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) December 15, 1999
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WINSTAR COMMUNICATIONS, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-10726 13-3585278
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
685 Third Avenue, New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 792-9800
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
General
On December 15, 1999, Winstar Communications, Inc. ("Company" or
"Winstar") and its wholly-owned subsidiary, WinStar Credit Corp. ("WCC"),
entered into a Securities Purchase Agreement ("Purchase Agreement") with Credit
Suisse First Boston Equity Partners, L.P. ("CSFBEP"), Welsh, Carson, Anderson &
Stowe VIII, L.P. ("WCAS"), Microsoft Corporation ("Microsoft") and the other
purchasers listed on the signature pages thereto (collectively and together with
certain other purchasers to be identified prior to closing, the "Purchasers"),
pursuant to which the Company and WCC agreed to sell to the Purchasers an
aggregate of 900,000 shares of the Company's Series G Senior Cumulative
Participating Convertible Preferred Stock ("Series G Stock") for an aggregate
purchase price of $900,000,000. The closing of the purchase is expected to take
place in January 2000 after the expiration of any applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the satisfaction of certain other customary closing conditions. The Series G
Stock, which will vote on an as-converted basis with the Company's Common Stock,
will represent, on an after-issued basis, ownership of approximately 19.4% of
the Company's outstanding common shares (18.3% of the Company's outstanding
voting shares) and approximately 13.3% of the Company's fully diluted common
shares. Hartley R. Rogers, Managing Director and Co-Head of Credit Suisse First
Boston Private Equity Division, and Lawrence B. Sorrel, a General Partner of
WCAS, will join the Company's Board of Directors upon the closing of the
transaction.
Concurrently with the execution of the Purchase Agreement, Winstar and
Microsoft also entered into a Master Agreement and certain software licenses and
other agreements under which they will work cooperatively to deliver and promote
broadband applications, including general business, e-commerce and multimedia
applications services. Included in this arrangement are a joint sales and
marketing program and licenses of Microsoft's branded applications, including
Office 2000 and other application services, to Winstar on an Application Service
Provider (ASP) basis. The focus of this arrangement will be on developing new
bandwidth-intensive services such as on-demand IP videoconferencing, based on
Microsoft software. The companies also plan to collaborate with respect to
Microsoft's BizTalk e-commerce and media streaming initiatives. These
applications will be delivered over Winstar's high-speed broadband network.
Dividends
If any cash dividends are paid on the Common Stock, the holders of
Series G Stock shall be entitled to receive such cash dividends on an
as-converted basis. In addition, the Series G Stock pays cumulative dividends at
a rate equal to the excess (if any) of (i) 5.75% per annum on its liquidation
preference over (ii) the amount of any regular cash dividends per share of
Series G Stock that have been paid during the applicable dividend period on the
Common Stock. Such dividends shall be payable quarterly in arrears on March 15,
June 15, September 15 and December 15 of each year to the record holders of the
Series G Stock as of March 1, June 1, September 1 and December 1. The Company
has the option to pay dividends in cash or by adding the amount of the dividend
to the liquidation preference of the Series G Stock.
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Conversion
Each share of Series G Stock is convertible, at the option of the
holder, into shares of Common Stock ("Conversion Shares") at a conversion price
("Conversion Price") of $67.50 per Conversion Share, subject to certain
adjustments (i.e., for a stock split, stock dividend, combination, merger,
consolidation, reclassification or other similar event involving the Company's
Common Stock). The Company will have the option to convert all of the shares of
Series G Stock into Common Stock at the Conversion Price if on any date after
the third anniversary of the date of issuance of the Series G Stock, the
volume-weighted average trading price of the Common Stock on Nasdaq for the 20
consecutive trading days immediately prior to such date is at least equal to
155% of the Conversion Price on such date.
Liquidation, Dissolution or Winding up
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, before any payment or distribution of the
Company's assets are made to the holders of Junior Securities (as defined
below), holders of Series G Stock will be entitled to receive an amount per
share equal to the greater of (i) the accreted value of the Series G Stock on
such date, plus all dividends accrued to such date (whether or not earned or
declared) since the end of the previous dividend period and (ii) the amount that
would have been payable on a number of shares of Common Stock equal to the
number of Conversion Shares into which a share of Series G Stock was convertible
immediately prior to such date. Holders of Series G Stock will not be entitled
to any further payment. If the assets of the Company distributable among the
holders of Series G Stock are insufficient to pay in full the preferential
amount and liquidating payments on any Parity Securities (as defined below),
then such assets will be distributed among the holders of Series G Stock and any
such Parity Securities ratably in accordance with the respective amounts that
would be payable if all amounts payable thereon were paid in full.
Ranking
With respect to dividend rights and rights on liquidation, dissolution
and winding up, the Series G Stock will rank (i) senior to the Company's Common
Stock, 6% Series A Cumulative Convertible Preferred Stock, Series E Junior
Convertible Preferred Stock and each other class or series of capital stock
established in the future by the Company's Board of Directors, the terms of
which do not expressly provide that it ranks senior to, or on a parity with, the
Series G Stock (collectively, the "Junior Securities") and (ii) on a parity with
the Company's Series C 14 1/4% Senior Cumulative Exchangeable Preferred Stock
Due 2007, Series D 7% Senior Cumulative Convertible Preferred Stock Due 2010,
Series F 7 1/4% Senior Cumulative Convertible Preferred Stock and each other
class or series of capital stock established in the future by the Company's
Board of Directors, the terms of which expressly provide that such class or
series will rank on a parity with the Series G Stock (collectively, the "Parity
Securities"). The Company may not issue any securities that are senior to the
Series G Stock without the consent of the holders of the Series G Stock.
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Redemption
On April 1, 2010, the Company will be required to redeem all of the
outstanding shares of Series G Stock at a redemption price per share equal to
the greater of (i) the accreted value of the Series G Stock on such date, plus
all dividends accrued to such date (whether or not earned or declared) since the
most recent dividend payment date and (ii) the volume-weighted average trading
price per share of Common Stock on Nasdaq for the 20 consecutive trading days
immediately prior to April 1, 2010 multiplied by the number of Conversion Shares
into which the Series G Stock is convertible on such date. The Company has the
option to pay the redemption price in cash or in shares of Common Stock. If the
Company elects to pay the redemption price, in whole or in part, in shares of
Common Stock, such shares will be valued at 97% of the volume- weighted average
trading price per share of Common Stock on Nasdaq for the 20 consecutive trading
days immediately prior to April 1, 2010. If the Company determines to pay the
redemption price in shares of Common Stock, the Company has agreed to use its
best efforts to register such shares under the Securities Act of 1933, as
amended, prior to the delivery of such shares.
Change of Control
In the event of a change in control of the Company, the Company will
make an offer to purchase all outstanding shares of Series G Stock at a purchase
price ranging from 102% to 108% of the accreted value per share on such date,
plus all dividends accrued to such date (whether or not earned or declared)
since the end of the previous dividend period. The Company has the option to pay
the change of control amount in cash or shares of Common Stock. If the Company
elects to pay the applicable change of control amount in shares of Common Stock,
such shares will be valued at the volume-weighted average trading price per
share of Common Stock on Nasdaq for the 20 consecutive trading days immediately
prior to the date the change of control amount is paid. The Company has agreed
to use its best efforts to register such shares prior to the delivery of such
shares.
Voting Rights
Each holder of Series G Stock will be entitled to vote on all matters
and will be entitled to that number of votes equal to the number of Conversion
Shares into which such holder's shares of Series G Stock could be converted on
the record date for the determination of shareholders entitled to vote on such
matter or, if no such record date is established, on the date such vote is taken
or any written consent of shareholders is solicited. In addition, so long as any
of the Series G Stock is outstanding, the affirmative vote of the holders of a
majority of the outstanding shares of Series G Stock, voting together as a
single class, will be necessary to: (i) amend, alter or repeal any provision of
the Company's Restated Certificate of Incorporation or By-laws so as to
adversely affect the Series G Stock, (ii) issue any additional Series G Stock or
create, authorize or issue any capital stock that ranks prior (whether with
respect to dividends or upon liquidation, dissolution, winding up or otherwise)
to the Series G Stock or (iii) redeem for cash any Junior Securities, subject to
certain exemptions.
Shareholders Agreement
Simultaneous with the closing of the transaction, each of (i) CSFBEP
and its affiliated co-investment partners, (ii) WCAS and its affiliated
co-investment partners and (iii) Microsoft (collectively, the "Holders") will
separately enter into a Shareholders Agreement with the Company, pursuant to
which (a) each of the Holders will agree that until the earlier of the tenth
anniversary of the closing or the date on which such Holder owns less than 20%
of its initial holdings on an as-converted basis, such Holder will not purchase
any additional voting securities of the Company without the Company's prior
written consent and (b) the Company will grant to each of the Holders customary
demand and "piggyback" registration rights.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits
4.1 Purchase Agreement, dated as of December 15, 1999,
among the Company, WCC and the Purchasers (without
exhibits)
4.2 Form of Certificate of Designations, Preferences and
Rights of Series G Senior Cumulative Participating
Convertible Preferred Stock
4.3 Form of Shareholders Agreement to be entered into
separately with the Company by each of (i) CSFBEP and
its affiliated co-investment partners, (ii) WCAS
and its affiliated co-investment partners and
(iii) Microsoft
99.1 Press Release, dated December 15, 1999
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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: December 30, 1999
WINSTAR COMMUNICATIONS, INC.
By: /s/ Kenneth J. Zinghini
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Kenneth J. Zinghini
Senior Vice President
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EXHIBIT INDEX
The following exhibits are filed as part of this report:
Exhibit Document
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4.1 Purchase Agreement, dated as of December 15, 1999, among the Company,
WCC and the Purchasers (without exhibits)
4.2 Form of Certificate of Designations, Preferences and Rights of Series
G Senior Cumulative Participating Convertible Preferred Stock
4.3 Form of Shareholders Agreement to be entered into separately with the
Company by each of (i) CSFBEP and its affiliated co-investment
partners, (ii) WCAS and its affiliated co-investment partners
and (iii) Microsoft
99.1 Press Release, dated December 15, 1999
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SECURITIES PURCHASE AGREEMENT
dated as of
December 15, 1999
among
WINSTAR COMMUNICATIONS, INC.,
WINSTAR CREDIT CORP.,
CREDIT SUISSE FIRST BOSTON EQUITY PARTNERS, L.P.,
WELSH, CARSON, ANDERSON & STOWE VIII, L.P.,
MICROSOFT CORPORATION
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. The Closing.................................................6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
SECTION 3.01. Corporate Existence and Power...............................7
SECTION 3.02. Corporate Authorization.....................................7
SECTION 3.03. Governmental Authorization..................................8
SECTION 3.04. Noncontravention............................................8
SECTION 3.05. Capitalization..............................................9
SECTION 3.06. Subsidiaries................................................9
SECTION 3.07. Financial Statements.......................................10
SECTION 3.08. Absence of Certain Changes.................................10
SECTION 3.09. No Material Undisclosed Liabilities........................10
SECTION 3.10. Litigation.................................................11
SECTION 3.11. Compliance with Laws.......................................11
SECTION 3.12. SEC Reports................................................11
SECTION 3.13. Material Contracts.........................................12
SECTION 3.14. Finders' Fees..............................................12
SECTION 3.15. Offering of Securities.....................................12
SECTION 3.16. Intellectual Property......................................12
SECTION 3.17. Environmental Compliance...................................13
SECTION 3.18. Compliance with ERISA......................................13
SECTION 3.19. Taxes......................................................13
SECTION 3.20. Regulatory Matters..........................................14
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PAGE
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 4.01. Corporate Existence and Power..............................16
SECTION 4.02. Authorization..............................................17
SECTION 4.03. Governmental Authorization.................................17
SECTION 4.04. Noncontravention...........................................17
SECTION 4.05. Finders' Fees..............................................17
SECTION 4.06. Private Placement..........................................18
ARTICLE 5
COVENANTS OF THE ISSUER
SECTION 5.01. Access to Information......................................19
SECTION 5.02. Certificate of Designations................................20
SECTION 5.03. Restrictions Pending the Closing...........................20
SECTION 5.04. Reservation of Shares......................................20
SECTION 5.05. Amendment to Rights Agreement..............................20
ARTICLE 6
COVENANTS OF THE PURCHASERS
SECTION 6.01. Confidentiality............................................21
SECTION 6.02. Agreement to Assign........................................21
SECTION 6.03. Tax Consistency............................................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 Seller's 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
EXHIBITS, ANNEX AND SCHEDULE
Annex I -- Securities to be Purchased
Exhibit A -- Form of Certificate of Designations for Series G Preferred Stock
Exhibit B -- Form of Shareholders Agreements
Exhibit C -- Form of Opinion of Counsel
Exhibit D -- Form of Opinion of FCC Counsel
Exhibit E -- Form of Management Sideletter
Disclosure Schedule
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SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of December 15, 1999 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"), and the other purchasers listed on the
signature pages hereof (together with CSFB, WCAS and Microsoft, 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 audited consolidated balance sheet of the
Issuer and its Subsidiaries as of the Balance Sheet Date.
