EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
dated as of
November 7, 2000
among
WINSTAR COMMUNICATIONS, INC.,
WINSTAR CREDIT CORP.,
CREDIT SUISSE FIRST BOSTON EQUITY PARTNERS, L.P.,
WELSH, CARSON, ANDERSON & STOWE VIII, L.P.,
MICROSOFT CORPORATION
CPQ HOLDINGS, INC.
and
THE OTHER PURCHASERS LISTED ON THE SIGNATURE PAGES
HEREOF
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TABLE OF CONTENTS
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Page
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitment to Purchase..........................................6
SECTION 2.02. Option to Assign................................................7
SECTION 2.03. The Closing.....................................................7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
SECTION 3.01. Corporate Existence and Power...................................7
SECTION 3.02. Corporate Authorization.........................................8
SECTION 3.03. Governmental Authorization......................................8
SECTION 3.04. Noncontravention................................................9
SECTION 3.05. Capitalization..................................................9
SECTION 3.06. Subsidiaries...................................................10
SECTION 3.07. Financial Statements...........................................10
SECTION 3.08. Absence of Certain Changes.....................................11
SECTION 3.09. No Material Undisclosed Liabilities............................11
SECTION 3.10. Litigation.....................................................11
SECTION 3.11. Compliance with Laws...........................................11
SECTION 3.12. SEC Reports....................................................12
SECTION 3.13. Material Contracts.............................................12
SECTION 3.14. Finders' Fees..................................................12
SECTION 3.15. Offering of Securities.........................................12
SECTION 3.16. Intellectual Property..........................................13
SECTION 3.17. Environmental Compliance.......................................13
SECTION 3.18. Compliance with ERISA..........................................13
SECTION 3.19. Taxes..........................................................14
SECTION 3.20. Regulatory Matters.............................................15
SECTION 3.21. Existing Securities and Agreements.............................16
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Page
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 4.01. Corporate Existence and Power..................................17
SECTION 4.02. Authorization..................................................17
SECTION 4.03. Governmental Authorization.....................................17
SECTION 4.04. Noncontravention...............................................18
SECTION 4.05. Finders' Fees..................................................18
SECTION 4.06. Private Placement..............................................18
ARTICLE 5
COVENANTS OF THE ISSUER
SECTION 5.01. Access to Information..........................................20
SECTION 5.02. Certificate of Designations....................................20
SECTION 5.03. Restrictions Pending the Closing...............................20
SECTION 5.04. Reservation of Shares..........................................20
ARTICLE 6
COVENANTS OF THE PURCHASERS
SECTION 6.01. Confidentiality................................................21
SECTION 6.02. Tax Consistency................................................22
SECTION 6.03. Schedule 13D and 13G...........................................22
ARTICLE 7
COVENANTS OF THE ISSUER AND THE PURCHASERS
SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts;
Further Assurances...................................................22
SECTION 7.02. Certain Filings................................................22
SECTION 7.03. Public Announcements...........................................23
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.01. Conditions to Each Party's Obligations.........................23
SECTION 8.02. Conditions to Each Purchaser's Obligations.....................24
SECTION 8.03. Conditions to Sellers' Obligations.............................25
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Page
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices........................................................26
SECTION 9.02. No Waivers; Amendments.........................................26
SECTION 9.03. Survival.......................................................26
SECTION 9.04. Indemnification................................................27
SECTION 9.05. Procedures.....................................................28
SECTION 9.06. Expenses; Documentary Taxes....................................28
SECTION 9.07. Termination....................................................28
SECTION 9.08. Several Obligations............................................29
SECTION 9.09. Successors and Assigns.........................................29
SECTION 9.10. Governing Law..................................................29
SECTION 9.11. Jurisdiction...................................................29
SECTION 9.12. Counterparts...................................................30
SECTION 9.13. Entire Agreement...............................................30
SECTION 9.14. Shareholders' Meeting..........................................30
EXHIBITS, ANNEX AND SCHEDULE
Annex I -- Securities to be Purchased
Exhibit A -- Form of Certificate of Designations for Series H Preferred
Exhibit B -- Forms of Amended and Restated Shareholders Agreements
Exhibit C -- Form of Opinion of Counsel
Exhibit D -- Form of Opinion of FCC Counsel
Exhibit E -- Form of Management Sideletter
Exhibit F -- Form of Warrants
Disclosure Schedule
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SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of November 7, 2000 among Winstar Communications,
Inc., a Delaware corporation (the "Issuer"), Winstar Credit Corp., a Delaware
corporation and wholly owned subsidiary of the Issuer ("WCC" and together with
the Issuer, the "Sellers"), Credit Suisse First Boston Equity Partners, L.P., a
Delaware limited partnership ("CSFB"), Welsh, Carson, Anderson & Stowe VIII,
L.P., a Delaware limited partnership ("WCAS"), Microsoft Corporation, a
Washington corporation ("Microsoft"), CPQ Holdings, Inc., a Delaware corporation
("CPQ"), and the other purchasers listed on the signature pages hereof (together
with CSFB, WCAS, and Microsoft and CPQ, the "Purchasers").
WHEREAS, the Sellers desire to sell the Securities (as defined below)
to the Purchasers, and the Purchasers desire to purchase the Securities from the
Sellers, upon the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person; provided
that none of the Purchasers or any of their Subsidiaries shall be considered an
Affiliate of any Seller.
"Agreement" means this Agreement, as it may be amended from time to
time.
"Applicable Law" means any applicable constitution, treaty, statute,
rule, regulation, ordinance, order, directive, code, interpretation, judgment,
decree, injunction, writ, determination, award, permit, license, authorization,
directive, requirement, ruling or decision of, agreement with, or by any
Governmental Authority.
"Balance Sheet" means the consolidated balance sheet of the Issuer and
its Subsidiaries as of the Balance Sheet Date.
"Balance Sheet Date" means September 30, 2000.
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"Benefit Arrangement" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Certificate of Designations" means the Certificate of Designations,
Preferences and Rights of Series H Senior Cumulative Participating Convertible
Preferred Stock, substantially in the form attached as Exhibit A hereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission or any
governmental body succeeding to the functions thereof.
"Common Stock" means the common stock, par value $.01 per share, of the
Issuer.
"Communications Act" means the Communications Act of 1934, as amended.
"CSFB Related Funds" means, collectively, (i) CSFB and (ii) Credit
Suisse First Boston Equity Partners (Bermuda), L.P., a Bermuda limited
partnership.
"Disclosure Schedule" means the Disclosure Schedule attached hereto,
dated as of the date hereof and delivered by the Issuer to the Purchasers
hereunder.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any governmental authority or
other third party, whether now or hereafter in effect, relating to human health
and safety, the environment or to pollutants, contaminants, wastes or chemicals
or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials.
"Environmental Liabilities" means all liabilities of the Issuer and
each of its Subsidiaries, whether contingent or fixed, known or unknown, which
(i) arise under or relate to matters covered by Environmental Laws and (ii)
relate to actions occurring or conditions existing on or prior to the Closing
Date.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Group" means the Issuer and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Issuer, are treated as a single employer
under Section 414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FCC" means the U.S. Federal Communications Commission or any
governmental body succeeding to the functions thereof.
"FCC Rules" means Title 47 of the Code of Federal Regulations, as
amended at any time and from time to time, and FCC decisions issued pursuant to
the adoption of such regulations and otherwise in accordance with and pursuant
to the Communications Act.
"Governmental Authority" means any governmental body, agency or
official of any country or political subdivision of any country, including, but
not limited to, federal, state, county and local governments, administrative
agencies and courts.
"Hazardous Substance" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics, including, without limitation,
any substance regulated under Environmental Laws.
