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) March 17, 1998
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WINSTAR COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10726 13-3585278
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
230 Park Avenue, New York, New York 10169
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 584-4000
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index -- Page
Page 1 of Pages
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Item 5. Other Events
In March 1998, WinStar Communications, Inc. ("WinStar" or "Company")
and a subsidiary received net proceeds of approximately $629.6 million from the
sale of certain of the Company's securities in the institutional private
placements described below. WinStar intends to use the proceeds to fund the
expansion of the Company's telecommunications and other operations.
Preferred Stock Placement
On March 17, 1998, WinStar and its wholly owned subsidiary, WinStar
Multichannel Corp., sold an aggregate of 4,000,000 shares of WinStar's Series D
7% Senior Cumulative Convertible Preferred Stock ("Preferred Shares") for an
aggregate purchase price of $200.0 million ("Preferred Stock Placement").
General
The sale was made to Credit Suisse First Boston Corporation, Smith
Barney Inc., Morgan Stanley & Co. Incorporated and NationsBanc Montgomery
Securities LLC (collectively, the "Initial Stock Purchasers") pursuant to a
stock purchase agreement dated March 12, 1998 ("Stock Purchase Agreement"). The
sale price per Preferred Share was $50.00, with each of the Initial Purchasers
receiving a discount equal to 3.38% (or $1.6875) of the purchase price of each
Preferred Share it purchased. The Initial Stock Purchasers resold all or a
portion of the Preferred Shares to Qualified Institutional Buyers ("QIBs") in
accordance with Rule 144A promulgated under the Securities Act of 1933 ("Rule
144A").
Each Preferred Share has a liquidation preference of $50.00 and
entitles the holder thereof to receive from WinStar dividends at a rate per
annum of $3.50 per share. Dividends are payable quarterly on March 15, June 15,
September 15 and December 15 of each year to the record holders of the Preferred
Shares as of the close of business on the business day next preceding the date
of such dividend payment. WinStar may pay such dividends in either cash or
through the issuance of shares of its Common Stock (the "Dividend Shares"), at
its election.
Each Preferred Share is convertible into shares of Common Stock (the
"Conversion Shares") at a conversion rate of 1.0079 Conversion Shares for each
share of Preferred Stock converted, equivalent to a conversion price of $49.61
per Conversion Share.
Registration Obligations
WinStar and the Initial Stock Purchasers entered into a registration
rights agreement, dated March 12, 1998 ("Stock Registration Rights Agreement"),
pursuant to which WinStar is obligated to file a registration statement under
the Securities Act of 1933, as amended (the "Act"), registering the resale of
the Preferred Shares, Conversion Shares and Dividend Shares by May 4, 1998 and
to have such registration statement declared effective by the Securities and
Exchange Commission ("SEC") on or prior to August 15, 1998. If such registration
statement is not declared effective by the SEC by August 15, 1998, the dividend
rate of the Preferred Shares shall increase to 9% per annum until the default
under the Stock Registration Rights Agreement is cured.
Redemption
The Preferred Shares are not redeemable by WinStar prior to March 20,
2001. Thereafter, each Preferred Share will be redeemable, at the Company's
option, in whole or in part, at any time or from time to time, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
holder's registered address, at the redemption prices set forth below, payable
in cash, plus accumulated and unpaid dividends, if any (including a prorated
dividend for any partial dividend period).
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If redeemed during the period commencing March 20, 2001 through March
14, 2002, the redemption price shall be $51.75 per share.
If redeemed during the 12-month period commencing on March 15 of the
years set forth below, the per share redemption prices shall be:
Redemption
Period Price
- ------ ----------
2002............................................ $51.17
2003............................................ 50.58
2004 and thereafter............................. 50.00
In the case of a redemption date falling after a dividend payment
record date and prior to the related payment date, the holders of the Preferred
Shares at the close of business on such record date will be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares following such dividend payment
record date. Except as provided for in the preceding sentence, no payment or
allowance will be made for accrued dividends on any Preferred Shares called for
redemption.
WinStar's ability to redeem the Preferred Shares at its option is
limited by the terms of WinStar's outstanding indebtedness. WinStar may not be
able to redeem the Preferred Shares at its option unless it simultaneously
redeems or repays such indebtedness.
On March 15, 2010, WinStar will be required to redeem in cash (subject
to the legal availability of funds therefor) all outstanding Preferred Shares at
a price in cash equal to $50.00 per share, plus accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for any partial
dividend period), if any, to the date of redemption. WinStar will not be
required to make sinking fund payments with respect to the Preferred Shares. The
Certificate of Designations, Rights and Preferences relating to the Preferred
Shares provides that WinStar will take all actions required or permitted under
Delaware law to permit such redemption.
Debt Placement
On March 20, 1998, WinStar sold (the "Debt Placement") $200 million of
its 10% Senior Subordinated Notes due 2008 (the "Cash-Pay Notes") and $250
million of its 11% Senior Subordinated Deferred Interest Notes due 2008 (the
"Deferred Interest Notes" and, together with the Cash-Pay Notes, the "1998
Notes").
General
The sale was made to Credit Suisse First Boston Corporation, Salomon
Brothers Inc., Morgan Stanley & Co. Incorporated and NationsBanc Montgomery
Securities LLC (collectively the "Initial Note Purchasers") pursuant to a note
purchase agreement dated March 17, 1998 ("Note Purchase Agreement"). The Initial
Note Purchasers each received a discount equal to 2.875% of the aggregate
purchase price of the 1998 Notes it purchased. The Initial Purchasers resold all
or a portion of the 1998 Notes to QIBs in accordance with Rule 144A.
The 1998 Notes rank pari passu with WinStar's existing 15% Senior
Subordinated Deferred Interest Notes issued in October 1997 and 14% Convertible
Senior Subordinated Notes issued in October 1995 and are junior in right of
payment to all future and existing senior indebtedness of WinStar, including
WinStar's 14 1/2% Senior Deferred Interest Notes issued in March 1997, 14%
Senior Discount Notes issued in October 1995 and guarantees of the 12 1/2%
Guaranteed Senior Secured Notes issued by certain subsidiaries of WinStar in
March and August 1997. All of the Company's above
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described outstanding notes, other than the 1998 Notes, are referred to herein
collectively as the "Existing Notes."
The Cash-Pay Notes bear interest at a rate of 10% per annum, payable
semiannually on March 15 and September 15, commencing September 15, 1998, to
holders of record at the close of business on March 1, and September 1. The
Cash-Pay Notes mature on March 15, 2008 and are redeemable on or after March 15,
2003, at the option of WinStar, in whole or part, as described below under
"Redemption."
Until September 15, 2003, interest on the Deferred Notes will accrue
and compound semiannually, but will not be payable in cash. Interest on the
accumulated amount of the Deferred Interest Notes as of March 15, 2003 will be
payable semiannually in cash on March 15 and September 15 of each year,
commencing September 15, 2003, to holders of record at the close of business on
March 1, and September 1. The Deferred Interest Notes mature on March 15, 2008
and are redeemable on or after March 15, 2003, at the option of WinStar, in
whole or part, as described below under "Redemption."
Each of the Cash-Pay Notes and the Deferred Interest Notes was issued
pursuant to, and each is governed by the terms of, an indenture (the
"Indentures") among WinStar (as issuer of the 1998 Notes) and United States
Trust Company of New York, as trustee. Under the Indentures, WinStar is subject
to restrictions substantially similar to the restrictions on WinStar contained
in the indentures between WinStar and the trustees with respect to the Existing
Notes. 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.
Pursuant to the Indentures, in the event of a change of control of
WinStar, WinStar must offer to purchase from the holders thereof all of its
respective Notes then outstanding at a purchase price equal to 101% of, in the
case of the Deferred Interest Notes, the accumulated amount on the date of
purchase, and, in the case of the Cash-Pay Notes, the principal amount, plus, in
each case, accrued and unpaid interest.
Registration Obligations
WinStar and the Initial Note Purchasers entered into a registration
rights agreement dated March 17, 1998 ("Note Registration Rights Agreement")
which requires WinStar to effect a registered exchange offer pursuant to which
the respective 1998 Notes may be exchanged by the holders thereof for notes (the
"Exchange Notes") having terms substantially identical to such exchanged 1998
Notes (except with respect to transfer restrictions). WinStar has agreed to use
its best efforts to have the registration statements in connection with such
exchange offers filed by May 4, 1998, and declared effective by the Securities
and Exchange Commission ("SEC") by August 17, 1998 and to keep the exchange
offers 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 respective
1998 Notes. WinStar has further agreed, under certain circumstances, including,
among others, its failure to consummate an exchange offer by September 16, 1998,
to file a shelf registration statement (a "Shelf Registration Statement")
covering resales of the 1998 Notes or Exchange Notes, as the case may be, and to
keep the Shelf Registration Statement effective until the time when the 1998
Notes or Exchange Notes covered thereby can be sold without an effective
registration statement. In the event of a default by WinStar, interest will
accrue on the applicable issue of 1998 Notes and Exchange 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 1998 Notes or Exchange 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
applicable 1998 Notes or Exchange Notes.
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Redemption
The Cash-Pay Notes are not redeemable prior to March 15, 2003.
Thereafter, the Cash-Pay Notes will be redeemable, at WinStar's option, in whole
or in part, at the following redemption prices (plus accrued and unpaid
interest), if any:
Redemption
Year Price
---- ----------
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 100.000%
The Deferred Interest Notes are not redeemable prior to March 15, 2003.
Thereafter, the Deferred Interest Notes will be redeemable, at WinStar's option,
in whole or in part, at the following redemption prices (expressed as a
percentage of the accumulated amount), plus accrued and unpaid interest, if any,
on such accumulated amount:
Redemption
Year Price
---- ----------
2003 105.500%
2004 103.667%
2005 101.833%
2006 and thereafter 100.000%
Press Releases
WinStar issued a press release on March 11, 1998 announcing that it
intended to raise certain proceeds in the Preferred Stock Placement and Debt
Placement. A copy of such press release was filed as an exhibit to the Company's
Current Report on Form 8-K, filed March 12, 1998.
WinStar issued a press release on March 12, 1998 announcing that it had
signed the Stock Purchase Agreement with respect to the Preferred Stock
Placement. A copy of such press release is filed herewith as an exhibit.
WinStar issued a press release on March 20, 1998 announcing the
consummation of both the Preferred Stock Placement and Debt Placement. A copy of
such press release is filed herewith as an exhibit.
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Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
Preferred Stock Placement
Exhibit Number Description
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4.1 Stock Purchase Agreement
4.2 Certificate of Designations, Rights and Preferences of the
Series D 7% Senior Cumulative Convertible Preferred Stock
4.3 Form of Certificate for Series D Preferred Stock
4.4 Stock Registration Rights Agreement
99.1 Press Release regarding signing of the Security Purchase
Agreement for the Preferred Stock Placement
Debt Placement
Exhibit Number Description
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4.5 Note Purchase Agreement
4.6 Cash-Pay Notes Indenture, including form of Cash-Pay Note
4.7 Deferred Interest Notes Indenture, including form of
Deferred Interest Note
4.8 Debt Registration Rights Agreement
99.2 Press Release regarding the consummation of both the Debt
Placement and the Preferred Stock Placement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: March 30, 1998 WINSTAR COMMUNICATIONS, INC.
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(Registrant)
/s/ Frederic E. Rubin
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Frederic E. Rubin, Vice President/Treasurer
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EXHIBIT INDEX
Preferred Stock Placement
Exhibit Number Description
- --------------- -----------
4.1 Stock Purchase Agreement
4.2 Certificate of Designations, Rights and Preferences of the
Series D 7% Senior Cumulative Convertible Preferred Stock
4.3 Form of Certificate for Series D Preferred Stock
4.4 Stock Registration Rights Agreement
99.1 Press Release regarding signing of the Security Purchase
Agreement for the Preferred Stock Placement
Debt Placement
Exhibit Number Description
- -------------- -----------
4.5 Note Purchase Agreement
4.6 Cash-Pay Notes Indenture, including form of Cash-Pay Note
4.7 Deferred Interest Notes Indenture, including form of
Deferred Interest Note
4.8 Debt Registration Rights Agreement
99.2 Press Release regarding the consummation of both the Debt
Placement and the Preferred Stock Placement
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4,000,000 Shares
WINSTAR COMMUNICATIONS, INC.
Series D 7% Senior Cumulative Preferred Stock Due 2010
(Liquidation Preference $50 Per Share)
PURCHASE AGREEMENT
March 12 , 1998
Credit Suisse First Boston Corporation
Smith Barney Inc.
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Dear Sirs:
1. Introductory. WinStar Communications, Inc., a Delaware corporation (the
"Issuer") and WinStar Multichannel Corp., a Delaware corporation and a wholly
owned subsidiary of the Issuer ("WMC", and together with the Issuer, the
"Sellers"), propose, subject to the terms and conditions stated herein, to issue
and sell to the several initial purchasers named in Schedule A hereto (the
"Purchasers") 3,700,000 and 300,000 shares, respectively, of the Issuer's Series
D 7% Senior Cumulative Convertible Preferred Stock Due 2010 (liquidation
preference $50 per share) (the "Convertible Preferred Stock"). The Convertible
Preferred Stock will be convertible into shares of Common Stock, par value $0.01
per share, of the Issuer (the "Common Stock") at $49.61 per share, subject to
adjustment in accordance with the Certificate of Designations relating to the
Convertible Preferred Stock (the "Certificate of Designations"). The shares of
Convertible Preferred Stock are herein referred to as the "Offered Securities"
and the shares of Common Stock issuable upon conversion thereof are referred to
herein as the "Underlying Shares". The United States Securities Act of 1933 is
herein referred to as the "Securities Act."
The Sellers hereby agree with the several Purchasers as follows:
2. Representations and Warranties of the Sellers. The Sellers represent and
warrant to, and agree with, the several Purchasers that:
(a) A preliminary offering circular and an offering circular relating to
the Offered Securities to be offered by the Purchasers have been prepared by the
Issuer. Such preliminary offering circular and offering circular, as both are
supplemented as of the date of this Agreement, together with any other document
approved by the Issuer for use in connection with the contemplated resale of the
Offered Securities are hereinafter collectively referred to as the "Offering
Document". On the date of this Agreement, the Offering Document does 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, it being
understood and agreed that the only such information is that described as such
in Section 7(b). The Issuer'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 Issuer with the Commission or sent to stockholders pursuant to the
United States 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.
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(b) The Issuer 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
Offering Document; and the Issuer 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 on the condition (financial or other),
business, properties or results of operations of the Issuer and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) Each subsidiary of the Issuer, including WMC, 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 Offering Document;
and each subsidiary of the Issuer 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 the issued and outstanding capital
stock of each subsidiary of the Issuer has been duly authorized and validly
issued and is fully paid and nonassessable; and the capital stock of each
subsidiary owned by the Issuer, directly or through subsidiaries, is owned free
from liens, encumbrances and defects, other than shares of the direct or
indirect subsidiaries of WinStar New Media, Inc.
(d) The Offered Securities have been duly and validly authorized; and when
the Offered Securities have been delivered by the Sellers and paid for pursuant
to this Agreement on the Closing Date (as defined below), such Offered
Securities will be validly issued, fully paid and nonassessable and will
conform, in all material respects, to the description thereof contained in the
Offering Document; the Underlying Shares have been duly and validly authorized
and reserved for issuance upon conversion of the Offered Securities; neither the
issuance of the Offered Securities nor the issuance of the Underlying Shares
upon conversion thereof is subject to preemptive or other similar rights.
(e) When the Offered Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, such Offered Securities will be convertible into
the Underlying Shares in accordance with the terms of the Offered Securities and
the Certificate of Designations; the Underlying Shares initially issuable upon
conversion of the Offered Securities have been duly authorized and reserved for
issuance upon such conversion and, when issued upon such conversion, will be
validly issued, fully paid and nonassessable; and the outstanding shares of
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable and conform in all material respects to the description thereof
contained in the Offering Document.
(f) Except as contemplated by this Agreement or as disclosed in the
Offering Document, there are no contracts, agreements or understandings between
the Sellers and any person that would give rise to a valid claim against the
Sellers or any Purchaser for a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated by this Agreement.
(g) 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 Sellers or the issuance of the Underlying
Shares by the Issuer, 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 between the Issuer 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.
(h) The execution, delivery and performance of 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
either of the Sellers or any subsidiary of the Issuer or any of their
properties, (ii) any agreement or instrument to which either of the Sellers or
any such subsidiary is a party or by which either of the Sellers or any such
subsidiary is bound or to which any of the properties of the Sellers or any such
subsidiary is subject, or (iii) the charters or by-laws of either of the Sellers
or any such subsidiary, except, in the case of clause (i) or (ii), such
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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 and WMC as contemplated by this Agreement and to authorize and issue the
Underlying Shares upon conversion of the Offered Securities.
(i) This Agreement has been duly authorized, executed and delivered by each
of the Sellers; the Registration Rights Agreement has been duly authorized,
executed and delivered by the Issuer and will constitute a valid and legally
binding obligation 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 except that rights to
indemnity and contribution may be limited by federal and state securities laws
and public policy considerations.
(j) Except as disclosed in the Offering Document and except for liens on
the shares of the direct or indirect subsidiaries of WinStar New Media, Inc.,
the Issuer and its 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 Offering Document, the Issuer and its
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.
(k) The Issuer and its 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.
(l) No labor dispute with the employees of the Issuer or any of its
subsidiaries exists or, to the knowledge of the Issuer, is imminent that could
reasonably be expected to have a Material Adverse Effect.
(m) The Issuer and its 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 has 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 or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(n) Except as disclosed in the Offering Document, neither the Issuer nor
any of its 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 is not aware of any pending investigation which might lead to such a
claim.
(o) Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting the Issuer, any of its
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 the Issuer to perform its
obligations under the Registration Rights Agreement or this Agreement, or which
are otherwise material in the context of the sale of the Offered Securities; and
to the Issuer's knowledge, no such actions, suits or proceedings are threatened
or contemplated.
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(p) The financial statements included in the Offering Document present
fairly the financial position of the Issuer and its consolidated subsidiaries
and, subject to the last paragraph of the report of Grant Thornton LLP, of
MIDCOM Communications, Inc. ("Midcom") 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, subject to the last paragraph of the
report of Grant Thornton LLP, 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 in the Offering Document 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.
(q) Except as disclosed in the Offering Document, since the date of the
latest audited financial statements included in the Offering Document, 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 the Issuer and its subsidiaries
taken as a whole (it being understood that the acquisition from Telesoft Corp.
of its Tier I Internet service provider, the acquisition of substantially all of
the assets of Midcom, a change in the price of the Common Stock or the
continuation of operating losses consistent with the Issuer's historical results
shall be deemed not to be, in and of themselves, such a material adverse
change), and, except as disclosed in or contemplated by the Offering Document,
there has been no dividend or distribution of any kind declared, paid or made by
the Issuer on any class of its capital stock.
(r) The Issuer is not 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 is it a closed-end investment company required to be
registered, but not registered, thereunder; and the Issuer is not and, after
giving effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the Offering Document, will
not be an "investment company" as defined in the Investment Company Act.
(s) 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.
(t) Assuming the accuracy of the representations of the Purchasers
contained herein, 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.
(u) Except for sales to or through the Purchasers or their affiliates,
neither the Issuer, nor any of its 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, its affiliates and any person acting
on their behalf have complied and will comply with the offering restrictions
requirement of Regulation S. The Issuer has not entered and will not enter into
any contractual arrangement with respect to the distribution of the Offered
Securities except for this Agreement and the Registration Rights Agreement.
(v) The Issuer is subject to Section 13 or 15(d) of the Exchange Act.
(w) The Issuer and its 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").
(x) The Issuer has provided to the Purchasers a complete and accurate list
of all licenses granted to the Issuer and its subsidiaries (other than
experimental licenses in the 38 GHz portions of the radio spectrum and licenses
granted to the Issuer or its subsidiaries or acquired from Local Area
<PAGE>
5
Telecommunications, Inc. that are not in the 38 GHz portion of the radio
spectrum) by the FCC (the "Licenses"). All the Licenses are currently valid and
in full force and effect. Neither the Issuer nor any of its subsidiaries has 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, except that, on March 9, 1998,
several parties filed petitions for reconsideration (the "Petitions") of the 38
GHz Order (as defined in the Offering Document) alleging, among other things,
that the February 10, 1998 License grants to the Issuer of additional channels
in each of Atlanta, Buffalo, Cincinnati, Dallas, Houston, Miami, New York, St.
Louis, Seattle, Spokane and Tampa were in violation of the rules of the FCC.
(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 or any of its subsidiaries thereunder.
(z) The Issuer and its 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 the Issuer nor any of its subsidiaries has 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. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Sellers agree to sell to the several
Purchasers, and each of the Purchasers hereby agrees, severally and not jointly,
to purchase from the Sellers, the number of shares of Convertible Preferred
Stock set forth opposite the names of the several Purchasers in Schedule A
hereto, at a purchase price of $48.3125 per share (which represents the discount
to the Purchasers of $1.6875 per share from the public offering price of $50.00)
plus accrued dividends (if any) from March 17, 1998 to the Closing Date (as
hereinafter defined).
The Issuers will 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 Continental Stock Transfer & Trust
Company ("Continental") 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 book-entry form through DTC,
except in the limited circumstances described in the Offering Document. Payment
for the Offered Securities shall be made by the Purchasers in Federal (same day)
funds by wire transfer to accounts previously designated to CSFBC by the Sellers
at one or more financial institutions 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 March 17, 1998, or at such other
time not later than seven full business days thereafter as CSFBC and the Sellers
determine, such time being herein referred to as the "Closing Date", against
delivery to Continental as custodian for DTC of the Global Securities
representing all of the Offered Securities. The Global Securities will be made
available for checking at the offices of Cravath, Swaine & Moore at least 24
hours prior to the Closing Date.
4. Representations and Agreements by Purchasers; Resale by Purchasers.
(a) Each Purchaser severally represents and warrants to the Issuer that it
is an "accredited investor" within the meaning of Regulation D under the
Securities Act.
(b) Each Purchaser severally acknowledges that neither the Offered
Securities nor the Underlying Shares have 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 Regula tion 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 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
<PAGE>
6
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 conces sion, 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 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 and except with the
prior written consent of the Issuer.
(d) Each Purchaser severally agrees that it and each of its affiliates has
not offered or sold, and 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 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.
(f) Each Purchaser agrees that promptly following the completion of its
initial resale of all the Offered Securities purchased by it pursuant to this
Agreement, it will notify the Issuer in writing thereof.
5. Certain Agreements of the Issuer. The Issuer agrees with the several
Purchasers that:
(a) The Issuer 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
promptly will notify CSFBC of such event and promptly will prepare, at its own
expense, an amendment or supplement which will correct such statement or
omission or effect such compliance. Neither the Purchasers' consent to,
<PAGE>
7
nor CSFBC's 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 will furnish to CSFBC copies of any preliminary offering
circular, the Offering Document and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as CSFBC
reasonably requests, and the Issuer will furnish to CSFBC on the Closing Date
five copies of the Offering Document signed by a duly authorized officer of the
Issuer, one of which will include the independent accountants' reports therein
manually signed by such independent accountants. At any time when the Issuer is
not subject to Section 13 or 15(d) of the Exchange Act, the Issuer 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 Rule 144A in
connection with resales by such holders of the Offered Securities. The Issuer
will pay the expenses of printing and distributing to the Purchasers all such
documents.
(c) The Issuer will use its 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 will not be required to qualify
as a foreign corporation or to file a general consent to service of process in
any such jurisdiction.
(d) During the period of five years after the Closing Date, the Issuer 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 Issuer's annual
report to stockholders for such year; and the Issuer 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 the Issuer 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 as
CSFBC may reasonably request.
(e) During the period of two years after the Closing Date, the Issuer will,
upon request, furnish to CSFBC and to each of the other Purchasers, and any
holder of Offered Securities or of the Underlying Shares, a copy of the
restrictions on transfer applicable to the Offered Securities and the Underlying
Shares.
(f) During the period of two years after the Closing Date, the Issuer will
not, and will not permit any of its 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, the Issuer will
not 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 the Issuer is not, and will not be
or become, a closed-end investment company required to be registered, but not
registered, under the Investment Company Act.
(h) The Issuer will pay all expenses incidental to the performance of its
obligations under this Agreement, including (i) all 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 Offering Document and amendments and supplements thereto, and
any other document relating to the issuance, offer, sale and delivery of the
Offered Securities; (ii) 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; (iii) the cost of any
advertising approved by the Issuer in connection with the issue of the Offered
Securities; (iv) 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; (v) any fees charged
by investment rating agencies for the rating of the Offered Securities; and (vi)
all expenses incurred in distributing preliminary offering circulars and the
Offering Document (including any amendments and supplements thereto) to the
Purchasers. The Issuer will also pay or reimburse the Purchasers (to the extent
<PAGE>
8
incurred by them) for all travel expenses of the Issuer's officers and employees
and any other expenses of the Issuer in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities from the
Purchasers.
(i) In connection with the offering, until CSFBC shall have notified the
Issuer and the other Purchasers of the completion of the resale of the Offered
Securities, neither the Issuer nor any of its affiliates has or will, 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 Common Stock or attempt to induce any person to purchase any
Offered Securities or Common Stock; and neither it nor any of its 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 or Common
Stock.
(j) For a period of 90 days after the date hereof (the "Applicable
Period"), the Issuer will not sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or (except pursuant to agreements executed
on or prior to the date hereof) arrange to have declared effective during the
Applicable Period a registration statement under the Securities Act covering the
sale by the Issuer of, (a) any preferred stock or any other securities of the
Issuer which are substantially similar to the Convertible Preferred Stock, (b)
any shares of Common Stock of the Issuer or any other capital stock of the
Issuer, or (c) any other securities which are convertible into, or exercisable
or exchangeable for, preferred stock or such substantially similar securities of
the Issuer, Common Stock or other capital stock of the Issuer (collectively,
"Derivative Securities"), without the prior written consent of CSFBC, which
shall not be unreasonably withheld, except (i) the Convertible Preferred Stock,
(ii) Common Stock or preferred stock issued or delivered as payment of dividends
on, or upon conversion, of any preferred stock of the Issuer, (iii) securities
issued or delivered upon conversion, exchange or exercise of any other
securities of the Issuer outstanding on the date of the Offering Document, (iv)
capital stock, options and other equity-based awards issued pursuant to benefit
or incentive plans maintained for the officers, directors or employees of, or
persons providing services to, the Issuer or its subsidiaries, or pursuant to
the Issuer's dividend reinvestment, 401(k), stock purchase or similar plans, (v)
securities issued in connection with, or in furtherance of, mergers,
acquisitions of assets or equity of others (including spectrum licenses and
interests in entities with spectrum licenses) or similar transactions, (vi)
securities representing a minority interest in the Issuer issued to a strategic
investor who agrees not to resell such securities during the Applicable Period,
or (vii) Common Stock, preferred stock, other capital stock or Derivative
Securities in a transaction not registered under the Securities Act of 1933, if
the Company does not arrange to have a registration statement covering the
resale of any such securities declared effective during the Applicable Period.
The Issuer 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 will cause each certificate for the Offered Securities or
the Underlying Shares to bear the legend described in the Offering Document
until such legend shall no longer be necessary or advisable because the Offered
Securities and the Underlying Shares are no longer subject to the restrictions
on transfer described therein.
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 accuracy of the representations and warranties on the part of the
Issuer herein, to the accuracy of the certificates of officers of the Issuer
delivered pursuant to the provisions hereof, to the performance by the Issuer of
its obligations hereunder and to the following additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the date of this
Agreement, of Grant Thornton LLP, in agreed form, confirming that they are
independent public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder ("Rules and Regulations")
and stating to the effect that:
(i) in their opinion the financial statements examined by them and
included in the Offering Document comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and the
related published Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Issuer, inquiries of certain officials of the Issuer
who have responsibility for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them to believe that:
<PAGE>
9
(A) at March 6, 1998, there was any change in the capital
stock or paid-in capital, increase in long-term debt or any decreases
in consolidated net current assets or stockholders' equity of the
Issuer and its subsidiaries, on a consolidated basis as compared with
amounts shown on the December 31, 1997 audited consolidated balance
sheet included in the Offering Document; or
(B) for the period from January 1, 1998 to March 6, 1998,
there were any decreases, as compared with the corresponding period in
the preceding year, in consolidated operating revenues or in the total
or per-share amounts of net loss;
except in all cases set forth in clauses (A) and (B) above for changes,
increases or decreases which the Offering Document discloses have occurred or
may occur or which are described in such letter; and
(iii) they have compared specified dollar amounts (or percentages
derived from such dollar amounts) and other financial information contained in
the Offering Document (in each case to the extent that such dollar amounts,
percentages and other financial information are derived from the general
accounting records of WinStar and its subsidiaries subject to the internal
controls of the Issuer's accounting system or are derived directly from such
records by analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures specified in
such letter and have found such dollar amounts, percentages and other financial
information to be in agreement with such results, except as otherwise specified
in such letter.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange controls
as would, in the judgment of CSFBC, be likely to prejudice materially the
success of the proposed issue, sale or distribution of the Offered Securities,
whether in the primary market or in respect of dealings in the secondary market,
or (ii) (A) any change, or any development or event involving a prospective
change, in the condition (financial or other), business, properties or results
of operations of the Issuer or its subsidiaries which, in the judgment of CSFBC,
is material and adverse and makes it impractical or inadvisable to proceed with
completion of the offering or the sale of and payment for the Offered Securities
(it being understood that a change in the price of the Common Stock or the
continuation of operating losses consistent with the Issuer's historical results
shall be deemed not to be, in and of itself, a material adverse change); (B) any
downgrading in the rating of any debt securities of the Issuer by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Securities Act), or any public announcement that any
such organization has under surveillance or review its rating of any debt
securities of the Issuer (other than an announcement with positive implications
of a possible upgrading, and no implication of a possible downgrading, of such
rating); (C) any suspension or limitation of trading in securities generally on
the New York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of the Issuer on
any exchange or in the over-the-counter market; (D) any banking moratorium
declared by U.S. Federal or New York authorities; or (E) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of CSFBC, the effect of
any such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the offering or sale of
and payment for the Offered Securities.
(c) The Purchasers shall have received an opinion, dated the Closing
Date, of Graubard Mollen & Miller, counsel for the Sellers, substantially to the
effect set forth in (i)-(x) below, and of Willkie Farr & Gallagher, regulatory
counsel for the Issuer, substantially to the effect set forth in (xi)-(xviii)
below:
(i) Each of the Issuer and WMC 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 Offering Document;
(ii) The Registration Rights Agreement has been duly authorized,
executed and delivered; the Registration Rights Agreement constitutes a valid
and legally binding obligation 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, except that
rights to indemnity and contribution may be limited by federal and state
securities laws and public policy considerations;
<PAGE>
10
(iii) The Offered Securities have been duly authorized and validly
issued, and upon payment therefor will be fully paid and nonassessable and
conform in all material respects to the description thereof contained in the
Offering Document; to their knowledge, the stockholders of the Issuer have no
preemptive or other similar rights with respect to the issuance of the Offered
Securities; the Offered Securities are convertible into Common Stock of the
Issuer in accordance with the Certificate of Designations; the Underlying Shares
have been duly authorized and reserved for issuance upon such conversion and,
when issued upon such conversion, will be validly issued, fully paid and
nonassessable; the outstanding shares of Common Stock conform in all material
respects to the description thereof contained in the Offering Document; and to
their knowledge the stockholders of the Issuer have no preemptive rights with
respect to the issuance of the Underlying Shares;
(iv) The Issuer is not and, after giving effect to the offering and
sale of the Offered Securities and the application of the proceeds thereof as
described in the Offering Document, will not be an "investment company" as
defined in the Investment Company Act;
(v) 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
or sale of the Offered Securities by the Issuer and WMC, the issuance by the
Issuer of the Underlying Shares upon conversion thereof and the consummation of
the transactions under the Registration Rights Agreement, 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 and the
transactions contemplated thereunder and such as may be required by securities
or blue sky laws of the various states of the United States and of foreign
jurisdictions in connection with the offer and sale of the Offered Securities;
(vi) The execution, delivery and performance of 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, (A) any statute, rule or regulation or any order known to such
counsel of any governmental agency or body or any court having jurisdiction over
either of the Sellers or any subsidiary of the Issuer or any of their
properties, (B) any agreement or instrument listed as an exhibit to the Issuer's
Annual Report on Form 10-K most recently filed with the Commission or listed as
an exhibit to or filed with any subsequent reports filed by the Issuer under the
Exchange Act through December 31, 1997, to which the Issuer or any such
subsidiary is a party or by which the Issuer or any such subsidiary is bound or
to which any of the properties of the Issuer or any such subsidiary is subject,
or (C) the charter or by-laws of the Issuer or any such subsidiary, except, in
the case of clause (A) or (B), breaches, violations or defaults that
individually or in the aggregate would not have a Material Adverse Effect; and
the Issuer has full power and corporate authority to authorize, issue and sell
the Offered Securities as contemplated by this Agreement and to authorize and
issue the Underlying Shares upon conversion;
(vii) Such counsel have no reason to believe that the Offering
Document, or any amendment or supplement thereto, as of the date hereof and as
of the Closing 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;
(viii) The descriptions in the Offering Document of statutes, legal and
governmental proceedings and contracts and other documents are accurate in all
material respects and fairly present the information purported to be described
therein;
(ix) This Agreement has been duly authorized, executed and delivered
by the Sellers;
(x) Based upon the accuracy of the representations and warranties of
the Issuer set forth in Section 2(u) of this Agreement and of the Purchasers in
Section 4 hereof, it is not necessary in connection with (i) the offer, sale and
delivery of the Offered Securities by the Issuer to the several Purchasers
pursuant to this Agreement or (ii) the resales of the Offered Securities by the
several Purchasers in the manner contemplated by this Agreement, to register the
Offered Securities or the Underlying Shares under the Securities Act other than
in connection with the Issuer's obligations under the Registration Rights
Agreement.
<PAGE>
11
(xi) No prior or subsequent consent, approval, authorization or order
of the FCC is required to be obtained, and no prior or subsequent notice to or
filing with the FCC is required to be made, in connection with the offering of
Offered Securities or the issuance of the Underlying Shares.
(xii) To the best of such counsel's knowledge, the Issuer and its
subsidiaries are in compliance in all material respects with all material terms
and conditions of each License.
(xiii) To the best of such counsel's knowledge, all of the Licenses are
currently valid and in full force and effect, and there is no investigation,
notice of apparent liability, violation, forfeiture or other order of 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; provided, however, on February 10, 1998, the FCC granted
additional channels for 38 GHz licenses in the following areas: Atlanta,
Buffalo, Cincinnati, Dallas, Houston, Miami, New York, St. Louis, Seattle,
Spokane and Tampa. On March 9, 1998, several parties filed petitions for
reconsideration of the 38 GHz Order, alleging, among other things, that the
February 10, 1998, license grants to the Issuer were in violation of the
Commission's processing rules, which Petitions for Reconsideration were made
available to the public on March 10, 1998. At least one of those parties stated
that it would be filing a separate pleading on this issue.
(xiv) Such counsel is not aware of any event or instance in which the
Issuer was not in compliance with all applicable and material rules, regulations
and policies of the FCC pertaining to the Licenses.
(xv) Such counsel is not aware of the occurrence of any event which (i)
results in, or after notice or lapse of time or both would result in,
revocation, suspension, adverse modification, nonrenewal, 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 or
any of its subsidiaries thereunder.
(xvi) To the best of such counsel's knowledge, the Issuer and its
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 pertaining to the Licenses.
(xvii) Such counsel is not aware of any reason to believe that any of
the Licenses will not be renewed in the ordinary course.
(xviii) The FCC has the authority, under certain circumstances, to
modify radio licenses that it has issued. On November 3, 1997, the FCC adopted
rules to auction unlicensed portions of the 38.6 - 40.0 GHz band for commercial
use. On March 24, 1997, the FCC proposed rules to segment the 38.6 - 40.0 GHz
band for terrestrial wireless services. In either event, the FCC may adopt
changes to the existing and proposed regulations governing 38 GHz licensees,
which could have an impact on the scope of the Licenses and the operations of
the Issuer and its subsidiaries. As of the date of such letter, and except as
otherwise discussed in such letter, such counsel is not aware of any official
FCC action that may permit or is likely to lead to the revocation, nonrenewal,
modification, impairment, restriction, or suspension of any License or any right
or authority thereunder in whole or in part.
(d) The Purchasers shall have received from Cravath, Swaine & Moore,
counsel for the Purchasers, such opinion or opinions, dated the Closing Date,
with respect to the incorporation of the Issuer, the validity of the Offered
Securities, the Offering Document, the exemption from registration for the offer
and sale of the Offered Securities by the Issuer to the several Purchasers and
the resales by the Purchaser as contemplated hereby and other related matters as
CSFBC may reasonably require, and the Issuer shall have furnished to such
counsel such documents as they reasonably request for the purpose of enabling
them to pass upon such matters.
(e) The Purchasers shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer or any Vice President and a principal
financial or accounting officer of the Issuer in which such officers, to the
best of their knowledge after reasonable investigation, shall state that the
representations and warranties of such Issuer in this Agreement are true and
correct, that the Issuer has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, and that, subsequent to the dates of the most recent financial
statements in the Offering Document there has been no material adverse change,
<PAGE>
12
nor any development or event involving a prospective material adverse change, in
the condition (financial or other), business, properties or results of
operations of the Issuer and its subsidiaries taken as a whole except as set
forth in or contemplated by the Offering Document or as described in such
certificate.
(f) The Purchasers shall have received a letter, dated the Closing
Date, of Grant Thornton LLP which meets the requirements of subsection (a) of
this Section, except that the specified date referred to in such subsection will
be a date not more than five days prior to the Closing Date for the purposes of
this subsection.
(g) The Issuer shall have filed with the Secretary of State of Delaware
the Certificate of Designations for the Convertible Preferred Stock.
The Issuer will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and documents as the Purchaser 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 will indemnify and
hold harmless each Purchaser against any losses, 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
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 any related preliminary offering circular, 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 each
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 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 by such Purchaser through CSFBC specifically
for use therein, it being understood and agreed that the only such information
consists of the information described as such in subsection (b) below; provided
further, however, that with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from any preliminary offering
circular, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Purchaser that sold the Offered Securities concerned
to the person asserting any such losses, claims, damages or liabilities, to the
extent that such sale was an initial resale by such Purchaser and any such loss,
claim, damage or liability of such Purchaser 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 Offered Securities to such person, a copy of the Offering
Document if the Issuer had previously furnished copies thereof to such Purchaser
and such Offering Document corrected such untrue statement or omission or
alleged untrue statement or omission.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Issuer and WMC against any losses, claims, damages or liabilities
to which the Issuer 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 any related preliminary
offering circular, 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 by such Purchaser through CSFBC specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Issuer in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the only such information furnished by any Purchaser consists of
the following information in the Offering Document furnished on behalf of the
Purchasers: the last paragraph at the bottom of the cover page concerning the
terms of the offering by the Purchaser, the legends concerning over-allotments
and stabilizing on the inside front cover page and, under the caption "Plan of
Distribution," (i) the third
<PAGE>
13
sentence of the second paragraph thereunder, (ii) the fifth paragraph thereunder
and (iii) the third sentence in the eighth paragraph thereunder.