"Balance Sheet Date" means September 30, 1999.
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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 G 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.
"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.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
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"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.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"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
Lien any asset that it has acquired or holds subject to the interest of a vendor
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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 Issuer's Series G Senior Cumulative
Participating Convertible Preferred Stock, par value $.01 per share.
"Securities Act" means the Securities Act of 1933, as amended.
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"Shareholders Agreements" means the three Shareholders Agreements among
the Issuer and each Purchaser, each substantially in the form attached as
Exhibit B hereto, 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).
(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)
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
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Term Section
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.
SECTION 2.02. 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 ten 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,
certificates evidencing the Securities being purchased by such Purchaser from
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such Seller 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
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 in accordance with the
terms of the Certificate of Designations, when issued and delivered in
accordance with the terms of this Agreement, 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 of the Securities will, when issued, be
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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)
compliance with any applicable requirements of the HSR Act, (ii) the filing of
the Certificate of Designations in accordance with the law of the State of
Delaware, (iii) 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, (iv) the filing of the listing
application referred to in Section 8.01(f), (v) any filing required pursuant to
the securities laws of the State of New York and (vi) 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 200,000,000 shares of Common Stock and 15,000,000 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
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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, 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 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, 1998 and the related audited consolidated statement of
income and cash flows for the year ended December 31, 1998 and the unaudited
interim consolidated balance sheet for the nine months ended September 30, 1999
and the related unaudited interim consolidated statements of income and cash
flows for the nine months ended September 30, 1999 of the Issuer and its
Subsidiaries have been delivered by the Issuer to the Purchasers. Such financial
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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
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, 1998 (the "10-K"), or in the Forms 10-Q of the Issuer for
the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999
(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
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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
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. 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, 1999 (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. The fees and commissions of any investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of any Seller in connection with the transactions
contemplated by this Agreement or the Shareholders Agreements will be paid by
the Issuer.
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
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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
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.
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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
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
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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.
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,
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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
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.
(e) Based upon the FCC Rules in place as of the date of this
Agreement, the Issuer is or will be eligible to participate in the 39 GHz
Auction (Auction 30) for licenses of radio spectrum that could be used to
provide the Broadband Services or similar services, scheduled under the FCC
Rules for April 11, 2000, and the transaction contemplated by this Agreement
will not interfere with the Issuer's ability to participate in that spectrum
auction.
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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 is 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
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) compliance with
any applicable requirements of the HSR Act, (ii) the filings with, notifications
to and the consents from the Regulatory Authorities set forth on Section 3.03 to
the Disclosure Schedule and (iii) 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,
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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. The fees and commissions of any investment
banker, broker, finder or other intermediary (other than JP Morgan & Co. Inc.,
whose customary fees will be paid by the Issuer) which has been retained by or
is authorized to act on behalf of any Purchaser in connection with the
transactions contemplated by this Agreement or the Shareholders Agreements will
be paid by such Purchaser.
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, the prospectus dated November 15, 1999
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.
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(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
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.
(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
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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.
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.
SECTION 5.05. Amendment to Rights Agreement. The Issuer agrees that at
the next meeting of its Board of Directors, all necessary action (including any
amendment thereof) under the Rights Agreement, dated as of July 2, 1997 between
the Issuer and Continental Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agreement"), will be taken so that the accretion of the liquidation
preference (in lieu of payment of cash dividends) on the Securities purchased by
the CSFB Entities pursuant hereto will not, at any time after the date hereof,
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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).
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
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 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
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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. Agreement to Assign. CSFB agrees that it will use its
reasonable best efforts to assign, prior to the Closing, to any third party or
parties the right to purchase Securities hereunder having an aggregate purchase
price of up to $150,000,000. 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.
SECTION 6.03. Tax Consistency. The Issuer acknowledges that the
Purchasers intend for the Securities to be treated as "common stock" for Tax
purposes, and the Issuer agrees not to take any voluntary action inconsistent
with such intention.
SECTION 6.04. 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.
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,
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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. Without
limiting the generality of the foregoing, the Issuer and each Purchaser
obligated to file a notification under the HSR Act shall promptly after the date
of this Agreement prepare and file the notifications required under the HSR Act
in connection with the transactions contemplated by this Agreement. 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, (B)
keep the other parties informed as to the status of any such action, suit,
litigation, arbitration, preceding or investigation, and (C) promptly inform the
other parties of any communication to or from the Federal Trade Commission, the
Department of Justice or any other governmental body regarding the transactions
contemplated by this Agreement and the Shareholders Agreements.
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 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
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.
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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 expiration of any applicable waiting period under the HSR Act;
(d) 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;
(e) 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
(f) The shares of Common Stock issuable upon conversion 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:
(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;
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(c) In the case of each of CSFB and WCAS, such Purchaser's nominee
shall have been elected or appointed to the Issuer's Board of Directors.
(d) Such Purchaser shall have received an opinion, dated the Closing
Date, of counsel to the Issuer, substantially in the form attached as Exhibit C;
(e) 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;
(f) 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;
(g) 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.
SECTION 8.03. Conditions to Seller's 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
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<PAGE>
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
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
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<PAGE>
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
materiality qualification contained in any representation, warranty or covenant
giving rise to the claim for indemnity hereunder) exceeds $10,000,000 (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
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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 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.
SECTION 9.07. Termination. (a) This Agreement may be terminated a
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 March 15, 2000 (or, if approval of the
Issuer's stockholders is required to consummate the transactions
contemplated hereby, May 1, 2000);
(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 25,000
shares of the Securities) 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
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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.
SECTION 9.09. Successors and Assigns. Except as contemplated by Section
6.02, no party may assign any of its rights and obligations hereunder without
the prior written consent of the other parties hereto. 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 and any
other documents executed concurrently herewith 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.
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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
Address for notices:
-------------------
685 Third Avenue
New York, New York 10017
Facsimile: (212) 792-9348
Attention: Timothy R. Graham
MICROSOFT CORPORATION
/s/ Gregory B. Maffei
By: _________________________________
Name: Gregory B. Maffei
Title:Senior Vice President,
Chief Financial officer
Address for notices:
------------------
One Microsoft Way
Redmond, WA 98052
Facsimile: (425) 936-7329
Attention: Chief Financial Officer
<PAGE>
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
<PAGE>
EMA PRIVATE EQUITY FUND 1999, L.P.
By: Credit Suisse First Boston (Bermuda)
Limited, as General Partner
/s/ Hartley R. Rogers
By: _________________________________
Name: Hartley R. Rogers
Title: Attorney-in-fact
Address for notices:
-------------------
11 Madison Avenue
New York, NY 10010
Facsimile: (212) 325-2291
Attention: Hartley R. Rogers
WELSH, CARSON, ANDERSON & STOWE
VIII, L.P.
By: WCAS VIII Associates LLC,
as General Partner
/s/ Lawrence B. Sorrel
By: _________________________________
Name: Lawrence B. Sorrel
Title: Member
Address for notices:
-------------------
320 Park Avenue, Suite 2500
New York, NY 10010
Facsimile: (212) 893-9575
Attention: Lawrence B. Sorrel or
Sanjay Swani
<PAGE>
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
<PAGE>
Individual investors:
/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
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
<PAGE>
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
<PAGE>
Annex I
Securities to be Purchased1
Purchaser Number of Shares Purchase Price
Microsoft Corporation 250,000 $250 million
The CSFB Entities (with 400,000 $400 million
the intention to allocate up to
$150 million to co-investors)
The WCAS Entities 250,000 $250 million
- --------
1 Securities to be allocated as among any affiliated group of Purchasers
in the manner designated by then no later than 2 Business Days prior to the
Closing.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES G SENIOR CUMULATIVE
PARTICIPATING CONVERTIBLE PREFERRED STOCK
of
WINSTAR COMMUNICATIONS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Winstar Communications, Inc., a Delaware corporation (hereinafter
called the "Company"), hereby certifies that, pursuant to the authority
expressly vested in the Board of Directors of the Company by the Restated
Certificate of Incorporation, as amended (the "Restated Certificate of
Incorporation"), and in accordance with the provisions of Sections 103 and 151
of the General Corporation Law of the State of Delaware, the Board of Directors
has duly adopted the following resolutions.
RESOLVED, that, pursuant to Article Fourth of the Restated Certificate
of Incorporation (which authorizes 15,000,000 shares of preferred stock, $.01
par value per share ("Preferred Stock")), the Board of Directors hereby fixes
the powers, designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions, of a
series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 900,000 shares of the Preferred Stock of
the Company shall be designated as Series G Senior Cumulative Participating
Convertible Preferred Stock (the "Series G Preferred Stock").
2. Rank. The Series G Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution and winding up, rank (i) senior to
all classes of the Company's common stock, $.01 par value per share ("Common
Stock"), the Company's 6% Series A Cumulative Convertible Preferred Stock, $.01
par value per share (the "Series A Preferred Stock"), and the Company's Series E
Junior Convertible Preferred Stock, $.01 par value per share (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
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ranks senior to, or on a parity with, the Series G Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution of the
Company (the securities in this clause (i) collectively referred to as "Junior
Securities"); and (ii) on a parity with the Company's Series C 14 1/4% Senior
Cumulative Exchangeable Preferred Stock Due 2007, $.01 par value per share (the
"Series C Preferred Stock"), the Company's Series D 7% Senior Cumulative
Convertible Preferred Stock Due 2010, $.01 par value per share (the "Series D
Preferred Stock"), the Company's Series F 7 1/4% Senior Cumulative Convertible
Preferred Stock, $.01 par value per share (the "Series F 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 Series G Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (the securities in this clause (ii)
collectively referred to as "Parity Securities"). The respective definitions of
Junior Securities and Parity Securities shall also include any rights or options
exercisable for or convertible into any of the Junior Securities and Parity
Securities, as the case may be.
