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) June 17, 1999
WINSTAR COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10726 13-3585278
- ---------------------------- ---------------- -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
230 Park Avenue, New York, New York 10169
- --------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 584-4000
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index -- Page ____
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ITEM 5. OTHER EVENTS
General
On June 17, 1999, WinStar Communications, Inc. ("Company") and its
subsidiary, WinStar Multichannel Corp. ("WMC") entered into a Purchase Agreement
with Credit Suisse First Boston and Salomon Smith Barney (together, the "Initial
Purchasers") pursuant to which the Company and WMC agreed to sell to the Initial
Purchasers 240,000 shares and 60,000 shares, respectively, of the Company's
Series F 7 1/4% Senior Cumulative Convertible Preferred Stock ("Convertible
Preferred Stock") for an aggregate purchase price of $300 million (less
customary discounts and expenses). The Initial Purchasers then resold all or a
portion of the Convertible Preferred Stock to "qualified institutional buyers"
in reliance on Rule 144A under the Securities Act of 1933.
The sale of the Convertible Preferred Stock was consummated on June 22, 1999.
Each share of Convertible Preferred Stock has a liquidation preference
of $1,000 and entitles the holder thereof to receive from the Company dividends
at a per annum rate of 7 1/4% ($72.50 per share). Dividends are payable
quarterly on March 15, June 15, September 15 and December 15 of each year,
commencing December 15, 1999, to the record holders of the Convertible Preferred
Stock as of the close of business on the business day next preceding the date of
such dividend payment. The Company may pay such dividends in either cash or
through the issuance of shares of its Common Stock (the "Dividend Shares"), at
its election. Dividends paid in Common Stock will be calculated by dividing the
dollar amount of the dividend by the "Discounted Current Market Value" of the
Common Stock, which is equal to 97% of the closing bid price of the Common Stock
on Nasdaq on the fourth trading day prior to the dividend payment date. The
Company's ability to pay cash dividends is limited by the terms of the Company's
outstanding indebtedness.
Each share of Convertible Preferred Stock is convertible into shares of
Common Stock (the "Conversion Shares") at a conversion rate of 16.13912
Conversion Shares for each share of Convertible Preferred Stock converted,
equivalent to a conversion price (the "Conversion Price") of $61.96 per
Conversion Share. The Company will have the option to convert all of the shares
of Convertible Preferred Stock into Common Stock if, on or after June 24, 2002,
the closing price of the Common Stock on Nasdaq has equaled or exceeded 130% of
the Conversion Price for at least 20 out of 30 consecutive trading days.
Registration Obligations
The Company and the Initial Purchasers also entered into a Registration
Rights Agreement, pursuant to which the Company is obligated to file a
registration statement under the Securities Act registering the resale of the
Convertible Preferred Stock, Conversion Shares and Dividend Shares by September
1, 1999, and to use its best efforts to have such registration statement
declared effective on or prior to November 15, 1999. If such registration
statement is not declared effective on or prior to November 15, 1999, the
dividend rate of the Convertible Preferred Stock increases to 9 1/4% per annum
until the default under the Registration Rights Agreement is cured.
Redemption
The Convertible Preferred Stock will not be redeemable by the Company
prior to June 24, 2002. Thereafter, each share of Convertible Preferred Stock
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 12-month period commencing on June 15 of the
years set forth below, the redemption prices shall be:
Redemption
Period Price
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2002 $1,018.13
2003 1,012.08
2004 1,006.04
2005 and thereafter 1,000.00
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
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 dividend payment 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.
The Company's ability to redeem the Convertible Preferred Stock at its
option is limited by the terms of the Company's outstanding indebtedness. The
Company may not be able to redeem the Convertible Preferred Stock at its option
unless it simultaneously redeems or repays such indebtedness.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS:
1 Purchase Agreement, dated as of June 17, 1999, among
the Company, WMC and the Initial Purchasers.
2 Registration Rights Agreement, dated as of June 17,
1999, between the Company, WMC and the Initial
Purchasers.
3 Certificate of Designations of the Powers,
Preferences and Relative Participants, Optional and
Other Special Rights of the Series F 7 1/4% Senior
Cumulative Convertible Preferred Stock of the
Company.