(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 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 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 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 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 Sellers
bear to the total discounts and commissions received by the Purchasers from the
Sellers 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 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 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 Issuers under this Section shall be in
addition to any liability which the Issuer 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 the
Issuer within the meaning of the Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder and the aggregate
number of shares of Offered Securities that such defaulting Purchaser or
Purchasers agreed but failed to purchase does not exceed 10% of the total number
of shares of Offered Securities, CSFBC may make arrangements satisfactory to the
Sellers for
<PAGE>
14
the purchase of such Offered Securities by other persons, including any of the
Purchasers, but if no such arrangements are made by the Closing Date, the
non-defaulting Purchasers shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Purchasers agreed but failed to purchase. If any Purchaser or
Purchasers so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the number
of shares of Offered Securities and arrangements satisfactory to CSFBC and the
Sellers for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Purchaser or the Sellers, except as
provided in Section 9. As used in this Agreement, the term "Purchaser" includes
any person substituted for a Purchaser under this Section. Nothing herein will
relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Issuer or its 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 Issuers 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 Purchaser is not consummated, the Issuer shall remain
responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 (other than with respect to a defaulting Purchaser) and the respective
obligations of the Issuer and the Purchasers pursuant to Section 7 shall remain
in effect. If the purchase of the Offered Securities by the Purchasers is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 8 or solely because of the occurrence of any event
specified in clause (C), (D) or (E) of Section 6(b)(ii), the Issuer will
reimburse the Purchasers for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telecopied and confirmed to
the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, NY 10010 or, if sent to the Sellers, will be mailed, delivered
or electronically transmitted and confirmed to it at 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 telecopied 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 Issuers 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>
15
Each of the parties hereby submits 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 between the Sellers and the
Purchasers in accordance with its terms.
Very truly yours,
WinStar Communications, Inc.
By.........................................
Name:
Title:
WinStar Multichannel Corp.
By..........................................
Name:
Title:
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
Smith Barney Inc.
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
By Credit Suisse First Boston Corporation
By..........................................
Name:
Title:
<PAGE>
16
SCHEDULE A
<TABLE>
<CAPTION>
Number of Shares Number of Shares
of Convertible of Convertible
Preferred Stock Preferred Stock
Purchaser from the Issuer from WMC Total
- --------------------- ------------------- ------------------- -------------
<S> <C> <C> <C>
Credit Suisse First
Boston Corporation 2,035,000 165,000 2,200,000
Smith Barney Inc. 1,110,000 90,000 1,200,000
Morgan Stanley & Co.
Incorporated 370,000 30,000 400,000
NationsBanc Montgomery
Securities LLC 185,000 15,000 200,000
-------------- -------------- -------------
3,700,000 300,000 4,000,000
============= ============== =============
</TABLE>
<PAGE>
EXECUTION COPY
WINSTAR COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF SERIES D 7% SENIOR
CUMULATIVE CONVERTIBLE PREFERRED STOCK DUE 2010 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
- -------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
- -------------------------------------------------------------------------------
WinStar Communications, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") by its Restated
Certificate of Incorporation, as amended (hereinafter referred to as the
"Restated Certificate of Incorporation"), and pursuant to the provisions of
Sections 141(c)(2) and 151 of the General Corporation Law of the State of
Delaware, said Board of Directors is authorized to issue Preferred Stock of the
Company in one or more series and has duly approved and adopted the following
resolution on March 10, 1998 (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board
of Directors by its Restated Certificate of Incorporation, the Board of
Directors does hereby create, authorize and provide for the issuance of
Series D 7% Senior Cumulative Convertible Preferred Stock Due 2010, par
value $.01 per share, with a liquidation preference of $50 per share,
consisting of 4,000,000 shares having the designations, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth
in the Restated Certificate of Incorporation and in this Resolution as
follows:
(a) Designation. There is hereby created out of the authorized
and unissued shares of Preferred Stock of the Company a series of Preferred
Stock designated as the "Series D 7% Senior Cumulative Convertible Preferred
Stock Due 2010" (the "Convertible Preferred Stock"). The number of shares
constituting the Convertible Preferred Stock shall be 4,000,000. The liquidation
<PAGE>
2
preference of the Convertible Preferred Stock shall be $50 per share (the
"Liquidation Preference").
Capitalized terms used herein but not defined shall have the
meanings assigned to them in paragraph (m).
(b) Rank. The Convertible Preferred Stock will, with respect
to dividend rights and rights on liquidation, winding-up and dissolution, rank
(i) senior to all classes of Common Stock and to the Company's 6% Series A
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") and to
each other class of Capital Stock of the Company or series of Preferred Stock of
the Company established hereafter by the Board of Directors of the Company, the
terms of which do not expressly provide that it ranks senior to, or on a parity
with, the Convertible Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution of the Company (collectively referred
to, together with all classes of Common Stock of the Company, as "Junior
Stock"); (ii) on a parity with the Company's Series C 14-1/4% Senior Cumulative
Exchangeable Preferred Stock Due 2007 (the "Series C Preferred Stock") and each
other class of Capital Stock of the Company or series of Preferred Stock of the
Company established hereafter by the Board of Directors of the Company, the
terms of which expressly provide that such class or series will rank on a parity
with the Convertible Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively referred to as "Parity
Stock"); and (iii) junior to each class of Capital Stock of the Company or
series of Preferred Stock of the Company established hereafter by the Board of
Directors of the Company, the terms of which expressly provide that such class
or series will rank senior to the Convertible Preferred Stock as to dividend
rights or rights on liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Stock").
(c) Dividends. (i) Holders of the outstanding shares of
Convertible Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available therefor, dividends on each share of the Convertible Preferred Stock
at a rate per annum equal to 7% of the Liquidation Preference of such share
payable quarterly (each such quarterly period being herein called a "Dividend
<PAGE>
3
Period"). In addition to the dividends described in the preceding sentence,
holders of outstanding shares of Convertible Preferred Stock will be entitled to
additional dividends (the "Additional Dividends"), when, as and if declared by
the Board of Directors of the Company, out of funds legally available therefor,
with respect to the shares of Convertible Preferred Stock, which Additional
Dividends shall accrue as follows if any of the following events occur (each
such event in clauses (A) and (B) below being herein called a "Registration
Default"): (A) if by August 15, 1998 (or if such day is not a Business Day, the
next following Business Day), the Shelf Registration Statement has not been
declared effective by the Commission; or (B) if after the Shelf Registration
Statement is declared effective (1) the Shelf Registration Statement thereafter
ceases to be effective; or (2) the Shelf Registration Statement or the related
prospectus ceases to be usable (in each case except as permitted below) in
connection with resales of Transfer Restricted Securities in accordance with and
during the periods specified herein.
Additional Dividends shall accrue on the shares of Convertible
Preferred Stock from and including the date on which any such Registration
Default shall occur, to but excluding the date on which all such Registration
Defaults have been cured, at a rate of 2% per annum.
A Registration Default referred to in clause (B) of paragraph
(c)(i) shall be deemed not to have occurred and be continuing in relation to the
Shelf Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events with respect
to the Company that would need to be described in the Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company proceeds promptly and in good faith to amend or supplement the Shelf
Registration Statement and related prospectus to describe such events unless the
Company has determined in good faith that there are material legal or commercial
impediments in doing so; provided, however, that in any case if such
Registration Default referred to in clause (B) of paragraph (c)(i) occurs for a
continuous period in excess of 45 days, Additional Dividends shall be payable in
accordance with the immediately preceding paragraphs of this paragraph (c)(i)
<PAGE>
4
from the 46th day after such Registration Default initially occurs until such
Registration Default is cured.
Any amounts of Additional Dividends due pursuant to clauses
(A) or (B) of this paragraph (c)(i) or pursuant to the proviso contained in the
preceding sentence will be payable on the regular dividend payment dates with
respect to the Convertible Preferred Stock and on the same terms and conditions
and subject to the same limitations as pertain at such time for the payment of
regular dividends. The amount of Additional Dividends will be determined by
multiplying the Additional Dividends rate by the aggregate liquidation
preference of the outstanding shares of Convertible Preferred Stock, multiplied
by a fraction, the numerator of which is the number of days such Additional
Dividend 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.
All dividends on the Convertible Preferred Stock, including
Additional Dividends, to the extent accrued, shall be cumulative, whether or not
earned or declared, on a daily basis from the last date through which dividends
have been paid or, if no dividends have been paid, from the Issue Date, and
shall be payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year (each a "Dividend Payment Date"), commencing on
September 15, 1998 to holders of record on the Business Day immediately
preceding the relevant Dividend Payment Date.
Any dividend on the Convertible Preferred Stock shall be, at
the option of the Company, payable (i) in cash or (ii) through the issuance of a
number of shares (rounded up or down to the nearest whole number) of Common
Stock (hereinafter referred to as "Dividend Common Stock") equal to the dividend
amount divided by the Discounted Current Market Value (as defined below) of the
Common Stock; provided, however, that the Company shall not pay any dividends on
the Convertible Preferred Stock in cash prior to the date all obligations under
each of the Specified Indentures shall have been satisfied in full (the
"Specified Debt Satisfaction Date").
The "Discounted Current Market Value" of the Common Stock with
respect to a Dividend Payment Date means the product of (x) 97% and (y) the
closing bid price for the Common Stock as reported by the NNM, or the principal
securities exchange or other securities market on which the Common Stock is then
being traded, on the fourth Trading Day preceding such Dividend Payment Date.
<PAGE>
5
"Trading Day" means any day on which the Common Stock is traded for any period
on the NNM (or on the principal securities exchange or other securities market
on which the Common Stock is then being traded).
"Specified Indentures" means the following: (i) the Indenture
dated October 23, 1995, governing the 14% Convertible Senior Subordinated
Discount Notes Due 2005 of the Company; (ii) the Indenture dated October 23,
1995 governing the 14% Senior Discount Notes Due 2005 of the Company; (iii) the
Indenture dated as of March 1, 1997, governing the 14 1/2% Senior Deferred
Interest Notes Due 2005 of the Company; (iv) the Indenture dated as of March 1,
1997, governing the 12 1/2% Senior Secured Notes Due 2004 of WinStar Equipment
Corp.; (v) the Indenture dated as of August 1, 1997, governing the 12 1/2%
Senior Secured Notes Due 2004 of WinStar Equipment II Corp.; (vi) the Indenture
dated as of October 1, 1997, governing the 15% Senior Subordinated Deferred
Interest Notes Due 2007 of the Company; and (vii) the Indenture to be entered
into with respect to the 14 1/4% Senior Subordinated Deferred Interest Notes Due
2007 of the Company that may be issued upon exchange for Series C Preferred
Stock of the Company.
If within two years after the Issue Date a Registration
Default shall have occurred and be continuing on a record date in respect of a
Dividend Payment Date on which dividends are to be paid in respect of any shares
of Convertible Preferred Stock (such deferred dividends being herein referred to
as "Deferred Dividends") in shares of Dividend Common Stock, then such dividends
shall not be paid on such Dividend Payment Date but shall be paid on a
subsequent payment date (each such subsequent payment is herein referred to as a
"Deferred Dividend Payment Date"), determined by the Company, which shall be a
date after, but not more than 15 Trading Days after, such time as all
Registration Defaults have been cured or all the shares of Dividend Common Stock
to be paid in respect of such Deferred Dividends are eligible to be sold under
Rule 144(k) under the Securities Act. The Discounted Current Market Value of the
Common Stock with respect to such Deferred Dividend Payment Date shall be
determined on the fourth Trading Day prior to such Deferred Dividend Payment
Date, and such Deferred Dividends, together with dividends (including Additional
Dividends for the period during which the Registration Default continues)
accrued from the Dividend Payment Date as to which such Deferred Dividends were
not paid to but excluding such Deferred Dividends Payment Date, shall be paid to
the holders of record on the Business Day next preceding such Deferred Dividend
<PAGE>
6
Payment Date. The Company shall give notice to the Holders of Convertible
Preferred Stock of any date to be designated a Deferred Dividends Payment Date
at least ten Trading Days prior to such Deferred Dividend Payment Date.
(ii) All dividends paid with respect to shares of the
Convertible Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the holders entitled thereto.
(iii) No dividend whatsoever shall be declared or paid upon,
or any sum set apart for the payment of dividends upon, any outstanding share of
the Convertible Preferred Stock with respect to any Dividend Period unless all
dividends for all preceding Dividend Periods have been declared and paid or
declared and a sufficient sum set apart for the payment of such dividend, upon
all outstanding shares of Convertible Preferred Stock. No dividend will be
declared or paid on any Parity Stock unless full cumulative dividends have been
paid on the Convertible Preferred stock for all prior Dividend Periods;
provided, however, that if accrued dividends on the Convertible Preferred Stock
for all prior Dividend Periods have not been paid in full then any dividend
declared on the Convertible Preferred Stock for any Dividend Period and on any
Parity Stock will be declared ratably in proportion to accrued and unpaid
dividends on the Convertible Preferred Stock and such Parity Stock.
(iv) The Company will not (A) declare, pay or set apart funds
for the payment of any dividend or other distribution with respect to any Junior
Stock or (B) redeem, purchase or otherwise acquire for consideration any Junior
Stock through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the Convertible Preferred Stock and any Parity Stock
at the time such dividends are payable have been paid or funds have been set
apart for payment of such dividends and (2) sufficient funds have been paid or
set apart for the payment of the dividend for the current Dividend Period with
respect to the Convertible Preferred Stock and any Parity Stock. Notwithstanding
anything in this Certificate of Designations to the contrary, the Company may
declare and pay dividends on Parity Stock which are payable solely in additional
shares of or by the increase in the liquidation value of Parity Stock or Junior
Stock or on Junior Stock which are payable in additional shares of or by the
increase in the liquidation value of Junior Stock, as applicable, or repurchase,
redeem or otherwise acquire Junior Stock in exchange for Junior Stock and Parity
Stock in exchange for Parity Stock or Junior Stock.
<PAGE>
7
(v) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on the Business Day immediately prior to the payment thereof,
as may be fixed by the Board of Directors of the Company.
(vi) Dividends payable on the Convertible Preferred Stock for
any period other than a Dividend Period shall be computed on the basis of a
360-day year consisting of twelve 30-day months. If a Dividend Payment Date is
not a Business Day, payment of dividends shall be made on the next succeeding
Business Day and dividends accruing for the intervening period shall be paid on
the next succeeding Dividend Payment Date.
(d) Liquidation Preference. (i) Upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, holders of
Convertible Preferred Stock will be entitled to be paid, out of the assets of
the Company available for distribution to its stockholders, the Liquidation
Preference of the outstanding shares of Convertible Preferred Stock, plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends (whether or not earned or declared and including Additional Dividends,
if any,) thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up that would have been payable had the Convertible Preferred Stock been
the subject of an redemption on such date pursuant to paragraph (e)(i)) before
any distribution is made on any Junior Stock. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the amounts
payable with respect to the Convertible Preferred Stock and all Parity Stock are
not paid in full, the Convertible Preferred Stock and the Parity Stock will
share equally and ratably (in proportion to the respective amounts that would be
payable on such shares of Convertible Preferred Stock and the Parity Stock,
respectively, if all amounts payable thereon had been paid in full) in any
distribution of assets of the Company to which each is entitled. After payment
of the full amount of the Liquidation Preference of the outstanding shares of
Convertible Preferred Stock (and, if applicable, an amount equal to a prorated
dividend), the holders of shares of Convertible Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Company.
<PAGE>
8
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
other entities shall be deemed to be a liquidation, dissolution or winding-up of
the Company.
(e) Redemption. (i) Optional Redemption. (A) The Convertible
Preferred Stock shall not be redeemable at the option of the Company prior to
March 20, 2001. On or after March 20, 2001, each share of the Convertible
Preferred Stock may be redeemed (subject to the legal availability of funds
therefor) at any time, in whole or in part, at the option of the Company, at the
redemption prices set forth below, payable in cash, plus, without duplication,
an amount in cash equal to all accrued and unpaid dividends (including
Additional Dividends) to the date fixed for redemption (the "Optional Redemption
Date") (including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Optional Redemption
Date) (the "Optional Redemption Price").
If redeemed during the period commencing March 20, 2001
through March 14, 2002, the redemption price shall be $51.75.
If redeemed during the 12-month period commencing on March 15
of the years set forth below, the redemption prices shall be:
Period Redemption
Price
------ -----------
2002.................................. $51.17
2003.................................. 50.58
2004 and thereafter................... 50.00
(B) In the case of any partial optional redemption, selection
of the Convertible Preferred Stock for redemption will be made by the Company in
compliance with the requirements of the principal national securities exchange,
if any, on which the Convertible Preferred Stock is listed, or if the
Convertible Preferred Stock is not listed on a national securities exchange, on
a pro rata basis, by lot or such other method as the Company, in its sole
discretion, shall deem fair and appropriate; provided, however, that the Company
may redeem all the shares held by holders of fewer than 100 shares (or all of
<PAGE>
9
the shares held by the holders who would hold less than 100 shares as a result
of such redemption) as may be determined by the Company.
(C) In the case of a redemption date falling after a record
date and prior to the related Dividend Payment Date, the holders of the
Convertible Preferred Stock at the close of business on such record date will be
entitled to receive the dividend payable on such shares on the corresponding
Dividend Payment Date, notwithstanding the redemption of such shares following
such record date. Except as provided for in the preceding sentence, no payment
or allowance will be made for accrued dividends on any shares of Convertible
Preferred Stock called for redemption.
(ii) Mandatory Redemption. Each share of the Convertible
Preferred Stock (if not earlier redeemed or converted) shall be subject to
mandatory redemption in whole (to the extent of lawfully available funds
therefor) on March 15, 2010 (the "Mandatory Redemption Date") at a price in cash
equal to 100% of the Liquidation Preference of such share, plus, without
duplication, all accrued and unpaid dividends thereon (including an amount equal
to a prorated dividend thereon from the immediately preceding Dividend Payment
Date to the Mandatory Redemption Date), if any, to the Mandatory Redemption Date
(the "Mandatory Redemption Price"). The Company shall take all actions required
or permitted by Delaware law to permit the redemption described in this
paragraph (e)(ii).
(iii) Procedure for Redemption. (A) On and after the Optional
Redemption Date or the Mandatory Redemption Date, as the case may be (the
"Redemption Date"), unless the Company defaults in the payment of the applicable
redemption price, dividends will cease to accumulate on shares of Convertible
Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the Optional Redemption Price or
the Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
subparagraph (iii)(B) and the funds necessary for redemption (including an
amount in respect of all dividends that will accrue to the Redemption Date)
shall have been segregated and irrevocably set apart by the Company, in trust
for the benefit of the holders of the shares called for redemption, then
dividends shall cease to accumulate on the Redemption Date on the shares to be
redeemed and, at the close of business on the day on which such funds are
segregated and set apart, the holders of the shares to be redeemed shall, with
<PAGE>
10
respect to the shares to be redeemed, cease to be stockholders of the Company
and shall be entitled only to receive the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be, for such shares without interest
from the Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i)
or (e)(ii), the Company will send a written notice of redemption by first class
mail to each holder of record of shares of Convertible Preferred Stock, not
fewer than 15 days nor more than 60 days prior to the Redemption Date at its
registered address (the "Redemption Notice"); provided, however, that no failure
to give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to
paragraph (e)(i) or (e)(ii) hereof;
(2) the Optional Redemption Price or the Mandatory Redemption
Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Convertible Preferred Stock are to be redeemed and the total number of
shares of the Convertible Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the holder is to surrender to the Company, in the
manner, at the place or places and at the price designated, his
certificate or certificates representing the shares of Convertible
Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Convertible Preferred
Stock to be redeemed shall cease to accumulate on such Redemption Date
unless the Company defaults in the payment of the Optional Redemption
Price or the Mandatory Redemption Price, as
the case may be.
(C) Each holder of Convertible Preferred Stock shall surrender
the certificate or certificates representing such shares of Convertible
Preferred Stock to the Company, duly endorsed (or otherwise in proper form for
<PAGE>
11
transfer, as determined by the Company), in the manner and at the place
designated in the Redemption Notice, and on the Redemption Date the full
Optional Redemption Price or Mandatory Redemption Price, as the case may be, for
such shares shall be payable in cash to the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
(f) Voting Rights. (i) The holders of Convertible Preferred
Stock, except as otherwise required under Delaware law or as set forth in
paragraphs (ii) and (iii) below, shall not be entitled to vote on any matter
required or permitted to be voted upon by the stockholders of the Company.
(ii) (A) If (1) dividends on the Convertible Preferred Stock
are in arrears and unpaid for six or more Dividend Periods (whether or not
consecutive); or (2) the Company fails to redeem the Convertible Preferred Stock
on March 15, 2010, then the number of directors constituting the Board of
Directors will, subject to paragraph (f)(ii)(E), be increased by two directors
and the Holders of the then outstanding shares of Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect to serve on the Board of Directors the lesser of (x)
such two additional members to the Board of Directors or (y) that number of
directors constituting at least 25% of the members of the Board of Directors.
Each such event described in clauses (1) or (2) above is a "Voting Rights
Triggering Event".
(B) The voting rights set forth in paragraph (f)(ii)(A) above
will continue until such time as all dividends in arrears on the Convertible
Preferred Stock, or the Mandatory Redemption Price, as the case may be, are paid
in full, at which time the term of any directors elected pursuant to the
provisions of paragraph (f)(ii)(A) above (subject to the right of holders of any
other Preferred Stock to elect directors pursuant to the terms of the
instruments governing such Preferred Stock) shall terminate forthwith and the
number of directors constituting the Board of Directors shall be decreased by
such number (until the occurrence of any subsequent Voting Rights Triggering
Event).
<PAGE>
12
At any time after voting power to elect directors shall have
become vested and be continuing in the holders of Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable) pursuant to paragraph (f)(ii)(A) hereof, or if
vacancies shall exist in the offices of directors elected by such holders, a
proper officer of the Company may, and upon the written request of the holders
of record of at least 25% of the shares of Convertible Preferred Stock then
outstanding or the holders of 25% of the shares of Parity Stock then outstanding
upon which like rights have been confirmed and are exercisable addressed to the
secretary of the Company shall, call a special meeting of the Holders of
Convertible Preferred Stock and the holders of such Parity Stock for the purpose
of electing the directors which such holders are entitled to elect pursuant to
the terms hereof; provided, however, that no such special meeting shall be
called if the next annual meeting of stockholders of the Company is to be held
within 60 days after the voting power to elect directors shall have become
vested, in which case such meeting shall be deemed to have been called for such
next annual meeting. If such meeting shall not be called by a proper officer of
the Company within 20 days after personal service to the secretary of the
Company at its principal executive offices, then the Holders of record of at
least 25% of the outstanding shares of Convertible Preferred Stock or the
holders of 25% of the shares of Parity Stock upon which like rights have been
confirmed and are exercisable may designate in writing one of their members to
call such meeting at the expense of the Company, and such meeting may be called
by the person so designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders. Any holder of Convertible Preferred Stock or
such Parity Stock so designated shall have, and the Company shall provide,
access to the lists of holders of Convertible Preferred Stock and the holders of
such Parity Stock to be called pursuant to the provisions hereof. If no special
meeting of the Holders of Convertible Preferred Stock and the holders of such
Parity Stock is called as provided in this paragraph (f)(ii), then such meeting
shall be deemed to have been called for the next annual meeting of stockholders
of the Company or special meeting of the holders of any other Capital Stock of
the Company.
(C) At any meeting held for the purposes of electing directors
at which the Holders of Convertible Preferred Stock (together with the holders
of Parity Stock upon which like rights have been conferred and are
<PAGE>
13
exercisable) shall have the right, voting together as a separate class, to elect
directors as aforesaid, the presence in person or by proxy of the holders of at
least a majority in voting power of the outstanding shares of Convertible
Preferred Stock (and such Parity Stock) shall be required to constitute a quorum
thereof.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Convertible Preferred Stock (and such Parity Stock) may be
filled by the remaining director elected by the Holders of Convertible Preferred
Stock (and such Parity Stock) unless and until such vacancy shall be filled by
the Holders of Convertible Preferred Stock (and such Parity Stock).
(E) In the event that an event occurs at any time which
results in the holders of any Parity Stock having voting rights to elect
directors to the Board of Directors, holders of Convertible Preferred Stock
shall, whether or not such event otherwise constitutes a Voting Rights
Triggering Event pursuant to paragraph (f)(ii)(A), have the voting rights set
forth in paragraphs (f)(ii)(A) and (f)(ii)(B), and such event shall be deemed
(for purposes of this paragraph (f) only) to constitute a Voting Rights
Triggering Event. In addition, in the event that during a time in which
directors elected by the holders of Convertible Preferred Stock pursuant to this
paragraph (f)(ii) are serving on the Board of Directors ("Previously-Elected
Directors") an event occurs which results in holders of Parity Stock having
voting rights to elect (voting together with the holders of Convertible
Preferred Stock) at least two directors to the Board of Directors, the holders
of Convertible Preferred Stock shall vote together with the holders of such
Parity Stock to elect such new directors, and upon the election of the new
directors the Previously- Elected Directors shall (unless such
Previously-Elected Directors are elected as new directors) cease to serve on the
Board of Directors.
(iii) (A) So long as any shares of the Convertible Preferred
Stock are outstanding, the Company will not authorize, create or increase the
authorized amount of any class or series of (1) Senior Stock or (2) Parity Stock
that has a mandatory redemption date earlier than the Mandatory Redemption Date
of, or an Average Life less than the Average Life of, the Convertible Preferred
Stock, in each case without the affirmative vote or consent of holders of at
least two-thirds of the shares of Convertible Preferred Stock then outstanding,
voting or consenting, as the case may be, as one class, given in person or by
<PAGE>
14
proxy, either in writing or by resolution adopted at an annual or special
meeting. However, without the consent of any holder of Convertible Preferred
Stock, the Company may create additional classes of stock, increase the
authorized number of shares of Preferred Stock or issue a series of Parity Stock
or Junior Stock (subject, in the case of Parity Stock, to the preceding
sentence).
(B) So long as any shares of the Convertible Preferred Stock
are outstanding, the Company will not amend this Certificate of Designations so
as to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Convertible Preferred Stock or to authorize the
issuance of any additional shares of Convertible Preferred Stock without the
affirmative vote or consent of Holders of at least majority of the issued and
outstanding shares of Convertible Preferred Stock, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting. Notwithstanding the
foregoing, the Company when authorized by resolutions of its Board of Directors
may amend or supplement this Certificate of Designations without the consent of
any Holder to cure any ambiguity, defect or inconsistency or make any other
change provided that such amendments or supplements shall not adversely affect
the interests of the Holders.
(C) Except as set forth in paragraph (f)(iii)(A) or (B) above,
(x) the creation, authorization or issuance of any shares of any Junior Stock or
Parity Stock, including the designation of a series of Convertible Preferred
Stock, or (y) the increase or decrease in the amount of authorized Capital Stock
of any class, including Preferred Stock, shall not require the consent of
Holders of Convertible Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of shares of
Convertible Preferred Stock.
(iv) In any case in which the Holders of Convertible Preferred
Stock shall be entitled to vote pursuant to this paragraph (f) or pursuant to
Delaware law, each Holder of Convertible Preferred Stock entitled to vote with
respect to such matters shall be entitled to one vote for each share of
Convertible Preferred Stock held.
(v) Except as required by law, the Holders of the Convertible
Preferred Stock will not be entitled to vote on any merger or consolidation
involving the Company or a sale of all or substantially all the assets of the
Company.
<PAGE>
15
(g) Conversion. (i) At any time after the Issue Date, at the
option of the Holder thereof, any share of Convertible Preferred Stock may be
converted at the Liquidation Preference thereof into fully paid and
nonassessable Common Stock (calculated as to each conversion to the nearest
1/100 of a share), at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. Such conversion right shall expire at the
close of business on the Mandatory Redemption Date. In case a share of
Convertible Preferred Stock is called for optional redemption, such conversion
right in respect of the share of Convertible Preferred Stock so called shall
expire at the close of business on the applicable Optional Redemption Date,
unless the Company defaults in making the payment due upon redemption.
The price at which Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially $49.61 per
share of Common Stock. The Conversion Price shall be adjusted in certain
instances as provided in paragraph (g)(iv) and paragraph (g)(v).
(ii) In order to exercise the conversion privilege, the Holder
of any share of Convertible Preferred Stock to be converted shall surrender the
certificate for such share of Convertible Preferred Stock, duly endorsed or
assigned to the Company or in blank, at the office of the Transfer Agent or at
any office or agency of the Company maintained for that purpose, accompanied by
written notice to the Company in the form of Exhibit B that the Holder elects to
convert such share of Convertible Preferred Stock or, if fewer than all the
shares of Convertible Preferred Stock represented by a single share certificate
are to be converted, the number of shares represented thereby to be converted.
Such notice shall also contain the office or the address to which the Company
should deliver shares of Common Stock issuable upon conversion (and any other
payments or certificates related thereto).
Holders of shares of Convertible Preferred Stock at the close
of business on a record date will be entitled to receive the dividend payable on
such shares on the corresponding Dividend Payment Date notwithstanding the
conversion of such shares following such record date and prior to such Dividend
Payment Date. However, shares of Convertible Preferred Stock surrendered for
conversion during the period between the close of business on any record date
and the opening of business on the corresponding Dividend Payment Date (except
shares converted after the issuance of a notice of redemption with respect to a
<PAGE>
16
redemption date during such period, which will be entitled to such dividend)
must be accompanied by payment of an amount equal to the dividend payable on
such shares on such Dividend Payment Date. A holder of shares of Convertible
Preferred Stock on a record date who (or whose transferee) tenders any such
shares for conversion into shares of Common Stock on such Dividend Payment Date
will receive the dividend payable by the Company on such shares of Convertible
Preferred Stock on such date, and the converting holder need not include payment
of the amount of such dividend upon surrender of shares of Convertible Preferred
Stock for conversion. Except as provided above, the Company will make no payment
or allowance for unpaid dividends, whether or not in arrears, on converted
shares or the dividends on the shares of Common Stock issued upon such
conversion.
Shares of Convertible Preferred Stock shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such shares of Convertible Preferred Stock for conversion in
accordance with the foregoing provisions, and at such time the rights of the
Holders of such shares of Convertible Preferred Stock as Holders shall cease,
and the person or persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock at such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver to such office or
agency as the converting Holder shall have designated in its written notice to
the Company a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in paragraph (g)(iii) hereof.
In the case of any conversion of fewer than all the shares of
Convertible Preferred Stock evidenced by a certificate, upon such conversion the
Company shall execute and the Transfer Agent shall authenticate and deliver to
the Holder thereof (at the address designated by such Holder), at the expense of
the Company, a new certificate or certificates representing the number of
unconverted shares of Convertible Preferred Stock.
(iii) No fractional Common Stock shall be issued upon the
conversion of a share of Convertible Preferred Stock. If more than one share of
Convertible Preferred Stock shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock which shall be
<PAGE>
17
issuable upon conversion thereof shall be computed on the basis of the aggregate
shares of Convertible Preferred Stock so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon conversion of any
share of Convertible Preferred Stock, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the closing
price (as defined in paragraph (g)(iv)(7)) per share of Common Stock at the
close of business on the Business Day prior to the day of conversion.
(iv) The Conversion Price shall be adjusted from time to time
by the Company as follows:
(1) If the Company shall hereafter pay a dividend or make a
distribution in Common Stock to all holders of any outstanding class or
series of Common Stock, the Conversion Price in effect at the opening
of business on the date following the date fixed for the determination
of stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date (as defined in
paragraph (g)(iv)(7)) fixed for such determination and the denominator
shall be the sum of such number of outstanding shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business
on the day following the Record Date. If any dividend or distribution
of the type described in this paragraph (g)(iv)(i) is declared but not
so paid or made, the Conversion Price shall again be adjusted to the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(2) If the Company shall offer or issue rights or warrants to
all holders of its outstanding Common Stock entitling them to subscribe
for or purchase Common Stock at a price per share less than the Current
Market Price (as defined in paragraph (g)(iv)(7)) on the Record Date
fixed for the determination of stockholders entitled to receive such
rights or warrants, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion
Price in effect at the opening of business on the date after such
Record Date by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the
Record Date plus the number of shares of Common
<PAGE>
18
Stock which the aggregate offering price of the total number of shares
of Common Stock subject to such rights or warrants would purchase at
such Current Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding at the close of business
on the Record Date plus the total number of additional shares of Common
Stock subject to such rights or warrants for subscription or purchase.
Such adjustment shall become effective immediately after the opening of
business on the day following the Record Date fixed for determination
of stockholders entitled to purchase or receive such rights or
warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights or warrants, upon the expiration or termination
of such rights or warrants the Conversion Price shall again be adjusted
to be the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made
on the basis of delivery of only the number of shares of Common Stock
actually delivered. If such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such date fixed for the determination
of stockholders entitled to receive such rights or warrants had not
been fixed. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase Common Stock at less than such
Current Market Price, and in determining the aggregate offering price
of such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, with the value of
such consideration, if other than cash, to be determined by the Board
of Directors.
(3) If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, if the outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
<PAGE>
19
(4) If the Company shall, by dividend or otherwise, distribute
to all holders of its shares of Common Stock shares of any class of
Capital Stock of the Company (other than any dividends or distributions
to which paragraph (g)(iv)(1) applies) or evidences of its
indebtedness, cash or other assets (including securities, but excluding
any rights or warrants of a type referred to in paragraph (g)(iv)(2)
and excluding dividends and distributions paid exclusively in cash and
excluding any Capital Stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which paragraph (g)(v)
applies) (the foregoing hereinafter in this paragraph (g)(iv)(4) called
the "Distributed Securities"), then, in each such case, the Conversion
Price shall be reduced so that the same shall be equal to the price
determined by multiplying the Conversion Price in effect immediately
prior to the close of business on the Record Date (as defined in
paragraph (g)(iv)(7)) with respect to such distribution by a fraction
of which the numerator shall be the Current Market Price (determined as
provided in paragraph (g)(iv)(7)) of the Common Stock on such date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) on such date of the portion of the Distributed
Securities so distributed applicable to one share of Common Stock and
the denominator shall be such Current Market Price, such reduction to
become effective immediately prior to the opening of business on the
day following the Record Date; provided, however, that, in the event
the then fair market value (as so determined) of the portion of the
Distributed Securities so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price on the
Record Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each holder of Convertible Preferred Stock shall
have the right to receive upon conversion of a share of Convertible
Preferred Stock (or any portion thereof) the amount of Distributed
Securities such holder would have received had such holder converted
such share of Convertible Preferred Stock (or portion thereof)
immediately prior to such Record Date. If such dividend or distribution
is not so paid or made, the Conversion Price shall again be adjusted to
be the Conversion Price which would then be in effect if such dividend
or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of
this
<PAGE>
20
paragraph (g)(iv)(4) by reference to the actual or when issued trading
market for any securities comprising all or part of such distribution,
it must in doing so consider the prices in such market over the same
period used in computing the Current Market Price pursuant to paragraph
(g)(iv)(7) to the extent possible.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares
of the Company's Capital Stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Dilution Trigger Event"): (i) are deemed to
be transferred with such Common Stock; (ii) are not exercisable; and
(iii) are also issued in respect of future issuances of Common Stock,
shall be deemed not to have been distributed for purposes of this
paragraph (g)(iv)(4) (and no adjustment to the Conversion Price under
this paragraph (g)(iv)(4) shall be required) until the occurrence of
the earliest Dilution Trigger Event, whereupon such rights and warrants
shall be deemed to have been distributed and an appropriate adjustment
to the Conversion Price under this paragraph (g)(iv)(4) shall be made.
If any such rights or warrants, including any such existing rights or
warrants distributed prior to the date hereof, are subject to
subsequent events, upon the occurrence of each of which such rights or
warrants shall become exercisable to purchase different securities,
evidences of indebtedness or other assets, then the occurrence of each
such event shall be deemed to be such date of issuance and record date
with respect to new rights or warrants (and a termination or expiration
of the existing rights or warrants without exercise by the holder
thereof). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Dilution Trigger Event with
respect thereto, that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price
under this paragraph (g)(iv)(4) was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased
without exercise by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give effect to
such distribution or Dilution Trigger Event, as the case may be, as
though it were a cash distribution, equal to the per share redemption
or repurchase price received by a holder or holders of Common Stock
with respect to such rights or
<PAGE>
21
warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants which
shall have expired or been terminated without exercise by any holders
thereof, the Conversion Price shall be readjusted as if such rights and
warrants had not been issued.
Notwithstanding any other provision of this paragraph (g)(iv)(4) to the
contrary, Capital Stock, rights, warrants, evidences of indebtedness,
other securities, cash or other assets (including any rights
distributed pursuant to any shareholder rights plan) shall be deemed
not to have been distributed for purposes of this paragraph (g)(iv)(4)
if the Company makes proper provision so that each holder of shares of
Convertible Preferred Stock who converts a share of Convertible
Preferred Stock (or any portion thereof) after the date fixed for
determination of stockholders entitled to receive such distribution
shall be entitled to receive upon such conversion, in addition to the
Common Stock issuable upon such conversion, the amount and kind of such
distributions that such holder would have been entitled to receive if
such holder had, immediately prior to such determination date,
converted such share of Convertible Preferred Stock into Common Stock.
For purposes of this paragraph (g)(iv)(4) and paragraphs (g)(iv)(1) and
(2), any dividend or distribution to which this paragraph (g)(iv)(4) is
applicable that also includes Common Stock, or rights or warrants to
subscribe for or purchase Common Stock to which paragraph (g)(iv)(2)
applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, cash, assets, shares of
Capital Stock, rights or warrants other than (A) such shares of Common
Stock or (B) rights or warrants to which paragraph (g)(iv)(2) applies
(and any Conversion Price reduction required by this paragraph
(g)(iv)(4) with respect to such dividend or distribution shall then be
made) immediately followed by (2) a dividend or distribution of such
Common Stock or such rights or warrants (and any further Conversion
Price reduction required by paragraph (g)(iv)(1) and (2) with respect
to such dividend or distribution shall then be made), except that (1)
the Record Date of such dividend or distribution shall be substituted
as "the Record Date fixed for the determination of stockholders
<PAGE>
22
entitled to receive such dividend or other distribution", "Record Date
fixed for such determination" and "Record Date" within the meaning of
paragraph (g)(iv)(1) and as "the Record Date fixed for the
determination of stockholders entitled to receive such rights or
warrants", "the date fixed for the determination of the stockholders
entitled to receive such rights or warrants" and "such Record Date"
within the meaning of paragraph (g)(iv)(2), and (2) any share of Common
Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of paragraph (g)(iv)(1).