3. Dividends. (a) In addition to any amounts to which a holder of
Series G Preferred Stock is entitled to receive pursuant to paragraph 3(d), such
holder shall be entitled to receive, in respect of each Dividend Period, when,
as and if declared by the Board of Directors of the Company, out of funds
legally available for the payment of dividends, cumulative dividends in an
amount per share equal to the excess (if any) of (i) the Applicable Percentage
of the Accreted Value as of the immediately preceding Dividend Payment Date (or,
for the initial Dividend Period, as of the date of issuance) over (ii) the
amount of any regular cash dividends per share of Series G Preferred Stock that
have been paid during such Dividend Period pursuant to paragraph 3(d). Subject
to the provisions of Section 3(b), dividends paid pursuant to this paragraph
3(a) shall be payable in cash in arrears quarterly on March 15, June 15,
September 15 and December 15 of each year (each of such dates being a "Dividend
Payment Date" and each such quarterly period being a "Dividend Period"). Such
dividends shall accrue from the date of issue (except that dividends on any
amounts added to Accreted Value pursuant to paragraph 3(b) shall accrue from the
date such amounts are added to Accreted Value), whether or not in any Dividend
Period or Periods there shall be funds of the Company legally available for the
payment of such dividends. Each such dividend shall be payable to the holders of
record of shares of the Series G Preferred Stock on March 1, June 1, September 1
and December 1, as they appear on the stock records of the Company at the close
of business on such record dates.
(b) If dividends are not paid in cash on any Dividend Payment Date for
the immediately preceding Dividend Period (or portion thereof if less than a
full Dividend Period), the unpaid amount shall be added to the Accreted Value
for purposes of calculating succeeding periods' dividends. Notwithstanding
anything else contained herein, once any dividends for the immediately preceding
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Dividend Period (or portion thereof if less than a full Dividend Period) are so
added to Accreted Value, such dividends will no longer be payable in cash.
(c) The Applicable Percentage for each full Dividend Period for the
Series G Preferred Stock shall be 1.4375%. The Applicable Percentage for the
initial Dividend Period, or any other period shorter or longer than a full
Dividend Period, on the Series G Preferred Stock shall be computed on the basis
of a per annum rate of 5.75% and the actual number of days elapsed over 12
30-day months and a 360-day year. Holders of shares of Series G Preferred Stock
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of dividends on the Series G Preferred Stock provided for in
this paragraph 3. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series G Preferred
Stock that may be in arrears.
(d) In case the Company shall fix a record date for the making of any
dividend or distribution to holders of Common Stock (other than dividends or
distributions payable solely in Common Stock), the holder of each share of
Series G Preferred Stock on such record date shall be entitled to receive an
equivalent dividend or distribution based on the number of shares of Common
Stock into which such share of Series G Preferred Stock is convertible on such
record date.
(e) So long as any shares of the Series G Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Parity Securities, for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series G Preferred Stock (or the unpaid amount
shall have been added to the Accreted Value pursuant to paragraph 3(b)) for all
Dividend Periods terminating on or prior to the date of payment of the dividend
on such class or series of Parity Securities. When dividends are not paid in
full or a sum sufficient for such payment is not set apart, as aforesaid, all
dividends declared upon shares of the Series G Preferred Stock and all dividends
declared upon any other class or series of Parity Securities shall be declared
ratably in proportion to the respective amounts of dividends accrued on the
Series G Preferred Stock and accrued and unpaid on such Parity Securities.
(f) So long as any shares of the Series G Preferred Stock are
outstanding, no dividends (other than dividends paid in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Junior Securities)
shall be declared or paid or set apart for payment or other distribution
declared or made upon Junior Securities, nor shall any Junior Securities be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any shares
of any such stock) by the Company, directly or indirectly (except by conversion
into or exchange for Junior Securities), unless in each case (i) the full
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dividends on all outstanding shares of the Series G Preferred Stock and any
Parity Securities shall have been paid or set apart for payment for all past
Dividend Periods with respect to the Series G Preferred Stock and all past
dividend periods with respect to such Parity Securities (or, in the case of the
Series G Preferred Stock, the unpaid amount shall have been added to the
Accreted Value pursuant to paragraph 3(b)) and (ii) sufficient funds shall have
been paid or set apart for the payment of the dividend for the current Dividend
Period with respect to the Series G Preferred Stock and the current dividend
period with respect to such Parity Securities. Notwithstanding the foregoing,
the Company may (i) pay cash in lieu of fractional shares of Common Stock to be
issued upon conversion of convertible Preferred Stock constituting Junior
Securities and (ii) redeem for cash convertible Preferred Stock that constitutes
Junior Securities if, as of the date of the giving of the redemption notice
thereunder, the applicable conversion price of such convertible Preferred Stock
is less than the Current Market Price Per Common Share.
4. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
before any payment or distribution of the assets of the Company (whether capital
or surplus) shall be made to or set apart for the holders of Junior Securities,
the holder of each share of Series G Preferred Stock shall be entitled to
receive an amount per share equal to the Liquidation Value of such share on the
date of distribution, and such holders shall not be entitled to any further
payment. If, upon any liquidation, dissolution or winding up of the Company, the
assets of the Company, or proceeds thereof, distributable among the holders of
the shares of Series G Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any Parity Securities,
then such assets, or the proceeds thereof, shall be distributed among the
holders of shares of Series G Preferred Stock and any such Parity Securities
ratably in accordance with the respective amounts that would be payable on such
shares of Series G Preferred Stock and any such Parity Securities if all amounts
payable thereon were paid in full. Solely for the purposes of this paragraph 4,
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.
(b) Subject to the rights of the holders of any Parity Securities,
after payment shall have been made in full to the holders of the Series G
Preferred Stock, as provided in this paragraph 4, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed to holders of capital stock of the Company,
and the holders of the Series G Preferred Stock shall not be entitled to share
therein.
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5. Conversion. (a) Conversion at the Option of the Company. If on any
date after the third anniversary of the date of issuance of the Series G
Preferred Stock, the Current Market Price Per Common Share is at least equal to
155% of the Conversion Price on such date, the Company may elect, by written
notice delivered to the Transfer Agent (with a copy to each holder of Series G
Preferred Stock), no later than five Market Days after such date, to cause all
outstanding shares of Series G Preferred Stock to be converted into fully paid
and nonassessable shares of Common Stock. Any such conversion shall be deemed to
have been effected, without further action by any party, immediately prior to
the close of business on the date such notice is received by the Transfer Agent.
The number of shares of Common Stock deliverable upon conversion of one share of
Series G Preferred Stock shall be equal to (i) the Accreted Value of such share
on the date of conversion, plus any dividends accrued to such date (whether or
not earned or declared) since the end of the previous Dividend Period, divided
by (ii) the Conversion Price on such date.
(b) Conversion at the Option of the Holder. Subject to the provisions
of this paragraph 5, each holder of shares of Series G Preferred Stock shall
have the right, at any time and from time to time, at such holder's option, to
convert its outstanding shares of Series G Preferred Stock, in whole or in part,
into fully paid and non-assessable shares of Common Stock. The number of shares
of Common Stock deliverable upon conversion of one share of Series G Preferred
Stock shall be equal to (i) the Accreted Value of such share on the date of
conversion, plus any dividends accrued to such date (whether or not earned or
declared) since the end of the previous Dividend Period, divided by (ii) the
Conversion Price on such date. No notice delivered by the Company pursuant to
paragraph 5(h), 5(j) or 6 will limit in any way the holders' rights to convert
pursuant to this paragraph 5(b). In order to exercise the conversion privilege
set forth in paragraph 5(b), the holder of the shares of Series G Preferred
Stock to be converted shall surrender the certificate representing such shares
at the office of the Company, with a written notice of election to convert
completed and signed, specifying the number of shares to be converted. Each
conversion pursuant to paragraph 5(b) shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of Series G Preferred Stock shall have been surrendered and such
notice received by the Company as aforesaid, and the person in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby at such time on such
date. Effective upon such conversion, the shares of Series G Preferred Stock so
converted shall no longer be deemed to be outstanding, and all rights of a
holder with respect to such shares surrendered for conversion shall immediately
terminate except the right to receive the Common Stock and other amounts payable
pursuant to this paragraph 5.
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(c) (i) Unless the shares issuable on conversion pursuant to
this paragraph 5 are to be issued in the same name as the name in which
such shares of Series G Preferred Stock are registered, each share
surrendered for conversion shall be accompanied by instruments of
transfer, in form reasonably satisfactory to the Company, duly
executed by the holder or the holder's duly authorized attorney and an
amount sufficient to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender by the holder of
the certificates for shares of Series G Preferred Stock as aforesaid,
the Company shall issue and shall deliver to such holder, or on the
holder's written order to the holder's transferee, a certificate or
certificates for the whole number of shares of Common Stock issuable
upon the conversion of such shares in accordance with the provisions of
this paragraph 5.
(iii) All shares of Common Stock delivered upon conversion of the
Series G Preferred Stock will upon delivery be duly and validly issued
and fully paid and non-assessable, free of all liens and charges and
not subject to any preemptive rights.
(d) (i) Upon delivery to the Company by a holder of shares of
Series G Preferred Stock of a notice of election to convert pursuant to
paragraph 5(b) above, the right of the Company to redeem such shares of
Series G Preferred Stock shall terminate, regardless of whether a
notice of redemption has been mailed pursuant to paragraph 6.
(ii) From the date of delivery by a holder of shares of Series G
Preferred Stock of such notice of election to convert, in lieu of
dividends on such Series G Preferred Stock pursuant to paragraph 3,
such Series G Preferred Stock shall participate equally and ratably
with the holders of shares of Common Stock in all dividends paid on the
Common Stock.
(iii) Except as provided herein, the Company shall make no payment
or adjustment for accrued dividends on shares of Series G Preferred
Stock, whether or not in arrears, on conversion of such shares or for
dividends in cash on the shares of Common Stock issued upon such
conversion.
(e) (i) The Company covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of
its authorized but unissued shares of Common Stock as shall be required
for the purpose of effecting conversion of the Series G Preferred
Stock.
(ii) Prior to the delivery of any securities which the Company
shall be obligated to deliver upon conversion of the Series G
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Preferred Stock, the Company shall comply with all applicable federal
and state laws and regulations which require action to be taken by the
Company.
(f) The Company will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock on conversion of the Series G Preferred Stock pursuant hereto;
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock in a name other than that of the holder of the Series G
Preferred Stock to be converted and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery 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.
(g) In connection with the conversion of any shares of Series G
Preferred Stock, no fractional shares of Common Stock shall be issued, but in
lieu thereof the Company shall round up any fractional shares to the nearest
whole number of shares of Common Stock.