"Licenses" means all licenses, permits, construction permits,
certificates of public convenience and necessity and other authorizations issued
by the FCC pursuant to the Communications Act, the Federal Aviation
Administration, or any other federal, state, county or local Governmental
Authorities to Issuer and its Subsidiaries and used or useful in connection with
the operation and conduct of the business or provision of the Broadband
Services, including any certificates issued by a Governmental Authority required
for the provision of competitive local exchange or exchange access services
within such state or locality, and including any applications for any such
licenses, permits, construction permits and other authorizations applied for by
the Issuer and its Subsidiaries that are currently pending.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, any Person shall be deemed to own subject to
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Lien any asset that it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Management Sideletter" means the letter agreement substantially in the
form attached as Exhibit E hereto.
"Material Adverse Effect" means any change or effect (or aggregation of
changes and effects) that is materially adverse to the business, assets,
condition (financial or otherwise) or results of operations of the Issuer and
its Subsidiaries, taken as a whole.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Person" means an individual or a corporation, partnership, limited
liability company, association, trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
"Preferred Stock" means the preferred stock, par value $.01 per share,
of the Issuer.
"Regulated Activity" means any generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substance.
"SEC Reports" means the forms, reports and documents filed with the
Commission.
"Securities" means the Series H Preferred and the Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
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"Series H Preferred" means the Issuer's Series H Senior Cumulative
Participating Convertible Preferred Stock, par value $.01 per share.
"Shareholders Agreements" means (i) the three Amended and Restated
Shareholders Agreements among the Issuer and each Purchaser, substantially in
the forms attached as Exhibits B-1, B-2 and B-3 hereto, and (ii) the
Shareholders Agreement between the Issuer and CPQ, substantially in the form
attached as Exhibit B-4 hereto, in each case as the same may be amended from
time to time.
"Subsidiary" means, with respect to any Person, any other Person of
which a majority of the capital stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or indirectly
owned by such Person.
"Tax" (and, with correlative meaning, "Taxes") means (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, withholding
on amounts paid by the Issuer or any of its Subsidiaries, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount due from, or in respect of the
Issuer or any of its Subsidiaries, as the case may be, imposed by any
governmental authority (a "Taxing Authority") responsible for the imposition of
any such tax (domestic or foreign) and (ii) any liability of the Issuer or any
of its Subsidiaries for the payment of any amount as a result of being a party
to any tax sharing agreement or with respect to the payment of any amount of the
type described in (i) as a result of any existing express or implied agreement
or arrangement (including, but not limited to, an indemnification agreement or
arrangement).
"Warrants" means the warrants to purchase shares of Common Stock in
substantially the form attached as Exhibit F hereto.
"WCAS Entities" means, collectively, (i) WCAS, (ii) WCAS Information
Partners, L.P., a Delaware limited partnership, and (iii) the individual
investors and trusts listed on the signature pages hereof.
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(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
10-K 3.09
10-Qs 3.09
Broadband Services 3.20(a)
Closing 2.02(a)
Closing Date 2.02(a)
Closing Failure 9.07(a)
CPQ Preamble
CSFB Preamble
Damages 9.04(a)
Indemnified Party 9.05
Indemnifying Party 9.05
Intellectual Property 3.16
Issuer Preamble
Issuer Securities 3.05(b)
Material Contract 3.13
Microsoft Preamble
Purchasers Preamble
Regulatory Authorities 3.03
Representatives 6.01
Returns 3.19
Sellers Preamble
Subsidiary Securities 3.06(b)
WCAS Preamble
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitment to Purchase. Upon the basis of the
representations and warranties herein contained of each Purchaser, but subject
to the terms and conditions hereinafter stated, the Sellers agree on a joint and
several basis to sell to each Purchaser, and each Purchaser, upon the basis of
the represen tations and warranties herein contained of the Issuer, but subject
to the terms and conditions hereinafter stated, agrees, severally but not
jointly, to purchase from the Sellers at the Closing, the Securities in the
amount and for the purchase price set forth opposite the name of such Purchaser
on Annex I hereto. Each Purchaser shall purchase 80% of the Securities from the
Issuer and 20% from WCC to the extent practicable.
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SECTION 2.02. Option to Assign. CSFB shall have the right to assign,
prior to the Closing, to any third party or parties the right to purchase up to
33,500 shares of Series H Preferred and Warrants to purchase up to 569,500
shares of Common Stock having an aggregate purchase price of up to $33,500,000.
Any such assignment shall be made pursuant to documents to be executed by CSFB
and the assignees in form and substance reasonably satisfactory to the Issuer.
In connection with any such assignment, each assignee shall agree to be a party
to and be bound by the provisions of this Agreement as a Purchaser hereunder.
SECTION 2.03. The Closing. (a) The closing (the "Closing") of the
purchase and sale of the Securities hereunder shall take place at 10:00 a.m. at
the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York,
as soon as possible, but in no event later than 20 Business Days, after
satisfaction of the conditions set forth in Article 8, or at such other time and
place as the Issuer and the Purchasers shall agree. The date and time of closing
are referred to herein as the "Closing Date."
(b) At the Closing, each Purchaser shall deliver to each Seller, by
wire transfer to an account designated by such Seller not later than three
Business Days prior to the Closing Date, an amount, in immediately available
funds, equal to the aggregate purchase price of the Securities being purchased
by such Purchaser from such Seller.
(c) At the Closing, each Seller shall deliver to each Purchaser,
against payment of the purchase price by such Purchaser to such Seller, (i) duly
executed certificates evidencing the shares of Series H Preferred being
purchased by such Purchaser from such Seller and (ii) the duly executed
Warrants, in each case in definitive form and registered in such names as such
Purchaser shall request not later than two Business Days prior to the Closing
Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer represents and warrants to each Purchaser as of the date
hereof and as of the Closing Date that, except as disclosed in the Disclosure
Schedule:
SECTION 3.01. Corporate Existence and Power. The Issuer is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate powers and all
material governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. The Issuer is duly qualified
to do business as a foreign corporation and is in good standing in each
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jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified or in good standing could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Issuer has heretofore made available to each Purchaser or
its counsel true and complete copies of the certificate of incorporation and
bylaws of each Seller as currently in effect.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance by each Seller of this Agreement and by the Issuer of the
Shareholders Agreements, and the consummation of the transactions contemplated
hereby and thereby are within such Person's corporate powers and have been duly
authorized by all necessary corporate action on the part of such Person. The
execution, delivery and performance by each Seller of this Agreement and by the
Issuer of the Shareholders Agreements, and the consummation of the transactions
contemplated hereby and thereby do not require the approval of the stockholders
of either Seller. This Agreement constitutes and, when executed and delivered in
accordance with its terms, each Shareholder Agreement will constitute, a legal,
valid and binding agreement of the Seller or Sellers party thereto, enforceable
against each such Seller in accordance with its terms, except (i) as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally, (ii) for limitations
imposed by general principles of equity and (iii) that rights to indemnity may
be limited by federal and state securities laws and public policy
considerations. The Securities issued to the Purchasers, when issued and
delivered in accordance with the terms of this Agreement and, in the case of the
Series H Preferred, the Certificate of Designations, will be validly issued and
outstanding, fully paid and nonassessable, and free and clear of any Liens other
than Liens arising as a result of the status of the Purchasers. The shares of
Common Stock issuable upon conversion or exercise of the Securities will, when
issued, be validly issued and outstanding, fully paid and nonassessable, and
free and clear of any Liens other than Liens arising as a result of the status
of the Purchasers.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by each Seller of this Agreement and by the Issuer of the
Shareholders Agreements, and the consummation of the transactions contemplated
hereby and thereby require no consent, approval, authorization or other action
by or in respect of any Governmental Authority or other party except (i) the
filing of the Certificate of Designations in accordance with the law of the
State of Delaware, (ii) the filings with, the notifications to and the consents
from the FCC, franchising authorities, state public utility commissions and
other similar governmental entities (collectively, "Regulatory Authorities") set
forth on Section 3.03 to the Disclosure Schedule, (iii) the filing of the
listing application referred to in Section 8.01(e), (iv) any filing required
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pursuant to the securities laws of the State of New York and (v) other filings,
notifications and consents that are immaterial to the consummation of the
transactions contemplated hereby and thereby.