(5) If the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which paragraph (g)(v)
applies or as part of a distribution referred to in paragraph
(g)(iv)(4)) in an aggregate amount that, combined together with (1) the
aggregate amount of any other such distributions to all holders of its
Common Stock made exclusively in cash within the 12 months preceding
the date of payment of such distribution, and in respect of which no
adjustment pursuant to this paragraph (g)(iv)(5) has been made, and (2)
the aggregate of any cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of consideration
payable in respect of any tender offer by the Company or a Subsidiary
of the Company for all or any portion of the Common Stock concluded
within the 12 months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to
paragraph (g)(iv)(4) has been made, exceeds 12.5% of the product of the
Current Market Price (determined as provided in paragraph (g)(iv)(7))
on the Record Date with respect to such distribution times the number
of shares of Common Stock outstanding on such date, then, and in each
such case, immediately after the close of business on such date, the
Conversion Price shall be reduced so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such Record Date by a
fraction (i) the numerator of which shall be equal to the Current
Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 12.5%
<PAGE>
23
amount divided by (y) the number of shares of Common Stock outstanding
on the Record Date and (ii) the denominator of which shall be equal to
the Current Market Price on such Record Date; provided, however, that,
if the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price of
the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of
Convertible Preferred Stock shall have the right to receive upon
conversion of a share of Convertible Preferred Stock (or any portion
thereof) the amount of cash such holder would have received had such
holder converted such share of Convertible Preferred Stock (or portion
thereof) immediately prior to such Record Date. If such dividend or
distribution is not so paid or made, the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared.
(6) If a tender or exchange offer made by the Company or any
of its Subsidiaries for all or any portion of the Common Stock expires
and such tender or exchange offer (as amended upon the expiration
thereof) requires the payment to stockholders (based on the acceptance
(up to any maximum specified in the terms of the tender offer) of
Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution
of the Board of Directors) that, combined together with (1) the
aggregate of the cash plus the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors), as of the
expiration of such tender offer, of consideration payable in respect of
any other tender offers by the Company or any of its Subsidiaries for
all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer and in respect of which
no adjustment pursuant to this paragraph (g)(iv)(6) has been made and
(2) the aggregate amount of any distributions to all holders of the
Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer and in respect of which no adjustment
pursuant to paragraph (g)(iv)(5) has been made, exceeds 12.5% of the
product of the Current Market Price (determined as provided in
paragraph (g)(iv)(7)) as of the last time
<PAGE>
24
(the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended) times the number of shares of
Common Stock outstanding (including any tendered shares) at the
Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time,
the Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time multiplied by the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the tender offer) of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up
to any such maximum, being referred to as the "Purchased Shares") and
(y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares
pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if
such tender offer had not been made. If the application of this
paragraph (g)(iv)(6) to any tender offer would result in an increase in
the Conversion Price, no adjustment shall be made for such tender offer
under this paragraph (g)(iv)(6).
(7) For purposes of this paragraph (g)(iv), the following
terms shall have the meaning indicated:
"closing price" with respect to any securities on any day means the
last sale price on such day or, if no such sale takes place on such
day, the average of the reported high bid and low ask prices on such
day, in each case on the NNM or the New York Stock Exchange, as
<PAGE>
25
applicable, or, if such security is not listed or admitted to trading
on such national market or exchange, on the principal national
securities exchange or quotation system on which such security is
quoted or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or quotation
system, the average of the high bid and low ask prices of such security
on the over-the-counter market on the day in question as reported by
the National Quotation Bureau Incorporated or a similar generally
accepted reporting service, or, if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of
Directors.
"Current Market Price" means the average of the daily closing prices
per share of Common Stock for the 10 consecutive Trading Days
immediately prior to the date in question; provided, however, that (A)
if the "ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to paragraphs (g)(iv)(1),
(2), (3), (4), (5) or (6) occurs during such 10 consecutive trading
days, the closing price for each trading day prior to the "ex" date for
such other event shall be adjusted by multiplying such closing price by
the same fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (B) if the "ex" date for any
event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs on
or after the "ex" date for the issuance or distribution requiring such
computation and prior to the day in question, the closing price for
each trading day on and after the "ex" date for such other event shall
be adjusted by multiplying such closing price by the reciprocal of the
fraction by which the Conversion Price is so required to be adjusted as
a result of such other event and (C) if the "ex" date for the issuance
or distribution requiring such computation is prior to the day in
question, after taking into account any adjustment required pursuant to
clause (A) or (B) of this proviso, the closing price for each trading
day on or after such "ex" date shall be adjusted by adding thereto the
<PAGE>
26
amount of any cash and the fair market value (as determined by the
Board of Directors in a manner consistent with any determination of
such value for purposes of paragraphs (g)(iv)(4) or (5), whose
determination shall be conclusive and described in a resolution of the
Board of Directors) of the evidence of indebtedness, shares of Capital
Stock or assets being distributed applicable to one Common Stock as of
the close of business on the day before such "ex" date. For purposes of
any computation under paragraph (g)(vi), the Current Market Price on
any date shall be deemed to be the average of the daily closing prices
per share of Common Stock for such day and the next two succeeding
trading days; provided, however, that, if the "ex" date for any event
(other than the tender offer requiring such computation) that requires
an adjustment to the Conversion Price pursuant to paragraph (g)(iv)(1),
(2), (3), (4), (5) or (6) occurs on or after the Expiration Time for
the tender or exchange offer requiring such computation and prior to
the day in question, the closing price for each trading day on and
after the "ex" date for such other event shall be adjusted by
multiplying such closing price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result of
such other event. For purposes of this paragraph, the term "ex" date
(I) when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on the relevant
exchange or in the relevant market from which the closing price was
obtained without the right to receive such issuance or distribution,
(II) when used with respect to any subdivision or combination of Common
Stock, means the first date on which the Common Stock trades regular
way on such exchange or in such market after the time at which such
subdivision or combination becomes effective and (III) when used with
respect to any tender or exchange offer means the first date on which
the Common Stock trades regular way on such exchange or in such market
after the Expiration Time of such offer. Notwithstanding the foregoing,
whenever successive adjustments to the Conversion Price are called for
pursuant to this paragraph (g)(iv), such adjustments shall be made to
the Current Market Price as may be necessary or appropriate to
effectuate the intent of this paragraph (g)(iv) and to avoid unjust or
inequitable results, as determined in good faith by the Board of
Directors.
<PAGE>
27
"fair market value" shall mean the amount which a willing buyer would
pay a willing seller in an arm's- length transaction.
"Record Date" shall mean, with respect to any dividend, distribution or
other transaction or event in which the holders of Common Stock have
the right to receive any cash, securities or other property or in which
the Common Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other property,
the date fixed for determination of stockholders entitled to receive
such cash, securities or other property (whether such date is fixed by
the Board of Directors or by statute, contract or otherwise).
(8) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments which
by reason of this paragraph (g)(iv)(8) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph (g)(iv) shall be made
by the Company and shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. No adjustment need be
made for a change in the par value or no par value of the Common Stock.
(9) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Transfer Agent an
Officers' Certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Conversion
Price setting forth the adjusted Conversion Price and the date on which
each adjustment becomes effective and shall mail such notice of such
adjustment of the Conversion Price to each holder of Convertible
Preferred Stock at such holder's last address appearing on the register
of holders maintained for that purpose within 20 days of the effective
date of such adjustment. Failure to deliver such notice shall not
affect the legality or validity of any such adjustment.
(10) In any case in which this paragraph (g)(iv) provides that
an adjustment shall become effective immediately after a Record Date
for an event, the
<PAGE>
28
Company may defer until the occurrence of such event issuing to the
holder of any share of Convertible Preferred Stock converted after such
Record Date and before the occurrence of such event the additional
Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment.
(11) For purposes of this paragraph (g)(iv), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of Common
Stock. The Company shall not pay any dividend or make any distribution
on Common Stock held in the treasury of the Company.
(v) In case of any consolidation of the Company with, or
merger of the Company into, any other corporation, or in case of any
merger of another corporation into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company), or
in case of any conveyance or transfer of the properties and assets of
the Company substantially as an entirety, the holder of each share of
Convertible Preferred Stock then outstanding shall have the right
thereafter, during the period such Convertible Preferred Stock shall be
convertible as specified in paragraph (g)(i), to convert such share of
Convertible Preferred Stock only (subject to paragraph (ix)(1) in the
case of a Common Stock Change in Control) into the kind and amount of
securities, cash and other property receivable upon such consolidation,
merger, conveyance or transfer by a holder of the number of shares of
Common Stock of the Company into which such share of Convertible
Preferred Stock might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of
Common Stock of the Company failed to exercise his rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer
(provided that, if the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or
transfer is not the same for each share of Common Stock of the Company
in respect of which such rights of election shall not have been
exercised ("nonelecting
<PAGE>
29
share"), then for the purpose of this paragraph (g)(v) the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer by each nonelecting share
shall be deemed to be the kind and amount so receivable per share by a
plurality of the nonelecting shares). Such securities shall provide for
adjustments which, for events subsequent to the effective date of the
triggering event, shall be as nearly equivalent as may be practicable
to the adjustments provided for in this paragraph (g)(v). The above
provisions of this Section shall similarly apply to successive
consolidations, mergers, conveyances or transfers.
(vi) In case:
(1) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of its
earned surplus; or
(2) the Company shall authorize the granting to all holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of Capital Stock of any class or of any other rights; or
(3) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock), or of
any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company is required, or the sale or transfer
of all or substantially all the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the Convertible
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the Convertible Preferred Stock Register, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined or (y) the date
on which such reclassification,
<PAGE>
30
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Failure to give the notice requested by this Section
or any defect therein shall not affect the legality or validity of any dividend,
distribution, right, warrant, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up, or the vote upon any such
action.
(vii) The Company shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
shares of Common Stock (or out of its authorized shares of Common Stock held in
the treasury of the Company), for the purpose of effecting the conversion of the
Convertible Preferred Stock, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding shares of Convertible Preferred
Stock.
(viii) The Company will pay any and all document, stamp or
similar issue or transfer taxes that may be payable in respect of the issue or
delivery of Common Stock on conversion of the Convertible Preferred Stock
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the holder of
the share of Convertible Preferred Stock or the shares of Convertible Preferred
Stock to be converted, and no such issue or delivery shall be made unless and
until the Person requesting such issue has paid to the Company the amount of any
such tax, or has established to the satisfaction of the Company that such tax
has been paid.
(ix) (1) Notwithstanding any other provision in the preceding
paragraphs to the contrary, if any Change in Control occurs then the Conversion
Price in effect shall be adjusted immediately after such Change in Control as
described below. In addition, in the event of a Common Stock Change in Control
(as defined in this paragraph (g)(ix)), each share of the Convertible Preferred
Stock shall be convertible solely into common stock of the kind received by
holders of Common Stock as the result of such Common Stock Change in Control.
For purposes of calculating any adjustment to be made pursuant to this
<PAGE>
31
paragraph in the event of a Change in Control, immediately after such Change in
Control:
(A) in the case of a Non-Stock Change in Control (as defined
in this paragraph (g)(ix)), the Conversion Price shall thereupon become
the lower of (x) the Conversion Price in effect immediately prior to
such Non-Stock Change in Control, but after giving effect to any other
prior adjustments, and (y) the result obtained by multiplying the
greater of the Applicable Price (as defined in this paragraph (g)(ix))
or the then applicable Reference Market Price (as defined in this
paragraph (g)(ix)) by a fraction of which the numerator shall be $50.00
and the denominator shall be the then current Optional Redemption Price
per share; or, prior to March 20, 2001, an amount per share determined
by the Company in its sole discretion, after consultation with an
investment banking firm, to be the equivalent of the hypothetical
Optional Redemption Price that would have been applicable if the
Convertible Preferred Stock had been redeemable during such period; and
(B) in the case of a Common Stock Change in Control, the
Conversion Price in effect immediately prior to such Common Stock
Change in Control, but after giving effect to any prior adjustments,
shall thereupon be adjusted by multiplying such Conversion Price by a
fraction, of which the numerator shall be the Purchaser Stock Price (as
defined in this paragraph (g)(ix)) and the denominator shall be the
Applicable Price; provided, however, that in the event of a Common
Stock Change in Control in which (x) 100% of the value of the
consideration received by a holder of Common Stock is common stock of
the successor, acquiror, or other third party (and cash, if any, is
paid with respect to any fractional interests in such common stock
resulting from such Common Stock Change in Control) and (y) all of the
Common Stock will have been exchanged for, converted into, or acquired
for, common stock (and cash with respect to fractional interests) of
the successor, acquiror or other third party, the Conversion Price in
effect immediately prior to such Common Stock Change in Control shall
thereupon be adjusted by multiplying such Conversion Price by a
fraction, of which the numerator shall be one (1) and the denominator
shall be the number of shares of common stock of the successor,
acquiror, or other third party received by a holder of
<PAGE>
32
one share of Common Stock as a result of such Common Stock Change in
Control.
(3) For purposes of this paragraph (ix), the following terms
shall have the meanings indicated:
"Applicable Price" means (i) in the event of a Non-Stock
Change in Control in which the holders of the Common Stock receive only
cash, the amount of cash received by the holder of one share of Common
Stock and (ii) in the event of any other Non-Stock Change in Control or
any Common Stock Change in Control, the average of the closing bid
prices for the Common Stock during the ten Trading Days prior to and
including the record date for the determination of the holders of
Common Stock entitled to receive cash, securities, property or other
assets in connection with such Non- Stock Change in Control or Common
Stock Change in Control or, if there is no such record date, the date
upon which the holders of the Common Stock shall have the right to
receive such cash, securities, property or other assets, in each case,
as adjusted in good faith by the Board of Directors to appropriately
reflect any of the events referred to in paragraph (g)(iv)(1) through
(6).
"Common Stock Change in Control" means any Change in Control
in which more than 50% of the value (as determined in good faith by the
Board of Directors of the Company) of the consideration received by
holders of Common Stock consists of common stock that for each of the
ten consecutive Trading Days referred to in the preceding paragraph has
been admitted for listing or admitted for listing subject to notice of
issuance on a national securities exchange or quoted on the NNM;
provided, however, that a Change in Control shall not be a Common Stock
Change in Control unless either (i) the Company continues to exist
after the occurrence of such Change in Control and the outstanding
shares of Convertible Preferred Stock continue to exist as outstanding
shares of Convertible Preferred Stock, or (ii) not later than the
occurrence of such Change in Control, the outstanding shares of
Convertible Preferred Stock are converted into or exchanged for shares
of convertible preferred stock of a corporation succeeding to the
business of the Company, which convertible preferred stock has powers,
preferences and relative, participating, optional or other rights, and
qualifications, limitations and restrictions,
<PAGE>
33
substantially similar to those of the Convertible Preferred Stock.
"Non-Stock Change in Control" means any Change in
Control other than a Common Stock Change in Control.
"Purchaser Stock Price" means, with respect to any Common
Stock Change in Control, the product of (i) the number of shares of
common stock received in such Common Stock Change of Control for each
share of Common Stock, and (ii) the average of the per share closing
bid prices for the common stock received in such Common Stock Change in
Control for the ten consecutive Trading Days prior to and including the
record date for the determination of the holders of Common Stock
entitled to receive such common stock, or if there is no such record
date, the date upon which the holders of the Common Stock shall have
the right to receive such common stock, in each case, as adjusted in
good faith by the Board of Directors to appropriately reflect any of
the events referred to in paragraph (g)(iv)(1) through (6); provided,
however, that if no such closing bid prices exist, then the Purchaser
Stock Price shall be set at a price determined in good faith by the
Board of Directors of the Company.
"Reference Market Price" shall initially mean $26.46 (which is
an amount equal to 66-2/3% of the reported last sale price for the
Common Stock on the NNM on March 11, 1998), and in the event of any
adjustment to the conversion prices other than as a result of a Change
in Control, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the Conversion Price after
giving effect to any such adjustment shall always be the same as the
ratio of $26.46 to the initial Conversion Price set forth in paragraph
(g)(i).
(x) If, as a result of the operation of this paragraph (g),
the cumulative number of shares of Common Stock issued or issuable upon
conversion of the Convertible Preferred Stock, after giving effect to the
adjustments described in this paragraph (g) and all prior conversions of
Convertible Preferred Stock, would exceed a number (the "Threshold Number")
equal to 20% of the outstanding shares of Common Stock as of the Issue Date,
then until and unless the Company obtains the approval of its common
stockholders for the issuance of any shares of Common Stock in excess of the
Threshold Number, the Conversion Price shall be adjusted pursuant to this
<PAGE>
34
paragraph (g) to that price that would entitle the holders of Convertible
Preferred Stock to receive in the aggregate, upon conversion of all the
Convertible Preferred Stock (including all prior conversions of Convertible
Preferred Stock), no more than the Threshold Number of shares of Common Stock.
If, as a result of the operation of the preceding sentence, the adjustments
required by operation of paragraph (g) in the Conversion Price is limited
because appropriate stockholder approval has not been obtained, the Company
agrees for the benefit of the Holders of Convertible Preferred Stock to seek, as
promptly as reasonably practicable, the requisite approval of its common
stockholders for the full adjustment of the Conversion Price as required by
operation of paragraph (g) (without giving effect to the preceding sentence).
(h) Reissuance of Convertible Preferred Stock. Shares of
Convertible Preferred Stock that have been issued and reacquired in any manner,
including shares purchased, redeemed, converted or exchanged, shall not be
reissued as shares of Convertible Preferred Stock and shall (upon compliance
with any applicable provisions of the laws of Delaware) have the status of
authorized and unissued shares of Preferred Stock undesignated as to series and
may be redesignated and reissued as part of any series of Preferred Stock;
provided, however, that so long as any shares of Convertible Preferred Stock are
outstanding, any issuance of such shares must be in compliance with the terms
hereof. Upon any such reacquisitions, the number of shares of Convertible
Preferred Stock authorized pursuant to this Certificate of Designations shall be
reduced by the number of shares so reacquired.
(i) Business Day. If any payment, redemption or exchange shall
be required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(j) Limitation on Mergers and Asset Sales. The Company may not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any person unless: (1) the successor,
transferee or lessee (if not the Company) is organized and existing under the
laws of the United States of America or any State thereof or the District of
Columbia and the Convertible Preferred Stock shall be converted into or
exchanged for and shall become shares of such successor, transferee or lessee,
having in respect of such successor, transferee or lessee substantially the same
powers, preference and relative participating, optional or other special rights
<PAGE>
35
and the qualifications, limitations or restrictions thereon, that the
Convertible Preferred Stock had immediately prior to such transaction; and (2)
the Company delivers to the Transfer Agent an Officers' Certificate and an
Opinion of Counsel stating that such consolidation, merger or transfer complies
with this Certificate of Designations. The successor, transferee or lessee will
be the successor company.
(k) Certificates. (i) Form and Dating. The Convertible
Preferred Stock and the Transfer Agent's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Certificate of Designations. The Convertible
Preferred Stock certificate 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 Convertible Preferred Stock certificate shall
be dated the date of its authentication. The terms of the Convertible Preferred
Stock certificate set forth in Exhibit A are part of the terms of this
Certificate of Designations.
(A) Global Convertible Preferred Stock. The Convertible
Preferred Stock shall be issued initially in the form of one or more fully
registered global certificates with the global securities legend and restricted
securities legend set forth in Exhibit A hereto (the "Global Convertible
Preferred Stock"), which shall be deposited on behalf of the purchasers
represented thereby with the Transfer Agent, at its New York office, as
custodian for DTC (or with such other custodian as DTC may direct), and regis
tered in the name of DTC or a nominee of DTC, duly executed by the Company and
authenticated by the Transfer Agent as hereinafter provided. The number of
shares of Convertible Preferred Stock represented by Global Convertible
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided. With respect to shares of Convertible Preferred Stock that are not
"restricted securities" as defined in Rule 144 on a record date for the payment
of dividends or on a conversion date, all shares of Dividend Common Stock
distributed on the related Dividend Payment Date in payment of dividends or on
such conversion date will be freely transferable without restriction under the
Securities Act (other than by affiliates), and such shares will be eligible for
receipt in global form through the facilities of DTC.
<PAGE>
36
(B) Book-Entry Provisions. In the event Global Convertible
Preferred Stock is deposited with or on behalf of DTC, the Company shall execute
and the Transfer Agent shall authenticate and deliver initially one or more
Global Convertible Preferred Stock certificates that (a) shall be registered in
the name of DTC for such Global Convertible Preferred Stock or the nominee of
DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's
instructions or held by the Transfer Agent as custodian for DTC.
Members of, or participants in, DTC ("Agent Members") shall
have no rights under this Certificate of Designations with respect to any Global
Convertible Preferred Stock held on their behalf by DTC or by the Transfer Agent
as the custodian of DTC or under such Global Convertible Preferred Stock, and
DTC may be treated by the Company, the Transfer Agent and any agent of the
Company or the Transfer Agent as the absolute owner of such Global Convertible
Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the
exercise of the rights of a holder of a beneficial interest in any Global
Convertible Preferred Stock.
(C) Certificated Convertible Preferred Stock; Certificated
Dividend Common Stock; Certificated Conversion Common Stock. Except as provided
in this paragraph (k)(i) or in paragraph (k)(iii), owners of beneficial
interests in Global Convertible Preferred Stock will not be entitled to receive
physical delivery of Convertible Preferred Stock in fully registered
certificated form ("Certificated Convertible Preferred Stock"). With respect to
shares of Convertible Preferred Stock that are "restricted securities" as
defined in Rule 144 on a record date for the payment of dividends or on a
conversion date, all such shares of Dividend Common Stock distributed on the
related Dividend Payment Date in payment of dividends on the Convertible
Preferred Stock or all such shares of Conversion Common Stock issuable on such
conversion date will be issued in fully registered certificated form
("Certificated Dividend Common Stock" or "Certificated Conversion Common Stock",
and collectively, "Certificated Common Stock"). Certificates of Certificated
Common Stock will be mailed or made available at the office of the Transfer
Agent for the Convertible Preferred Stock on or as soon as reasonably
practicable
<PAGE>
37
after the relevant Dividend Payment Date or the conversion date, as the case may
be, to those Persons who are Holders of Convertible Preferred Stock shown on the
records of DTC at the close of business on the relevant record date (in the case
of Certificated Dividend Common Stock) or to the converting holder (in the case
of Certificated Conversion Common Stock).
After a transfer of any Convertible Preferred Stock or
Certificated Common Stock during the period of the effectiveness of a Shelf
Registration Statement with respect to such Convertible Preferred Stock or such
Certificated Common Stock, all requirements pertaining to legends on such
Convertible Preferred Stock (including Global Convertible Preferred Stock) or
Certificated Common Stock will cease to apply, the requirements requiring that
any such Convertible Preferred Stock or Certificated Common Stock issued to
Holders be issued in global form or that any such Certificated Common Stock
issued to Holders be issued in certificated form, as the case may, will cease to
apply, and Convertible Preferred Stock or Common Stock, as the case may be, in
global or fully registered certificated form, in either case without legends,
will be available to the transferee of the Holder of such Convertible Preferred
Stock or Certificated Common Stock upon exchange of such transferring Holder's
Convertible Preferred Stock or Common Stock or directions to transfer such
Holder's interest in the Global Convertible Preferred Stock, as applicable.
(ii) Execution and Authentication. Two Officers shall sign the
Convertible Preferred Stock certificate for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Convertible Preferred Stock certificate and may be in
facsimile form.
If an Officer whose signature is on Convertible Preferred
Stock certificate no longer holds that office at the time the Transfer Agent
authenticates the Convertible Preferred Stock certificate, the Convertible
Preferred Stock certificate shall be valid nevertheless.
A Convertible Preferred Stock certificate shall not be valid
until an authorized signatory of the Transfer Agent manually signs the
certificate of authentication on the Convertible Preferred Stock certificate.
The signature shall be conclusive evidence that the Convertible Preferred Stock
certificate has been authenticated under this Certificate of Designations.
<PAGE>
38
The Transfer Agent shall authenticate and deliver certificates
for 4,000,000 shares of Convertible Preferred Stock for original issue 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 number of shares of Convertible Preferred Stock to be
authenticated and the date on which the original issue of Convertible Preferred
Stock is to be authenticated.
The Transfer Agent may appoint an authenticating agent
reasonably acceptable to the Company to authenticate the certificates for
Convertible Preferred Stock. Unless limited by the terms of such appointment, an
authenticating agent may authenticate certificates for Convertible Preferred
Stock whenever the Transfer Agent may do so. Each reference in this Certificate
of Designations to authentication by the Transfer Agent includes authentication
by such agent. An authenticating agent has the same rights as the Transfer Agent
or agent for service of notices and demands.
(iii) Transfer and Exchange. (A) Transfer and Exchange of
Certificated Convertible Preferred Stock. When Certificated Convertible
Preferred Stock is presented to the Transfer Agent with a request to register
the transfer of such Certificated Convertible Preferred Stock or to exchange
such Certificated Convertible Preferred Stock for an equal number of shares of
Certificated Convertible Preferred Stock of other authorized denominations, the
Transfer Agent shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Certificated Convertible Preferred Stock surrendered for transfer or
exchange:
(1) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Transfer Agent, duly executed by the Holder thereof or its
attorney duly authorized in writing; and
(2) is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause
(I) or (II) below, and is accompanied by the following additional
information and documents, as applicable:
(I) if such Certificated Convertible Preferred Stock
is being delivered to the Transfer Agent by a Holder for
registration in the name of
<PAGE>
39
such Holder, without transfer, a certification from such
Holder to that effect in substantially the form of Exhibit C
hereto; or
(II) if such Certificated Convertible Preferred Stock
is being transferred to the Company or to a "qualified
institutional buyer" ("QIB") in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under
the Securities Act, (i) a certification to that effect (in
substantially the form of Exhibit C hereto and, if applicable,
Exhibit D hereto) and (ii) if the Company so requests, an
Opinion of Counsel or other evidence reasonably satisfactory
to it as to the compliance with the restrictions set forth in
the legend set forth in paragraph (k)(iii)(G).
(B) Restrictions on Transfer of Certificated Convertible
Preferred Stock for a Beneficial Interest in Global Convertible Preferred Stock.
Certificated Convertible Preferred Stock may not be exchanged for a beneficial
interest in Global Convertible Preferred Stock except upon satisfaction of the
requirements set forth below. Upon receipt by the Transfer Agent of Certificated
Convertible Preferred Stock, duly endorsed or accompanied by appropriate
instruments of transfer, in form reasonably satisfactory to the Company and the
Transfer Agent, together with written instructions directing the Transfer Agent
to make, or to direct DTC to make, an adjustment on its books and records with
respect to such Global Convertible Preferred Stock to reflect an increase in the
number of shares of Convertible Preferred Stock represented by the Global
Convertible Preferred Stock, then the Transfer Agent shall cancel such
Certificated Convertible Preferred Stock and cause, or direct DTC to cause, in
accordance with the standing instructions and procedures existing between DTC
and the Transfer Agent, the number of shares of Convertible Preferred Stock
represented by the Global Convertible Preferred Stock to be increased
accordingly. If no Global Convertible Preferred Stock is then outstanding, the
Company shall issue and the Transfer Agent shall authenticate, upon written
order of the Company in the form of an Officers' Certificate, a new Global
Convertible Preferred Stock representing the appropriate number of shares.
(C) Transfer and Exchange of Global Convertible Preferred
Stock. The transfer and exchange of Global
<PAGE>
40
Convertible Preferred Stock or beneficial interests therein shall be effected
through DTC, in accordance with this Certificate of Designations (including
applicable restrictions on transfer set forth herein, if any) and the
procedures of DTC therefor.
(D) Transfer of a Beneficial Interest in Global Convertible
Preferred Stock for a Certificated Convertible Preferred Stock.
(1) Any person having a beneficial interest in Convertible
Preferred Stock that is being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant
to an exemption from registration in accordance with Rule 144 may upon
request, and if accompanied by a certification from such person to that
effect (in substantially the form of Exhibit C hereto), exchange such
beneficial interest for Certificated Convertible Preferred Stock
representing the same number of shares of Convertible Preferred Stock.
Upon receipt by the Transfer Agent of written instructions or such
other form of instructions as is customary for DTC from DTC or its
nominee on behalf of any person having a beneficial interest in Global
Convertible Preferred Stock and upon receipt by the Transfer Agent of a
written order or such other form of instructions as is customary for
DTC or the person designated by DTC as having such a beneficial
interest in a Transfer Restricted Security only, then, the Transfer
Agent or DTC, at the direction of the Transfer Agent, will cause, in
accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Convertible
Preferred Stock represented by Global Convertible Preferred Stock to be
reduced on its books and records and, following such reduction, the
Company will execute and the Transfer Agent will authenticate and
deliver to the transferee Certificated Convertible Preferred Stock.
(2) Certificated Convertible Preferred Stock issued in
exchange for a beneficial interest in a Global Convertible Preferred
Stock pursuant to this paragraph (k)(iii)(D) shall be registered in
such names and in such authorized denominations as DTC, pursuant to
instructions from its direct or indirect participants or otherwise,
shall instruct the Transfer Agent. The Transfer Agent shall deliver
such
<PAGE>
41
Certificated Convertible Preferred Stock to the persons in whose names
such Convertible Preferred Stock are so registered in accordance with
the instructions of DTC.
(E) Restrictions on Transfer and Exchange of Global
Convertible Preferred Stock.
(1) Notwithstanding any other provisions of this Certificate
of Designations (other than the provisions set forth in paragraph
(k)(iii)(F)), Global Convertible Preferred Stock may not be transferred
as a whole except 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 depository or a nominee of such successor depository.
(2) In the event that the Global Convertible Preferred Stock
is exchanged for Convertible Preferred Stock in definitive registered
form pursuant to paragraph (k)(iii)(F) prior to the effectiveness of a
Shelf Registration Statement with respect to such Securities, such
Convertible Preferred Stock may be exchanged only in accordance with
such procedures as are substantially consistent with the provisions of
this paragraph (k)(iii) (including the certification requirements set
forth in the Exhibits to this Certificate of Designations intended to
ensure that such transfers comply with Rule 144A, Regulation S or such
other applicable exemption from registration under the Securities Act,
as the case may be) and such other procedures as may from time to time
be adopted by the Company.
(F) Authentication of Certificated Convertible Preferred
Stock. If at any time:
(1) DTC notifies the Company that DTC is unwilling or unable
to continue as depository for the Global Convertible Preferred Stock
and a successor depository for the Global Convertible Preferred Stock
is not appointed by the Company within 90 days after delivery of such
notice;
(2) DTC ceases to be a clearing agency registered
under the Exchange Act;
(3) there shall have occurred and be continuing a
Voting Rights Triggering Event; or
<PAGE>
42
(4) the Company, in its sole discretion, notifies the Transfer
Agent in writing that it elects to cause the issuance of Certificated
Convertible Preferred Stock under this Certificate of Designations,
then the Company will execute, and the Transfer Agent, upon receipt of a written
order of the Company signed by two Officers or by an Officer and an Assistant
Treasurer of the Company requesting the authentication and delivery of
Certificated Convertible Preferred Stock to the persons designated by the
Company, will authenticate and deliver Certificated Convertible Preferred Stock
equal to the number of shares of Convertible Preferred Stock represented by the
Global Convertible Preferred Stock, in exchange for such Global Convertible
Preferred Stock.
(G) Legend. (1) Except as permitted by the following paragraph
(2) and in paragraph (k)(i)(c), each certificate evidencing the Global
Convertible Preferred Stock, the Certificated Convertible Preferred Stock and
Certificated Common Stock shall bear a legend in substantially the following
form:
"THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) [(AND THE COMMON
STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE)] WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. [EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY (OR THE COMMON STOCK INTO WHICH THIS
SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.] THE HOLDER OF THE
SECURITY EVIDENCED HEREBY [(AND OF THE COMMON STOCK INTO WHICH THIS
SECURITY IN CONVERTIBLE)] AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY [(AND THE COMMON STOCK INTO WHICH THIS SECURITY IS
CONVERTIBLE)] MAY BE RESOLD, PLEDGED OR OTHERWISE
<PAGE>
43
TRANSFERRED, ONLY (1) [TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A,] (2) IN AN OFFSHORE TRANSACTION COMPLYING
WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B)
IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE
UNITED STATES." */
(2) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by Global
Convertible Preferred Stock) pursuant to Rule 144 under the Securities Act or an
effective registration statement under the Securities Act:
(I) in the case of any Transfer Restricted Security
that is a Certificated Convertible Preferred Stock, the
Transfer Agent shall permit the Holder thereof to exchange
such Transfer Restricted Security for Certificated Convertible
Preferred Stock that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security; and
(II) in the case of any Transfer Restricted Security
that is represented by a Global Convertible Preferred Stock,
the Transfer Agent shall permit the Holder thereof to exchange
such Transfer Restricted Security for Certificated Convertible
Preferred Stock that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security, if the Holder's request for such exchange
was made in reliance on Rule 144 and the Holder certifies to
that effect in writing to the Transfer Agent (such
certification to be in the form set forth in Exhibit C
hereto).
_______________________________
* Brackets indicate legend for shares of Convertible Preferred Stock only.
<PAGE>
44
(H) Cancellation or Adjustment of Global Convertible Preferred
Stock. At such time as all beneficial interests in Global Convertible Preferred
Stock have either been exchanged for Certificated Convertible Preferred Stock,
redeemed, repurchased or canceled, such Global Convertible Preferred Stock shall
be returned to DTC for cancellation or retained and canceled by the Transfer
Agent. At any time prior to such cancellation, if any beneficial interest in
Global Convertible Preferred Stock is exchanged for Certificated Convertible
Preferred Stock, redeemed, repurchased or canceled, the number of shares of
Convertible Preferred Stock represented by such Global Convertible Preferred
Stock shall be reduced and an adjustment shall be made on the books and records
of the Transfer Agent with respect to such Global Convertible Preferred Stock,
by the Transfer Agent or DTC, to reflect such reduction.
(I) Obligations with Respect to Transfers and Exchanges of
Convertible Preferred Stock. (1) To permit registrations of transfers and
exchanges, the Company shall execute and the Transfer Agent shall authenticate
Certificated Convertible Preferred Stock and Global Convertible Preferred Stock
as required pursuant to the provisions of this paragraph (k)(iii).
(2) All Certificated Convertible Preferred Stock and Global
Convertible Preferred Stock issued upon any registration of transfer or
exchange of Certificated Convertible Preferred Stock or Global
Convertible Preferred Stock shall be the valid obligations of the
Company, entitled to the same benefits under this Certificate of
Designations as the Certificated Convertible Preferred Stock or Global
Convertible Preferred Stock surrendered upon such registration of
transfer or exchange.
(3) Prior to due presentment for registration of transfer of
any shares of Convertible Preferred Stock, the Transfer Agent and the
Company may deem and treat the person in whose name such shares of
Convertible Preferred Stock are registered as the absolute owner of
such Convertible Preferred Stock and neither the Transfer Agent nor the
Company shall be affected by notice to the contrary.
(4) No service charge shall be made to a Holder for any
registration of transfer or exchange upon surrender of any Convertible
Preferred Stock Certificate or Common Stock Certificate at the office
of the Transfer Agent maintained for that purpose.
<PAGE>
45
However, the Company may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Convertible Preferred
Stock certificates or Common Stock certificate.
(5) Upon any sale or transfer of shares of Convertible
Preferred Stock (including any Convertible Preferred Stock represented
by a Global Convertible Preferred Stock Certificate) or of Certificated
Common Stock pursuant to an effective registration statement under the
Securities Act, pursuant to Rule 144 under the Securities Act or
pursuant to an opinion of counsel reasonably satisfactory to the
Company that no legend is required:
(A) in the case of any Certificated Convertible Preferred
Stock or Certificated Common Stock, the Company and the
Transfer Agent shall permit the holder thereof to
exchange such Convertible Preferred Stock or
Certificated Common Stock for Certificated Convertible
Preferred Stock or Certificated Common Stock, as the
case may be, that does not bear the legend set forth in
paragraph (iii)(G) above and rescind any restriction on
the transfer of such Convertible Preferred Stock or
Dividend Common Stock or Conversion Common Stock
issuable in respect thereof; and
(B) in the case of any Global Convertible Preferred Stock,
such Convertible Preferred Stock shall not be required
to bear the legend set forth in paragraph (iii)(G)
above but shall continue to be subject to the
provisions of paragraph (iii)(D) hereof; provided,
however, that with respect to any request for an
exchange of Convertible Preferred Stock that is
represented by Global Convertible Preferred Stock for
Certificated Convertible Preferred Stock that does not
bear the legend set forth in paragraph (iii)(G) above
in connection with a sale or transfer thereof pursuant
to Rule 144 (and based upon an opinion of counsel if
the Company so requests), the Holder thereof shall
certify in writing to the Transfer Agent that such
request is being made pursuant to Rule 144 (such
certification to
<PAGE>
46
be substantially in the form of Exhibit C hereto).
(J) No Obligation of the Transfer Agent.
(i) The Transfer Agent shall have no responsibility or
obligation to any beneficial owner of Global Convertible Preferred
Stock, a member of, or a participant in DTC or any other Person with
respect to the accuracy of the records of DTC or its nominee or of any
participant or member thereof, with respect to any ownership interest
in the Convertible Preferred Stock or with respect to the delivery to
any participant, member, beneficial owner or other Person (other than
DTC) of any notice (including any notice of redemption or repurchase)
or the payment of any amount, under or with respect to such Global
Convertible Preferred Stock. All notices and communications to be given
to the Holders and all payments to be made to Holders under the
Convertible Preferred Stock shall be given or made only to the
registered Holders (which shall be DTC or its nominee in the case of
the Global Convertible Preferred Stock). The rights of beneficial
owners in any Global Convertible Preferred Stock shall be exercised
only through DTC subject to the applicable rules and procedures of DTC.
The Transfer Agent may rely and shall be fully protected in relying
upon information furnished by DTC with respect to its mem bers,
participants and any beneficial owners.
(ii) The Transfer Agent shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under this Certificate of Designations or under
applicable law with respect to any transfer of any interest in any
Convertible Preferred Stock (including any transfers between or among
DTC participants, members or beneficial owners in any Global
Convertible Preferred Stock) 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 Certificate of Designations, and to examine the same to
determine substantial compliance as to form with the express
requirements hereof.
(iv) Replacement Certificates. If a mutilated Convertible Preferred
Stock certificate is surrendered to the Transfer Agent or if the Holder of a
<PAGE>
47
Preferred Stock certificate claims that the Convertible Preferred
StockConvertible certificate has been lost, destroyed or wrongfully taken, the
Company shall issue and the Transfer Agent shall countersign a replacement
Convertible Preferred Stock certificate if the reasonable requirements of the
Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in effect
in the State of New York are met. If required by the Transfer Agent or the
Company, such Holder shall furnish an indemnity bond sufficient in the judgment
of the Company and the Transfer Agent to protect the Company and the Transfer
Agent from any loss which either of them may suffer if a Convertible Preferred
Stock certificate is replaced. The Company and the Transfer Agent may charge the
Holder for their expenses in replacing a Convertible Preferred Stock
certificate.
(v) Temporary Certificates. Until definitive Convertible
Preferred Stock certificates are ready for delivery, the Company may prepare and
the Transfer Agent shall countersign temporary Convertible Preferred Stock
certificates. Temporary Convertible Preferred Stock certificates shall be
substantially in the form of definitive Convertible Preferred Stock certificates
but may have variations that the Company considers appropriate for temporary
Convertible Preferred Stock certificates. Without unreasonable delay, the
Company shall prepare and the Transfer Agent shall countersign definitive
Convertible Preferred Stock certificates and deliver them in exchange for
temporary Convertible Preferred Stock certificates.