4 Press Release announcing proposed sale of securities.
5 Press Release announcing closing of sale.
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SIGNATURE
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.
Date: June 22, 1999
WINSTAR COMMUNICATIONS, INC.
/s/ Fred Rubin
By:__________________________
Fred Rubin
Vice President
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EXHIBIT INDEX
The following exhibit is filed herewith:
Exhibit Document
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1 Purchase Agreement, dated as of June 17, 1999, among the
Company, WMC and the Initial Purchasers.
2 Registration Rights Agreement, dated as of June 17, 1999,
between the Company, WMC and the Initial Purchasers.
3 Certificate of Designations of the Powers,
Preferences and Relative Participants, Optional and
Other Special Rights of the Series F 7 1/4% Senior
Cumulative Convertible Preferred Stock of the
Company.
4 Press Release announcing proposed sale of securities.
5 Press Release announcing closing of sale.
EXECUTION COPY
300,000 Shares
WINSTAR COMMUNICATIONS, INC.
Series F 7 1/4% Senior Cumulative Convertible Preferred Stock
(Liquidation Preference $1,000 Per Share)
PURCHASE AGREEMENT
June 17, 1999
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Salomon Smith Barney Inc.
Seven World Trade Center
New York, NY 10048
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") 240,000 and 60,000 shares, respectively, of the Issuer's Series F
7 1/4% Senior Cumulative Convertible Preferred Stock (liquidation preference
$1,000 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 $61.96 per share, subject to
adjustment in accordance with the Certificate of Designations relating to the
Convertible Preferred Stock (the "Certificate of Designations") attached hereto
as Exhibit A. 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".
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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) An offering circular relating to the Offered Securities to be
offered by the Purchasers is being prepared by the Issuer. Such offering
circular is hereinafter 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 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.
(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 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 Company, 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
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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 conforms 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 (a) filing the Certificate of
Designations with the Secretary of State of the State of Delaware, (b) 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 (c) 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 charter or by-laws of either of the Sellers
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
Sellers as contemplated by this Agreement and to authorize and issue the
Underlying Shares upon conversion of the Offered Securities.
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(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 each of this Agreement and the
Registration Rights Agreement constitutes a valid and legally binding obligation
of the Sellers and the Issuer, as the case may be, enforceable in accordance
with its 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 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, 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
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5
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.
(p) The financial statements included or incorporated by reference in
the Offering Document present fairly the financial position of the Issuer and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial statements,
have been prepared in conformity with generally accepted accounting principles
in the United States applied on a consistent basis; and the assumptions used in
preparing the pro forma financial statements included 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 or incorporated by reference 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 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.
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(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(c) 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 held as of June 14, 1999 by 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 and proceedings affecting the service rules and licensing of spectrum
in the 38 GHz band) 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
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 12, 1998, several parties
filed petitions for reconsideration of each of these grants, with the exception
of the Seattle grant, alleging, among other things, that the February 10, 1998,
license grants to the Issuer were in violation of the FCC's processing rules and
the FCC's 38 GHz Order (as defined in the Offering Document). The Issuer filed
oppositions to these petitions. These petitions remain pending at the FCC. In
addition, on March 9, 1998, several parties filed petitions for reconsideration
of the FCC's 38 GHz Order, alleging, among other things, that the February 10,
1998, license grants to the Issuer were in violation of the FCC's processing
rules. The Issuer filed a consolidated opposition to these petitions. These
petitions remain pending at the FCC. In addition, on October 23, 1997, DCT
Communications, Inc. filed a petition for reconsideration seeking revocation of
the Issuer's license in Ft. Lauderdale, Florida. The Issuer opposed the
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7
petition. On January 21, 1999, the FCC released an order denying DCT's petition
for reconsideration. In response, DCT filed an application for review which the
Issuer opposed. The application for review remains pending.
(y) Except as disclosed in the Offering Document, 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 the loss of which could reasonably be expected to have a material
adverse effect 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 $972.50 per share plus accrued
dividends (if any) from June 22, 1999 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
the Purchasers by the Sellers at one or more financial institutions acceptable
to the Purchasers, 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
June 22, 1999, or at such other time not later than seven full business days
thereafter as the Purchasers 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.