SECTION 3.04. Noncontravention. The execution, delivery and performance
by each Seller of this Agreement and by the Issuer of the Shareholders
Agreements, and the consummation of the transactions contemplated hereby and
thereby do not and will not (i) violate the certificate of incorporation or
bylaws of such Seller or any Subsidiary of such Seller, (ii) assuming compliance
with the matters referred to in Section 3.03, violate any Applicable Law, (iii)
require any consent or other action by any Person under, constitute a default
under, or give rise to any right of termination, cancellation or acceleration of
any material right or obligation of such Seller or any Subsidiary of such Seller
or to a loss of any material benefit to which such Seller or any Subsidiary of
such Seller is entitled under any provision of any agreement or other instrument
binding upon such Seller or any Subsidiary of such Seller or (iv) result in the
creation or imposition of any Lien on any material asset of such Seller or any
Subsidiary of such Seller, except for, in the case of clauses (ii), (iii) and
(iv), such matters that could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
SECTION 3.05. Capitalization. (a) The authorized capital stock of the
Issuer consists of 400,000,000 shares of Common Stock and 30,000,000 shares of
Preferred Stock. The outstanding shares of Common Stock and Preferred Stock of
the Issuer as well as all securities convertible into or exchangeable for shares
of the Issuer's Common Stock are set forth on the Disclosure Schedule.
(b) All of the outstanding shares of capital stock of the Issuer have
been duly authorized and validly issued and are fully paid and non-assessable.
Except as set forth in Section 3.05(a), there are no outstanding (i) shares of
capital stock or voting securities of the Issuer, (ii) securities of the Issuer
or any Subsidiary of the Issuer convertible into or exchangeable for shares of
capital stock or voting securities of the Issuer or (iii) options or other
rights to acquire from the Issuer or any Subsidiary of the Issuer, or other
obligation of the Issuer to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Issuer (the items in clauses 3.05(b)(i), 3.05(b)(ii) and
3.05(b)(iii) being referred to collectively as the "Issuer Securities"). There
are no outstanding obligations of the Issuer or any Subsidiary of the Issuer to
repurchase, redeem or otherwise acquire any Issuer Securities.
SECTION 3.06. Subsidiaries. (a) Each Subsidiary of the Issuer is a
corporation or limited liability company duly incorporated or formed, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation and has all powers (corporate or otherwise) and all
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material governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted. Each Subsidiary of the
Issuer is duly qualified to do business as a foreign corporation or limited
liability company and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified or in good standing could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) All of the outstanding capital stock or other voting securities or
other equity interests of each Subsidiary of the Issuer is owned by the Issuer,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or other
equity interests). There are no outstanding (i) securities of the Issuer or any
Subsidiary of the Issuer convertible into or exchangeable for shares of capital
stock or voting securities or other equity securities of any Subsidiary of the
Issuer or (ii) options or other rights to acquire from the Issuer or any
Subsidiary of the Issuer, or other obligation of the Issuer or any Subsidiary of
the Issuer to issue, any capital stock, voting securities, other equity
interests or securities convertible into or exchangeable for capital stock or
voting securities or other equity interests of any Subsidiary of the Issuer (the
items in clauses 3.06(b)(i) and 3.06(b)(ii) being referred to collectively as
the "Subsidiary Securities"). There are no outstanding obligations of the Issuer
or any Subsidiary of the Issuer to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
SECTION 3.07. Financial Statements. The audited consolidated balance
sheet as of December 31, 1999 and the related audited consolidated statement of
income and cash flows for the year ended December 31, 1999 and the unaudited
interim consolidated balance sheet for the nine months ended September 30, 2000
and the related unaudited interim consolidated statements of income and cash
flows for the nine months ended September 30, 2000 of the Issuer and its
Subsidiaries have been delivered by the Issuer to the Purchasers. Such financial
statements fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Issuer and its
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements).
SECTION 3.08. Absence of Certain Changes. Since the Balance Sheet Date,
the business of the Issuer and its Subsidiaries has been conducted in the
ordinary course consistent with past practices and there has not been any event,
occurrence, development or state of circumstances or facts which has had or
could reasonably be expected to have, individually or in the aggregate, a
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Material Adverse Effect or an adverse effect on the ability of either Seller to
perform its obligations under this Agreement and the Shareholders Agreements.
SECTION 3.09. No Material Undisclosed Liabilities. There are no
liabilities of the Issuer or any Subsidiary of the Issuer of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of circumstances
which could reasonably be expected, individually or in the aggregate, to result
in such a liability, other than:
(i) liabilities provided for in the Balance Sheet or
disclosed in the notes thereto or in the Form 10-K of the Issuer for
the year ended December 31, 1999 (the "10-K"), or in the Forms 10-Q of
the Issuer for the quarters ended March 31, 2000 and June 30, 2000
(the "10-Qs");
(ii) liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practices;
(iii) liabilities under this Agreement and the Shareholders
Agreements or incurred in connection with the transactions
contemplated by this Agreement and the Shareholders Agreements; and
(iv) other undisclosed liabilities which, individually or in
the aggregate, are not material to the Issuer and its Subsidiaries,
taken as a whole.
SECTION 3.10. Litigation. There is no action, suit, investigation or
proceeding (or any basis therefor) pending against, or to the knowledge of the
Issuer, threatened against or affecting, the Issuer or any Subsidiary of the
Issuer or any of their respective properties before any court or arbitrator or
any governmental body, agency or official which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect or which in
any manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
SECTION 3.11. Compliance with Laws. Neither the Issuer nor any
Subsidiary of the Issuer is in violation of, or has since January 1, 1997
violated, or to the best knowledge of the Issuer, is under investigation with
respect to or been threatened to be charged with or given notice of any
violation of, any Applicable Law, in each case other than any such violations
that could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
SECTION 3.12. SEC Reports. Since January 1, 1996, the Issuer has filed
all required SEC Reports when due (or within permitted extension periods) in
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accordance with the Exchange Act. As of their respective dates (or, in the case
of any amended SEC Report, as of the date of the amendment), the SEC Reports
complied in all material respects with all applicable requirements of the
Exchange Act or the Securities Act, as the case may be. As of their respective
dates (or, in the case of any amended SEC Report, as of the date of the
amendment), none of the SEC Reports contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
SECTION 3.13. Material Contracts. Except to the extent fully performed
or terminated pursuant to its terms, each of the agreements, contracts, leases
and commitments listed as an exhibit to the 10-K, any of the 10-Qs or any Form
8-K filed with the Commission since January 1, 2000 (each, a "Material
Contract") is a legal, valid and binding agreement of the Issuer or a Subsidiary
of the Issuer, as the case may be, and is in full force and effect, and none of
the Issuer, such Subsidiary or, to the knowledge of the Issuer, any other party
thereto is in default or breach, in each case except for any such default or
breach that could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and, to the best knowledge of the Issuer,
no event or circumstance has occurred that, with notice or lapse of time or
both, would constitute any event of default thereunder.
SECTION 3.14. Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of any Seller who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement or the
Shareholders Agreements.