(vi) Cancellation. (A) In the event the Company shall purchase
or otherwise acquire Certificated Convertible Preferred Stock, the same shall
thereupon be delivered to the Transfer Agent for cancellation.
(B) At such time as all beneficial interests in Global
Convertible Preferred Stock have either been exchanged for Certificated
Convertible Preferred Stock, redeemed, repurchased or canceled, such Global
Convertible Preferred Stock shall thereupon be delivered to the Transfer
Agent for cancellation.
(C) The Transfer Agent and no one else shall cancel and
destroy all Convertible Preferred Stock certificates surrendered for transfer,
exchange, replacement or cancellation and deliver a certificate of such
destruction to the Company unless the Company directs the Transfer Agent to
deliver canceled Convertible Preferred Stock certificates to the Company. The
Company may not issue new Convertible Preferred Stock certificates to replace
<PAGE>
48
Convertible Preferred Stock certificates to the extent they evidence Convertible
Preferred Stock which the Company has purchased or otherwise acquired.
(l) Additional Rights of Holders. In addition to the rights
provided to Holders under this Certificate of Designations, Holders shall have
the rights set forth in the Registration Rights Agreement.
(m) Certain Definitions. As used in this Certificate of
Designations, the following terms shall have the following meanings (and (1)
terms defined in the singular have comparable meanings when used in the plural
and vice versa, (2) "including" means including without limitation, (3) "or" is
not exclusive and (4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles as in effect on the Issue Date and all accounting calculations will
be determined in accordance with such principles), unless the content otherwise
requires:
"Average Life" means, as of the date of determina tion, with
respect to any Preferred Stock, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive redemption or similar payment with respect to such Preferred
Stock multiplied by the amount of such payment by (ii) the sum of all such
payments.
"Business Day" means each day which is not a Legal
Holiday.
"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 Issue Date, including all Common Stock and Preferred Stock.
"Change in Control" or "Change of Control" means: (i) the
sale, lease, transfer, conveyance other disposition (other than by way of merger
or consolidation), in one or a series of related transactions, of all or
substantially all the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction
<PAGE>
49
(including any merger or consolidation) the result of which is that any "person"
(as defined above), other than certain present officers, directors and
stockholders of the Company and their affiliates on the date of this Certificate
of Designations, becomes the beneficial owner (as determined in accordance with
Rules 13d-3 and 13d-5 under the Exchange Act except that a person will be deemed
to have beneficial ownership of all shares that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the voting stock of the
Company or (iv) the first day on which a majority of the members of the board of
directors (excluding the directors elected pursuant to paragraph (f)) are not
Continuing Directors.
"Common Stock" means the Company's common stock, par value
$0.01 per share.
"Continuing Directors" means, as of any date of determination,
individuals who on the Issue 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 Issue Date or whose
election or nomination for election was previously so approved).
"Dividend Period" means each period between two consecutive
Dividend Payment Dates and the period from the Issue Date to the first Dividend
Payment Date.
"DTC" or "Depository" means The Depository Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holders" means the registered holders from time to time of
the Convertible Preferred Stock.
"Issue Date" means the date on which the Convertible Preferred
Stock is initially issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions are not required to be open in the State of New York.
"NNM" means The Nasdaq National Market.
<PAGE>
50
"Officer" means the Chairman of the Board of Directors, the
President, any Vice President, the Treasurer, the Secretary or any Assistant
Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Transfer Agent. The counsel may be an employee
of or counsel to the Company or the Transfer Agent.
"person" or "Person" means any individual, corporation,
partnership, joint venture, limited liability company, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
"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 all series and
classes of such preferred or preference stock.
"Registration Rights Agreement" means the Registration Rights
Agreement dated March 12, 1998 among the Company, Credit Suisse First Boston
Corporation, Smith Barney Inc., Morgan Stanley & Co. Incorporated and
NationsBanc Montgomery Securities LLC with respect to the Convertible Preferred
Stock.
"SEC" or "Commission" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933.
"Shelf Registration Statement" means a shelf registration
statement filed with the SEC to cover resales of Transfer Restricted Securities
by holders thereof, as required by the Registration Rights Agreement.
"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 shares of outstanding Voting Stock is owned,
directly or indirectly, by such Person, or one or more other Subsidiaries of
such Person.
<PAGE>
51
"Transfer Agent" means the transfer agent for the Convertible
Preferred Stock appointed by the Company, which initially shall be Continental
Stock Transfer & Trust Company.
"Transfer Restricted Securities" means each share of
Convertible Preferred Stock (or the shares of Common Stock into which such share
of Convertible Preferred Stock is convertible) and shares of Dividend Common
Stock and issued in payment of dividends on the Convertible Preferred Stock, if
any, as permitted in accordance with the terms hereof until (i) the date on
which such security or its predecessor or, in the case of Dividend Common Stock,
the Convertible Preferred Stock in respect of which such Dividend Common Stock
has been paid has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (ii) the date
on which such security or its predecessor or, in the case of Dividend Common
Stock, the Convertible Preferred Stock in respect of which such Dividend Common
Stock has been paid 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
(or any successor rule thereof) or would be saleable pursuant to Rule 144(k)
under the Securities Act had it not been held by, or had it never been held by,
an affiliate of the Company.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in the
election of directors.
<PAGE>
52
IN WITNESS WHEREOF, said WinStar Communications,
Inc., has caused this Certificate of Designations to be
signed by Timothy R. Graham, its Executive Vice President,
this 17th day of March, 1998.
WINSTAR COMMUNICATIONS, INC.,
by ______________________________
Name: Timothy R. Graham
Title: Executive Vice
President
<PAGE>
EXHIBIT A
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON
STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) AND THE COMMON STOCK ISSUABLE IN
PAYMENT OF DIVIDENDS ON THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) AGREES
FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO
WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE
COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OF 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
- --------
Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
<PAGE>
2
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.]**
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE CERTIFICATE OF Designations REFERRED TO BELOW.]**
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
REGISTRAR AND TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
Certificate Number Number of Shares of Convertible
Preferred Stock
[ ] [ ]
CUSIP NO.: [ ]
Series D 7% Senior Cumulative Convertible Preferred Stock
Due 2010 (par value $0.01) (liquidation preference
$50 per share of Convertible Preferred Stock)
of
WinStar Communications, Inc.
WinStar Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that [ ] (the "Holder") is the registered owner of
fully paid and non-assessable preferred securities of the Company designated the
Series D 7% Senior Cumulative Convertible Preferred Stock Due 2010 (par value
$0.01) (liquidation preference $50 per share of Convertible Preferred Stock)
(the "Convertible Preferred Stock"). The shares of Convertible Preferred Stock
are transferable on the books and records of the Registrar, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer. The Designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Convertible Preferred Stock
- --------
Subject to removal if not a global security.
<PAGE>
3
represented hereby are issued and shall in all respects be subject to the
provisions of the Certificate of Designations dated March 17, 1998, as the same
may be amended from time to time (the "Certificate of Designations").
Capitalized terms used herein but not defined shall have the meaning given them
in the Certificate of Designations. The Company will provide a copy of the
Certificate of Designations to a Holder without charge upon written request to
the Company at its principal place of business.
Reference is hereby made to select provisions of the
Convertible Preferred Stock set forth on the reverse hereof, and to the
Certificate of Designations, which select provisions and the Certificate of
Designations shall for all purposes have the same effect as if set forth at this
place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designations and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication
hereon has been properly executed, these shares of Convertible Preferred Stock
shall not be entitled to any benefit under the Certificate of Designations or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate
this [ ] day of [ ], [ ].
WINSTAR COMMUNICATIONS, INC.,
By: __________________________________
Name:
Title:
[Seal]
By: __________________________________
Name:
Title:
<PAGE>
4
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Stock referred to in
the within-mentioned Certificate of Designations.
Dated: [ ], [ ]
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
as Transfer Agent,
By: _____________________________
Authorized Signatory
<PAGE>
5
REVERSE OF SECURITY
Dividends on each share of Convertible Preferred Stock shall
be payable at a rate per annum set forth in the face hereof or as provided in
the Certificate of Designations (including Additional Dividends). Dividends may
be paid in cash or in shares of Common Stock of the Company, at the option of
the Company.
The shares of Convertible Preferred Stock shall be redeemable
as provided in the Certificate of Designations. The shares of Convertible
Preferred Stock shall be convertible into the Company's Common Stock in the
manner and according to the terms set forth in the Certificate of Designations.
As required under Delaware law, the Company shall furnish to
any Holder upon request and without charge, a full summary statement of the
designations, voting rights preferences, limitations and special rights of the
shares of each class or series authorized to be issued by the Company so far as
they have been fixed and determined and the authority of the Board of Directors
to fix and determine the designations, voting rights, preferences, limitations
and special rights of the class and series of shares of the Company.
<PAGE>
6
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the
shares of Convertible Preferred Stock evidenced hereby to: ____________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert assignee's social security or tax identification number)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute another
to act for him or her.
Date: ________________________________
Signature: ________________________________
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)
Signature Guarantee:*** _______________________________________________
____________________________
(Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of Series D 7% Senior Cumulative Convertible Preferred Stock (the "Convertible
Preferred Stock"), represented by stock certificate No(s). (the "Convertible
Preferred Stock Certificates") into shares of common stock ("Common Stock") of
WinStar Communications, Inc. (the "Company") according to the conditions of the
Certificate of Designations, Preferences and Rights of the Convertible Preferred
Stock (the "Certificate of Designations"), as of the date written below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates. No fee will be charged to the holder for
any conversion, except for transfer taxes, if any. A copy of each Convertible
Preferred Stock Certificate is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933 (the "Act"),
or pursuant to any exemption from registration under the Act.
Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designations and the Convertible Preferred Stock,
agrees to be bound by the terms of the Registration Rights Agreement.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designations.
Date of Conversion: ___________________________________________
Applicable Conversion Price: __________________________________
Number of shares of Convertible
Preferred Stock to be Converted: ______________________________
Number of shares of Common Stock to be Issued: ________________
<PAGE>
2
Signature: ________________________________________________
Name: ____________________________________________________
Address:** ________________________________________________
Fax No.: __________________________________________________
*The Company is not required to issue shares of Common Stock until the original
Convertible Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Company or its Transfer
Agent. The Company shall issue and deliver shares of Common Stock to an
overnight courier not later than three business days following receipt of the
original Convertible Preferred Stock Certificate(s) to be converted.
**Address where shares of Common Stock and any other payments or certificates
shall be sent by the Company.
<PAGE>
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF CONVERTIBLE PREFERRED STOCK
Re: Series D 7% Senior Cumulative Convertible Preferred
Stock Due 2010 (the "Convertible Preferred Stock") of
WinStar Communications, Inc. (the "Company")
This Certificate relates to ____ shares of Convertible
Preferred Stock held in |_| */ book-entry or |_| */ definitive form by
_______________ (the "Transferor").
The Transferor*:
|_| has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Convertible Preferred Stock held by
the depository shares of Convertible Preferred Stock in definitive, registered
form equal to its beneficial interest in such Convertible Preferred Stock (or
the portion thereof indicated above); or
|_| has requested the Transfer Agent by written order
to exchange or register the transfer of Convertible
Preferred Stock.
In connection with such request and in respect of such
Convertible Preferred Stock, the Transferor does hereby certify that the
Transferor is familiar with the Certificate of Designations relating to the
above-captioned Convertible Preferred Stock and that the transfer of this
Convertible Preferred Stock does not require registration under the Securities
Act of 1933 (the "Securities Act") because */:
|_| Such Convertible Preferred Stock is being acquired for the
Transferor's own account without transfer.
|_| Such Convertible Preferred Stock is being transferred to the
Company.
|_| Such Convertible Preferred Stock is being transferred (i) to
a qualified institutional buyer (as defined in Rule 144A under the Securities
Act), in reliance on Rule 144A or (ii) pursuant to an exemption from
registration in accordance with Rule 904 under the Securities Act (and, in the
case of clause (ii), based on an opinion of counsel if the Company so requests
and together with a certification in substantially the form of Exhibit D to the
Certificate of Designations).
_____________________
__/Please check applicable box.
<PAGE>
2
|_| Such Convertible Preferred Stock is being transferred in reliance
on and in compliance with another exemption from the registration requirements
of the Securities Act (and based on an opinion of counsel if the Company so
requests).
______________________________________
[INSERT NAME OF TRANSFEROR]
by __________________________________
Date: ___________________
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
----------, ----
Continental Stock Transfer & Trust Company
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed sale of certain Series D 7%
Senior Cumulative Convertible Preferred Stock Due 2010 (the "Convertible
Preferred Stock") of WinStar Communications, Inc., a Delaware corporation ("the
"Company"), we represent that:
(i) the offer of the Convertible Preferred Stock was not made to
a person in the United States;
(ii) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S under the Securities Act of 1933 (the
"Securities Act"), as applicable; and
(iv) the transaction is not part of a plan or scheme by us to
evade the registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
<PAGE>
2
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
----------------------------------
(Name of Transferor)
by _______________________________
Name:
Title:
Address:
<PAGE>
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON
STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) AND THE COMMON STOCK ISSUABLE IN
PAYMENT OF DIVIDENDS ON THIS SECURITY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) AGREES
FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO
WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE
COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OF 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
- --------
Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
<PAGE>
2
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.]**
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE CERTIFICATE OF Designations REFERRED TO BELOW.]**
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
REGISTRAR AND TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
Certificate Number Number of Shares of Convertible
Preferred Stock
[ ] [ ]
CUSIP NO.: [ ]
Series D 7% Senior Cumulative Convertible Preferred Stock
Due 2010 (par value $0.01) (liquidation preference
$50 per share of Convertible Preferred Stock)
of
WinStar Communications, Inc.
WinStar Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that [ ] (the "Holder") is the registered owner of
fully paid and non-assessable preferred securities of the Company designated the
Series D 7% Senior Cumulative Convertible Preferred Stock Due 2010 (par value
$0.01) (liquidation preference $50 per share of Convertible Preferred Stock)
(the "Convertible Preferred Stock"). The shares of Convertible Preferred Stock
are transferable on the books and records of the Registrar, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer. The Designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Convertible Preferred Stock
- --------
Subject to removal if not a global security.
<PAGE>
3
represented hereby are issued and shall in all respects be subject to the
provisions of the Certificate of Designations dated March 17, 1998, as the same
may be amended from time to time (the "Certificate of Designations").
Capitalized terms used herein but not defined shall have the meaning given them
in the Certificate of Designations. The Company will provide a copy of the
Certificate of Designations to a Holder without charge upon written request to
the Company at its principal place of business.
Reference is hereby made to select provisions of the
Convertible Preferred Stock set forth on the reverse hereof, and to the
Certificate of Designations, which select provisions and the Certificate of
Designations shall for all purposes have the same effect as if set forth at this
place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designations and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication
hereon has been properly executed, these shares of Convertible Preferred Stock
shall not be entitled to any benefit under the Certificate of Designations or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate
this [ ] day of [ ], [ ].
WINSTAR COMMUNICATIONS, INC.,
By: __________________________________
Name:
Title:
[Seal]
By: __________________________________
Name:
Title:
<PAGE>
4
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Stock referred to in
the within-mentioned Certificate of Designations.
Dated: [ ], [ ]
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
as Transfer Agent,
By: _____________________________
Authorized Signatory
<PAGE>
5
REVERSE OF SECURITY
Dividends on each share of Convertible Preferred Stock shall
be payable at a rate per annum set forth in the face hereof or as provided in
the Certificate of Designations (including Additional Dividends). Dividends may
be paid in cash or in shares of Common Stock of the Company, at the option of
the Company.
The shares of Convertible Preferred Stock shall be redeemable
as provided in the Certificate of Designations. The shares of Convertible
Preferred Stock shall be convertible into the Company's Common Stock in the
manner and according to the terms set forth in the Certificate of Designations.
As required under Delaware law, the Company shall furnish to
any Holder upon request and without charge, a full summary statement of the
designations, voting rights preferences, limitations and special rights of the
shares of each class or series authorized to be issued by the Company so far as
they have been fixed and determined and the authority of the Board of Directors
to fix and determine the designations, voting rights, preferences, limitations
and special rights of the class and series of shares of the Company.
<PAGE>
6
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the
shares of Convertible Preferred Stock evidenced hereby to: ____________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert assignee's social security or tax identification number)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute another
to act for him or her.
Date: ________________________________
Signature: ________________________________
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)
Signature Guarantee:*** _______________________________________________
____________________________
(Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE>
4,000,000 Shares
WINSTAR COMMUNICATIONS, INC.
Series D 7% Senior Cumulative Convertible Preferred Stock
Due 2010
(Liquidation Preference $50 per share)
REGISTRATION RIGHTS AGREEMENT
March 12, 1998
Credit Suisse First Boston Corporation
Smith Barney Inc.
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Ladies and Gentlemen:
Winstar Communications, Inc., a Delaware corporation (the
"Company"), together with its wholly owned subsidiary, WinStar Multichannel
Corp., a Delaware corporation, propose to issue and sell to Credit Suisse First
Boston Corporation, Smith Barney Inc., Morgan Stanley & Co. Incorporated and
NationsBanc Montgomery Securities LLC (the "Initial Purchasers"), upon the terms
set forth in a purchase agreement of even date herewith (the "Purchase
Agreement"), 4,000,000 shares of the Company's Series D 7% Senior Cumulative
Convertible Preferred Stock Due 2010 (liquidation preference $50 per share) (the
"Convertible Preferred Stock"). The Convertible Preferred Stock will be
convertible into shares of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock") at the conversion price set forth in the Offering
Circular dated March 12, 1998 (the "Offering Circular"), subject to adjustment
in accordance with the Certificate of Designation of the Convertible Preferred
Stock (the "Certificate of Designation"). Dividends on the Convertible Preferred
Stock may, at the option of the Company be paid in shares of Common Stock, as
described in the Offering Circular. The Convertible Preferred Stock and the
Common Stock issuable as dividends on the Convertible Preferred Stock or upon
conversion of the Convertible Preferred Stock are collectively herein referred
to as the "Securities" and each of them as held singularly is herein referred to
as a "Security". As an inducement to the Initial Purchasers to
<PAGE>
2
enter into the Purchase Agreement and in satisfaction of a condition to the
Initial Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders of the Securities from time to time (each of the
foregoing a "Holder" and together the "Holders"), as follows:
1. Shelf Registration. So long as any Transfer Restricted
Security (as defined in Section 5 hereof) exists, the Company shall take the
following actions:
(a) The Company shall, at its cost, prepare and, not later
than 45 days after (or if such 45th day is not a business day, the first
business day thereafter) the date of original issue of the Convertible Preferred
Stock, file with the Securities and Exchange Commission (the "Commission") and
thereafter shall use its best efforts to cause to be declared effective on or
prior to August 15, 1998 a registration statement on the appropriate form (the
"Shelf Registration Statement") covering the offer and sale of the Transfer
Restricted Securities by the Holders thereof 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 of 1933 (the "Securities Act")
(hereinafter, the "Shelf Registration").
(b) The Company shall use its 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 relevant
Securities, until such time as all the Securities covered by the Shelf
Registration Statement have been sold pursuant thereto or may be sold pursuant
to Rule 144(k) under the Securities Act (or any successor rule thereof),
assuming for this purpose that the Holders thereof are not affiliates of the
Company (in any such case, such period being called the "Shelf Registration
Period"). The Company shall be deemed not to have used its best efforts to keep
the Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Securities covered
thereby not being able to offer and sell such Securities during that period,
unless (i) such action is required by applicable law or (ii) upon the occurrence
of any event contemplated by paragraph 2(b)(iv) below, such action is taken by
<PAGE>
3
the Company in good faith and for valid business reasons and the Company
thereafter promptly complies with the requirements of paragraph 2(h) below if
the Company has determined in good faith that there are no material legal or
commercial impediments in so doing.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause (other than information required to be
supplied by the selling Holders pursuant to this Agreement) (i) the Shelf
Registration Statement and the related prospectus and any amendment or
supplement thereto to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission thereunder, (ii) the Shelf Registration Statement and any amendment
thereto not to contain, when it becomes effective, an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming a part of the Shelf Registration Statement, and any amendment or
supplement to such prospectus, not to contain, as of the date of such prospectus
or amendment or supplement, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) The Company shall ensure that the Shelf Registration
Statement includes the shares of Common Stock issued in payment of dividends, if
any, as permitted in accordance with the terms of the Convertible Preferred
Stock.
2. Registration Procedures. In connection with the Shelf
Registration contemplated by Section 1 hereof the following provisions shall
apply so long as any Transfer Restricted Security exists:
(a) The Company shall (i) furnish, without charge, to the
Initial Purchasers, prior to the filing thereof with the Commission, a copy of
the Shelf Registration Statement and each amendment thereof and each amendment
or supplement, other than such amendments or supplements filed solely pursuant
to (iii) below, 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 Shelf Registration
Statement, shall use its best efforts to reflect in each such document, when so
filed with the
<PAGE>
4
Commission, such comments as such Initial Purchaser reasonably and timely may
propose, (ii) include in each such document the names of the Holders who notify
the Company that they propose to sell Transfer Restricted Securities pursuant to
the Shelf Registration Statement as selling security holders and (iii) file
pursuant to Rule 424(b) under the Securities Act an amendment to the Shelf
Registration Statement or amend the prospectus to cover new Holders of
Securities upon written notice by such new Holders to such effect.
(b) The Company shall give written notice to the Initial
Purchasers and the Holders of Transfer Restricted Securities included within the
coverage of the Shelf Registration Statement (which notice pursuant to clauses
(ii)-(iv) hereof shall be accompanied by an instruction, if applicable, to
suspend the use of the prospectus until the requisite changes have been made):
(i) when the Shelf Registration Statement or any amendment
thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose;
(iii) of the receipt by the Company or its legal counsel of
any notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(iv) of the happening of any event that requires the Company
to make changes in the Shelf Registration Statement or the prospectus
in order that the Shelf Registration Statement and the prospectus do
not contain an untrue statement of a material fact and do not 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 Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Shelf Registration Statement.
<PAGE>
5
(d) The Company shall furnish to each Holder of Transfer
Restricted Securities included within the coverage of the Shelf Registration, if
the Holder so requests in writing, without charge, one copy of the Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Transfer Restricted Securities included within the
coverage of the Shelf Registration Statement, 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 Company consents, subject to the provisions of this
Agreement, to the use of the then current prospectus or any amendment thereto,
together with any supplement thereto, by each of the selling Holders in
connection with the offering and sale of the Transfer Restricted Securities
covered by the prospectus, or any amendment or supplement thereto, included in
the Shelf Registration Statement.
(f) Prior to any public offering of the Securities pursuant to
the Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Transfer Restricted Securities included
therein and their respective counsel in connection with the registration or
qualification of such Securities for offer and sale under the securities or
"blue sky" laws of such states of the United States as any such Holder
reasonably requests in writing and do any and all other acts or things
reasonably necessary or advisable to enable the offer and sale in such
jurisdictions of the Securities covered by the Shelf Registration Statement;
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then otherwise
required to be so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction where it is not
then so subject.
(g) The Company shall cooperate with the Holders of the
Transfer Restricted Securities to facilitate the timely preparation and delivery
of certificates representing the Securities sold pursuant to the Shelf
Registration Statement free of any restrictive legends and in such denominations
<PAGE>
6
and registered in such names as the Holders may request in connection with sales
of the Securities pursuant to the Shelf Registration Statement.
(h) Upon the occurrence of any event contemplated by
paragraphs (ii) through (iv) of Section 2(b) above during the period for which
the Company is required to maintain an effective Shelf Registration Statement,
the Company shall promptly prepare and file a post-effective amendment to the
Shelf Registration Statement or an amendment or 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 the prospectus will
not contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. If the
Company notifies the Initial Purchasers or the Holders of Transfer Restricted
Securities included within the coverage of the Shelf Registration Statement, in
accordance with paragraphs (ii) through (iv) of Section 2(b) above, to suspend
the use of the prospectus until the requisite changes to the prospectus have
been made, then the Initial Purchasers and the Holders shall suspend use of such
prospectus.
(i) Not later than the effective date of the Shelf
Registration Statement, the Company will provide CUSIP numbers for the
Convertible Preferred Stock registered for resale under the Shelf Registration
Statement, and use reasonable commercial efforts to provide printed certificates
for such Convertible Preferred Stock, in form eligible for deposit with The
Depository Trust Company.
(j) The Company will comply with all rules and regulations of
the Commission to the extent and so long as they are applicable to the Shelf
Registration and will make generally available to its 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 Company's
first fiscal quarter commencing after the effective date of the Shelf
Registration Statement, which statement shall cover such 12-month period.
(k) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder, his or her ownership of Securities and the
distribution of the Securities by such Holder as the
<PAGE>
7
Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such registration the
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
(l) The Company shall (i) make reasonably available for
inspection by the Holders of the Transfer Restricted Securities included within
the coverage of the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Securities all relevant financial and
other records, pertinent corporate documents and properties of the Company and
(ii) cause the Company's officers, directors, employees, accountants and
auditors to supply all relevant information reasonably requested by the Holders
of the Securities or any such attorney, accountant or agent in connection with
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 (i) shall be coordinated by you and, on
behalf of the other parties, by one counsel (the "Designated Counsel")
designated by the Holders of a majority of the shares of the Convertible
Preferred Stock covered by the Shelf Registration Statement (provided that
Holders of Common Stock issued upon the conversion of the Convertible Preferred
Stock shall be deemed to be Holders of the aggregate number of shares of
Convertible Preferred Stock from which such Common Stock was converted) and (ii)
shall not be available for any such Holder that is a competitor of the Company,
and provided further that any records, documents, properties or information that
are designated by the Company 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 pursuant to the requirements of the Securities Act).
(m) The Company, if requested by the Designated Counsel, shall
cause (i) its counsel to deliver an opinion and updates thereof relating to the
Transfer Restricted Securities in customary form, with customary limitations,
<PAGE>
8
qualifications and exceptions, addressed to such Holders, 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
the due incorporation and good standing of the Company and its subsidiaries; the
due authorization, execution and issuance, and the validity and
nonassessibility, of the applicable Securities; other than as disclosed, the
absence of governmental approvals required to be obtained in connection with the
Shelf Registration Statement, or the offering and sale of the applicable
Securities; the compliance as to form of such Shelf Registration Statement and
any documents incorporated by reference therein; and, as of the date of the
opinion and as of the effective date of the 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 any such documents, in the
light of the circumstances existing at the time that such documents were filed
with the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"))), (ii) its officers to execute and deliver all customary
documents and certificates and updates thereof reasonably requested by the
Designated Counsel and (iii) its independent public accountants and the
independent public accountants with respect to any other entity for which
financial information is provided in the Shelf Registration Statement to provide
to the selling Holders of the applicable Securities a comfort letter in
customary form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
(n) The Company will use its best efforts to cause the Common
Stock included in such Shelf Registration Statement to be, upon resale
thereunder, listed on each securities exchange, if any, on which any shares of
Common Stock are then listed.
(o) The Company shall use reasonable commercial efforts to
take all other steps necessary to effect the registration of the Transfer
Restricted Securities covered by the Shelf Registration Statement contemplated
hereby.
<PAGE>
9
(p) The Company shall use reasonable commercial efforts to
cooperate with Holders of Convertible Preferred Stock that are required to
receive physical certificates evidencing shares of Common Stock received as
dividends paid in respect of such Convertible Preferred Stock to assist such
Holders through the prompt delivery of such physical certificates to such
Holders.
3. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 1 through 2 hereof, whether or not the Shelf Registration Statement is
filed or becomes effective, and shall bear or reimburse the Holders of the
Securities covered by the Shelf Registration for the reasonable fees and
disbursements of the Designated Counsel.
4. Indemnification. (a) The Company agrees to indemnify and
hold harmless each Holder of Transfer Restricted Securities included within the
coverage of the Shelf Registration Statement and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (each Holder and such controlling persons are referred to collectively as
the "Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including any
losses, claims, damages, liabilities or actions relating to purchases and sales
of the Securities) to which each Indemnified Party becomes subject under the
Securities Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the Shelf
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to the Shelf Registration, or arise
out of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and subject to subsection (c) below, shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
the Company shall not be liable in any such case to the extent that such loss,
claim, damage, liability, or action in respect thereof arises out of or is based
upon (x) the use of any prospectus in violation of the last sentence of Section
2(h), or (y) any untrue statement or alleged untrue statement or omission or
alleged omission made in the Shelf
<PAGE>
10
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to the Shelf Registration in reliance
upon, and in conformity with, written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein; provided further, however, that this indemnity agreement will
be separate from any liability which the Company may otherwise have to such
Indemnified Party; provided further, however, that with respect to any untrue
statement or alleged untrue statement in or omission or alleged omission from
any prospectus, the indemnity agreement contained in this subsection (a) shall
not enure to the benefit of any Holder that sold the Securities concerned to the
person asserting any such losses, claims, damages or liabilities, to the extent
that any such loss, claim, damage or liability of such Holder results from the
fact that there was not sent or given to such person, at or prior to the written
confirmation of the sale of such Securities to such person, a copy of the
prospectus if the Company had previously furnished copies thereof to such Holder
and such prospectus corrected such untrue statement or omission or alleged
untrue statement or omission.
(b) Each Holder of Transfer Restricted Securities included
within the coverage of the Shelf Registration Statement, severally and not
jointly, will indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act from and against any losses, claims, damages or liabilities or any
actions in respect thereof, to which the Company or any such controlling person
becomes subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a Shelf Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration, or arise out of, or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein; and, subject to the limitation set forth immediately
preceding this clause, and to subsection (c) below, shall reimburse, as
incurred, the Company for any legal or other expenses
<PAGE>
11
reasonably incurred by the Company or any such controlling person in connection
with investigating or defending any loss, claim, damage, liability or action in
respect thereof; provided, however, that such Holder shall not have any
liability under this clause (b) in excess of the aggregate purchase price paid
by such Holder for the shares of Convertible Preferred Stock purchased by such
Holder. This indemnity agreement will be separate from any liability which such
Holder may otherwise have to the Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this
Section 4 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 4,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in subsections (a) or (b) above. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 4 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then
<PAGE>
12
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 subsections (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the indemnifying party or parties on the one hand and the indemnified party on
the other from the registration of the Securities, pursuant to the Shelf
Registration, or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other, in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Holder or such other indemnified
party, as the case may be, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this subsection (d), the Holders 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 the Shelf 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 Company within the
meaning of the
<PAGE>
13
Securities Act or the Exchange Act shall have the same rights to contribution as
the Company.
(e) The agreements contained in this Section 4 shall survive
the sale of the Securities pursuant to the Shelf Registration Statement and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.
5. Additional Dividends Under Certain Circumstances. (a)
Additional dividends (the "Additional Dividends") with respect to the
Convertible Preferred Stock shall accrue as follows if any of the following
events occur (each such event in clauses (i) and (ii) below being herein called
a "Registration Default"):
(i) if by August 15, 1998, the Shelf Registration Statement has
not been declared effective by the Commission; or
(ii) if after the Shelf Registration Statement is declared
effective (A) the Shelf Registration Statement thereafter ceases to be
effective; or (B) the Shelf Registration Statement or the related
prospectus ceases to be usable (in each case except as permitted in
paragraph (b) below) in connection with resales of Transfer Restricted
Securities in accordance with and during the periods specified herein
because either (1) any event occurs as a result of which the related
prospectus forming part of such Shelf 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 Shelf Registration Statement or
supplement the related prospectus, to comply with the Securities Act or
the Exchange Act or the respective rules thereunder.
Additional Dividends shall accrue on the shares of Convertible
Preferred Stock from and including the date on which any such Registration
Default shall occur, to but excluding the date on which all such Registration
Defaults have been cured, at a rate of 2% per annum in addition to the dividends
otherwise accruing on the Convertible Preferred Stock).
(b) A Registration Default referred to in Section 5(a)(ii) shall
<PAGE>
14
be deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Company that would need to be described in the Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company proceeds promptly and in good faith to amend or supplement (including by
way of filing documents under the Exchange Act which are incorporated by
reference into the Registration Statement) the Shelf Registration Statement and
related prospectus to describe such events; provided, however, that in any case
if such Registration Default occurs for a continuous period in excess of 45
days, Additional Dividends shall be payable in accordance with the above
paragraph from the 46th day after such Registration Default initially occurs
until such Registration Default is cured.
(c) Any amounts of Additional Dividends due pursuant to clause
(a)(i) or (a)(ii) of this Section 5 or pursuant to the proviso contained in
Section 5(b) will be payable on the regular dividend payment dates with respect
to the Convertible Preferred Stock on the same terms and conditions and subject
to the same limitations as pertain at such time for the payment of regular
dividends. The amount of Additional Dividends will be determined by multiplying
the applicable Additional Dividends rate by the aggregate liquidation preference
of the outstanding shares of Convertible Preferred Stock, multiplied by a
fraction, the numerator of which is the number of days such Additional Dividend
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.
(d) "Transfer Restricted Securities" means each Security until
(i) 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 (ii) 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 (or any successor rule thereof) or would be
saleable pursuant to Rule 144(k) under the Securities Act had it not been held
by, or had never been held by, an affiliate of the Company.
<PAGE>
15
6. Rules 144 and 144A. So long as any Transfer Restricted
Security exists, the Company shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the reasonable request of any Holder of Transfer
Restricted Securities, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rules 144 and 144A. The
Company covenants that, in the event the Company is no longer subject to
Sections 13 or 15(d) of the Exchange Act, it 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 Company will provide a copy of this
Agreement to prospective purchasers of Securities identified to the Company by
the Initial Purchasers upon request. Notwithstanding the foregoing, nothing in
this Section 6 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
7. Miscellaneous. (a) Amendments and Waivers. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, except by
the Company and the written consent of the Holders of a majority of the shares
of Transfer Restricted Securities (provided that Holders of Common Stock issued
upon conversion of Convertible Preferred Stock shall be deemed to be Holders of
the aggregate number of Convertible Preferred Stock from which such Common Stock
was converted) affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
<PAGE>
16
(1) if to the Holders, at the most current address shown for
the Holders in the records of the Transfer Agent, with a copy in like
manner to you as follows:
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Fax No.: (212) 474-3700
Attention: Kris F. Heinzelman, Esq.
(2) if to the Company, at its address as follows:
WinStar Communications, Inc.
230 Park Avenue
New York, NY 10169
Fax No.: (212) 922-1637
Attention: Timothy Graham
with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, NY 10016
Fax No.: (212) 682-2320
Attention: David A. Miller, Esq.
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.
(c) No Inconsistent Agreements; Damages. The Company has not,
as of the date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
<PAGE>
17
Notwithstanding anything to the contrary contained in this Agreement, it is
hereby acknowledged and agreed that the Company shall have no liability for
monetary damages to the Initial Purchasers or any Holder for any breaches,
failures to comply or violations by it of Section 1 or 2 of this Agreement
except as expressly provided in Section 4 or 5 hereof; provided, however, in the
event that the Company breaches, fails to comply or violates the provisions of
Section 1 or 2 hereof, the Holders shall be entitled to, and the Company shall
not oppose the granting of, equitable relief, including injunction and specific
performance.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Transfer Restricted Securities. The
Company hereby agrees to extend the benefits of this Agreement to any Holder of
Transfer Restricted Securities and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.
By the execution and delivery of this Agreement, the Company
submits to the nonexclusive jurisdiction of any federal or state court in the
State of New York.
(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.
<PAGE>
18
(i) Securities Held by the Company. Whenever the consent or
approval of Holders of a specified number of Transfer Restricted Securities is
required hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Transfer Restricted 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.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along
<PAGE>
19
with all counterparts, will become a binding agreement among the several Initial
Purchasers and the Company in accordance with its terms.
Very truly yours,
WINSTAR COMMUNICATIONS, INC.
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
Smith Barney Inc.
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
By: Credit Suisse First Boston Corporation
By: ______________________________________
Name:
Title:
<PAGE>
WinStar to Raise $200 Million in Preferred Stock Offering
NEW YORK--March 12, 1998--WinStar Communications, Inc. (NASDAQ - WCII) announced
today it has signed a purchase agreement with several investment banks to place
$200 million of 7% Senior Cumulative Convertible Preferred Stock at a face value
of $50 per share through a Rule 144A institutional private placement. The
agreement reflects an increase in the amount of an offering of Preferred Stock
announced by the company on March 11, 1998. A private placement of Notes, which
do not include an equity component, was also announced on March 11, and that
offering is continuing.
The shares are convertible into WinStar Common Stock at a price of $49.61 per
share, which is a 25% premium to the closing bid price on March 11, 1998. The
company intends to use the net proceeds of the offering to expand its
telecommunications operations and for general corporate purposes.
The Senior Cumulative Convertible Preferred Stock will not be, and has not been,
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements.
WinStar Communications, Inc. is a national local communications company, serving
business customers, long distance carriers, fiber-based competitive access
providers, mobile communications companies, local telephone companies, and other
customers with broadband local communications needs. The company provides its
Wireless Fiber(SM) services using its licenses in the 38 GHz spectrum. The
company also provides long distance, Internet and information services.
WinStar is a registered trademark, and Wireless Fiber is a service mark of
WinStar Communications, Inc.
<PAGE>
$450,000,000
WINSTAR COMMUNICATIONS, INC.
$200,000,000 10% Senior Subordinated Notes Due 2008
$250,000,000 11% Senior Subordinated Deferred Interest Notes Due 2008
PURCHASE AGREEMENT
--------------------
March 17, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue
New York, N.Y. 10010
Ladies and Gentlemen:
1. Introductory. WinStar Communications, Inc., a Delaware corporation
(the "Issuer" or "WinStar"), 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.$200,000,000 principal amount of the
Issuer's 10% Senior Subordinated Notes Due 2008 (the "Cash-Pay Notes") and
U.S.$250,000,000 principal amount of the Issuer's 11% Senior Subordinated
Deferred Interest Notes Due 2008 (the "Deferred Interest Notes" and, together
with the Cash-Pay Notes, the "Offered Securities"). Each of the Cash-Pay Notes
and the Deferred Interest Notes will be issued under a separate indenture, each
dated as of March 15, 1998 (each, an "Indenture" and together, the "Indentures")
between the Issuer 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."
The Issuer hereby agrees with the several Purchasers as follows:
2. Representations and Warranties of the Issuer. The Issuer represents
and warrants to, and agrees with, the several Purchasers that:
(a) A preliminary offering circular and an offering circular relating
to the Offered Securities to be offered by the Purchasers have been prepared by
the Issuer. Such preliminary offering circular and offering circular, as both
are supplemented as of the date of this Agreement, together with any other
document approved by the Issuer for use in connection with the contemplated
resale of the Offered Securities are hereinafter collectively referred to as the
"Offering Document." On the date of this Agreement, the Offering Document does
not include any untrue statement of a material
<PAGE>
2
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, it being understood and agreed that the
only such information is that described as such in Section 7(b). WinStar'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 WinStar 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.
(b) The Issuer 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 Offering Document; and the Issuer 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 on the condition
(financial or other), business, properties or results of operations of the
Issuer and its subsidiaries, taken as a whole (a "Material Adverse Effect"). The
Issuer is qualified to do business as a foreign corporation in the State of New
York.
