of the Purchasers under this
Section shall be in addition to any liability which the respective Purchasers
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls either of the Issuer and the Guarantor within the
meaning of the Securities Act or the Exchange Act.
8. Certain Other Post-Closing Obligations of the Issuer and the Guarantor.
(a) Upon delivery of the Offering Document to the Purchasers as provided in
Section 5(a), the Issuer and the Guarantor shall cause the following additional
documents to be delivered to the Purchasers:
(i) a letter, dated the date of the Offering Document, of
Grant Thornton LLP, in form substantially similar to the letter
delivered to the Purchasers by such firm in connection with the
transactions contemplated by the March Offering Document, with such
changes as are appropriate to reflect the inclusion of interim
financial statements in the Offering Document.
(ii) a letter from Graubard Mollen & Miller, counsel for the
Issuer and the Guarantor, stating that such counsel have no reason to
believe that the Offering Document, as of such date, contained any
untrue statement of a material fact or omitted 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; it being understood that such counsel need express no
opinion as to the financial statements or other financial data
contained in the Offering Document.
(b) In connection with the delivery of the Offering Document to the
Purchasers, the Issuer, the Guarantor and the Purchasers shall execute a letter
setting forth all information furnished to the Issuer or the Guarantor by the
Purchasers through CSFBC
<PAGE>
18
specifically for use therein, which information shall be substantially identical
to such information provided in connection with the March Offering Document.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Issuer and the Guarantor or their officers and of the several Purchasers set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Purchaser, the Issuer, the Guarantor or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Offered Securities. If for any
reason the purchase of the Offered Securities by the Purchasers is not
consummated, the Issuer and the Guarantor shall remain responsible for the
expenses to be paid or reimbursed by them pursuant to Section 5 and the
respective obligations of the Issuer and the Guarantor, and the Purchasers
pursuant to Section 7 shall remain in effect.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to
the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, NY 10010, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Issuer or the
Guarantor, will be mailed, delivered or electronically transmitted and confirmed
to, in the case of the Issuer, 1577 Spring Hill Road, 6th Floor, Vienna,
Virginia 22182, Attention: General Counsel, and, in the case of the Guarantor,
230 Park Avenue, New York, NY 10169, Attention: Timothy Graham; provided,
however, that any notice to a Purchaser pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Purchaser.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Issuer and the Guarantor as
if such holders were parties thereto.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
13. Applicable 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.
<PAGE>
19
The Issuer and the Guarantor hereby submit to the non-exclusive
jurisdiction of the Federal and state courts in the Borough of Manhattan in The
City of New York in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among the Issuer, the Guarantor and
the several Purchasers in accordance with its terms.
Very truly yours,
WinStar Equipment II Corp., as Issuer
By:
------------------------------------
Name:
Title:
WinStar Communications, Inc., as Guarantor
By:
------------------------------------
Name:
Title:
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
BT Securities Corporation
By Credit Suisse First Boston Corporation
By:
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
Principal Amount
of Offered
Purchaser Securities
- ---------- --------------------
Credit Suisse First Boston $30,000,000
Corporation
BT Securities Corporation 20,000,000
--------------
$50,000,000
A-1
<PAGE>
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC
TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (iv) TO THE ISSUER, OR (v) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH
(v) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
<PAGE>
2
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
<PAGE>
3
WINSTAR EQUIPMENT II CORP.
12 1/2% Guaranteed Senior Secured Note Due 2004
CUSIP 975518AA9
No. QIB-01 $50,000,000
WINSTAR EQUIPMENT II CORP., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to CEDE & CO., or its
registered assigns, the principal sum of FIFTY MILLION DOLLARS ($50,000,000) on
March 15, 2004.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1997.
Regular Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE>
4
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
WINSTAR EQUIPMENT II CORP.
By:
-------------------------------
Name: Kenneth J. Zinghini
Title: Vice President
By:
-------------------------------
Name: Frederic E. Rubin
Title: Treasurer
This is one of the 12 1/2% Guaranteed Senior Secured Notes Due 2004
described in the within-mentioned Indenture.
Date: August 8, 1997 UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
-------------------------------
Authorized Signatory
<PAGE>
5
WINSTAR EQUIPMENT II CORP.
12 1/2% Guaranteed Senior Secured Note Due 2004
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2004.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the March 1 and September 1
immediately preceding the relevant Interest Payment Date) on each Interest
Payment Date, commencing September 15, 1997.
Interest on the Notes will accrue from the most recent
Interest Payment Date; provided, however, that, if there is no existing default
in the payment of interest and this Note is authenticated between a Regular
Record Date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Notwithstanding the above, (i) if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Note at a rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the earlier of (x) the date on
which all Registration Defaults have been cured and (y) the date on which all
Notes become freely transferable by Holders other than Affiliates of the Company
without further registration under the Securities Act.
The Company shall pay interest on overdue principal and
premium, if any, and (to the extent lawful) interest on overdue installments of
interest.
2. Method of Payment.
The Company will pay principal as provided above and interest (except
defaulted interest) on the principal amount of the Notes as provided above on
each March 15 and September 15 to the persons who are Holders (as reflected in
the Security Register at the close of business on the March 1 and September 1
immediately preceding the relevant Interest Payment Date), in each case, even if
the Note is cancelled on registration of transfer or registration of exchange
after such record date; provided, however, that, with respect to the payment of
principal, the Company will not make payment to the Holder unless this Note is
surrendered to a Paying Agent.
<PAGE>
6
The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Notes represented by a global Note
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Company will make all payments in respect of a certificated Note
(including principal, premium and interest) by mailing a check to the registered
address of each Holder thereof; provided, however, that payments on a
certificated Note will be made by wire transfer to a U.S. dollar account
maintained by the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the Paying
Agent to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the trustee
may accept in its discretion).
3. Paying Agent and Registrar.
Initially, United States Trust Company of New York (the
"Trustee") will act as authenticating agent, Paying Agent and Registrar. The
Company may change any authenticating agent, Paying Agent or Registrar without
notice. The Company, any Subsidiary or any Affiliate of any of them may act as
Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture dated as of
August 1, 1997 (the "Indenture"), among the Company, WinStar Communications,
Inc., as guarantor (the "Guarantor") and the Trustee. Capitalized terms herein
are used as defined in the Indenture unless otherwise indicated. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Notes are subject to all
such terms, and Holders are referred to the Indenture and the Trust Indenture
Act for a statement of all such terms. To the extent permitted by applicable
law, in the event of any inconsistency between the terms of this Note and the
terms of the Indenture, the terms of the Indenture shall control.
The Notes are secured senior indebtedness of the Company. The
Indenture limits the original aggregate principal amount of the Notes to
$50,000,000 (subject to Section 2.07 of the Indenture).
5. Optional Redemption.
The Notes will not be redeemable prior to March 15, 2002.
Thereafter, the Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time on or after March 15, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed as a percentage of the
<PAGE>
7
principal amount of the Notes, plus accrued and unpaid interest, if any, on such
amount to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is on or prior to the Redemption Date to
receive interest due on the relevant Interest Payment Date if redeemed during
the 12-month period commencing on March 15 of the years set forth below:
Year Redemption Price
---- ------------------
2002 106.250%
2003 and thereafter 103.125%
6. Mandatory Redemption.
In the event that by August 8, 1999, the Company shall not
have applied at least $50.0 million to fund the Acquisition Costs of Designated
Equipment pursuant to the Indenture ($50.0 million less the amount so applied
being herein called the "Unused Equipment Amount"), the Company shall redeem
Notes in an aggregate principal amount equal to the Unused Equipment Amount at a
redemption price of 112.5% of such principal amount, plus accrued and unpaid
interest thereon to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on the relevant Interest Payment Date). The
mandatory redemption shall occur no later than August 23, 1999.
Selection of the Notes for mandatory redemption will be made
on a pro rata basis; provided, however, that no Note of $1,000 in principal
amount or less shall be redeemed in part. If any Notes are to be redeemed in
part only, a new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
7. Notice of Redemption.
Notice of any optional redemption will be mailed by the
Company at least 30 days but not more than 60 days before a Redemption Date, and
notice of a mandatory redemption will be mailed by the Company at least 10
Business Days but not more than 15 Business Days before a Redemption Date, in
each case, to each Holder of Notes to be redeemed at his last address as it
appears in the Security Register. Notes in original denominations larger than
$1,000 may be redeemed in part; provided, however, that Notes will only be
issued in denominations of $1,000 principal amount or integral multiples
thereof. On and after the Redemption Date, interest ceases to accrue on Notes
(or portions of Notes) called for redemption, unless the Company defaults in the
payment of the Redemption Price.
8. Repurchase upon Change in Control.
<PAGE>
8
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
principal amount of such Notes on such date of purchase, plus accrued and unpaid
interest, if any, on such amount to the date of purchase (the "Change of Control
Payment").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part; provided, however, that Notes will only be issued
in denominations of $1,000 principal amount at maturity or integral multiples
thereof. On and after the Change of Control Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the Change of Control Payment.
9. Guarantee.
The Notes are guaranteed on a senior unsubordinated basis by the
Guarantor to the extent provided in the Indenture.
10. Collateral and Security Documents.
To secure the due and punctual payment of the principal of, premium if
any, and interest on the Notes and all other amounts payable by the Company
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, the Grantor has granted
security interests in the Collateral to the Collateral Agent for the benefit of
the Holders of Notes pursuant to the Security Documents.
11. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount and integral multiples thereof. A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Notes selected for redemption. Also, it need not
register the transfer or exchange of any Notes for a period of 15 days before a
selection of Notes to be redeemed is made.
12. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
<PAGE>
9
13. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity.
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Notes, the Indenture and the Security
Documents, and the Guarantor may terminate its obligations under the Equipment
Note Guarantee, if the Company deposits with the Trustee money or U.S.
Government Obligations for payment of principal and interest on the Notes to
redemption or maturity, as the case may be.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that, in the opinion
of the Board of Directors of the Company, does not materially and adversely
affect the rights of any Holder.
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Guarantor and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; create liens; engage in sale-leaseback transactions;
pay dividends or make distributions in respect of their capital stock; make
investments or make certain other restricted payments; sell assets; issue or
sell stock of Restricted Subsidiaries; enter into transactions with stockholders
or affiliates; or, with respect to the Company, to incur any indebtedness other
than the Notes; engage in any other business activities; apply the gross
proceeds from the sale of the Notes to uses other than the acquisition of
Designated Equipment; fail to take action to vest a security interest in the
Designated Equipment in the Trustee; fail to file proper UCC-1s and UCC-3s;
consolidate, merge or sell all or substantially all of its assets. Within 90
days after the end of the last fiscal quarter of each year, the Company must
report to the Trustee on compliance with such limitations.
<PAGE>
10
17. Successor Persons.
Generally, when a successor person or other entity assumes all
the obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
18. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable, upon acceleration, redemption or
otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days; (c)
the Company or WCI defaults in the performance of or breaches any other covenant
or agreement of the Company or WCI in the Indenture or under the Notes or the
Security Documents and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount of the Notes; (d) there occurs with respect
to any issue or issues of Indebtedness of WCI or any Significant Subsidiary
having an outstanding principal amount of $25,000,000 or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now exists or
shall hereafter be created, (i) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (ii) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (e) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $25,000,000 in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against WCI or any Significant Subsidiary
and shall not be paid or discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding and not paid
or discharged against all such Persons to exceed $25,000,000 during which a stay
of enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (f) a court having jurisdiction in the
premises enters a decree or order for (i) relief in respect of WCI or any
Significant Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (ii) appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of WCI or any Significant Subsidiary or for all or substantially all of
the property and assets of WCI or any Significant Subsidiary or (iii) the
winding up or liquidation of the affairs of WCI or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in effect for
a period of 60 consecutive days; (g) WCI or any Significant Subsidiary (i)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case
<PAGE>
11
under any such law, (i) consents to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of WCI or any Significant Subsidiary or for all or substantially all of
the property and assets of WCI or any Significant Subsidiary or (iii) effects
any general assignment for the benefit of creditors; (h) any of the provisions
of the Indenture relating to the Security Documents or the Security Documents
shall cease to be in full force and effect or shall cease to give the secured
parties the Liens, rights, power and privileges purported to be created thereby;
or (i) the Equipment Note Guarantee shall cease to be in full force and effect
(other than in accordance with its terms) or the Guarantor shall deny or
disaffirm its obligations under the Equipment Note Guarantee.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to the Company or WCI) occurs
and is continuing under the Indenture, the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes, then outstanding, by written
notice to the Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
principal of, premium, if any, and accrued interest, if any, on the Notes to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any Restricted Subsidiary occurs and is continuing, the
principal amount of the Notes automatically becomes due and payable. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
19. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services for
the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
20. No Recourse Against Others.
No incorporator, stockholder, officer, director, employee or
controlling person as such, of the Company or of any successor Person thereof in
such capacity, shall have any liability for any obligations of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation provided, however, that the foregoing
shall not affect the Guarantor's obligations with respect to the Equipment Note
Guarantee. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
<PAGE>
12
21. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
22. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Note, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
23. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
24. Governing Law.
The Indenture and the Notes shall be governed by the law of the State
of New York, excluding (to the extent permissible by law) any rule of law that
would cause the application of the laws of any jurisdiction other than the State
of New York.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to WinStar Equipment II
Corp., 1577 Spring Hill Road, 6th Floor, Vienna, Virginia 22182, Attention:
General Counsel.
<PAGE>
13
ASSIGNMENT FORM
I or we assign and transfer this Note to:
Please insert social security or other identifying number of assignee
- ------------------------------------------------------------
- ------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably appoint
__________________, as agent, to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Dated _________________ Signed _______________
- -------------------------------------------------------------
(Sign exactly as name appears on the other side of this Note)
Signature Guarantee ___________________________________(1)
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which
_________________________________
(1) The Holder's signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Exchange Act.
<PAGE>
14
such Securities were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Securities are being transferred in accordance
with its terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under the Securities
Act of 1933; or
(3) |_| inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that purchases for
its own account or for the account of a qualified institutional buyer to
whom notice is given that such transfer is being made in reliance on Rule
144A, in each case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) |_| outside the United States in an offshore transaction within the meaning
of Regulation S under the Securities Act in compliance with Rule 904 under
the Securities Act of 1933; or
(5) |_| pursuant to another available exemption from registration provided by
Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a
<PAGE>
15
transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule 144
under such Act.
------------------------
Signature
Signature Guarantee:
- ------------------------ ------------------------
Signature must be guaranteed Signature
- ------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security
have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following officer of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
16
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.11 or Section 4.12 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.11 or Section 4.12 of the Indenture, state the
amount (in principal amount):
$_____________
Date: _____________
Your Signature: ___________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: _________________________
<PAGE>
EXECUTION COPY
WINSTAR EQUIPMENT II CORP.,
as Issuer
WINSTAR COMMUNICATIONS, INC.,
as Guarantor
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
----------------------
Guaranteed Senior Secured Notes Indenture
Dated as of August 1, 1997
----------------------
12 1/2% Guaranteed Senior Secured Notes Due 2004
<PAGE>
CROSS-REFERENCE TABLE
TIA Sections Indenture Sections
310(a)(1)....................................................... 7.10
(a)(2)....................................................... 7.10
(b).......................................................... 7.08
313(c).......................................................... 7.06; 12.02
314(a).......................................................... 4.20; 12.02
(a)(4)....................................................... 4.19; 12.02
(c)(1)....................................................... 12.03
(c)(2)....................................................... 12.03
(e).......................................................... 12.04
315(b).......................................................... 7.05; 12.02
316(a)(1)(A).................................................... 6.05
(a)(1)(B).................................................... 6.04
(b).......................................................... 6.07
317(a)(1)....................................................... 6.08
(a)(2)....................................................... 6.09
318(a).......................................................... 12.01
(c).......................................................... 12.01
- ----------------
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part
of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
RECITALS OF THE COMPANY...........................................................................................1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions...............................................................................1
-----------
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........................................16
-------------------------------------------------
SECTION 1.03. Rules of Construction....................................................................16
---------------------
SECTION 1.04. Designation of the Securities............................................................17
-----------------------------
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating..........................................................................17
---------------
SECTION 2.02. Execution and Authentication.............................................................17
----------------------------
SECTION 2.03. Registrar and Paying Agent...............................................................18
--------------------------
SECTION 2.04. Paying Agent To Hold Money in Trust......................................................18
-----------------------------------
SECTION 2.05. Securityholder Lists.....................................................................18
--------------------
SECTION 2.06. Transfer and Exchange....................................................................18
---------------------
SECTION 2.07. Replacement Securities...................................................................19
----------------------
SECTION 2.08. Outstanding Securities...................................................................19
----------------------
SECTION 2.09. Temporary Securities.....................................................................20
--------------------
SECTION 2.10. Cancellation.............................................................................20
------------
SECTION 2.11. Defaulted Interest.......................................................................20
------------------
SECTION 2.12. CUSIP Numbers ...........................................................................20
-------------
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Optional Redemption.............................................................21
----------------------------
SECTION 3.02 Mandatory Redemption.....................................................................21
--------------------
SECTION 3.03. Notices to Trustee.......................................................................21
------------------
SECTION 3.04. Selection of Securities To Be Redeemed...................................................21
--------------------------------------
SECTION 3.05. Notice of Redemption.....................................................................22
--------------------
SECTION 3.06. Effect of Notice of Redemption...........................................................23
------------------------------
SECTION 3.07. Deposit of Redemption Price..............................................................23
---------------------------
SECTION 3.08. Payment of Securities Called for Redemption..............................................23
-------------------------------------------
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.09. Securities Redeemed in Part..............................................................23
---------------------------
- ----------------
Note: The Table of Contents shall not for any purpose be deemed to be a part of
the Indenture.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities....................................................................23
---------------------
SECTION 4.02. Maintenance of Office or Agency..........................................................24
-------------------------------
SECTION 4.03. Limitation on Indebtedness...............................................................24
--------------------------
SECTION 4.04. Limitation on Restricted Payments........................................................26
---------------------------------
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries................................................................28
SECTION 4.06. Limitation on the Issuance of Capital Stock of Restricted Subsidiaries...................30
----------------------------------------------------------------------
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted Subsidiaries ........................30
-----------------------------------------------------------------
SECTION 4.08. Limitation on Transactions with Shareholders and Affiliates..............................30
-----------------------------------------------------------
SECTION 4.09. Limitation on Liens......................................................................31
-------------------
SECTION 4.10. Limitation on Sale-Leaseback Transactions................................................32
-----------------------------------------
SECTION 4.11. Limitation on Asset Sales................................................................32
-------------------------
SECTION 4.12. Repurchase of Securities upon a Change of Control........................................33
-------------------------------------------------
SECTION 4.13. Existence................................................................................34
---------
SECTION 4.14. Payment of Taxes and Other Claims........................................................34
---------------------------------
SECTION 4.15. Maintenance of Properties and Insurance..................................................34
---------------------------------------
SECTION 4.16. Notice of Defaults.......................................................................35
------------------
SECTION 4.17. Compliance Certificates..................................................................35
-----------------------
SECTION 4.18. SEC Reports and Reports to Holders.......................................................35
----------------------------------
SECTION 4.19. Waiver of Stay, Extension or Usury Laws..................................................43
---------------------------------------
SECTION 4.20. Limitation on the Company's Business Activities .........................................36
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SECTION 4.21. Use of Proceeds .........................................................................36
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SECTION 4.22. Purchase Money Security Interests .......................................................36
---------------------------------
SECTION 4.23. Impairment of Security Interest .........................................................36
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SECTION 4.24. Ownership of the Company ................................................................37
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ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When WCI or the Company May Merge, Etc...................................................37
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SECTION 5.02. Successor Substituted....................................................................38
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ARTICLE SIX
DEFAULT AND REMEDIES
<S> <C> <C>
SECTION 6.01. Events of Default........................................................................38
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SECTION 6.02. Acceleration.............................................................................39
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SECTION 6.03. Other Remedies...........................................................................40
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SECTION 6.04. Waiver of Past Defaults..................................................................40
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SECTION 6.05. Control by Majority......................................................................40
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SECTION 6.06. Limitation on Suits......................................................................41
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SECTION 6.07. Rights of Holders to Receive Payment.....................................................41
------------------------------------
SECTION 6.08. Collection Suit by Trustee...............................................................41
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SECTION 6.09. Trustee May File Proofs of Claim.........................................................42
--------------------------------
SECTION 6.10. Priorities...............................................................................42
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SECTION 6.11. Undertaking for Costs....................................................................42
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SECTION 6.12. Restoration of Rights and Remedies.......................................................42
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SECTION 6.13. Rights and Remedies Cumulative...........................................................43
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SECTION 6.14. Delay or Omission Not Waiver.............................................................43
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General..................................................................................43
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SECTION 7.02. Certain Rights of Trustee................................................................43
-------------------------
SECTION 7.03. Individual Rights of Trustee.............................................................44
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SECTION 7.04. Trustee's Disclaimer.....................................................................44
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SECTION 7.05. Notice of Default........................................................................44
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SECTION 7.06. Reports by Trustee to Holders............................................................45
-----------------------------
SECTION 7.07. Compensation and Indemnity...............................................................45
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SECTION 7.08. Replacement of Trustee...................................................................45
----------------------
SECTION 7.09. Successor Trustee by Merger, Etc.........................................................46
---------------------------------
SECTION 7.10. Eligibility..............................................................................46
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SECTION 7.11. Money Held in Trust......................................................................46
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SECTION 7.12. Withholding Taxes........................................................................46
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ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.....................................................47
------------------------------------
SECTION 8.02. Defeasance and Discharge of Indenture....................................................47
-------------------------------------
SECTION 8.03. Defeasance of Certain Obligations........................................................49
---------------------------------
SECTION 8.04. Application of Trust Money...............................................................51
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SECTION 8.05. Repayment to Company.....................................................................51
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SECTION 8.06. Reinstatement............................................................................51
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SECTION 8.07. Insiders.................................................................................51
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders...............................................................52
--------------------------
SECTION 9.02. With Consent of Holders..................................................................52
-----------------------
SECTION 9.03. Revocation and Effect of Consent.........................................................53
--------------------------------
SECTION 9.04. Notation on or Exchange of Securities....................................................53
-------------------------------------
SECTION 9.05. Trustee to Sign Amendments, Etc..........................................................54
-------------------------------
SECTION 9.06. Conformity with Trust Indenture Act......................................................54
-----------------------------------
ARTICLE TEN
EQUIPMENT NOTE GUARANTEE
SECTION 10.01. Guarantee................................................................................54
---------
SECTION 10.02. Successors and Assigns...................................................................55
----------------------
SECTION 10.03. No Waiver............................................................................... 56
---------
SECTION 10.04. Modification.............................................................................56
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ARTICLE ELEVEN
SECURITY DOCUMENTS
SECTION 11.01. Collateral and Security Documents........................................................56
---------------------------------
SECTION 11.02. Release of Collateral....................................................................56
---------------------
SECTION 11.03. Certificates and Opinions................................................................57
-------------------------
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act of 1939..............................................................57
---------------------------
SECTION 12.02. Notices..................................................................................57
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SECTION 12.03. Certificate and Opinion as to Conditions Precedent.......................................58
--------------------------------------------------
SECTION 12.04. Statements Required in Certificate or Opinion............................................59
---------------------------------------------
SECTION 12.05. Rules by Trustee, Paying Agent or Registrar..............................................59
-------------------------------------------
SECTION 12.06. Payment Date Other Than a Business Day...................................................59
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SECTION 12.07. Governing Law............................................................................59
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SECTION 12.08. No Adverse Interpretation of Other Agreements............................................59
---------------------------------------------
SECTION 12.09. No Recourse Against Others...............................................................60
--------------------------
SECTION 12.10. Successors...............................................................................60
----------
SECTION 12.11. Duplicate Originals......................................................................60
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SECTION 12.12. Separability.............................................................................60
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SECTION 12.13. Table of Contents, Headings, Etc.........................................................60
---------------------------------
EXHIBIT A Form of Security............................................................................ A-1
Rule 144A/Regulation S Appendix .............................................................................. AP-1
</TABLE>
<PAGE>
INDENTURE, dated as of August 1, 1997, among WINSTAR
EQUIPMENT II CORP., a Delaware corporation, as issuer (the
"Company"), WINSTAR COMMUNICATIONS, INC., a Delaware
corporation, as guarantor (the "Guarantor" or "WCI"), and
UNITED STATES TRUST COMPANY OF NEW YORK, as trustee (the
"Trustee").
RECITALS OF THE COMPANY
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's 12
1/2% Guaranteed Senior Secured Notes Due 2004 (the "Initial Securities") and, if
and when issued pursuant to a registered exchange for Initial Securities, the
Company's 12 1/2% Guaranteed Senior Secured Notes Due 2004 (the "Exchange
Securities") and, if and when issued pursuant to a private exchange for Initial
Securities, the Company's 12 1/2% Guaranteed Senior Secured Notes Due 2004 (the
"Private Exchange Securities", together with the Exchange Securities and the
Initial Securities, the "Securities"):
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of WCI and its Restricted Subsidiaries for such
period determined in conformity with GAAP; provided, however, that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person (other than WCI or
any of its Restricted Subsidiaries) has a joint interest and the net income of
any Unrestricted Subsidiary, except to the extent of the amount of dividends or
other distributions actually paid to WCI or any of its Restricted Subsidiaries
by such other Person, including, without limitation, an Unrestricted Subsidiary
during such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04 (and, in such case, except to the extent includable
pursuant to clause (i) above), the net income (or loss) of any Person accrued
prior to the date it becomes a Restricted Subsidiary or is merged into or
consolidated with WCI or any of its Restricted Subsidiaries or all or
substantially all of the property and assets of such Person are acquired by WCI
or any of its Restricted Subsidiaries; (iii) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
<PAGE>
2
clause (C) of the first paragraph of Section 4.04, any amount paid as, or
accrued for, cash dividends on Preferred Stock of WCI or any Restricted
Subsidiary owned by Persons other than WCI and any of its Restricted
Subsidiaries; and (vi) all extraordinary gains and extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total
amount of assets of WCI and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of WCI and its Restricted Subsidiaries
(excluding intercompany items) and (ii) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other like intangibles (other
than licenses issued by the FCC), all as set forth on the quarterly or annual
consolidated balance sheet of WCI and its Restricted Subsidiaries, prepared in
conformity with GAAP and most recently filed with the SEC pursuant to Section
4.18; provided, however, that the value of any licenses issued by the FCC shall,
in the event of an auction for similar licenses, be equal to the fair market
value ascribed thereto in good faith by the Board of Directors and evidenced by
a Board Resolution. As used in this Indenture, references to financial
statements of WCI and its Restricted Subsidiaries shall be adjusted to exclude
Unrestricted Subsidiaries if the context requires.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating
agent or co-Registrar.