SECTION 3.15. Offering of Securities. Neither Seller nor any Person
acting on their behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Issuer under circumstances
which would require, under the Securities Act, the integration of such offering
with the offering and sale of the Securities) which might subject the offering,
issuance or sale of the Securities to the registration requirements of Section 5
of the Securities Act.
SECTION 3.16. Intellectual Property. The Issuer and each of its
Subsidiaries owns, or has the legal right to use, all material patents, patent
applications, trademarks, trademark applications, tradenames, copyrights,
technology, know-how and processes and other intellectual property rights
necessary for each of them to conduct its business as currently conducted (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
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the validity or effectiveness of any such Intellectual Property, nor does the
Issuer know of any facts or circumstances that could provide a reasonable basis
for any such claim. To the best knowledge of the Issuer, the use of such
Intellectual Property by the Issuer and its Subsidiaries does not infringe on
the rights of any Person, except for such infringements which could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.17. Environmental Compliance. (a) No notice, notification,
demand, request for information, citation, summons, complaint or order has been
issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending, or to the Issuer's best knowledge,
threatened by any governmental or other entity (i) with respect to any alleged
material violation by the Issuer or any of its Subsidiaries of any Environmental
Law, (ii) with respect to any alleged failure by the Issuer or any of its
Subsidiaries to have any material permit, certificate, license, approval,
registration or authorization required under any Environmental Law in connection
with the conduct of their businesses or (iii) with respect to any Regulated
Activity or any release, as defined in 42 U.S.C. 9601(22), of any Hazardous
Substance which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) (i) Neither the Issuer nor any of its Subsidiaries has engaged in
any Regulated Activity other than in compliance in all material respects with
all applicable Environmental Laws and (ii) to the best knowledge of the Issuer,
no release, as defined in 42 U.S.C. 9601(22), of any Hazardous Substance has
occurred at or on any property now or previously owned or leased by the Issuer
or any of its Subsidiaries which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(c) To the best knowledge of the Issuer, there are no Environmental
Liabilities that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.18. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations, if any, under the minimum funding standards of ERISA
and the Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code with
respect to each Plan to the extent the ERISA Group maintains such plans. No
member of the ERISA Group has (a) sought a waiver of the minimum funding
standards under Section 412 of the Code in respect of any Plan, (b) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Code or (c) incurred
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any liability under Title IV of ERISA other than a liability to the Pension
Benefit Guaranty Corporation for premiums under Section 4007 of ERISA.
SECTION 3.19. Taxes. (a) The Issuer and each of its Subsidiaries has
filed in accordance with Applicable Law, all material Tax returns, statements,
reports and forms (collectively, "Returns") required to be filed with any Taxing
Authority when due (taking into account any extension of a required filing
date); (b) at the time filed, such Returns were true, correct and complete in
all material respects; (c) the Issuer and each of its Subsidiaries has timely
paid all Taxes shown as due and payable on the Returns that have been filed; (d)
the charges, accruals and reserves for Taxes reflected on the Balance Sheet
(excluding any provision for deferred income taxes) are adequate under United
States generally accepted accounting principles, consistently applied, to cover
the Tax liabilities accruing through the date thereof; (e) there is no action,
suit, proceeding, investigation, audit or claim pending or, to the knowledge of
the Issuer, threatened against or with respect to it in respect of any Tax; (f)
all Returns filed with the City of New York with respect to Tax years of the
Issuer and its Subsidiaries through the Tax year ended December 31, 1993 have
been examined and closed or are Returns with respect to which the applicable
period for assessment under Applicable Law, after giving effect to extensions or
waivers, has expired; no Returns filed with any other Taxing Authority with
respect to any Tax years of the Company and its Subsidiaries have been examined,
and all Returns filed with any other Taxing Authority with respect to Tax years
of the Issuer and its Subsidiaries through the Tax year ended December 31, 1992
are Returns with respect to which the applicable period for assessment under
Applicable Law, after giving effect to extensions or waivers, has expired; (g)
neither the Issuer nor any of its Subsidiaries has any obligation under any Tax
sharing agreement, Tax allocation agreement or Tax indemnity agreement or any
other agreement or arrangement in respect of any Tax with any Person other than
the Issuer or its Subsidiaries; (h) neither the Issuer nor any of its
Subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which the Issuer was the common parent; (i)
proper and adequate amounts have been withheld by the Issuer and its
Subsidiaries from their respective employees and other Persons for all periods
in compliance in all material respects with the Tax, social security and
unemployment, excise and other withholding provisions of all federal, state,
local and foreign laws; (j) there is no Tax lien, whether imposed by any
federal, state, local, or foreign taxing authority, outstanding against the
assets, properties or business of the Issuer or any of its Subsidiaries, other
than any liens that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and (k) the Issuer is not now, has
never been and does not contemplate becoming a "United States Real Property
Holding Corporation" as defined in Section 897(c)(2) of the Code and Section
1.897-2(b) of the Treasury regulations thereunder.
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SECTION 3.20. Regulatory Matters. (a) The Issuer and its Subsidiaries
have all requisite power and authority and hold or have applied for all Licenses
required under the Communications Act, the FCC Rules, state law or any other
Applicable Law to own and operate their properties and their Licenses and to
carry on the business of the Issuer and its Subsidiaries with respect to the
local exchange, exchange access and Internet access services (collectively
"Broadband Services"), as such business is conducted on the date hereof, except
to the extent that the failure to have such power or authority or to hold any
such Licenses could not reasonably be expected to have a Material Adverse
Effect. Each material License issued to the Issuer or its Subsidiaries is
validly issued and is in full force and effect. The Issuer and its Subsidiaries
have taken such actions, performed all of their obligations and entered into all
contracts with telecommunications carriers to the extent that are necessary to
maintain such Licenses without Material Adverse Effect, and complete and correct
copies of the Licenses of the Issuer and its Subsidiaries have been made
available to the Purchasers. Neither the Issuer nor any Subsidiary knows of any
reason why any Governmental Authority might revoke any material License. Except
as described in the legal opinion of Issuer's counsel delivered at Closing,
neither the Issuer nor any Subsidiary knows of any party who has a current
filing pending in specific opposition to or expressed an interest in opposing
the grant of the Licenses held or applied for by the Issuer or its Subsidiaries,
or of any reason why any Governmental Authority might not grant any of the
Licenses.
(b) None of the Issuer and its Subsidiaries is a party to nor, to the
best knowledge of the Issuer and each Subsidiary, is there threatened any
investigation, notice of apparent liability, violation, show cause order,
forfeiture or other notice, order or complaint issued by or before any
Governmental Authority, or of any other proceeding (other than proceedings of
general applicability) that could in any manner threaten or adversely affect the
validity, future grant or continued effectiveness of the Licenses of the Issuer
and its Subsidiaries, except for such matters as could not reasonably be
expected to result in a Material Adverse Effect. None of the Issuer and its
Subsidiaries has any reason to believe that each of the Licenses will not be
renewed in the ordinary course. The Issuer and each Subsidiary has filed in a
substantially timely manner all material reports, applications, documents,
instruments and information required to be filed by it pursuant to the
Communications Act, the FCC Rules or other Applicable Law, including, but not
limited to, employment reports, and all such filings are accurate and complete
in all material respects, except for such omissions as could not reasonably be
expected to result in a Material Adverse Effect.
(c) The Issuer and its Subsidiaries are in compliance with the
Licenses, the Communications Act, the FCC Rules and other Applicable Law, and
are operating their physical facilities, electrical and mechanical systems and
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transmitting equipment and are providing the Broadband Services in compliance
with the Licenses, the Communications Act, the FCC Rules and other Applicable
Law, except for any noncompliance which could not reasonably be expected to
result in a Material Adverse Effect. The Issuer and its Subsidiaries, in their
ownership and operation of the business of the Issuer and the Subsidiaries and
the provision of the Broadband Services, are operating only those facilities for
which an appropriate License, waiver, consent or other authorization has been
obtained and is in effect, except for any such failures which could not
reasonably be expected to result in a Material Adverse Effect.