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(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 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 144A
under the Securities Act ("Rule 144A").
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 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 the Purchasers promptly of any proposal to
amend or supplement the Offering Document and will not effect such amendment or
supplementation without the Purchasers' 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 the Purchasers 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, nor the Purchasers' delivery to offerees or investors of, any such amendment
<PAGE>
9
or supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(b) The Issuer will furnish to the Purchasers copies of the Offering
Document and all amendments and supplements to such document, as soon as
available and in such quantities as each Purchaser reasonably requests, and the
Issuer will furnish to the Purchasers 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 with respect to the
financial statements incorporated therein by reference 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 the 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 as the Purchasers reasonably designate 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 the 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 the 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 the
Purchasers 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 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
<PAGE>
10
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 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 Portal(sm)
Market ("PORTAL"), a subsidiary of The Nasdaq Stock Market, Inc. 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 as the Purchasers designate and the printing
of memoranda relating thereto; and (v) 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 the Purchasers shall have
notified the Issuer 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 the Purchasers,
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,
<PAGE>
11
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 Closing
Date, 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 or incorporated by reference 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 June 14, 1999, 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 March 31, 1999 unaudited condensed consolidated
balance sheet incorporated by reference in the Offering Document; or
(B) for the period from April 1, 1999 to June 14, 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;
[NYCORP;858178.8:4205A:06/18/1999--9:57a]
<PAGE>
12
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 reasonable judgment of the Purchasers, 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 and its subsidiaries taken as
one enterprise which, in the judgment of the Purchasers, 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 material
suspension or material 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 the Purchasers, 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.
<PAGE>
13
(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 its
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;
(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, 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
and such as may be required by Nasdaq to include the Underlying Shares for
quotation on Nasdaq;
(vi) The execution, delivery and performance of the Registration Rights
Agreement and this Agreement, and the issuance and sale of the Offered
<PAGE>
14
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 June 16, 1999, 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 thereof 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.
(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,
<PAGE>
15
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 and proceedings affecting the service rules
and licensing of spectrum in the 38 GHz band) 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 12, 1998, several parties filed petitions for
reconsideration of each of these grants, with the exception of the Seattle
grant, alleging, among other things, that the February 10, 1998, license grants
to the Issuer were in violation of the FCC's processing rules and the FCC's 38
GHz Order (as defined in the Offering Document). The Issuer filed oppositions to
these petitions. These petitions remain pending at the FCC. In addition, on
March 9, 1998, several parties filed petitions for reconsideration of the FCC's
38 GHz Order, alleging, among other things, that the February 10, 1998, license
grants to the Issuer were in violation of the FCC's processing rules. The Issuer
filed a consolidated opposition to these petitions. These petitions remain
pending at the FCC. In addition, on October 23, 1997, DCT Communications, Inc.
filed a petition for reconsideration seeking revocation of the Issuer's license
in Ft. Lauderdale, Florida. The Issuer opposed the petition. On January 21,
1999, the FCC released an order denying DCT's petition for reconsideration. In
response, DCT filed an application for review which the Issuer opposed. The
application for review remains pending.
(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 released
an Order concerning the 38.6-40 GHz band adopting licensing, service and
technical rules, and a plan to auction the remaining unlicensed portions of the
38.6-40 GHz band for commercial use. On February 20, 1998, a party filed a
petition for reconsideration of the FCC's 38 GHz Order seeking review of the
FCC's channelization and assignment of the 38 GHz band to ensure that spectrum
remains available for satellite services. In the 38 GHz Order, the FCC declined
<PAGE>
16
to reserve spectrum in this band for satellite services. The Issuer filed an
opposition to this petition. The petition remains pending. On December 23, 1998,
the FCC issued an Order primarily designating the 38.6-40 GHz band for
terrestrial wireless services. Several parties filed petitions for
reconsideration of that decision seeking authority to use the 38.6-40 GHz band
for satellite services. The Issuer filed an opposition to those petitions which
remain pending. 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
the Purchasers 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,
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 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 Purchasers reasonably
request. The Purchasers may in their sole discretion waive 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, its directors and officers and each person, if
any, who controls such Purchaser within the meaning of Section 15 of the
Securities Act, 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
<PAGE>
17
herein or any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and will
reimburse each Purchaser for any legal or other expenses reasonably incurred by
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 specifically for use
therein, it being understood that the only such information consists of the
information described as such in subsection (b) below.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Issuer and WMC, its directors and officers and each person, if any,
who controls the Issuer or WMC within the meaning of Section 15 of the
Securities Act, 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 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 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: under the caption "Plan of Distribution," (i) the third sentence of
the second paragraph thereunder, (ii) the fifth paragraph thereunder (iii) the
third sentence in the eighth paragraph thereunder and (iv) the ninth 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
<PAGE>
18
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 and does not include a
statement as to or an admission of fault, culpability or failure to act by or on
behalf of any indemnified party.