(c) Each subsidiary of the Issuer 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 Offering Document; and each subsidiary
of the Issuer 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 has been duly authorized and validly issued and is
fully paid and nonassessable; and the capital stock of each subsidiary owned by
the Issuer, directly or through subsidiaries, is owned free from liens,
encumbrances and defects other than shares of the direct or indirect
subsidiaries of WinStar New Media, Inc.
(d) Each of the Indentures and the Registration Rights Agreement has
been duly authorized; 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), the Indentures and the Registration Rights
Agreement will have been duly executed and delivered, such Offered Securities
will have been duly executed, authenticated, issued and delivered and will
conform, in all material respects, to the description thereof contained in the
Offering Document and the Indentures, the Registration Rights Agreement 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
<PAGE>
3
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
Offering Document, there are no contracts, agreements or understandings between
the Issuer and any person that would give rise to a valid claim against the
Issuer or any Purchaser for a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated by this Agreement.
(f) No consent, approval, authorization, or order of, or filing with,
any govern mental 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, 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 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 Indentures, 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 or any subsidiary of the Issuer or any of their
properties, (ii) any agreement or instrument to which the Issuer or any such
subsidiary is a party or by which the Issuer or any such subsidiary is bound or
to which any of the properties of the Issuer or any such subsidiary is subject,
or (iii) the charter or by-laws of the Issuer 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.
(i) Except as disclosed in the Offering Document, and except for liens
on the shares of the direct or indirect subsidiaries of WinStar New Media, Inc.,
the Issuer and its 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 Offering Document, the Issuer and its
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.
(j) The Issuer and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the
<PAGE>
4
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 or any of its
subsidiaries exists or, to the knowledge of the Issuer, is imminent that could
reasonably be expected to have a Material Adverse Effect.
(l) The Issuer and its 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 has 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 or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.
(m) Except as disclosed in the Offering Document, neither the Issuer
nor any of its 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 is not aware of any pending investigation which might lead to such a
claim.
(n) Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting the Issuer, any of its
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 the Issuer to perform its
obligations under any of the Indentures, the Registration Rights Agreement or
this Agreement, or which are otherwise material in the context of the sale of
the Offered Securities; and, to the Issuer's knowledge, no such actions, suits
or proceedings are threatened or contemplated.
(o) The financial statements included in the Offering Document present
fairly the financial position of the Issuer and its consolidated subsidiaries
and, subject to the last paragraph of the report of Grant Thornton LLP, of
MIDCOM Communications, Inc. ("Midcom") 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, subject to the last paragraph of the
report of Grant Thornton LLP, 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 in the Offering Document provide a reasonable basis for presenting the
significant effects
<PAGE>
5
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.
(p) Except as disclosed in the Offering Document, since the date of the
latest audited financial statements included in the Offering Document, 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 the Issuer and its subsidiaries
taken as a whole (it being understood that the acquisition from Telesoft Corp.
of its Tier I Internet service provider, the acquisition of substantially all of
the assets of Midcom, a change in the price of the Common Stock or the
continuation of operating losses consistent with the Issuer's historical results
shall be deemed not to be, in and of themselves, such a material adverse
change), and, except as disclosed in or contemplated by the Offering Document,
there has been no dividend or distribution of any kind declared, paid or made by
the Issuer on any class of its capital stock.
(q) The Issuer is not 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 is it a closed-end investment company required to
be registered, but not registered, there under; and the Issuer is not and, after
giving effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the Offering Document, will
not be an "investment company" as defined in the Investment Company Act.
(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) Assuming the accuracy of the representations and warranties of the
Purchasers contained herein, 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 obligations under the Registration Rights
Agreement.
(t) Except for sales to or through the Purchasers or affiliates
thereof, neither the Issuer nor any of its 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, its
affiliates and any person acting on their behalf have complied and will comply
<PAGE>
6
with the offering restrictions requirement of Regulation S. The Issuer has not
entered and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement and the
Registration Rights Agreement.
(u) The Issuer is subject to Section 13 or 15(d) of the Exchange Act.
(v) The Issuer and its 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").
(w) The Issuer has provided to the Purchasers a complete and accurate
list of all licenses granted to the Issuer and its subsidiaries (other than
experimental licenses in the 38 GHz portions of the radio spectrum and licenses
granted to the Issuer or its subsidiaries or 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 the Issuer nor any of its subsidiaries has
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, except that, on March 9, 1998,
several parties filed petitions for reconsideration (the "Petitions") of the 38
GHz Order (as defined in the Offering Document) alleging, among other things,
that the February 10, 1998 License grants to the Issuer of additional channels
in each of Atlanta, Buffalo, Cincinnati, Dallas, Houston, Miami, New York, St.
Louis, Seattle, Spokane and Tampa were in violation of the rules of the FCC.
(x) 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 or any of its subsidiaries thereunder.
(y) The Issuer and its 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.
(z) Neither the Issuer nor any of its subsidiaries has 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
$437,062,500.
<PAGE>
7
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 book-entry form through DTC, except in limited
circumstances (which are described in the 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 Issuer 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 March 20, 1998, or at such other time not later than seven full
business days thereafter as CSFBC and the Issuer determine, such time being
herein referred to as the "Closing Date", against delivery to the Trustee as
custodian for DTC of the Global Securities representing all of the Offered
Securities. The Global Securities will be made available for examination at the
offices of Cravath, Swaine & Moore at least 24 hours prior to the Closing Date.
4. Representations and Agreements by Purchasers; Resale by Purchasers.
(a) Each Purchaser severally represents and warrants to the Issuer 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 only in accor dance 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 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.
<PAGE>
8
(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 dis tribution 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.
(d) Each Purchaser severally agrees that it and each of its affiliates
has not offered or sold, and 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 other wise 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.
(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 in writing thereof.
5. Certain Agreements of the Issuer. The Issuer agrees with the several
Purchasers that:
(a) The Issuer 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
<PAGE>
9
applicable law, the Issuer promptly will notify CSFBC of such event and promptly
will prepare, at its 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 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
will furnish to CSFBC on the Closing Date three copies of the Offering Document
signed by a duly authorized officer of the Issuer, one of which will include the
independent accountants' reports therein manually signed by such independent
accountants. At any time when the Issuer is not subject to Section 13 or 15(d)
of the Exchange Act, the Issuer 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 Rule 144A in connection with resales by such holders of the
Offered Securities. The Issuer will pay the expenses of printing and
distributing to the Purchasers all such documents.
(c) The Issuer will use its 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 will not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction.
(d) During the period of five years after the Closing Date, the Issuer
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 Issuer's
annual report to stockholders for such year; and the Issuer 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 the
Issuer 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 as CSFBC may reasonably request.
(e) During the period of two years after the Closing Date, the Issuer
will, upon request, furnish to the 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
will not, and will not permit any of its 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, the Issuer
will not 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 the Issuer is not, or will not be
or become, a closed-end
<PAGE>
10
investment company required to be registered, but not registered, under the
Investment Company Act.
(h) The Issuer will pay all expenses incidental to the performance of
the Issuer's obligations under this Agreement and the Indentures, including (i)
the fees and expenses of the Trustee and its professional advisers; (ii) all
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 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 Issuer will also pay or reimburse the Purchasers
(to the extent incurred by them) for all travel expenses of the Issuer's
officers and employees and any other expenses of the Issuer in connection with
attending or hosting meetings with prospective purchasers of the Offered
Securities from the Purchasers.
(i) In connection with the offering, until CSFBC shall have notified
the Issuer and the other Purchasers of the completion of the resale of the
Offered Securities, neither the Issuer nor any of its 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 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 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 applicable 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.
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 accuracy of the representations and warranties on the part of the
Issuer herein, to the
<PAGE>
11
accuracy of the certificates of officers of the Issuer delivered pursuant to the
provisions hereof, to the performance by the Issuer of its obligations hereunder
and to the following additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the date of this
Agreement, of Grant Thornton LLP, in agreed form, confirming that they are
independent public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder ("Rules and Regulations")
and stating to the effect that:
(i) in their opinion the financial statements examined by them
and included in the Offering Document comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act and the related published Rules and Regulations;
(ii) on the basis of a reading of the latest available interim
financial statements of the Issuer, inquiries of certain officials of
the Issuer who have responsibility for financial and accounting matters
and other specified procedures, nothing came to their attention that
caused them to believe that:
(A) at March 13, 1998, there was any change in the
capital stock or paid-in capital, increase in long-term debt
or any decreases in consolidated net current assets or
stockholders' equity of the Issuer and its subsidiaries, on a
consolidated basis as compared with amounts shown on the
December 31, 1997 audited consolidated balance sheet included
in the Offering Document; or
(B) for the period from January 1, 1998 to March 13,
1998, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated
operating revenues or in the total or per-share amounts of net
loss;
except in all cases set forth in clauses (A) and (B) above for changes,
increases or decreases which the Offering Document discloses have
occurred or may occur or which are described in such letter; and
(iii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Offering Document (in each case to the
extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of WinStar
and its subsidiaries subject to the internal controls of the Issuer's
accounting system or are derived directly from such records by analysis
or computation) with the results obtained from inquiries, a reading of
such general accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages and other
financial information to be in agreement with such results, except as
otherwise specified in such letter.
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange controls
as would, in the judgment of CSFBC, be likely to prejudice materially the
success of the proposed issue, sale or distribution of the Offered Securities,
whether in the primary market or in respect of
<PAGE>
12
dealings in the secondary market, or (ii) (A) any change, or any development or
event involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Issuer or its subsidiaries
which, in the judgment of CSFBC, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the offering or the
sale of and payment for the Offered Securities (it being understood that a
change in the price of the Issuer's common stock or the continuation of
operating losses consistent with the Issuer's historical results shall be deemed
not to be, in and of itself, a material adverse change); (B) any downgrading in
the rating of any debt securities of the Issuer by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of any debt securities of the Issuer
(other than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating); (C) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange, or any setting of minimum prices for trading on such exchange,
or any suspension of trading of any securities of the Issuer on any exchange or
in the over-the-counter market; (D) any banking moratorium declared by U.S.
Federal or New York authorities; or (E) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of CSFBC, the effect of any such outbreak,
escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the offering or sale of and payment
for the Offered Securities.
(c) The Purchasers shall have received an opinion, dated the Closing
Date, of Graubard Mollen & Miller, counsel for the Issuer, substantially to the
effect set forth in (i)-(ix) below, and of Willkie Farr & Gallagher, regulatory
counsel for the Issuer, substantially to the effect set forth in (x)-(xvii)
below:
(i) Issuer 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 Offering Document;
(ii) Each of the Indentures and the Registration Rights
Agreement has been duly authorized, executed and delivered; the Offered
Securities have been duly authorized, executed, authenticated, issued
and delivered and conform in all material respects to the description
thereof contained in the Offering Document; and the Indentures, the
Offered Securities and the Registration Rights Agreement 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;
(iii) The Issuer is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will not be an
"investment company" as defined in the Investment Company Act;
<PAGE>
13
(iv) 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 or sale of the Offered Securities by
the Issuer and the consummation of the transactions under the
Registration Rights Agreement, 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 and the
transactions contemplated thereunder and such as may be required by
securities or blue sky laws of the various states of the United States
and of foreign jurisdictions in connection with the offer and sale of
the Offered Securities;
(v) The execution, delivery and performance of the Indentures,
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, (A) any
statute, rule or regulation or any order known to such counsel of any
governmental agency or body or any court having jurisdiction over the
Issuer or any subsidiary of the Issuer or any of its properties, (B)
any agreement or instrument listed as an exhibit to the Issuer's Annual
Report on Form 10-K most recently filed with the Commission or listed
as an exhibit to or filed with any subsequent reports filed by the
Issuer under the Exchange Act through December 31, 1997, to which the
Issuer or any such subsidiary is a party or by which the Issuer or any
such subsidiary is bound or to which any of the properties of the
Issuer or any such subsidiary is subject, or (C) the charter or by-laws
of the Issuer or any such subsidiary, except, in the case of clause (A)
or (B), breaches, violations or defaults that individually or in the
aggregate would not have a Material Adverse Effect; and the Issuer has
full power and corporate authority to authorize, issue and sell the
Offered Securities to be sold by the Issuer as contemplated by this
Agreement;
(vi) Such counsel have no reason to believe that the Offering
Document, or any amendment or supplement thereto, as of the date hereof
and as of the Closing 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;
(vii) The descriptions in the Offering Document of statutes,
legal and governmental proceedings and contracts and other documents
are accurate in all material respects and fairly present the
information purported to be described therein;
(viii) This Agreement has been duly authorized, executed and
delivered by the Issuer;
(ix) Based upon the accuracy of the representations and
warranties of the Issuer set forth in Section 2(t) of this Agreement
and of the Purchasers in Section 4 hereof, it is not necessary in
connection with (i) the offer, sale and delivery of the Offered
Securities by the Issuer to the several Purchasers pursuant
<PAGE>
14
to this Agreement or (ii) the resales of the Offered Securities by the
several Purchasers in the manner contemplated by this Agreement, to
register the Offered Securities under the Securities Act other than in
connection with the Issuer's obligations under the Registration Rights
Agreement.
(x) No prior or subsequent consent, approval, authorization or
order of the FCC is required to be obtained, and no prior or subsequent
notice to or filing with the FCC is required to be made, in connection
with the offering of Offered Securities or the issuance of the
Underlying Shares.
(xi) To the best of such counsel's knowledge, the Issuer and
its subsidiaries are in compliance in all material respects with all
material terms and conditions of each License.
(xii) To the best of such counsel's knowledge, all of the
Licenses are currently valid and in full force and effect, and there is
no investigation, notice of apparent liability, violation, forfeiture
or other order of 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;
provided, however, on February 10, 1998, the FCC granted additional
channels for 38 GHz licenses in the following areas: Atlanta, Buffalo,
Cincinnati, Dallas, Houston, Miami, New York, St. Louis, Seattle,
Spokane and Tampa. On March 9, 1998, several parties filed petitions
for reconsideration of the 38 GHz Order, alleging, among other things,
that the February 10, 1998, license grants to the Issuer were in
violation of the Commission's processing rules, which Petitions for
Reconsideration were made available to the public on March 10, 1998. At
least one of those parties stated that it would be filing a separate
pleading on this issue.
(xii) Such counsel is not aware of any event or instance in
which the Issuer was not in compliance with all applicable and material
rules, regulations and policies of the FCC pertaining to the Licenses.
(xiv) Such counsel is not aware of the occurrence of any event
which (i) results in, or after notice or lapse of time or both would
result in, revocation, suspension, adverse modification, nonrenewal,
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 or any of its subsidiaries
thereunder.
(xv) To the best of such counsel's knowledge, the Issuer and
its 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 pertaining to
the Licenses.
(xvi) Such counsel is not aware of any reason to believe that
any of the Licenses will not be renewed in the ordinary course.
<PAGE>
15
(xvii) The FCC has the authority, under certain circumstances,
to modify radio licenses that it has issued. On November 3, 1997, the
FCC adopted rules to auction unlicensed portions of the 38.6 - 40.0 GHz
band for commercial use. On March 24, 1997, the FCC proposed rules to
segment the 38.6 - 40.0 GHz band for terrestrial wireless services. In
either event, the FCC may adopt changes to the existing and proposed
regulations governing 38 GHz licensees, which could have an impact on
the scope of the Licenses and the operations of the Issuer and its
subsidiaries. As of the date of such letter, and except as otherwise
discussed in such letter, such counsel is not aware of any official FCC
action that may permit or is likely to lead to the revocation,
nonrenewal, modification, impairment, restriction, or suspension of any
License or any right or authority thereunder in whole or in part.
(d) The Purchasers shall have received from Cravath, Swaine & Moore,
counsel for the Purchasers, such opinion or opinions, dated the Closing Date,
with respect to the incorporation of the Issuer, the validity of the Offered
Securities, the Offering Document, the exemption from registration for the offer
and sale of the Offered Securities by the Issuer 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 shall have furnished to
such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(e) The Purchasers shall have received a certificate, dated the Closing
Date, of the Chief Executive Officer or any Vice President and a principal
financial or accounting officer of the Issuer in which such officers, to the
best of their knowledge after reasonable investigation, shall state that the
representations and warranties of the Issuer in this Agreement are true and
correct, that the Issuer has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, and that, subsequent to the dates of the most recent financial
statements in the Offering Document 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 the Issuer and its subsidiaries taken as a whole except as set
forth in or contemplated by the Offering Document or as described in such
certificate (it being understood that the acquisition from Telesoft Corp. of its
Tier I Internet service provider, the acquisition of substantially all of the
assets of Midcom, a change in the price of the Common Stock or the continuation
of operating losses consistent with the Issuer's historical results shall be
deemed not to be, in and of themselves, such a material adverse change), and,
except as disclosed in or contemplated by the Offering Document, there has been
no dividend or distribution of any kind declared, paid or made by the Issuer on
any class of its capital stock.
(f) The Purchasers shall have received a letter, dated the Closing
Date, of Grant Thornton LLP which meets the requirements of subsection (a) of
this Section, except that the specified date referred to in such subsection will
be a date not more than five days prior to the Closing Date for the purposes of
this subsection.
The Issuer 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.
<PAGE>
16
7. Indemnification and Contribution. (a) The Issuer will indemnify and
hold harmless each Purchaser against any losses, 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
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 any related preliminary offering circular, 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 each
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 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 by such Purchaser through CSFBC specifically
for use therein, it being understood and agreed that the only such information
consists of the information described as such in subsection (b) below; provided
further, however, that with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from any preliminary offering
circular, the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Purchaser that sold the Offered Securities concerned
to the person asserting any such losses, claims, damages or liabilities, to the
extent that such sale was an initial resale by such Purchaser and any such loss,
claim, damage or liability of such Purchaser 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 Offered Securities to such person, a copy of the Offering
Document if the Issuer had previously furnished copies thereof to such Purchaser
and such Offering Document corrected such untrue statement or omission or
alleged untrue statement or omission.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Issuer against any losses, claims, damages or liabilities to which
the Issuer 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 any related preliminary offering circular,
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 by such
Purchaser through CSFBC specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Issuer in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Purchaser consists of the following information in
the Offering Document furnished on behalf of the Purchasers: the last paragraph
at the bottom of the cover page concerning the terms of the offering by the
Purchasers, the legends concerning over-allotments and stabilizing on the inside
front cover page and, under the caption "Plan of Distribution," (i) the third
sentence of the second paragraph
<PAGE>
17
thereunder, (ii) the fourth paragraph thereunder and (iii) the third sentence in
the sixth paragraph thereunder.
(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 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 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 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 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 bear
to the total discounts and commissions received by the Purchasers from the
Issuer 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 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 by such indemnified party in connection
with investigating
<PAGE>
18
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 under this Section shall be in
addition to any liability which the Issuer 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 the
Issuer within the meaning of the Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder and the aggregate
number of shares of Offered Securities that such defaulting Purchaser or
Purchasers agreed but failed to purchase does not exceed 10% of the total number
of shares of Offered Securities, CSFBC may make arrangements satisfactory to the
Issuer for the purchase of such Offered Securities by other persons, including
any of the Purchasers, but if no such arrangements are made by the Closing Date,
the non-defaulting Purchasers shall be obligated severally, in proportion to
their respective commitments hereunder, to purchase the Offered Securities that
such defaulting Purchasers agreed but failed to purchase. If any Purchaser or
Purchasers so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the number
of shares of Offered Securities and arrangements satisfactory to CSFBC and the
Issuer for the purchase of such Offered Securities by other persons are not made
within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Purchaser or the Issuer, except as
provided in Section 9. As used in this Agreement, the term "Purchaser" includes
any person substituted for a Purchaser under this Section. Nothing herein will
relieve a defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Issuer or its 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 or any of its 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 Purchaser is not consummated, the Issuer shall remain
responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 (other than with respect to a defaulting Purchaser) and the respective
obligations of the Issuer and the Purchasers pursuant to Section 7 shall remain
in effect. If the purchase of the Offered Securities by the Purchasers is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 8 or solely because of the occurrence of any event
specified in clause (C), (D) or (E) of Section 6(b)(ii), the Issuer
<PAGE>
19
will reimburse the Purchasers for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telecopied and confirmed to
the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, NY 10010 or, if sent to the Issuer, will be mailed, delivered
or electronically transmitted and confirmed to it at 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 telecopied 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 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.
Each of the parties hereby submits 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.
<PAGE>
20
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 and the several
Purchasers in accordance with its terms.
Very truly yours,
WinStar Communications, Inc.
By....................................
Name:
Title:
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
Credit Suisse First Boston Corporation
Salomon Brothers Inc
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
By Credit Suisse First Boston Corporation
By..........................................
Name:
Title:
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount Principal Amount
of Cash-Pay of Deferred
Initial Purchasers Notes Interest Notes
- ------------------ --------------------- -----------------
<S> <C> <C>
Credit Suisse First Boston Corporation............... $ 110,000,000 $ 137,500,000
Salomon Brothers Inc................................. 60,000,000 75,000,000
Morgan Stanley & Co. Incorporated.................... 20,000,000 25,000,000
NationsBanc Montgomery Securities LLC................ 10,000,000 12,500,000
---------- ----------
Total................................................ $ 200,000,000 250,000,000
=========== ===========
</TABLE>
A-1
<PAGE>
EXECUTION COPY
=============================================================================
WINSTAR COMMUNICATIONS, INC.,
as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
-----------------------------
Indenture
Dated as of March 15, 1998
-------------------------------
10% Senior Subordinated Notes Due 2008
===============================================================================
<PAGE>
2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ----------------- ---------------------
<S> <C>
ss.310(a)(1)............................................................................ 7.10
(a)(2)......................................................................... 7.10
(b)............................................................................ 7.08
ss.313(c)............................................................................... 7.06; 11.02
ss.314(a)............................................................................... 4.18; 11.02
(a)(4)......................................................................... 4.17; 11.02
(c)(1)......................................................................... 11.03
(c)(2)......................................................................... 11.03
(e)............................................................................ 11.04
ss.315(b)............................................................................... 7.05; 11.02
ss.316(a)(1)(A)......................................................................... 6.05
(a)(1)(B)...................................................................... 6.04
(b)............................................................................ 6.07
ss.317(a)(1)............................................................................ 6.08
(a)(2)......................................................................... 6.09
ss.318(a)............................................................................... 11.01
(c)............................................................................ 11.01
</TABLE>
- ----------
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>
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............................. 17
SECTION 1.03. Rules of Construction......................................................... 17
SECTION 1.04. Ranking of the Securities..................................................... 17
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating............................................................... 18
SECTION 2.02. Execution and Authentication.................................................. 18
SECTION 2.03. Registrar and Paying Agent.................................................... 18
SECTION 2.04. Paying Agent To Hold Money in Trust........................................... 19
SECTION 2.05. Securityholder Lists.......................................................... 19
SECTION 2.06. Transfer and Exchange......................................................... 19
SECTION 2.07. Replacement Securities........................................................ 20
SECTION 2.08. Outstanding Securities........................................................ 20
SECTION 2.09. Temporary Securities.......................................................... 21
SECTION 2.10. Cancelation................................................................... 21
SECTION 2.11. Defaulted Interest............................................................ 21
SECTION 2.12. CUSIP Numbers................................................................. 21
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption........................................................... 22
SECTION 3.02. Notices to Trustee............................................................ 22
SECTION 3.03. Selection of Securities To Be Redeemed........................................ 22
SECTION 3.04. Notice of Redemption.......................................................... 23
SECTION 3.05. Effect of Notice of Redemption................................................ 23
SECTION 3.06. Deposit of Redemption Price................................................... 24
SECTION 3.07. Payment of Securities Called for Redemption................................... 24
SECTION 3.08. Securities Redeemed in Part................................................... 24
</TABLE>
<PAGE>
ii
<TABLE>
ARTICLE FOUR
COVENANTS
<S> <C> <C>
SECTION 4.01. Payment of Securities......................................................... 24
SECTION 4.02. Maintenance of Office or Agency............................................... 25
SECTION 4.03. Limitation on Indebtedness.................................................... 25
SECTION 4.04. Limitation on Senior Subordinated Indebtedness................................ 27
SECTION 4.05. Limitation on Restricted Payments............................................. 28
SECTION 4.06. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries......................................... 30
SECTION 4.07. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries................................................... 32
SECTION 4.08. Limitation on Issuances of Guarantees by Restricted
Subsidiaries.............................................................. 32
SECTION 4.09. Limitation on Transactions with Shareholders and Affiliates................... 32
SECTION 4.10. Limitation on Asset Sales..................................................... 33
SECTION 4.11. Repurchase of Securities upon a Change of Control............................. 34
SECTION 4.12. Existence..................................................................... 35
SECTION 4.13. Payment of Taxes and Other Claims............................................. 35
SECTION 4.14. Maintenance of Properties and Insurance....................................... 35
SECTION 4.15. Notice of Defaults............................................................ 36
SECTION 4.16. Compliance Certificates....................................................... 36
SECTION 4.17. SEC Reports and Reports to Holders............................................ 37
SECTION 4.18. Waiver of Stay, Extension or Usury Laws....................................... 37
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc................................................... 37
SECTION 5.02. Successor Substituted......................................................... 38
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................................. 38
SECTION 6.02. Acceleration.................................................................. 39
SECTION 6.03. Other Remedies................................................................ 40
SECTION 6.04. Waiver of Past Defaults....................................................... 40
SECTION 6.05. Control by Majority........................................................... 41
SECTION 6.06. Limitation on Suits........................................................... 41
SECTION 6.07. Rights of Holders to Receive Payment.......................................... 42
SECTION 6.08. Collection Suit by Trustee.................................................... 42
SECTION 6.09. Trustee May File Proofs of Claim.............................................. 42
SECTION 6.10. Priorities.................................................................... 42
SECTION 6.11. Undertaking for Costs......................................................... 43
SECTION 6.12. Restoration of Rights and Remedies............................................ 43
</TABLE>
<PAGE>
iii
<TABLE>
<S> <C> <C>
SECTION 6.13. Rights and Remedies Cumulative................................................ 43
SECTION 6.14. Delay or Omission Not Waiver.................................................. 43
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General....................................................................... 44
SECTION 7.02. Certain Rights of Trustee..................................................... 44
SECTION 7.03. Individual Rights of Trustee.................................................. 45
SECTION 7.04. Trustee's Disclaimer.......................................................... 45
SECTION 7.05. Notice of Default............................................................. 45
SECTION 7.06. Reports by Trustee to Holders................................................. 45
SECTION 7.07. Compensation and Indemnity.................................................... 45
SECTION 7.08. Replacement of Trustee........................................................ 46
SECTION 7.09. Successor Trustee by Merger, Etc.............................................. 47
SECTION 7.10. Eligibility................................................................... 47
SECTION 7.11. Money Held in Trust........................................................... 47
SECTION 7.12. Withholding Taxes............................................................. 47
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.......................................... 48
SECTION 8.02. Defeasance and Discharge of Indenture......................................... 48
SECTION 8.03. Defeasance of Certain Obligations............................................. 50
SECTION 8.04. Application of Trust Money.................................................... 52
SECTION 8.05. Repayment to Company.......................................................... 52
SECTION 8.06. Reinstatement................................................................. 53
SECTION 8.07. Insiders...................................................................... 53
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.................................................... 53
SECTION 9.02. With Consent of Holders....................................................... 53
SECTION 9.03. Revocation and Effect of Consent.............................................. 54
SECTION 9.04. Notation on or Exchange of Securities......................................... 55
SECTION 9.05. Trustee to Sign Amendments, Etc............................................... 55
SECTION 9.06. Conformity with Trust Indenture Act........................................... 55
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Securities Subordinate to Senior Indebtedness............................. 55
</TABLE>
<PAGE>
iv
<TABLE>
<S> <C> <C>
SECTION 10.02. No Payment on Securities in Certain Circumstances......................... 56
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc............................ 57
SECTION 10.04. Subrogation of Holders to Rights of Holders of
Senior Indebtedness................................................ 58
SECTION 10.05. Obligations of Company Unconditional...................................... 59
SECTION 10.06. Payments May Be Made Prior to Dissolution................................. 59
SECTION 10.07. No Waiver of Subordination Provisions..................................... 59
SECTION 10.08. Authorization to Trustee to Take Action to Effectuate
Subordination...................................................... 60
SECTION 10.09. Senior Indebtedness May Be Renewed or Extended, Etc....................... 60
SECTION 10.10. Trustee to Have No Fiduciary Duty to Holders of Senior
Indebtedness....................................................... 60
SECTION 10.11. Rights of Trustee as Holder of Senior Indebtedness........................ 60
SECTION 10.12. Notice to Trustee......................................................... 60
SECTION 10.13. Reliance on Judicial Order or Certificate of Liquidating
Agent.............................................................. 61
SECTION 10.14. Not to Prevent Events of Default.......................................... 61
SECTION 10.15. Trustee's Compensation Not Prejudiced..................................... 61
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939............................................... 62
SECTION 11.02. Notices................................................................... 62
SECTION 11.03. Certificate and Opinion as to Conditions Precedent........................ 63
SECTION 11.04. Statements Required in Certificate or Opinion............................. 63
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar............................... 63
SECTION 11.06. Payment Date Other Than a Business Day.................................... 63
SECTION 11.07. Governing Law............................................................. 64
SECTION 11.08. No Adverse Interpretation of Other Agreements............................. 64
SECTION 11.09. No Recourse Against Others................................................ 64
SECTION 11.10. Successors................................................................ 64
SECTION 11.11. Duplicate Originals....................................................... 64
SECTION 11.12. Separability.............................................................. 64
SECTION 11.13. Table of Contents, Headings, Etc.......................................... 64
EXHIBIT A Form of Security.......................................................... EA-1
Rule 144A/Regulation S Appendix
</TABLE>
<PAGE>
INDENTURE, dated as of March 15, 1998, between WINSTAR
COMMUNICATIONS, INC., a Delaware corporation, as issuer (the "Company") 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 10%
Senior Subordinated Notes Due 2008 (the "Initial Securities") and, if and when
issued pursuant to a registered exchange for Initial Securities, the Company's
10% Senior Subordinated Notes Due 2008 (the "Exchange Securities") and, if and
when issued pursuant to a private exchange for Initial Securities, the Company's
10% Senior Subordinated Notes Due 2008 (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.
"1995 Notes" means the 1995 Senior Notes and the Convertible Notes.
"1997 Notes" means the 1997 Senior Notes and the Equipment Notes.
"1995 Senior Notes" means the 14% Senior Discount Notes Due 2005 of
the Company.
"1997 Senior Notes" means the 14 1/2% Senior Deferred Interest Notes
Due 2005 of the Company.
"1997 Senior Subordinated Notes" means the 15% Senior Subordinated
Deferred Interest Notes Due 2007 of the Company.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company 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 the
Company 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 the Company 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 4.05 (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 the Company or any of its Restricted
Subsidiaries or all or substantially all of the property
<PAGE>
2
and assets of such Person are acquired by the Company 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 clause (C) of the first
paragraph of Section 4.05, any amount paid as, or accrued for, cash dividends on
Preferred Stock of the Company or any Restricted Subsidiary owned by Persons
other than the Company 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 the Company 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 the Company 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 the Company and its Restricted
Subsidiaries, prepared in conformity with GAAP and most recently filed with the
SEC pursuant to Section 4.17; 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 the Company 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.
"Allocated Proceeds" has the meaning provided in Section 4.05.
"Asset Acquisition" means (i) an Investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
into or consolidated with the Company or any of its Restricted Subsidiaries or
(ii) an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person.
<PAGE>
3
"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 the Company or any of its
Restricted Subsidiaries to any Person other than the Company 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 the Company or any of its Restricted Subsidiaries
or (iii) any other property or assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company 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 the Company or its
Restricted Subsidiaries; (C) a substantially simultaneous exchange of, or a sale
or disposition (other than 85% or more for cash or cash equivalents) by the
Company or any of its Restricted Subsidiaries of, licenses issued by the FCC or
applications or bids therefor; provided, however, that the consideration
received by the Company 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.
"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 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 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.
"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.
<PAGE>
4
"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 Issue 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 Issue 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.
"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 paragraph
preceding 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 the Company (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 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 the Company 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 the Company or any of its Restricted
Subsidiaries divided by (2) the total number of
<PAGE>
5
shares of outstanding Common Stock of such Restricted Subsidiary on the last day
of such period.
"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 the Company 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 the Company 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, the Deferred Interest Notes, the
Convertible Preferred Stock, the 1997 Senior Subordinated Notes, the 1997 Notes,
the WSAC Loan and the Exchangeable Preferred Stock, all as 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 the Company 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 the Company 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 the Company.
"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.
"Convertible Preferred Stock" means the Series D 7% Senior
Cumulative Convertible Preferred Stock Due 2010 of the Company.
<PAGE>
6
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Restricted Subsidiaries against fluctuations
in currency values to or under which the Company 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.
"Deemed Closing Date" means March 18, 1997.
"Deferred Interest Notes" means the 11% Senior Subordinated
Deferred Interest Notes Due 2008 of the Company.
"Deferred Interest Notes Indenture" means the Indenture, dated
as of March 15, 1998, between the Company and United States Trust Company of New
York, pursuant to which the Deferred Interest Notes were issued.
"Designated Senior Indebtedness" means the 1995 Senior Notes,
the 1997 Senior Notes, the Equipment Note Guarantees and any Indebtedness
constituting Senior Indebtedness of the Company that, at the date of
determination, has an aggregate principal amount of at least $25,000,000 and
that is specifically designated by the Company in the instrument creating or
evidencing such Senior Indebtedness as "Designated Senior Indebtedness."
"Equipment Notes" means the $200,000,000 of 12 1/2% Guaranteed
Senior Secured Notes Due 2004 of WEC and the $50,000,000 of 12 1/2% Guaranteed
Senior Secured Notes Due 2004 of WEC II.
"Equipment Note Guarantees" means the Guarantees provided by
the Company with respect to the Equipment Notes.
"Exchange Debentures" means the 14 1/4% Senior Subordinated
Deferred Interest Notes Due 2007 of the Company issuable in exchange for the
Exchangeable Preferred Stock.
"Exchangeable Preferred Stock" means the Series C 14 1/4%
Senior Cumulative Exchangeable Preferred Stock Due 2007 of the Company.
"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
<PAGE>
7
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, the Deferred Interest Notes, the Convertible Preferred Stock, the
1997 Senior Subordinated Notes, the 1997 Notes, the WSAC Loan and the
Exchangeable Preferred Stock and (ii) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting Principles Board
Opinion Nos. 16 and 17.
"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 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
4.08.
"Holder" means the Person in whose name a Security is
registered on the books of the registrar for the Security.
"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 the Company and its Restricted
Subsidiaries, an "Incurrence" of Indebtedness by reason of a Person becoming a
Restricted Subsidiary of the Company; 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
<PAGE>
8
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 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 the
Company 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 the Company for the then most recent four full fiscal
quarters for which reports have been filed pursuant to Section 4.17 (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"), the Company 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 the Company or any of the Restricted Subsidiaries shall have
made any Asset Acquisition, Consolidated EBITDA of the Company 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, 1998.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap
<PAGE>
9
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedge agreement or other similar agreement or arrangement designed to
protect the Company or any of its Restricted Subsidiaries against fluctuations
in interest rates in respect of Indebtedness to or under which the Company 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 exceed the principal amount
of the Indebtedness of the Company 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 the Company 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 the
Company 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 4.07. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.05, (i) "Investment" shall include the fair market value of the assets
(net of liabilities) of any Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary of the Company 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 the Company 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).
"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 thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) 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 the Company 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
<PAGE>
10
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 the Company
or any Restricted Subsidiary of the Company 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 the Company or any Restricted Subsidiary of the Company) 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 the Company or any of its subsidiaries as a result thereof.
"Offer to Purchase" means an offer to purchase Securities by
the Company from the Holders thereof that is required by Section 4.10 or Section
4.11 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 the 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 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
<PAGE>
11
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 the Company, (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).
"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.
"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, the Company 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
the Company or any of its Restricted Subsidiaries consists solely of Capital
Stock (other than Redeemable Stock) of the Company; (vii) notes payable to the
Company that are received by the Company as payment of the purchase price for
Capital Stock (other than Redeemable Stock) of the Company; 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) the Company or one of its Restricted Subsidiaries has
the right to acquire Capital Stock representing a majority of the voting power
of the
<PAGE>
12
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, the Company 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 the Company and its
Restricted Subsidiaries for such minority equity interest.
"Permitted Investor" means Mr. William J. Rouhana, Jr.
"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.
"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 Deemed Closing 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 such debt security.
"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 the
Company's option, without conditions precedent, payable solely in Common Stock
(other than Redeemable Stock) of the Company) 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 4.10 and Section 4.11 and such Capital Stock specifically provides
that such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Securities as are required
to be repurchased pursuant to the provisions of Section 4.10 and Section 4.11.
"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.
<PAGE>
13
"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 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 4.05.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission and any
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 Register" has the meaning provided in Section 2.03.
"Senior Indebtedness" means the following obligations of the
Company, whether outstanding on the Issue Date or thereafter Incurred: (i) all
Indebtedness and all other monetary obligations of the Company under the 1995
Senior Notes, the 1997 Senior Notes, and the Equipment Note Guarantees, (ii) all
other Indebtedness of the Company (other than the Securities, the Deferred
Interest Notes, the 1997 Senior Subordinated Notes, the Exchange Debentures and
the Convertible Notes), including principal and interest on such Indebtedness,
unless such Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, is pari passu with, or
subordinated in right of payment to, the Securities and (iii) all fees, expenses
and indemnities payable in connection with the 1995 Senior Notes, the 1997
Senior Notes and the Equipment Note Guarantees (including any agreements
pursuant to which the 1995 Senior Notes, the 1997 Senior Notes or the Equipment
Note Guarantees were issued); provided, however, that the term "Senior
Indebtedness" shall not include (a) any Indebtedness of the Company that, when
Incurred and without respect to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to the Company, (b) any
Indebtedness of the Company to a Subsidiary of the Company or to a joint venture
in which the Company has an interest, (c) any Indebtedness of the Company, to
the extent not permitted by Section 4.03 or Section 4.04, (d) any repurchase,
redemption or other obligation in respect of Redeemable Stock, (e) any
Indebtedness to any employee of the Company or any of its Subsidiaries, (f) any
liability for federal, state, local or
<PAGE>
14
other taxes owed or owing by the Company or (g) any trade payables of the
Company. Senior Indebtedness of the Company will also include interest accruing
subsequent to events of bankruptcy of the Company and its Subsidiaries at the
rate provided for in the document governing such Senior Indebtedness, whether or
not such interest is an allowed claim enforceable against the debtor in a
bankruptcy case under federal bankruptcy law.
"Senior Subordinated Obligations" means any principal of,
premium, if any, or interest on the Securities and the Deferred Interest Notes,
payable pursuant to the terms of the Securities and the Deferred Interest Notes
or upon acceleration, to the extent relating to the purchase of Securities and
the Deferred Interest Notes or amounts corresponding to such principal, premium,
if any, or interest on the Securities and the Deferred Interest Notes.
"Significant Subsidiary" means, at any date of determination,
any Restricted Subsidiary of the Company that, together with its Subsidiaries,
(i) for the most recent fiscal year of the Company, accounted for more than 10%
of the consolidated revenues of the Company and its Restricted Subsidiaries or
(ii) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"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 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
4.08.