(d) Except for such matters as could not reasonably be expected to
result in a Material Adverse Effect, none of the Issuer and its Subsidiaries is
aware of any facts, and none of the Issuer and its Subsidiaries has received any
notice or other communication, indicating that the Issuer and the Subsidiaries,
in their ownership and operation of the Licenses, the business of the Issuer and
the Subsidiaries and the provision of the Broadband Services, are not in
compliance with all requirements of the Communications Act, FCC Rules or other
Applicable Law. Except for such matters as could not reasonably be expected to
result in a Material Adverse Effect, none of the Issuer and its Subsidiaries is
aware of any facts, and none of the Issuer and its Subsidiaries has received any
notice or communication, formal or informal, indicating that any Governmental
Authority is considering modifying, revoking, suspending, canceling, rescinding
or terminating any License.
SECTION 3.21. Existing Securities and Agreements. A list of certain
existing securities and agreements which provide for the issuance of securities
by the Issuer is set forth in Section 3.21 of the Disclosure Schedule.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Issuer
as of the date hereof and as of the Closing Date that:
SECTION 4.01. Corporate Existence and Power. Such Purchaser (if not an
individual) is an entity duly organized, validly existing and in good standing
(in such jurisdiction where the concept of good standing exists) under the laws
of its jurisdiction of organization and has all corporate or partnership powers
and all material governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted. Such Purchaser (if
not an individual) is duly qualified to do business and is in good standing (in
such jurisdiction is where the concept of good standing exists) in each
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jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified could not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on such
Purchaser.
SECTION 4.02. Authorization. The execution, delivery and performance by
such Purchaser (if such Purchaser is not an individual) of this Agreement and
the Shareholders Agreement to which such Purchaser is a party and the
consummation of the transactions contemplated hereby and thereby are within such
Purchaser's corporate or partnership powers and have been duly authorized by all
necessary corporate or partnership action on the part of such Purchaser. This
Agreement constitutes and, when executed and delivered in accordance with its
terms, the Shareholders Agreement to which such Purchaser is a party will
constitute, a legal, valid and binding agreement of such Purchaser, enforceable
against such Purchaser in accordance with its terms, except (i) as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and (ii) for
limitations imposed by general principles of equity.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by such Purchaser of this Agreement and the Shareholders Agreement
to which such Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby require no action by or in respect of, or filing
with, any governmental body, agency or official other than (i) the filings with,
notifications to and the consents from the Regulatory Authorities set forth on
Section 3.03 to the Disclosure Schedule and (ii) other filings, notifications
and consents that are immaterial to the consummation of the transactions
contemplated hereby.
SECTION 4.04. Noncontravention. The execution, delivery and performance
by such Purchaser of this Agreement and the Shareholders Agreement to which such
Purchaser is a party and the consummation of the transactions contemplated
hereby and thereby do not and will not (i) violate the organizational documents,
if any, of such Purchaser, (ii) assuming compliance with the matters referred to
in Section 4.03, violate any Applicable Law, except for any such violation which
would not have a material adverse effect on the ability of such Purchaser to
consummate the transactions contemplated hereby and thereby or (iii) require any
consent or other action by any Person, or constitute a default, under any
provision of any agreement or other instrument binding upon such Purchaser,
except as to matters which would not be material to such Purchaser.
SECTION 4.05. Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of any Purchaser who might be entitled to any fee or commission in
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connection with the transactions contemplated by this Agreement or the
Shareholders Agreements.
SECTION 4.06. Private Placement. (a) Such Purchaser understands that
the offering and sale of the Securities is intended to be exempt from
registration under the Securities Act pursuant to Section 4(2) of the Securities
Act and any applicable state securities or blue sky laws.
(b) The Securities to be acquired by such Purchaser pursuant to this
Agreement are being acquired for its own account and without a view to the
resale or distribution of such Securities or any interest therein other than in
a transaction exempt from registration under the Securities Act.
(c) Such Purchaser is an "Accredited Investor" as such term is defined
in Regulation D under the Securities Act.
(d) Such Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Securities and such Purchaser is capable of
bearing the economic risks of such investment, including a complete loss of its
investment in the Securities. Such Purchaser understands that Purchaser's
investment in the Securities involves a high degree of risk.
(e) Such Purchaser has been furnished with and carefully read a copy
of the Form 10-K, each of the Form 10-Qs and this Agreement and has been given
the opportunity to ask questions of, and receive answers from, the Issuer
concerning the terms and conditions of the Securities and other related matters.
The Issuer has made available to such Purchaser or its agents all documents and
information relating to an investment in the Securities requested by or on
behalf of such Purchaser.
(f) Such Purchaser understands that the Securities have not been and,
except as provided in the Shareholders Agreements, are not being registered
under the Securities Act or any state securities laws, and may not be offered,
sold, pledged or otherwise transferred except as permitted pursuant to the
Shareholders Agreements.
(g) Such Purchaser understands that the Securities shall bear a
restrictive legend substantially in the form set forth in the Shareholders
Agreements.
(h) If such Purchaser is an individual, such Purchaser is a citizen of
the United States and is a resident of the State of New York unless otherwise
indicated on the signature pages to this Agreement. If such Purchaser is an
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entity, such Purchaser's principal place of business is in the State of New York
unless otherwise indicated on the signature pages to this Agreement.
(i) Such Purchaser acknowledges and understands that the Sellers
intend to use the proceeds derived from the sale of the Securities for working
capital for the Issuer's telecommunications and non-telecommunications
businesses and to make investments in, acquire, make loans to, or otherwise
enter into business arrangements with companies that may or may not be involved
in the telecommunications business. In that connection, the Sellers may
contribute such proceeds to Subsidiaries of the Issuer that acquire, produce and
distribute information and entertainment content or engage in other
non-telecommunication business.
(j) Immediately following the Closing, such Purchaser will not
beneficially own any voting securities of the Issuer other than the Securities
and the Issuer's Series G Senior Cumulative Participating Convertible Preferred
Stock, par value $.01 per share.
(k) Such Purchaser does not have any agreements, arrangements or
understandings with any other Person (other than with other Purchasers who are
Affiliates of such Purchaser) with regard to acquiring, holding, voting or
disposing of the securities of the Issuer other than as set forth in this
Agreement and in the Shareholders Agreement to which such Purchaser is a party.
ARTICLE 5
COVENANTS OF THE ISSUER
The Issuer agrees that:
SECTION 5.01. Access to Information. From the date hereof until the
Closing Date, the Issuer will (i) furnish to each Purchaser and its authorized
representatives such financial and operating data and other information relating
to the Issuer and its Subsidiaries as such Persons may reasonably request and
(ii) instruct its counsel, independent accountants and financial advisors to
cooperate with such Purchaser and its authorized representatives in its
investigation of the Issuer and its Subsidiaries. Any investigation pursuant to
this Section shall be conducted in a manner that does not interfere unreasonably
with the conduct of the business of the Issuer and its Subsidiaries.
SECTION 5.02. Certificate of Designations. Prior to the Closing, the
Issuer shall cause to be filed the Certificate of Designations as required
pursuant to the law of the State of Delaware.