(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
<PAGE>
19
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, the Purchasers may make arrangements
satisfactory to the Sellers 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 the
Purchasers 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, Credit Suisse First Boston Corporation, Eleven Madison Avenue,
New York, NY 10010 Attention: Investment Banking Department-Transaction Advisory
Group and Salomon Smith Barney, Seven World Trade Center, New York, NY 10048 or,
if sent to the Sellers, will be mailed, delivered or electronically transmitted
and confirmed to them 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.
<PAGE>
20
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.
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>
21
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
Salomon Smith Barney Inc.
By Credit Suisse First Boston Corporation
By..........................................
Name:
Title:
<PAGE>
SCHEDULE A
Number of Shares Number of Shares
of Convertible of Convertible
Preferred Stock Preferred Stock
Purchaser from the Issuer from WMC Total
- ------------------- ----------------- ---------------- ------
Credit Suisse First
Boston Corporation
Salomon Smith Barney Inc.
----------------- --------------- -------
================= =============== =======
<PAGE>
Exhibit A
Form of Designation Certificate
-------------------------------
EXECUTION COPY
300,000 Shares
WINSTAR COMMUNICATIONS, INC.
Series F 7 1/4% Senior Cumulative Convertible Preferred Stock
(Liquidation Preference $1,000 per share)
REGISTRATION RIGHTS AGREEMENT
June 17, 1999
Credit Suisse First Boston Corporation
Salomon Smith Barney Inc.
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, have agreed to issue and sell to Credit Suisse
First Boston Corporation and Salomon Smith Barney Inc., (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement of even date
herewith (the "Purchase Agreement"), 300,000 shares of the Company's Series F 7
1/4% Senior Cumulative Convertible Preferred Stock (liquidation preference
$1,000 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 (subject to
adjustment) set forth in the Certificate of Designation of the Convertible
Preferred Stock (the "Certificate of Designation") a form of which is attached
hereto as Exhibit A. 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
<PAGE>
2
"Security". As an inducement to the Initial Purchasers to 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 September 1, 1999, 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 November 15, 1999 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
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
<PAGE>
3
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 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
<PAGE>
4
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.
(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
<PAGE>
5
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
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
<PAGE>
6
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 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
<PAGE>
7
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,
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
<PAGE>
8
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.
(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
<PAGE>
9
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 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
<PAGE>
10
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 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
<PAGE>
11
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 and does not include a statement as to or on admission of
fault, culpability or a failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 4 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred 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
<PAGE>
12
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this paragraph (d), each person, if any, who controls such indemnified party
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such indemnified party and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Company.
(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
cancelation 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 November 15, 1999, 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).
<PAGE>
13
(b) A Registration Default referred to in Section 5(a)(ii)
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 (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>
14
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) Remedies. The Company acknowledges and
agrees that any failure by the Company to comply with its obligations under
Section 1 hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that, in
the event of any such failure, the Initial Purchasers or any Holder may obtain
such relief as may be required to specifically enforce the Company's obligations
under Sections 1 hereof. The Company further agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) 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.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, first-class
<PAGE>
15
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
(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.
(d) Third Party Beneficiaries. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Initial Purchasers, on the other hand, and shall have the
right to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder.
<PAGE>
16
(e) 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.
(f) 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.
(g) 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.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) 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.
(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
<PAGE>
17
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 Company a counterpart hereof,
whereupon this instrument, along 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
Salomon Smith Barney Inc.