(h) (i) In case the Company shall at any time after the date
of issue of the Series G Preferred Stock (A) declare a dividend or make
a distribution on Common Stock payable in Common Stock, (B) subdivide
or split the outstanding Common Stock, (C) combine or reclassify the
outstanding Common Stock into a smaller number of shares or (D)
consolidate with, or merge with or into, any other Person, or engage in
any reorganization, reclassification or recapitalization which, in the
case of any such transaction is effected in such a manner that the
holders of Common Stock are entitled to receive stock, securities, cash
or other assets with respect to or in exchange for Common Stock (other
than as a dividend or distribution referred to in paragraph 3(d)), the
Conversion Price and the kind and amount of stock, securities, cash or
other assets issuable upon conversion of the Series G Preferred Stock
in effect at the time of the record date for such dividend or
distribution or of the effective date of such subdivision, split,
combination, consolidation, merger, reorganization, reclassification or
recapitalization shall be adjusted so that the conversion of the Series
G Preferred Stock after such time shall entitle the holder to receive
the aggregate number of shares of Common Stock or securities, cash and
other assets which, if the Series G Preferred Stock had been converted
immediately prior to such time, such holder would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination, consolidation, merger,
reorganization, reclassification or recapitalization, assuming such
holder of Common Stock (x) is not a Person with which the Company
consolidated or into which the Company merged or which merged into the
Company or to which such reorganization, reclassification,
recapitalization, sale or transfer was made, as the case may be
("constituent person"), or an affiliate of a constituent person and (y)
failed to exercise any rights of election as to the kind or amount of
securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, reorganization or
recapitalization (provided, that if the kind or amount of securities,
cash and other property receivable upon such reclassification,
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change, consolidation, merger, reorganization or recapitalization is
not the same for each share of Common Stock held immediately prior to
such reclassification, change, consolidation, merger, reorganization or
recapitalization by other than a constituent person or an affiliate
thereof and in respect of which such rights of election shall not have
been exercised ("non-electing share"), then for the purpose of this
paragraph 5(h) the kind and amount of securities, cash and other
property receivable upon such reorganization, reclassification, change,
consolidation, merger or recapitalization by each non-electing share
shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). Such adjustment shall be made
successively whenever any event listed above shall occur.
(ii) All calculations under this paragraph 5(h) shall be made to
the nearest four decimal points.
(iii) In the event that, at any time as a result of the provisions of
this paragraph 5(h), the holder of this Series G Preferred Stock upon
subsequent conversion shall become entitled to receive any securities
other than Common Stock, the number and kind of such other securities
so receivable upon conversion of this Series G Preferred Stock shall
thereafter be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions
contained herein.
(i) All adjustments pursuant to this paragraph 5 shall be notified to
the holders of this Series G Preferred Stock promptly following the making
thereof and such notice shall be accompanied by a schedule of computations of
the adjustments.
(j) Change of Control Offer. (i) Promptly after the occurrence of a
Change of Control (the date of such occurrence being the "Change of Control
Date"), the Company shall commence (or cause to be commenced) an offer to
purchase all outstanding shares of Series G Preferred Stock pursuant to the
terms described in paragraph (j) (iv) (the "Change of Control Offer") at a
purchase price equal to the Change of Control Amount on the Change of Control
Payment Date, and shall purchase (or cause the purchase of) any shares of Series
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G Preferred Stock tendered in the Change of Control Offer pursuant to the terms
hereof.
(ii) At the Company's option, the Change of Control Amount shall be
payable in cash or in shares of Common Stock (or the securities of the
entity into which the Common Stock became converted in connection with
the Change of Control) having a Current Market Price Per Common Share
on the Change of Control Payment Date equal to the Change of Control
Amount.
(iii) If the Company elects to pay the Change of Control Amount in
cash, prior to the mailing of the notice referred to in paragraph
(j)(iv), but in any event within 30 days following the date on which a
Change of Control has occurred, the Company shall (A) promptly
determine if the purchase of the Series G Preferred Stock for cash
would violate or constitute a default under the indebtedness of the
Company or the terms of any other series of the Company's outstanding
preferred stock and (B) either shall repay to the extent necessary all
such indebtedness or preferred stock of the Company that would
prohibit the repurchase of the Series G Preferred Stock pursuant to a
Change of Control Offer or obtain any requisite consents or approvals
under instruments governing any indebtedness or preferred stock of the
Company to permit the repurchase of the Series G Preferred Stock for
cash. The Company shall first comply with this paragraph (j)(ii)
before it shall repurchase for cash any Series G Preferred Stock
pursuant to this paragraph (j).
(iv) Within 30 days following the date on which a Change in Control
has occurred, the Company shall send, by first-class mail, postage
prepaid, a notice to each holder of Series G Preferred Stock. If
applicable, such notice shall contain all instructions and materials
necessary to enable such holders to tender Series G Preferred Stock
pursuant to the Change of Control Offer. Such notice shall state:
(A) that a Change of Control has occurred, that a Change
of Control Offer is being made pursuant to this paragraph (j)
and that all Series G Preferred Stock validly tendered and not
withdrawn will be accepted for payment;
(B) the purchase price (including the amount of accrued
dividends, if any) and the purchase date (which must be no
earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law) (the
"Change of Control Payment Date");
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(C) that any shares of Series G Preferred Stock not
tendered will continue to accrue dividends;
(D) that, unless the Company defaults in making payment
therefor, any share of Series G Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to
accrue dividends after the Change of Control Payment Date;
(E) that holders electing to have any share of Series G
Preferred Stock purchased pursuant to a Change of Control
Offer will be required to surrender stock certificates
representing such shares of Series G Preferred Stock, properly
endorsed for transfer, together with such other customary
documents as the Company and the Transfer Agent may
reasonably request to the Transfer Agent and registrar for
the Series G Preferred Stock at the address specified in the
notice prior to the close of business on the business day
prior to the Change of Control Payment Date;
(F) that holders will be entitled to withdraw their
election if the Company receives, not later than five business
days prior to the Change of Control Payment Date, a telegram,
facsimile transmission or letter setting forth the name of the
holder, the number of shares of Series G Preferred Stock the
holder delivered for purchase and a statement that such holder
is withdrawing its election to have such shares of Series G
Preferred Stock purchased;
(G) that holders who tender only a portion of the shares
of Series G Preferred Stock represented by a certificate
delivered will, upon purchase of the shares tendered, be
issued a new certificate representing the unpurchased shares
of Series G Preferred Stock; and
(H) the circumstances and relevant facts regarding such
Change of Control (including information with respect to pro
forma historical income, cash flow and capitalization after
giving effect to such Change of Control).
(v) The Company will comply with any tender offer rules under the
Exchange Act which then may be applicable in connection with any offer
made by the Company to repurchase the shares of Series G Preferred
Stock as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
provisions of this Certificate of Designations, the Company shall
comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligation under this Certificate of
Designations by virtue thereof.
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(vi) On the Change of Control Payment Date, the Company shall (A)
accept for payment the shares of Series G Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the
holders of shares so accepted the purchase price therefor in cash or
Common Stock (or the securities of the entity into which the Common
Stock became converted in connection with the Change of Control) as
provided above and (C) cancel each surrendered certificate and retire
the shares represented thereby. Unless the Company defaults in the
payment for the shares of Series G Preferred Stock tendered pursuant to
the Change of Control Offer, dividends will cease to accrue with
respect to the shares of Series G Preferred Stock tendered and all
rights of holders of such tendered shares will terminate, except for
the right to receive payment therefor on the Change of Control Payment
Date.
(vii) To accept the Change of Control Offer, the holder of a share of
Series G Preferred Stock shall deliver, prior to the close of business
on the business day prior to the Change of Control Payment Date,
written notice to the Company (or an agent designated by the Company
for such purpose) of such holder's acceptance, together with
certificates evidencing the shares of Series G Preferred Stock with
respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.
(viii) For the avoidance of doubt, nothing in this paragraph 5(j)
shall restrict the right of the holders of Series G Preferred Stock,
in connection with a Change of Control, to convert and to receive the
kind and amount of consideration payable to holders of Common Stock in
respect of the Common Stock into which the Series G Preferred Stock
may be converted.
(k) Certain Mergers. In connection with any consolidation with or
merger with or into, any person in a transaction where the Common Stock is
converted into or exchanged for securities of such person or an affiliate of
such person, the Company covenants that the person issuing such securities will
be organized and existing under the laws of a jurisdiction which allows for the
issuance of preference stock and that the Series G Preferred Stock shall be
converted into or exchanged for and shall become shares of such person having in
respect of such person substantially the same powers, preference and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon that the Series G Preferred Stock had
immediately prior to such transaction.
6. Redemption. (a) On April 1, 2010, the Company will be required to
redeem all of the outstanding shares of Series G Preferred Stock at a redemption
price per share equal to the greater of (i) the Accreted Value on such date,
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plus all dividends accrued to such date (whether or not earned or declared)
since the most recent Dividend Payment Date and (ii) the aggregate Current
Market Price Per Common Share on such date for the number of shares of Common
Stock into which a share of Series G Preferred Stock is convertible on such
date. The redemption price will be payable, solely at the Company's option, in
cash or in shares of Common Stock, which shares shall be valued for purposes of
this paragraph 6 at 97% of the Current Market Price Per Common Share on April 1,
2010, or in some combination thereof.
(b) Notice of such redemption shall be given by the Company by first
class mail, postage prepaid, mailed not less than 30 days nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register of
the Company; provided that neither the failure to give such notice nor any
defect therein shall affect the validity of the giving of notice for the
redemption of any share of Series G Preferred Stock to be redeemed except as to
the holder to whom the Company has failed to give said notice or except as to
the holder whose notice was defective. Each such notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; and (iv) that dividends on the shares to be redeemed will cease to accrue
on such redemption date.
(c) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Company in providing money
for the payment of the redemption price of the shares called for redemption),
dividends on the shares of Series G Preferred Stock so called for redemption
shall cease to accrue, and all rights of the holders thereof as stockholders of
the Company (except the right to receive from the Company the redemption price)
shall cease. Upon surrender in accordance with said notice of the certificates
for any shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors of the Company shall so require and the notice shall so
state), such share shall be redeemed by the Company at the redemption price
aforesaid.
7. Voting Rights. (a) Except as otherwise provided in paragraph 7(b)
or as required by law, each holder of Series G Preferred Stock shall be entitled
to vote on all matters and shall be entitled to that number of votes equal to
the number of shares of Common Stock into which such holder's shares of Series G
Preferred Stock could be converted, pursuant to the provisions of paragraph 5
hereof, on the record date for the determination of shareholders entitled to
vote on such matter or, if no such record date is established, on the date such
vote is taken or any written consent of shareholders is solicited. Except as
otherwise expressly provided herein or as required by law, the holders of shares
of Series G Preferred Stock and Common Stock shall vote together as a single
class on all matters.
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(b) In addition, so long as any of the Series G Preferred Stock is
outstanding, the affirmative vote of the holders of a majority of the
outstanding shares of Series G Preferred Stock, voting together as a single
class, shall be necessary to: (i) amend, alter or repeal any provision of the
Restated Certificate of Incorporation (whether by amendment, merger or
otherwise) or the By-laws so as to adversely affect the preferences, rights or
powers of the Series G Preferred Stock, including, without limitation, the
voting powers and liquidation preference of the Series G Preferred Stock, or
change the Series G Preferred Stock into any other securities (other than as
required by paragraph 5(k)), cash or other property, (ii) issue any additional
Series G Preferred Stock or create, authorize or issue any capital stock that
ranks prior (whether with respect to dividends or upon liquidation, dissolution,
winding up or otherwise) to the Series G Preferred Stock or (iii) redeem for
cash any Junior Securities, other than the redemption of any convertible
preferred stock, if at the time of the redemption notice, the applicable
conversion price of such convertible preferred stock is less than the Current
Market Price Per Common Share.
8. Miscellaneous. (a) If, in connection with a Change of Control
Offer pursuant to paragraph 5(j) or a redemption pursuant to paragraph 6, the
Company determines to pay the Change of Control Amount or the redemption price
in shares of Common Stock ("Stock Election"), the Company will use its best
efforts to (i) register such shares of Common Stock under the Securities Act of
1933, as amended, (ii) cause such registration statement to be effective at or
prior to the time that the Company will deliver such shares to the holders of
Series G Preferred Stock, (iii) have such shares listed on the principal trading
market for the Common Stock and (iv) take such other actions as may reasonably
be required to register the issuance (or, as appropriate, the re-sale) of the
shares of Common Stock to be delivered to the holders of the Series G Preferred
Stock.