"Asset Acquisition" means (i) an investment by WCI or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of WCI or shall be merged into or
consolidated with WCI or any of its Restricted Subsidiaries or (ii) an
acquisition by WCI or any of its Restricted Subsidiaries of the property and
assets of any Person other than WCI or any of its Restricted Subsidiaries that
constitute substantially all of a division or line of business of such Person.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by WCI or any of its
Restricted Subsidiaries to any Person other than WCI or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of WCI or any of
<PAGE>
3
its Restricted Subsidiaries or (iii) any other property or assets of WCI or any
of its Restricted Subsidiaries outside the ordinary course of business of WCI or
such Restricted Subsidiary and, in each case, that is not governed by the
provisions of Article Five; provided, however, that the following shall not be
included within the meaning of "Asset Sale": (A) sales or other dispositions of
inventory, receivables and other current assets; (B) sales or other dispositions
of equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of WCI or its Restricted
Subsidiaries and (C) a substantially simultaneous exchange of, or a sale or
disposition (other than 85% or more for cash or cash equivalents) by WCI or any
of its Restricted Subsidiaries of, licenses issued by the FCC or applications or
bids therefor; provided, however, that the consideration received by WCI or any
such Restricted Subsidiary in connection with such exchange, sale or disposition
shall be equal to the fair market value of licenses so exchanged, sold or
disposed of, as determined by the Board of Directors; and (D) except for
purposes of the definition of "Indebtedness to EBITDA Ratio", any sale or other
disposition of securities of an Unrestricted Subsidiary. Notwithstanding
anything to the contrary in this definition, any sale, transfer or other
disposition (other than a lease in the ordinary course of business but including
the receipt of insurance proceeds in respect of Collateral) of any Collateral
shall be deemed to be an Asset Sale of such Collateral.
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Board of Directors" means the Board of Directors of the
Company or WCI, as the context requires, or any committee of such Board of
Directors duly authorized to act with respect to this Indenture.
"Board Resolution" means a copy of a resolution, certified by
the Secretary or Assistant Secretary of the Company or WCI, as the context
requires, to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now outstanding
or issued after the date of this Indenture, including, without limitation, all
Common Stock and Preferred Stock.
<PAGE>
4
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
and "Capitalized Lease Obligations" means the discounted present value of the
rental obligations under such lease.
"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 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 the Closing Date constituted the Board
of Directors (together with any new directors whose election by the Board of
Directors or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors then in office who either were members of the Board of Directors on
the Closing Date 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 then in office.
"Closing Date" means March 18, 1997.
"Collateral" means (i) all Designated Equipment acquired by
the Company pursuant to Section 4.21 hereof; (ii) the proceeds of any sale or
other disposition of such Designated Equipment (including any insurance proceeds
from the loss or destruction of such Designated Equipment); and (iii) any
additional Designated Equipment acquired by the Company with the proceeds of any
such sale or other disposition of Designated Equipment.
"Collateral Agent" means the collateral agent under the
Security Agreement, who initially will be United States Trust Company of New
York.
"Common Stock" means. with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the party named as such in the first paragraph
of the recitals hereof until a successor replaces it pursuant to Article Five of
this Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the
name of WCI or the Company, as the case may be, (i) by its Chairman, a Vice
Chairman, its President or a Vice President and (ii) by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to
the Trustee; provided, however, that such written request or order may be signed
<PAGE>
5
by any two of the officers or directors listed in clause (i) above in lieu of
being signed by one of such officers or directors listed in such clause (i) and
one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, the sum of the
amounts for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, (iii) income taxes, to the extent
such amount was deducted in calculating Adjusted Consolidated Net Income (other
than income taxes (either positive or negative) attributable to extraordinary
and nonrecurring gains or losses or sales of assets), (iv) depreciation expense,
to the extent such amount was deducted in calculating Adjusted Consolidated Net
Income, (v) amortization expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, and (vi) all other noncash items
reducing Adjusted Consolidated Net Income (other than items that will require
cash payments and for which an accrual or reserve is, or is required by GAAP to
be, made), less all noncash items increasing Adjusted Consolidated Net Income,
all as determined on a consolidated basis for WCI and its Restricted
Subsidiaries in conformity with GAAP; provided, however, that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1)
the number of shares of outstanding Common Stock of such Restricted Subsidiary
not owned on the last day of such period by WCI or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding Common
Stock of such Restricted Subsidiary on the last day of such period.
"Consolidated Indebtedness" means the aggregate amount of
Indebtedness of WCI and its Restricted Subsidiaries on a consolidated basis.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including amortization
of original issue discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by WCI or any of its Restricted
Subsidiaries) and all but the principal component of rentals in respect of
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by WCI and its Restricted Subsidiaries during such period; excluding,
however, (i) any amount of such interest of any Restricted Subsidiary if the net
income of such Restricted Subsidiary is excluded in the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition thereof (but
only in the same proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof) and (ii) any premiums, fees and expenses
(and any amortization thereof) payable in connection with the offering of the
Securities and the offering of the March 1997 Notes, all as
<PAGE>
6
determined on a consolidated basis (without taking into account Unrestricted
Subsidiaries) in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of WCI and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Redeemable Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of WCI or any of its Restricted Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Convertible Notes" means the 14% Convertible Senior
Subordinated Discount Notes due 2005 of WCI.
"Convertible Notes Indenture" means the Indenture dated as of
October 23, 1995, between the Company and United States Trust Company of New
York pursuant to which the Convertible Notes were issued.
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular time,
be principally administered, which office is, at the date of this Indenture,
located at 114 West 47th Street, New York, New York 10036- 1532.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect WCI or any of its Restricted Subsidiaries against fluctuations in
currency values to or under which WCI or any of its Restricted Subsidiaries is a
party or a beneficiary on the date of this Indenture or becomes a party or a
beneficiary thereafter.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" shall mean The Depository Trust Company, its
nominees, and their respective successors.
"Designated Equipment" means (i) telecommunications switches
and related equipment and inventory; (ii) customer premise equipment; (iii)
radios, antennae and cabling; (iv) office and warehouse furniture, fixtures and
equipment (including without limitation, computers and communications
equipment); (v) company service vehicles; and (vi) software related to each
<PAGE>
7
of the foregoing, in each case used in the telecommunications business of WCI
and its Subsidiaries.
"Equipment Note Guarantee" means the Guarantee of the
Securities by the Guarantor pursuant to Article Ten hereof.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors (whose determination shall
be conclusive) and evidenced by a Board Resolution.
"FCC" means the United States Federal Communications
Commission and any state or local telecommunications authority, department,
commission or agency (and any successors thereto).
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of this Indenture,
including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession. All ratios and
computations contained in this Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants set forth in Article
Four and Article Five and with other provisions of this Indenture shall be made
without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Securities or the March 1997 Notes and (ii)
except as otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"Grantor" means the Company, as grantor, under the Security
Agreement.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or
<PAGE>
8
services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in
Section 4.07.
"Guarantor" means the party named as such in the first
paragraph of the recitals hereof until a successor replaces it pursuant to
Article Five of this Indenture and thereafter means the successor.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the books of the registrar.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including, with respect to WCI and its Restricted Subsidiaries, an
"Incurrence" of Indebtedness by reason of a Person becoming a Restricted
Subsidiary of WCI; provided, however, that neither the accrual of interest nor
the accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments (whether negotiable or
non-negotiable), (iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, except trade
payables, (v) all obligations of such Person as lessee under Capitalized Leases,
(vi) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person; provided,
however, that the amount of such Indebtedness shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the amount
of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such
Person to the extent such Indebtedness is Guaranteed by such Person and (viii)
to the extent not otherwise included in this definition, obligations under
Currency Agreements and Interest Rate Agreements. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations that are included in any of clauses (i) through (viii) above, the
maximum liability upon the occurrence of the contingency giving rise to the
obligation, provided, however, that (A) the amount
<PAGE>
9
outstanding at any time of any Indebtedness issued with original issue discount
is (1) for purposes of determining the Indebtedness to EBITDA Ratio, the face
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP and (2) for all other purposes, the amount determined in
clause (1) on the date such Indebtedness is originally Incurred and (B)
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of
determination, the ratio of (i) the aggregate amount of Indebtedness of WCI and
its Restricted Subsidiaries on a consolidated basis ("Consolidated
Indebtedness") as at the date of determination (the "Transaction Date") to (ii)
the Consolidated EBITDA of WCI for the then most recent four full fiscal
quarters for which reports have been filed pursuant to Section 4.18 (such four
full fiscal quarter period being referred to herein as the "Four Quarter
Period"); provided, however, that (x) pro forma effect shall be given to any
Indebtedness Incurred from the beginning of the Four Quarter Period through the
Transaction Date (including any Indebtedness Incurred on the Transaction Date),
to the extent outstanding on the Transaction Date, (y) if during the period
commencing on the first day of such Four Quarter Period through the Transaction
Date (the "Reference Period"), WCI or any of the Restricted Subsidiaries shall
have engaged in any Asset Sale, Consolidated EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale and any related retirement of
Indebtedness as if such Asset Sale and related retirement of Indebtedness had
occurred on the first day of such Reference Period or (z) if during such
Reference Period WCI or any of the Restricted Subsidiaries shall have made any
Asset Acquisition, Consolidated EBITDA of WCI shall be calculated on a pro forma
basis as if such Asset Acquisition and any Incurrence of Indebtedness to finance
such Asset Acquisition had taken place on the first day of such Reference
Period.
"Indenture" means this Indenture as originally executed or as
it may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Interest Payment Date" means each semiannual interest payment
date on March 15 and September 15 of each year, commencing September 15, 1997.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect WCI or any of its Restricted Subsidiaries
against fluctuations in interest rates in respect of Indebtedness to or under
which WCI or any of its Restricted Subsidiaries is a party or a beneficiary on
the date of this Indenture or becomes a party or a beneficiary hereafter;
provided, however, that the notional principal amount thereof does not
<PAGE>
10
exceed the principal amount of the Indebtedness of WCI and its Restricted
Subsidiaries that bears interest at floating rates.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of WCI or its Restricted Subsidiaries)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock held by WCI and the Restricted
Subsidiaries of any Person that has ceased to be a Restricted Subsidiary by
reason of any transaction permitted by clause (iii) of Section 4.06. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities) of any Restricted Subsidiary of WCI at the time that such
Restricted Subsidiary of WCI is designated an Unrestricted Subsidiary and shall
exclude the fair market value of the assets (net of liabilities) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of WCI and (ii) any property transferred to
or from an Unrestricted Subsidiary shall be valued at its fair market value at
the time of such transfer, in each case as determined by the Board of Directors
in good faith.
"Issue Date" means the date on which the Securities are
originally issued under this Indenture.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"March 1997 Equipment Notes" means the 12 1/2% Guaranteed
Senior Secured Notes Due 2004 of WinStar Equipment Corp.
"March 1997 Notes" means the March 1997 Senior Notes and the
March 1997 Equipment Notes.
"March 1997 Senior Notes" means the 14 1/2% Senior Deferred
Interest Notes Due 2005 of WCI.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component
<PAGE>
11
thereof) when received in the form of cash or cash equivalents (except to the
extent such obligations are financed or sold with recourse to WCI or any
Restricted Subsidiary of WCI) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes (whether or not such taxes will actually be paid or are payable) as a
result of such Asset Sale without regard to the consolidated results of
operations of WCI and its Restricted Subsidiaries, taken as a whole, (iii)
payments made to repay Indebtedness or any other obligation outstanding at the
time of such Asset Sale that either (A) is secured by a Lien on the property or
assets sold or (B) is required to be paid as a result of such sale and (iv)
appropriate amounts to be provided by WCI or any Restricted Subsidiary of WCI as
a reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP and (b) with respect to any issuance or sale of Capital
Stock, the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations (to
the extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to WCI or any Restricted
Subsidiary of WCI) and proceeds from the conversion of other property received
when converted to cash or cash equivalents, net of attorneys' fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable by WCI or any of its subsidiaries as a
result thereof.
"Offer to Purchase" means an offer to purchase Securities by
the Company from the Holders required by Section 4.11 or Section 4.12 which is
commenced by mailing a notice to the Trustee and each Holder stating: (i) the
covenant pursuant to which the offer is being made and that all Securities
validly tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the Payment Date; (iii) that any Security not tendered will
continue to accrue interest pursuant to its terms; (iv) that, unless the Company
defaults in the payment of the purchase price, any Security accepted for payment
pursuant to the Offer to Purchase shall cease to accrue interest on and after
the Payment Date; (v) that Holders electing to have a Security purchased
pursuant to the Offer to Purchase will be required to surrender the Security
together with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side thereof completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day immediately
preceding the Payment Date; (vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Securities delivered for purchase and a statement that such
Holder is withdrawing his election to have such Securities purchased; and (vii)
that Holders whose Securities are being purchased only in part will be issued
new Securities equal in principal amount (and accrued and unpaid interest) to
the unpurchased
<PAGE>
12
portion thereof; provided, however, that each Security purchased and each new
Security issued shall be in a principal amount of $1,000 or integral multiples
thereof. On the Payment Date, the Company shall (i) accept for payment on a pro
rata basis any Securities or portions thereof tendered pursuant to an Offer to
Purchase; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Securities or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee all Securities or portions
thereof so accepted together with an Officers' Certificate specifying the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail to the Holders of the Securities so accepted for
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Security equal in principal amount
to any unpurchased portion of the Securities surrendered; provided, however,
that each Security purchased and each new Security issued shall be in a
principal amount of $1,000 or integral multiples thereof. The Company will
publicly announce the results of an Offer to Purchase as soon as practicable
after the Payment Date. The Trustee shall act as the Paying Agent for an Offer
to Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Securities pursuant to an Offer to Purchase.
"Officer" means, with respect to WCI or the Company, as the
context requires, (i) the Chairman of the Board, the Vice-Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or the
Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed in
clause (ii) of the definition thereof; provided, however, that any such
certificate may be signed by any two of the Officers listed in clause (i) of the
definition thereof in lieu of being signed by one Officer listed in clause (i)
of the definition thereof and one Officer listed in clause (ii) of the
definition thereof. Each Officers' Certificate (other than certificates provided
pursuant to TIA Section 314(a)(4)) shall include the statements provided for in
TIA Section 314(e).
"Old Senior Notes" means the 14% Senior Discount Notes due
2005 of WCI.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company. Each such Opinion
of Counsel shall include the statements provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.03,
except that, for the purposes of Article Eight, the Paying Agent shall not be
the Company or a Subsidiary of the Company or an Affiliate of any of them. The
term "Paying Agent" includes any additional Paying Agent.
<PAGE>
13
"Payment Date" means the date of purchase, which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date a
notice is mailed pursuant to an Offer to Purchase.
"Permitted Investment" means (i) an Investment in a Restricted
Subsidiary or a Person which will, upon the making of such Investment, become a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, WCI or a Restricted Subsidiary;
(ii) Temporary Cash Investments; (iii) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP; (iv) loans or advances to employees
in a principal amount not to exceed $1,000,000 at any one time outstanding; (v)
stock, obligations or securities received in satisfaction of judgments; (vi)
Investments, to the extent that the consideration provided by WCI or any of its
Restricted Subsidiaries consists solely of Capital Stock (other than Redeemable
Stock) of WCI; (vii) notes payable to WCI that are received by WCI as payment of
the purchase price for Capital Stock (other than Redeemable Stock) of WCI; and
(viii) acquisitions of a minority equity interest in entities engaged in the
telecommunications business; provided, however, that (A) the acquisition of a
majority equity interest in such entities is not permitted under U.S. law
without FCC consent, (B) WCI or one of its Restricted Subsidiaries has the right
to acquire Capital Stock representing a majority of the voting power of the
Voting Stock of such entity upon receipt of FCC consent and (C) in the event
that such consent has not been obtained within 18 months of funding such
Investment, WCI or one of its Restricted Subsidiaries has the right to sell such
minority equity interest in the seller thereof for consideration consisting of
the consideration originally paid by WCI and its Restricted Subsidiaries for
such minority equity interest.
"Permitted Investor" means William J. Rouhana, Jr.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory or common law Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (iii) Liens incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money) and a
bank's unexercised right of set-off with respect to
<PAGE>
14
deposits made in the ordinary course; (v) easements, rights-of-way, municipal
and zoning ordinances and similar charges, encumbrances, title defects or other
irregularities that do not materially interfere with the ordinary course of
business of WCI or any of its Restricted Subsidiaries; (vi) Liens (including
extensions and renewals thereof) upon real or personal property acquired after
the Closing Date; provided, however, that (a) such Lien is created solely for
the purpose of securing Indebtedness Incurred in accordance with Section 4.03
either (1) to finance the cost (including the cost of improvement or
construction) of the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of WCI and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or
assets under construction arising from progress or partial payments by a
customer of WCI or its Restricted Subsidiaries relating to such property or
assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of stock or Indebtedness of, any corporation existing at the
time such corporation becomes, or becomes a part of, any Restricted Subsidiary;
provided, however, that such Liens do not extend to or cover any property or
assets of WCI or any Restricted Subsidiary other than the property or assets
acquired; (xii) Liens in favor of WCI or any Restricted Subsidiary; (xiii) Liens
arising from the rendering of a final judgment or order against WCI or any
Restricted Subsidiary of WCI that does not give rise to an Event of Default;
(xiv) Liens securing reimbursement obligations with respect to letters of credit
that encumber documents and other property relating to such letters of credit
and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are either
within the general parameters customary in the industry and incurred in the
ordinary course of business, in each case, securing Indebtedness under Interest
Rate Agreements and Currency Agreements and forward contracts, options, futures
contracts, futures options or similar agreements or arrangements designed to
protect WCI or any of its Restricted Subsidiaries from fluctuations in the price
of commodities; (xvii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by WCI or
any of its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of WCI and its Restricted Subsidiaries prior
to the Closing Date; and (xviii) Liens on or sales of receivables.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
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15
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the Issue Date, including, without
limitation, all series and classes of such preferred or preference stock.
"Principal" of a debt security, including the Securities,
means the principal amount due on the Stated Maturity as shown on such debt
security.
"Protected Property" has the meaning provided in Section 4.09.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms or otherwise is (i) required to be redeemed
prior to the Stated Maturity of the Securities, (ii) redeemable at the option of
the holder of such class or series of Capital Stock at any time prior to the
Stated Maturity of the Securities (unless the redemption price is, at WCI's
option, without conditions precedent, payable solely in Common Stock (other than
Redeemable Stock) of WCI) or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Securities; provided, however, that
any Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the Securities shall not
constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions of Section 4.11 and Section 4.12 and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to WCI's repurchase of
such Securities as are required to be repurchased pursuant to the provisions of
Section 4.11 and Section 4.12.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which such Security is to be redeemed pursuant
to this Indenture.
"Registrar" has the meaning provided in Section 2.03.
"Regular Record Date" for the interest payable on any Interest
Payment Date means March 1 or September 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice
<PAGE>
16
president, any assistant vice president, the secretary, any assistant secretary,
the treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller or any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his or her knowledge of and familiarity
with the particular subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of WCI other
than an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission and any
other successor agency.
"Securities" means any of the securities, as defined in the
first paragraph of the recitals hereof, that are authenticated and delivered
under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Security Agreement dated as of
August 1, 1997, between the Company and United States Trust Company of New York,
as collateral agent.
"Security Documents" means the Security Agreement and any
other agreements, instruments or documents entered into or delivered in
connection with any of the foregoing, as such agreements, instruments or
documents may from time to time be amended in accordance with the terms hereof
and thereof.
"Security Register" has the meaning provided in Section 2.03.
"Significant Subsidiary" means, at any date of determination,
any Restricted Subsidiary of WCI that, together with its Subsidiaries, (i) for
the most recent fiscal year of WCI, accounted for more than 10% of the
consolidated revenues of WCI and its Restricted Subsidiaries or (ii) as of the
end of such fiscal year, was the owner of more than 10% of the consolidated
assets of WCI and its Restricted Subsidiaries, all as set forth on the most
recently available consolidated financial statements of WCI for such fiscal
year. Notwithstanding the foregoing, the Company shall be deemed to be a
"Significant Subsidiary" for all purposes and at all times under this Indenture.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or
<PAGE>
17
interest on any debt security, the date specified in such debt security as the
fixed date on which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which Voting Stock
representing more than 50% of the voting power of the outstanding Voting Stock
is owned, directly or indirectly, by such Person and one or more other
Subsidiaries of such Person.
"Subsidiary Guarantee" has the meaning provided in Section
4.07.
"Telecommunications Assets" means any (i) entity or business
substantially all the revenues of which are derived from (a) providing
transmission of sound, data or video; (b) the sale or provision of phone cards,
"800" services, voice mail, switching, enhanced telecommunications services,
telephone directory or telephone number information services or
telecommunications network intelligence; or (c) any business ancillary or
directly related to the businesses referred to in clause (a) or (b) above and
(ii) any assets used primarily to effect such transmission or provide the
products or services referred to in clause (a) or (b) above and any directly
related or ancillary assets including, without limitation, licenses and
applications, bids and agreements to acquire licenses, or other authority to
provide transmission services previously granted, or to be granted, by the FCC.
"Telecommunications Subsidiary" means (i) WCI Gateway, WinStar
Wireless, WinStar Telecommunications, Inc., WinStar Milliwave, Inc., WinStar
Locate, Inc., WinStar Wireless Fiber Corp. and, in each case, its successors and
(ii) any other Restricted Subsidiary of WCI that holds more than a de minimis
amount of Telecommunications Assets.
"Temporary Cash Investment" means any of the following: (i)
direct obligations of the United States or any agency thereof or obligations
fully and unconditionally guaranteed by the United States or any agency thereof;
(ii) time deposit accounts, certificates of deposit and money market deposits
maturing within 180 days of the date of acquisition thereof issued by a bank or
trust company which is organized under the laws of the United States, any state
thereof or any foreign country recognized by the United States, and which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50,000,000 (or the foreign currency equivalent thereof) and has
outstanding deposits or debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor; (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above; (iv)
commercial paper, maturing not more than six months after the date of
acquisition, issued by a corporation (other than an Affiliate of WCI) organized
and in existence under the laws of the United States, any state thereof or any
foreign country recognized by the United States with a
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18
rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard & Poor's Ratings Group; and (v) securities with maturities
of six months or less from the date of acquisition issued or fully and
unconditionally guaranteed by any state, commonwealth or territory of the United
States, or by any political subdivision or taxing authority thereof, and rated
at least "A" by Standard & Poor's Ratings Group or Moody's Investors Service,
Inc.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbb), as in effect on the date
this Indenture was executed, except as provided in Section 9.06.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by WCI or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of Article Seven of this Indenture and thereafter means such
successor.
"United States Bankruptcy Code" means the Bankruptcy Reform
Act of 1978, as amended and as codified in Title 11 of the United States Code,
as amended from time to time hereafter, or any successor federal bankruptcy law.
"Unrestricted Subsidiary" means (i) any Subsidiary of WCI that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary of WCI (including any newly acquired or newly formed Subsidiary of
WCI), other than a guarantor of the Securities, to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, WCI or any Restricted Subsidiary; provided, however, that
neither WCI nor its Restricted Subsidiaries has any Guarantee of any
Indebtedness of such Subsidiary outstanding at the time of such designation and
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets greater than $1,000, that such designation
would be permitted under the provisions of Section 4.04. Notwithstanding the
foregoing, WinStar New Media Company Inc., Non Fiction Films Inc. and WinStar
Global Products, Inc. and their Subsidiaries are Unrestricted Subsidiaries. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of WCI; provided, however, that immediately after giving effect to
such designation (x) WCI could Incur $1.00 of additional Indebtedness under the
first paragraph of Section 4.03 and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
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19
provisions. Anything to the contrary contained in this Indenture
notwithstanding, no Telecommunications Subsidiary may be designated an
Unrestricted Subsidiary.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Securities, and shall also include a depositary
receipt issued by a bank or trust company as custodian with respect to any such
U.S. Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account of
the holder of a depositary receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by such
depositary receipt.
"Voting Stock" means with respect to any Person, Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"WCI" means the party named as such in the first paragraph of
the recitals hereof until a successor replaces it pursuant to Article Five of
this Indenture and thereafter means the successor.
"WCI Gateway" means WinStar Gateway Network, Inc. and its
successors.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, such Subsidiary if all of the outstanding Capital Stock in such
Subsidiary (other than any director's qualifying shares or Investments by
foreign nationals mandated by applicable law) is owned by such Person or one or
more Wholly Owned Subsidiaries of such Person.
"WinStar Wireless" means WinStar Wireless, Inc.
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
<PAGE>
20
"indenture security holder" means a Holder or a
Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by a rule of the
SEC and not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in
the plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision; and
(vii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise
indicated.
SECTION 1.04. Designation of the Securities. The Equipment
Note Guarantee shall be Designated Senior Indebtedness (as defined in the
Convertible Notes Indenture) for the purposes of the Convertible Notes
Indenture.
<PAGE>
21
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. Provisions relating to the
Initial Securities, the Private Exchange Securities and the Exchange Securities
are set forth in the Rule 144A/Regulation S Appendix attached hereto (the
"Appendix") which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to the Appendix
(with such appropriate insertions, omissions, substitutions and other variations
as are required by this Indenture) which is hereby incorporated in and expressly
made a part of this Indenture. The Exchange Securities, the Private Exchange
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A (with such appropriate insertions,
omissions, substitutions and other variations as are required by this
Indenture), which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Security shall be dated the date of its
authentication. The terms of the Securities set forth in the Appendix and
Exhibit A are part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two Officers
shall sign the Securities for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate and deliver Securities for
original issue upon a written order of the Company signed by two Officers. Such
order shall specify the amount of the Securities to be authenticated and the
date on which the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
that amount except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate the Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as any Registrar or Paying Agent.
<PAGE>
22
SECTION 2.03. Registrar and Paying Agent. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange (the
"Security Register"). The Company may have one or more co-registrars and one or
more additional paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust. On or prior
to each due date of the principal and interest on any Security, the Company
shall deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the Securities and
shall notify the Trustee of any default by the Company in making any such
payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money held by it to
the Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve
in as current a form as is reasonably practicable the most recent list available
to it of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing on or before
each interest payment date and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When Securities are presented to the
Registrar or a co-registrar with a request (i) to
<PAGE>
23
register a transfer or (ii) to exchange them for an equal principal amount of
Securities of other denominations, the Registrar shall register the transfer or
make the transfer, as requested if the requirements of Section 8-401(1) of the
Uniform Commercial Code are met; provided, however, that any Security presented
or surrendered for registration of transfer or exchange shall be duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Registrar and the Trustee duly executed by the Holder thereof or by his attorney
duly authorized in writing. To permit registration of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Securities at the
Registrar's or co-registrar's request. The Company may require payment of a sum
sufficient to pay all taxes, assessments or other governmental charges in
connection with any transfer or exchange pursuant to this Section. The Company
shall not be required to make and the Registrar need not register transfers or
exchanges of Securities selected for redemption (except, in the case of
Securities to be redeemed in part, the portion thereof not to be redeemed) or
any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
Prior to the due presentation for registration of transfer of
any Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture will evidence the same debt and will be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate and deliver a replacement Security if the
requirements of Section 8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements of the Trustee. If required
by the Trustee or the Company, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Company and the Trustee to protect the
Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from
any loss which any of them may suffer if a Security is replaced. The Company and
the Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for
<PAGE>
24
cancellation and those described in this Section as not outstanding. A Security
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Security; provided, however, that, in determining whether the
Holders of the requisite principal amount of the outstanding Securities have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, then on and after that date, such Securities (or portions thereof) shall
cease to be outstanding and interest on them shall cease to accrue.
SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate and deliver temporary Securities. Temporary Securities shall be
substantially in the form of definitive Securities but may have variations that
the Company and the Trustee consider appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities and deliver them in exchange for temporary
Securities.
SECTION 2.10 Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Company unless
the Company directs the Trustee to deliver canceled Securities to the Company.
The Company may not issue new Securities to replace Securities it has redeemed,
paid or delivered to the Trustee for cancellation.
<PAGE>
25
SECTION 2.11. Defaulted Interest. If and to the extent the
Company defaults in a payment of interest on the Securities, the Company shall
pay defaulted interest (plus interest on such defaulted interest to the extent
lawful) in any lawful manner. The Company may pay the defaulted interest to the
persons who are Securityholders on a subsequent special record date. The Company
shall fix or cause to be fixed any such special record date and payment date to
the reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Optional Redemption. The Securities may
be redeemed at the election of the Company, in whole at any time or in part from
time to time on or after March 15, 2002 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's last address as it appears in the Security Register, at the following
Redemption Prices (expressed as a percentage of principal amount), plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on the relevant Interest Payment Date)
if redeemed during the 12-month period commencing on March 15 of the years set
forth below:
================================================================================
Year Redemption Price
- --------------------------------------------------------------------------------
2002 106.250%
- --------------------------------------------------------------------------------
2003 and thereafter 103.125%
================================================================================
SECTION 3.02. Mandatory Redemption. In the event that by
August 8, 1999, the Company shall not have applied at least $50.0 million to
fund the Acquisition Costs (as defined in Section 4.21) of Designated Equipment
pursuant to Section 4.21 ($50.0 million less the amount so applied being herein
called the "Unused Equipment Amount"), the Company shall redeem Securities in an
aggregate principal amount equal to the Unused Equipment Amount at a Redemption
Price of 112.5% of such principal amount, plus accrued and unpaid interest
thereon
<PAGE>
26
to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is on or prior to the Redemption Date to
receive interest due on the relevant Interest Payment Date).
SECTION 3.03. Notices to Trustee. If the Company elects to
redeem Securities pursuant to Section 3.01 hereof or is required to redeem
Securities pursuant to Section 3.02 hereof, it shall notify the Trustee in
writing of the Redemption Date (which shall occur no later than August 23, 1999,
in the case of a mandatory redemption pursuant to Section 3.02), and the
principal amount of Securities to be redeemed (which shall be equal to the
Unused Equipment Amount in the case of a mandatory redemption pursuant to
section 3.02) plus interest accrued and premium due thereon, if any, to the
Redemption Date.
The Company shall give each notice provided for in this
Section 3.03 in an Officers' Certificate at least five days before mailing the
notice to Holders referred to in Section 3.05.
SECTION 3.04. Selection of Securities To Be Redeemed. If less
than all of the Securities are to be redeemed at any time, the Trustee shall
select the Securities to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Securities are
listed or, if the Securities are not listed on a national securities exchange,
on a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem fair and appropriate; provided, however, that no
Securities of $1,000 in principal amount or less shall be redeemed in part;
provided further, however, that with respect to Securities to be redeemed
pursuant to Section 3.02, the Trustee shall select the Securities to be redeemed
on a pro rata basis.
The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption. Securities in
denominations of $1,000 in principal amount may only be redeemed in whole. The
Trustee may select for redemption portions (equal to $1,000 in principal amount
or any integral multiple thereof) of Securities that have denominations larger
than $1,000 in principal amount. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Company and the Registrar promptly in
writing of the Securities or portions of Securities to be called for redemption.
SECTION 3.05. Notice of Redemption. With respect to any
redemption of Securities pursuant to Section 3.01, at least 30 days but not more
than 60 days (or, in the case any redemption of Securities required pursuant to
Section 3.02, at least 10 Business Days but not more than 15 Business Days)
before a Redemption Date, the Company shall mail a notice of redemption by first
class mail to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
<PAGE>
27
(a) the Redemption Date;
(b) the Redemption Price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be
surrendered to the Paying Agent in order to collect the
Redemption Price;
(e) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption
ceases to accrue on and after the Redemption Date and the only
remaining right of the Holders is to receive payment of the
Redemption Price plus accrued interest to the Redemption Date
upon surrender of the Securities to the Paying Agent;
(f) that, if any Security is being redeemed in part, the
portion of the principal amount (equal to $1,000 in principal
amount or any integral multiple thereof) of such Security to be
redeemed and that, on and after the Redemption Date, upon
surrender of such Security, a new Security or Securities in
principal amount equal to the unredeemed portion thereof will be
reissued;
(g) the paragraph of the Securities (i.e., either paragraph
5 or 6) pursuant to which the Securities called for redemption
are being redeemed; and
(h) that, if any Security contains a CUSIP number as
provided in Section 2.12, no representation is being made as to
the correctness of the CUSIP number either as printed on the
Securities or as contained in the notice of redemption and that
reliance may be placed only on the other identification numbers
printed on the Securities.
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given such
notice to the Holders), made in writing to the Trustee at least five days before
mailing the notice to the Holders referred to in Section 3.05, the Trustee shall
give such notice of redemption in the name and at the expense of the Company.
If, however, the Company gives such notice to the Holders, the Company shall
concurrently deliver to the Trustee an Officers' Certificate stating that such
notice has been given.
SECTION 3.06. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the relevant Redemption Date and at the Redemption Price. Upon surrender of any
Securities to the Paying Agent, such Securities shall be paid at the Redemption
Price, plus accrued interest, if any, to the Redemption Date.
<PAGE>
28
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of Securities held by Holders to whom such notice
was properly given.
SECTION 3.07. Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.04) money sufficient to pay the Redemption Price of and
accrued interest on all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date that have been
delivered by the Company to the Trustee for cancellation.
SECTION 3.08. Payment of Securities Called for Redemption. If
notice of redemption has been given in the manner provided above, the Securities
or portion of Securities specified in such notice to be redeemed shall become
due and payable on the Redemption Date at the Redemption Price stated therein,
together with accrued interest to such Redemption Date, and on and after such
date (unless the Company shall default in the payment of such Securities at the
Redemption Price and accrued interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Securities), such Securities shall cease to accrue interest.
Upon surrender of any Security for redemption in accordance with a notice of
redemption, such Security shall be paid and redeemed by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holders registered as
such at the close of business on the relevant Regular Record Date.
SECTION 3.09. Securities Redeemed in Part. Upon surrender of
any Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security equal in principal
amount to the unredeemed portion of such surrendered Security.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. The Company shall pay the
principal of, premium, if any, and interest on the Securities on the dates and
in the manner provided in the Securities and this Indenture. An installment of
principal, premium, if any, or interest shall be considered paid on the date due
if the Trustee or Paying Agent (other than the Company, a Subsidiary of the
Company, or any Affiliate of any of them) holds on that date money designated
for and sufficient to pay the installment. If the Company or any Subsidiary of
the Company or any Affiliate of any of them, acts as Paying Agent, an
installment of principal, premium, if any,
<PAGE>
29
or interest shall be considered paid on the due date if the entity acting as
Paying Agent complies with Section 2.04. As provided in Section 6.09, upon any
bankruptcy or reorganization procedure relative to the Company, the Trustee
shall serve as the Paying Agent and conversion agent, if any, for the
Securities.
The Company shall pay interest on overdue principal, premium,
if any, and interest on overdue installments of interest, to the extent lawful,
at the rate per annum specified in the Securities.
SECTION 4.02. Maintenance of Office or Agency. The Company
will maintain an office or agency (which may be an office of the Trustee,
Registrar or co-registrar or any Affiliate of any of them) where Securities may
be surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 12.02.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee, located in the Borough of Manhattan, the City of New
York, as such office of the Company in accordance with Section 2.03.
SECTION 4.03. Limitation on Indebtedness. (a) WCI will not,
and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the Securities and Indebtedness existing on the Issue
Date); provided, however, that WCI may Incur Indebtedness if, after giving
effect to the Incurrence of such Indebtedness and the receipt and application of
the proceeds therefrom, the Indebtedness to EBITDA Ratio would be greater than
zero and less than 5:1.
Notwithstanding the foregoing, WCI and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness of WCI outstanding at any time in an
aggregate principal amount not to exceed $125,000,000, less any amount
of Indebtedness Incurred pursuant to this clause (i) and permanently
repaid as provided under Section 4.11;
<PAGE>
30
(ii) Indebtedness (A) to WCI evidenced by an unsubordinated
promissory note or (B) to any of its Restricted Subsidiaries; provided,
however, that any event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to WCI or another Restricted Subsidiary)
shall be deemed, in each case, to constitute an Incurrence of such
Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued in exchange for, or the net proceeds
of which are used to refinance or refund, then outstanding
Indebtedness, other than Indebtedness Incurred under clause (i), (ii),
(v), (vi) or (viii) of this paragraph, and any refinancings thereof in
an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided, however, that
Indebtedness the proceeds of which are used to refinance or refund the
Securities or Indebtedness that is pari passu with, or subordinated in
right of payment to, the Equipment Note Guarantee shall only be
permitted under this clause (iii) if (A) in case the Securities are
refinanced in part or the Indebtedness to be refinanced is pari passu
with the Equipment Note Guarantee, such new Indebtedness, by its terms
or by the terms of any agreement or instrument pursuant to which such
new Indebtedness is outstanding, is expressly made pari passu with, or
subordinate in right of payment to, the Equipment Note Guarantee, (B)
in case the Indebtedness to be refinanced is subordinated in right of
payment to the Equipment Note Guarantee, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which
such new Indebtedness is outstanding, is expressly made subordinate in
right of payment to the Equipment Note Guarantee at least to the extent
that the Indebtedness to be refinanced is subordinated to the Equipment
Note Guarantee and (C) such new Indebtedness, determined as of the date
of Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness to be refinanced or refunded, and
the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or
refunded; provided further, however, that in no event may Indebtedness
of WCI be refinanced by means of any Indebtedness of any Restricted
Subsidiary of WCI pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements; provided, however,
that such agreements do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder; and (C) arising from
agreements providing for indemnification, adjustment of purchase price
or similar obligations, or from Guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of WCI or any of
the Restricted Subsidiaries pursuant to such agreements, in any case
Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of WCI (other than Guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business,
<PAGE>
31
assets or Restricted Subsidiary of WCI for the purpose of financing
such acquisition), in a principal amount not to exceed the gross
proceeds actually received by WCI or any Restricted Subsidiary in
connection with such disposition;
(v) Indebtedness of WCI not to exceed, at any one time
outstanding, two times the Net Cash Proceeds received by WCI from and
after October 23, 1995, from the issuance and sale of its Capital Stock
(other than Redeemable Stock and Preferred Stock that provides for the
payment of dividends in cash); provided, however, that such
Indebtedness (x) does not mature prior to the Stated Maturity of the
Securities and has an Average Life longer than the Securities and (y)
is subordinated to the Equipment Note Guarantee at least to the extent
that the Convertible Notes are subordinated to Senior Indebtedness (as
defined in the Convertible Notes Indenture as in effect on the Closing
Date);
(vi) Indebtedness of any Restricted Subsidiary Incurred
pursuant to any credit agreement of such Restricted Subsidiary in
effect on the Issue Date (and refinancings thereof), up to the amount
of the commitment under such credit agreement on the Issue Date;
(vii) Indebtedness to the extent such Indebtedness is secured
by Liens which are purchase money or other Liens upon equipment or
inventory acquired or held by WCI or any of its Restricted Subsidiaries
taken or obtained by (A) the seller or lessor of such equipment or
inventory to secure all or a part of the purchase price or lease
payments therefor or (B) the person who makes advances or incurs
obligations, thereby giving value to WCI to enable it to purchase or
acquire rights in such equipment or inventory, to secure the repayment
of all or a part of the advances so made or obligations so incurred;
provided, however, that such Liens do not extend to or cover any
property or assets of WCI or any Restricted Subsidiary other than the
equipment or inventory acquired;
(viii) Indebtedness of any Restricted Subsidiary not to
exceed, at any one time outstanding, 80% of the accounts receivable net
of reserves and allowances for doubtful accounts, determined in
accordance with GAAP, of such Restricted Subsidiary and its Restricted
Subsidiaries (without duplication); provided, however, that such
Indebtedness is not Guaranteed by WCI or any of its Restricted
Subsidiaries; and
(ix) Indebtedness of WCI, to the extent the proceeds thereof are
immediately used to purchase Convertible Notes, Old Senior Notes, March
1997 Notes or Securities tendered in an Offer to Purchase made as a
result of a Change of Control.
(b) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be
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32
included. For purposes of determining compliance with this Section 4.03, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness described in the above clauses, WCI, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses.
(c) WCI will not, and will not permit any Restricted
Subsidiary to, Incur any Guarantee of Indebtedness of any Unrestricted
Subsidiary.
SECTION 4.04. Limitation on Restricted Payments. WCI will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on its Capital Stock (other
than dividends or distributions payable solely in shares of its or such
Restricted Subsidiary's Capital Stock (other than Redeemable Stock) held by such
holders or in options, warrants or other rights to acquire such shares of
Capital Stock) other than such Capital Stock held by WCI or any of its
Restricted Subsidiaries (and other than pro rata dividends or distributions on
Common Stock of Restricted Subsidiaries); (ii) repurchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of WCI (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by Persons other than any Wholly Owned Restricted Subsidiaries of WCI; (iii)
make any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of WCI that is subordinated in right of payment to the
Equipment Note Guarantee; or (iv) make any Investment, other than a Permitted
Investment, in any Person (such payments or any other actions described in
clauses (i) through (iv) being collectively "Restricted Payments") if, at the
time of, and after giving effect to, the proposed Restricted Payment: (A) a
Default or Event of Default shall have occurred and be continuing, (B) except
with respect to any Investment (other than an Investment consisting of the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary), WCI could
not Incur at least $1.00 of Indebtedness under the first paragraph of Section
4.03 or (C) the aggregate amount expended for all Restricted Payments (the
amount so expended, if other than in cash, to be determined in good faith by the
Board of Directors, whose determination shall be conclusive and evidenced by a
Board Resolution) after the Closing Date shall exceed the sum of (1) 50% of the
aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of such amount) (determined by
excluding income resulting from transfers of assets by WCI or a Restricted
Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis during
the period (taken as one accounting period) beginning on the first day of the
fiscal quarter immediately following the Closing Date and ending on the last day
of the last fiscal quarter preceding the Transaction Date for which reports have
been filed pursuant to Section 4.18 plus (2) the aggregate Net Cash Proceeds
received by WCI after the Closing Date from the issuance and sale permitted by
this Indenture of its Capital Stock (other than Redeemable Stock) to a Person
who is not a Subsidiary of WCI, or from the issuance to a Person who is not a
Subsidiary of WCI of any options, warrants or other rights to acquire Capital
Stock of WCI (in each case, exclusive of any convertible Indebtedness,
Redeemable Stock or any options, warrants or other rights that are redeemable at
the option of the Holder, or are required to be redeemed, prior to the Stated
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33
Maturity of the Securities) plus (3) an amount equal to the net reduction in
Investments (other than reductions in Permitted Investments and other than
reductions in Investments made pursuant to clauses (vi) or (vii) of the second
paragraph of this Section 4.04) in any Person resulting from payments of
interest on Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to WCI or any Restricted Subsidiary (except to
the extent any such payment is included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed the amount of Investments previously made by WCI
and its Restricted Subsidiaries in such Person.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date
of declaration thereof if, at said date of declaration, such payment
would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Equipment Note Guarantee,
including premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause
(iii) of the second paragraph of Section 4.03;
(iii) the repurchase, redemption or other acquisition of
Capital Stock of WCI (or options, warrants or other rights to acquire
such Capital Stock) in exchange for, or out of the proceeds of a
substantially concurrent sale of, shares of Capital Stock or options,
warrants or other rights to purchase such Capital Stock (in each case
other than Redeemable Stock) of WCI;
(iv) the making of any other Restricted Payment made by
exchange for, or out of the proceeds of, a substantially concurrent
sale of, shares of the Capital Stock or options, warrants or other
rights to acquire such Capital Stock (in each case other than
Redeemable Stock) of the Company;
(v) payments or distributions, in the nature of satisfaction
of dissenters' rights, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of this Indenture applicable to mergers, consolidations and
transfers of all or substantially all of the property and assets of
WCI;
(vi) Investments, not to exceed $15,000,000 at any one time
outstanding;
(vii) Investments, not to exceed $15,000,000 at any one time
outstanding, in entities, substantially all of the assets of
which consist of Telecommunications Assets;
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34
(viii) (A) cash payments in lieu of the issuance of fractional
shares of Common Stock upon conversion (including mandatory conversion)
of the Convertible Notes provided for in the Convertible Notes
Indenture and (B) cash payments on the Convertible Notes required to be
made under Section 4.12 and Section 4.13 in the Convertible Notes
Indenture (as in effect on the Closing Date);
(ix) cash payments in lieu of the issuance of fractional
shares of Common Stock of WCI upon conversion of any class of Preferred
Stock of WCI; provided, however, that this exception shall not be
available with respect to more than two such conversions with respect
to any such class of Preferred Stock by any given Affiliate of WCI; and
(x) Investments in entities that directly (or indirectly
through subsidiaries) own licenses granted by the FCC or any other
governmental entity with authority to grant telecommunications
licenses; provided, however, that, in each case WCI or a Restricted
Subsidiary shall, at the time of making such Investment, have an active
role in the management or operation of such entity and in the provision
of telecommunications services by such entity;
provided, however, that, except in the case of clauses (i) and (iii) of this
paragraph, no Default or Event of Default shall have occurred and be continuing
or occur as a consequence of the actions or payments set forth herein. Any
Investments made other than in cash shall be valued, in good faith, by the Board
of Directors. Any Investment made pursuant to clause (vi) or (vii) of this
paragraph shall be deemed to be no longer outstanding (and repaid in full) if
and when the Person in which such Investment is made becomes a Restricted
Subsidiary of WCI.
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clause (ii)
thereof), and the Net Cash Proceeds from any issuance and sale of Capital Stock
referred to in clauses (iii) or (iv) shall be included in calculating whether
the conditions of clause (C) of the first paragraph of this Section 4.04 have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of WCI are used for the redemption,
repurchase or other acquisition of the Securities or Indebtedness that is pari
passu with the Equipment Note Guarantee then the Net Cash Proceeds of such
issuance shall be included in clause (C) of the first paragraph of this Section
4.04 only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of Indebtedness.
SECTION 4.05. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. WCI will not, and will not
permit any Restricted Subsidiary to, create
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35
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to:
(i) pay dividends or make any other distributions permitted
by applicable law on any Capital Stock of such Restricted
Subsidiary owned by WCI or any other Restricted Subsidiary;
(ii) pay any Indebtedness owed to WCI or any other
Restricted Subsidiary that owns, directly or indirectly, any
Capital Stock of such Restricted Subsidiary;
(iii) make loans or advances to WCI or any other Restricted
Subsidiary that owns, directly or indirectly, any Capital Stock
of such Restricted Subsidiary; or
(iv) transfer any of its property or assets to WCI or any
other Restricted Subsidiary that owns, directly or indirectly,
any Capital Stock of such Restricted Subsidiary.
The foregoing provisions shall not prohibit any encumbrances
or restrictions:
(i) existing on the Issue Date in this Indenture or any other
agreement in effect on the Issue Date, and any extensions,
refinancings, renewals or replacements of such agreements; provided,
however, that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by WCI or any Restricted Subsidiary, at
the time of such acquisition and not incurred in contemplation thereof,
which encumbrances or restrictions are not applicable to any Person or
the property or assets of any Person other than such Person or the
property or assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of this
Section 4.05, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of WCI or any
Restricted Subsidiary not otherwise prohibited by this Indenture or (C)
arising or agreed to in the ordinary course of business, not relating
to any Indebtedness, and that do not, individually or in the aggregate,
detract
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36
from the value of property or assets of WCI or any Restricted
Subsidiary in any manner material to WCI or any Restricted Subsidiary;
or
(v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary.
Nothing contained in this Section 4.05 shall prevent WCI or any Restricted
Subsidiary from (i) restricting the sale or other disposition of property or
assets of WCI or any of its Restricted Subsidiaries that secure Indebtedness of
WCI or any of its Restricted Subsidiaries or (ii) creating, incurring, assuming
or suffering to exist any Liens otherwise permitted under Section 4.09.
SECTION 4.06. Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries. WCI will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of Capital Stock
of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except:
(i) to WCI or a Wholly Owned Restricted Subsidiary;
(ii) issuances or sales to foreign nationals of shares of
Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law;
(iii) if, immediately after giving effect to such issuance
or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary; or
(iv) issuances or sales of Common Stock of Restricted
Subsidiaries, other than the Telecommunications Subsidiaries, if
within six months of each such issuance or sale, WCI or such
Restricted Subsidiary applies an amount not less than the Net
Cash Proceeds thereof (if any) in accordance with clause (A) or
(B) of the first paragraph of Section 4.11.
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries. WCI will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of WCI ("Guaranteed Indebtedness"),
unless (i) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for a Guarantee (a
"Subsidiary Guarantee") of payment of the Securities by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against WCI or any
other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided, however, that this
paragraph shall not be applicable to any Guarantee of any Restricted Subsidiary
that (x) existed at the time such Person became a Restricted Subsidiary and (y)
was not Incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary. If the Guaranteed Indebtedness
[NYCORP2:409141.3:4605B:08/08/97--3:52a]
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37
is (A) pari passu with the Equipment Note Guarantee, then the Guarantee of such
Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Equipment Note Guarantee then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Equipment Note Guarantee.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of WCI of all of WCI's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
SECTION 4.08. Limitation on Transactions with Shareholders and
Affiliates. WCI will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of WCI or with any Affiliate
of WCI or any Restricted Subsidiary, except upon fair and reasonable terms no
less favorable to WCI or such Restricted Subsidiary than could be obtained, at
the time of such transaction or, if such transaction is pursuant to a written
agreement, at the time of the execution of the agreement providing therefor, in
a comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.
The foregoing limitation does not limit, and shall not apply
to (i) transactions (A) approved by a majority of the disinterested members of
the Board of Directors or (B) for which WCI or a Restricted Subsidiary delivers
to the Trustee a written opinion of a nationally recognized investment banking
firm stating that the transaction is fair to WCI or such Restricted Subsidiary
from a financial point of view; (ii) any transaction solely between WCI and any
of its Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries; (iii) the payment of reasonable fees to directors of
WCI who are not employees of WCI; (iv) any payments or other transactions
pursuant to any tax-sharing agreement between WCI and any other Person with
which WCI files a consolidated tax return or with which WCI is part of a
consolidated group for tax purposes; or (v) any Restricted Payments not
prohibited by the provisions of Section 4.04 (other than pursuant to clause (iv)
of the definition of "Permitted Investment" or clause (vi) of the second
paragraph of Section 4.04). Notwithstanding the foregoing, any transaction
covered by the first paragraph of this Section 4.08 and not covered by clauses
(ii) through (iv) of this paragraph, the aggregate amount of which exceeds
$250,000 in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
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38
SECTION 4.09. Limitation on Liens. WCI will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties of any character, or any shares of
Capital Stock or Indebtedness of any Restricted Subsidiary (collectively,
"Protected Property"), without making effective provision for the Equipment Note
Guarantee and all other amounts due under this Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Equipment Note Guarantee
prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to:
(i) Liens existing on the Issue Date;
(ii) Liens granted after the Issue Date on any assets or Capital
Stock of WCI or its Restricted Subsidiaries created in favor of the
Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to WCI or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to WCI or such
other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of Section 4.03; provided, however, that
such Liens do not extend to or cover any property or assets of WCI or
any Restricted Subsidiary other than the property or assets securing
the Indebtedness being refinanced;
(v) Liens securing Indebtedness Incurred pursuant to the first
sentence of Section 4.03;
(vi) purchase money or other Liens upon equipment or inventory
acquired or held by WCI or any of its Restricted Subsidiaries taken or
obtained by (A) the seller or lessor of such equipment or inventory to
secure all or a part of the purchase price or lease payments therefor
or (B) the person who makes advances or incurs obligations, thereby
giving value to WCI to enable it to purchase or acquire rights in such
equipment or inventory, to secure the repayment of all or a part of
the advances so made or obligations so incurred; provided, however,
that such Liens do not extend to or cover any property or assets of
WCI or any Restricted Subsidiary other than the equipment or inventory
acquired; or
(vii) Permitted Liens.
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39
SECTION 4.10. Limitation on Sale-Leaseback Transactions. WCI
will not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby WCI or a Restricted Subsidiary sells or
transfers such assets or properties and then or thereafter leases such assets or
properties or any part thereof or any other assets or properties which WCI or
such Restricted Subsidiary, as the case may be, intends to use for substantially
the same purpose or purposes as the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if:
(i) the lease is for a period, including renewal rights, of not
in excess of three years;
(ii) the lease secures or relates to industrial revenue or
pollution control bonds;
(iii) the transaction is solely between WCI and any Wholly Owned
Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries;
(iv) the assets or properties are sold and leased back within 30
days of the date that the account payable with respect to the
acquisition by WCI or any Restricted Subsidiary of such assets or
properties is due and payable; or
(v) WCI or such Restricted Subsidiary, within six months after
the sale or transfer of any assets or properties is completed, applies
an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the first paragraph of Section
4.11.
SECTION 4.11. Limitation on Asset Sales. WCI will not, and
will not permit any Restricted Subsidiary to, consummate any Asset Sale, unless
(i) the consideration received by WCI or such Restricted Subsidiary is at least
equal to the fair market value of the assets sold or disposed of and (ii) at
least 85% of the consideration received consists of cash or Temporary Cash
Investments. In the event and to the extent that the Net Cash Proceeds received
by WCI or its Restricted Subsidiaries from one or more Asset Sales occurring on
or after the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date closest to
the commencement of such 12-month period for which a consolidated balance sheet
of WCI and its Subsidiaries has been prepared), then WCI shall or shall cause
the relevant Restricted Subsidiary to (i) within six months after the date Net
Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible
Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of WCI, or Indebtedness of any Restricted
Subsidiary, in each case owing to a Person other than WCI or any of its
Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within six months after
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40
the date of such agreement), in property or assets of a nature or type or that
are used in a business (or in a company having property and assets of a nature
or type, or engaged in a business) similar or related to the nature or type of
the property and assets of, or the business of, WCI and its Restricted
Subsidiaries existing on the date of such investment (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) apply (no later than the end of the
six-month period referred to in clause (i)) such excess Net Cash Proceeds (to
the extent not applied pursuant to clause (i)) as provided in the following
paragraph of this Section 4.11. The amount of such excess Net Cash Proceeds
required to be applied (or to be committed to be applied) during such six-month
period as set forth in clause (i) of the preceding sentence and not applied as
so required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Offer to Purchase
pursuant to this Section 4.11 totals at least $10,000,000, WCI or the Company
must commence, not later than the 15th Business Day after the first day of such
month, and consummate an Offer to Purchase from the Holders on a pro rata basis
an aggregate principal amount of Securities equal to the Excess Proceeds on such
date, at a purchase price equal to 101% of the principal amount of such
Securities on such date of purchase, plus accrued and unpaid interest (if any)
on such amount to the date of purchase.