By: Credit Suisse First Boston Corporation
By: _______________________________________
Name:
Title:
<PAGE>
19
EXHIBIT A
Form of Certificate of Designation
----------------------------------
WINSTAR COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF SERIES F 7 1/4% SENIOR
CUMULATIVE CONVERTIBLE PREFERRED STOCK 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 June 16, 1999 (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 F 7 1/4% Senior Cumulative Convertible Preferred Stock, par
value $.01 per share, with a liquidation preference of $1,000 per
share, consisting of 300,000 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 F 7 1/4% Senior Cumulative Convertible Preferred
Stock" (the "Convertible Preferred Stock"). The number of shares constituting
the Convertible Preferred Stock shall be 300,000. The liquidation preference of
the Convertible Preferred Stock shall be $1,000 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, the Company's 6% Series A Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock") and the Company's
Series E Non-Redeemable Junior Convertible Preferred Stock (the "Series E
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
<PAGE>
2
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"), the Company's Series D 7% Senior Cumulative Convertible
Preferred Stock Due 2010 (the "Series D 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 7.25% of the Liquidation Preference of such share
payable quarterly (each such quarterly period being herein called a "Dividend
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 November 15, 1999 (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
<PAGE>
3
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)
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
December 15, 1999 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.
"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% Senior Discount Notes Due 2005 of the
Company; (ii) the Indenture dated as of March 1, 1997, governing the 14 1/2%
Senior Deferred Interest Notes Due 2005 of the Company; (iii) the Indenture
dated as of March 1, 1997, governing the 12 1/2% Senior Secured Notes Due 2004
of WinStar Equipment Corp.; (iv) the Indenture dated as of August 1, 1997,
governing the 12 1/2% Senior Secured Notes Due 2004 of WinStar Equipment II
Corp.; (v) the Indenture dated as of October 1, 1997, governing the 15% Senior
Subordinated Deferred Interest Notes Due 2007 of the Company; (vi) the Indenture
dated as of March 11, 1998, governing the 10% Senior Subordinated Notes Due 2008
of the Company; (vii) the Indenture dated as of March 15, 1998, with respect to
the 11% Senior Subordinated Deferred Interest Notes Due 2008 of the Company and
viii) the Indenture to be entered into with respect to the 14 1/4% Senior
<PAGE>
4
(viii) 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
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 for any Dividend Period on the Convertible Preferred Stock 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,
<PAGE>
5
redeem or otherwise acquire Junior Stock in exchange for Junior Stock and Parity
Stock in exchange for Parity Stock or Junior Stock.
(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.
(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
June 24, 2002. On or after June 24, 2002, 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 "Redemption Date")
<PAGE>
6
(including a cash amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date) (the "Optional
Redemption Price"):
if redeemed during the 12-month period commencing on
June 15 (or, if June 15 is not a day on which the Nasdaq National
Market is open for business, then the next day the Nasdaq National
Market is open for business) of the years set forth below, the
redemption prices shall be:
Period Redemption Price
-------- ----------------
2002 $1,018.125
2003 1,012.08
2004 1,006.042
2005 and thereafter 1,000.00
(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 5 shares (or all of the
shares held by the holders who would hold less than 5 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) Procedure for Redemption. (A) On and after 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 without
interest; provided, however, that if a notice of redemption shall have been
given as provided in subparagraph (ii)(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 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
for such shares without interest from the Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i),
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
<PAGE>
7
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) that the redemption is pursuant to paragraph (e)(i)
hereof;
(2) the Optional Redemption Price;
(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.
(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
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 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. (A) The holders of Convertible Preferred
Stock, except as otherwise required under Delaware law or as set forth in
paragraphs (B) and (C) below, shall not be entitled to vote on any matter
required or permitted to be voted upon by the stockholders of the Company.
(B) (1) If dividends on the Convertible Preferred Stock are in
arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Voting Rights Triggering Event"), then the number of
directors constituting the Board of Directors will, subject to
paragraph (f)(B)(5), 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.
(2) The voting rights set forth in paragraph (f)(B)(1) above
will continue until such time as all dividends in arrears on the
Convertible Preferred Stock are paid in full, at which time the term of
any directors elected pursuant to the provisions of paragraph (f)(B)(1)
above (subject to the right of holders of any other Preferred Stock to
<PAGE>
8
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).