"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) WinStar Gateway
Network, Inc., WinStar Wireless, Inc., WinStar Telecommunications, Inc., WinStar
Milliwave, Inc., WinStar Locate, Inc. and WinStar Wireless Fiber Corp., and, in
each case, its
<PAGE>
15
successors and (ii) any other Restricted Subsidiary of the Company 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 the Company)
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 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 the Company 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 the
Company 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 the Company (including any newly acquired or newly
formed Subsidiary of the Company), other than a guarantor of the Securities, to
be an Unrestricted Subsidiary unless such
<PAGE>
16
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided, however, that neither
the Company 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, such designation would
be permitted under the provisions of Section 4.05. 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 the Company; provided, however, that immediately after giving
effect to such designation (x) the Company 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 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.
"WEC" means WinStar Equipment Corp. and its successors.
"WEC II" means WinStar Equipment II Corp. and its successors.
"WSAC" means WinStar Switch Acquisition Corp. and its successors.
"WSAC Credit Agreement" means the Credit Agreement dated as of
October 17, 1997, among WSAC, the Lenders named therein, Credit Suisse First
Boston, as documentation agent, and Salomon Brothers Inc, as syndication agent
and collateral and administrative agent, as in effect from time to time.
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17
"WSAC Loan" means all Indebtedness and other obligations of
WSAC arising in connection with the WSAC Credit Agreement.
"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.
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;
"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.
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18
SECTION 1.04. Ranking of the Securities. The Securities shall
rank pari passu with the Convertible Notes, the 1997 Senior Subordinated Notes,
the Exchange Debentures and the Deferred Interest Notes.
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 (not to
exceed $200,000,000) 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
appoint ment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authen tication by such agent. An authenticating agent has the
same rights as any Registrar or Paying Agent.
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19
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 Security holders 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 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
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20
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 cancelation 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
<PAGE>
21
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. Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. 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
cancelation 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 cancelation.
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.
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22
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of 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, 2003 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 of the
Securities), 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
------- ----------------
2003 105.000%
2004 103.333
2005 101.667
2006 and thereafter 100.000
====================== ==================
SECTION 3.02. Notices to Trustee. If the Company elects to
redeem Securities pursuant to Section 3.01, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed plus interest accrued and premium due thereon, if any, to the
Redemption Date.
The Company shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least five days before mailing the
notice to Holders referred to in Section 3.01.
SECTION 3.03. 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.
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.
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23
SECTION 3.04. 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 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:
(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; and
(g) 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 this Section 3.04, 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 3.05. 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.
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
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24
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 3.06. 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 cancelation.
SECTION 3.07. 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 3.08. 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, 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.
<PAGE>
25
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 11.02.
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) The Company 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 the Company 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, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i)Indebtedness of the Company outstanding at any time in an
aggregate principal amount not to exceed $200,000,000, less any amount
of Indebtedness Incurred pursuant to this clause (i) and permanently
repaid as provided under Section 4.10;
(ii)Indebtedness (A) to the Company 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 the Company 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
<PAGE>
26
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 Securities 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 Securities, 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 remaining Securities, (B) in
case the Indebtedness to be refinanced is subordinated in right of
payment to the Securities, 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 Securities, at least to the extent that the Indebtedness
to be refinanced is subordinated to the Securities 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 the Company be refinanced by means
of any Indebtedness of any Restricted Subsidiary of the Company
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 the Company 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 the Company (other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition), in a principal amount not to
exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition;
(v)Indebtedness of the Company not to exceed, at any one time
outstanding, two times the Net Cash Proceeds received by the Company
from and after March 1, 1998 (less the amount of any such Net Cash
Proceeds the receipt of which permitted the Company or any Restricted
Subsidiary to make any Restricted Payment, including any Restricted
Payment described in the second paragraph under Section 4.05) 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 pari passu with or subordinated to the
Securities at least to the extent that the Securities are subordinated
to Senior Indebtedness;
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27
(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 the Company 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 the Company 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 the Company or any
Restricted Subsidiary other than the equipment or inventory acquired;
(vii) 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); and
(ix)Indebtedness of the Company, to the extent the proceeds
thereof are immediately used to purchase the 1995 Notes, the 1997
Notes, the 1997 Senior Subordinated Notes, the Exchange Debentures, the
Securities or the Deferred Interest Notes 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 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, the Company, 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) The Company will not, and will not permit any Restricted
Subsidiary to, Incur any Guarantee of Indebtedness of any Unrestricted
Subsidiary.
SECTION 4.04. Limitation on Senior Subordinated Indebtedness.
The Company will not (i) Incur any Indebtedness, other than the Securities, that
is expressly made subordinated in right of payment to any Senior Indebtedness of
the Company unless such Indebtedness, by its terms and by the terms of any
agreement or instrument pursuant to which such Indebtedness is outstanding is
expressly made pari passu with, or subordinate in right of payment to, the
Securities pursuant to provisions substantially similar to those contained in
Article 10; provided, however, that the foregoing limitation shall not apply to
distinctions between categories of Senior Indebtedness of the Company that exist
by reason of any Liens or Guarantees arising or created in respect of some but
not all Senior Indebtedness of the Company or (ii) Incur any Indebtedness
secured by a Lien if such Indebtedness is not Senior Indebtedness of the
Company, unless
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28
contemporaneously therewith effective provision is made to secure the Securities
equally and ratably with such secured Indebtedness for so long as such secured
Indebtedness is secured by a Lien.
SECTION 4.05. Limitation on Restricted Payments. The Company
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 the Company 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 the
Company (including options, warrants or other rights to acquire such shares of
Capital Stock) held by Persons other than any Wholly Owned Restricted
Subsidiaries of the Company; (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 the Company that is
subordinated in right of payment to the Securities 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), the Company 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 Deemed 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 the Company 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 Deemed 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 4.17 plus (2) the aggregate Net Cash Proceeds received by
the Company after the Deemed Closing Date (less the amount of such Net Cash
Proceeds the receipt of which served as the basis on which the Company Incurred
Indebtedness pursuant to clause (v) of the second paragraph under Section 4.03
or pursuant to any similar provision contained in the indenture relating to the
1995 Senior Notes as in effect on the Deemed Closing Date (such Net Cash
Proceeds being herein called "Allocated Proceeds")) 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 the Company, or from the issuance to a
Person who is not a Subsidiary of the Company of any options, warrants or other
rights to acquire Capital Stock of the Company (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 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
<PAGE>
29
of this Section 4.05 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 the Company 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 the
Company 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 Securities, 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;
(iiithe repurchase, redemption or other acquisition of Capital
Stock of the Company (or options, warrants or other rights to acquire
such Capital Stock) in exchange for, or out of the proceeds (other than
Allocated Proceeds), of a substantially concurrent sale of, shares of
Capital Stock or options, warrants or other rights to acquire such
Capital Stock (in each case other than Redeemable Stock) of the
Company;
(iv)the making of any other Restricted Payment made by
exchange for, or out of the proceeds (other than Allocated 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 the
Company;
(vi)Investments, not to exceed $30,000,000 at any one time
outstanding;
(vii) Investments, not to exceed $30,000,000 at any one
time outstanding, in entities, substantially all of the assets of
which consist of Telecommunications Assets;
(vii)(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 the provisions of the Convertible Notes Indenture that
relate to repurchases of Convertible Notes upon a change of control and
that relate to limitations on sales of assets;
<PAGE>
30
(ix)cash payments in lieu of the issuance of fractional shares
of Common Stock of the Company upon conversion of any class of
Preferred Stock of the Company; 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 the Company;
(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 the Company 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; and
(xi)the redemption of the shares of Exchangeable Preferred
Stock upon mandatory redemption on December 15, 2007;
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 the Company.
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 4.05 have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Securities or Indebtedness
that is pari passu with the Securities, then the Net Cash Proceeds of such
issuance shall be included in clause (C) of the first paragraph of this Section
4.05 only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of the Securities or such Indebtedness.
SECTION 4.06. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company will not, and will
not permit any Restricted Subsidiary to, create 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 the Company or any other Restricted Subsidiary;
(ii)pay any Indebtedness owed to the Company or any other
Restricted Subsidiary that owns, directly or indirectly, any Capital
Stock of such Restricted Subsidiary;
<PAGE>
31
(iii) make loans or advances to the Company 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 the Company 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 the Company 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 4.06, (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 the
Company 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 from the value of property or
assets of the Company or any Restricted Subsidiary in any manner
material to the Company 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 4.06 shall prevent the Company or any Restricted
Subsidiary from (A) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries
that secure Indebtedness of the Company or any of its Restricted
Subsidiaries or (B) creating, incurring, assuming or suffering to exist
any Liens otherwise permitted pursuant to the indenture relating to the
1997 Senior Notes as in effect on the Deemed Closing Date.
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32
SECTION 4.07. Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries. The Company 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 the Company or a Wholly Owned Restricted Subsidiary;
(ii)issuances or sales to foreign nationals of shares of
Capital Stock of foreign Restricted Subsidiaries;
(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, the Company 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 4.10.
SECTION 4.08. Limitation on Issuances of Guarantees by
Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary,
directly or indirectly, to Guarantee any Indebtedness of the Company
("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 the Company 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 is (A) pari passu with the Securities, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Securities,
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 Securities.
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 the Company of all of the Company'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 4.09. Limitation on Transactions with Shareholders
and Affiliates. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without
<PAGE>
33
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 the Company or with any Affiliate of
the Company or any Restricted Subsidiary, except upon fair and reasonable terms
no less favorable to the Company 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 the Company 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 the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable fees to directors of the Company who are not employees of the
Company; (iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company files
a consolidated tax return or with which the Company is part of a consolidated
group for tax purposes; or (v) any Restricted Payments not prohibited by the
provisions of Section 4.05 (other than pursuant to clause (iv) of the definition
of "Permitted Investment" or clause (vi) of the second paragraph of Section
4.05). Notwithstanding the foregoing, any transaction (or series of related
transactions) with any Unrestricted Subsidiary covered by the first paragraph of
this Section 4.09 and not covered by clauses (i) through (v) of this paragraph,
the aggregate amount of which does not exceed $250,000 in value in any year will
not be covered by this Section 4.09 and, if the aggregate value of such
transaction exceeds $250,000 in any year, will not be covered by this Section
4.09 if such transaction has been determined by the Board of Directors to be
fair to the Company.
SECTION 4.10. Limitation on Asset Sales. The Company will not,
and will not permit any Restricted Subsidiary to, consummate any Asset Sale,
unless (i) the consideration received by the Company 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 the Company or its Restricted Subsidiaries from one or more
Asset Sales occurring on or after the Issue 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 the Company and its Subsidiaries has been
prepared), then the Company 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 the Company, or Indebtedness of any Restricted Subsidiary, in
each case owing to a Person other than the Company 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 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, the Company and its
<PAGE>
34
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 4.10. 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 4.10 totals at least $10,000,000, 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 and from the holders
of the Deferred Interest Notes on a pro rata basis an aggregate principal amount
of Securities and Deferred Interest Notes equal to the Excess Proceeds on such
date of purchase, at a purchase price equal to 101% of the principal amount of
such Securities or the principal amount of the Deferred Interest Notes on such
date of purchase, plus accrued and unpaid interest (if any) on such principal
amount of Securities or of Deferred Interest Notes, as the case may be, to such
date of purchase; provided, however, that no Offer to Purchase shall be required
to be commenced with respect to the Securities or the Deferred Interest Notes
until the Business Day following the payment date with respect to the Offer to
Purchase any 1997 Notes and need not be commenced if the Excess Proceeds
remaining after application thereof to the 1997 Notes purchased in such Offer to
Purchase applicable thereto are less than $10,000,000; provided further,
however, that no Securities or Deferred Interest Notes may be purchased under
this Section 4.10 unless the Company shall have purchased all 1997 Notes
tendered pursuant to such Offer to Purchase applicable thereto.
SECTION 4.11. 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, plus 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, the Company covenants to (i) repay in
full all indebtedness of 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 the Company to
permit the repurchase of the Securities. The Company shall first comply with the
covenant in the preceding sentence before it shall repurchase Securities
pursuant to this Section 4.11.
The Company may not repurchase any Securities (or any other
subordinated obligations, including the Deferred Interest Notes, the 1997 Senior
Subordinated Notes, the Exchange Debentures and the Convertible Notes) pursuant
to this Section 4.11 until it has repurchased all of the 1995 Senior Notes and
the 1997 Senior Notes and has caused each of WEC and WEC II to repurchase all of
the WEC Equipment Notes and WEC II Equipment Notes, respectively, tendered
pursuant to any Offer to Purchase as a result of such Change of Control.
However, if the Company is unable to repay all of its Indebtedness that would
prohibit repurchase of the Securities or
<PAGE>
35
is unable to obtain the consents of the holders of Indebtedness, if any, of the
Company outstanding at the time of a Change of Control whose consent would be so
required to permit the repurchase of Securities or otherwise fails to purchase
any Securities validly tendered, then the Company will have breached this
Section 4.11. 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 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 4.12. Existence. Subject to Articles Four and Five of
this Indenture, the Company 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 the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the existence of any
Restricted Subsidiary (other than of the Company), if the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries taken as a whole. In addition, the
Company 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 the Company), as may be necessary to ensure that it shall be in
good standing under the laws of the jurisdiction of its incorporation.
SECTION 4.13. Payment of Taxes and Other Claims. The Company
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) the Company or any such Subsidiary, (b) the income or
profits of any such Subsidiary which is a corporation or (c) the property of the
Company 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 the Company or any such Subsidiary; provided, however, that the
Company 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 4.14. Maintenance of Properties and Insurance. The
Company 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,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.14 shall prevent the Company 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
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36
judgment of the Company, desirable in the conduct of the business of the Company
or such Subsidiary.
The Company 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 the Company or such Restricted Subsidiary, as the case may be,
is then conducting business.
SECTION 4.15. Notice of Defaults. In the event that the
Company becomes aware of any Default or Event of Default, the Company, promptly
after it becomes aware thereof, will give written notice thereof to the Trustee.
SECTION 4.16. Compliance Certificates. (a) Beginning with
respect to the fiscal year ended December 31, 1998, the Company shall deliver to
the Trustee, within 90 days after the end of the Company'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 the Company that a review
has been conducted of the activities of the Company and the Restricted
Subsidiaries and the Company's and the Restricted Subsidiaries' performance
under this Indenture and that, to the best knowledge of such officer, the
Company has complied with all conditions and covenants under this Indenture. For
purposes of this Section 4.16, 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) Beginning with respect to the fiscal year ended December
31, 1998, the Company 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 the Company'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 4.16 and
(iii) whether, in connection with their audit examination, anything came to
their attention that caused them to believe that 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 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.
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37
(c) Within 90 days after the end of the Company's fiscal year,
the Company 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 4.17. SEC Reports and Reports to Holders. Whether or
not the Company is required to file reports with the SEC, if any Securities are
outstanding, the Company 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. The Company 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 4.18. 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.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company 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 the Company)
shall be issued or distributed to the stockholders of the Company) or permit any
Person to merge with or 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;
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38
(iii) immediately after giving effect to such transaction on a
pro forma basis, the Company 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 the Company immediately
prior to such transaction;
(iv) immediately after giving effect to such transaction on a
pro forma basis the Company, 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) the Company 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 the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company;
provided further, however, that any such transaction shall not have as one of
its purposes the evasion of the foregoing limitations.
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 the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company 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, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company 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 principal of (or
premium, if any, on) any Security when the same becomes due and payable
at maturity, upon acceleration, redemption or otherwise, whether or not
such payment is prohibited by the provisions of Article Ten;
(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, whether or not such payment is
prohibited pursuant to the provisions of Article 10;
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39
(c) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company contained in this Indenture
or under the Securities, 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
Securities;
(d) there occurs with respect to any issue or issues of
Indebtedness of the Company 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 the Company 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 the Company 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 the Company or any
Significant Subsidiary or for all or substantially all of the property
and assets of the Company or any Significant Subsidiary or (iii) the
winding up or liquidation of the affairs of the Company 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) the Company 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 the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) effects any general assignment for the
benefit of creditors.
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) occurs and is continuing under this Indenture, the
Trustee or the Holders
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40
of at least 25% in aggregate principal amount of the Securities 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 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 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, 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 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 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 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
<PAGE>
41
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
or the 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.
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42
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 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;
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
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43
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.
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.
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44
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.
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 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;
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45
(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, 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 or the
Securities, (ii) shall not be accountable for the Company's use or application
of the proceeds from the Securities and (iii) shall not be responsible for any
statement in the Securities other than its certificate of authentication.
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, 1999, 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 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
<PAGE>
46
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 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
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47
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.
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.
<PAGE>
48
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 cancelation 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 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
<PAGE>
49
respect of the Securities 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;
(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
<PAGE>
50
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
(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.
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
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51
Section 5.01 and Sections 4.03 through 4.19, and clause (c) of Section 6.01 with
respect to clauses (iii) and (iv) of Section 5.01 and Sections 4.03 through
4.19, and clauses (d) and (e) of Section 6.01 shall be deemed not to be Events
of Default, 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 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
<PAGE>
52
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) 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.
<PAGE>
53
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. 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
<PAGE>
54
waive future compliance by the Company with any provision of this Indenture or
the Securities.
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; or
(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.
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.
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.
<PAGE>
55
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.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Securities Subordinate to Senior Indebtedness.
The Company and the Trustee each covenants and agrees, and each Holder, by its
acceptance of a Security, likewise covenants and agrees, that all Securities
shall be issued subject to the subordination provisions contained in this
Article Ten, and each Holder of a Security, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that the Senior
Subordinated Obligations shall be, to the extent and in the manner set forth in
this Article Ten, subordinated in right of payment and subject to the prior
payment in full, in cash or cash equivalents, of all amounts payable under
Senior
<PAGE>
56
Indebtedness including, without limitation, the Company's obligations under the
Designated Senior Indebtedness and any interest accruing subsequent to an event
specified in Sections 6.01(f) and 6.01(g), whether or not such interest is an
allowed claim enforceable against the debtor under the United States Bankruptcy
Code. The Securities are pari passu with the Convertible Notes, the 1997 Senior
Subordinated Notes, the Exchange Debentures and the Deferred Interest Notes.
SECTION 10.02. No Payment on Securities in Certain
Circumstances. (a) No direct or indirect payment by or on behalf of the Company
of any Senior Subordinated Obligations, whether pursuant to the terms of the
Securities or upon acceleration or otherwise, shall be made if, at the time of
such payment, there exists a default in the payment of all or any portion of the
obligations on any Senior Indebtedness, and such default shall not have been
cured or waived, or the benefits of this sentence waived by or on behalf of, the
holders of such Senior Indebtedness.
(b) In addition, during the continuance of any other event of
default with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, upon receipt by the Trustee of written
notice from the trustee or other representative for the holders of such
Designated Senior Indebtedness (or the holders of at least a majority in
principal amount of such Designated Senior Indebtedness then outstanding), no
payment of Senior Subordinated Obligations may be made by or on behalf of the
Company upon or in respect of the Securities for a period (a "Payment Blockage
Period") commencing on the date of receipt of such notice and ending 159 days
thereafter (unless, in each case, such Payment Blockage Period shall be
terminated by written notice to the Trustee from such trustee of, or other
representatives for, such holders). Not more than one Payment Blockage Period
may be commenced with respect to the Securities during any period of 360
consecutive days. Notwithstanding anything in this Indenture to the contrary,
there must be 180 consecutive days in any 360-day period in which no Payment
Blockage Period is in effect. No event of default that existed or was continuing
(it being acknowledged that any subsequent action that would give rise to an
event of default pursuant to any provision under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose) on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period shall be, or shall be made, the basis for the commencement of a
second Payment Blockage Period by the representative for, or the holders of,
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder and the Trustee has
received notice pursuant to Section 10.12 that such payment is prohibited by
paragraphs (a) and (b) of this Section 10.02, the Trustee shall promptly notify
the holders of the Senior Indebtedness identified to the Trustee by the Company
as being holders of Senior Indebtedness of such prohibited payment and such
payment shall be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that, upon notice from the Trustee
to the holders of Senior Indebtedness that such prohibited payment has been
made, the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) within 30 days of
<PAGE>
57
receipt of such notice from the Trustee, notify the Trustee of the amounts then
due and owing on the Senior Indebtedness, if any, and only the amounts specified
in such notice to the Trustee shall be paid to the holders of Senior
Indebtedness and any excess above such amounts due and owing on Senior
Indebtedness shall be paid to the Holders.
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities, upon any
dissolution or winding up or total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness (including any interest accruing subsequent to an event of
bankruptcy, whether or not such interest is an allowed claim enforceable against
the debtor under the United States Bankruptcy Code) shall first be paid in full,
in cash or cash equivalents, before the Holders of the Securities or the Trustee
on behalf of the Holders of the Securities shall be entitled to receive any
payment by the Company on account of Senior Subordinated Obligations, or any
payment to acquire any of the Securities for cash, property or securities, or
any distribution with respect to the Securities of any cash, property or
securities. Before any payment may be made by, or on behalf of, the Company of
any Securities upon any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Securities or the Trustee on behalf of the Holders of
the Securities would be entitled, but for the subordination provisions of this
Article Ten, shall be made by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution or by the Holders of the Securities or the Trustee if
received by them or it, directly to the holders of the Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives as their respective
interests appear, to the extent necessary to pay all such Senior Indebtedness in
full, in cash or cash equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether
by or on behalf of the Company, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. To the extent the obligation to
repay any Senior Indebtedness is declared to be fraudulent, invalid, or
otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then the obligation so declared fraudulent, invalid
or otherwise set aside (and all other amounts that would come due with respect
thereto had such obligation not been so affected) shall be deemed to be
reinstated and outstanding as Senior Indebtedness for all purposes of this
Indenture as if such declaration, invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, shall be received by the
<PAGE>
58
Trustee or any Holder at a time when such payment or distribution is prohibited
by Section 10.03(a) and before all obligations in respect of Senior Indebtedness
are paid in full, in cash or cash equivalents, such payment or distribution
shall be received and held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Indebtedness (pro rata to such holders on
the basis of the respective amount of Senior Indebtedness held by such holders)
or their representatives, or to the trustee under the Senior Note Indenture, or
to the trustee or trustees under any other indenture pursuant to which any such
Senior Indebtedness may have been issued, as their respective interests appear,
for application to the payment of Senior Indebtedness remaining unpaid until all
such Senior Indebtedness has been paid in full, in cash or cash equivalents,
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of such Senior Indebtedness.
(d) For purposes of this Section 10.03, the words "cash,
property or securities" shall not be deemed to include, so long as the effect of
this clause is not to cause the Securities to be treated in any case or
proceeding or similar event described in this Section 10.03 as part of the same
class of claims as the Senior Indebtedness or any class of claims pari passu
with, or senior to, the Senior Indebtedness for any payment or distribution,
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment that are subordinated, at least to the extent
that the Securities are subordinated, to the payment of all Senior Indebtedness
then outstanding; provided, however, that (i) if a new corporation results from
such reorganization or readjustment, such corporation assumes the Senior
Indebtedness and (ii) the rights of the holders of the Senior Indebtedness are
not, without the consent of such holders, altered by such reorganization or
readjustment. The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the sale, conveyance, transfer, lease or other disposition
of all or substantially all of its property and assets to another corporation
upon the terms and conditions provided in Article Five shall not be deemed a
dissolution, winding up, liquidation or reorganization for the purposes of this
Section 10.03 if such other corporation shall, as a part of such consolidation,
merger, sale, conveyance, transfer, lease or other disposition, comply with the
conditions provided in Article Five.
SECTION 10.04. Subrogation of Holders to Rights of Holders of
Senior Indebtedness. Upon the payment in full of all Senior Indebtedness in cash
or cash equivalents, the Holders of Securities shall be subrogated to the rights
of the holders of Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company made on such Senior Indebtedness
until the principal of, premium, if any, and interest on the Securities shall be
paid in full, and no such payments or distributions to the holders of Senior
Indebtedness (or any trustee therefor) of any cash, property or securities of
the Company to which the Holders or the Trustee on their behalf would be
entitled except for the provisions of this Article Ten, and no payment pursuant
to the provisions of this Article Ten to the holders of Senior Indebtedness by
Holders or the Trustee on their behalf shall be, as among the Trustee, the
Company, its creditors other than the holders of Senior Indebtedness, and the
Holders, deemed to be a payment by the Company to or on account of the Senior
Indebtedness, it being understood that the provisions of this Article Ten are
and are intended solely for the purpose of defining the relative rights of, the
Holders, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.
<PAGE>
59
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Ten shall
have been applied, pursuant to the provisions of this Article Ten, to the
payment of all amounts payable under Senior Indebtedness, then, and in such
case, the Holders shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount required to make payment in full, in cash
or cash equivalents, of such Senior Indebtedness of such holders.
SECTION 10.05. Obligations of Company Unconditional. Nothing
contained in this Article Ten or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, the obligation
of the Company, which is unconditional and absolute, to pay to the Holders the
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms, or to affect
the relative rights of the Holders and creditors of the Company other than the
holders of the Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon a Default or an Event of Default under this Indenture,
subject to the rights, if any, under this Article Ten, of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Ten will restrict the right of the Trustee or the
Holders to take any action to declare the Securities to be due and payable prior
to their Stated Maturity pursuant to Section 6.01 or to pursue any rights or
remedies hereunder; provided, however, that all Senior Indebtedness then due and
payable or thereafter declared to be due and payable shall first be paid in
full, in cash or cash equivalents, before the Holders or the Trustee are
entitled to receive any direct or indirect payment from the Company of Senior
Subordinated Obligations.
SECTION 10.06. Payments May Be Made Prior to Dissolution.
Nothing contained in this Article Ten or elsewhere in this Indenture or in any
of the Securities (a) shall prevent the Company at any time, except under the
conditions described in Article Six or Section 10.02 or 10.03, from making
payments of or on account of the Senior Subordinated Obligations to the Holders
entitled thereto or from depositing any moneys with the Trustee for such
payments, or (b) shall prevent the application by the Trustee (or any Paying
Agent other than the Company) of any moneys deposited with it hereunder to the
payment of or on account of the Senior Subordinated Obligations, if the Trustee
or such Paying Agent, as the case may be, did not, at least two business days
prior to the date upon which such payment becomes due and payable, have written
notice as provided in Section 10.02 or 10.12 of any event prohibiting the making
of such payment. The Company shall give prompt written notice to the Trustee of
any dissolution, winding up, liquidation or reorganization of the Company.
SECTION 10.07. No Waiver of Subordination Provisions. No right
of any present or future holder of any Senior Indebtedness of the Company to
enforce the subordination provisions of this Article Ten shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge
<PAGE>
60
thereof any such holder may have or be otherwise charged with. The provisions of
this Article Ten are intended to be for the benefit of, and shall be enforceable
directly by, the holders of Senior Indebtedness.
SECTION 10.08. Authorization to Trustee to Take Action to
Effectuate Subordination. Each Holder of Securities by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate, as between the Holders and the holders
of the Senior Indebtedness, the subordination as provided in this Article Ten
and appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 10.09. Senior Indebtedness May Be Renewed or Extended,
Etc. Without in any way limiting the generality of Section 10.07 of this
Indenture, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article Ten or the obligations hereunder of the
Holders to the holders of Senior Indebtedness, do any one or more of the
following: (a) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 10.10. Trustee to Have No Fiduciary Duty to Holders of
Senior Indebtedness. With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Ten, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the
Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay
over or deliver to the Holders, the Company or any other Person moneys or assets
to which any holder of Senior Indebtedness shall be entitled by virtue of this
Article Ten or otherwise.
SECTION 10.11. Rights of Trustee as Holder of Senior
Indebtedness. The Trustee shall be entitled to all rights set forth in this
Article Ten in respect of any Senior Indebtedness at any time held by it, to the
same extent as any other holder of Senior Indebtedness and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
SECTION 10.12. Notice to Trustee. The Company shall give
prompt written notice to the Trustee of any fact known to the Company which
would prohibit the making of any payment of moneys to or by the Trustee in
respect of Securities pursuant to the provisions of this Article Ten or
otherwise. The Trustee shall not be charged with knowledge of the existence of a
default or event of default with respect to the Senior Indebtedness or any other
facts that would prohibit the making of any payment to or by the Trustee unless
and until the Trustee shall have received written notice thereof mailed or
delivered to the Trustee at its Corporate Trust Office signed by an Officer of
the Company, any holder or representative of any class of Senior Indebtedness or
any trustee
<PAGE>
61
or agent therefor; and prior to the receipt of any such written notice, the
Trustee shall, subject to Article Seven, be entitled to assume that no such
facts exist; provided, however, that, if the Trustee shall not have received the
notice provided for in this Section 10.12 at least two Business Days prior to
the date upon which, by the terms of this Indenture, any money shall become
payable for any purpose (including, without limitation, the payment of the
principal or, premium, if any, or interest on any Security), then
notwithstanding anything herein to the contrary, the Trustee shall have full
power and authority to receive any money from the Company and to apply the same
to the purpose for which they were received, and shall not be affected by any
notice to the contrary that may be received by it on or after such prior date
except for an acceleration of the Securities prior to such application. Nothing
contained in this Section 10.12 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by this Article Ten. The
foregoing shall not apply if the Paying Agent is the Company.
The Trustee shall be entitled to rely on the delivery to it of
a written notice by a Person representing himself or itself to be a holder of
any Senior Indebtedness (or a trustee on behalf of, or other representative of,
such holder) to establish that such notice has been given by a holder of such
Senior Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Ten.
SECTION 10.13. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities
referred to in this Article Ten, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which bankruptcy, dissolution, winding up, liquidation or reorganization
proceedings are pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution, delivered to the Trustee or to the Holders for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.14. Not to Prevent Events of Default. The failure
to make a payment on account of principal of, premium, if any, or interest on
the Securities by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.15. Trustee's Compensation Not Prejudiced. Nothing in this
Article Ten will apply to amounts due to the Trustee pursuant to other sections
of this Indenture.
<PAGE>
62
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. 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 11.02. 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 Communications, Inc.
230 Park Avenue
New York, New York 10169
Attention: General Counsel
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.
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 11.02 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
<PAGE>
63
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 11.03. 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 11.04. 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
(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 11.05. 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 11.06. 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.
<PAGE>
64
SECTION 11.07. 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 11.08. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.09. 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; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as consideration for, the execution of this
Indenture and the issue of the Securities.
SECTION 11.10. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.11. 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 11.12. 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 11.13. 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.
<PAGE>
65
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
WINSTAR COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustees
By:__________________________
Name:
Title:
<PAGE>
EA-1
EXHIBIT A
[FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
*/
**/
WINSTAR COMMUNICATIONS, INC.
10% Senior Subordinated Note Due 2008
CUSIP _________
No. $_________
WINSTAR COMMUNICATIONS, INC., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to ____________, or its
registered assigns, the principal sum of ___________________ ($__________) on
March 15, 2008.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1998.
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.
- ----------------------------
*/ 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 1 caption "[TO BE ATTACHED TO GLOBAL SECURITIES]--SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY".
**/ 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 1 to the Rule
144A/Regulation S Appendix and replace the Assignment Form included in this
Exhibit A with Assignment Form included in such Exhibit 1.
<PAGE>
EA-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
Date: WINSTAR COMMUNICATIONS, INC.
By: _________________________
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 10% Senior Subordinated Notes Due 2008 described
in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
Date:
By: __________________________
Authorized Signatory
<PAGE>
EA-3
[REVERSE SIDE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
WINSTAR COMMUNICATIONS, INC.
10% Senior Subordinated Note Due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2008.
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, 1998.
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, commencing September 15, 1998, to the
persons who are Holders (as reflected in the Security Register) at the close of
business on the March 1 or September 1 immediately preceding the relevant
Interest Payment Date, in each case, even if the Note is canceled 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.
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.
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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
March 15, 1998 (the "Indenture"), between the Company 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 Indenture limits the original aggregate principal amount
of the Notes to $200,000,000 (subject to Section 2.07 of the Indenture).
5. Redemption.
The Notes will not be redeemable prior to March 15, 2003.
Thereafter, the Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time 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 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 March 15 of the
years set forth below:
Year Redemption Price
---- ----------------
2003 105.000%
2004 103.333
2005 101.667
2006 and thereafter 100.000
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6. 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 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.
7. Repurchase upon Change in Control.
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.
8. 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.
9. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
10. 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.
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11. 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 and the Indenture 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.
12. 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.
13. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; 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, 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.
14. 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.
15. 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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (c) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in the Indenture or
under the Notes 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 the Company or any Significant
Subsidiary having an outstanding principal amount of $25,000,000 or more in the
aggregate for all such issues
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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 the Company 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 the Company 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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) the winding up or liquidation of the affairs of
the Company 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) the Company 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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) effects any general assignment for the benefit
of creditors.
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)
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.
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16. Subordination.
The payment of the Notes is, to the extent set forth in the
Indenture, subordinated in right of payment in full, in cash or cash
equivalents, of all Senior Indebtedness of the Company. To the extent provided
in the Indenture, Senior Indebtedness of the Company must be paid before the
Notes may be paid. The Company agrees, and each Holder by accepting a Note
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purposes.
17. 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.
18. 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. 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.
19. 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.
20. 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.
21. 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).
22. 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.
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The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to WinStar
Communications, Inc., 230 Park Avenue, Suite 2700, New York, NY 10169,
Attention: General Counsel.
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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 _________________________________________***/
- -----------------------------------
*** 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.
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OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.11 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 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: _________________________________________****/
- ----------------------------
**** 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.
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RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
RULE 144A, 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:
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 10% Senior Subordinated Notes
Due 2008 to be issued pursuant to this Indenture in connection with a Registered
Exchange Offer pursuant to the Registration Rights Agreement.
"Initial Purchasers" means Credit Suisse First Boston Corporation,
Salomon Brothers Inc, Morgan Stanley & Co. Incorporated and NationsBanc
Montgomery Securities LLC.
"Initial Securities" means the 10% Senior Subordinated Notes
Due 2008, 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 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 10% Senior
Subordinated Notes Due 2008 to be issued pursuant to this Indenture to the
Initial Purchasers in a Private Exchange.
"Purchase Agreement" means the Purchase Agreement dated March
17, 1998, 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.
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"Registration Rights Agreement" means the Registration Rights
Agreement dated March 17, 1998, among the Company 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.
1.2 Other Definitions
<TABLE>
<CAPTION>
Defined in
Term Section:
---- ----------
<S> <C>
"Agent Members"................................................2.1(b)
"Global Security"..............................................2.1(a)
"Regulation S".................................................2.1(a)
"Rule 144A"....................................................2.1(a)
</TABLE>
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.
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(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.
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.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$200,000,000 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 $200,000,000 except
as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) 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.
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(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 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.
(b) Legend.
(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)
OUTSIDE THE UNITED STATES IN A 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) OR (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
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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.
(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, 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 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.
(c) Cancelation 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
<PAGE>
A-6
returned to the Depositary for cancelation or retained and canceled by the
Trustee. At any time prior to such cancelation, 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.
(d) 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 3.07, 4.10, 4.11 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 Security
selected for redemption in whole or in part pursuant to Article Three
of this Indenture, except the unredeemed portion of any certificated
Security being redeemed in part, or (b) any Security for a period
beginning 15 Business Days before the mailing of a notice of an 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.
(e) 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
<PAGE>
A-7
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.
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
<PAGE>
A-8
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>
EI-1
EXHIBIT 1
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.
[Restricted Securities Legend]
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) OUTSIDE THE
UNITED STATES IN A 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) OR (IV) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(IV) 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
<PAGE>
EI-2
ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN
(A) ABOVE.
<PAGE>
EI-3
WINSTAR COMMUNICATIONS, INC.
10% Senior Subordinated Note Due 2008
CUSIP _________
No. $___________
WINSTAR COMMUNICATIONS, INC., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to ____________, or its
registered assigns, the principal sum of ____________ ($_____) on March 15,
2008.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 1998.
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>
EI-4
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
Date: WINSTAR COMMUNICATIONS, INC.
By: ___________________________
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 10% Senior Subordinated Notes Due 2008 described in
the within-mentioned Indenture.
Date:
UNITED STATES TRUST
COMPANY OF NEW YORK, as
Trustee
By: ______________________________
Authorized Signatory
<PAGE>
EI-5
[REVERSE SIDE OF NOTE]
WINSTAR COMMUNICATIONS, INC.
10% Senior Subordinated Note Due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2008.
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, 1998.
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, commencing September 15, 1998, to the
persons who are Holders (as reflected in the Security Register) at the close of
business on the March 1 or September 1 immediately preceding the relevant
Interest Payment Date, in each case, even if the Note is canceled 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.
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.
<PAGE>
EI-6
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
March 15, 1998 (the "Indenture"), between the Company 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 Indenture limits the original aggregate principal amount
of the Notes to $200,000,000 (subject to Section 2.07 of the Indenture).
5. Redemption.
The Notes will not be redeemable prior to March 15, 2003.
Thereafter, the Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time 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 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 March 15 of the
years set forth below:
Year Redemption Price
---- ----------------
2003 105.000%
2004 103.333
2005 101.667
2006 and thereafter 100.000
<PAGE>
EI-7
6. 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 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.
7. Repurchase upon Change in Control.
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.
8. 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.
9. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
10. 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.
<PAGE>
EI-8
11. 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 and the Indenture 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.
12. 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.
13. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; 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, 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.
14. 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.
15. 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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (c) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in the Indenture or
under the Notes 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 the Company or any Significant
Subsidiary having an outstanding principal amount of $25,000,000 or more in the
aggregate for all such issues
<PAGE>
EI-9
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 the Company 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 the Company 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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) the winding up or liquidation of the affairs of
the Company 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) the Company 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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) effects any general assignment for the benefit
of creditors.
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)
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.
<PAGE>
EI-10
16. Subordination.
The payment of the Notes is, to the extent set forth in the
Indenture, subordinated in right of payment in full, in cash or cash
equivalents, of all Senior Indebtedness of the Company. To the extent provided
in the Indenture, Senior Indebtedness of the Company must be paid before the
Notes may be paid. The Company agrees, and each Holder by accepting a Note
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purposes.
17. 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.
18. 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. 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.
19. 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.
20. 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.
21. 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).
22. 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.
<PAGE>
EI-11
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to WinStar
Communications, Inc., 230 Park Avenue, Suite 2700, New York, NY 10169,
Attention: General Counsel.