Notwithstanding the foregoing, the Company will not, and WCI
will not permit the Company to, consummate any Asset Sale of Collateral unless
(A) such Asset Sale complies with clause (i) and (ii) of the first paragraph of
this Section 4.11 and the Company applies the Net Cash Proceeds from the Asset
Sale within 45 days following the receipt of such Net Cash Proceeds to acquire
additional Designated Equipment and (B) the Company takes such action as is
necessary to vest in the Trustee a security interest in such additional
Designated Equipment pursuant to Section 4.22 and the Security Documents.
SECTION 4.12. Repurchase of Securities upon a Change of
Control. The Company must commence, within 30 days of the occurrence of a Change
of Control, and consummate an Offer to Purchase for all the Securities then
outstanding, at a purchase price equal to 101% of the principal amount of the
Securities on the date of purchase and accrued and unpaid interest (if any) on
such amount to the date of purchase. Prior to the mailing of the notice to
Holders of Securities commencing such Offer to Purchase, but in any event within
30 days following any Change of Control, WCI covenants to (i) repay in full all
indebtedness of WCI and the Company that would prohibit the repurchase of the
Securities pursuant to such Offer to Purchase or (ii) obtain any requisite
consents under instruments governing any such indebtedness of WCI and the
Company to permit the repurchase of the Securities. WCI shall first comply with
the covenant in the preceding sentence before the Company shall repurchase
Securities pursuant to this Section 4.12.
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41
WCI may not repurchase any subordinated obligations, including
the Convertible Notes, until the Company has repurchased all Securities tendered
pursuant to the Offer to Purchase Securities as a result of such Change of
Control. However, if WCI is unable to repay all of its Indebtedness that would
prohibit repurchase of the Securities or is unable to obtain the consents of the
holders of Indebtedness, if any, outstanding at the time of a Change of Control
whose consent would be so required to permit the repurchase of Securities of WCI
or the Company or otherwise fail to purchase any Securities validly tendered,
then WCI and the Company will have breached such covenant. This breach will
constitute an Event of Default under this Indenture if it continues for a period
of 30 consecutive days after written notice is given to WCI and the Company by
the Trustee or the Holders of at least 25% in aggregate principal amount of the
Securities outstanding. In addition, the failure by the Company to repurchase
Securities at the conclusion of the Offer to Purchase will constitute an Event
of Default without any waiting period or notice requirements.
SECTION 4.13. Existence. Subject to Articles Four and Five of
this Indenture, WCI will do or cause to be done all things necessary to preserve
and keep in full force and effect its existence and the existence of each of its
Restricted Subsidiaries in accordance with the respective organizational
documents of WCI and each such Subsidiary and the rights (whether pursuant to
charter, partnership certificate, agreement, statute or otherwise), material
licenses and franchises of WCI and each such Subsidiary; provided, however, that
WCI shall not be required to preserve any such right, license or franchise, or
the existence of any Restricted Subsidiary (other than of WCI), if the
maintenance or preservation thereof is no longer desirable in the conduct of the
business of WCI and its Restricted Subsidiaries taken as a whole. In addition,
WCI agrees to take such actions, within a reasonable time after the Issue Date
(and in any event prior to any proceeding initiated regarding the dissolution of
WCI), as may be necessary to ensure that it shall be in good standing under the
laws of the jurisdiction of its incorporation.
SECTION 4.14. Payment of Taxes and Other Claims. WCI will pay
or discharge and shall cause each of its Subsidiaries to pay or discharge, or
cause to be paid or discharged, before the same shall become delinquent (i) all
material taxes, assessments and governmental charges levied or imposed upon (a)
WCI or any such Subsidiary, (b) the income or profits of any such Subsidiary
which is a corporation or (c) the property of WCI or any such Subsidiary and
(ii) all material lawful claims for labor, materials and supplies that, if
unpaid, might by law become a lien upon the property of WCI or any such
Subsidiary; provided, however, that WCI shall not be required to pay or
discharge, or cause to be paid or discharged, any such tax, assessment, charge
or claim the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established.
SECTION 4.15. Maintenance of Properties and Insurance. WCI
will cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries, to be maintained and kept in
reasonable condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
<PAGE>
42
replacements, betterments and improvements thereof, all as in the judgment of
WCI may be necessary so that the business carried on in connection therewith may
be properly and advantageously conducted at all times; provided, however, that
nothing in this Section 4.15 shall prevent WCI or any such Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of WCI, desirable in the conduct of the business of WCI or such Subsidiary.
WCI will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
product liability insurance and public liability insurance, with reputable
insurers or with the government of the United States of America, or an agency or
instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which WCI or such Restricted Subsidiary, as the case may be, is then
conducting business.
SECTION 4.16. Notice of Defaults. In the event that WCI or the
Company becomes aware of any Default or Event of Default, WCI or the Company, as
the case may be, promptly after it becomes aware thereof, will give written
notice thereof to the Trustee.
SECTION 4.17. Compliance Certificates. (a) Each of WCI and the
Company shall deliver to the Trustee, within 90 days after the end of WCI's
fiscal year, an Officers' Certificate stating whether or not the signers know of
any Default or Event of Default that occurred during such fiscal year. Such
certificates shall contain a certification from the principal executive officer,
principal financial officer or principal accounting officer of WCI and the
Company that a review has been conducted of the activities of WCI, the Company
and the Restricted Subsidiaries and WCI's, the Company's and the Restricted
Subsidiaries' performance under this Indenture and that, to the best knowledge
of such officer, each of WCI and the Company has complied with all conditions
and covenants under this Indenture. For purposes of this Section 4.17, such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture. If they do know of such a
Default or Event of Default, the certificate shall describe any such Default or
Event of Default and its status.
(b) WCI shall (to the extent not prohibited by applicable
accounting rules) deliver to the Trustee, within 90 days after the end of its
fiscal year, a certificate signed by WCI's independent certified public
accountants stating (i) that their audit examination has included a review of
the terms of this Indenture and the Securities as they relate to accounting
matters, (ii) that they have read the most recent Officers' Certificate
delivered to the Trustee pursuant to paragraph (a) of this Section 4.17 and
(iii) whether, in connection with their audit examination, anything came to
their attention that caused them to believe that WCI or the Company, as the case
may be, was not in compliance with any of the terms, covenants, provisions or
conditions of Article Four and Section 5.01 of this Indenture as they pertain to
accounting matters and, if any
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Default or Event of Default has come to their attention, specifying the nature
and period of existence thereof; provided, however, that such independent
certified public accountants shall not be liable in respect of such statement by
reason of any failure to obtain knowledge of any such Default or Event of
Default that would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards in effect at
the date of such examination.
(c) Within 90 days after the end of WCI's fiscal year, WCI
shall deliver to the Trustee a list of all Significant Subsidiaries. The Trustee
shall have no duty with respect to any such list except to keep it on file and
available for inspection by the Holders.
SECTION 4.18. SEC Reports and Reports to Holders. Whether or
not WCI is required to file reports with the SEC, if any Securities are
outstanding, WCI shall file with the SEC all such reports and other information
as it would be required to file with the SEC by Sections 13(a) or 15(d) under
the Exchange Act. WCI shall supply the Trustee and each Holder of Securities or
shall supply to the Trustee for forwarding to each such Holder, without cost to
the Trustee or such Holder, copies of such reports or other information.
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
SECTION 4.20. Limitation on the Company's Business Activities.
The Company shall not, and WCI shall not permit the Company to,
(i) Incur any Indebtedness other than the Securities and
refinancing thereof permitted under Section 4.03; or
(ii) engage in any business activities other than (A) the
activities contemplated in Sections 4.21 and 4.22, (B) leasing
Designated Equipment and (C) activities incidental to the activities
described in clauses (A) and (B) of this clause (ii).
SECTION 4.21. Use of Proceeds. The Company shall, and WCI
shall cause the Company to, apply the gross proceeds received by the Company
from the sale of the Securities to acquire Designated Equipment, including the
payment of the purchase price therefor and
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44
shipping, handling, storage, transportation, testing and insurance charges,
design, integration and site preparation expenses and installation and
service/warranty costs associated with the acquisition of any Designated
Equipment (collectively, "Acquisition Costs"). On the Issue Date, the Company
shall acquire Designated Equipment having an Acquisition Cost of at least $2.5
million. Any gross proceeds not applied on the Issue Date to acquire Designated
Equipment pursuant to this Section 4.21 shall be invested by the Company in
Temporary Cash Investments pending application of such gross proceeds to acquire
Designated Equipment (or application of such gross proceeds pursuant to Section
3.02 of the Securities).
SECTION 4.22. Purchase Money Security Interests. Upon the
acquisition by the Company of Designated Equipment, the Company shall, and WCI
shall cause the Company to, take such action as is required to vest in the
Trustee a security interest in such Designated Equipment, for the benefit of the
Holders of Securities, and thereupon all provisions of this Indenture and the
Security Documents relating to Collateral shall be deemed to relate to and
include such Designated Equipment. On the Issue Date and from time to time if
requested by the Trustee, the Company shall, and WCI shall cause the Company to,
execute such security instruments and financing statements as may be reasonably
necessary to vest in the Trustee such security interests. In addition, with
respect to any telecommunications switch that constitutes Designated Equipment
acquired pursuant to Section 4.21, the Company shall post a notice on, or in the
location housing, such telecommunications switch, identifying the Company as the
owner of such telecommunications switch and stating that such telecommunications
switch is subject to the security interest under this Indenture and the Security
Documents.
SECTION 4.23. Impairment of Security Interest. The Company
shall, and WCI shall cause the Company to, on or prior to the date that is four
business days following the Issue Date, file UCC-1s in each state in the United
States covering all Designated Equipment acquired by the Company pursuant to
Section 4.21, and to file such UCC-3 continuation statements from time to time
as may be necessary to continue to vest in the Trustee the security interest in
such Designated Equipment, and the Company shall not, and WCI shall not and
shall not permit any of its Subsidiaries to, grant to any Person (other than the
Collateral Agent on behalf of Holders of the Securities) any security interest
in the Collateral.
SECTION 4.24. Ownership of the Company. WCI shall at all times
own all the Capital Stock of the Company.
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45
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When WCI or the Company May Merge, Etc. (a) WCI
shall not consolidate with, merge with or into, or sell, convey, transfer, lease
or otherwise dispose of all or substantially all of its property and assets (as
an entirety or substantially an entirety in one transaction or a series of
related transactions) to, any Person (other than a consolidation or merger with
or into a Wholly Owned Restricted Subsidiary with a positive net worth;
provided, however, that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the surviving Person or WCI) shall be
issued or distributed to the stockholders of WCI) or permit any Person to merge
with or into WCI unless:
(i) WCI shall be the continuing Person, or the Person (if other
than WCI) formed by such consolidation or into which WCI is merged or
that acquired or leased such property and assets of WCI shall be a
corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered
to the Trustee, all of the obligations of WCI on all of the Securities
and under this Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis, WCI or any Person becoming the successor obligor of
the Securities shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of WCI immediately prior to such
transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis WCI, or any Person becoming the successor obligor of the
Securities could Incur at least $1.00 of Indebtedness under the first
paragraph of Section 4.03; and
(v) WCI delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and, if applicable, (iv)) and Opinion of Counsel, in
each case stating that such consolidation, merger or transfer and such
supplemental indenture complies with the provisions of this Section
5.01 and that all conditions precedent provided for herein relating to
such transaction have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of WCI, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of WCI; provided
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46
further, however, that any such transaction shall not have as one of its
purposes the evasion of the foregoing limitations.
(b) The Company shall not consolidate with, merge with or
into, or sell, convey, transfer, lease (other than in the ordinary course of
business) or otherwise dispose of all or substantially all of its property and
assets to, any Person or permit any Person to merge with and into the Company
unless: (i) the Company shall be the continuing Person, or the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or that acquired or leased such property and assets of the Company shall
be a corporation organized and validly existing under the laws of the United
States of America or any jurisdiction thereof and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Securities and under this Indenture;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iii) the Company delivers to
the Trustee an Officers' Certificate and Opinion of Counsel, in each case
stating that such consolidation, merger or transfer and such supplemental
indenture complies with this provision and that all conditions precedent
provided for herein relating to such transaction have been complied with.
SECTION 5.02. Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer or other disposition of all or
substantially all of the property and assets of WCI or the Company, as the case
may be, in accordance with Section 5.01 of this Indenture, the successor Person
formed by such consolidation or into which WCI or the Company, as the case may
be, is merged or to which such sale, conveyance, transfer or other disposition
is made shall succeed to, and be substituted for, and may exercise every right
and power of, WCI or the Company, as the case may be, under this Indenture with
the same effect as if such successor Person had been named as WCI or the
Company, as the case may be, herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall
occur with respect to the Securities if:
(a) the Company defaults in the payment of the principal of (or
premium, if any, on) any Security when the same becomes due and
payable upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any
Security when the same becomes due and payable, and such default
continues for a period of 30 days;
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47
(c) the Company or WCI defaults in the performance of or
breaches any other covenant or agreement of the Company or WCI
contained in this Indenture or under the Securities or the Security
Documents and such default or breach continues for a period of 30
consecutive days after written notice to the Company and WCI by the
Trustee or the Holders of 25% or more in aggregate principal amount of
the Securities;
(d) there occurs with respect to any issue or issues of
Indebtedness of WCI, or any Significant Subsidiary having an
outstanding principal amount of $25,000,000 or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (i) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (ii) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(e) any final judgment or order (not covered by insurance) for
the payment of money in excess of $25,000,000 in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against WCI or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 consecutive
days following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding and
not paid or discharged against all such Persons to exceed $25,000,000
during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect;
(f) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of WCI or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of WCI or any Significant Subsidiary
or for all or substantially all of the property and assets of WCI or
any Significant Subsidiary or (C) the winding up or liquidation of the
affairs of WCI or any Significant Subsidiary and, in each case, such
decree or order shall remain unstayed and in effect for a period of 60
consecutive days;
(g) WCI or any Significant Subsidiary (i) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (ii)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of WCI or any Significant Subsidiary or
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for all or substantially all of the property and assets of WCI any
Significant Subsidiary or (iii) effects any general assignment for the
benefit of creditors;
(h) any of the provisions of this Indenture relating to the
Security Documents or the Security Documents shall cease to be in full
force and effect or shall cease to give the secured parties the Liens,
rights, powers and privileges purported to be created thereby; or
(i) the Equipment Note Guarantee shall cease to be in full
force and effect (other than in accordance with its terms) or the
Guarantor shall deny or disaffirm its obligations under the Equipment
Note Guarantee.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in clause (f) or (g) of Section 6.01 that occurs
with respect to the Company or WCI) occurs and is continuing under this
Indenture, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Securities, then outstanding, by written notice to the Company and
WCI (and to the Trustee if such notice is given by the Holders), may, and the
Trustee at the request of such Holders shall, declare the principal of, premium,
if any, and accrued interest on the Securities to be immediately due and
payable. Upon a declaration of acceleration, such principal, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (d)
of Section 6.01 has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event of default triggering
such Event of Default pursuant to clause (d) shall be remedied or cured by the
Company, WCI or the relevant Significant Subsidiary or waived by the holders of
the relevant Indebtedness within 60 days after the declaration of acceleration
with respect thereto. If an Event of Default specified in clause (f) or (g) of
Section 6.01 occurs with respect to the Company or WCI, the principal of,
premium, if any, and accrued interest on the Securities then outstanding shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration, but
before a judgment or decree for the payment of the money due has been obtained
by the Trustee, the Holders of at least a majority in principal amount of the
outstanding Securities by written notice to the Company, WCI and to the Trustee,
may waive all past Defaults and rescind and annul such declaration of
acceleration and its consequences if (a) the Company has paid or deposited with
the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all
Securities, (iii) the principal of and premium, if any, on any Securities that
have become due otherwise than by such declaration or occurrence of acceleration
and interest thereon at the rate prescribed therefor by such Securities, and
(iv) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate prescribed therefor by such
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49
Securities, (b) all existing Events of Default, other than the nonpayment of the
principal of, premium, if any, and accrued interest on the Securities that have
become due solely by such declaration of acceleration, have been cured or waived
and (c) the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, premium, if any, or
interest on the Securities or to enforce the performance of any provision of the
Securities, the Security Documents or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of
the outstanding Securities, by written notice to the Trustee, may waive all past
Defaults and Events of Default and rescind and annul a declaration of
acceleration (except a Default in the payment of principal of, premium, if any,
or interest on any Security as specified in clause (a) or (b) of Section 6.01 or
in respect of a covenant or provision of this Indenture which cannot be modified
or amended without the consent of the holder of each outstanding Security
affected) if (i) all existing Events of Default, other than the nonpayment of
principal of, premium, if any, or interest on the Securities that have become
due solely by such declaration of acceleration, have been cured or waived and
(ii) the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Securities may direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee;
provided, however, that the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders not joining in the giving of such
direction; and provided further, however, that the Trustee may take any other
action it deems proper that is not inconsistent with any directions received
from Holders of Securities pursuant to this Section 6.05.
SECTION 6.06. Limitation on Suits. A Holder or Holders may not
institute any proceeding, judicial or otherwise, with respect to this Indenture,
the Security Documents or the
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50
Securities, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder or Holders have previously given to the Trustee
written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such
request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Securities have not
given the Trustee a direction that is inconsistent with such written
request.
For purposes of Section 6.05 of this Indenture and this
Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any
determination of whether the Holders of the required aggregate principal amount
of outstanding Securities have concurred in any request or direction of the
Trustee to pursue any remedy available to the Trustee or the Holders with
respect to this Indenture or the Securities or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Security to receive payment of principal of, premium, if any, or interest
on such Holder's Security on or after the respective due dates expressed on such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of principal, premium or interest specified in clause (a),
(b) or (c) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor of the Securities for the whole amount of principal,
premium, if any, and accrued interest remaining unpaid, together with interest
on overdue principal, premium, if any, and, to the extent that payment of such
interest is lawful, interest on
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51
overdue installments of interest, in each case at the rate specified in the
Securities, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Securities), its creditors or its
property and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Securities or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee holds or collects any
money or property pursuant to this Article Six, it shall pay out the money or
property in the following order:
First: to the Trustee for all amounts due under Section 7.07 and
to the Collateral Agent for all amounts due under the Security
Documents;
Second: to Holders for amounts then due and unpaid for principal
of, premium, if any, and interest on the Securities in respect of
which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if
any, and interest, respectively; and
Third: to the Company or any other obligors of the Securities, as
their interests may appear, or as a court of competent jurisdiction
may direct.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Section 6.10.
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52
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court may
require any party litigant in such suit to file an undertaking to pay the costs
of the suit, and the court may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 of this Indenture, or a suit by Holders of more than
10% in principal amount of the outstanding Securities.
SECTION 6.12. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Company, Trustee and the Holders shall continue as though no
such proceeding has been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Securities in Section 2.07, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of the
Trustee shall be as provided by the TIA and as set forth herein. Whether or not
herein expressly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Article Seven.
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SECTION 7.02. Certain Rights of Trustee. Subject to TIA Sections
315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document and may in good faith
conclusively rely as to the truth of the statements and the correctness
of the opinions therein;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on such certificate, opinion and/or an accountants'
certificate;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any
attorney or agent appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or the Security
Documents at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such
request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers or for any action it takes or omits to take in
accordance with the direction of the Holders of a majority in principal
amount of the Outstanding Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; provided, however, that the Trustee's conduct
does not constitute negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a fact or circumstance be proved
or established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, request and
rely upon an Officer's Certificate;
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
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54
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company
personally or by agent or attorney; and
(viii) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a written Company Order and
any resolution of the Board of Directors may be sufficiently evidenced
by a written Board Resolution.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not the Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to TIA Sections 310(b) and
311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture, the Securities
or the Collateral, (ii) shall not be accountable for the Company's use or
application of the proceeds from the Securities, (iii) shall not be responsible
for any statement in the Securities other than its certificate of authentication
and (iv) shall not be responsible for the perfection of the Lien granted by the
Security Documents in the Collateral.
SECTION 7.05. Notice of Default. If any Default or any Event
of Default occurs and is continuing and if such Default or Event of Default is
known to a trust officer of the Trustee, the Trustee shall mail to each Holder
in the manner and to the extent provided in TIA Section 313(c) notice of the
Default or Event of Default within five Business Days after it occurs, unless
such Default or Event of Default has been cured; provided, however, that, except
in the case of a default in the payment of the principal of, premium, if any, or
interest on any Security, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or the Responsible Officer of the Trustee in
good faith determines that the withholding of such notice is in the interest of
the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 15, 1998, the Trustee shall mail to each
Holder as provided in TIA Section 313(c) a brief report that complies with TIA
Section 313(a) dated as of such May 15, if required by TIA Section 313(a).
SECTION 7.07. Compensation and Indemnity. The Company shall pay
to the Trustee from time to time and upon the Trustee's request such
compensation as shall be agreed upon in writing for its services in any capacity
hereunder. The compensation of the Trustee shall
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55
not be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses and advances incurred or made by the Trustee; provided,
however, that the Trustee shall be under no obligation whatsoever under this
Indenture or any other document delivered in connection with the Securities, to
advance or expend its own funds. Such expenses shall include the reasonable
compensation and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability or expense incurred by it without
negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Securities, including, without limitation, the costs and expenses of defending
itself against any claim or liability and of complying with any process served
upon it or any of its officers in connection with the exercise or performance of
any of its powers or duties under this Indenture and the Securities.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of, premium, if any, and
interest on particular Securities.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (f) or (g) of Section
6.01, the expenses and the compensation for the services are intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.08. Replacement of Trustee. A resignation or removal
of the Trustee and appointment of a successor Trustee shall become effective
only upon the successor Trustee's acceptance of appointment as provided in this
Section 7.08.
The Trustee may resign at any time by so notifying the Company
in writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee with the consent of the Company. The Company may at any time
remove the Trustee, by Company Order given at least 30 days prior to the date of
the proposed removal.
If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company. If the successor Trustee does not deliver its written acceptance
required by the next succeeding paragraph of this Section 7.08 within 30 days
after the retiring Trustee resigns or is
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56
removed, the retiring Trustee, the Company or the Holders of a majority in
principal amount of the outstanding Securities may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, either subject to the lien provided in
Section 7.07 or less amounts retained by the retiring Trustee to satisfy amounts
owed to it pursuant to the terms of this Indenture, including but not limited to
Section 7.07 hereof, as the retiring Trustee determines, (i) the retiring
Trustee shall transfer all property held by it as Trustee to the successor
Trustee, (ii) the resignation or removal of the retiring Trustee shall become
effective and (iii) the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder.
If the Trustee is no longer eligible under Section 7.10, any
Holder who satisfies the requirements of TIA Section 310(b) may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
The Company shall give notice of any resignation and any
removal of the Trustee and each appointment of a successor Trustee to all
Holders. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue
indefinitely for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.10. Eligibility. This Indenture shall always have a
Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition.
SECTION 7.11. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
in writing with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law and except for
money held in trust under Article Eight of this Indenture.
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57
SECTION 7.12. Withholding Taxes. The Trustee, as agent for the
Company, shall exclude and withhold from each payment of principal and interest
and other amounts due hereunder or under the Securities any and all withholding
taxes applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Securities, to withhold such amounts and timely pay
the same to the appropriate authority in the name of and on behalf of the
holders of the Securities, that it will file any necessary withholding tax
returns or statements when due, and that, as promptly as possible after the
payment thereof, it will deliver to each Holder of a Security appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Holders may reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except as
otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Securities and this Indenture if:
(i) all Securities previously authenticated and delivered
(other than destroyed, lost or stolen Securities that have been
replaced or Securities that are paid pursuant to Section 4.01 or
Securities for whose payment money or securities have theretofore been
held in trust and thereafter repaid to the Company, as provided in
Section 8.05) have been delivered to the Trustee for cancellation and
the Company has paid all sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all of them
are to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B)
the Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Securities to maturity
or redemption, as the case may be, and to pay all other sums payable by
it hereunder, (C) no Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such
deposit, (D) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound and
(E) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of
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Counsel, in each case stating that all conditions precedent provided
for herein relating to the satisfaction and discharge of this Indenture
have been complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06,
2.07, 2.11, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the
Securities are no longer outstanding. Thereafter, only the Company's obligations
in Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable
deposit, the Trustee upon request shall acknowledge in writing the discharge of
the Company's obligations, as the case may be, under the Securities and this
Indenture except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The
Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Securities (including the provisions of Article
Eleven by which the Securities are secured by Collateral and Article Ten by
which the Securities are Guaranteed by the Equipment Note Guarantee) on the
123rd day (or, to the extent applicable under clause (D) below, one year) after
the date of the deposit referred to in clause (A) of this Section 8.02 if:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 7.10
of this Indenture) and conveyed all right, title and interest for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Securities, and dedicated solely to,
the benefit of the Holders, in and to (1) money in an amount, (2) U.S.
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (A), money in an amount or (3) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and accrued interest on the outstanding
Securities at the Stated Maturity or earlier optional redemption of
such principal or interest; provided, however, that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Securities;
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59
(B) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and no Default or Event of
Default shall occur during the period ending on the 123rd day (or one
year) after such date of deposit;
(D) the Company shall have delivered to the Trustee (1) either
(x) a ruling directed to the Trustee received from the Internal Revenue
Service to the effect that the Holders will not recognize income, gain
or loss for federal income tax purposes as a result of the Company's
exercise of its option under this Section 8.02 and will be subject to
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised or (y) an Opinion of Counsel to the same effect as the ruling
described in clause (x) above accompanied by a ruling to that effect
published by the Internal Revenue Service, unless there has been a
change in the applicable federal income tax law since the date of this
Indenture such that a ruling from the Internal Revenue Service is no
longer required and (2) an Opinion of Counsel to the effect that (x)
the creation of the defeasance trust does not violate the Investment
Company Act of 1940 and (y) after the passage of 123 days following the
deposit (except, with respect to any trust funds for the account of any
Holder who may be deemed to be an "insider" for purposes of the United
States Bankruptcy Code, after one year following the deposit), the
trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (i) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally) or (ii) if a court
were to rule under any such law in any case or proceeding that the
trust funds remained property of the Company (a) assuming such trust
funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold,
for the benefit of the Holders, a valid and perfected security interest
in such trust funds that is not avoidable in bankruptcy or otherwise
except for the effect of Section 552(b) of the United States Bankruptcy
Code on interest on the trust funds accruing after the commencement of
a case under such statute and (b) the Holders will be entitled to
receive adequate protection of their interests in such trust funds if
such trust funds are used in such case or proceeding;
(E) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit defeasance and discharge will
not cause the Securities to be delisted; and
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(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day
(or one year) period referred to in clause (D)(2)(y) of this Section 8.02, none
of the Company's obligations under this Indenture shall be discharged.