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SECTION 5.03. Restrictions Pending the Closing. After the date hereof
and prior to the Closing Date, except as expressly provided for in this
Agreement or as consented to in writing by each Purchaser, the Issuer will not:
(i) amend its certificate of incorporation or bylaws;
(ii) split, combine or reclassify any shares of its capital
stock without appropriately adjusting the conversion price and/or
ratio applicable to the Securities prior to their issuance at the
Closing;
(iii) declare or pay any dividend or distribution (whether
in cash, stock or property) in respect of its Common Stock;
(iv) take any action, or knowingly omit to take any action,
that could reasonably be expected to result in (A) any of the
representations and warranties of the Issuer set forth in Article 3
becoming untrue or (B) any of the conditions to the obligations of the
Purchasers set forth in Section 8.01 or 8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any of the
foregoing.
SECTION 5.04. Reservation of Shares. For so long as any of the
Securities are outstanding, the Issuer shall keep reserved for issuance a
sufficient number of shares of Common Stock to satisfy its conversion
obligations under the Certificate of Designations and its obligation to issue
shares of Common Stock upon exercise of the Warrants.
ARTICLE 6
COVENANTS OF THE PURCHASERS
SECTION 6.01. Confidentiality. Each Purchaser will hold, and will use
its reasonable best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors, financing sources, financial
institutions, and agents (the "Representatives") to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law or national stock exchange, all confidential documents and
information concerning the Issuer or any of its Affiliates that are furnished to
such Purchaser, except to the extent that such information can be shown to have
been (i) previously known on a nonconfidential basis by such Purchaser or such
Representatives, (ii) in the public domain through no fault of such Purchaser or
its Representatives (with respect to information received in their capacity as
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such) or (iii) later acquired by such Purchaser or such Representatives from
sources other than the Issuer or any of its Affiliates not known by such
Purchaser or such Representatives, as applicable, to be bound by any
confidentiality obligation; provided that such Purchaser may disclose such
information to any of its Representatives (or its limited partners and
co-investors, if applicable) in connection with the transactions contemplated by
this Agreement and the Shareholders Agreements so long as such Persons are
informed by such Purchaser of the confidential nature of such information and
are directed by such Purchaser to treat such information confidentially. The
obligation of each Purchaser to hold and to cause its Representatives to hold
any such information in confidence shall be satisfied if such Purchaser
exercises the same care with respect to such information as such Purchaser would
take to preserve the confidentiality of its own similar information. If any
Purchaser or any of its Representatives is requested to disclose any
confidential information by judicial or administrative process or by other
requirements of law or a national stock exchange, such Purchaser will promptly
notify the Issuer of such request so that the Issuer may seek an appropriate
protective order. Each Purchaser agrees that it will not, and will use its
reasonable best efforts to cause its Representatives not to, use any
confidential documents or information for any purpose other than monitoring and
evaluating its investment in the Issuer and in connection with the transactions
contemplated by this Agreement and the Shareholders Agreements. If this
Agreement is terminated, each Purchaser will, and will use its reasonable best
efforts to cause its Representatives to, destroy or deliver to the Issuer, upon
request, all documents and other materials, and all copies thereof, obtained by
such Purchaser or on its behalf from the Issuer, or any of the Representatives,
in connection with this Agreement that are subject to such confidence.
SECTION 6.02. Tax Consistency. The Issuer acknowledges that the
Purchasers intend for the Series H Shares to be treated as "common stock" for
Tax purposes, and the Issuer agrees not to take any voluntary action
inconsistent with such intention.
SECTION 6.03. Schedule 13D and 13G. Each Purchaser agrees to provide
the Issuer with a copy of any Schedule 13D or 13G that it intends to file with
the Commission in connection with their purchase of Securities in advance of
such filing.
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ARTICLE 7
COVENANTS OF THE ISSUER AND THE PURCHASERS
SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts;
Further Assurances. The Issuer and the Purchasers acknowledge that certain
regulatory or governmental approvals may be required to lawfully consummate the
transactions contemplated by this Agreement and the Shareholders Agreements.
Subject to the terms and conditions of this Agreement, the Issuer and each
Purchaser will, and will cause their Affiliates to, use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement and the Shareholders
Agreements. The Sellers and each Purchaser agree to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement and the
Shareholders Agreements.
SECTION 7.02. Certain Filings. The Issuer and each Purchaser will, and
will cause their Affiliates to, cooperate with one another (i) in determining
whether any action by or in respect of, or filing with, any governmental body,
agency, official or authority is required, or any actions, consents, approvals
or waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by this
Agreement and the Shareholders Agreements or the conversion by such Purchaser of
such Purchaser's Securities and (ii) in taking such actions or making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such actions, consents, approvals or waivers. The Issuer
and each Purchaser shall (A) give the other parties prompt notice of the
commencement of any action, suit, litigation, arbitration, preceding or
investigation by or before any governmental body with respect to the
transactions contemplated by this Agreement and the Shareholders Agreements and
(B) keep the other parties informed as to the status of any such action, suit,
litigation, arbitration, preceding or investigation.
SECTION 7.03. Public Announcements. In connection with the execution of
this Agreement, the Issuer shall issue a press release (a "Signing Release") and
shall file with the Commission a Report on Form 8-K with respect to the
transactions contemplated hereby (the "Signing 8-K" and together with the
Signing Release, the "Agreed Disclosure"). The Signing Release shall be in form
and substance as previously agreed by the parties hereto. The Signing 8-K shall
be provided to the Purchasers prior to filing and the Purchasers shall be given
a reasonable opportunity to comment thereon. The Issuer shall accept all
reasonable changes suggested by the Purchasers. If the Issuer does not accept
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any changes suggested in good faith by a Purchaser, the provisions of this
Section 7.03 shall immediately terminate and be of no further force or effect as
to such Purchaser. If the Issuer accepts all such changes, the Agreed Disclosure
shall serve as the basis for any public disclosure by the parties of the
transactions contemplated hereby and neither the Issuer nor any Purchaser shall
make any statement or representation regarding the transactions contemplated
hereby, publicly or in a manner which could reasonably be expected to result in
its public dissemination, which is materially inconsistent with the Agreed
Disclosure. Except as otherwise permitted pursuant to this Section 7.03, the
Issuer shall not use or refer to the name of any Purchaser in any public
statement or disclosure without the consent of such Purchaser.
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.01. Conditions to Each Party's Obligations. The obligation of
each party hereto to consummate the Closing is subject to the satisfaction, at
or prior to the Closing Date, of the following conditions:
(a) All filings with, notifications to and consents from Regulatory
Authorities required for the consummation of the Closing shall have been made or
obtained, as applicable;
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing;
(c) The Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware in accordance with the law of the
State of Delaware;
(d) To the extent required by Applicable Law or the rules of the
Nasdaq Stock Market, the issuance of the Securities contemplated by this
Agreement shall have been duly approved and adopted by the shareholders of the
Issuer; and
(e) The shares of Common Stock issuable upon conversion or exercise of
the Securities shall have been approved for listing on the Nasdaq Stock Market.