(b) If the Company makes a Stock Election, it shall comply with all
statutes, rules and regulations applicable thereto at that time, including any
and all regulations of the principal trading market on which the Common Stock is
then trading, including, if necessary, any shareholder approval requirement
under NASD Rule 4460(i), as it may be amended from time to time.
9. Definitions. The following terms, as used herein, shall have the
following meanings:
"Accreted Value" equals, with respect to one share of Series G
Preferred Stock, $1,000, plus the amount of any dividends added to Accreted
Value in accordance with paragraph 3(b) (which aggregate amount shall be subject
to adjustment whenever there shall occur a stock split, combination,
re-classification or other similar event involving the Series G Preferred
Stock).
13
<PAGE>
"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 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 Securities of the Company, (iii) the
first day on which a majority of the members of the board of directors are not
Continuing Directors, or (iv) prior to the five-year anniversary of the date of
issuance of the Series G Preferred Stock, any transaction or series of related
transactions with or involving a regional Bell operating company (Bell Atlantic
Corp., SBC Communications, BellSouth and U.S. West/Qwest) if, immediately
following such transaction or series of related transactions, holders of the
Common Stock outstanding immediately prior to such transaction or series of
related transactions own 50% or less of the outstanding voting securities of the
surviving or transferee corporation (or its parent corporation).
"Change of Control Amount" means, with respect to one share of Series G
Preferred Stock, (i) if the Change of Control Date occurs prior to the first
anniversary of the issuance of the Series G Preferred Stock, 102% of the
Accreted Value per share on the Change of Control Payment Date plus any
dividends accrued to such date (whether or not earned or declared) since the end
of the previous Dividend Period, (ii) if the Change of Control Date occurs on or
after such first anniversary, but prior to the second anniversary of the
issuance of the Series G Preferred Stock, 105% of the Accreted Value per share
on the Change of Control Payment Date plus any dividends accrued to such date
(whether or not earned or declared) since the end of the previous Dividend
Period, and (iii) if the Change of Control date occurs on or after such second
anniversary, 108% of the Accreted Value per share on the Change of Control
Payment Date plus any dividends accrued to such date (whether or not earned or
declared) since the end of the previous Dividend Period.
"Continuing Directors" means individuals who constituted the Board of
Directors of the Company on the date hereof (the "Incumbent Directors");
provided that any individual becoming a director during any year shall be
considered to be an Incumbent Director if such individual's election,
appointment or nomination was recommended or approved by at least two-thirds of
the other Incumbent Directors continuing in office following such election,
appointment or nomination present, in person or by telephone, at any meeting of
the Board of Directors of the Company, after the giving of a sufficient notice
14
<PAGE>
to each Incumbent Director so as to provide a reasonable opportunity for such
Incumbent Directors to be present at such meeting.
"Conversion Price" means $67.50, subject to adjustment from time to
time as provided in paragraph 5.
"Current Market Price Per Common Share" means, as of any date, the
average (weighted by daily trading volume) of the Daily Prices per share of
Common Stock for the 20 consecutive trading days immediately prior to such date.
"Daily Price" means, as of any date, (i) if the shares of such class of
Common Stock then are listed and traded on the New York Stock Exchange, Inc.
("NYSE"), the closing price on such date as reported on the NYSE Composite
Transactions Tape; (ii) if the shares of such class of Common Stock then are not
listed and traded on the NYSE, the closing price on such date as reported by the
principal national securities exchange on which the shares are listed and
traded; (iii) if the shares of such class of Common Stock then are not listed
and traded on any such securities exchange, the last reported sale price on such
date on the National Market of the National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ"); or (iv) if the shares of such class
of Common Stock then are not traded on the NASDAQ National Market, the average
of the highest reported bid and lowest reported asked price on such date as
reported by NASDAQ.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Liquidation Value" on any date means, with respect to one share of
Series G Preferred Stock, the greater of (i) the Accreted Value on such date,
plus all dividends (whether or not earned or declared) accrued since the end of
the previous Dividend Period and (ii) the amount that would have been payable on
a number of shares of Common Stock equal to the number of shares of Common Stock
into which a share of Series G Preferred Stock was convertible immediately prior
to such date.
"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.
"Person" as used herein means any corporation, limited liability
company, partnership, trust, organization, association, other entity or
individual.
"Securities Act" means the Securities Act of 1933, as amended.
15
<PAGE>
"Transfer Agent" means the transfer agent for the Series G Preferred
Stock appointed by the Company.
"Voting Securities" means securities of the Company ordinarily having
the power to vote for the election of directors of the Company; provided that
when the term "Voting Securities" is used with respect to any other Person it
means the capital stock or other equity interests of any class or kind
ordinarily having the power to vote for the election of directors or other
members of the governing body of such Person.
16
<PAGE>
IN WITNESS WHEREOF, Winstar Communications, Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned this __
day of _________________.
WINSTAR COMMUNICATIONS, INC.
By: ___________________________________
Name:
Title:
ATTEST:
- --------------------
Name:
Assistant Secretary
17
SHAREHOLDERS AGREEMENT
Dated as of [ ], 2000
among
WINSTAR COMMUNICATIONS, INC.
[ ]
[ ]
and
THE OTHER PERSONS LISTED
ON THE SIGNATURES PAGES HEREOF
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions..............................................1
ARTICLE 2
RIGHTS AND OBLIGATIONS WITH RESPECT TO TRANSFER
SECTION 2.01. General Restrictions.....................................5
SECTION 2.02. Agreement to Be Bound....................................6
SECTION 2.03. Legends..................................................6
ARTICLE 3
REGISTRATION RIGHTS
SECTION 3.01. Definitions..............................................7
SECTION 3.02. Demand Registration Rights...............................8
SECTION 3.03. Piggy-Back Registration Rights..........................11
SECTION 3.04. Registration Procedures.................................13
SECTION 3.05. Participation in Underwritten Registrations.............16
SECTION 3.06. Holdback Agreements.....................................16
SECTION 3.07. Indemnification.........................................17
SECTION 3.08. Shelf Registration......................................20
ARTICLE 4
CORPORATE GOVERNANCE; COVENANTS
SECTION 4.01. Board of Directors......................................21
SECTION 4.02. Financial Information...................................23
ARTICLE 5
STANDSTILL
SECTION 5.01. Definitions.............................................23
SECTION 5.02. Acquisition of Voting Securities........................24
SECTION 5.03. Certain Actions.........................................25
i
<PAGE>
PAGE
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Headings................................................26
SECTION 6.02. No Inconsistent Agreements..............................26
SECTION 6.03. Entire Agreement........................................26
SECTION 6.04. Notices.................................................26
SECTION 6.05. Applicable Law; Submission to Jurisdiction..............27
SECTION 6.06. Severability............................................27
SECTION 6.07. Successors, Assigns, Transferees........................27
SECTION 6.08. Amendments; Waivers.....................................28
SECTION 6.09. Counterparts............................................28
SECTION 6.10. Recapitalization, etc...................................28
SECTION 6.11. Remedies................................................28
SECTION 6.12. Fees and Expenses.......................................28
SECTION 6.13. Reasonable Best Efforts.................................29
ii
<PAGE>
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT dated as of [ ], 2000 among Winstar
Communications, Inc., a Delaware corporation (the "Issuer"), [
], [ ], and each of the other Persons listed on the signature
pages hereof. Each of the parties to this Agreement (other than the Issuer) and
any other Person who, pursuant to the terms hereof, shall become a party to or
agree to be bound by the terms of this Agreement after the date hereof is
sometimes hereinafter referred to as a "Holder".
WHEREAS, the parties hereto are among the parties to a Securities
Purchase Agreement dated as of December 15, 1999 (as amended from time to time,
the "Subscription Agreement") pursuant to which the Holders purchased Series G
Shares (as defined below) from the Issuer; and
WHEREAS, the parties hereto desire to provide for certain rights and
obligations relating to the capital stock of the Issuer and certain matters
relating to the conduct of the business and the affairs of the Issuer following
the date hereof.
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" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person; provided that, for purposes of this Agreement, (i) the Issuer
shall not be treated as an Affiliate of any Holder or its Affiliates, (ii) a
Holder and its Affiliates shall not be treated as Affiliates of the Issuer or
its Affiliates or as Affiliates of any other Holder or such Holder's Affiliates
solely by reason of its ownership interest in the Issuer and (iii) any portfolio
company of a Holder shall not be treated as an Affiliate of such Holder. For
purposes of this definition, the term "control" (including the correlative terms
"controlling", "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
<PAGE>
"beneficial ownership" and "beneficially own" shall be determined in
accordance with Rules 13d-3 and 13d-5 under the Exchange Act.
"Board of Directors" means the Board of Directors of the Issuer.
"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.
["CSFB" means Credit Suisse First Boston Equity Partners, L.P., a
Delaware limited partnership.]1
["CSFB Bermuda" means Credit Suisse First Boston Equity Partners
(Bermuda), L.P., a Bermuda limited partnership.]1
["CSFB EMA" means EMA Private Equity Fund 1999, L.P., a Delaware
limited partnership.]1
["CSFB Entities " means, collectively, CSFB, CSFB Bermuda and CSFB
EMA.]1
"Commission" means the Securities and Exchange Commission or any
successor commission or agency having similar powers.
"Common Shares" means shares of the common stock of the Issuer, par
value $0.01 per share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Fully-Diluted Basis" means to take into account all outstanding shares
of Common Stock, shares issuable in respect of stock appreciation rights or
options, warrants and other rights to purchase or subscribe for Common Stock or
securities convertible into or exchangeable for Common Stock.
"group" shall have the meaning set forth in Section 13(d)(3) of the
Exchange Act.
"Initial Holdings" means, with respect to any Person, the number of
Common Shares that would be received upon conversion of the Series G Shares
purchased by such Person pursuant to the Subscription Agreement.
- --------
1 CSFB Agreement only.
2
<PAGE>
["Microsoft" means Microsoft Corporation, a Washington corporation.]2
"Permitted Transferee" means:
[(i) with respect to any [ ] Entity, (v) any Affiliate of such [ ]
Entity, [(w) any general or limited partner of such [ ] Entity (a
"Partner"),]3 (x) any officer, general partner, director or limited
partner of such [ ] Entity or Partner (collectively, "Associates"), (y)
the heirs, executors, administrators, testamentary trustees, legatees
or beneficiaries of any Associate and (z) a trust, corporation,
partnership or other entity substantially all the economic interests of
which are held by or for the benefit of such [ ] Entity or any of its
Affiliates, Partners, Associates, and any of their spouses or children
(whether by birth or adoption);]4
(ii) with respect to any Holder that is an individual, (x) the
spouse, children (whether by birth or adoption) grandparents,
grandchildren, aunts, uncles, nieces and nephews of such Holder, (y) a
Person to whom Shares are Transferred by such Holder by will or the
laws of descent and distribution and (z) a trust established for the
exclusive benefit of such Holder or any of the Persons referred to in
clause (x); and
[(iii) with respect to [ ], any Affiliate of such Holder.]2
"Person" means an individual, partnership, corporation, limited
liability company, trust, joint stock company, association, joint venture, or
any other entity or organization.
"Public Offering" means any underwritten public offering of equity
securities of the Issuer pursuant to an effective registration statement under
the Securities Act other than pursuant to a registration statement on Form S-4
or Form S-8 or any successor or similar form.
"Rouhana Letter Agreement" means a letter agreement dated as of the
date hereof among William Rouhana, Jr., the Issuer and the persons listed on the
signature pages thereof.