Subsequent to the end of such 123-day (or one year) period with respect to this
Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.11, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall survive until the
Securities are no longer outstanding. Thereafter, only the Company's obligations
in Sections 7.07, 8.05 and 8.06 shall survive. If and when a ruling from the
Internal Revenue Service or an Opinion of Counsel referred to in clause (D)(1)
of this Section 8.02 may be provided specifically without regard to, and not in
reliance upon, the continuance of the Company's obligations under Section 4.01,
then the Company's obligations under such Section 4.01 shall cease upon delivery
to the Trustee of such ruling or Opinion of Counsel and compliance with the
other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon written
request shall acknowledge in writing the discharge of the Company's obligations
under the Securities and this Indenture except for those surviving obligations
in the immediately preceding paragraph. Such acknowledgment shall include, among
other things, the fact that payment of the Securities may not be accelerated
because of an Event of Default and the Securities will no longer have the
benefit of the Security Documents or the Equipment Note Guarantee.
SECTION 8.03. Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in clauses
(iii) and (iv) of Section 5.01 and Sections 4.03 through 4.24, and clause (c) of
Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01 and Sections
4.03 through 4.24, and clauses (d), (e), (h) and (i) of Section 6.01 shall be
deemed not to be Events of Default and the Securities will no longer have the
benefit of the Security Documents or the Equipment Note Guarantee, in each case
with respect to the outstanding Securities if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Securities, and dedicated solely to,
the benefit of the Holders, in and to (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment
referred to
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61
in this clause (i), money in an amount or (C) a combination thereof in
an amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in
respect thereof payable by the Trustee, the principal of, premium, if
any, and interest on the outstanding Securities on the Stated Maturity
or earlier optional redemption of such principal or interest; provided,
however, that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such U.S. Government Obligations to
the payment of such principal, premium, if any, and interest with
respect to the Securities;
(ii) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(iii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) the Holders
have a valid first-priority security interest in the trust funds, (C)
the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and the defeasance of the
obligations referred to in the first paragraph of this Section 8.03 and
will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and (D) after the passage of
123 days following the deposit (except, with respect to any trust funds
for the account of any Holder who may be deemed to be an "insider" for
purposes of the United States Bankruptcy Code, after one year following
the deposit), the trust funds will not be subject to the effect of
Section 547 of the United States Bankruptcy Code or Section 15 of the
New York Debtor and Creditor Law in a case commenced by or against the
Company under either such statute, and either (1) the trust funds will
no longer remain the property of the Company (and therefore will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally)
or (2) if a court were to rule under any such law in any case or
proceeding that the trust funds remained property of the Company (x)
assuming such trust funds remained in the possession of the Trustee
prior to such court ruling to the extent not paid to the Holders, the
Trustee will hold, for the benefit of the Holders, a valid and
perfected security interest in such trust funds that is not avoidable
in bankruptcy or otherwise (except for the effect of Section 552(b) of
the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such statute), (y) the
Holders will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used in such case
or proceeding and (z)
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62
no property, rights in property or other interests granted to the
Trustee or the Holders in exchange for, or with respect to, such trust
funds will be subject to any prior rights of holders of other
Indebtedness of the Company or any of its Subsidiaries;
(v) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit defeasance and discharge will
not cause the Securities to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Securities and this Indenture to
the payment of principal of, premium, if any, and interest on the Securities;
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 8.05. Repayment to Company. Subject to Sections 7.07,
8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any excess money held
by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years; provided, however, that
the Trustee or such Paying Agent before being required to make any payment shall
cause to be published at the expense of the Company once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled to
such money at such Holder's address (as set forth in the Security Register)
notice that such money remains unclaimed and that after a date specified therein
(which shall be at least 30 days from the date of such publication or mailing)
any unclaimed balance of such money then remaining will be repaid to the
Company. After payment to the Company, Holders entitled to such money must look
to the Company for payment as general creditors unless an applicable law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02
or 8.03, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S.
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63
Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the
case may be; provided, however, that, if the Company has made any payment of
principal of, premium, if any, or interest on any Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
SECTION 8.07. Insiders. With respect to the determination of
the Persons constituting beneficial owners of Securities and whether any such
Person is an "insider" for purposes of Sections 8.02(D)(2)(y) and 8.03(iv)(D),
the Trustee may rely on an Officers' Certificate.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by resolutions of its Board of Directors, and the Trustee may amend
or supplement this Indenture or the Securities without notice to or the consent
of any Holder:
(a) to cure any ambiguity, defect or inconsistency in this
Indenture; provided, however, that such amendments or supplements
shall not adversely affect the interests of the Holders in any
material respect;
(b) to comply with Article Five;
(c) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(e) to make any change that, in the opinion of the Board of
Directors of the Company evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections
6.04 and 6.07 and without prior notice to the Holders, the Company, when
authorized by its Board of Directors (as evidenced by a Board Resolution), and
the Trustee may amend this Indenture and the Securities with the written consent
of the Holders of a majority in principal amount of the Securities then
outstanding, and the Holders of a majority in principal amount of the Securities
then outstanding by written notice to the Trustee may waive future compliance by
the Company with any provision of this Indenture or the Securities.
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Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or adversely affect any right of repayment
at the option of any Holder of any Security, or the currency in which,
any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage in principal amount of outstanding
Securities the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain
provisions of this Indenture or certain Defaults and their consequences
provided for in this Indenture;
(iii) waive a Default in the payment of principal of, premium, if
any, or interest on, any Security;
(iv) modify any of the provisions of this Section 9.02, except
to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Security affected thereby; or
(v) amend the Equipment Note Guarantee or the Security
Documents or otherwise affect the interests of any Holder in the
Collateral, in each case in any manner that adversely affects the
rights of any Holder or the Trustee.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the Security of the
consenting Holder, even if notation of the consent is not made on any Security.
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65
However, any such Holder or subsequent Holder may revoke the consent as to its
Security or portion of its Security. Such revocation shall be effective only if
the Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver shall
become effective on receipt by the Trustee of written consents from the Holders
of the requisite percentage in principal amount of the outstanding Securities.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses (i)
through (v) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (v) of Section 9.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Security that evidences the same indebtedness as the Security of the consenting
Holder.
SECTION 9.04. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security, the Trustee may
require the Holder to deliver such Security to the Trustee. The Trustee may
place an appropriate notation on the Security about the changed terms and return
it to the Holder and the Trustee may place an appropriate notation on any
Security thereafter authenticated. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
<PAGE>
66
ARTICLE TEN
EQUIPMENT NOTE GUARANTEE
SECTION 10.01. Guarantee. The Guarantor unconditionally and
irrevocably guarantees to each Holder and to the Trustee and its successors and
assigns (a) the full and punctual payment of principal of and interest on the
Securities when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under this
Indenture and the Securities and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Company under this
Indenture and the Securities (all the foregoing being hereinafter collectively
called the "Guaranteed Obligations"). The Guarantor further agrees that the
Guaranteed Obligations may be extended or renewed, in whole or in part, without
notice or further assent from the Guarantor, and that the Guarantor will remain
bound under this Article Ten notwithstanding any extension or renewal of any
Guaranteed Obligation.
The Guarantor waives presentation to, demand of, payment from
and protest to the Company of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. The Guarantor waives notice of any default
under the Securities or the Guaranteed Obligations. The obligations of the
Guarantor hereunder shall not be affected by (a) the failure of any Holder or
the Trustee to assert any claim or demand or to enforce any right or remedy
against the Company or any other Person under this Indenture, the Securities or
any other agreement or other-
wise; (b) any extension or renewal of any thereof; (c) any rescission, waiver,
amendment or modification of any of the terms or provisions of this Indenture,
the Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Guaranteed Obligations or any of them; (e) the
failure of any Holder or the Trustee to exercise any right or remedy against any
other guarantor of the Guaranteed Obligations; or (f) any change in the
ownership of the Guarantor.
The Guarantor further agrees that its Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
Except as expressly set forth in Sections 8.02 and 8.03, the
obligations of the Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of the Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Securities or
any other agreement, by any waiver or modification of any thereof, by any
default,
<PAGE>
67
failure or delay, willful or otherwise, in the performance of the obligations,
or by any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of the Guarantor
or would otherwise operate as a discharge of the Guarantor as a matter of law or
equity.
The Guarantor further agrees that its Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any time
payment, or any part thereof, of principal of or interest on any Guaranteed
Obligation is rescinded or must otherwise be restored by any Holder or the
Trustee upon the bankruptcy or reorganization of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against the
Guarantor by virtue hereof, upon the failure of the Company to pay the principal
of or interest on any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Guaranteed Obligation, the Guarantor hereby
promises to and will, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid amount of such Guaranteed Obligations, (ii) accrued
and unpaid interest on such Guaranteed Obligations (but only to the extent not
prohibited by law) and (iii) all other monetary Guaranteed Obligations of the
Company to the Holders and the Trustee.
The Guarantor agrees that it shall not be entitled to any
right of subrogation in respect of any Guaranteed Obligations guaranteed hereby
until payment in full of all Guaranteed Obligations. The Guarantor further
agrees that, as between it, on the one hand, and the Holders and the Trustee, on
the other hand, (x) the maturity of the Guaranteed Obligations guaranteed hereby
may be accelerated as provided in Article Six for the purposes of the
Guarantor's Guarantee herein, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article Six, such Guaranteed
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purposes of this Section.
The Guarantor also agrees to pay any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under this Section.
SECTION 10.02. Successors and Assigns. This Article Ten shall
be binding upon the Guarantor and its successors and assigns and shall enure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.
<PAGE>
68
SECTION 10.03. No Waiver. Neither a failure nor a delay on the
part of either the Trustee or the Holders in exercising any right, power or
privilege under this Article Ten shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Article Ten
at law, in equity, by statute or otherwise.
SECTION 10.04. Modification. No modification, amendment or
waiver of any provision of this Article Ten, nor the consent to any departure by
the Guarantor therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Trustee, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on the Guarantor in any case shall entitle the Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
ARTICLE ELEVEN
SECURITY DOCUMENTS
SECTION 11.01. Collateral and Security Documents. (a) To
secure the due and punctual payment of the obligations of the Company under this
Indenture and the Securities, the Grantor, the Trustee and the Collateral Agent
have entered into the Security Documents to create the security interests and
related matters. The Trustee and the Company hereby acknowledge and agree that
the Collateral Agent holds the Collateral in trust for the equal and ratable
benefit of the Holders and the Trustee and the other parties secured under the
Security Documents pursuant to the terms of the Security Documents.
(b) Each Holder, by accepting a Security, authorizes the
Collateral Agent to execute and deliver the Security Documents, agrees to all of
the terms and provisions of the Security Documents, as the same may be amended
from time to time pursuant to the provisions of the Security Documents and this
Indenture, and authorizes and directs the Collateral Agent to perform its
obligations and exercise its rights under the Security Documents in accordance
therewith; provided, however, that if any provisions of the Security Documents
limit, qualify or conflict with the duties imposed by the provisions of the TIA,
the TIA will control.
(c) As set forth in and governed by the Security Documents,
the Collateral as now or hereafter constituted shall be held for the equal and
ratable benefit of the Secured Parties (as defined in the Security Agreement)
without preference, priority or distinction of any thereof over any other by
reason of difference in time of issuance, sale or otherwise, as security for the
Secured Obligations (as defined in the Security Agreement). As among the
Holders, the Collateral shall be held for the equal and ratable benefit of the
Holders without preference, priority or distinction of any thereof over any
other.
<PAGE>
69
SECTION 11.02. Release of Collateral. Collateral may be
released from the security interest created by the Security Documents at any
time or from time to time in accordance with the provisions of the Security
Documents. The release of any Collateral from the terms hereof and of the
Security Documents or the release of, in whole or in part, the Liens created by
the Security Documents, will not be deemed to impair the Lien on the Collateral
in contravention of the provisions hereof if and to the extent the Collateral or
Liens are released pursuant to the applicable Security Documents and pursuant to
the terms of this Article Eleven. The Trustee and each of the Holders
acknowledge that a release of Collateral or a Lien strictly in accordance with
the terms of the Security Documents and of this Article Eleven will not be
deemed for any purpose to be an impairment of the Lien on the Collateral in
contravention of the terms of this Indenture. To the extent applicable, the
Company and each obligor on the Securities shall cause ss. 314(d) of the TIA
relating to the release of property or securities from the Lien hereof and of
the Security Documents to be complied with. Any certificate or opinion required
by ss. 314(d) of the TIA may be made by an Officer of the Company, except in
cases which ss. 314(d) of the TIA requires that such certificate or opinion be
made by an independent person.
SECTION 11.03. Certificates and Opinions. (a) The Company shall
deliver to the Trustee:
(i) promptly after the execution and delivery of this
Indenture, an Opinion of Counsel either stating that in the opinion of
such counsel this Indenture and the Security Documents (including
financing statements or other instruments) grant to the Secured Parties
a security interest in the Collateral to the extent described herein
and therein and that filings have been (or, within four Business Days
following the Issue Date, will be) made in each of the fifty states of
the United States to record the existence of such security interest or
stating that in the opinion of such counsel no such action is necessary
to make such security interest effective; and
(ii) on or before March 1 of each year, (A) an Opinion of
Counsel either stating that in the opinion of such counsel such action
has been taken with respect to the recording, filing, re-recording and
re-filing of such of the Security Documents (including financing
statements or other instruments) as is necessary to maintain the
security interest intended to be created thereby for the benefit of the
Securityholders, and reciting the details of such action, or stating
that in the opinion of such counsel no such action is necessary to
maintain such security interest and (B) a Status Certificate (as
defined in the Security Agreement) prepared by the Company and current
in all respects as of such March 1.
(b) The Company shall comply with TIA ss. 314(d), relating to,
among other matters, the release of Collateral from the Lien of the Security
Documents and Officers' Certificates or other documents regarding fair value of
the Collateral, to the extent such provisions are applicable. Any certificate or
opinion required by TIA ss. 314(d) may be executed and delivered by an Officer
of the Company to the extent permitted by TIA ss. 314(d).
<PAGE>
70
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act of 1939. This Indenture shall
be subject to the provisions of the TIA that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
SECTION 12.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
WinStar Equipment II Corp.
1577 Spring Hill Road
Sixth Floor
Vienna, Virginia 22182
Attention: General Counsel
if to the Guarantor (or WCI):
WinStar Communications, Inc.
230 Park Avenue
New York, New York 10169
Attention: Chief Financial Officer
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Division
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
at the Company's expense to such Holder's address as it appears on the Security
Register by first class mail and shall be sufficiently given to such Holder if
so mailed within the time prescribed. Copies of any such communication or notice
to a Holder shall also be mailed to the Trustee and each Agent at the same time.
<PAGE>
71
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received,
and except as otherwise provided in this Indenture, if a notice or communication
is mailed in the manner provided in this Section 12.02, it is duly given,
whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be in writing and filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 12.03. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
SECTION 12.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
<PAGE>
72
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion
of Counsel may rely on an Officers' Certificate or certificates of
public officials.
SECTION 12.05. Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.06. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Change of Control Payment Date, Excess
Proceeds Payment Date, Stated Maturity or date of maturity of any Security shall
not be a Business Day, then payment of principal of, premium, if any, or
interest on such Security, as the case may be, need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, Change of Control Payment Date,
Excess Proceeds Payment Date, or Redemption Date, or at the Stated Maturity or
date of maturity of such Security; provided, however, that no interest shall
accrue for the period from and after such Interest Payment Date, Change of
Control Payment Date, Excess Proceeds Payment Date, Redemption Date, Stated
Maturity or date of maturity, as the case may be.
SECTION 12.07. Governing Law. This Indenture and the
Securities shall be governed by the laws of the State of New York, excluding (to
the extent permissible by law) any rule of law that would cause the application
of the laws of any jurisdiction other than the State of New York.
SECTION 12.08. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the WCI or any of its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.09. No Recourse Against Others. No recourse for the
payment of the principal of, premium, if any, or interest on any of the
Securities, or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
contained in this Indenture, or in any of the Securities, or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee or controlling person, as
such, of the Company or of any successor Person thereof in such capacity;
provided, however, that the foregoing shall not affect WCI's obligations with
respect to the Equipment Note Guarantee; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the
Securities.
<PAGE>
73
SECTION 12.10. Successors. All agreements of WCI and the Company
in this Indenture and the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 12.11. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 12.12. Separability. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.13. Table of Contents, Headings, Etc. The Table of
Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
WINSTAR EQUIPMENT II CORP.,
as Issuer
By:
---------------------------
Name:
Title:
WINSTAR COMMUNICATIONS, INC.,
as Guarantor
By:
---------------------------
Name:
Title:
<PAGE>
74
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By:
---------------------------
Name:
Title:
<PAGE>
A-1
EXHIBIT A
[FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE] (1/2)
WINSTAR EQUIPMENT II CORP.
12 1/2% Guaranteed Senior Secured Note Due 2004
CUSIP _________
No. R- $_________
WINSTAR EQUIPMENT II CORP., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to __________ , or its
registered assigns, the principal sum of ___________________ ($__________) on
March 15, 2004.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1997.
Regular Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
- --------
1. If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to the Rule 144A/Regulation S Appendix and the attachment
from such Exhibit I caption "[TO BE ATTACHED TO GLOBAL SECURITIES]--SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY".
2. If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment, add
the Restricted Securities Legend from Exhibit I to the Rule 144A/Regulation S
Appendix and replace the Assignment Form included in this Exhibit A with
Assignment Form included in such Exhibit I.
<PAGE>
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
WINSTAR EQUIPMENT II CORP.
By:
------------------------------
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 12 1/2% Guaranteed Senior Secured Notes Due 2004
described in the within-mentioned Indenture.
Date:__________________ , 1997 UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By:
------------------------------
Authorized Signatory
<PAGE>
A-3
[REVERSE SIDE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
WINSTAR EQUIPMENT II CORP.
12 1/2% Guaranteed Senior Secured Note Due 2004
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2004.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the March 1 and September 1
immediately preceding the relevant Interest Payment Date) on each Interest
Payment Date, commencing September 15, 1997.
Interest on the Notes will accrue from the most recent
Interest Payment Date; provided, however, that, if there is no existing default
in the payment of interest and this Note is authenticated between a Regular
Record Date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Notwithstanding the above, (i) if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Note at a rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the earlier of (x) the date on
which all Registration Defaults have been cured and (y) the date on which all
Notes become freely transferable by Holders other than Affiliates of the Company
without further registration under the Securities Act.
The Company shall pay interest on overdue principal and
premium, if any, and (to the extent lawful) interest on overdue installments of
interest.
2. Method of Payment.
The Company will pay principal as provided above and interest (except
defaulted interest) on the principal amount of the Notes as provided above on
each March 15 and September 15 to the persons who are Holders (as reflected in
the Security Register at the close of business on the March 1 and September 1
immediately preceding the relevant Interest Payment Date), in each case, even if
the Note is cancelled on registration of transfer or registration of exchange
after such record date; provided, however, that, with respect to the payment of
principal, the Company will not make payment to the Holder unless this Note is
surrendered to a Paying Agent.
<PAGE>
A-4
The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Notes represented by a global Note
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Company will make all payments in respect of a certificated Note
(including principal, premium and interest) by mailing a check to the registered
address of each Holder thereof; provided, however, that payments on a
certificated Note will be made by wire transfer to a U.S. dollar account
maintained by the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the Paying
Agent to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the trustee
may accept in its discretion).
3. Paying Agent and Registrar.
Initially, United States Trust Company of New York (the
"Trustee") will act as authenticating agent, Paying Agent and Registrar. The
Company may change any authenticating agent, Paying Agent or Registrar without
notice. The Company, any Subsidiary or any Affiliate of any of them may act as
Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture dated as of
August 1, 1997 (the "Indenture"), among the Company, WinStar Communications,
Inc., as guarantor (the "Guarantor"), and the Trustee. Capitalized terms herein
are used as defined in the Indenture unless otherwise indicated. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Notes are subject to all
such terms, and Holders are referred to the Indenture and the Trust Indenture
Act for a statement of all such terms. To the extent permitted by applicable
law, in the event of any inconsistency between the terms of this Note and the
terms of the Indenture, the terms of the Indenture shall control.
The Notes are secured senior indebtedness of the Company. The
Indenture limits the original aggregate principal amount of the Notes to
$50,000,000 (subject to Section 2.07 of the Indenture).
5. Optional Redemption.
The Notes will not be redeemable prior to March 15, 2002.
Thereafter, the Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time on or after March 15, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holders' last address as it appears in the Security
Register, at the following Redemption Prices (expressed as a percentage of the
principal amount
<PAGE>
A-5
of the Notes, plus accrued and unpaid interest, if any, on such amount to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on the relevant Interest Payment Date if redeemed during the
12-month period commencing on March 15 of the years set forth below:
Year Redemption Price
---- ----------------
2002 106.250%
2003 and thereafter 103.125%
6. Mandatory Redemption.
In the event that by August 8, 1999, the Company shall not
have applied at least $50.0 million to fund the Acquisition Costs of Designated
Equipment pursuant to the Indenture ($50.0 million less the amount so applied
being herein called the "Unused Equipment Amount"), the Company shall redeem
Notes in an aggregate principal amount equal to the Unused Equipment Amount at a
Redemption Price of 112.5% of such principal amount, plus accrued and unpaid
interest thereon to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on the relevant Interest Payment Date). The
mandatory redemption shall occur no later than August 23, 1999.
Selection of the Notes for mandatory redemption will be made
on a pro rata basis; provided, however, that no Note of $1,000 in principal
amount or less shall be redeemed in part. If any Notes are to be redeemed in
part only, a new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
7. Notice of Redemption.
Notice of any optional redemption will be mailed by the
Company at least 30 days but not more than 60 days before a Redemption Date, and
notice of a mandatory redemption will be mailed by the Company at least 10
Business Days but not more than 15 Business Days before a Redemption Date, in
each case, to each Holder of Notes to be redeemed at his last address as it
appears in the Security Register. Notes in original denominations larger than
$1,000 may be redeemed in part; provided, however, that Notes will only be
issued in denominations of $1,000 principal amount or integral multiples
thereof. On and after the Redemption Date, interest ceases to accrue on Notes
(or portions of Notes) called for redemption, unless the Company defaults in the
payment of the Redemption Price.
8. Repurchase upon Change in Control.
<PAGE>
A-6
Upon the occurrence of a Change of Control, each Holder shall
have the right to require the repurchase of its Notes by the Company in cash
pursuant to the offer described in the Indenture at a purchase price equal to
101% of the principal amount of such Notes on such date of purchase, plus
accrued and unpaid interest, if any, on such amount to the date of purchase (the
"Change of Control Payment").
A notice of such Change of Control will be mailed within 30
days after any Change of Control occurs to each Holder at his last address as it
appears in the Security Register. Notes in original denominations larger than
$1,000 may be sold to the Company in part; provided, however, that Notes will
only be issued in denominations of $1,000 principal amount at maturity or
integral multiples thereof. On and after the Change of Control Payment Date,
interest ceases to accrue on Notes or portions of Notes surrendered for purchase
by the Company, unless the Company defaults in the payment of the Change of
Control Payment.
9. Guarantee.
The Notes are guaranteed on a senior unsubordinated basis by
the Guarantor to the extent provided in the Indenture.
10. Collateral and Security Documents.
To secure the due and punctual payment of the principal of,
premium if any, and interest on the Notes and all other amounts payable by the
Company under the Indenture and the Notes when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, the Grantor has
granted security interests in the Collateral to the Collateral Agent for the
benefit of the Holders of Notes pursuant to the Security Documents.
11. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount and integral multiples thereof. A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Notes selected for redemption. Also, it need not
register the transfer or exchange of any Notes for a period of 15 days before a
selection of Notes to be redeemed is made.
12. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
13. Unclaimed Money.
<PAGE>
A-7
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an applicable law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity.
Subject to certain conditions, the Company may terminate some
or all of its obligations under the Notes, the Indenture and the Security
Documents, and the Guarantor may terminate its obligations under the Equipment
Note Guarantee, if the Company deposits with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
redemption or maturity, as the case may be.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that, in the opinion
of the Board of Directors of the Company, does not materially and adversely
affect the rights of any Holder.
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Guarantor and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; create liens; engage in sale-leaseback transactions;
pay dividends or make distributions in respect of their capital stock; make
investments or make certain other restricted payments; sell assets; issue or
sell stock of Restricted Subsidiaries; enter into transactions with stockholders
or affiliates; or, with respect to the Company, to incur any indebtedness other
than the Notes; engage in any other business activities; apply the gross
proceeds from the sale of the Notes to uses other than the acquisition of
Designated Equipment; fail to take action to vest a security interest in the
Designated Equipment in the Trustee; fail to file proper UCC-1s and UCC-3s;
consolidate, merge or sell all or substantially all of its assets. Within 90
days after the end of the last fiscal quarter of each year, the Company must
report to the Trustee on compliance with such limitations.
<PAGE>
A-8
17. Successor Persons.
Generally, when a successor person or other entity assumes all
the obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
18. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable, upon acceleration, redemption or
otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days; (c)
the Company or WCI defaults in the performance of or breaches any other covenant
or agreement of the Company or WCI in the Indenture or under the Notes or the
Security Documents and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount of the Notes; (d) there occurs with respect
to any issue or issues of Indebtedness of WCI or any Significant Subsidiary
having an outstanding principal amount of $25,000,000 or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now exists or
shall hereafter be created, (i) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (ii) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (e) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $25,000,000 in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against WCI or any Significant Subsidiary
and shall not be paid or discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding and not paid
or discharged against all such Persons to exceed $25,000,000 during which a stay
of enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (f) a court having jurisdiction in the
premises enters a decree or order for (i) relief in respect of WCI or any
Significant Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (ii) appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of WCI or any Significant Subsidiary or for all or substantially all of
the property and assets of WCI or any Significant Subsidiary or (iii) the
winding up or liquidation of the affairs of WCI or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in effect for
a period of 60 consecutive days; or (g) WCI or any Significant Subsidiary (i)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (ii) consents
<PAGE>
A-9
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of WCI or any Significant
Subsidiary or for all or substantially all of the property and assets of WCI or
any Significant Subsidiary or (iii) effects any general assignment for the
benefit of creditors; (h) any of the provisions of the Indenture relating to the
Security Documents or the Security Documents shall cease to be in full force and
effect or shall cease to give the secured parties the Liens, rights, power and
privileges purported to be created thereby; or (i) the Equipment Note Guarantee
shall cease to be in full force and effect (other than in accordance with its
terms) or the Guarantor shall deny or disaffirm its obligations under the
Equipment Note Guarantee.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to the Company or WCI) occurs
and is continuing under the Indenture, the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes, then outstanding, by written
notice to the Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
principal of, premium, if any, and accrued interest, if any, on the Notes to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any Restricted Subsidiary occurs and is continuing, the
principal amount of the Notes automatically becomes due and payable. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
19. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services for
the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
20. No Recourse Against Others.
No incorporator, stockholder, officer, director, employee or
controlling person as such, of the Company or of any successor Person thereof in
such capacity, shall have any liability for any obligations of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation provided, however, that the foregoing
shall not affect the Guarantor's obligations with respect to the Equipment Note
Guarantee. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
<PAGE>
A-10
21. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
22. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Note, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
23. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
24. Governing Law.
The Indenture and the Notes shall be governed by the laws of
the State of New York, excluding (to the extent permissible by law) any rule of
law that would cause the application of the laws of any jurisdiction other than
the State of New York.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to WinStar
Equipment II Corp., 1577 Spring Hill Road, Sixth Floor, Vienna, Virginia 22182,
Attention: General Counsel.