SECTION 8.02. Conditions to Each Purchaser's Obligations. The
obligation of each Purchaser to consummate the Closing is further subject to the
satisfaction, at or prior to the Closing Date, of the following additional
conditions:
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(a) The representations and warranties of the Issuer contained herein
that are qualified as to materiality or Material Adverse Effect shall be true
and correct in all respects on and as of the Closing Date and the
representations and warranties of the Issuer contained herein that are not so
qualified shall be true and correct in all material respects on and as of the
Closing Date, in each case as if made on and as of such date; the Issuer shall
have performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it at
or prior to the Closing Date; and such Purchaser shall have received a
certificate dated the Closing Date signed by an authorized officer of the Issuer
to the foregoing effect;
(b) The Management Sideletter shall have been executed and delivered
by Mr. Rouhana and the Shareholders Agreements shall have been executed and
delivered by the parties thereto other than such Purchaser;
(c) Such Purchaser shall have received an opinion, dated the Closing
Date, of counsel to the Issuer, substantially in the form attached as Exhibit C;
(d) Such Purchaser shall have received an opinion, dated the Closing
Date, of FCC counsel to the Issuer, substantially in the form attached as
Exhibit D;
(e) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Governmental Authority before any
court, arbitrator or governmental body, agency or official binding on any party
hereto and be pending;
(f) Such Purchaser shall have received all documents reasonably
requested by it relating to the existence of each Seller, the corporate
authority for such Seller's entering into, and the validity of, this Agreement,
the Shareholders Agreements and the Securities, all in form and substance
reasonably satisfactory to it;
(g) The Company shall have entered into definitive agreements with its
lenders and/or vendors which provide for senior committed financing of at least
$450,000,000 on terms reasonably satisfactory to such Purchaser, including,
without limitation, terms of any covenants; and
(h) The Company shall have taken all necessary action under the Rights
Agreement, dated as of July 2, 1997 between the Issuer and Continental Stock
Transfer & Trust Company, as Rights Agent (as amended from time to time, the
"Rights Agreement"), including amending such Rights Agreement, to ensure that
the purchase of the Securities hereunder and the accretion of the liquidation
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preference (in lieu of payment of cash dividends) on such Securities will not,
absent the acquisition of "beneficial ownership" (as defined in the Rights
Agreement) of any other securities of the Issuer by such Purchaser, at any time
after the date hereof, cause (i) the rights issued pursuant to the Rights
Agreement to become exercisable under the Rights Agreement, or (ii) any
Purchaser or any of its Affiliates to be deemed an "Acquiring Person" (as
defined in the Rights Agreement).
SECTION 8.03. Conditions to Sellers' Obligations. The obligation of
the Sellers to consummate the Closing is further subject to the satisfaction, at
or prior to the Closing Date, of the following additional conditions:
(a) The representations and warranties of each Purchaser contained
herein that are qualified as to materiality or material adverse effect shall be
true and correct in all respects on and as of the Closing Date and the
representations and warranties of each Purchaser contained herein that are not
so qualified shall be true and correct in all material respects on and as of the
Closing Date, in each case as if made on and as of such date; each Purchaser
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by
such Purchaser at or prior to the Closing Date; and the Sellers shall have
received a certificate dated the Closing Date signed by an authorized officer of
such Purchaser to the foregoing effect;
(b) The Shareholders Agreements shall have been executed and
delivered by the parties thereto other than the Issuer; and
(c) The Issuer shall have received all documents reasonably requested
by it relating to the existence of the Purchasers, the authority for their
entering into, and the validity of, this Agreement and the Shareholders
Agreements, all in form and substance reasonably satisfactory to it.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address or telecopier number
set forth on the signature page hereof, or such other address or telecopier
number as such party may hereinafter specify for the purpose to the party giving
such notice. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the telecopy
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number specified pursuant to this Section 9.01 and the appropriate confirmation
is received, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when delivered at the address specified in
this Section 9.01.
SECTION 9.02. No Waivers; Amendments. (a) No failure or delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by all the parties
hereto.
SECTION 9.03. Survival. The representations and warranties contained in
this Agreement shall survive the Closing until the 18-month anniversary of the
Closing Date, except that (i) the representations and warranties contained in
Sections 3.01, 3.02, 3.03, 3.05, 4.01, 4.02, and 4.03 shall survive indefinitely
and (ii) the representations and warranties contained in Sections 3.17, 3.18 and
3.19 shall survive until the expiration of the statute of limitations applicable
to the matters covered thereby (giving effect to any waiver, mitigation or
extension thereof, if applicable). Notwithstanding the preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given in
reasonable detail to the party against whom such indemnity may be sought prior
to such time. The covenants and agreements of the parties contained in this
Agreement shall survive the Closing in accordance with their terms or, if no
term is specified, indefinitely.
SECTION 9.04. Indemnification. (a) Effective upon the Closing, the
Issuer hereby indemnifies each Purchaser and its Affiliates against and agrees
to hold such Purchaser and its Affiliates harmless (on an after-Tax basis) from
any and all damage, loss (including by reason of a diminution in value of the
Securities), liability and expense (including, without limitation, reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any action, suit or proceeding) ("Damages") incurred or suffered
by such Purchaser or its Affiliates arising out of any misrepresentation or
breach of warranty, covenant or agreement made or to be performed by a Seller
pursuant to this Agreement; provided that (i) the Issuer shall not be liable
under this Section 9.04 unless the aggregate amount of Damages with respect to
all matters referred to in this Section 9.04 (determined without regard to any
26
<PAGE>
materiality qualification contained in any representation, warranty or covenant
giving rise to the claim for indemnity hereunder) exceeds $2,700,000 (in which
case all Damages in excess of $1.00 shall be made subject to indemnification
hereunder) and (ii) the Issuer's maximum liability under this Section 9.04 shall
not exceed the amount of the aggregate purchase price paid for all Securities
purchased by the Purchasers pursuant to this Agreement.
(b) Effective upon the Closing, each Purchaser hereby indemnifies the
Issuer and its Affiliates against and agrees to hold the Issuer and its
Affiliates harmless from any and all Damages incurred or suffered by the Issuer
or its Affiliates arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by such Purchaser pursuant to this
Agreement; provided that (i) such Purchaser shall not be liable under this
Section 9.04 unless the aggregate amount of Damages with respect to all matters
referred to in this Section 9.04 (determined without regard to any materiality
qualification contained in any representation, warranty or covenant giving rise
to the claim for indemnity hereunder) exceeds 2% of the amount of the purchase
price paid for the Securities purchased by such Purchaser pursuant to this
Agreement (in which case all Damages in excess of $1.00 shall be made subject to
indemnification hereunder) and (ii) such Purchaser's maximum liability under
this Section 9.04 shall not exceed the amount of the purchase price paid for the
Securities purchased by such Purchaser pursuant to this Agreement.
SECTION 9.05. Procedures. The party seeking indemnification under
Section 9.04 (the "Indemnified Party") agrees to give prompt notice to the party
against whom indemnity is sought (the "Indemnifying Party") and to all other
Purchasers of the assertion of any claim, or the commencement of any suit,
action or proceeding in respect of which indemnity may be sought under such
Section. The Indemnifying Party may at its election participate in and control
the defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 9.04 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
SECTION 9.06. Expenses; Documentary Taxes. The Issuer shall reimburse
the Purchasers for all of their respective reasonable out-of-pocket expenses,
including, without limitation, fees and reasonable disbursements of counsel,
incurred in connection with the consummation of the transactions contemplated by
this Agreement. The Issuer shall pay any and all stamp, transfer and other
similar taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement or the Shareholders Agreements or the
issuance of the Securities.
27
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SECTION 9.07. Termination. (a) This Agreement may be terminated at
any time prior to the Closing:
(i) by mutual written agreement of the Issuer and each
Purchaser;
(ii) by the Issuer or any Purchaser if the Closing shall not
have been consummated on or before December 15, 2000 (or, if approval
of the Issuer's stockholders is required to consummate the
transactions contemplated hereby, February 15, 2001);
(iii) by the Issuer or any Purchaser if there shall be any
law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation
of the transactions contemplated hereby would violate any
nonappealable, final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
(iv) by the Issuer or any Purchaser if one or more of the
other Purchasers (who collectively are obligated to purchase at least
7,000 shares of the Series H Preferred) defaults in its or their
obligations to purchase such Securities ("Closing Failure").
The party desiring to terminate this Agreement pursuant to clauses 9.07(a)(ii),
(iii) or (iv) shall give notice of such termination to the other parties hereto.