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)(B)(1) 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)(B), 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.
(3) 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 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.
(4) 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).
(5) If an event occurs at any time that results in the holders
of any Parity Stock having voting rights to elect directors to the
Board of Directors, then holders of Convertible Preferred Stock shall,
whether or not such event otherwise constitutes a Voting Rights
<PAGE>
9
Triggering Event pursuant to paragraph (f)(B)(1), have the voting
rights set forth in paragraphs (f)(B)(1) and (f)(B)(2), 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)(B) are serving on the
Board of Directors ("Previously-Elected Directors") an event occurs
that 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.
(C) (1) 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 Senior Stock
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 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.
(2) 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 a 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.
(3) Except as set forth in paragraph (f)(C)(1) or (2) 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.
(D) 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.
<PAGE>
10
(E) 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.
(g) Conversion. (A)(1) 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. 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 Redemption Date, unless the Company defaults in
making the payment due upon redemption.
(2) If on any date after June 22, 2002, the closing price (as
defined in paragraph (g)(D)(7) below) of the Common Stock has equaled or
exceeded 130% of the then current Conversion Price, as hereinafter provided, for
20 or more out of the prior 30 consecutive Market Days, then the Company shall
have the right, for up to five Market Days after any such date, to cause all the
Convertible Preferred Stock to convert 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. The Company may
exercise such right by sending written notice of such exercise to the Transfer
Agent wherever the conversion will automatically occur. The Convertible
Preferred Stock shall convert on the date such notice is received by the
Transfer Agent, and the Conversion Price shall be the Conversion Price in effect
on such date. For the purposes of this paragraph (g)(A)(2), "Market Day" means a
day on which the principal national securities market or exchange on which the
Common Stock is listed or admitted for trading is open for the transaction of
business.
(3) The price at which Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially $61.96125
per share of Common Stock. The Conversion Price shall be adjusted in certain
instances as provided in paragraph (g)(D) and paragraph (g)(E).
(B) In order to exercise the conversion privilege provided for
in paragraph (g)(A)(1), 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). Upon any conversion of Convertible Preferred Stock pursuant to
paragraph (g)(A)(2), the Company will promptly notify the Holders thereof and
will deliver shares of Common Stock issuable upon such conversion to the office
or address specified by such Holders.
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
<PAGE>
11
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
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 or prior to such Dividend
Payment Date (or where shares of Convertible Preferred Stock are automatically
converted during such period) 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 (x) of
surrender of such shares of Convertible Preferred Stock for conversion in
accordance with the foregoing provisions or (y) in the case of an automatic
conversion, the Transfer Agent receives the appropriate notice from the Company,
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)(C)
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.
(C) 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
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)(D)(7)) per share of Common Stock at the close
of business on the Business Day prior to the day of conversion.
(D) 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
<PAGE>
12
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)(D)(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)(D)(1) 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)(D)(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 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
<PAGE>
13
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.
(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)(D)(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)(D)(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)(E) applies) (the
foregoing hereinafter in this paragraph (g)(D)(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)(D)(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)(D)(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 paragraph (g)(D)(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)(D)(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)(D)(4) (and no adjustment to the Conversion Price under
this paragraph (g)(D)(4) shall be required) until the occurrence of the
earliest Dilution Trigger Event, whereupon such rights and warrants
<PAGE>
14
shall be deemed to have been distributed and an appropriate adjustment
to the Conversion Price under this paragraph (g)(D)(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)(D)(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 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)(D)(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)(D)(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)(D)(4) and paragraphs (g)(D)(1) and
(2), any dividend or distribution to which this paragraph (g)(D)(4) is
applicable that also includes Common Stock, or rights or warrants to
subscribe for or purchase Common Stock to which paragraph (g)(D)(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)(D)(2) applies
(and any Conversion Price reduction required by this paragraph
(g)(D)(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)(D)(1) and (2) with respect to
such dividend or distribution shall then be made), except that (x) the
Record Date of such dividend or distribution shall be substituted as
"the Record Date fixed for the determination of stockholders entitled
to receive such dividend or other distribution", "Record Date fixed for
such determination" and "Record Date" within the meaning of paragraph
(g)(D)(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)(D)(2), and (y) any share of Common Stock included in such
<PAGE>
15
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)(D)(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)(E)
applies or as part of a distribution referred to in paragraph
(g)(D)(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)(D)(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)(D)(4) has been made, exceeds 12.5% of the product of the
Current Market Price (determined as provided in paragraph (g)(D)(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% 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 (i) the
<PAGE>
16
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)(D)(6) has been made and
(ii) 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)(D)(5) has been made, exceeds 12.5% of the
product of the Current Market Price (determined as provided in
paragraph (g)(D)(7)) as of the last time (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)(D)(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)(D)(6).