<PAGE>
EI-12
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 _______________________________________*/
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 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
- ------------------
* 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>
EI-13
(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 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
<PAGE>
EI-14
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>
EI-15
[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>
<S> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
EI-16
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.11 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 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: ____________________________ **/
- ------------------------------------------
** 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
===============================================================================
WINSTAR COMMUNICATIONS, INC.,
as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
----------------------
Indenture
Dated as of March 15, 1998
----------------------
11% Senior Subordinated Deferred Interest Notes Due 2008
==============================================================================
<PAGE>
2
CROSS-REFERENCE TABLE
----------------------
TIA Sections Indenture Sections
ss.310(a)(1)........................................... 7.10
(a)(2)......................................... 7.10
(b)............................................ 7.08
ss.313(c).............................................. 7.06; 11.02
ss.314(a).............................................. 4.18; 11.02
(a)(4)......................................... 4.17; 11.02
(c)(1)......................................... 11.03
(c)(2)......................................... 11.03
(e)............................................ 11.04
ss.315(b).............................................. 7.05; 11.02
ss.316(a)(1)(A)........................................ 6.05
(a)(1)(B)...................................... 6.04
(b)............................................ 6.07
ss.317(a)(1)........................................... 6.08
(a)(2)......................................... 6.09
ss.318(a).............................................. 11.01
(c)......................................... 11.01
- -------------------------
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............................. 18
SECTION 1.03. Rules of Construction......................................................... 18
SECTION 1.04. Ranking of the Securities..................................................... 19
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating............................................................... 19
SECTION 2.02. Execution and Authentication.................................................. 19
SECTION 2.03. Registrar and Paying Agent.................................................... 20
SECTION 2.04. Paying Agent To Hold Money in Trust........................................... 20
SECTION 2.05. Securityholder Lists.......................................................... 20
SECTION 2.06. Transfer and Exchange......................................................... 20
SECTION 2.07. Replacement Securities........................................................ 21
SECTION 2.08. Outstanding Securities........................................................ 21
SECTION 2.09. Temporary Securities.......................................................... 22
SECTION 2.10. Cancelation................................................................... 22
SECTION 2.11. Defaulted Interest............................................................ 22
SECTION 2.12. CUSIP Numbers................................................................. 22
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption........................................................... 23
SECTION 3.02. Notices to Trustee............................................................ 23
SECTION 3.03. Selection of Securities To Be Redeemed........................................ 23
SECTION 3.04. Notice of Redemption.......................................................... 24
SECTION 3.05. Effect of Notice of Redemption................................................ 24
SECTION 3.06. Deposit of Redemption Price................................................... 25
SECTION 3.07. Payment of Securities Called for Redemption................................... 25
SECTION 3.08. Securities Redeemed in Part................................................... 25
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
ARTICLE FOUR
COVENANTS Page
<S> <C> <C>
SECTION 4.01. Payment of Securities......................................................... 25
SECTION 4.02. Maintenance of Office or Agency............................................... 26
SECTION 4.03. Limitation on Indebtedness.................................................... 26
SECTION 4.04. Limitation on Senior Subordinated Indebtedness................................ 28
SECTION 4.05. Limitation on Restricted Payments............................................. 29
SECTION 4.06. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries......................................... 31
SECTION 4.07. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries................................................... 33
SECTION 4.08. Limitation on Issuances of Guarantees by Restricted
Subsidiaries.............................................................. 33
SECTION 4.09. Limitation on Transactions with Shareholders and Affiliates................... 33
SECTION 4.10. Limitation on Asset Sales..................................................... 34
SECTION 4.11. Repurchase of Securities upon a Change of Control............................. 35
SECTION 4.12. Existence..................................................................... 36
SECTION 4.13. Payment of Taxes and Other Claims............................................. 36
SECTION 4.14. Maintenance of Properties and Insurance....................................... 36
SECTION 4.15. Notice of Defaults............................................................ 37
SECTION 4.16. Compliance Certificates....................................................... 37
SECTION 4.17. SEC Reports and Reports to Holders............................................ 38
SECTION 4.18. Waiver of Stay, Extension or Usury Laws....................................... 38
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc................................................... 38
SECTION 5.02. Successor Substituted......................................................... 39
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................................. 39
SECTION 6.02. Acceleration.................................................................. 40
SECTION 6.03. Other Remedies................................................................ 41
SECTION 6.04. Waiver of Past Defaults....................................................... 41
SECTION 6.05. Control by Majority........................................................... 42
SECTION 6.06. Limitation on Suits........................................................... 42
SECTION 6.07. Rights of Holders to Receive Payment.......................................... 42
SECTION 6.08. Collection Suit by Trustee.................................................... 43
SECTION 6.09. Trustee May File Proofs of Claim.............................................. 43
SECTION 6.10. Priorities.................................................................... 43
SECTION 6.11. Undertaking for Costs......................................................... 44
</TABLE>
<PAGE>
iii
<TABLE>
Page
<S> <C> <C>
SECTION 6.12. Restoration of Rights and Remedies............................................ 44
SECTION 6.13. Rights and Remedies Cumulative................................................ 44
SECTION 6.14. Delay or Omission Not Waiver.................................................. 44
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General....................................................................... 44
SECTION 7.02. Certain Rights of Trustee..................................................... 45
SECTION 7.03. Individual Rights of Trustee.................................................. 46
SECTION 7.04. Trustee's Disclaimer.......................................................... 46
SECTION 7.05. Notice of Default............................................................. 46
SECTION 7.06. Reports by Trustee to Holders................................................. 46
SECTION 7.07. Compensation and Indemnity.................................................... 46
SECTION 7.08. Replacement of Trustee........................................................ 47
SECTION 7.09. Successor Trustee by Merger, Etc.............................................. 48
SECTION 7.10. Eligibility................................................................... 48
SECTION 7.11. Money Held in Trust........................................................... 48
SECTION 7.12. Withholding Taxes............................................................. 48
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.......................................... 48
SECTION 8.02. Defeasance and Discharge of Indenture......................................... 49
SECTION 8.03. Defeasance of Certain Obligations............................................. 51
SECTION 8.04. Application of Trust Money.................................................... 53
SECTION 8.05. Repayment to Company.......................................................... 53
SECTION 8.06. Reinstatement................................................................. 53
SECTION 8.07. Insiders...................................................................... 53
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.................................................... 54
SECTION 9.02. With Consent of Holders....................................................... 54
SECTION 9.03. Revocation and Effect of Consent.............................................. 55
SECTION 9.04. Notation on or Exchange of Securities......................................... 55
SECTION 9.05. Trustee to Sign Amendments, Etc............................................... 56
SECTION 9.06. Conformity with Trust Indenture Act........................................... 56
</TABLE>
<PAGE>
iv
<TABLE>
<CAPTION>
ARTICLE TEN Page
SUBORDINATION
<S> <C> <C>
SECTION 10.01. Securities Subordinate to Senior Indebtedness............................. 56
SECTION 10.02. No Payment on Securities in Certain Circumstances......................... 56
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc............................ 57
SECTION 10.04. Subrogation of Holders to Rights of Holders of
Senior Indebtedness................................................ 59
SECTION 10.05. Obligations of Company Unconditional...................................... 59
SECTION 10.06. Payments May Be Made Prior to Dissolution................................. 60
SECTION 10.07. No Waiver of Subordination Provisions..................................... 60
SECTION 10.08. Authorization to Trustee to Take Action to Effectuate
Subordination...................................................... 60
SECTION 10.09. Senior Indebtedness May Be Renewed or Extended, Etc....................... 60
SECTION 10.10. Trustee to Have No Fiduciary Duty to Holders of Senior
Indebtedness....................................................... 61
SECTION 10.11. Rights of Trustee as Holder of Senior Indebtedness........................ 61
SECTION 10.12. Notice to Trustee......................................................... 61
SECTION 10.13. Reliance on Judicial Order or Certificate of Liquidating
Agent.............................................................. 62
SECTION 10.14. Not to Prevent Events of Default.......................................... 62
SECTION 10.15. Trustee's Compensation Not Prejudiced..................................... 62
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939............................................... 62
SECTION 11.02. Notices................................................................... 62
SECTION 11.03. Certificate and Opinion as to Conditions Precedent........................ 63
SECTION 11.04. Statements Required in Certificate or Opinion............................. 63
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar............................... 64
SECTION 11.06. Payment Date Other Than a Business Day.................................... 64
SECTION 11.07. Governing Law............................................................. 64
SECTION 11.08. No Adverse Interpretation of Other Agreements............................. 64
SECTION 11.09. No Recourse Against Others................................................ 64
SECTION 11.10. Successors................................................................ 65
SECTION 11.11. Duplicate Originals....................................................... 65
SECTION 11.12. Separability.............................................................. 65
SECTION 11.13. Table of Contents, Headings, Etc.......................................... 65
EXHIBIT A Form of Security.......................................................... EA-1
Rule 144A/Regulation S Appendix
</TABLE>
<PAGE>
INDENTURE, dated as of March 15, 1998, between WINSTAR
COMMUNICATIONS, INC., a Delaware corporation, as issuer (the "Company") 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 11%
Senior Subordinated Deferred Interest Notes Due 2008 (the "Initial Securities")
and, if and when issued pursuant to a registered exchange for Initial
Securities, the Company's 11% Senior Subordinated Deferred Interest Notes Due
2008 (the "Exchange Securities") and, if and when issued pursuant to a private
exchange for Initial Securities, the Company's 11% Senior Subordinated Deferred
Interest Notes Due 2008 (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.
"1995 Notes" means the 1995 Senior Notes and the Convertible Notes.
"1997 Notes" means the 1997 Senior Notes and the Equipment Notes.
"1995 Senior Notes" means the 14% Senior Discount Notes Due 2005 of
the Company.
"1997 Senior Notes" means the 14 1/2% Senior Deferred Interest Notes
Due 2005 of the Company.
"1997 Senior Subordinated Notes" means the 15% Senior Subordinated
Deferred Interest Notes Due 2007 of the Company.
"Accumulated Amount" means, as of any date (the "Specified
Date"), the amount provided below for each $1,000 principal amount of the
Securities:
(i)if the Specified Date occurs on one of the following dates
(each, a "SemiAnnual Interest Accrual Date"), the Accumulated Amount
will equal the amount set forth below for such SemiAnnual Interest
Accrual Date:
Accumulated
SemiAnnual Interest Accrual Date Amount
- --------------------------------- -----------
September 15, 1998................................... $1,053.78
March 15, 1999....................................... 1,111.74
<PAGE>
2
September 15, 1999.................................. 1,172.88
March 15, 2000...................................... 1,237.39
September 15, 2000.................................. 1,305.45
March 15, 2001...................................... 1,377.25
September 15, 2001.................................. 1,452.99
March 15, 2002...................................... 1,532.91
September 15, 2002.................................. 1,617.22
March 15, 2003...................................... 1,706.17
(ii)if the Specified Date occurs before the first SemiAnnual
Interest Accrual Date, the Accumulated Amount will equal the sum of (A)
$1,000 and (B) an amount equal to the product of (1) the Accumulated
Amount for the first SemiAnnual Interest Accrual Date less $1,000
multiplied by (2) a fraction, the numerator of which is the number of
days elapsed from the Issue Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is the
number of days from the Issue Date to the first SemiAnnual Interest
Accrual Date, using a 360-day year of twelve 30-day months;
(iiiif the Specified Date occurs between two SemiAnnual
Interest Accrual Dates, the Accumulated Amount will equal the sum of
(A) the Accumulated Amount for the SemiAnnual Interest Accrual Date
immediately preceding such Specified Date and (B) an amount equal to
the product of (1) the Accumulated Amount for the immediately following
SemiAnnual Interest Accrual Date less the Accumulated Amount for the
immediately preceding SemiAnnual Interest Accrual Date multiplied by
(2) a fraction, the numerator of which is the number of days elapsed
from the immediately preceding SemiAnnual Interest Accrual Date to the
Specified Date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180; or
(iv)if the Specified Date occurs after the last SemiAnnual
Interest Accrual Date, the Accumulated Amount will equal $ 1,706.17.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company 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 the
Company 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 the Company 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 4.05 (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 the Company or any of its Restricted
Subsidiaries or all or substantially all of the property
<PAGE>
3
and assets of such Person are acquired by the Company 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 clause (C) of the first
paragraph of Section 4.05, any amount paid as, or accrued for, cash dividends on
Preferred Stock of the Company or any Restricted Subsidiary owned by Persons
other than the Company 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 the Company 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 the Company 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 the Company and its Restricted
Subsidiaries, prepared in conformity with GAAP and most recently filed with the
SEC pursuant to Section 4.17; 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 the Company 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.
"Allocated Proceeds" has the meaning provided in Section 4.05.
"Asset Acquisition" means (i) an Investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
into or consolidated with the Company or any of its Restricted Subsidiaries or
(ii) an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person.
<PAGE>
4
"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 the Company or any of its
Restricted Subsidiaries to any Person other than the Company 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 the Company or any of its Restricted Subsidiaries
or (iii) any other property or assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company 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 the Company or its
Restricted Subsidiaries; (C) a substantially simultaneous exchange of, or a sale
or disposition (other than 85% or more for cash or cash equivalents) by the
Company or any of its Restricted Subsidiaries of, licenses issued by the FCC or
applications or bids therefor; provided, however, that the consideration
received by the Company 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.
"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 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 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.
"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.
<PAGE>
5
"Cash-Pay Notes" means the 10% Senior Subordinated Notes Due
2008 of the Company.
"Cash-Pay Notes Indenture" means the Indenture, dated as of
March 15, 1998, between the Company and United States Trust Company of New York,
pursuant to which the Cash-Pay Notes were issued.
"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 Issue 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 Issue 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.
"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 paragraph
preceding 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 the Company (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 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 the Company and its Restricted
Subsidiaries in
<PAGE>
6
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 the Company 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 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 the Company 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 the Company 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, the Cash-Pay Notes, the Convertible
Preferred Stock, the 1997 Senior Subordinated Notes, the 1997 Notes, the WSAC
Loan and the Exchangeable Preferred Stock, all as 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 the Company 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 the Company 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 the Company.
"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.
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7
"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.
"Convertible Preferred Stock" means the Series D 7% Senior
Cumulative Convertible Preferred Stock Due 2010 of the Company.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Restricted Subsidiaries against fluctuations
in currency values to or under which the Company 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.
"Deemed Closing Date" means March 18, 1997.
"Designated Senior Indebtedness" means the 1995 Senior Notes,
the 1997 Senior Notes, the Equipment Note Guarantees and any Indebtedness
constituting Senior Indebtedness of the Company that, at the date of
determination, has an aggregate principal amount of at least $25,000,000 and
that is specifically designated by the Company in the instrument creating or
evidencing such Senior Indebtedness as "Designated Senior Indebtedness."
"Equipment Notes" means the $200,000,000 of 12 1/2% Guaranteed
Senior Secured Notes Due 2004 of WEC and the $50,000,000 of 12 1/2% Guaranteed
Senior Secured Notes Due 2004 of WEC II.
"Equipment Note Guarantees" means the Guarantees provided by
the Company with respect to the Equipment Notes.
"Exchange Debentures" means the 14 1/4% Senior Subordinated
Deferred Interest Notes Due 2007 of the Company issuable in exchange for the
Exchangeable Preferred Stock.
"Exchangeable Preferred Stock" means the Series C 14 1/4%
Senior Cumulative Exchangeable Preferred Stock Due 2007 of the Company.
"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).
<PAGE>
8
"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, the Cash-Pay Notes, the
Convertible Preferred Stock, the 1997 Senior Subordinated Notes, the 1997 Notes,
the WSAC Loan and the Exchangeable Preferred Stock and (ii) except as otherwise
provided, the amortization of any amounts required or permitted by Accounting
Principles Board Opinion Nos. 16 and 17.
"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 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
4.08.
"Holder" means the Person in whose name a Security is
registered on the books of the registrar for the Securities.
"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 the Company and its Restricted
Subsidiaries, an "Incurrence" of Indebtedness by reason of a Person becoming a
Restricted Subsidiary of the Company; 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
<PAGE>
9
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 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 the
Company 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 the Company for the then most recent four full fiscal
quarters for which reports have been filed pursuant to Section 4.17 (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"), the Company 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 the Company or any of the Restricted Subsidiaries shall have
made any Asset Acquisition, Consolidated EBITDA of the Company 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, 2003.
<PAGE>
10
"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 the Company or any of its Restricted
Subsidiaries against fluctuations in interest rates in respect of Indebtedness
to or under which the Company 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 exceed the principal amount of the Indebtedness of the Company
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 the Company 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 the
Company 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 4.07. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.05, (i) "Investment" shall include the fair market value of the assets
(net of liabilities) of any Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary of the Company 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 the Company 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).
"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 thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary of the Company) 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 the Company and its
<PAGE>
11
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 the Company or any Restricted Subsidiary of the Company 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 the Company or any Restricted
Subsidiary of the Company) 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 the Company or any of
its subsidiaries as a result thereof.
"Offer to Purchase" means an offer to purchase Securities by
the Company from the Holders thereof that is required by Section 4.10 or Section
4.11 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 the 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 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
<PAGE>
12
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 the Company, (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).
"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.
"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, the Company 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
the Company or any of its Restricted Subsidiaries consists solely of Capital
Stock (other than Redeemable Stock) of the Company; (vii) notes payable to the
Company that are received by the Company as payment of the purchase price for
Capital Stock (other than Redeemable Stock) of the Company; 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
<PAGE>
13
U.S. law without FCC consent, (B) the Company 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, the Company 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 the Company and
its Restricted Subsidiaries for such minority equity interest.
"Permitted Investor" means Mr. William J. Rouhana, Jr.
"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.
"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 Deemed Closing 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 such debt security, which, in the case of the
Securities, shall be the Accumulated Amount from time to time.
"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 the
Company's option, without conditions precedent, payable solely in Common Stock
(other than Redeemable Stock) of the Company) 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 4.10 and Section 4.11 and such Capital Stock specifically provides
that such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Securities as are required
to be repurchased pursuant to the provisions of Section 4.10 and Section 4.11.
"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.
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14
"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 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 4.05.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission and any
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 Register" has the meaning provided in Section 2.03.
"Senior Indebtedness" means the following obligations of the
Company, whether outstanding on the Issue Date or thereafter Incurred: (i) all
Indebtedness and all other monetary obligations of the Company under the 1995
Senior Notes, the 1997 Senior Notes, and the Equipment Note Guarantees, (ii) all
other Indebtedness of the Company (other than the Securities, the Cash-Pay
Notes, the 1997 Senior Subordinated Notes, the Exchange Debentures and the
Convertible Notes), including principal and interest on such Indebtedness,
unless such Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, is pari passu with, or
subordinated in right of payment to, the Securities and (iii) all fees, expenses
and indemnities payable in connection with the 1995 Senior Notes, the 1997
Senior Notes and the Equipment Note Guarantees (including any agreements
pursuant to which the 1995 Senior Notes, the 1997 Senior Notes or the Equipment
Note Guarantees were issued); provided, however, that the term "Senior
Indebtedness" shall not include (a) any Indebtedness of the Company that, when
Incurred and without respect to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to the Company, (b) any
Indebtedness of the Company to a Subsidiary of the Company or to a joint venture
in which the Company has an interest, (c) any Indebtedness of the Company, to
the extent not permitted by Section 4.03 or Section 4.04, (d) any repurchase,
redemption or other obligation in respect of
<PAGE>
15
Redeemable Stock, (e) any Indebtedness to any employee of the Company or any of
its Subsidiaries, (f) any liability for federal, state, local or other taxes
owed or owing by the Company or (g) any trade payables of the Company. Senior
Indebtedness of the Company will also include interest accruing subsequent to
events of bankruptcy of the Company and its Subsidiaries at the rate provided
for in the document governing such Senior Indebtedness, whether or not such
interest is an allowed claim enforceable against the debtor in a bankruptcy case
under federal bankruptcy law.
"Senior Subordinated Obligations" means any principal of,
premium, if any, or interest on the Securities and the Cash-Pay Notes, payable
pursuant to the terms of the Securities and the Cash-Pay Notes or upon
acceleration, to the extent relating to the purchase of Securities and the
Cash-Pay Notes or amounts corresponding to such principal, premium, if any, or
interest on the Securities and the Cash-Pay Notes.
"Significant Subsidiary" means, at any date of determination,
any Restricted Subsidiary of the Company that, together with its Subsidiaries,
(i) for the most recent fiscal year of the Company, accounted for more than 10%
of the consolidated revenues of the Company and its Restricted Subsidiaries or
(ii) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"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 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
4.08.
"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) WinStar Gateway
Network, Inc., WinStar Wireless, Inc., WinStar Telecommunications, Inc., WinStar
Milliwave, Inc., WinStar Locate, Inc. and WinStar Wireless Fiber Corp., and, in
each case, its
<PAGE>
16
successors and (ii) any other Restricted Subsidiary of the Company 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 the Company)
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 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 the Company 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 the
Company 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 the Company (including any newly acquired or newly
formed Subsidiary of the Company), other than a guarantor of the Securities, to
be an Unrestricted Subsidiary unless such
<PAGE>
17
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided, however, that neither
the Company 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, such designation would
be permitted under the provisions of Section 4.05. 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 the Company; provided, however, that immediately after giving
effect to such designation (x) the Company 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 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.
"WEC" means WinStar Equipment Corp. and its successors.
"WEC II" means WinStar Equipment II Corp. and its successors.
"WSAC" means WinStar Switch Acquisition Corp. and its
successors.
"WSAC Credit Agreement" means the Credit Agreement dated as of
October 17, 1997, among WSAC, the Lenders named therein, Credit Suisse First
Boston, as documentation agent, and Salomon Brothers Inc, as syndication agent
and collateral and administrative agent, as in effect from time to time.
<PAGE>
18
"WSAC Loan" means all Indebtedness and other obligations of
WSAC arising in connection with the WSAC Credit Agreement.
"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.
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;
"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.
<PAGE>
19
SECTION 1.04. Ranking of the Securities. The Securities shall
rank pari passu with the Convertible Notes, the 1997 Senior Subordinated Notes,
the Exchange Debentures and the Cash-Pay Notes.
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 (not to
exceed $250,000,000) 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
appoint ment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authen tication by such agent. An authenticating agent has the
same rights as any Registrar or Paying Agent.
<PAGE>
20
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 Security holders 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 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
<PAGE>
21
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 Secur ity.
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 cancelation 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
<PAGE>
22
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. Cancelation. The Company at any time may deliver
Securities to the Trustee for cancelation. 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
cancelation 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 cancelation.
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.
<PAGE>
23
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of 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, 2003 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 the Accumulated Amount of the
Securities), plus accrued and unpaid interest, if any, on such Accumulated
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
---- ----------------
2003 105.500%
2004 103.667
2005 101.833
2006 and thereafter 100.000
========================= ===============
SECTION 3.02. Notices to Trustee. If the Company elects to
redeem Securities pursuant to Section 3.01, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed plus interest accrued and premium due thereon, if any, to the
Redemption Date.
The Company shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least five days before mailing the
notice to Holders referred to in Section 3.01.
SECTION 3.03. 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.
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.
<PAGE>
24
SECTION 3.04. 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 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:
(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; and
(g) 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 this Section 3.04, 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 3.05. 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.
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
<PAGE>
25
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 3.06. 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 cancelation.
SECTION 3.07. 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 3.08. 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, 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.
<PAGE>
26
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 11.02.
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) The Company 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 the Company 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, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i)Indebtedness of the Company outstanding at any time in an
aggregate principal amount not to exceed $200,000,000, less any amount
of Indebtedness Incurred pursuant to this clause (i) and permanently
repaid as provided under Section 4.10;
(ii)Indebtedness (A) to the Company 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 the Company or
another Restricted Subsidiary) shall be deemed, in each case, to
constitute an Incurrence of such Indebtedness not permitted by this
clause (ii);
(iiiIndebtedness 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
<PAGE>
27
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 Securities 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 Securities, 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 remaining Securities, (B) in
case the Indebtedness to be refinanced is subordinated in right of
payment to the Securities, 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 Securities, at least to the extent that the Indebtedness
to be refinanced is subordinated to the Securities 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 the Company be refinanced by means
of any Indebtedness of any Restricted Subsidiary of the Company
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 the Company 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 the Company (other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition), in a principal amount not to
exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition;
(v)Indebtedness of the Company not to exceed, at any one time
outstanding, two times the Net Cash Proceeds received by the Company
from and after March 1, 1998 (less the amount of any such Net Cash
Proceeds the receipt of which permitted the Company or any Restricted
Subsidiary to make any Restricted Payment, including any Restricted
Payment described in the second paragraph under Section 4.05) 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 pari passu with or subordinated to the
Securities at least to the extent that the Securities are subordinated
to Senior Indebtedness;
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28
(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 the Company 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 the Company 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 the Company or any Restricted
Subsidiary other than the equipment or inventory acquired;
(viiIndebtedness 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); and
(ix)Indebtedness of the Company, to the extent the proceeds
thereof are immediately used to purchase the 1995 Notes, the 1997
Notes, the 1997 Senior Subordinated Notes, the Exchange Debentures, the
Securities or the Cash-Pay Notes 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 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, the Company, 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) The Company will not, and will not permit any Restricted
Subsidiary to, Incur any Guarantee of Indebtedness of any Unrestricted
Subsidiary.
SECTION 4.04. Limitation on Senior Subordinated Indebtedness.
The Company will not (i) Incur any Indebtedness, other than the Securities, that
is expressly made subordinated in right of payment to any Senior Indebtedness of
the Company unless such Indebtedness, by its terms and by the terms of any
agreement or instrument pursuant to which such Indebtedness is outstanding is
expressly made pari passu with, or subordinate in right of payment to, the
Securities pursuant to provisions substantially similar to those contained in
Article 10; provided, however, that the foregoing limitation shall not apply to
distinctions between categories of Senior Indebtedness of the Company that exist
by reason of any Liens or Guarantees arising or created in respect of some but
not all Senior Indebtedness of the Company or (ii) Incur any Indebtedness
secured by a Lien if such Indebtedness is not Senior Indebtedness of the
Company, unless contemporaneously therewith effective provision is made to
secure the Securities equally
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29
and ratably with such secured Indebtedness for so long as such secured
Indebtedness is secured by a Lien.
SECTION 4.05. Limitation on Restricted Payments. The Company
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 the Company 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 the
Company (including options, warrants or other rights to acquire such shares of
Capital Stock) held by Persons other than any Wholly Owned Restricted
Subsidiaries of the Company; (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 the Company that is
subordinated in right of payment to the Securities 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), the Company 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 Deemed 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 the Company 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 Deemed 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 4.17 plus (2) the aggregate Net Cash Proceeds received by
the Company after the Deemed Closing Date (less the amount of such Net Cash
Proceeds the receipt of which served as the basis on which the Company Incurred
Indebtedness pursuant to clause (v) of the second paragraph under Section 4.03
or pursuant to any similar provision contained in the indenture relating to the
1995 Senior Notes as in effect on the Deemed Closing Date (such Net Cash
Proceeds being herein called "Allocated Proceeds")) 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 the Company, or from the issuance to a
Person who is not a Subsidiary of the Company of any options, warrants or other
rights to acquire Capital Stock of the Company (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 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 4.05 in any Person
resulting from payments of interest on Indebtedness,
<PAGE>
30
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company 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 the
Company 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 Securities, 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;
(iiithe repurchase, redemption or other acquisition of Capital
Stock of the Company (or options, warrants or other rights to acquire
such Capital Stock) in exchange for, or out of the proceeds (other than
Allocated Proceeds), of a substantially concurrent sale of, shares of
Capital Stock or options, warrants or other rights to acquire such
Capital Stock (in each case other than Redeemable Stock) of the
Company;
(iv)the making of any other Restricted Payment made by
exchange for, or out of the proceeds (other than Allocated 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 the
Company;
(vi)Investments, not to exceed $30,000,000 at any one time
outstanding;
(vii) Investments, not to exceed $30,000,000 at any one time
outstanding, in entities, substantially all of the assets of which
consist of Telecommunications Assets;
(vii)(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 the provisions of the Convertible Notes
Indenture that relate to repurchases of Convertible Notes upon a
change of control and that relate to limitations on sales of assets;
<PAGE>
31
(ix)cash payments in lieu of the issuance of fractional shares
of Common Stock of the Company upon conversion of any class of
Preferred Stock of the Company; 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 the Company;
(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 the Company 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; and
(xi)the redemption of the shares of Exchangeable Preferred Stock
upon mandatory redemption on December 15, 2007;
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 the Company.
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 4.05 have
been met with respect to any subsequent Restricted Payments. In the event the
proceeds of an issuance of Capital Stock of the Company are used for the
redemption, repurchase or other acquisition of the Securities or Indebtedness
that is pari passu with the Securities, then the Net Cash Proceeds of such
issuance shall be included in clause (C) of the first paragraph of this Section
4.05 only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of the Securities or such Indebtedness.
SECTION 4.06. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company will not, and will
not permit any Restricted Subsidiary to, create 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 the Company or any other Restricted Subsidiary;
(ii)pay any Indebtedness owed to the Company or any other
Restricted Subsidiary that owns, directly or indirectly, any Capital
Stock of such Restricted Subsidiary;
<PAGE>
32
(iii) make loans or advances to the Company 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 the Company 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 the Company 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 4.06, (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 the
Company 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 from the value of property or
assets of the Company or any Restricted Subsidiary in any manner
material to the Company 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 4.06 shall prevent the Company or any Restricted
Subsidiary from (A) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries
that secure Indebtedness of the Company or any of its Restricted
Subsidiaries or (B) creating, incurring, assuming or suffering to exist
any Liens otherwise permitted pursuant to the indenture relating to the
1997 Senior Notes as in effect on the Deemed Closing Date.
<PAGE>
33
SECTION 4.07. Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries. The Company 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 the Company or a Wholly Owned Restricted Subsidiary;
(ii)issuances or sales to foreign nationals of shares of Capital
Stock of foreign Restricted Subsidiaries;
(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, the Company 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 4.10.
SECTION 4.08. Limitation on Issuances of Guarantees by
Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary,
directly or indirectly, to Guarantee any Indebtedness of the Company
("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 the Company 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 is (A) pari passu with the Securities, then the
Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Securities,
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 Securities.
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 the Company of all of the Company'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 4.09. Limitation on Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without
<PAGE>
34
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 the Company or with any Affiliate of
the Company or any Restricted Subsidiary, except upon fair and reasonable terms
no less favorable to the Company 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 the Company 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 the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable fees to directors of the Company who are not employees of the
Company; (iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company files
a consolidated tax return or with which the Company is part of a consolidated
group for tax purposes; or (v) any Restricted Payments not prohibited by the
provisions of Section 4.05 (other than pursuant to clause (iv) of the definition
of "Permitted Investment" or clause (vi) of the second paragraph of Section
4.05). Notwithstanding the foregoing, any transaction (or series of related
transactions) with any Unrestricted Subsidiary covered by the first paragraph of
this Section 4.09 and not covered by clauses (i) through (v) of this paragraph,
the aggregate amount of which does not exceed $250,000 in value in any year will
not be covered by this Section 4.09 and, if the aggregate value of such
transaction exceeds $250,000 in any year, will not be covered by this Section
4.09 if such transaction has been determined by the Board of Directors to be
fair to the Company.
SECTION 4.10. Limitation on Asset Sales. The Company will not,
and will not permit any Restricted Subsidiary to, consummate any Asset Sale,
unless (i) the consideration received by the Company 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 the Company or its Restricted Subsidiaries from one or more
Asset Sales occurring on or after the Issue 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 the Company and its Subsidiaries has been
prepared), then the Company 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 the Company, or Indebtedness of any Restricted Subsidiary, in
each case owing to a Person other than the Company 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 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, the Company and its
<PAGE>
35
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 4.10. 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 4.10 totals at least $10,000,000, 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 and from the holders
of the Cash-Pay Notes on a pro rata basis an aggregate principal amount of
Securities and Cash-Pay Notes equal to the Excess Proceeds on such date of
purchase, at a purchase price equal to 101% of the Accumulated Amount of such
Securities or the principal amount of the Cash-Pay Notes on such date of
purchase, plus accrued and unpaid interest (if any) on such Accumulated Amount
of Securities or principal amount of Cash-Pay Notes, as the case may be, to the
date of purchase; provided, however, that no Offer to Purchase shall be required
to be commenced with respect to the Securities or the Cash-Pay Notes until the
Business Day following the payment date with respect to the Offer to Purchase
any 1997 Notes and need not be commenced if the Excess Proceeds remaining after
application thereof to the 1997 Notes purchased in such Offer to Purchase
applicable thereto are less than $10,000,000; provided further, however, that no
Securities or Cash-Pay Notes may be purchased under this Section 4.10 unless the
Company shall have purchased all 1997 Notes tendered pursuant to such Offer to
Purchase applicable thereto.
SECTION 4.11. 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 Accumulated Amount of the
Securities on the date of purchase, plus accrued and unpaid interest (if any) on
such Accumulated 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, the Company covenants to
(i) repay in full all indebtedness of 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 the
Company to permit the repurchase of the Securities. The Company shall first
comply with the covenant in the preceding sentence before it shall repurchase
Securities pursuant to this Section 4.11.
The Company may not repurchase any Securities (or any other
subordinated obligations, including the Cash-Pay Notes, the 1997 Senior
Subordinated Notes, the Exchange Debentures and the Convertible Notes) pursuant
to this Section 4.11 until it has repurchased all of the 1995 Senior Notes and
the 1997 Senior Notes and has caused each of WEC and WEC II to repurchase all of
the WEC Equipment Notes and WEC II Equipment Notes, respectively, tendered
pursuant to any Offer to Purchase as a result of such Change of Control.
However, if the Company is unable to repay all of its Indebtedness that would
prohibit repurchase of the Securities or is unable to obtain the
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36
consents of the holders of Indebtedness, if any, of the Company outstanding at
the time of a Change of Control whose consent would be so required to permit the
repurchase of Securities or otherwise fails to purchase any Securities validly
tendered, then the Company will have breached this Section 4.11. 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 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 4.12. Existence. Subject to Articles Four and Five of
this Indenture, the Company 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 the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the existence of any
Restricted Subsidiary (other than of the Company), if the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries taken as a whole. In addition, the
Company 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 the Company), as may be necessary to ensure that it shall be in
good standing under the laws of the jurisdiction of its incorporation.
SECTION 4.13. Payment of Taxes and Other Claims. The Company
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) the Company or any such Subsidiary, (b) the income or
profits of any such Subsidiary which is a corporation or (c) the property of the
Company 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 the Company or any such Subsidiary; provided, however, that the
Company 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 4.14. Maintenance of Properties and Insurance. The
Company 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,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.14 shall prevent the Company 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 the Company, desirable in the conduct of the business of the
Company or such Subsidiary.
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37
The Company 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 the Company or such Restricted Subsidiary, as the case may be,
is then conducting business.
SECTION 4.15. Notice of Defaults. In the event that the
Company becomes aware of any Default or Event of Default, the Company, promptly
after it becomes aware thereof, will give written notice thereof to the Trustee.
SECTION 4.16. Compliance Certificates. (a) Beginning with
respect to the fiscal year ended December 31, 1998, the Company shall deliver to
the Trustee, within 90 days after the end of the Company'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 the Company that a review
has been conducted of the activities of the Company and the Restricted
Subsidiaries and the Company's and the Restricted Subsidiaries' performance
under this Indenture and that, to the best knowledge of such officer, the
Company has complied with all conditions and covenants under this Indenture. For
purposes of this Section 4.16, 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) Beginning with respect to the fiscal year ended December
31, 1998, the Company 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 the Company'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 4.16 and
(iii) whether, in connection with their audit examination, anything came to
their attention that caused them to believe that 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 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 the Company's fiscal year,
the Company 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.
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SECTION 4.17. SEC Reports and Reports to Holders. Whether or
not the Company is required to file reports with the SEC, if any Securities are
outstanding, the Company 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. The Company 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 4.18. 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.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company 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 the Company)
shall be issued or distributed to the stockholders of the Company) or permit any
Person to merge with or 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;
(iii) immediately after giving effect to such transaction on a
pro forma basis, the Company 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 the Company immediately
prior to such transaction;
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39
(iv) immediately after giving effect to such transaction on a
pro forma basis the Company, 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) the Company 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 the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company;
provided further, however, that any such transaction shall not have as one of
its purposes the evasion of the foregoing limitations.
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 the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company 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, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company 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 principal of (or
premium, if any, on) any Security when the same becomes due and payable
at maturity, upon acceleration, redemption or otherwise, whether or not
such payment is prohibited by the provisions of Article Ten;
(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, whether or not such payment is
prohibited pursuant to the provisions of Article 10;
(c) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company contained in this Indenture
or under the Securities, 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
Securities;
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(d) there occurs with respect to any issue or issues of
Indebtedness of the Company 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 the Company 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 the Company 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 the Company or any
Significant Subsidiary or for all or substantially all of the property
and assets of the Company or any Significant Subsidiary or (iii) the
winding up or liquidation of the affairs of the Company 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) the Company 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 the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) effects any general assignment for the
benefit of creditors.
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) 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 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
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41
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 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, 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 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 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 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
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42
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
or the 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
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43
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 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;
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.
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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.
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 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, 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
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46
(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 or the
Securities, (ii) shall not be accountable for the Company's use or application
of the proceeds from the Securities and (iii) shall not be responsible for any
statement in the Securities other than its certificate of authentication.
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, 1999, 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 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.
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47
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 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.
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48
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.
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 cancelation and
the Company has paid all sums payable by it hereunder; or
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49
(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 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 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,
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50
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;
(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;
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51
(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
(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.
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 4.19, and clause (c) of
Section 6.01 with respect to clauses (iii) and (iv) of Section 5.01 and Sections
4.03 through 4.19, and clauses (d) and (e) of Section 6.01 shall be deemed not
to be Events of Default, 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 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
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52
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) 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
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53
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. 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.
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54
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.
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
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55
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; or
(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.
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.
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
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56
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.
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Securities Subordinate to Senior Indebtedness.
The Company and the Trustee each covenants and agrees, and each Holder, by its
acceptance of a Security, likewise covenants and agrees, that all Securities
shall be issued subject to the subordination provisions contained in this
Article Ten, and each Holder of a Security, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that the Senior
Subordinated Obligations shall be, to the extent and in the manner set forth in
this Article Ten, subordinated in right of payment and subject to the prior
payment in full, in cash or cash equivalents, of all amounts payable under
Senior Indebtedness including, without limitation, the Company's obligations
under the Designated Senior Indebtedness and any interest accruing subsequent to
an event specified in Sections 6.01(f) and 6.01(g), whether or not such interest
is an allowed claim enforceable against the debtor under the United States
Bankruptcy Code. The Securities are pari passu with the Convertible Notes, the
1997 Senior Subordinated Notes, the Exchange Debentures and the Cash-Pay Notes.
SECTION 10.02. No Payment on Securities in Certain
Circumstances. (a) No direct or indirect payment by or on behalf of the Company
of any Senior Subordinated Obligations, whether pursuant to the terms of the
Securities or upon acceleration or otherwise, shall be made if, at the time of
such payment, there exists a default in the payment of all or any portion of the
obligations on any Senior Indebtedness, and such default shall not have been
cured or waived, or the benefits of this sentence waived by or on behalf of, the
holders of such Senior Indebtedness.