"Series G Shares" means shares of Series G Senior Cumulative
Participating Convertible Preferred Stock, par value $0.01 per share, of the
Issuer.
- --------
2 Microsoft Agreement only.
3 CSFB Agreement and WCAS Agreement only.
4 CSFB Agreement and WCAS Agreement only.
3
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Shares" means the Common Shares and the Series G Shares.
"Subsidiary" means any entity of which 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 the Issuer.
"Transaction Agreements" means this Agreement, the Subscription
Agreement and the Rouhana Letter Agreement.
"Transfer" means, with respect to any security, (i) when used as a
verb, to sell, assign, dispose of, exchange or otherwise transfer such security
or any interest therein, whether directly or indirectly, or agree or commit to
do any of the foregoing and (ii) when used as a noun, a direct or indirect sale,
assignment, disposition, exchange or other transfer of such security or any
interest therein or any agreement or commitment to do any of the foregoing.
["WCAS Entities" means each of WCAS VIII, WCAS IP and WCAS
Individual Investors.]5
["WCAS Individual Investors" means, collectively, the individual
investors that are listed on the signature pages hereof.]5
["WCAS IP" means WCAS Information Partners, L.P., a Delaware limited
partnership.]5
["WCAS VIII" means Welsh, Carson, Anderson & Stowe VIII, L.P., a
Delaware limited partnership.]5
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
----------- ---------
Acquisition Proposal 5.01
Daily Price 5.01
Disadvantageous Condition 3.02(a)(ii)
Holder Preamble
Indemnified Party 3.07(c)
Indemnifying Party 3.07(c)
- --------
5 WCAS Agreement only.
4
<PAGE>
Term Section
----------- ---------
Inspectors 3.04(h)
Issuer Preamble
Majority Requesting Holders 3.02(a)(ii)
Market Price Per Common Share 5.01
Maximum Offering Size 3.02(b)
Records 3.04(h)
Registering Holders 3.01
Registrable Common Shares 3.01
Registration Expenses 3.01
Requesting Holder 3.01
Rule 144 2.01(a)
Subscription Agreement Recitals
Voting Securities 5.01
ARTICLE 2
RIGHTS AND OBLIGATIONS WITH RESPECT TO TRANSFER
SECTION 2.01. General Restrictions. (a) No Holder may Transfer any
Shares to any Person or group to the extent that, after giving effect to such
Transfer, such Holder knows, or has reason to believe, after asking such Person
or group, that such Person or group would beneficially own more than 5% of the
outstanding Common Shares calculated on a Fully-Diluted Basis, except (i)
pursuant to a Public Offering in which the underwriters have been instructed to
pursue a broad distribution or pursuant to Rule 144 (or any successor provision)
under the Securities Act (as such rule may be amended from time to time, "Rule
144"), (ii) to the Issuer or to a Permitted Transferee of such Holder or (iii)
with the prior written consent of the Issuer.
(b) Each Transfer of Shares must be made in compliance with the
Securities Act, any applicable state and foreign securities law and this Article
2. Each Holder understands and agrees that the Shares have not been registered
under the Securities Act and that they are restricted securities. Any attempt to
Transfer, pledge, grant a security interest in, or otherwise encumber any Shares
not in compliance with this Agreement shall be null and void and neither the
Issuer nor any transfer agent shall give any effect in the Issuer's transfer
records to such Transfer, pledge, grant or encumbrance.
SECTION 2.02. Agreement to Be Bound. No Transfer of Shares otherwise
permitted pursuant to Article 2 (other than Transfers pursuant to a Public
Offering or Rule 144 or Transfers to the Issuer) shall be effective unless (i)
the certificates representing such Shares delivered to such transferee shall
bear the legend set forth in Section 2.03, if required by such Section, and (ii)
prior to such Transfer, (A) such transferee (if not already a party to this
Agreement) shall have executed and delivered to the Issuer an instrument or
5
<PAGE>
instruments substantially in the form of Exhibit A hereto confirming that such
transferee has agreed to be bound as a "Holder" by the terms of this Agreement,
a copy of which instrument shall be maintained on file with the Secretary of the
Issuer and shall include the address of such transferee to which notices
hereunder shall be sent and (B) if so requested by the Issuer, upon receipt of
an opinion of counsel (which shall be reasonably acceptable to the Issuer) to
the effect that such Shares may be sold or transferred pursuant to an exemption
from registration under the Securities Act, [ ; provided that the provisions of
clause (ii) above shall not be applied to any Transfer by a Holder of any of its
Shares to the partners of such Holder pursuant to a distribution in respect of
the partnership interests of such Holder].6
SECTION 2.03. Legends. (a) Each certificate evidencing outstanding
Shares acquired by any Holder shall bear a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, OR
TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SHAREHOLDERS
AGREEMENT DATED AS OF [ ], 2000, A COPY OF WHICH WILL BE
FURNISHED BY THE ISSUER UPON REQUEST AND WITHOUT CHARGE.
(b) If any Shares (i) shall (in the case of Common Shares) cease to be
Registrable Common Shares, (ii) may be sold pursuant to Rule 144(k) or otherwise
in the public market without being registered under the Securities Act or (iii)
are sold pursuant to Rule 144 (other than Rule 144(k)), upon the written request
of the holder thereof, the Issuer shall issue, in the case of clauses (i) and
(ii) above, to such holder and, in the case of clause (iii), to the purchaser
thereof, a new certificate evidencing such Shares without the first sentence of
the legend required by Section 2.03(a) hereof endorsed thereon. If any Shares
shall cease to be subject to the restrictions on Transfer set forth in this
Agreement, the Issuer shall, upon the written request of the holder thereof,
issue to such holder a new certificate evidencing such Shares without the second
sentence of the legend (or the reference therein to the applicable agreement)
required by Section 2.03(a) hereof endorsed thereon.
- --------
6 CSFB Agreement and WCAS Agreement only.
6
<PAGE>
ARTICLE 3
REGISTRATION RIGHTS
SECTION 3.01. Definitions. The following terms, as used in this
Article 3, have the following meanings:
"Piggyback Holders" means Persons (other than the Holders) who hold
Series G Shares or Common Shares received upon conversion of Series G Shares and
who are entitled to incidental registration rights pursuant to an agreement
(other than this Agreement) with the Issuer.
"Registering Holders" means Holders and Piggyback Holders whose
Registrable Common Shares are covered by or offered pursuant to a registration
statement filed pursuant to this Article 3.
"Registrable Common Shares" means all Common Shares of the Issuer owned
by the Holders and the Piggyback Holders or into which the Series G Shares owned
by the Holders and the Piggyback Holders may be converted. Registrable Common
Shares shall cease to be Registrable Common Shares when (i) a registration
statement with respect to the sale of such Common Shares shall have become
effective under the Securities Act and such Common Shares shall have been
disposed of pursuant to such registration statement, or (ii) such Common Shares
shall have ceased to be outstanding.
"Registration Expenses" means all (i) registration, qualification and
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of a qualified independent
underwriter, if any, counsel in connection therewith and the reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Common Shares), (iii) printing expenses, (iv) internal expenses of
the Issuer (including, without limitation, all salaries and expenses of officers
and employees performing legal or accounting duties), (v) fees and disbursements
of counsel for the Issuer, (vi) customary fees and expenses for independent
certified public accountants retained by the Issuer (including the expenses of
any comfort letters or costs associated with the delivery by independent
certified public accountants of a comfort letter or comfort letters), (vii) fees
and expenses of any special experts retained by the Issuer in connection with
such registration, (viii) reasonable fees and expenses of one separate firm of
attorneys for the Registering Holders (which counsel shall be selected by the
Registering Holders selling securities constituting a majority of all securities
to be included in such registration in the case of any registration pursuant to
Section 3.02) and (ix) fees and expenses of listing the Registrable Common
Shares on a securities exchange; but shall not include any underwriting fees or
discounts or commissions attributable to the sale of Registrable Common Shares.
7
<PAGE>
"Requesting Holder" means [any WCAS Entity] [any CSFB Entity]
[Microsoft].
SECTION 3.02. Demand Registration Rights. (a) Registration on Request.
Subject to Section 3.08, if one or more Requesting Holders desire to effect the
registration under the Securities Act of outstanding Registrable Common Shares
pursuant to a Public Offering, such Requesting Holders may make a written
request that the Issuer effect such registration; provided that, no Requesting
Holder shall make any such written request (1) during the pendency of, and for a
period of 90 days after the effective date of, any Public Offering of securities
for the account of the Issuer, (2) for a period of six months after the
effective date of any Public Offering of Common Shares for the account of any
Person other than the Issuer pursuant to the exercise of a demand registration
right covering Common Shares acquired upon exercise of Series G Shares and (3)
prior to the first anniversary of the date hereof. Each such request will
specify the number of shares of Registrable Common Shares proposed to be sold
and will also specify the intended method of disposition thereof. The Issuer
will promptly give written notice of such requested registration to all other
Holders of Registrable Common Shares and all Piggyback Holders of Registrable
Common Shares, and thereupon will use its best efforts to effect, as promptly as
practicable, the registration under the Securities Act of:
(i) the Registrable Common Shares which the Issuer has been so
requested to register by such Requesting Holders pursuant to this
Section 3.02; and
(ii) the Registrable Common Shares which the Issuer has been requested
to register by all Holders (other than such Requesting Holders) and all
Piggyback Holders by written request given to the Issuer within 15 days
after the giving of such written notice by the Issuer;
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Common Shares so to be
registered; provided that:
(x) the Issuer shall not be obligated to effect a registration
pursuant to this Section 3.02 unless the aggregate number of
Registrable Common Shares to be sold is greater than or equal to
2,500,000;
(y) subject to Section 3.02(f), the Issuer shall not be obligated to
effect more than one registration pursuant to this Section 3.02; and
(z) at the time of any request to register Registrable Common Shares
pursuant to this Section 3.02, if the Board of Directors determines in
its good faith reasonable judgment that the Issuer should not file any
registration statement otherwise required to be filed pursuant to
8
<PAGE>
Section 3.02(a) because the Issuer is engaged in any financing,
acquisition or other material transaction which would require the
Issuer to disclose material non-public information (a "Disadvantageous
Condition"), the Issuer shall be entitled to postpone for the shortest
reasonable period of time (but not exceeding 90 days from the date of
the request), the filing of such registration statement and shall
promptly give the Requesting Holders written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. Such right
to delay a request for registration pursuant to this Section 3.02 may
not be exercised more than twice in any 12-month period. If the Issuer
shall so postpone the filing of the registration statement, the
Requesting Holders proposing to sell securities constituting a
majority of all securities requested to be included by all Requesting
Holders (the "Majority Requesting Holders") shall have the right to
withdraw (without prejudice to their rights under clause (y) above)
the request for registration by giving written notice to the Issuer
within 30 days after receipt of the notice of postponement.
Promptly after the expiration of the 15-day period referred to in
clause (ii) above, the Issuer shall notify each holder of Registrable Common
Shares to be included in the registration of the other holders requesting
Registrable Common Shares to be included therein and the number of Registrable
Common Shares requested to be included therein. The Majority Requesting Holders
may, at any time prior to the effective date of the registration statement
relating to such registration, revoke such request, without liability to any
other holder holding Registrable Common Shares requested to be registered
pursuant to clause (ii) above, by providing a written notice to the Issuer
revoking such request; provided that, if as a result thereof such registration
is abandoned, all Registration Expenses shall be borne by the Requesting Holders
revoking such registration pro rata in accordance with the number of securities
requested by them to be included in such registration, in which case such
revocation shall be without prejudice to the rights of the Holders under clause
(y) above.