<PAGE>
A-11
ASSIGNMENT FORM
I or we assign and transfer this Note to:
Please insert social security or other identifying number of assignee
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably appoint
__________________, as agent, to transfer this Note on the books of the Company.
The agent may substitute another to act for him.
Dated ____________ Signed __________________________
(Sign exactly as name appears on the other side of this Note)
Signature Guarantee _________________________(3)
- --------
3. The Holder's signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Exchange Act.
<PAGE>
A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.11 or Section 4.12 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, state the amount (in
principal amount):
$__________________
Date: _________________
Your Signature: _____________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ___________________________(4)
- --------
4. The Holder's signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Exchange Act.
<PAGE>
AP-1
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE
144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7)) AND TO CERTAIN PERSONS IN OFFSHORE
TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security
bearing the restricted securities legend set forth in Section 2.3(d) and which
is held by an IAI in accordance with Section 2.1(c).
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 12 1/2% Guaranteed Senior
Secured Notes Due 2004 to be issued pursuant to this Indenture in connection
with a Registered Exchange Offer pursuant to the Registration Rights Agreement.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act and
Regulation D promulgated thereunder.
"Initial Purchasers" means Credit Suisse First Boston
Corporation and BT Securities Corporation.
"Initial Securities" means the 12 1/2% Guaranteed Senior
Secured Notes Due 2004, issued under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to
the Registration Rights Agreement, to the Initial Purchasers to issue and
deliver to each Initial Purchaser, in
<PAGE>
AP-2
exchange for the Initial Securities held by the Initial Purchaser as part of its
initial distribution, a like aggregate principal amount of Private Exchange
Securities.
"Private Exchange Securities" means the 12 1/2% Guaranteed
Senior Secured Notes Due 2004 to be issued pursuant to this Indenture to the
Initial Purchasers in a Private Exchange.
"Purchase Agreement" means the Purchase Agreement dated August
8, 1997, among the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A under the Securities Act.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights Agreement, to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated August 8, 1997, among the Company, the Guarantor and the Initial
Purchasers.
"Securities" means the Initial Securities, the Exchange
Securities and the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depositary), or any successor person
thereto and shall initially be the Trustee.
"Shelf Registration Statement" means the registration
statement issued by the Company, in connection with the offer and sale of
Initial Securities or Private Exchange Securities, pursuant to the Registration
Rights Agreement.
"Transfer Restricted Securities" means Definitive Securities
and Securities that bear or are required to bear the legend set forth in Section
2.3(d) hereto.
<PAGE>
AP-3
1.2 Other Definitions
Defined in
Term Section:
"Agent Members".....................................................2.1(b)
"Global Security"...................................................2.1(a)
"Regulation S"......................................................2.1(a)
"Rule 144A".........................................................2.1(a)
2. The Securities.
2.1 Form and Dating.
The Initial Securities are being offered and sold by the
Company pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a QIB in
reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance on
Regulation S under the Securities Act ("Regulation S"), in each case as provided
in the Purchase Agreement, shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Initial Securities represented
thereby with the Trustee, at its New York office, as custodian for the
Depositary (or with such other custodian as the Depositary may direct), and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount at maturity of the Global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global
Security deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary for such
Global Security or Global Securities or the nominee of such Depositary and (b)
shall be delivered by the Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
<PAGE>
AP-4
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the exercise of
the rights of a holder of a beneficial interest in any Global Security.
(c) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.3 or 2.4, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery of certificated
Securities. Purchasers of Initial Securities who are IAI's and are not QIBs and
did not purchase Initial Securities sold in reliance on Regulation S will
receive Definitive Securities; provided, however, that upon transfer of such
Definitive Securities to a QIB, such Definitive Securities will, unless the
Global Security has previously been exchanged, be exchanged for an interest in a
Global Security pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$50,000,000 and (2) Exchange Securities or Private Exchange Securities for issue
only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order of the Company signed by
two Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of the Company. Such order shall specify the amount of the Securities
to be authenticated and the date on which the original issue of Securities is to
be authenticated and whether the Securities are to be Initial Securities,
Exchange Securities or Private Exchange Securities. The aggregate principal
amount of Securities outstanding at any time may not exceed $50,000,000 except
as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal amount
of Definitive Securities of other authorized denominations,
<PAGE>
AP-5
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar or co-registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section
2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied
by the following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in the form set forth on the reverse of
the Security); or
(B) if such Definitive Securities are being
transferred to the Company, a certification to that effect (in
the form set forth on the reverse of the Security); or
(C) if such Definitive Securities are being
transferred (w) pursuant to an exemption from registration in
accordance with Rule 144; or (x) in reliance on another
exemption from the registration requirements of the Securities
Act: (i) a certification to that effect (in the form set forth
on the reverse of the Secu-
rity) and (ii) if the Company or Registrar so requests, an
opinion of counsel or other evidence reasonably satisfactory
to them as to the compliance with the restrictions set forth
in the legend set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a
QIB in accordance with Rule 144A, or (B) outside the United States in
an offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
<PAGE>
AP-6
(ii) written instructions directing the Trustee to make, or to
direct the Securities Custodian to make, an adjustment on its books and
records with respect to such Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so cancelled. If no
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate, upon written order of the Company in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor. A transferor of a beneficial interest in a Global
Security shall deliver to the Registrar a written order given in accordance with
the Depositary's procedures containing information regarding the participant
account of the Depositary to be credited with a beneficial interest in the
Global Security. The Registrar shall, in accordance with such instructions,
instruct the Depositary to credit to the account of the Person specified in such
instructions a beneficial interest in the Global Security and to debit the
account of the Person making the transfer the beneficial interest in the Global
Security being transferred.
(ii) Notwithstanding any other provisions of this Rule
144A/Regulation S Appendix (other than the provisions set forth in
Section 2.4), a Global Security may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or by a nominee
of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 or
Section 2.09 of the Indenture prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration Statement
with respect to such Securities, such Securities may be exchanged only
in accordance with such procedures as are substantially consistent with
the provisions of this Section 2.3 (including the certification
requirements set forth on
<PAGE>
AP-7
the reverse of the Initial Securities intended to ensure that such
transfers comply with Rule 144A or Regulation S, as the case may be)
and such other procedures as may from time to time be adopted by the
Company.
(d) Legends.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Security certificate evidencing the Global
Securities and the Definitive Securities (and all Securities issued in
exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS
SECURITY MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED
THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY (i) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (iv) TO THE ISSUER, OR (v) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (i) THROUGH (v) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES,
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF
THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.
Each Definitive Security will also bear the following
additional legend:
<PAGE>
AP-8
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a certificated Security that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
that is represented by a Global Security, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a certificated Security that does not bear the
legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security, if the Holder
certifies in writing to the Registrar that its request for
such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of
the Security).
(iii) After a transfer of any Initial Securities or Private
Exchange Securities during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Securities or
Private Exchange Securities, as the case may be, all requirements
pertaining to legends on such Initial Security or such Private Exchange
Security will cease to apply, the requirements requiring any such
Initial Security or such Private Exchange Security issued to certain
Holders to be issued in global form will cease to apply, and a
certificated Initial Security or Private Exchange Security without
legends will be available to the transferee of the Holder of such
Initial Securities or Private Exchange Securities upon exchange of such
transferring Holder's certificated Initial Security or Private Exchange
Security or directions to transfer such Holder's interest in the Global
Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such
Initial Securities are offered Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will cease to apply and certificated Initial Securities
with the Restricted Securities Legend set forth in Exhibit 1 hereto
will be available to Holders of such
<PAGE>
AP-9
Initial Securities that do not exchange their Initial Securities, and
Exchange Securities in certificated or global form will be available to
Holders that exchange such Initial Securities in such Registered
Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Private Exchange Securities in exchange for
their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued
in global form will still apply, and Private Exchange Securities in
global form with the Restricted Securities Legend set forth in Exhibit
1 hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
(e) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for certificated or Definitive Securities, redeemed, repurchased or canceled,
such Global Security shall be returned to the Depositary for cancellation or
retained and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or canceled, the principal amount
at maturity of Securities represented by such Global Security shall be reduced
and an adjustment shall be made on the books and records of the Trustee (if it
is then the Securities Custodian for such Global Security) with respect to such
Global Security, by the Trustee or the Securities Custodian, to reflect such
reduction.
(f) Obligations with Respect to Transfers and Exchanges of
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate certificated
Securities, Definitive Securities and Global Securities at the
Registrar's or co-registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments or similar
governmental charge payable in connection therewith (other than any
such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.08, 4.11, 4.12 and
9.04 of the Indenture).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated or
Definitive Security selected for redemption in whole or in part
pursuant to Article Three of this Indenture, except the unredeemed
portion of any certificated or Definitive Security being redeemed in
part, or (b) any Security for a period beginning 15 Business Days
before the mailing of a notice of an
<PAGE>
AP-10
offer to repurchase or redeem Securities or 15 Business Days before an
interest payment date.
(iv) Prior to the due presentation for registration of transfer
of any Security, the Company, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose
name a Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and interest on
such Security and for all other purposes whatsoever, whether or not
such Security is overdue, and none of the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar shall be affected by
notice to the contrary.
(v) All Securities issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt
and shall be entitled to the same benefits under this Indenture as the
Securities surrendered upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Security, a member of or a participant
in the Depositary or other Person with respect to the accuracy of the
records of the Depositary or its nominee or of any participant or
member thereof with respect to any ownership interest in the Securities
or with respect to the delivery to any participant, member, beneficial
owner or other Person (other than the Depositary) of any notice
(including any notice of redemption) or the payment of any amount under
or with respect to such Securities. All notices and communications to
be given to the Holders and all payments to be made to Holders under
the Securities shall be given or made only to or upon the order of the
registered Holders (which shall be the Depositary or its nominee in the
case of a Global Security). The rights of beneficial owners in any
Global Security shall be exercised only through the Depositary subject
to the applicable rules and procedures of the Depositary. The Trustee
may rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants
and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Security (including any transfers
between or among Depositary participants, members or beneficial owners
in any Global Security) other than to require delivery of such
certificates and other documentation or evidence as are expressly
required by, and to do so if and when expressly required by, the terms
of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
<PAGE>
AP-11
2.4 Certificated Securities.
(a) A Global Security deposited with the Depositary or with
the Trustee as custodian for the Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the form of certificated
Securities in an aggregate principal amount equal to the principal amount of
such Global Security, in exchange for such Global Security, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for such Global
Security or if at any time such Depositary ceases to be a "clearing agency"
registered under the Exchange Act and a successor depositary is not appointed by
the Company within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section shall be surrendered by the Depositary
to the Trustee located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global Security
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 principal amount and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security delivered in exchange for an interest in the
Global Security shall, except as otherwise provided by Section 2.3(d), bear the
Restricted Securities Legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise authorize
any Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
<PAGE>
E-1
EXHIBIT I
to
Rule 144A/REGULATION S APPENDIX
[FACE OF INITIAL NOTE]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE REGISTERED FORM, THIS CERTIFICATE MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC
TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE
<PAGE>
E-2
REQUIREMENTS OF RULE 144A, (ii) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (iv) TO THE ISSUER, OR (v) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (v) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
<PAGE>
E-3
WINSTAR EQUIPMENT II CORP.
12 1/2% Guaranteed Senior Secured Note Due 2004
CUSIP
No. QIB- $___________
WINSTAR EQUIPMENT II CORP., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to __________ , or its
registered assigns, the principal sum of ____________ ($_____) on March 15,
2004.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1997.
Regular Record Dates: March 1 and September 1.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE>
E-4
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
WINSTAR EQUIPMENT II CORP.
By:
--------------------------------
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 12 1/2% Guaranteed Senior Secured Notes Due
2004 described in the within-mentioned Indenture.
Date: _______________ , 1997 UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
---------------------------------
Authorized Signatory
<PAGE>
E-5
[REVERSE SIDE OF NOTE]
WINSTAR EQUIPMENT II CORP.
12 1/2% Guaranteed Senior Secured Note Due 2004
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2004.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the March 1 and September 1
immediately preceding the relevant Interest Payment Date) on each Interest
Payment Date, commencing September 15, 1997.
Interest on the Notes will accrue from the most recent
Interest Payment Date; provided, however, that, if there is no existing default
in the payment of interest and this Note is authenticated between a Regular
Record Date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Notwithstanding the above, (i) if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional interest will accrue on this
Note at a rate of 0.50% per annum from and including the date on which any such
Registration Default shall occur to but excluding the earlier of (x) the date on
which all Registration Defaults have been cured and (y) the date on which all
Notes become freely transferable by Holders other than Affiliates of the Company
without further registration under the Securities Act.
The Company shall pay interest on overdue principal and
premium, if any, and (to the extent lawful) interest on overdue installments of
interest.
2. Method of Payment.
The Company will pay principal as provided above and interest (except
defaulted interest) on the principal amount of the Notes as provided above on
each March 15 and September 15 to the persons who are Holders (as reflected in
the Security Register at the close of business on the March 1 and September 1
immediately preceding the relevant Interest Payment Date), in each case, even if
the Note is cancelled on registration of transfer or registration of exchange
after such record date; provided, however, that, with respect to the payment of
principal, the Company will not make payment to the Holder unless this Note is
surrendered to a Paying Agent.
<PAGE>
E-6
The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Notes represented by a global Note
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Company will make all payments in respect of a certificated Note
(including principal, premium and interest) by mailing a check to the registered
address of each Holder thereof; provided, however, that payments on a
certificated Note will be made by wire transfer to a U.S. dollar account
maintained by the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the Paying
Agent to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the trustee
may accept in its discretion).
3. Paying Agent and Registrar.
Initially, United States Trust Company of New York (the
"Trustee") will act as authenticating agent, Paying Agent and Registrar. The
Company may change any authenticating agent, Paying Agent or Registrar without
notice. The Company, any Subsidiary or any Affiliate of any of them may act as
Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture dated as of
August 1,1997 (the "Indenture"), among the Company, WinStar Communications,
Inc., as guarantor (the "Guarantor") and the Trustee. Capitalized terms herein
are used as defined in the Indenture unless otherwise indicated. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Notes are subject to all
such terms, and Holders are referred to the Indenture and the Trust Indenture
Act for a statement of all such terms. To the extent permitted by applicable
law, in the event of any inconsistency between the terms of this Note and the
terms of the Indenture, the terms of the Indenture shall control.
The Notes are secured senior indebtedness of the Company. The
Indenture limits the original aggregate principal amount of the Notes to
$50,000,000 (subject to Section 2.07 of the Indenture).
5. Optional Redemption.
The Notes will not be redeemable prior to March 15, 2002.
Thereafter, the Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time on or after March 15, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holders' last address as it appears in
<PAGE>
E-7
the Security Register, at the following Redemption Prices (expressed as a
percentage of the principal amount of the Notes, plus accrued and unpaid
interest, if any, on such amount to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on the relevant Interest Payment Date if
redeemed during the 12-month period commencing on March 15 of the years set
forth below:
Year Redemption Price
------ -----------------
2002 106.250%
2003 and thereafter 103.125%
6. Mandatory Redemption.
In the event that by August 8, 1999, the Company shall not
have applied at least $50.0 million to fund the Acquisition Costs of Designated
Equipment pursuant to the Indenture ($50.0 million less the amount so applied
being herein called the "Unused Equipment Amount"), the Company shall redeem
Notes in an aggregate principal amount equal to the Unused Equipment Amount at a
redemption price of 112.5% of such principal amount, plus accrued and unpaid
interest thereon to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is on or prior to the Redemption
Date to receive interest due on the relevant Interest Payment Date). The
mandatory redemption shall occur no later than August 23, 1999.
Selection of the Notes for mandatory redemption will be made
on a pro rata basis; provided, however, that no Note of $1,000 in principal
amount or less shall be redeemed in part. If any Notes are to be redeemed in
part only, a new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
7. Notice of Redemption.
Notice of any optional redemption will be mailed by the
Company at least 30 days but not more than 60 days before a Redemption Date, and
notice of a mandatory redemption will be mailed by the Company at least 10
Business Days but not more than 15 Business Days before a Redemption Date, in
each case, to each Holder of Notes to be redeemed at his last address as it
appears in the Security Register. Notes in original denominations larger than
$1,000 may be redeemed in part; provided, however, that Notes will only be
issued in denominations of $1,000 principal amount or integral multiples
thereof. On and after the Redemption Date, interest ceases to accrue on Notes
(or portions of Notes) called for redemption, unless the Company defaults in the
payment of the Redemption Price.
8. Repurchase upon Change in Control.
<PAGE>
E-8
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
principal amount of such Notes on such date of purchase, plus accrued and unpaid
interest, if any, on such amount to the date of purchase (the "Change of Control
Payment").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part; provided, however, that Notes will only be issued
in denominations of $1,000 principal amount at maturity or integral multiples
thereof. On and after the Change of Control Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the Change of Control Payment.
9. Guarantee.
The Notes are guaranteed on a senior unsubordinated basis by the
Guarantor to the extent provided in the Indenture.
10. Collateral and Security Documents.
To secure the due and punctual payment of the principal of, premium if
any, and interest on the Notes and all other amounts payable by the Company
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, the Grantor has granted
security interests in the Collateral to the Collateral Agent for the benefit of
the Holders of Notes pursuant to the Security Documents.
11. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount and integral multiples thereof. A
Holder may register the transfer or exchange of Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Notes selected for redemption. Also, it need not
register the transfer or exchange of any Notes for a period of 15 days before a
selection of Notes to be redeemed is made.
12. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
<PAGE>
E-9
13. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
14. Discharge Prior to Redemption or Maturity.
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Notes, the Indenture and the Security
Documents, and the Guarantor may terminate its obligations under the Equipment
Note Guarantee, if the Company deposits with the Trustee money or U.S.
Government Obligations for payment of principal and interest on the Notes to
redemption or maturity, as the case may be.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that, in the opinion
of the Board of Directors of the Company, does not materially and adversely
affect the rights of any Holder.
16. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Guarantor and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; create liens; engage in sale-leaseback transactions;
pay dividends or make distributions in respect of their capital stock; make
investments or make certain other restricted payments; sell assets; issue or
sell stock of Restricted Subsidiaries; enter into transactions with stockholders
or affiliates; or, with respect to the Company, to incur any indebtedness other
than the Notes; engage in any other business activities; apply the gross
proceeds from the sale of the Notes to uses other than the acquisition of
Designated Equipment; fail to take action to vest a security interest in the
Designated Equipment in the Trustee; fail to file proper UCC-1s and UCC-3s;
consolidate, merge or sell all or substantially all of its assets. Within 90
days after the end of the last fiscal quarter of each year, the Company must
report to the Trustee on compliance with such limitations.
<PAGE>
E-10
17. Successor Persons.
Generally, when a successor person or other entity assumes all
the obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
18. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable, upon acceleration, redemption or
otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days; (c)
the Company or WCI defaults in the performance of or breaches any other covenant
or agreement of the Company or WCI in the Indenture or under the Notes or the
Security Documents and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount of the Notes; (d) there occurs with respect
to any issue or issues of Indebtedness of WCI or any Significant Subsidiary
having an outstanding principal amount of $25,000,000 or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now exists or
shall hereafter be created, (i) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (ii) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (e) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $25,000,000 in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against WCI or any Significant Subsidiary
and shall not be paid or discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order that causes the
aggregate amount for all such final judgments or orders outstanding and not paid
or discharged against all such Persons to exceed $25,000,000 during which a stay
of enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; (f) a court having jurisdiction in the
premises enters a decree or order for (i) relief in respect of WCI or any
Significant Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (ii) appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of WCI or any Significant Subsidiary or for all or substantially all of
the property and assets of WCI or any Significant Subsidiary or (iii) the
winding up or liquidation of the affairs of WCI or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in effect for
a period of 60 consecutive days; (g) WCI or any Significant Subsidiary (i)
commences a voluntary case under any applicable bankruptcy, insolvency or
<PAGE>
E-11
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (i) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of WCI or any Significant
Subsidiary or for all or substantially all of the property and assets of WCI or
any Significant Subsidiary or (iii) effects any general assignment for the
benefit of creditors; (h) any of the provisions of the Indenture relating to the
Security Documents or the Security Documents shall cease to be in full force and
effect or shall cease to give the secured parties the Liens, rights, power and
privileges purported to be created thereby; or (i) the Equipment Note Guarantee
shall cease to be in full force and effect (other than in accordance with its
terms) or the Guarantor shall deny or disaffirm its obligations under the
Equipment Note Guarantee.
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to the Company or WCI) occurs
and is continuing under the Indenture, the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes, then outstanding, by written
notice to the Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
principal of, premium, if any, and accrued interest, if any, on the Notes to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any Restricted Subsidiary occurs and is continuing, the
principal amount of the Notes automatically becomes due and payable. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
19. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services for
the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
20. No Recourse Against Others.
No incorporator, stockholder, officer, director, employee or
controlling person as such, of the Company or of any successor Person thereof in
such capacity, shall have any liability for any obligations of the Company under
the Notes or the Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation provided, however, that the foregoing
shall not affect the Guarantor's obligations with respect to the Equipment Note
Guarantee. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes.
<PAGE>
E-12
21. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
22. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Note, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
23. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
24. Governing Law.
The Indenture and the Notes shall be governed by the laws of the State
of New York, excluding (to the extent permissible by law) any rule of law that
would cause the application of the laws of any jurisdiction other than the State
of New York.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to WinStar Equipment II
Corp., 1577 Spring Hill Road, Sixth Floor, Vienna, Virginia 22182, Attention:
General Counsel.
<PAGE>
E-13
ASSIGNMENT FORM
I or we assign and transfer this Note to:
Please insert social security or other identifying number of assignee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Print or type name, address and zip code of assignee and irrevocably appoint
____________________, as agent, to transfer this Note on the books of the
Company.
The agent may substitute another to act for him.
Dated ____________________ Signed ____________________________
___________________________________________________________________________
(Sign exactly as name appears on the other side of this Note)
Signature Guarantee ______________________________(1)
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which
- --------
1. The Holder's signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Exchange Act.
<PAGE>
E-14
such Securities were owned by the Company or any Affiliate of the Company, the
undersigned confirms that such Securities are being transferred in accordance
with its terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) |_| inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that purchases
for its own account or for the account of a qualified institutional
buyer to whom notice is given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(4) |_| outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
(5) |_| pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (4) or (5) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption
<PAGE>
E-15
from, or in a transaction not subject to, the registration requirements
of the Securities Act of 1933, such as the exemption provided by Rule
144 under such Act.
------------------------
Signature
Signature Guarantee:
- --------------------- --------------------------
Signature must be guaranteed Signature
- ------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
E-16
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security
have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Date of Principal Amount of this Principal Amount of this Global Security following officer of Trustee or
Exchange Global Security Global Security such decrease or increase) Securities Custodian
</TABLE>
<PAGE>
E-17
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.11 or Section 4.12 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, state the amount (in
principal amount):
$_______________
Date: _________________
Your Signature: _____________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: __________________________(2)
- --------
2. The Holder's signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Exchange Act.
<PAGE>
EXECUTION COPY
$50,000,000
WINSTAR EQUIPMENT II CORP.
$50,000,000 12 1/2% Guaranteed Senior Secured Notes Due 2004
REGISTRATION RIGHTS AGREEMENT
August 8, 1997
Credit Suisse First Boston Corporation
BT Securities Corporation
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
WinStar Equipment II Corp., a Delaware corporation (the "Issuer"), has
agreed to issue and sell to Credit Suisse First Boston Corporation and BT
Securities Corporation (the "Initial Purchasers"), upon the terms set forth in a
purchase agreement of even date herewith (the "Purchase Agreement"),$50,000,000
aggregate principal amount of the Issuer's 12 1/2% Guaranteed Senior Secured
Notes Due 2004 (the"Notes"). The Notes will be unconditionally guaranteed on a
senior basis (the "Guarantee") by WinStar Communications, Inc., a Delaware
corporation (the "Guarantor"). The Notes will be issued pursuant to an
Indenture, dated as of August 1, 1997 (the "Indenture"), among the Issuer, the
Guarantor and United States Trust Company of New York (the "Trustee"). As an
inducement to the Initial Purchasers, the Issuer and the Guarantor agree with
the Initial Purchasers, for the benefit of the holders of the Notes (including,
without limitation, the Initial Purchasers), the Exchange Securities (as defined
below) and the Private Exchange Securities (as defined below) (collectively the
"Holders"), as follows:
1. Registered Exchange Offer. The Issuer and the Guarantor shall, at
the Guarantor's cost, prepare and, not later than 45 days after (or if the 45th
day is not a business day, the first business day thereafter) the date of
original issue of the Notes (the "Issue Date"), file with the Securities and
Exchange Commission (the "Commission") a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to a proposed offer
(the "Registered Exchange Offer") to the Holders of the Notes, who are not
prohibited by any law or policy of the Commission from participating in such a
<PAGE>
2
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
their Notes, a like aggregate principal amount of debt securities of the Issuer
(the "Exchange Securities") issued under the Indenture and identical in all
material respects to the Notes (except for the transfer restrictions relating to
the Notes), that would be registered under the Securities Act. The Issuer shall
use its best efforts to cause such Exchange Offer Registration Statement to
become effective under the Securities Act within 150 days (or if the 150th day
is not a business day, the first business day thereafter) after the Issue Date
of the Notes and shall keep the Exchange Offer Registration Statement effective
for not less than 30 days (or longer, if required by applicable law) after the
date notice of the Registered Exchange Offers is mailed to the Holders (such
period being called the "Exchange Offer Registration Period").
If the Issuer and the Guarantor effect the Registered Exchange Offer,
the Issuer will be entitled to close such Registered Exchange Offer 30 days
after the commencement thereof provided that the Issuer has accepted all the
Notes theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Issuer and the Guarantor shall promptly commence the
Registered Exchange Offer, it being the objective of such Registered Exchange
Offer to enable each Holder of the Notes electing to exchange such Notes for
Exchange Securities (assuming that such Holder is not an affiliate of the Issuer
or the Guarantor within the meaning of the Securities Act, acquires the Exchange
Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the Exchange
Securities and is not prohibited by any law or policy of the Commission from
participating in the Registered Exchange Offers) to trade such Exchange
Securities from and after their receipt without any limitations or restrictions
under the Securities Act and without material restrictions under the securities
laws of the several states of the United States.