(b) If this Agreement is terminated as permitted by Section 9.07(a),
such termination shall be without liability of either party (or any stockholder,
director, officer, employee, agent, consultant or representative of such party)
to the other parties to this Agreement; provided that if such termination shall
result from the willful (i) failure by any party to fulfill a condition to the
performance of the obligations of the other parties, (ii) failure by any party
to perform a covenant of this Agreement or (iii) breach by any party hereto of
any representation, warranty, covenant or agreement contained herein, or a
Closing Failure by any party, such party shall be fully liable for any and all
Damages incurred or suffered by the other parties as a result of such failure or
breach. The provisions of Sections 6.01, 9.01, 9.06, 9.07, 9.10, 9.11 and 9.13
shall survive any termination hereof pursuant to Section 9.07(a).
SECTION 9.08. Several Obligations. The obligations of the Purchasers
hereunder are several. No Purchaser shall be responsible for the obligations of,
or any action taken or omitted by, any other Purchaser hereunder.
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SECTION 9.09. Successors and Assigns. No party may assign any of its
rights and obligations hereunder without the prior written consent of the other
parties hereto except for assignments pursuant to Section 2.02. This Agreement
shall be binding upon the parties hereto and their respective successors and
permitted assigns.
SECTION 9.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
SECTION 9.11. Jurisdiction. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court for
the Southern District of New York or any New York State court sitting in New
York City, and each of the parties hereby consents to the exclusive jurisdiction
of such courts (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding in any such court or that
any such suit, action or proceeding which is brought in any such court has been
brought in an inconvenient forum. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 9.01 shall
be deemed effective service of process on such party.
SECTION 9.12. Counterparts. This Agreement may be executed in any
number of counterparts each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 9.13. Entire Agreement. This Agreement, the Shareholders
Agreements, the Management Sideletter, the Certificate of Designations, the
Warrants and any other documents executed concurrently herewith or referred to
herein constitute the entire agreement and understanding among the parties
hereto and supersede any and all prior agreements and understandings, written or
oral, relating to the subject matter hereof.
SECTION 9.14. Shareholders' Meeting. If approval of Issuer's
stockholders is required to consummate the transactions contemplated hereby, the
Purchasers agree to vote in favor of the proposals presented to the stockholders
in connection with obtaining such approval.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories as of the date first
above written.
WINSTAR COMMUNICATIONS, INC.
/s/ timothy R. Graham
By: _____________________________________
Name: Timothy R. Graham
Title: Executive Vice President,
General Counsel
Address for notices:
-------------------
685 Third Avenue
New York, New York 10017
Facsimile: (212) 792-9348
Attention: Timothy R. Graham
WINSTAR CREDIT CORP.
/s/ Kenneth J. Zinghini
By: ____________________________________
Name: Kenneth J. Zinghini
Title: Vice President
Address for notices:
-------------------
685 Third Avenue
New York, New York 10017
Facsimile: (212) 792-9348
Attention: Timothy R. Graham
30
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MICROSOFT CORPORATION
/s/ John Connors
By: _________________________________
Name: John Connors
Title: Chief Financial Officer
Address for notices:
-------------------
One Microsoft Way
Redmond, WA 98052
Facsimile: (425) 936-7329
Attention: Chief Financial Officer
31
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CREDIT SUISSE FIRST BOSTON EQUITY
PARTNERS, L.P.
By: Credit Suisse First Boston Advisory
Partners, LLC, as Investment Advisor
/s/ Hartley R. Rogers
By: ____________________________________
Name: Hartley R. Rogers
Title: Managing Director
Address for notices:
-------------------
11 Madison Avenue
New York, NY 10010
Facsimile: (212) 325-2291
Attention: Hartley R. Rogers
CREDIT SUISSE FIRST BOSTON EQUITY
PARTNERS (BERMUDA), L.P.
By: Credit Suisse First Boston Advisory
Partners, LLC, as Investment Advisor
/s/ Hartley R. Rogers
By: __________________________________
Name: Hartley R. Rogers
Title: Managing Director
Address for notices:
-------------------
11 Madison Avenue
New York, NY 10010
Facsimile: (212) 325-2291
Attention: Hartley R. Rogers
32
<PAGE>
WELSH, CARSON, ANDERSON & STOWE
VIII, L.P.
By: WCAS VIII Associates LLC,
as General Partner
/s/ Jonathan M. Rather
By: ____________________________
Name: Jonathan M. Rather
Title: Member
Address for notices:
-------------------
320 Park Avenue, Suite 2500
New York, NY 10010
Facsimile: (212) 893-9575
Attention: Larry Sorrel or
Sanjay Swani
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners,
as General Partner
/s/ Jonathan M. Rather
By: ____________________________
Name: Jonathan M. Rather
Title: Attorney-in-fact
Address for notices:
-------------------
c/o Welsh, Carson, Anderson & Stowe
VIII, L.P.
320 Park Avenue, Suite 2500
New York, NY 10010
Facsimile: (212) 893-9575
Attention: Jonathan M. Rather
33
<PAGE>
Individual investors and trusts:
/s/ Jonathan M. Rather
By: ____________________________
Jonathan M. Rather, as
Attorney-in-fact for the individual
investors listed below:
Patrick J. Welsh New Jersey
Russell L. Carson New York
Bruce K. Anderson New Jersey
Andrew M. Paul New York
Thomas E. McInerney New York
Robert A. Minicucci Connecticut
Anthony J. de Nicola New Jersey
Paul B. Queally Connecticut
Lawrence B. Sorrel New York
Rudolph E. Rupert New York
D. Scott Mackesy New York
Sanjay Swani New York
Sean Traynor New York
John Almeida New York
Eric J. Lee New York
Jonathan M. Rather Connecticut
Laura VanBuren New York
/s/ Carol Welsh
By: ____________________________
Carol Welsh, as Trustee for the
trusts listed below:
Trust dated 11/26/84 for the benefit
of Eric Welsh
Trust dated 11/26/84 for the benefit
of Randall Welsh
Trust dated 11/26/84 for the benefit
of Jennifer Welsh
/s/ Jonathan M. Rather
By: ____________________________
Patrick J. Welsh, as Trustee for the
trusts listed below (Jonathan M.
Rather, Attorney-in-Fact):
Kristin M. Anderson Trust
Mark S. Anderson Trust
Daniel B. Anderson Trust
Address for notices:
-------------------
c/o Welsh, Carson, Anderson & Stowe
VIII, L.P.
320 Park Avenue, Suite 2500
New York, NY 10010
Facsimile: (212) 893-9575
Attention: Jonathan M. Rather
34
<PAGE>
CPQ HOLDINGS, INC.
/s/ Peter Blackmore
By: ____________________________
Name: Peter Blackmore
Title: Vice President
Address for notices:
-------------------
CPQ Holdings, Inc.
c/o Compaq Computer Corporation
20555 State Highway 249
Houston, TX 77070
Facsimile: (281) 518-1388
Attention: General Counsel
(Office of the Corporate
Secretary)
35
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Annex I
Securities to be Purchased1
--------------------------
Number of
Shares Warrants to
of Purchase Number
Series H of Shares of Purchase
Purchaser Preferred Common Stock Price
--------- ---------- -------------- ------------
Microsoft Corporation 69,444 1,180,548 $ 69,444,000
The CSFB Related Funds (with the
intention to allocate up to
$33,500,000 to co-investors) 111,112 1,888,904 $111,112,000
The WCAS Entities 69,444 1,180,548 $ 69,444,000
CPQ Holdings, Inc. 20,000 340,000 $ 20,000,000
--------
1 Securities to be allocated among any affiliated group of Purchasers
in the manner designated by them no later than 2 Business Days prior to the
Closing.
36