(b) Priority Participation in Requested Registrations. If the managing
underwriter shall advise the Issuer that, in its view, the number of securities
requested to be included in such registration (including securities which the
Issuer may request to be included which are not Registrable Common Shares)
exceeds the largest number of securities which can be sold without having a
material adverse effect on such offering (the "Maximum Offering Size"),
including the price at which such securities can be sold, the Issuer will
include in such registration:
(i) first, the Registrable Common Shares requested to be included in
such registration pursuant to Section 3.02(a)(i) or (ii) by all Holders
and their Permitted Transferees and all Piggyback Holders, allocated
(if necessary) among such holders pro rata based on the number
9
<PAGE>
of Registrable Common Shares requested to be included in such
registration; and
(ii) second, Common Shares to be sold for the account of other
Persons (including the Issuer), with such priorities among them as the
Issuer shall determine.
(c) Registration Statement Form. Registrations under this Section 3.02
shall be on such appropriate registration form of the Commission (i) as shall be
selected by the Issuer, subject to Section 3.02(a), and as shall be reasonably
acceptable to the Requesting Holders and (ii) as shall permit the disposition of
such Registrable Common Shares in accordance with the method or methods of
disposition intended on the part of the Requesting Holders who initiated the
request. Notwithstanding anything herein to the contrary, if, pursuant to a
registration request under this Section 3.02, the Issuer proposes to effect
registration by filing of a registration statement on Form S-3 (or any successor
or similar short-form registration statement) and any managing underwriter shall
advise the Issuer in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success of such proposed
offering, then such registration shall be effected on such other form.
(d) Expenses. The Issuer will pay promptly all Registration Expenses
in connection with the registration requests made pursuant to this Section 3.02.
(e) Underwriters. The managing underwriter or underwriters of any
Public Offering effected pursuant to this Section 3.02 shall be selected by the
Registering Holders proposing to sell securities constituting a majority of all
securities requested to be included by all Registering Holders, which selection
shall be reasonably satisfactory to the Issuer, it being understood that the
selection of Credit Suisse First Boston Corporation shall be deemed to be
satisfactory to the Issuer. The price, terms and provisions of such offering
shall be subject to the approval of the Requesting Holders. The Issuer will
enter into customary agreements (including an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such Registrable Common Shares. The
Holders shall not be required by the Issuer to make any representation or
warranty in the underwriting agreement in connection with such offering other
than as to their ownership and authority to Transfer, free of liens, claims and
encumbrances (other than those that arise under the terms of this Agreement).
(f) If at least 75% of the Registrable Common Shares requested to be
registered by the Requesting Holders are not included in such registration, then
the Requesting Holders shall have the right to require the Issuer to effect an
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additional registration under the Securities Act of all or part of the
Requesting Holders' Registrable Common Shares in accordance with this Section
3.02 and the Issuer shall pay the Registration Expenses in connection with such
additional registration.
SECTION 3.03. Piggy-Back Registration Rights. (a) Right to Include
Registrable Common Shares. Subject to Section 3.08, if the Issuer at any time
proposes to register any of its equity securities under the Securities Act
(other than (i) by a registration on Form S-4, Form S-8 or any successor or
similar form, (ii) pursuant to a registration requested pursuant to Section
3.02, (iii) in connection with a direct acquisition by the Issuer of another
Person or (iv) pursuant to an employee share purchase plan, dividend
reinvestment plan or similar plan of the Issuer), in each case whether or not
for sale for its own account, it will at each such time give prompt written
notice at least 30 days prior to the anticipated filing date of the registration
statement relating to such registration to all Holders of Registrable Common
Shares of its intention to do so and of such Holders' rights under this Section
3.03. Any such notice shall offer all such Holders, subject to Section 3.08, the
opportunity to include in such registration such number of Registrable Common
Shares as each such Holder may request. Upon the written request of any Holder
made within 15 days after the receipt of any such notice (which request shall
specify the number of Registrable Common Shares intended to be disposed of by
such Holder), the Issuer will use its best efforts to effect the registration
with the Commission under the Securities Act and any related qualification or
other compliance of all Registrable Common Shares which the Issuer has been so
requested to register, to the extent required to permit the disposition of the
Registrable Common Shares to be so registered; provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Issuer shall determine for any reason not to
register or to delay registration of such securities, the Issuer shall give
written notice of such determination to each Holder and, thereupon, (x) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Common Shares in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any Holder entitled to
do so, to request that such registration be effected as a registration under
Section 3.02, and (y) in the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Common Shares, for the same
period as the delay in registering such other securities. Each Holder holding
Registrable Common Shares requesting to be included in such registration may
elect, in writing not less than 5 Business Days prior to the effective date of
the registration statement filed in connection with such registration, not to
register such securities in connection with such registration. No registration
effected under this Section 3.03 shall relieve the Issuer of its obligation to
effect any registration upon request under Section 3.02. The Issuer will pay
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promptly all Registration Expenses in connection with each registration of
Registrable Common Shares requested pursuant to this Section 3.03.
(b) Priority in Incidental Registrations. If a registration pursuant
to this Section 3.03 involves a Public Offering and the managing underwriter
shall advise the Issuer that, in its view, the number or proposed mix of
securities (including all Registrable Common Shares) which the Issuer, the
Holders and any other Persons intend to include in such registration exceeds the
Maximum Offering Size, the Issuer will include in such registration, in the
priority listed below, securities up to the Maximum Offering Size:
(i) first, (A) if such registration has been initiated by the Issuer
for its own account, the equity securities the Issuer proposes to sell
or (B) if such registration has not been initiated by the Issuer or a
Piggyback Holder, the equity securities proposed to be sold by the
security holder(s) initiating such registration;
(ii) second, the Registrable Common Shares requested to be included
in such registration by all Holders and their Permitted Transferees and
all Piggyback Holders, allocated (if necessary) among such holders pro
rata based on the number of Registrable Common Shares requested by them
to be included in such registration, subject to any incidental
registration rights granted a higher priority under contracts existing
on the date hereof; and
(iii) third, equity securities to be sold for the account of other
Persons having incidental registration rights and, if such registration
has not been initiated by the Issuer, the Issuer, with such priorities
among them as the Issuer shall determine.
SECTION 3.04. Registration Procedures. If the Issuer is required to use
its best efforts to effect the registration of any Registrable Common Shares
under the Securities Act as provided in Section 3.02 or 3.03, the Issuer will,
as promptly as possible:
(a) prepare and file with the Commission a registration statement on
an appropriate form (subject to 3.02(c)), and thereafter use its best efforts to
cause such registration statement to become effective and to remain effective
pursuant to the terms of the underwriting agreement and prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period specified pursuant to the terms
of the underwriting agreement and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
Registering Holders thereof set forth in such registration statement; provided
that the Issuer will, at least 5 Business Days (or at least 3 Business Days in
the case of incidental registrations) prior to filing a registration statement
or prospectus or any amendment or supplement thereto, furnish to each
Registering Holder copies of such registration statement or prospectus (or
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amendment or supplement) as proposed to be filed (including, upon the request of
such Holder, documents to be incorporated by reference therein) which documents
will be subject to the reasonable review and comments of such Holder (and its
attorneys) during such 5-Business Day period (or 3-Business Day period, as the
case may be) and the Issuer will not file any registration statement, any
prospectus or any amendment or supplement thereto (or any such documents
incorporated by reference) containing any statements with respect to such Holder
to which such Holder shall reasonably object in writing;
(b) furnish to each Registering Holder and to any underwriter such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 or Rule 430A under the Securities Act, in conformity with the requirements
of the Securities Act, documents incorporated by reference in such registration
statement, amendment, supplement or prospectus and such other documents (in each
case including all exhibits), as a Registering Holder or underwriter may
reasonably request;
(c) after the filing of the registration statement, promptly notify
each Registering Holder of the effectiveness thereof and of any stop order
issued or threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered and promptly
notify such Registering Holder of such lifting or withdrawal of such order;
(d) use its reasonable best efforts to register or qualify all
Registrable Common Shares and other securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions as
the Registering Holders holding a majority of the Registrable Common Shares to
be included in such registration or the underwriter shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable the Registering Holders to
consummate the disposition in such jurisdictions of the securities owned by such
Registering Holders, except that the Issuer shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this Section
3.04(d) be obligated to be so qualified, to subject itself to taxation in any
such jurisdiction or to consent to general service of process in any such
jurisdiction;
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(e) use its reasonable best efforts to cause all Registrable Common
Shares covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to enable
the Registering Holders to consummate the disposition of such Registrable Common
Shares;
(f) furnish to each Registering Holder and to each underwriter, if
any, a signed counterpart of: (i) an opinion of counsel for the Issuer addressed
to such Holder and underwriter on which opinion both Holder and such underwriter
are entitled to rely and (ii) a "comfort" letter signed by the independent
public accountants who have certified the Issuer's financial statements included
in such registration statement, each in customary form and covering such matters
of the type customarily covered by opinions or comfort letters, as the case may
be, as the Registering Holders holding a majority of the Registrable Common
Shares included in such registration or the managing underwriter therefor
reasonably request. The Issuer will use its best efforts to have such comfort
letters addressed to each Registering Holder;
(g) immediately notify each Registering Holder at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and promptly prepare and furnish to such Registering Holder a reasonable
number of copies of any supplement to or amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
statements therein not misleading in the light of the circumstances under which
they were made;
(h) make available for inspection by any Registering Holder, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other professional retained by any
such Holder or underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Issuer
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and shall cause (i) the Issuer's
officers, directors and employees to supply all information reasonably requested
by any Inspectors and (ii) the senior management of the Issuer and its
Subsidiaries to participate in any "road show" presentations to investors for
such period of time as is reasonably requested by the managing underwriters, in
each case in connection with such registration statement. Each such Holder
agrees that information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuer or its Affiliates unless and until
such information is made generally available to the public. Each such Holder
further agrees that it will, upon learning that disclosure of such Records is
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sought in a court of competent jurisdiction, give notice to the Issuer and allow
the Issuer, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(i) use its reasonable best efforts to list all Registrable Common
Shares covered by such registration statement on any securities exchange or
quotation system on which any of the Registrable Common Shares is then listed or
traded; and
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement or
such other document that shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder.
The Issuer may require each Registering Holder to promptly furnish to
the Issuer, as a condition precedent to including such Registering Holder's
Registrable Common Shares in any registration, such written information
regarding such Registering Holder and the distribution of such securities as the
Issuer may from time to time reasonably request in writing.
Each Holder agrees that upon receipt of any notice from the Issuer of
the happening of any event of the kind described in Section 3.04(g), such Holder
will forthwith discontinue such Holder's disposition of Registrable Common
Shares pursuant to the registration statement relating to such Registrable
Common Shares until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.04(g) and, if so directed by the
Issuer, will deliver to the Issuer (at the Issuer's expense) all copies, other
than permanent file copies, then in such Holder's possession, of the prospectus
and any amendments or supplements thereto relating to such Registrable Common
Shares current at the time of receipt of such notice. In the event the Issuer
shall give such notice, the Issuer shall extend the period during which the
effectiveness of such registration statement shall be maintained by the number
of days during the period from and including the date of the giving of notice
pursuant to Section 3.04(g) to the date when the Issuer shall make available to
the Holders a prospectus supplemented or amended to conform with the
requirements of Section 3.04(g).