The Issuer and the Guarantor acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act, in
the absence of an applicable exemption therefrom, (i) each Holder which is a
broker-dealer electing to exchange Notes, acquired for its own account as a
result of market making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section, and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer pursuant to a Registered Exchange
Offer and (ii) an Initial Purchaser that elects to sell Exchange Securities
acquired in exchange for Notes constituting any portion of an unsold allotment
is required to deliver a prospectus
<PAGE>
3
containing the information required by Items 507 or 508 of Regulation S-K under
the Securities Act, as applicable, in connection with such sale.
The Issuer and the Guarantor shall use their best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however, that
(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer or an Initial Purchaser, such period
shall be the lesser of 180 days and the date on which all Exchanging Dealers and
the Initial Purchasers have sold all Exchange Securities held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the Issuer and
the Guarantor shall make such prospectus and any amendment or supplement
thereto, available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period not less than 90 days after the
consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Issuer, simultaneously with the delivery of the Exchange Securities pursuant to
the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser
upon the written request of such Initial Purchaser, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchaser, a like principal amount
of debt securities of the Issuer issued under the Indenture and identical in all
material respects (including the existence of restrictions on transfer under the
Securities Act and the securities laws of the several states of the United
States) to the Notes (the "Private Exchange Securities"). The Notes, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "Securities".
In connection with the Registered Exchange Offer, the Issuer and the
Guarantor shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York, which
may be the Trustee
<PAGE>
4
or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer
or Private Exchange, as the case may be, the Issuer shall:
(x) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer or the Private Exchange, as
the case may be (such acceptance constituting the "consummation" of such
Registered Exchange Offer notwithstanding the fact that not all of the Notes may
have been so tendered);
(y) deliver to the Trustee for cancellation all the Notes so accepted for
exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder which validly tendered Notes, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Notes of such
Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities subject to the
Indenture will not be subject to the transfer restrictions set forth in such
Indenture. The Indenture will also provide that all the Notes, Exchange
Securities and Private Exchange Securities subject to such Indenture will vote
and consent together on all matters as one class and that none of the Notes,
Exchange Securities or Private Exchange Securities subject to such Indenture
will have the right to vote or consent as a separate class from one another on
any matter.
Interest on each Exchange Security or Private Exchange Security issued
pursuant to a Registered Exchange Offer or Private Exchange will accrue from the
last interest payment date on which interest was paid on the Note surrendered in
exchange therefor or, if no interest has been paid on such Note, from the date
of original issue of such Note.
Each Holder tendering Notes in a Registered Exchange Offer shall be
required to represent to the Issuer that at the time of the consummation of such
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Notes or the Exchange Securities within the meaning of the
Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule
<PAGE>
5
405 of the Securities Act, of the Issuer or the Guarantor or if it is an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Notes that were acquired as a result of market-making activities or
other trading activities and that it will be required to acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities.
Notwithstanding any other provisions hereof, the Issuer and the
Guarantor will ensure that (i) the Exchange Offer Registration Statement and any
amendment thereto and any prospectus forming a part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations thereunder, (ii) the Exchange Offer Registration Statement and
any amendment thereto does not, when it becomes effective, contain 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 forming part of the Exchange Offer Registration Statement,
and any supplement to such prospectus, does not include an 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 the light of the
circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Issuer
and the Guarantor are not permitted to effect the Registered Exchange Offer, as
contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not
consummated within 180 days of the Issue Date, (iii) any Initial Purchaser so
requests with respect to the Notes (or the Private Exchange Securities) not
eligible to be exchanged for Exchange Securities in a Registered Exchange Offer
and held by it following consummation of the Registered Exchange Offers or (iv)
any Holder of Notes (other than an Exchanging Dealer) is not eligible to
participate in the Registered Exchange Offer or, in the case of any Holder
(other than an Exchanging Dealer) that participates in the Registered Exchange
Offer, such Holder does not receive freely tradeable Exchange Securities on the
date of the exchange, the Issuer and the Guarantor shall take the following
actions:
(a) The Issuer and the Guarantor shall, at their cost, as promptly as
practicable (but in no event more than 30 days after so required or requested
pursuant to this Section 2) file with the Commission and thereafter shall use
their best efforts to cause to be declared effective a registration statement or
statements (the "Shelf Registration Statement" and, together with the Exchange
Offer Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined in Section 6 hereof) by the Holders thereof
<PAGE>
6
from time to time in accordance with the methods of distribution set forth in
the Shelf Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); provided, however, that no Holder
(other than an Initial Purchaser) shall be entitled to have the Securities held
by it covered by such Shelf Registration Statement unless such Holder agrees in
writing to be bound by all the provisions of this Agreement
applicable to such Holder.
(b) The Issuer and the Guarantor shall use their best efforts to keep
the Shelf Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
Securities, for a period of two years (or for such longer period if extended
pursuant to Section 3(j) below) from the date of its effectiveness or such
shorter period that will terminate when all the Securities covered by the Shelf
Registration Statement (i) have been sold pursuant thereto or (ii) are eligible
for sale under Rule 144(k) under the Securities Act. The Issuer and the
Guarantor shall be deemed not to have used their best efforts to keep the Shelf
Registration Statement effective during the requisite period if they voluntarily
take any action (other than any action permitted to be taken under this
Agreement) that would result in Holders of Securities covered thereby not being
able to offer and sell such Securities during that period, unless such action is
required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Issuer and the Guarantor shall cause the Shelf Registration
Statement and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain 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.
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Issuer and the Guarantor shall (i) furnish to each Initial
Purchaser, prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement, if any,
to the prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original offering)
is participating in the Registered Exchange Offer or the Shelf Registration,
shall use their best efforts to reflect in each such document, when so filed
with the Commission, such comments as such Initial Purchaser reasonably and
timely may propose; (ii) include the information set forth in Annex A hereto on
the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange
<PAGE>
7
Offer" section and in Annex C hereto in the "Plan of Distribution" section of
the prospectus forming a part of the Exchange Offer Registration Statement and
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to such Registered Exchange Offer; (iii) if requested by an
Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration Statement; (iv) include within
the prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," reasonably acceptable to the Initial
Purchasers, which shall contain a summary statement of the positions taken or
policies made by the staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Exchange Securities received by such broker-dealer in such
Registered Exchange Offer (a "Participating Broker-Dealer"), whether such
positions or policies have been publicly disseminated by the staff of the
Commission or such positions or policies, in the reasonable judgment of the
Initial Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in the
case of a Shelf Registration, include the names of the Holders, who propose to
sell Securities pursuant to the Shelf Registration Statement, as selling
securityholders.
(b) The Issuer and the Guarantor shall give written notice to the
Initial Purchasers, the Holders of the Securities and any Participating
Broker-Dealer from whom the Issuer or Guarantor has received prior written
notice that it will be a Participating Broker-Dealer in a Registered Exchange
Offer (which notice pursuant to clauses (ii)-(v) 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 any request by the Commission for amendments or supplements to the
Registration Statement or the prospectus included therein or for additional
information;
(iii) 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;
(iv) of the receipt by the Issuer or the Guarantor or their legal counsel
of any notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
<PAGE>
8
(v) of the happening of any event that requires the Issuer or the Guarantor
to make changes in the Registration Statement or the prospectus in order that
the Registration Statement or the prospectus does 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.
(c) The Issuer and the Guarantor shall make every reasonable effort to
obtain the withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Issuer and the Guarantor shall furnish to each Holder of
Securities included within the coverage of the Shelf Registration, without
charge, at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Holder so requests in writing, all exhibits thereto (including
those, if any, incorporated by reference).
(e) The Issuer and the Guarantor shall deliver to each Exchanging
Dealer and each Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Issuer and the Guarantor shall, during the Shelf Registration
Period, deliver to each Holder of Securities included within the coverage of the
Shelf Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement and
any amendment or supplement thereto as such person may reasonably request. The
Issuer and the Guarantor consent, 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 of the Securities in connection with the offering and sale
of the Securities covered by the prospectus, or any amendment or supplement
thereto, included in the Shelf Registration Statement.
(g) The Issuer and the Guarantor shall deliver to each Initial
Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered Exchange
Offers, without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement thereto as
such persons may reasonably request. The Issuer and the Guarantor consent,
subject to the provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by any Initial Purchaser, if necessary, any
Participating Broker-Dealer and such other persons required to deliver a
prospectus following the Registered Exchange Offers in connection with the
offering and sale of the
<PAGE>
9
Exchange Securities covered by the prospectus, or any amendment or supplement
thereto, included in such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Issuer and the Guarantor shall register or qualify
or cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any Holder of the Securities reasonably requests
in writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities covered by
such Registration Statement; provided, however, that the Issuer and the
Guarantor shall not be required to (i) qualify generally to do business in any
jurisdiction where they are not then so qualified or (ii) take any action which
would subject them to general service of process or to taxation in any
jurisdiction where they are not then so subject.
(i) The Issuer and the Guarantor 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 any Registration Statement
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 such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Issuer and the
Guarantor are required to maintain an effective Registration Statement, the
Issuer and the Guarantor shall promptly prepare and file a post-effective
amendment to the Registration Statement or a supplement (by way of incorporation
by reference from an Exchange Act report or otherwise) to the related prospectus
and any other required document so that, as thereafter delivered to Holders of
the Notes 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 Issuer or the
Guarantor notify the Initial Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer in accordance with paragraphs (ii) through (v)
of Section 3(b) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchasers, the
Holders of the Securities and any such Participating Broker-Dealers shall
suspend use of such prospectus, and the period of effectiveness of the Shelf
Registration Statement provided for in Section 2(b) above (unless and until the
Securities covered thereby are eligible for sale under Rule 144(k) under the
Securities Act) or the Exchange Offer Registration Statement provided for in
Section 1 above, as the case may be, shall be extended by the number of days
from and including the date of the giving of such notice to and including the
date when the Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer shall have received such amended
<PAGE>
10
or supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Issuer and the Guarantor will provide CUSIP numbers for the
Notes, the Exchange Securities or the Private Exchange Securities, as the case
may be, and provide the applicable trustee with printed certificates for the
Notes, the Exchange Securities or the Private Exchange Securities, as the case
may be, in forms eligible for deposit with The Depository Trust Company.
(l) The Issuer and the Guarantor will comply with all rules and
regulations of the Commission to the extent and so long as they are applicable
to the Registered Exchange Offers or the Shelf Registration and the Guarantor
will make generally available to the Issuer's and the Guarantor's security
holders (or otherwise provide in accordance with Section 11(a) of the Securities
Act) an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act, no later than 45 days after the end of a 12-month period (or 90
days, if such period is a fiscal year) beginning with the first month of the
Guarantor's first fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover such 12-month period.
(m) The Issuer and the Guarantor shall cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Issuer and the Guarantor
shall appoint a new trustee thereunder pursuant to the applicable provisions of
such Indenture.
(n) The Issuer and the Guarantor may require each Holder of Securities
to be sold pursuant to the Shelf Registration Statement to furnish to the Issuer
and the Guarantor such information regarding the Holder, his or her ownership of
Securities and the distribution of the Securities as the Issuer and the
Guarantor may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Issuer and the Guarantor may exclude from such
registration the Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(o) The Issuer and the Guarantor shall enter into such customary
agreements (including if requested an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Issuer and the Guarantor
shall (i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant to the
Shelf Registration Statement
<PAGE>
11
and any attorney, accountant or other agent retained by the Holders of the
Securities or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Issuer and the Guarantor and
(ii) cause the Issuer's and the Guarantor's officers, directors, employees,
accountants and auditors to supply all relevant information reasonably requested
by the Holders of the Securities or any such underwriter, attorney, accountant
or agent in connection with the Shelf 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 shall be
coordinated on behalf of the Initial Purchasers by you and on behalf of the
other parties, by one counsel designated by and on behalf of such other parties
as described in Section 4 hereof; provided, further, that any records,
documents, properties or information that are designated by the Issuer and the
Guarantor as confidential at the time of delivery of such records, documents,
properties or information shall be kept confidential by such persons, unless (i)
such records, documents, properties or information are in the public domain or
otherwise publicly available, (ii) disclosure of such records, documents,
properties or information is required by court or administrative order or (iii)
disclosure of such records, documents, properties or information, in the written
opinion of counsel to such person, is otherwise required by law (including,
without limitation, pursuant to the requirements of the Securities Act).
(q) In the case of any Shelf Registration, the Issuer and the
Guarantor, if requested by any Holder of Securities covered thereby, shall cause
(i) their counsel to deliver an opinion and updates thereof relating to the
Securities in customary form addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial opinion, the
effective date of such Shelf 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 Issuer, the Guarantor and their
subsidiaries; the due authorization, execution and delivery of the relevant
agreement of the type referred to in Section 3(o) hereof; the due authorization,
execution, authentication and issuance, and the validity and enforceability, of
the applicable Securities; the absence of governmental approvals required to be
obtained in connection with the Shelf Registration Statement, the offering and
sale of the applicable Securities, or any agreement of the type referred to in
Section 3(o) hereof; the compliance as to form of such Shelf Registration
Statement and any documents incorporated by reference therein and of the
Indentures with the requirements of the Securities Act and the Trust Indenture
Act, respectively; and, as of the date of the opinion and as of the effective
date of the Shelf Registration Statement or most recent post-effective amendment
thereto, as the case may be, the absence from such Shelf 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
<PAGE>
12
any such documents, in the light of the circumstances existing at the time that
such documents were filed with the Commission under the Exchange Act); (ii)
their officers to execute and deliver all customary documents and certificates
and updates thereof reasonably requested by any underwriters of the applicable
Securities and (iii) their independent public accountants to provide to the
selling Holders of the applicable Securities and any underwriter therefor 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.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Issuer and the
Guarantor shall cause (i) their counsel to deliver to such Initial Purchaser or
such Participating Broker- Dealer a signed opinion in the form set forth in
Section 6(a) of the Purchase Agreement with such changes as are customary in
connection with the preparation of a Registration Statement and (ii) their
independent public accountants to deliver to such Initial Purchaser or such
Participating Broker-Dealer a comfort letter, in customary form, meeting the
requirements as to the substance thereof as set forth in Sections 8(a) of the
Purchase Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Issuer and the
Guarantor (or to such other Person as directed by the Issuer and the Guarantor)
in exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be, the Issuer and the Guarantor shall mark, or cause to be marked,
on the Notes so exchanged that such Notes are being canceled in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be; in
no event shall the Notes be marked as paid or otherwise satisfied.
(t) The Issuer and the Guarantor shall (a) if the Notes have been rated
prior to the initial sale of such Notes, use their best efforts to confirm such
ratings will apply to the Securities covered by a Registration Statement, or (b)
if the Notes were not previously rated, use commercially reasonable efforts to
cause the Securities covered by a Registration Statement to be rated with the
appropriate rating agencies, if so requested by Holders of a majority in
aggregate principal amount of Securities covered by such Registration Statement,
or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution" (within
the meaning of the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an
underwriter, a placement or sales agent or a broker or
<PAGE>
13
dealer in respect thereof, or otherwise, the Issuer and the Guarantor shall
assist such broker-dealer in complying with the requirements of such Conduct
Rules, including, without limitation, by (i) if Rule 2720 thereto shall so
require, engaging (solely, except in the case of an Initial Purchaser, at such
broker-dealer's expense) a "qualified independent underwriter" (as defined in
Rule 2720) to participate in the preparation of the Registration Statement
relating to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities, (ii)
indemnifying any such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof and (iii) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules of Fair Practice of
the NASD.
(v) The Issuer and the Guarantor shall use their best efforts to take
all other steps necessary to effect the registration of the Securities covered
by a Registration Statement contemplated hereby.
4. Registration Expenses. The Guarantor shall bear all fees and
expenses incurred by the Issuer and the Guarantor in connection with the
performance of their obligations under Sections 1 through 3 hereof, whether or
not the respective Registered Exchange Offer or a Shelf Registration is filed or
becomes effective, and, in the event of a Shelf Registration, shall bear or
reimburse the Holders of the Securities covered thereby for the reasonable fees
and disbursements of one firm of counsel designated by the Holders of a majority
in principal amount of the Securities covered thereby to act as counsel for the
Holders of the Securities in connection therewith. Each Holder of the Securities
shall pay all underwriting discounts, if any, and commissions and transfer
taxes, if any, relating to the sale or disposition of such Holder's Securities.
5. Indemnification. (a) The Issuer and the Guarantor severally and
jointly agree to indemnify and hold harmless each Holder of the Securities, any
Participating Broker- Dealer and each person, if any, who controls such Holder
or such Participating Broker- Dealer within the meaning of the Securities Act or
the Exchange Act (each Holder, any Participating Broker-Dealer 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 may become 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,
<PAGE>
14
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 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 Issuer and the Guarantor 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 any untrue statement or alleged untrue
statement or omission or alleged omission made in a Registration Statement or
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration in reliance upon and in conformity
with written information pertaining to such Holder and furnished to the Issuer
or the Guarantor 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 a
Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer 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 Issuer and
the Guarantor had previously furnished copies thereof to such Holder or
Participating Broker-Dealer; provided further, however, that this indemnity
agreement will be in addition to any liability which the Issuer and the
Guarantor may otherwise have to such Indemnified Party. The Issuer and the
Guarantor shall also indemnify underwriters, their officers and directors and
each person who controls such underwriters within the meaning of the Securities
Act or the Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Issuer and the Guarantor and each person, if
any, who controls the Issuer and the Guarantor 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 Issuer or the
Guarantor or any such controlling person may become 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
<PAGE>
15
alleged untrue statement or omission was made in reliance upon and in conformity
with written information pertaining to such Holder and furnished to the Issuer
or the Guarantor by or on behalf of such Holder specifically for inclusion
therein; and, subject to the limitation set forth immediately preceding this
clause, shall reimburse, as incurred, the Issuer and the Guarantor for any legal
or other expenses reasonably incurred by the Issuer or the Guarantor or any such
controlling person in connection with investigating or defending any loss,
claim, damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability which such Holder may otherwise have to the
Issuer and the Guarantor or any of their controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5
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 5,
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 paragraph (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), 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 5 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 5 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 to in
subsection (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 exchange of the respective
Notes, pursuant to the relevant Registered Exchange Offers, or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by applicable
law, in such proportion
<PAGE>
16
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 Issuer or the Guarantor 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 5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
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 Issuer or the
Guarantor within the meaning of the Securities Act or the Exchange Act shall
have the same rights to contribution as the Issuer and the Guarantor.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a 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.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iii) below a "Registration Default"):
(i) If by September 22, 1997, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement relating to such series of
Securities has been filed with the Commission;
<PAGE>
17
(ii) If by February 4, 1997, neither the Registered Exchange Offer
relating to such series of Securities is consummated nor, if required in lieu
thereof, a Shelf Registration Statement relating to such series of Securities is
declared effective by the Commission; or
(iii) If, after February 4, 1997, and after either the Exchange Offer
Registration Statement or the Shelf Registration Statement relating to such
series of Securities is declared effective (A) such Registration Statement
thereafter ceases to be effective (except as permitted in paragraph (b)); or (B)
such Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b)) in connection with resales of Transfer
Restricted Securities 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 (such period of time during which the Registration
Statement is not effective or the Registration Statement or the related
prospectus is not useable being referred to as a "Blackout Period").
Additional Interest shall accrue on the Securities covered by the Registration
Statement to which the Registration Default relates over and above the interest
set forth in the title of such Securities from and including the date on which
any such Registration Default shall occur to but excluding the date on which all
such Registration Defaults relating to the Securities have been cured, at a rate
of 0.50% per annum (the "Additional Interest Rate").
(b) A Blackout Period referred to in Section 6(a)(iii) shall be deemed
not to be a Registration Default in relation to a Registration Statement or the
related prospectus if (i) the Blackout Period has occurred solely as a result of
(x) the filing of a post-effective amendment to such Shelf Registration
Statement to incorporate annual audited financial information with respect to
the Issuer or the Guarantor 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) the occurrence of other material events with respect
to the Issuer or the Guarantor that would need to be described in such
Registration Statement or the related prospectus and (ii) in the case of clause
(y), the Issuer and the Guarantor are proceeding promptly and in good faith to
amend or supplement (including by way of filing documents under the Exchange Act
which are incorporated by reference into the Registration Statement) such
Registration Statement and related prospectus to describe such events; provided,
however, that in any case if such Blackout Period occurs for a continuous period
in excess of 45 days, a Registration Default shall be deemed to have occurred on
the 46th day of such Blackout Period and Additional Interest shall be payable in
accordance with the above paragraph from the day such Registration Default
occurs until such Registration Default is cured or until the Company is no
longer required pursuant to
<PAGE>
18
this Agreement to keep such Registration Statement effective or such
Registration Statement or Prospectus useable.
(c) Any amounts of Additional Interest due pursuant to clause (a)(i),
(a)(ii) or (a)(iii) of Section 6 above will be payable in cash, on each Interest
Payment Date (as defined in the indenture governing the Securities), commencing
with the first such Interest Payment Date following the applicable Registration
Default. The amount of Additional Interest will be determined by multiplying the
Additional Interest Rate by the principal amount of such Securities, multiplied
by a fraction, the numerator of which is the number of days such Additional
Interest Rate was applicable during such period (determined on the basis of a
360-day year comprised of twelve 30-day months), and the denominator of which is
360. Payments of Additional Interest on the Securities will be made to the
Holders of such Securities on the regular record date immediately preceding the
relevant Additional Interest payment date .
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferrable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in a Registered
Exchange Offer of such Security for an Exchange Security, the date on which such
Exchange Security is sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Issuer and the Guarantor shall use their
best efforts to file the reports required to be filed by them under the
Securities Act and the Exchange Act in a timely manner and, if at any time the
Issuer and the Guarantor are not required to file such reports, they will, upon
the request of any Holder of Transfer Restricted Securities, make publicly
available other information so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A. The Issuer and the Guarantor covenant
that they will take such further action as any Holder of Transfer Restricted
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Transfer Restricted Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)).
The Issuer and the Guarantor will provide a copy of this Agreement to
prospective purchasers of Notes (or Private Exchange Securities) identified to
the Issuer and the Guarantor by the Initial Purchasers upon request. Upon the
request of any Holder of Transfer Restricted Securities, the Issuer and the
Guarantor shall deliver to such Holder a written statement as to whether they
have complied with such requirements.
<PAGE>
19
Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to
require the Issuer and the Guarantor to register any of its securities pursuant
to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. 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 Issuer and the Guarantor
and the written consent of the Holders of a majority in principal amount of the
Securities 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:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Issuer and the Guarantor in accordance with
the provisions of this Section 9(b).
(2) if to the Initial Purchasers, at the following address:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Fax No.: (212) 318-0532
Attention: Transactions Advisory Group
<PAGE>
20
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Kris F. Heinzelman
(3) if to the Guarantor, at the following address:
WinStar Communications, Inc.
230 Park Avenue
New York, NY 10169
Attention: Timothy Graham
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016
Attention: David A. Miller
(4) if to the Issuer, at the following address:
WinStar Equipment II Corp.
1577 Spring Hill Road, 6th Floor
Vienna, Virginia 22182
Attention: General Counsel
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016
Attention: David A. Miller
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
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>
21
(c) No Inconsistent Agreements. The Issuer and the Guarantor have not,
as of the date hereof, entered into, nor shall they, on or after the date
hereof, enter into, any agreement with respect to their securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the Issuer
and the Guarantor and their successors and assigns.
(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.
(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 Issuer or the Guarantor. Whenever the
consent or approval of Holders of a specified percentage of principal amount of
Securities is required hereunder, Securities held by the Issuer or the Guarantor
or their affiliates (other than subsequent Holders of Securities if such
subsequent Holders are deemed to be affiliates solely by reason of their
holdings of such Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
<PAGE>
22
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer and the Guarantor a counterpart
hereof, whereupon this instrument, along with all counterparts, will become a
binding agreement among the several Initial Purchasers, the Issuer and the
Guarantor in accordance with its terms.
Very truly yours,
WINSTAR COMMUNICATIONS, INC., as
Guarantor
By:
---------------------------
Name:
Title:
WINSTAR EQUIPMENT II CORP., as
Issuer
By:
---------------------------
Name:
Title:
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BT SECURITIES CORPORATION
By: CREDIT SUISSE FIRST BOSTON CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to an Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Notes where such
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuer and the Guarantor have agreed
that, for a period of 180 days after the Expiration Date (as defined herein),
they will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
A-1
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Securities. See "Plan of Distribution."
B-1
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to an Exchange Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Securities. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Issuer and the Guarantor have agreed
that, for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until _____________ , 199_ ,
all dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus.(1)
The Issuer and the Guarantor will not receive any proceeds from any
sale of Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to an Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such Exchange Securities. Any broker-dealer that resells Exchange Securities
that were received by it for its own account pursuant to an Exchange Offer and
any broker or dealer that participates in a distribution of such Exchange
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Securities and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuer and the
Guarantor will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Guarantor has agreed to pay all
expenses incidental to the Exchange Offers (including the reasonable expenses of
one counsel for the Holders of the Securities)
- --------
1. In addition, the legend required by Item 502(e) of Regulation S-K will appear
on the back cover page of the Exchange Offer prospectus.
C-1
<PAGE>
other than commissions or concessions of any brokers or dealers and will
indemnify the Holders of the Securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
C-2
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:___________________________________________
Address: _______________________________________
_______________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Securities; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
D-1
<PAGE>
EXECUTION COPY
SECURITY AGREEMENT dated as of August 1,
1997, between WINSTAR EQUIPMENT II CORP., a Delaware
corporation (the "Grantor"), and UNITED STATES TRUST
COMPANY OF NEW YORK, a New York banking corporation
("U.S. Trust"), as collateral agent (in such
capacity, the "Collateral Agent") for the Secured
Parties (as defined herein).
Reference is made to the Indenture dated as of August 1, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Indenture"),
among the Grantor, WinStar Communications, Inc., as guarantor (the "Guarantor")
and U.S. Trust, as trustee (in such capacity, the "Trustee").
On the date hereof, (i) the Grantor has issued $50,000,000 12 1/2%
Guaranteed Senior Secured Notes Due 2004 (the "Notes") to various Initial
Purchasers (as defined in the Indenture) and such Initial Purchasers have agreed
to resell the Notes to various Holders thereof and (ii) the Guarantor has agreed
to guarantee the Notes on a senior unsecured basis, each pursuant to, and upon
the terms and subject to the conditions specified in, the Indenture. The
Indenture requires, among other things, the execution and delivery by the
Grantor of an agreement in the form hereof to secure (a) the due and punctual
payment by the Grantor of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Notes, when and as due, whether at
maturity, by acceleration, upon one or more dates set for redemption or
otherwise, (ii) each payment required to be made by any obligor under the
Indenture in respect of any Note, when and as due, including payments in respect
of reimbursement of disbursements and interest thereon, and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of any obligor to the Secured Parties under the
Indenture and the other Security Documents and (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
obligors under or pursuant to the Indenture and the other Security Documents
(all the monetary and other obligations described in the preceding clauses (a)
and (b) being collectively called the "Obligations").