(b) In addition, during the continuance of any other event of
default with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, upon receipt by the Trustee of written
notice from the trustee or
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57
other representative for the holders of such Designated Senior Indebtedness (or
the holders of at least a majority in principal amount of such Designated Senior
Indebtedness then outstanding), no payment of Senior Subordinated Obligations
may be made by or on behalf of the Company upon or in respect of the Securities
for a period (a "Payment Blockage Period") commencing on the date of receipt of
such notice and ending 159 days thereafter (unless, in each case, such Payment
Blockage Period shall be terminated by written notice to the Trustee from such
trustee of, or other representatives for, such holders). Not more than one
Payment Blockage Period may be commenced with respect to the Securities during
any period of 360 consecutive days. Notwithstanding anything in this Indenture
to the contrary, there must be 180 consecutive days in any 360-day period in
which no Payment Blockage Period is in effect. No event of default that existed
or was continuing (it being acknowledged that any subsequent action that would
give rise to an event of default pursuant to any provision under which an event
of default previously existed or was continuing shall constitute a new event of
default for this purpose) on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or shall be made, the basis for the
commencement of a second Payment Blockage Period by the representative for, or
the holders of, such Designated Senior Indebtedness, whether or not within a
period of 360 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder and the Trustee has
received notice pursuant to Section 10.12 that such payment is prohibited by
paragraphs (a) and (b) of this Section 10.02, the Trustee shall promptly notify
the holders of the Senior Indebtedness identified to the Trustee by the Company
as being holders of Senior Indebtedness of such prohibited payment and such
payment shall be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that, upon notice from the Trustee
to the holders of Senior Indebtedness that such prohibited payment has been
made, the holders of the Senior Indebtedness (or their representative or
representatives or a trustee) within 30 days of receipt of such notice from the
Trustee, notify the Trustee of the amounts then due and owing on the Senior
Indebtedness, if any, and only the amounts specified in such notice to the
Trustee shall be paid to the holders of Senior Indebtedness and any excess above
such amounts due and owing on Senior Indebtedness shall be paid to the Holders.
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities, upon any
dissolution or winding up or total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness (including any interest accruing subsequent to an event of
bankruptcy, whether or not such interest is an allowed claim enforceable against
the debtor under the United States Bankruptcy Code) shall first be paid in full,
in cash or cash equivalents, before the Holders of the Securities or the Trustee
on behalf of the Holders of the Securities shall be entitled to receive any
payment by the Company on account of Senior Subordinated Obligations, or any
payment to acquire any of the Securities for cash, property or securities, or
any distribution with respect to the Securities of any cash, property or
securities. Before any payment may be
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58
made by, or on behalf of, the Company of any Securities upon any such
dissolution, winding up, liquidation or reorganization, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Securities
or the Trustee on behalf of the Holders of the Securities would be entitled, but
for the subordination provisions of this Article Ten, shall be made by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person making such payment or distribution or by the Holders of
the Securities or the Trustee if received by them or it, directly to the holders
of the Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders) or their
representatives as their respective interests appear, to the extent necessary to
pay all such Senior Indebtedness in full, in cash or cash equivalents, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether
by or on behalf of the Company, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. To the extent the obligation to
repay any Senior Indebtedness is declared to be fraudulent, invalid, or
otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then the obligation so declared fraudulent, invalid
or otherwise set aside (and all other amounts that would come due with respect
thereto had such obligation not been so affected) shall be deemed to be
reinstated and outstanding as Senior Indebtedness for all purposes of this
Indenture as if such declaration, invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, shall be received by the Trustee or any Holder at a time when such
payment or distribution is prohibited by Section 10.03(a) and before all
obligations in respect of Senior Indebtedness are paid in full, in cash or cash
equivalents, such payment or distribution shall be received and held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amount of Senior Indebtedness held by such holders) or their representatives, or
to the trustee under the Senior Note Indenture, or to the trustee or trustees
under any other indenture pursuant to which any such Senior Indebtedness may
have been issued, as their respective interests appear, for application to the
payment of Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid in full, in cash or cash equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Indebtedness.
(d) For purposes of this Section 10.03, the words "cash,
property or securities" shall not be deemed to include, so long as the effect of
this clause is not to cause the Securities to be treated in any case or
proceeding or similar event described in this Section 10.03 as part of the same
class of claims as the Senior Indebtedness or any class of claims pari passu
with, or senior to, the Senior Indebtedness for any payment or
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59
distribution, securities of the Company or any other corporation provided for by
a plan of reorganization or readjustment that are subordinated, at least to the
extent that the Securities are subordinated, to the payment of all Senior
Indebtedness then outstanding; provided, however, that (i) if a new corporation
results from such reorganization or readjustment, such corporation assumes the
Senior Indebtedness and (ii) the rights of the holders of the Senior
Indebtedness are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company with, or the
merger of the Company with or into, another corporation or the liquidation or
dissolution of the Company following the sale, conveyance, transfer, lease or
other disposition of all or substantially all of its property and assets to
another corporation upon the terms and conditions provided in Article Five shall
not be deemed a dissolution, winding up, liquidation or reorganization for the
purposes of this Section 10.03 if such other corporation shall, as a part of
such consolidation, merger, sale, conveyance, transfer, lease or other
disposition, comply with the conditions provided in Article Five.
SECTION 10.04. Subrogation of Holders to Rights of Holders of
Senior Indebtedness. Upon the payment in full of all Senior Indebtedness in cash
or cash equivalents, the Holders of Securities shall be subrogated to the rights
of the holders of Senior Indebtedness to receive payments or distributions of
cash, property or securities of the Company made on such Senior Indebtedness
until the principal of, premium, if any, and interest on the Securities shall be
paid in full, and no such payments or distributions to the holders of Senior
Indebtedness (or any trustee therefor) of any cash, property or securities of
the Company to which the Holders or the Trustee on their behalf would be
entitled except for the provisions of this Article Ten, and no payment pursuant
to the provisions of this Article Ten to the holders of Senior Indebtedness by
Holders or the Trustee on their behalf shall be, as among the Trustee, the
Company, its creditors other than the holders of Senior Indebtedness, and the
Holders, deemed to be a payment by the Company to or on account of the Senior
Indebtedness, it being understood that the provisions of this Article Ten are
and are intended solely for the purpose of defining the relative rights of, the
Holders, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Ten shall
have been applied, pursuant to the provisions of this Article Ten, to the
payment of all amounts payable under Senior Indebtedness, then, and in such
case, the Holders shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount required to make payment in full, in cash
or cash equivalents, of such Senior Indebtedness of such holders.
SECTION 10.05. Obligations of Company Unconditional. Nothing
contained in this Article Ten or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, the obligation
of the Company, which is unconditional and absolute, to pay to the Holders the
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms, or to affect
the relative rights of the Holders and creditors of the Company other than the
holders of the Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon a Default or an Event of Default under this Indenture,
subject to the rights, if any, under this Article Ten, of the holders of Senior
Indebtedness
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60
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Ten will restrict the right of the Trustee or the
Holders to take any action to declare the Securities to be due and payable prior
to their Stated Maturity pursuant to Section 6.01 or to pursue any rights or
remedies hereunder; provided, however, that all Senior Indebtedness then due and
payable or thereafter declared to be due and payable shall first be paid in
full, in cash or cash equivalents, before the Holders or the Trustee are
entitled to receive any direct or indirect payment from the Company of Senior
Subordinated Obligations.
SECTION 10.06. Payments May Be Made Prior to Dissolution.
Nothing contained in this Article Ten or elsewhere in this Indenture or in any
of the Securities (a) shall prevent the Company at any time, except under the
conditions described in Article Six or Section 10.02 or 10.03, from making
payments of or on account of the Senior Subordinated Obligations to the Holders
entitled thereto or from depositing any moneys with the Trustee for such
payments, or (b) shall prevent the application by the Trustee (or any Paying
Agent other than the Company) of any moneys deposited with it hereunder to the
payment of or on account of the Senior Subordinated Obligations, if the Trustee
or such Paying Agent, as the case may be, did not, at least two business days
prior to the date upon which such payment becomes due and payable, have written
notice as provided in Section 10.02 or 10.12 of any event prohibiting the making
of such payment. The Company shall give prompt written notice to the Trustee of
any dissolution, winding up, liquidation or reorganization of the Company.
SECTION 10.07. No Waiver of Subordination Provisions. No right
of any present or future holder of any Senior Indebtedness of the Company to
enforce the subordination provisions of this Article Ten shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with. The provisions of this Article Ten are intended to
be for the benefit of, and shall be enforceable directly by, the holders of
Senior Indebtedness.
SECTION 10.08. Authorization to Trustee to Take Action to
Effectuate Subordination. Each Holder of Securities by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate, as between the Holders and the holders
of the Senior Indebtedness, the subordination as provided in this Article Ten
and appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 10.09. Senior Indebtedness May Be Renewed or Extended,
Etc. Without in any way limiting the generality of Section 10.07 of this
Indenture, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article Ten or the obligations hereunder of the
Holders to the holders of Senior Indebtedness, do any one or more of the
following: (a) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness or any instrument
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61
evidencing the same or any agreement under which Senior Indebtedness is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness; (c)
release any Person liable in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against the
Company and any other Person.
SECTION 10.10. Trustee to Have No Fiduciary Duty to Holders of
Senior Indebtedness. With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Ten, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the
Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay
over or deliver to the Holders, the Company or any other Person moneys or assets
to which any holder of Senior Indebtedness shall be entitled by virtue of this
Article Ten or otherwise.
SECTION 10.11. Rights of Trustee as Holder of Senior
Indebtedness. The Trustee shall be entitled to all rights set forth in this
Article Ten in respect of any Senior Indebtedness at any time held by it, to the
same extent as any other holder of Senior Indebtedness and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
SECTION 10.12. Notice to Trustee. The Company shall give
prompt written notice to the Trustee of any fact known to the Company which
would prohibit the making of any payment of moneys to or by the Trustee in
respect of Securities pursuant to the provisions of this Article Ten or
otherwise. The Trustee shall not be charged with knowledge of the existence of a
default or event of default with respect to the Senior Indebtedness or any other
facts that would prohibit the making of any payment to or by the Trustee unless
and until the Trustee shall have received written notice thereof mailed or
delivered to the Trustee at its Corporate Trust Office signed by an Officer of
the Company, any holder or representative of any class of Senior Indebtedness or
any trustee or agent therefor; and prior to the receipt of any such written
notice, the Trustee shall, subject to Article Seven, be entitled to assume that
no such facts exist; provided, however, that, if the Trustee shall not have
received the notice provided for in this Section 10.12 at least two Business
Days prior to the date upon which, by the terms of this Indenture, any money
shall become payable for any purpose (including, without limitation, the payment
of the principal or, premium, if any, or interest on any Security), then
notwithstanding anything herein to the contrary, the Trustee shall have full
power and authority to receive any money from the Company and to apply the same
to the purpose for which they were received, and shall not be affected by any
notice to the contrary that may be received by it on or after such prior date
except for an acceleration of the Securities prior to such application. Nothing
contained in this Section 10.12 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by this Article Ten. The
foregoing shall not apply if the Paying Agent is the Company.
The Trustee shall be entitled to rely on the delivery to it of
a written notice by a Person representing himself or itself to be a holder of
any Senior Indebtedness (or a trustee on behalf of, or other representative of,
such holder) to establish that such notice has been given by a holder of such
Senior Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Trustee
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62
determines in good faith that further evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article Ten, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article Ten.
SECTION 10.13. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities
referred to in this Article Ten, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which bankruptcy, dissolution, winding up, liquidation or reorganization
proceedings are pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution, delivered to the Trustee or to the Holders for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.14. Not to Prevent Events of Default. The failure
to make a payment on account of principal of, premium, if any, or interest on
the Securities by reason of any provision of this Article Ten will not be
construed as preventing the occurrence of an Event of Default.
SECTION 10.15. Trustee's Compensation Not Prejudiced. Nothing in
this Article Ten will apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. 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 11.02. 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 Communications, Inc.
230 Park Avenue
New York, New York 10169
Attention: General Counsel
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63
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.
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 11.02 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 11.03. 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 11.04. 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;
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64
(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
(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 11.05. 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 11.06. 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 11.07. 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 11.08. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.09. 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; it
being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as consideration for, the execution of this
Indenture and the issue of the Securities.
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65
SECTION 11.10. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.
SECTION 11.11. 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 11.12. 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 11.13. 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.
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66
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
WINSTAR COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF
NEW YORK
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT A
[FACE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
*/
**/
***/
WINSTAR COMMUNICATIONS, INC.
11% Senior Subordinated Deferred Interest Note Due 2008
CUSIP _________
No. $_________
WINSTAR COMMUNICATIONS, INC., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to _____________, or its
registered assigns, the principal sum of ___________________ ($__________) on
March 15, 2008.
SemiAnnual Interest Accrual Date: March 15 and September 15,
commencing September 15, 1998.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 2003.
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.
- -----------------------
*/ 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 1 caption "[TO BE ATTACHED TO GLOBAL SECURITIES]--SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY".
**/ 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 1 to the Rule 144A/Regulation S
Appendix and replace the Assignment Form included in this Exhibit A with
Assignment Form included in such Exhibit 1.
***/ Add the Original Issue Discount Legend from Exhibit 1 to the Rule
144A/Regulation S Appendix..
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EA-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
Date: WINSTAR COMMUNICATIONS, INC.
By: ______________________________
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 11% Senior Subordinated Deferred Interest Notes
Due 2008 described in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
Date:
By: _______________________________
Authorized Signatory
<PAGE>
EA-3
[REVERSE SIDE OF EXCHANGE NOTE OR PRIVATE EXCHANGE NOTE]
WINSTAR COMMUNICATIONS, INC.
11% Senior Subordinated Deferred Interest Note Due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2008.
The Company promises to pay interest on the Accumulated Amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Until March 15, 2003, interest on the Notes will accrue at a
rate of 11% per annum and be compounded semiannually on each SemiAnnual Interest
Accrual Date, but (except as provided below) will not be payable in cash. From
and after March 15, 2003, interest on the Accumulated Amount of each Note will
be payable semiannually (to the holders of record of the Notes at the close of
business on the March 1 or September 1 immediately preceding the relevant
Interest Payment Date) on each Interest Payment Date, commencing September 15,
2003.
"Accumulated Amount" means, as of any date (the "Specified
Date"), the amount provided below for each $1,000 principal amount of Notes.
(i) If the Specified Date occurs on one of the following dates
(each, a "SemiAnnual Interest Accrual Date"), the Accumulated Amount of
this Note will equal the amount set forth below for such Note for such
SemiAnnual Interest Accrual Date:
Accumulated
SemiAnnual Interest Accrual Date Amount
-------------------------------- -----------
September 15, 1998............................. $1,053.78
March 15, 1999................................. 1,111.74
September 15, 1999............................. 1,172.88
March 15, 2000................................. 1,237.39
September 15, 2000............................. 1,305.45
March 15, 2001................................. 1,377.25
September 15, 2001............................. 1,452.99
March 15, 2002................................. 1,532.91
September 15, 2002............................. 1,617.22
March 15, 2003................................. 1,706.17
(ii) if the Specified Date occurs before the first SemiAnnual
Interest Accrual Date, the Accumulated Amount will equal the sum of (A)
$1,000 and (B) an amount equal to the product of (1) the Accumulated
Amount for the first SemiAnnual Interest Accrual Date less $1,000
multiplied by (2) a fraction, the numerator of which is the number of
days elapsed from the Issue Date to the Specified Date, using a 360-day
year
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EA-4
of twelve 30-day months, and the denominator of which is the number of
days from the Issue Date to the first SemiAnnual Interest Accrual Date,
using a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two SemiAnnual
Interest Accrual Dates, the Accumulated Amount will equal the sum of
(A) the Accumulated Amount for the SemiAnnual Interest Accrual Date
immediately preceding such Specified Date and (B) an amount equal to
the product of (1) the Accumulated Amount for the immediately following
SemiAnnual Interest Accrual Date less the Accumulated Amount for the
immediately preceding SemiAnnual Interest Accrual Date multiplied by
(2) a fraction, the numerator of which is the number of days elapsed
from the immediately preceding SemiAnnual Interest Accrual Date to the
Specified Date, using a 360-day year or twelve 30-day months, and the
denominator of which is 180; or
(iv) if the Specified Date occurs after the last SemiAnnual
Interest Accrual Date, the Accumulated Amount of this Note will equal
$1,706.17.
Notwithstanding anything to the contrary above, (i) if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
additional interest will accrue on this Note 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. Such
additional interest will be payable in cash semiannually in arrears, at a rate
per annum equal to .50% of the Accumulated Amount of the Notes on the relevant
additional interest payment date. Such additional interest will be payable on
each SemiAnnual Interest Accrual Date or Interest Payment Date, as the case may
be, commencing with the first SemiAnnual Interest Accrual Date following the
applicable Registration Default. Payments of additional interest on the Notes
will be made to the Holders of Notes on the Regular Record Date (or, if there is
no Regular Record Date, the date 15 days prior to such SemiAnnual Interest
Accrual Date) immediately preceding such SemiAnnual Interest Accrual Date or
Interest Payment Date.
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 Accumulated Amount of the Notes as provided
above on each March 15 and September 15, commencing September 15, 2003, to the
persons who are Holders (as reflected in the Security Register) at the close of
business on the March 1 or September 1 immediately preceding the relevant
Interest Payment Date, in each case, even if the Note is canceled 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.
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
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EA-5
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
March 15, 1998, (the "Indenture"), between the Company 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 Indenture limits the original aggregate principal amount
of the Notes to $250,000,000 (subject to Section 2.07 of the Indenture).
5. Redemption.
The Notes will not be redeemable prior to March 15, 2003.
Thereafter, the Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time 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 Accumulated Amount of the Notes), plus accrued
and unpaid interest, if any, on such Accumulated 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 March 15 of the years set forth below:
Year Redemption Price
---- ----------------
2003 105.500%
2004 103.667
2005 101.833
2006 and thereafter 100.000
6. 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 to
each Holder of Notes to be redeemed at his last address as it appears in the
Security Register. Notes in original
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EA-6
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.
7. Repurchase upon Change in Control.
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 Accumulated Amount of such Notes on such date of purchase, plus
accrued and unpaid interest, if any, on such Accumulated 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.
8. 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.
9. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
10. 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.
11. 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 and the Indenture 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.
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EA-7
12. 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.
13. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; 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, 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.
14. 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.
15. 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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (c) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in the Indenture or
under the Notes 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 the Company 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 the Company or any Significant
Subsidiary and shall not be
<PAGE>
EA-8
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 the Company 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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) the winding up or liquidation of the affairs of
the Company 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) the Company 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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) effects any general assignment for the benefit
of creditors.
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)
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.
16. Subordination.
The payment of the Notes is, to the extent set forth in the
Indenture, subordinated in right of payment in full, in cash or cash
equivalents, of all Senior Indebtedness of the Company. To the extent provided
in the Indenture, Senior Indebtedness of the Company must be paid before the
Notes may be paid. The Company agrees, and each Holder by accepting a Note
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purposes.
17. 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.
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EA-9
18. 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. 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.
19. 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.
20. 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.
21. 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).
22. 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
Communications, Inc., 230 Park Avenue, Suite 2700, New York, NY 10169,
Attention: General Counsel.
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EA-10
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
- -------------------
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.
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EA-11
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.10 or Section 4.11 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 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>
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE
144A, 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:
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 11% Senior Subordinated
Deferred Interest Notes Due 2008 to be issued pursuant to this Indenture in
connection with a Registered Exchange Offer pursuant to the Registration Rights
Agreement.
"Initial Purchasers" means Credit Suisse First Boston
Corporation, Salomon Brothers Inc, Morgan Stanley & Co. Incorporated and
NationsBanc Montgomery Securities LLC.
"Initial Securities" means the 11% Senior Subordinated
Deferred Interest Notes Due 2008, 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 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 11% Senior
Subordinated Deferred Interest Notes Due 2008 to be issued pursuant to this
Indenture to the Initial Purchasers in a Private Exchange.
"Purchase Agreement" means the Purchase Agreement dated March
17, 1998, 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.
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A-2
"Registration Rights Agreement" means the Registration
Rights Agreement dated March 17, 1998, among the Company 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.
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.
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A-3
(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.
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.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Initial Securities for original issue in an aggregate principal amount of
$250,000,000 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 $250,000,000 except
as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) 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.
<PAGE>
A-4
(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 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.
(b) Legend.
(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)
OUTSIDE THE UNITED STATES IN A 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) OR (IV) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
<PAGE>
A-5
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.
(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, 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 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.
(c) Cancelation 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
<PAGE>
A-6
returned to the Depositary for cancelation or retained and canceled by the
Trustee. At any time prior to such cancelation, 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.
(d) 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 3.07, 4.10, 4.11 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 Security
selected for redemption in whole or in part pursuant to Article Three
of this Indenture, except the unredeemed portion of any certificated
Security being redeemed in part, or (b) any Security for a period
beginning 15 Business Days before the mailing of a notice of an 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.
(e) 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
<PAGE>
A-7
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.
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
<PAGE>
A-8
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>
EXHIBIT 1
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.
[Restricted Securities Legend]
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) OUTSIDE THE
UNITED STATES IN A 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) OR (IV) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE
<PAGE>
EI-2
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>
EI-3
[Original Issue Discount Legend]
FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR
PURPOSES OF SECTION 1273 OF THE CODE, THE ISSUE PRICE IS $1,000 AND THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT IS $1,644.56, IN EACH CASE PER $1,000 PRINCIPAL
AMOUNT OF THIS SECURITY. THE AMOUNT OF THE ORIGINAL ISSUE DISCOUNT ATTRIBUTABLE
TO THE PERIOD COMMENCING MARCH 20, 1998 AND ENDING ON MARCH 15, 2003 IS $706.17.
FOR PURPOSES OF SECTION 1275 OF THE CODE, THE ISSUE DATE OF THIS SECURITY IS
MARCH 20, 1998. FOR PURPOSES OF SECTION 1272 OF THE CODE, THE YIELD TO MATURITY
(COMPOUNDED SEMIANNUALLY ON MARCH 15 AND SEPTEMBER 15) IS 11.00%, CALCULATED
BASED ON THE APPROXIMATE METHOD.
<PAGE>
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WINSTAR COMMUNICATIONS, INC.
11% Senior Subordinated Deferred Interest Note Due 2008
CUSIP _________
No. $___________
WINSTAR COMMUNICATIONS, INC., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to ____________, or its
registered assigns, the principal sum of ____________ ($_____) on March 15,
2008.
SemiAnnual Interest Accrual Date: March 15 and September 15,
commencing September 15, 1998.
Interest Payment Dates: March 15 and September 15, commencing
September 15, 2003.
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>
EI-5
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer.
Date: WINSTAR COMMUNICATIONS, INC.
By: ___________________________
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 11% Senior Subordinated Deferred Interest Notes Due
2008 described in the within-mentioned Indenture.
Date:
UNITED STATES TRUST
COMPANY OF NEW YORK, as
Trustee
By: _________________________________
Authorized Signatory
<PAGE>
EI-6
[REVERSE SIDE OF NOTE]
WINSTAR COMMUNICATIONS, INC.
11% Senior Subordinated Deferred Interest Note Due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on March 15,
2008.
The Company promises to pay interest on the Accumulated Amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Until March 15, 2003, interest on the Notes will accrue at a
rate of 11% per annum and be compounded semiannually on each SemiAnnual Interest
Accrual Date, but (except as provided below) will not be payable in cash. From
and after March 15, 2003, interest on the Accumulated Amount of each Note will
be payable semiannually (to the holders of record of the Notes at the close of
business on the March 1 or September 1 immediately preceding the relevant
Interest Payment Date) on each Interest Payment Date, commencing September 15,
2003.
"Accumulated Amount" means, as of any date (the "Specified
Date"), the amount provided below for each $1,000 principal amount of Notes.
(i) If the Specified Date occurs on one of the following dates
(each, a "SemiAnnual Interest Accrual Date"), the Accumulated Amount of
this Note will equal the amount set forth below for such Note for such
SemiAnnual Interest Accrual Date:
Accumulated
SemiAnnual Interest Accrual Date Amount
-------------------------------- -----------
September 15, 1998..................................... $1,053.78
March 15, 1999......................................... 1,111.74
September 15, 1999..................................... 1,172.88
March 15, 2000......................................... 1,237.39
September 15, 2000..................................... 1,305.45
March 15, 2001......................................... 1,377.25
September 15, 2001..................................... 1,452.99
March 15, 2002......................................... 1,532.91
September 15, 2002..................................... 1,617.22
March 15, 2003......................................... 1,706.17
(ii) if the Specified Date occurs before the first SemiAnnual
Interest Accrual Date, the Accumulated Amount will equal the sum of (A)
$1,000 and (B) an amount equal to the product of (1) the Accumulated
Amount for the first SemiAnnual Interest Accrual Date less $1,000
multiplied by (2) a fraction, the
<PAGE>
EI-7
numerator of which is the number of days elapsed from the Issue Date to
the Specified Date, using a 360-day year of twelve 30-day months, and
the denominator of which is the number of days from the Issue Date to
the first SemiAnnual Interest Accrual Date, using a 360-day year of
twelve 30-day months;
(iii) if the Specified Date occurs between two SemiAnnual
Interest Accrual Dates, the Accumulated Amount will equal the sum of
(A) the Accumulated Amount for the SemiAnnual Interest Accrual Date
immediately preceding such Specified Date and (B) an amount equal to
the product of (1) the Accumulated Amount for the immediately following
SemiAnnual Interest Accrual Date less the Accumulated Amount for the
immediately preceding SemiAnnual Interest Accrual Date multiplied by
(2) a fraction, the numerator of which is the number of days elapsed
from the immediately preceding SemiAnnual Interest Accrual Date to the
Specified Date, using a 360-day year or twelve 30-day months, and the
denominator of which is 180; or
(iv) if the Specified Date occurs after the last SemiAnnual
Interest Accrual Date, the Accumulated Amount of this Note will equal
$1,706.17.
Notwithstanding anything to the contrary above, (i) if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
additional interest will accrue on this Note 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. Such
additional interest will be payable in cash semiannually in arrears, at a rate
per annum equal to .50% of the Accumulated Amount of the Notes on the relevant
additional interest payment date. Such additional interest will be payable on
each SemiAnnual Interest Accrual Date or Interest Payment Date, as the case may
be, commencing with the first SemiAnnual Interest Accrual Date following the
applicable Registration Default. Payments of additional interest on the Notes
will be made to the Holders of Notes on the Regular Record Date (or, if there is
no Regular Record Date, the date 15 days prior to such SemiAnnual Interest
Accrual Date) immediately preceding such SemiAnnual Interest Accrual Date or
Interest Payment Date.
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 Accumulated Amount of the Notes as provided
above on each March 15 and September 15, commencing September 15, 2003, to the
persons who are Holders (as reflected in the Security Register) at the close of
business on the March 1 or September 1 immediately preceding the relevant
Interest Payment Date, in each case, even if the Note is canceled 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>
EI-8
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
March 15, 1998 (the "Indenture"), between the Company 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 Indenture limits the original aggregate principal amount
of the Notes to $250,000,000 (subject to Section 2.07 of the Indenture).
5. Redemption.
The Notes will not be redeemable prior to March 15, 2003.
Thereafter, the Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time 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 Accumulated Amount of the Notes), plus accrued
and unpaid interest, if any, on such Accumulated 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 March 15 of the years set forth below:
Year Redemption Price
----- ----------------
2003 105.500%
2004 103.667
<PAGE>
EI-9
2005 101.833
2006 and thereafter 100.000
6. 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 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.
7. Repurchase upon Change in Control.
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 Accumulated Amount of such Notes on such date of purchase, plus
accrued and unpaid interest, if any, on such Accumulated 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.
8. 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.
9. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
10. 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
<PAGE>
EI-10
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.
11. 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 and the Indenture 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.
12. 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.
13. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries, among other things, to incur
additional indebtedness; 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, 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.
14. 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.
15. 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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (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 whether or not such payment is prohibited by the subordination
provisions of the Indenture; (c) the Company defaults in the performance of or
breaches any other covenant or agreement of the Company in the Indenture or
under the Notes 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
<PAGE>
EI-11
aggregate principal amount of the Notes; (d) there occurs with respect to any
issue or issues of Indebtedness of the Company 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 the Company 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 the Company
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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) the winding up or liquidation of the affairs of
the Company 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) the Company 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 the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (iii) effects any general assignment for the benefit
of creditors.
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)
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.
<PAGE>
EI-12
16. Subordination.
The payment of the Notes is, to the extent set forth in the
Indenture, subordinated in right of payment in full, in cash or cash
equivalents, of all Senior Indebtedness of the Company. To the extent provided
in the Indenture, Senior Indebtedness of the Company must be paid before the
Notes may be paid. The Company agrees, and each Holder by accepting a Note
agrees, to the subordination provisions contained in the Indenture and
authorizes the Trustee to give it effect and appoints the Trustee as
attorney-in-fact for such purposes.
17. 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.
18. 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. 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.
19. 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.
20. 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.
21. 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).
22. 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.
<PAGE>
EI-13
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to WinStar
Communications, Inc., 230 Park Avenue, Suite 2700, New York, NY 10169,
Attention: General Counsel.
<PAGE>
EI-14
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 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:
- ---------------
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>
EI-15
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 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
<PAGE>
EI-16
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>
EI-17
[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>
<S> <C> <C> <C> <C>
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
</TABLE>
<PAGE>
EI-18
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to Section
4.10 or Section 4.11 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 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>
$450,000,000
WINSTAR COMMUNICATIONS, INC.
$200,000,000 10% Senior Subordinated Notes Due 2008
$250,000,000 11% Senior Subordinated Deferred Interest Notes Due 2008
REGISTRATION RIGHTS AGREEMENT
March 17, 1998
Credit Suisse First Boston Corporation
Salomon Brothers Inc
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
WinStar Communications, Inc., a Delaware corporation (the "Issuer") has
agreed to issue and sell to Credit Suisse First Boston Corporation, Salomon
Brothers Inc, Morgan Stanley Incorporated and NationsBanc Montgomery Securities
LLC (the "Initial Purchasers"), upon the terms set forth in a purchase agreement
of even date herewith (the "Purchase Agreement"), $200,000,000 of the Issuer's
10% Senior Subordinated Notes Due 2008 (the "Cash-Pay Notes") and $250,000,000
of the Issuer's 11% Senior Subordinated Deferred Interest Notes Due 2008 (the
"Deferred Interest Notes") (collectively, the "Notes"). Each of the Cash-Pay
Notes and the Deferred Interest Notes will be issued pursuant to a separate
Indenture, each dated as of March 15, 1998 (each, an "Indenture" and
collectively, the "Indentures"), among the Issuer and United States Trust
Company of New York (the "Trustee"). As an inducement to the Initial Purchasers,
the Issuer agrees 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 shall, at the Issuer'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 or statements (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 (each
a "Registered Exchange Offer" and collectively, the "Registered Exchange
Offers") to the Holders of the Notes, who are not prohibited by any law or
policy of the Commission from participating in such a Registered Exchange Offer,
to issue and deliver to such Holders, in exchange for their respective Notes, a
like aggregate principal amount of debt securities of the Issuer (collectively,
the "Exchange Securities") 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
<PAGE>
2
Exchange Offer Registration Statement to become effective under the Securities
Act by August 17, 1998 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 effects 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 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 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 Offer) 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 acknowledges 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 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 shall use its 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 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.
<PAGE>
3
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Cash-Pay Notes or Deferred Interest 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 respective Notes held by
such Initial Purchaser, a like aggregate principal amount of debt securities of
the Issuer 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 Cash-Pay Notes or Deferred Interest
Notes, as the case may be (collectively, 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 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 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 applicable Trustee for cancelation all the Notes so
accepted for exchange; and
(z) cause the applicable Trustee to authenticate and deliver promptly
to each Holder which validly tendered the 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.
Each Indenture will provide that the Exchange Securities subject to the
applicable Indenture will not be subject to the transfer restrictions set forth
in the applicable Indenture. Each Indenture will also provide that all the
Notes, Exchange Securities and Private Exchange Securities subject to the
applicable Indenture will vote and consent together on all
<PAGE>
4
matters as one class and that none of the Notes, Exchange Securities or Private
Exchange Securities subject to the applicable 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 date on which interest was paid or accrued, as the case may be, on such
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 405
of the Securities Act, of the Issuer 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 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 is
not permitted to effect the Registered Exchange Offers, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offers are not consummated by
September 16, 1998, (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 a Registered
Exchange Offer or, in the case of any Holder of Notes (other than an Exchanging
Dealer) that participates in a
<PAGE>
5
Registered Exchange Offer, such Holder does not receive freely tradeable
Exchange Securities on the date of the exchange, the Issuer shall take the
following actions:
(a) The Issuer shall, at its 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 its 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 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 shall use its 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 relevant
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 shall be deemed
not to have used its best efforts to keep the Shelf Registration Statement
effective during the requisite period if it voluntarily takes 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 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 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 its 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 Offer" section and in Annex C hereto in the "Plan of Distribution"
section of the prospectus forming a part of the Exchange Offer Registration
<PAGE>
6
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 shall give written notice to the Initial Purchasers, the
Holders of the Securities and any Participating Broker-Dealer from whom the
Issuer 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 its 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
(v) of the happening of any event that requires the Issuer 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 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 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
<PAGE>
7
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 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 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 consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling Holders
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 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 consents, 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 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 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 shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so qualified
or (ii) take any action which would subject them to general service of process
or to taxation in any jurisdiction where it is not then so subject.
(i) The Issuer 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 is
required to maintain an effective
<PAGE>
8
Registration Statement, the Issuer 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 notifies 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 or supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Issuer will provide CUSIP numbers for the Notes, the Exchange
Securities or the Private Exchange Securities, as the case may be, and provide
the Transfer Agent or the Trustee, as applicable, 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 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 Issuer will make generally
available to the Issuer'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 Issuer's first fiscal quarter commencing
after the effective date of the Registration Statement, which statement shall
cover such 12-month period.
(m) The Issuer shall cause the Indentures 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 any of
the Indentures, the Issuer shall appoint a new trustee thereunder pursuant to
the applicable provisions of such Indenture.
(n) The Issuer may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Issuer such
information regarding the Holder, his or her ownership of Securities and the
distribution of the Securities as the Issuer may from time to time reasonably
require for inclusion in the Shelf Registration Statement, and the Issuer 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 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
<PAGE>
9
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 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 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 (ii) cause the
Issuer'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 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 if requested by
any Holder of Securities covered thereby, shall cause (i) its 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 and its 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 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) its officers to execute and
deliver all customary documents and certificates and updates thereof reasonably
requested by any underwriters of the applicable Securities and (iii) its
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
<PAGE>
10
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 a Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Issuer shall
cause (i) its counsel to deliver to such Initial Purchaser or such Participating
Broker-Dealer signed opinions in the forms described in Section 6 of the
Purchase Agreement with such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its 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 Section 6(a) and (f) 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 (or to such
other Person as directed by the Issuer) in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be, the Issuer 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 shall (a) if the Notes have been rated prior to the
initial sale of such Notes, use its 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 dealer in respect
thereof, or otherwise, the Issuer 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 shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a Registration
Statement contemplated hereby.
<PAGE>
11
4. Registration Expenses. The Issuer shall bear all fees and expenses
incurred by the Issuer in connection with the performance of its 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 agrees 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, 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 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 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 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 may otherwise have to such
Indemnified Party. The Issuer 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.
<PAGE>
12
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Issuer and each person, if any, who controls the
Issuer 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 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 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 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 for any legal or other expenses reasonably incurred by the
Issuer 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 or any of its 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
<PAGE>
13
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuer 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 within the meaning of the Securities Act or the Exchange Act shall have
the same rights to contribution as the Issuer.
(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 cancelation 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 May 4, 1998, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement relating to such series of
Securities has been filed with the Commission;
(ii) If by August 17, 1998, 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 September 16, 1998, 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
<PAGE>
14
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 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 that would need
to be described in such Registration Statement or the related prospectus and
(ii) in the case of clause (y), the Issuer is 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 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, (A) in the case
of the Deferred Interest Notes and any Private Exchange Securities exchanged
therefor, on each SemiAnnual Interest Accrual Date or Interest Payment Date
(each as defined in the applicable indenture governing such Securities), as the
case may be, commencing with the first SemiAnnual Interest Accrual Date
following the applicable Registration Default, and (B) in the case of the
Cash-Pay Notes and any Private Exchange Securities exchanged therefor, on each
Interest Payment Date (as defined in the indenture governing such 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, (A) in the case of the Deferred
Interest Notes and any Private Exchange Securities exchanged therefor, the
Accumulated Amount (as defined in the indenture governing such Securities) of
such Securities on the relevant Additional Interest payment date and (B) in the
case of the Cash- Pay Notes and any Private Exchange Securities exchanged
therefor, the principal amount of such Securities, in each case, 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
<PAGE>
15
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 (or, if there is no
regular record date, the date 15 days prior to such Additional Interest payment
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 shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Issuer is not required to file
such reports, it will, upon the request of any Holder of Transfer Restricted
Securities, make publicly available other information so long as necessary to
permit sales of its securities pursuant to Rules 144 and 144A. The Issuer
covenants that it 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 will provide a copy of this Agreement to prospective
purchasers of Notes (or Private Exchange Securities) identified to the Issuer by
the Initial Purchasers upon request. Upon the request of any Holder of Transfer
Restricted Securities, the Issuer shall deliver to such Holder a written
statement as to whether it has complied with such requirements. Notwithstanding
the foregoing, nothing in this Section 7 shall be deemed to require the Issuer
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.
<PAGE>
16
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 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 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
Attention: Investment Banking Department--Transactions
Advisory Group
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 Issuer, at the following address:
WinStar Communications, Inc.
230 Park Avenue
New York, NY 10169
Fax No.: (212) 922-1637
Attention: Timothy Graham
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>
17
(c) No Inconsistent Agreements. The Issuer has not, as of the date
hereof, entered into, nor shall they, on or after the date hereof, enter into,
any agreement with respect to its 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 its 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 LAW 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. 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 its 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>
18
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers and the Issuer in accordance with its
terms.
Very truly yours,
WINSTAR COMMUNICATIONS, INC.,
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
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
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 has 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 has 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 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 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 Issuer has agreed to pay all expenses incidental to the
Exchange Offers (including the reasonable expenses of one counsel for the
Holders of the Securities) 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.
- --------
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>
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>
Winstar Completes $650 Million in Institutional Private Placements
NEW YORK--March 20, 1998--WINSTAR COMMUNICATIONS, INC. (NASDAQ -WCII)
reported today it completed $650 million in institutional private placements of
bonds and preferred stock. The company had previously announced plans to raise
$500 million, but increased the size of the offerings due to investor demand.
The offerings were placed by Credit Suisse First Boston; Salomon Smith Barney;
Morgan Stanley Dean Witter; and NationsBanc Montgomery Securities.
The private placements consisted of:
- -- $200 million of 7% Senior Cumulative Convertible Preferred Stock; convertible
at $49.61 per share , a 25% premium to the company's stock price on the day of
the offering;
- -- $200 million in 10% Senior Subordinated Notes due 2008; and
- -- $250 million in 11% Senior Subordinated Deferred Interest Notes due 2008.
The proceeds of these offerings will be used to expand WinStar's
telecommunications operations and for general corporate purposes.
WinStar Communications, Inc. is a national local communications company, serving
business customers, long distance carriers, fiber-based competitive access
providers, mobile communications companies, local telephone companies, and other
customers with broadband local communications needs. The company provides its
Wireless FiberSM services using its licenses in the 38 GHz spectrum. The company
also provides long distance, Internet and information services.
WinStar is a registered trademark, and Wireless Fiber is a service mark of
WinStar Communications, Inc.
<PAGE>