(7) For purposes of this paragraph (g), 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
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
<PAGE>
17
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)(D)(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)(D)(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
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)(D)(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)(F), 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)(D)(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)(D), such adjustments shall be made to
the Current Market Price as may be necessary or appropriate to
effectuate the intent of this paragraph (g)(D) and to avoid unjust or
inequitable results, as determined in good faith by the Board of
Directors.
<PAGE>
18
"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)(D)(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)(D) 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)(D) provides that
an adjustment shall become effective immediately after a Record Date
for an event, the 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)(D), 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.
(E) 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
<PAGE>
19
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)(A), to convert such share of
Convertible Preferred Stock only (subject to paragraph (I)(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 share"), then for the purpose of this paragraph
(g)(E) 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)(E). The above provisions of this Section shall
similarly apply to successive consolidations, mergers, conveyances or
transfers.
(F) 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
<PAGE>
20
on which such reclassification, 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.
(G) 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.
(H) 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.
(I) (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)(I)),
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
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)(I)), 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)(I))
or the then applicable Reference Market Price (as defined in this
paragraph (g)(I)) by a fraction of which the numerator shall be
$1,000.00 and the denominator shall be the then current Optional
Redemption Price per share; or, prior to June 24, 2002, 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
<PAGE>
21
fraction, of which the numerator shall be the Purchaser Stock Price (as
defined in this paragraph (g)(I)) 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 one share of
Common Stock as a result of such Common Stock Change in Control.
(3) For purposes of this paragraph (I), 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)(D)(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, 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.
<PAGE>
22
"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)(D)(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 $33.585 (which
is an amount equal to 66-2/3% of the reported last sale price for the
Common Stock on the NNM on June 16, 1999), and in the event of any
adjustment to the Conversion Price 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 $33.585 to the initial Conversion Price set forth in paragraph
(g)(A)(3).
(J) 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
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.
<PAGE>
23
(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
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
registered 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.
(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
<PAGE>
24
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 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.
<PAGE>
25
(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.
The Transfer Agent shall authenticate and deliver certificates
for 300,000 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 such Holder, without transfer, a
certification from such Holder to that effect in substantially
the form of Exhibit C hereto; or
<PAGE>
26
(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 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
<PAGE>
27
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 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
(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,
<PAGE>
28
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 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."1
_________________________
1 Brackets indicate legend for shares of Convertible Preferred Stock only.
<PAGE>
29
(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).
(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.
<PAGE>
30
(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. 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 be
substantially in the form of Exhibit C hereto).
(J) No Obligation of the Transfer Agent.
(x) 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.
<PAGE>
31
The Transfer Agent may rely and shall be fully protected in relying
upon information furnished by DTC with respect to its members,
participants and any beneficial owners.
(y) 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 Convertible Preferred Stock certificate claims that the Convertible
Preferred Stock 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
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32
Company may not issue new Convertible Preferred Stock certificates to replace
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:
"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 (including any merger or
consolidation) the result of which is that any "person" (as defined above),
other than William J. Rouhana, Jr., 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" means The Depository Trust Company.
<PAGE>
33
"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.
"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 June 17, 1999 among the Company, Credit Suisse First Boston
Corporation and Salomon Smith Barney Inc. 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.
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34
"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 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>
35
IN WITNESS WHEREOF, said WinStar Communications, Inc., has
caused this Certificate of Designations to be signed by Frederic E. Rubin, its
Vice President and Treasurer, this 22nd day of June, 1999.