Accordingly, the Grantor, the Collateral Agent, on behalf of itself and
each Secured Party, and each of their respective successors or assigns, hereby
agree as follows:
<PAGE>
2
ARTICLE I
Definitions
SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Indenture.
SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Collateral" shall mean (i) all Designated Equipment acquired by the
Grantor pursuant to Section 4.21 of the Indenture; (ii) the Proceeds of any sale
or other disposition (other than leases in the ordinary course of business, as
provided in Section 5.01(a) hereof) of such Designated Equipment (including any
insurance proceeds from the loss or destruction of such Designated Equipment);
and (iii) any additional Designated Equipment acquired by the Grantor with the
Proceeds of any such sale or other disposition of Designated Equipment.
"Designated Equipment" shall mean (i) telecommunications switches and
related equipment and inventory; (ii) customer premise equipment; (iii) radios,
antennae and cabling; (iv) office and warehouse furniture, fixtures and
equipment (including without limitation, computers and communications
equipment); (v) company service vehicles; and (vi) software related to each of
the foregoing, in each case used in the telecommunications business of the
Guarantor and its subsidiaries.
"Indenture" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.
"Holder" shall mean the person in whose name a Note is registered on
the books of the registrar.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease (other than consideration received solely from the
lease of Designated Equipment in the ordinary course of business) or other
disposition of any asset or property that constitutes Collateral, any value
received as a consequence of the possession of any Collateral and any payment
received from any insurer or other person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property that
<PAGE>
3
constitutes Collateral, and shall include all cash and negotiable instruments
received or held on behalf of the Collateral Agent and any and all other amounts
from time to time paid or payable under or in connection with any of the
Collateral.
"Secured Parties" shall mean (a) the Holders, (b) the Trustee, (c) the
Collateral Agent, (d) the beneficiaries of each indemnification obligation
undertaken by the Grantor under any Security Document and (e) the permitted
successors and assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such term in Section
2.01.
"Status Certificate" shall mean a certificate substantially in the form
of Annex 1, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by two executive officers of the
Grantor.
SECTION 1.03. Rules of Construction. The rules of construction specified in
Section 1.03 of the Indenture shall be applicable to this Agreement.
ARTICLE II
Security Interest
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, the Grantor hereby
bargains, sells, conveys, assigns, sets over, pledges, hypothecates and
transfers to the Collateral Agent, its successors and assigns, for the ratable
benefit of the Secured Parties, and hereby grants to the Collateral Agent, its
successors and assigns, for the ratable benefit of the Secured Parties, a
security interest in all of the Grantor's right, title and interest in, to and
under the Collateral (the "Security Interest"). In furtherance of such Security
Interest, and pursuant to Sections 4.22 and 4.23 of the Indenture, the Grantor
has filed (or, if not filed on or prior to the date hereof, will file no later
than August 14, 1997) fully executed Uniform Commercial Code financing
statements with the Secretary of State of all 50 states of the United States,
or, where a state does not provide for filing with the Secretary of State
thereof, in another appropriate filing office, as more fully described in
Section 3.02 hereof. Without limiting the foregoing, the Collateral Agent also
is hereby authorized to file one or more financing statements, continuation
statements or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by the
Grantor, without the signature of the Grantor, naming the Grantor as debtor and
the Collateral Agent as secured party. The Collateral Agent shall furnish the
Grantor with copies of any such statements and other documents so filed.
<PAGE>
4
SECTION 2.02. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
the Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
The Grantor represents and warrants to the Collateral Agent and the
Holders that:
SECTION 3.01. Title and Authority. The Grantor has good and valid
rights in and title to the Collateral that it has purported to grant a Security
Interest in hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other person other than
any consent or approval which has been obtained.
SECTION 3.02. Filings. The Status Certificate has been duly prepared,
completed and executed and the information set forth therein is correct and
complete. Fully executed Uniform Commercial Code financing statements (UCC-1's)
or other appropriate filings, recordings or registrations containing a
description of the Collateral have been filed (or, if not filed on or prior to
the date hereof, will be filed no later than August 14, 1997) with the Secretary
of State or other appropriate office of all 50 states of the United States and
in such other governmental, municipal or other office specified in Schedule 5 to
each Status Certificate (with copies delivered to the Collateral Agent).
SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes a legal and valid security interest in all the Collateral securing
the payment and performance of the Obligations, subject to any requirements
regarding attachment. The Security Interest in the Collateral will be perfected
only to the extent that the filings referred to in Section 3.02 are sufficient
to perfect such Security Interest. The Security Interest is prior to any other
Lien on any of the Collateral on the date hereof.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantor free and clear of any Lien. The Grantor has not filed or consented to
the filing of any financing statement or analogous document under the Uniform
Commercial Code or any other applicable laws covering any Collateral and which
financing statement or analogous document is still in effect, except for the
Liens and financing statements expressly created or permitted by this Agreement
or the Indenture.
<PAGE>
5
ARTICLE IV
Covenants
SECTION 4.01. Change of Name; Location of Collateral; Records; Place of
Business. (a) The Grantor agrees promptly to notify the Collateral Agent of any
change (i) in its corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of its chief executive office, its principal place of business, any
office in which it maintains books or records relating to Collateral owned by it
or any office or facility at which Collateral owned by it is located (including
the establishment of any such new office or facility), (iii) in its identity or
corporate structure or (iv) in its Federal Taxpayer Identification Number. The
Grantor agrees to notify the Collateral Agent, as soon as practicable after an
executive officer of the Grantor learns thereof, if any material portion of the
Collateral owned or held by the Grantor is damaged or destroyed.
(b) The Grantor agrees to maintain, at its own cost and expense, such
complete and accurate records with respect to the Collateral owned or held by it
as is consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which the Grantor is engaged, but in any event to include complete
accounting records indicating all payments and proceeds received with respect to
any part of the Collateral, and, at such time or times as the Collateral Agent
may reasonably request, promptly to prepare and deliver to the Collateral Agent
a duly certified schedule or schedules in form and detail reasonably
satisfactory to the Collateral Agent showing the identity, amount and location
of any and all Collateral.
SECTION 4.02. Protection of Security. The Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to defend title to
the Collateral against all persons.
SECTION 4.03. Continuation Statements. The Grantor agrees, at its
expense, to execute, acknowledge, deliver and cause to be duly filed all such
continuation statements on Form UCC-3 as to maintain in effect the financing
statements filed pursuant to Section 3.02, and to take all such actions as the
Collateral Agent may from time to time reasonably request to preserve the
Security Interest, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements or other
documents in connection herewith.
SECTION 4.04. Inspection and Verification. The Collateral Agent and
such persons as the Collateral Agent may reasonably designate shall have the
right, at the Grantor's own cost and expense, to inspect the Collateral, all
records related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, where such premises is
within the control of the Grantor or any affiliate of the Grantor, to
<PAGE>
6
discuss the Grantor's affairs with the officers of the Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of Collateral in the
possession of any third person, by contacting the third party possessing such
Collateral (after two days' notice to the Grantor) for the purpose of making
such a verification. Where the premises upon which any of the Collateral is
located are not within the control of the Grantor, Grantor shall reasonably
request such person(s) controlling such premises to allow the Collateral Agent
and its designees to inspect such premises for the purposes, and subject to the
limitations, of the foregoing sentence. The Collateral Agent shall have the
absolute right to share any information it gains from such inspection or
verification with any Secured Party.
SECTION 4.05. Taxes; Encumbrances. At its option, upon not less than 10
days' prior written notice to the Grantor, the Collateral Agent may discharge
past due taxes, assessments, charges, fees, liens, security interests or other
encumbrances at any time levied or placed on the Collateral and not permitted
under the Indenture, and may pay for the maintenance and preservation of the
Collateral to the extent the Grantor fails to do so as required by the Indenture
or this Agreement, and the Grantor agrees to reimburse the Collateral Agent on
demand for any reasonable payment or other expenses incurred by the Collateral
Agent pursuant to the foregoing authorization; provided, however, that nothing
in this Section shall be interpreted as excusing the Grantor from the
performance of, or imposing any obligation on the Collateral Agent or any
Secured Party to cure or perform, any covenants or other promises of the Grantor
with respect to taxes, assessments, charges, fees, liens, security interests or
other encumbrances and maintenance as set forth herein or in the other Security
Documents.
SECTION 4.06. Continuing Obligations of the Grantor. The Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, including Sections 4.22 and 4.23 of the Indenture,
all in accordance with the terms and conditions thereof, and the Grantor agrees
to indemnify and hold harmless the Collateral Agent and the Secured Parties from
and against any and all liability for such performance.
SECTION 4.07. Insurance. (a) The Grantor, at its own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Designated Equipment, including without limitation such insurance as is
required pursuant to Section 4.15 of the Indenture.
(b) In the event that the Grantor at any time or times shall fail to
obtain or maintain any of the policies of insurance required hereby or to pay
any premium in whole or part relating thereto, the Collateral Agent may, without
waiving or releasing any obligation or liability of the Grantor hereunder or any
Event of Default, in its sole discretion, obtain and
<PAGE>
7
maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Collateral Agent deems advisable. All sums
disbursed by the Collateral Agent in connection with this Section, including
reasonable attorneys' fees, court costs, expenses and other charges relating
thereto, shall be payable, upon demand, by the Grantor to the Collateral Agent
and shall be additional Obligations secured hereby.
SECTION 4.08. Posting of Notices. The Grantor shall, with respect to
any telecommunications switch that constitutes Designated Equipment acquired by
the Grantor pursuant to Section 4.21 of the Indenture, post a notice on, or in
the location housing, such telecommunications switch, identifying the Grantor as
the owner of the telecommunications switch and stating that such
telecommunication switch is subject to the Security Interest under the Indenture
and the Security Documents.
SECTION 4.09. FCC Approvals. Notwithstanding anything to the contrary
set forth herein, the Grantor agrees that to the extent prior FCC approval is
required pursuant to the Communications Act of 1934, as amended, for (i) the
operation and effectiveness of any grant, right or remedy hereunder or under the
Indenture or (ii) taking any action that may be taken by the Collateral Agent
hereunder or under the Indenture, such grant, right, remedy or actions will be
subject to such prior Federal Communications Commission ("FCC") approval having
been obtained by or in favor of the Collateral Agent, on behalf of the Secured
Parties (and Grantor will use its best efforts to obtain any such approval as
promptly as possible). Grantor agrees that, upon and during the continuance of
an Event of Default and at Collateral Agent's request, Grantor will, and will
cause its subsidiaries to, immediately file, or cause to be filed, such
applications for approval and shall take all other and further actions required
by the Collateral Agent, on behalf of the Secured Parties, to obtain such
governmental authorizations, including FCC authorizations, as are necessary to
transfer ownership and control to the Collateral Agent, on behalf of the Secured
Parties, or their successors or assigns, of the Collateral held by it or its
subsidiaries, or its interest in any Person holding any such Collateral.
SECTION 4.10. UCC-1 Filings. The Grantor shall, and the Guarantor shall
cause the Grantor to, on or prior to August 14, 1997, file UCC-1's or other
appropriate filings, recordings or registrations containing a description of the
Collateral with the Secretary of State or other appropriate office in all states
of the United States (and in such other governmental, municipal or other office
specified in Schedule 5 to each Status Certificate) where the Grantor has
heretofore not filed the UCC-1's required to be filed pursuant to Sections 4.22
and 4.23 of the Indenture.
<PAGE>
8
ARTICLE V
Transfer and Sales of Collateral
SECTION 5.01. Transfer and Sales of Collateral. (a) Grantor shall not,
except as permitted by the terms of the Indenture from time to time in effect
(including without limitation Sections 4.11, 4.23 and 11.02 thereof), sell,
assign (by operation of law or otherwise) or otherwise dispose of any of the
Collateral. For the avoidance of doubt, Grantor may lease Designated Equipment
in the ordinary course of business without such lease constituting a sale,
assignment or other disposition prohibited by the preceding sentence, and any
consideration received by Grantor in respect of any such lease shall not be
subject to a security interest under the Security Documents.
(b) As long as no Event of Default shall have occurred and be
continuing, and no event which, with the lapse of time or after notice, would
become an Event of Default shall have occurred and be continuing, Grantor shall
be entitled from time to time to request the Collateral Agent to release all or
a portion of the Collateral owned by it and subject to this Agreement; provided,
however, that such request must be in writing and accompanied by an Officers'
Certificate of Grantor and an Opinion of Counsel to Grantor (which counsel shall
be reasonably satisfactory to the Collateral Agent) stating that all conditions
precedent to the release of such Collateral pursuant to this Article V and the
Indenture have been complied with. Upon satisfaction of the conditions in this
Article V and the Indenture, the Lien of this Agreement on all Collateral to be
released without any further action on the part of the Collateral Agent or any
other person. In furtherance of the foregoing, the Collateral Agent shall
execute and deliver to Grantor an instrument or instruments acknowledging the
release of such Collateral from this Agreement and the discharge of the Lien on
such Collateral created by this Agreement, and will duly assign, transfer and
deliver to Grantor (without recourse and without any representation or warranty)
such Collateral to be released.
(c) No Collateral shall be released from the Lien of this Agreement
pursuant to any request described in paragraph (b) above unless (i) as promptly
as is practicable thereafter, the Grantor shall sell such Collateral, (ii) as
promptly as is practicable thereafter, the Grantor deposits with the Collateral
Agent cash or cash equivalents, if any, representing the Net Cash Proceeds from
the sale of such Collateral; and (iii) Grantor delivers to the Collateral Agent
an Officers' Certificate and an Opinion of Counsel to the effect that all
conditions precedent contained in the Indenture to the sale and release of such
Collateral shall have been satisfied in full. On or after deposit of the sums
described in clause (ii) of this paragraph (c), Grantor shall be entitled
thereafter to request release of such cash proceeds at such times and in such
amounts in order to, and only to the extent necessary to, comply with its
obligations under, or otherwise in accordance with, the Indenture, including
without limitation, its obligation to acquire additional Designated Equipment
within 45 days pursuant to Section 4.11 thereof, as a result of the disposition
of such Collateral. Such releases of Net Cash Proceeds shall not be
<PAGE>
9
made until and unless Grantor shall have delivered an Officers' Certificate and
an Opinion of Counsel to the Collateral Agent stating that all conditions
precedent to such release set forth in the Indenture shall have been satisfied.
(d) The release of any Collateral from the terms hereof and of the
other Security Documents or the release of, in whole or in part, the Liens
created by the Security Documents, will not be deemed to impair the Lien on the
Collateral in contravention of the provisions of the Indenture if and to the
extent the Collateral or Liens are released pursuant to the applicable Security
Documents and pursuant to the terms of the Indenture. Each of the Secured
Parties acknowledge that a release of Collateral strictly in accordance with the
terms of the Security Documents and of the Indenture will not be deemed for any
purpose to be an impairment of the Lien on the Collateral in contravention of
the terms of the Indenture. To the extent applicable, Grantor and each obligor
on the Securities shall cause ss. 314(d) of the Trust Indenture Act of 1939 (the
"TIA") relating to the release of property or securities from the Lien of the
Security Documents and of the Indenture to be complied with. Any certificate or
opinion required by ss. 314(d) of the TIA may be made by an officer of Grantor,
except in cases which ss. 314(d) of the TIA required that such certificate or
opinion be made by an independent person.
ARTICLE VI
Power of Attorney
SECTION 6.01. Power of Attorney. The Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as the Grantor's true and lawful
agent and attorney-in-fact, and in such capacity the Collateral Agent shall have
the right, with power of substitution for the Grantor and in the Grantor's name
or otherwise, for the use and benefit of the Collateral Agent and the Secured
Parties, upon the occurrence and during the continuance of an Event of Default
(a) to receive, endorse, assign and/or deliver any and all notes, acceptances,
checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (b) to demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of the Collateral;
(c) to sign the name of the Grantor on any invoice or bill of lading relating to
any of the Collateral; (d) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (e) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to all or any of the
Collateral; (f) to notify, or to require the Grantor to notify third parties to
make payment directly to the Collateral Agent; and (g) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to carry
out the purposes of this Agreement, as
<PAGE>
10
fully and completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent or
any Secured Party to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of the Grantor or to any claim or action against the
Collateral Agent or any Secured Party. It is understood and agreed that the
appointment of the Collateral Agent as the agent and attorney-in-fact of the
Grantor for the purposes set forth above is coupled with an interest and is
irrevocable. The provisions of this Section shall in no event relieve the
Grantor of any of its obligations hereunder or under the Indenture with respect
to the Collateral or any part thereof or impose any obligation on the Collateral
Agent or any Secured Party to proceed in any particular manner with respect to
the Collateral or any part thereof, or in any way limit the exercise by the
Collateral Agent or any Secured Party of any other or further right which it may
have on the date of this Agreement or hereafter, whether hereunder, under any
other Security Document, by law or otherwise.
ARTICLE VII
Remedies
SECTION 7.01. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, the Grantor agrees to deliver each item of
Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right (subject to applicable law) to take any of
or all the following actions at the same or different times: with or without
legal process and with or without previous notice or demand for performance, to
take possession of the Collateral and without liability for trespass to enter
any premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and all
rights afforded to a secured party under the Uniform Commercial Code or other
applicable law. Without limiting the generality of the foregoing, the Grantor
agrees that the Collateral Agent shall have the right, subject to the mandatory
requirements of applicable law, to sell or otherwise dispose of all or any part
of the Collateral, at public or private sale, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of the Grantor, and the Grantor hereby waives (to
the extent permitted by law) all rights of redemption, stay and appraisal which
the Grantor now has or may at any time in the future have under any rule of law
or statute now existing or hereafter enacted.
<PAGE>
11
The Collateral Agent shall give the Grantor 15 days' written notice
(which the Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or places as
the Collateral Agent may fix and state in the notice (if any) of such sale. At
any such sale, the Collateral, or portion thereof, to be sold may be sold in one
lot as an entirety or in separate parcels, as the Collateral Agent may (in its
sole and absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public sale made pursuant to this Section, any Secured Party may
bid for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of the Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
the Collateral or any part thereof offered for sale and may make payment on
account thereof by using any claim then due and payable to such Secured Party
from the Grantor as a credit against the purchase price, and such Secured Party
may, upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to the Grantor therefor. For purposes
hereof, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement and the Grantor shall not be entitled
to the return of the Collateral or any portion thereof subject thereto, notwith-
standing the fact that after the Collateral Agent shall have entered into such
an agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.
SECTION 7.02. Application of Proceeds. The Collateral Agent shall apply the
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by
the Trustee or the Collateral Agent (in its capacity as such hereunder
or under any other Security
<PAGE>
12
Document) in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Obligations, including all
court costs and the reasonable fees and expenses of its agents and
legal counsel, the repayment of all advances made by the Collateral
Agent hereunder or under any other Security Document on behalf of the
Grantor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Security
Document;
SECOND, to the payment of the fees and expenses of the Secured Parties on
an equal and ratable basis;
THIRD, to the payment of interest on and fees, if any, with respect to the
Obligations on an equal and ratable basis;
FOURTH, to the payment of the unpaid principal amount of the Obligations on
an equal and ratable basis;
FIFTH, to the payment of costs and expenses of, all premiums on, and all
other amounts due with respect to, the Obligations on an equal and ratable
basis; and
SIXTH, to the Grantor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 12.02 of the Indenture.
SECTION 8.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantor
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Indenture or
<PAGE>
13
any other Security Document, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Indenture, any other Security
Document or any other agreement or instrument, (c) any exchange, release or non-
perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance which
might otherwise constitute a defense available to, or a discharge of, the
Grantor in respect of the Obligations or this Agreement.
SECTION 8.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Security Document shall be considered to
have been relied upon by the Holders, regardless of any investigation made by
the Holders or on their behalf, and shall continue in full force and effect
until this Agreement shall terminate.
SECTION 8.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to the Grantor when a counterpart hereof executed on behalf
of the Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon the Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of the
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that the Grantor shall not have the right to
assign its rights hereunder or any interest herein or in the Collateral except
as expressly contemplated by this Agreement or the Indenture.
SECTION 8.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 8.06. Collateral Agent's Fees and Expenses; Indemnification.
(a) The Grantor agrees to pay upon demand to the Collateral Agent the amount of
any and all reasonable expenses, including the reasonable fees, disbursements
and other charges of its counsel and of any experts or agents, which the
Collateral Agent may incur in connection with (i) the administration of this
Agreement (including the customary fees of the Collateral Agent for any ongoing
monitoring or audits conducted by it with respect to the Collateral), (ii) the
custody or preservation of, or the sale of, collection from or other realization
upon any of the Collateral, (iii) the exercise, enforcement or protection of any
of the rights of the Collateral Agent hereunder or (iv) the failure of the
Grantor to perform or observe any of the provisions hereof.
<PAGE>
14
(b) Without limitation of its indemnification obligations under the
other Security Documents, the Grantor jointly and severally agrees to indemnify
the Collateral Agent and the other Secured Parties (collectively, "Indemnitees")
against, and hold each of them harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable fees,
disbursements and other charges of counsel, incurred by or asserted against any
of them arising out of, in any way connected with, or as a result of, the
execution, delivery or performance of this Agreement or any claim, litigation,
investigation or proceeding relating hereto or to the Collateral, whether or not
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section shall remain
operative and in full force and effect regardless of the termination of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Notes, the invalidity or unenforceability of any term or
provision of this Agreement or any other Security Document, or any investigation
made by or on behalf of the Collateral Agent or any Holder. All amounts due
under this Section shall be payable on written demand therefor.
SECTION 8.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, EXCLUDING (TO THE EXTENT PERMISSIBLE BY LAW) ANY RULE
OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
SECTION 8.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Trustee and the Holders under the other
Security Documents are cumulative and are not exclusive of any rights or
remedies which they would otherwise have. No waiver of any provisions of this
Agreement or any other Security Document or consent to any departure by the
Grantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Grantor in any case shall entitle the Grantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the
<PAGE>
15
Collateral Agent and the Grantor with respect to which such waiver, amendment or
modification is to apply, subject to any consent required in accordance with
Section 9.02 of the Indenture.
SECTION 8.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER SECURITY
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER SECURITY DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION.
SECTION 8.10. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Security Document should
be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 8.11. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in Section
8.04. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 8.12. Headings. Article and Section headings used herein are
for the convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 8.13. Jurisdiction; Consent to Service of Process. (a) The
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Security Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
<PAGE>
16
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent, the Trustee or any Holder may otherwise have to
bring any action or proceeding relating to this Agreement or the other Security
Documents against the Grantor or its properties in the courts of any
jurisdiction.
(b) The Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Security Documents in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to service of
process by registered mail, postage prepaid. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 8.14. Termination or Release. (a) Except as provided in Section
8.06, this Agreement and the Security Interest shall terminate when all the
Obligations have been indefeasibly paid in full and the Grantor and the
Guarantor have no further obligations to the Holders.
(b) In connection with any termination pursuant to paragraph (a) above,
upon the request of the Grantor accompanied by an Officers' Certificate and
Opinion of Counsel stating that all conditions precedent to the termination of
the Lien in the Collateral pursuant to this Agreement and the Indenture have
been satisfied, the Collateral Agent shall execute and deliver to the Grantor,
at the Grantor's expense, all Uniform Commercial Code termination
<PAGE>
17
statements and similar documents which the Grantor shall reasonably request to
evidence such termination. Any execution and delivery of termination statements
or documents pursuant to this Section 8.14 shall be without recourse to or
warranty by the Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
WINSTAR EQUIPMENT II CORP., as
Grantor,
By:
---------------------------
Name:
Title:
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Collateral Agent,
By:
---------------------------
Name:
Title:
<PAGE>
Annex 1 to the
Security Agreement
[Form of]
STATUS CERTIFICATE
Reference is made to the Indenture dated as of August 1, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Indenture"),
among WINSTAR EQUIPMENT II CORP., a Delaware corporation ("WinStar Equipment
II"), WINSTAR COMMUNICATIONS, INC., a Delaware corporation (the "Guarantor"),
UNITED STATES TRUST COMPANY OF NEW YORK, as trustee (the "Trustee"), and to the
Security Agreement dated August 1, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Security Agreement"), among WinStar Equipment
II, as grantor (the "Grantor"), and the Trustee as collateral agent (the
"Collateral Agent"). Capitalized terms used herein and not defined herein shall
have the meanings assigned to such terms in the Indenture.
Under the Security Agreement, WinStar Equipment II is the Grantor of
security interests in the Collateral as defined therein. In order to facilitate
the perfection of such security interests, the Collateral Agent has requested
that WinStar Equipment II provide the information specified in this certificate
for the Grantor.
The undersigned, executive officers of the Grantor, hereby certify to the
Collateral Agent and each other Secured Party as follows:
1. Names. (a) The exact corporate name of the Grantor, as such name appears
in its certificate of incorporation, is as follows:
(b) Set forth below is each other corporate name the Grantor has had in the
past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1 hereto, the Grantor has not changed
its identity or corporate structure in any way within the past five years.
Changes in identity or corporate structure would include mergers, consolidations
and acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.
(d) The following is a list of all other names (including trade names or
similar appellations) used by the Grantor or any of its divisions or other
business units in connection with the conduct of its business or the ownership
of its properties at any time during the past five years:
(e) Set forth below is the Federal Taxpayer Identification Number of the
Grantor: 13-3960835.
<PAGE>
2
2. Current Locations. (a) The chief executive office of the Grantor is
located at the address set forth on Schedule 2(a) hereto.
(b) Set forth on Schedule 2(b) hereto are all locations where the
Grantor maintains (or intends to maintain) Collateral having an Acquired Cost of
at least $25,000 in such location.
(c) Set forth on Schedule 2(c) hereto are all the places where the
Grantor maintains an office or other facility not identified in paragraph (a) or
(b) above.
3. Unusual Transactions. All Designated Equipment has been purchased by the
Grantor in the ordinary course of its business.
4. UCC Filings. Duly signed financing statements on Form UCC-1 in
substantially the form of Schedule 4 hereto have been prepared for filing with
the Secretary of State or other appropriate office of the states of the United
States listed in Schedule 5.
5. Schedule of Filings. Attached hereto as Schedule 5 is a schedule setting
forth, with respect to the filings described in Section 4 above, each filing and
the filing office in which such filing is to be made.
6. Filing Fees. All filing fees and taxes payable in connection with the
filings described in Section 4 above have been paid.
IN WITNESS WHEREOF, the undersigned has duly executed this certificate on
this _____ day of ________________, 199_.
WINSTAR EQUIPMENT II CORP.,
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
CHANGES
<PAGE>
SCHEDULE 2(a)
CHIEF EXECUTIVE OFFICE
<PAGE>
SCHEDULE 2(b)
LOCATIONS OF COLLATERAL
<PAGE>
SCHEDULE 2(c)
OFFICES AND OTHER FACILITIES
<PAGE>
SCHEDULE 4
FORM UCC-1
<PAGE>
SCHEDULE 5
UCC-1 FILINGS
<PAGE>