WINSTAR COMMUNICATIONS, INC.,
by ______________________________
Name: Frederic E. Rubin
Title: Vice President and Treasurer
<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 IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.]***
_________________
__Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
__Subject to removal if not a global security.
<PAGE>
2
[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.: 975515867
Series F 7 1/4% Senior Cumulative Convertible Preferred Stock (par value
$0.01) (liquidation preference $1,000 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 F 7 1/4% Senior Cumulative Convertible Preferred Stock (par value $0.01)
(liquidation preference $1,000 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
represented hereby are issued and shall in all respects be subject to the
provisions of the Certificate of Designations dated June 22, 1999, 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.
<PAGE>
3
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
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>
5
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 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 F 7 1/4% 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:______________
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 F 7 1/4% Senior Cumulative Convertible Preferred Stock (the
"Convertible Preferred Stock") of WinStar Communications, Inc. (the
"Company")
This Certificate relates to ____ shares of Convertible
Preferred Stock held in
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 1/:
|_| 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).
<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 REGULATIONS
__________, ____
Continental Stock Transfer & Trust Company
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed sale of certain Series F .% Senior
Cumulative Convertible Preferred Stock (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
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:
WinStar Announces Fully Subscribed $300 Million Private Placement of
Convertible Preferred Stock
NEW YORK--(BUSINESS WIRE)--June 17, 1999--In a move to further strengthen its
balance sheet, WINSTAR COMMUNICATIONS, INC. (NASDAQ:WCII) today announced it has
agreed to sell $300 million of 7.25% Series F Convertible Preferred Stock
through a Rule 144A institutional private placement. The placement, which is
fully subscribed, is scheduled to close on June 22, 1999.
The shares are convertible by the holders into WinStar common stock at a price
of $61.96 per share, which is a 23% premium To Whom It May Concern: the closing
price on June 16, 1999. WinStar has no obligation to redeem the shares and may
trigger conversion into common stock beginning in three years when its common
stock trades at certain defined levels.
WinStar intends to use the net proceeds of the offering to expand its
telecommunications operations and for general corporate purposes. The 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 pioneer in providing business customers with
broadband communications services, including local and long distance phone
service, as well as high-speed Internet access, data and information services.
WinStar provides these Wireless Fiber(SM) services in more than 30 U.S. markets
over its own local broadband networks, using its licenses in the 28 and 38 GHz
spectrum, which are connected to the company's nationwide fiber-optic network.
In addition, the company offers Wireless Fiber services in two markets outside
of the U.S. In the past year, WinStar has become one of the largest Internet
companies in the U.S. Recently, the company announced a destination Web site for
businesses, Office.com(SM), a service from WinStar.
WinStar is a registered trademark and Wireless Fiber and Office.com are service
marks of WinStar Communications, Inc.
CONTACT:
WinStar Communications, Inc., New York
Financial Community:
Daniel Briggs
Director, Capital Market Relations
(212) 584-4032
[email protected]
or
Press:
Marianne Steiner
<PAGE>
WinStar Completes Previously Announced $300 Million Private Placement of
Preferred Stock
NEW YORK--(BUSINESS WIRE)--June 22, 1999--WINSTAR COMMUNICATIONS, INC. (NASDAQ:
WCII) today announced it has completed its $300 million Rule 144A institutional
private placement of Senior Cumulative Exchangeable Preferred Stock, as
scheduled and on the terms previously announced.
WinStar Communications, Inc. is a pioneer in providing business customers with
broadband communications services, including local and long distance phone
service, as well as high-speed Internet access, data and information services.
WinStar provides these Wireless Fiber(SM) services in more than 30 U.S. markets
over its own local broadband networks, using its licenses in the 28 and 38 GHz
spectrum, which are connected to the company's nationwide fiber-optic network.
In addition, the company offers Wireless Fiber services in two markets outside
of the U.S. In the past year, WinStar has become one of the largest Internet
companies in the U.S. Recently, the company announced a destination Web site for
businesses, Office.com(SM), a service from WinStar.
WinStar is a registered trademark and Wireless Fiber and Office.com are service
marks of WinStar Communications, Inc.
CONTACT:
WinStar Communications, Inc.
Financial Community:
Daniel Briggs
Director, Capital Market Relations
212/584-4032
[email protected]
or
Press:
Marianne Steiner
VP, Corporate Communications
212/584-4021