SECTION 3.05. Participation in Underwritten Registrations. No Person
may participate in any Public Offering pursuant to Section 3.02 or 3.03 unless
such Person (i) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled hereunder to
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approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
SECTION 3.06. Holdback Agreements. If any registration or offering of
Registrable Common Shares shall be in connection with a Public Offering, the
Issuer and each Holder agrees not to effect any public sale or distribution of
any Common Shares or any securities convertible into or exchangeable or
exercisable for Common Shares (in each case other than as part of such Public
Offering), if and to the extent requested by the managing underwriter during the
90-day period beginning on the effective date of such registration statement
without the written consent of such managing underwriter; provided that each
such Holder has received written notice of such registration at least 5 Business
Days prior to the anticipated beginning of the 90-day period referred to above.
SECTION 3.07. Indemnification. (a) Indemnification by the Issuer. The
Issuer agrees to indemnify and hold harmless each Registering Holder, its
officers, directors and agents and each Person, if any, who controls such
Registering Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities or expenses caused by any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Common Shares (as amended or supplemented
if the Issuer shall have furnished any amendments or supplements thereto) or
caused by any 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 the Issuer will reimburse such Registering Holders for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending such loss, claim, damage, liability or expense,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information furnished in writing to the Issuer by such
Registering Holder or on such Registering Holder's behalf expressly for use
therein; provided that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, or in
any prospectus, as the case may be, the indemnity agreement contained in this
paragraph shall not apply to the extent that any such loss, claim, damage,
liability or expense results from the fact that a current copy of the prospectus
(or the amended or supplemented prospectus, as the case may be) was not sent or
given to the Person asserting any such loss, claim, damage, liability or expense
at or prior to the written confirmation of the sale of the Registrable Common
Shares concerned to such Person if it is determined that the Issuer has provided
such prospectus (or amended or supplemented prospectus) and it was the
responsibility of such Registering Holder to provide such Person with a current
copy of the prospectus (or such amended or supplemented prospectus, as the case
may be) and such current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) would have cured the defect giving rise to such
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loss, claim, damage, liability or expense. The Issuer also agrees to indemnify
any underwriters of the Registrable Common Shares, their officers and directors
and each Person who controls such underwriters on substantially the same basis
as that of the indemnification of the Registering Holders provided in this
Section 3.07(a).
(b) Indemnification by the Registering Holders. Each Registering
Holder agrees, severally but not jointly, to indemnify and hold harmless the
Issuer, its officers, directors and agents and each Person, if any, who controls
the Issuer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Issuer to such Registering Holder, but only (i) with respect to
information furnished in writing by such Registering Holder or on such
Registering Holder's behalf expressly for use in any registration statement or
prospectus relating to the Registrable Common Shares, or any amendment or
supplement thereto, or any preliminary prospectus or (ii) to the extent that any
loss, claim, damage, liability or expense described in Section 3.07(a) results
from the fact that a current copy of the prospectus (or the amended or
supplemented prospectus, as the case may be) was not sent or given to the Person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Common Shares concerned to
such Person if it is determined that it was the responsibility of such
Registering Holder to provide such Person with a current copy of the prospectus
(or such amended or supplemented prospectus, as the case may be) and such
current copy of the prospectus (or such amended or supplemented prospectus, as
the case may be) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. Each such Registering Holder also agrees to
indemnify and hold harmless the underwriters of the Registrable Common Shares,
their officers and directors and each Person who controls such underwriters on
substantially the same basis as that of the indemnification of the Issuer
provided in this Section 3.07(b). Each Registering Holder's obligation to
indemnify pursuant to this Section is several in the proportion that the
proceeds of the offering received by such Holder bears to the total proceeds of
the offering received by all the Holders and not joint.
(c) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to this Section
3.07, such Person (an "Indemnified Party") shall promptly notify the Person
against whom such indemnity may be sought (the "Indemnifying Party") in writing
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses; provided that the failure of
any Indemnified Party so to notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the
Indemnifying Party is materially prejudiced by such failure to notify. In any
such proceeding, any Indemnified Party shall have the right to retain its own
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counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall
be reimbursed as they are incurred. In the case of any such separate firm for
the Indemnified Parties, such firm shall be designated in writing by the
Indemnified Party that had the largest number of Registrable Common Shares
included in such registration. The Indemnifying Party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding 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 arising out of such proceeding.
(d) Contribution. If the indemnification provided for in this Section
3.07 is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein, then each Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Issuer and the Registering Holders on the one
hand and the underwriters on the other, in such proportion as is appropriate to
reflect the relative benefits received by the Issuer and such Registering
Holders on the one hand and the underwriters on the other, from the offering of
the Registrable Common Shares, or if such allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits but also the relative fault of the Issuer and such Registering
Holders on the one hand and of such underwriters 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 and (ii) as
between the Issuer on the one hand and each such Registering Holder on the
other, in such proportion as is appropriate to reflect the relative fault of the
Issuer and of each such Registering Holder in connection with such statements or
omissions, as well as any other relevant equitable considerations. The relative
benefits received by the Issuer and such Registering Holders on the one hand and
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such underwriters on the other shall be deemed to be in the same proportion as
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Issuer and such
Registering Holders bear to the total underwriting discounts and commissions
received by such underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of the Issuer and such
Registering Holders on the one hand and of such underwriters on the other shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuer and such
Registering Holders or by such underwriters. The relative fault of the Issuer on
the one hand and of each such Registering Holder on the other 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 such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Issuer and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 3.07 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 3.07, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Common Shares underwritten by it and distributed
to the public were offered to the public exceeds the aggregate amount of any
damages which such underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission, and no
Holder shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Common Shares of such Holder were
offered to the public exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Each such Holder's obligation to contribute
pursuant to this Section 3.07 is several in the proportion that the proceeds of
the offering received by such Holder bears to the total proceeds of the offering
received by all such Holders and not joint.
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SECTION 3.08. Shelf Registration. Notwithstanding anything herein to
the contrary, if the Issuer prepares and files with the Commission a shelf
registration statement on an appropriate form relating to all (but not less than
all) of the Registrable Common Shares of the Holders in accordance with Rule 415
under the Securities Act (the "Shelf Registration Statement"), the registration
rights of the Holders pursuant to Sections 3.02 and 3.03 shall be suspended for
so long as such Shelf Registration Statement is maintained continuously
effective and in compliance with the Securities Act and usable for resale of
Registrable Common Shares. The provisions set forth in Section 3.02(d), the last
sentence of Section 3.03(a), Section 3.04 and Section 3.07 shall, to the extent
relevant, apply to any such Shelf Registration Statement. In the event that the
Shelf Registration Statement is withdrawn or ceases to be effective for any
reason, the Holder's rights under Sections 3.02 and 3.03 shall be reinstated in
accordance with their original terms without any action by any party.
ARTICLE 4
CORPORATE GOVERNANCE; COVENANTS
SECTION 4.01. Board of Directors. (a) [WCAS VIII]7 [CSFB]8 shall be
entitled to designate one director nominee to the Board of Directors for so long
as it continues (together with its Permitted Transferees) to beneficially own
Shares representing at least 40% of its Initial Holdings. Such director nominee
shall be reasonably acceptable to the Issuer (it being understood that without
limiting the generality of the foregoing, [Larry Sorrel and each general partner
of WCAS VIII]7 [Hartley Rogers]8 shall be deemed to be acceptable.) The Issuer
agrees to use its best efforts to take all actions necessary to have such
director nominee elected to the Board of Directors. The Issuer shall be deemed
to have used its best efforts to elect a nominee director to the Board of
Directors if it nominates such designee, includes the designee in the Issuer's
proxy statement, recommends a vote for such designee and casts proxies given to
the Issuer in favor of such designee.
(b) For so long as [WCAS VIII]7 [CSFB]8 has the right to designate a
director nominee pursuant to Section 4.01(a), it shall have the right to have
such director appointed to either the Audit or Compensation committee of the
Board of Directors. Such director initially shall be appointed to the [ ]
committee. The Issuer agrees to use its best efforts to take all actions
necessary to appoint such committee member.
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7 WCAS Agreement only.
8 CSFB Agreement only.
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(c) If, as a result of death, disability, retirement, resignation,
removal (with or without cause) or otherwise, there shall exist or occur any
vacancy on the Board of Directors, [WCAS VIII]9 [CSFB]10 may designate another
individual nominee to be appointed by the Board of Directors to fill such
capacity and serve as such director.
(d) The Issuer hereby agrees to take, or cause to be taken, all
reasonable actions and to do, or cause to be done, all reasonable things
necessary to give effect to the rights of [WCAS VIII]9 [CSFB]10 hereunder.
(e) The director nominated pursuant to Section 4.01(a) shall be
entitled to receive the same compensation and benefits (including equity-based
compensation) that are provided to the other non-executive members of the Board
of Directors.
(f) For so long as [WCAS VIII]9 [CSFB]10 retains its right to nominate
a director pursuant to Section 4.01(a), the Issuer shall maintain policies of
directors and officers liability insurance, with financially sound and reputable
insurers, having terms that are customary for companies similarly situated and
providing coverage in amounts at least equal to the amounts in effect on the
date hereof.
(g) Until such time as it shall cease to own [40%]11 [20%]12 of its
Initial Holdings, [Microsoft]11, [WCAS VIII]9 [CSFB]10 [but only to the extent
that it no longer has the right to designate a director nominee pursuant to
Section 4.01(a))]12 shall be entitled to designate one individual as a
non-voting observer to the Board of Directors. Such observer shall have the
right to (i) receive notice of each meeting of the Board of Directors in the
same manner as such notice is provided to the Issuer's directors, (ii) attend
and participate in discussions at each such meeting and (iii) receive copies of
all materials distributed to the directors in connection with such meetings at
the same time as such materials are distributed to the directors. In the event
that an observer, for whatever reason, fails to attend a meeting of the Board of
Directors, the Chairman of the Board of Directors or his designee shall, upon
the observer's request, brief the observer on the matters discussed at such
meeting, other than any such matters with respect to which such observer would
have been excluded from such meeting pursuant to Section 4.01(h). Any observer
will be required to sign appropriate confidentiality and similar agreements as
the Issuer shall reasonably request. Each observer shall be entitled to
reimbursement from the Issuer for all reasonable and customary expenses
associated with attending meetings of the Board of Directors, but shall not be
entitled to any other form of compensation or benefits.
- --------
9 WCAS Agreement only.
10 CSFB Agreement only.
11 Microsoft Agreement only.
12 WCAS and CSFB Agreements only.
21
<PAGE>
(h) In respect of any director nominated pursuant to Section 4.01(a)
and observer designated pursuant to Section 4.01(g), materials relating to any
matter may be withheld from such director or observer, and such director or
observer may be excluded from a meeting of the Board of Directors during
consideration of any matter, if, in the good faith determination of a majority
of the members of the Board of Directors excluding any conflicted director, such
matter is competitively sensitive.
SECTION 4.02. Financial Information. [CSFB]13 [WCAS]14 shall be
entitled to (i) receive all information made available to shareholders of the
Issuer or members of the Board of Directors, in each case, at the same time as
such materials are distributed to the shareholders or directors, as the case may
be, (ii) meet on a quarterly basis with members of senior management, (iii)
receive copies of management "flash" reports (to be mutually agreed upon), in
each such case, for so long as the [CSFB Entities and their Permitted
Transferees]12 [WCAS Entities and their Permitted Transferees]13 beneficially
own Shares representing at least 20% of their Initial Holdings and (iv) disclose
on a confidential basis all such information referred to in clauses (i) and
(iii) above to the other [CSFB Entities]12 [WCAS Entities].13
ARTICLE 5
STANDSTILL
SECTION 5.01. Definitions. The following terms, as used in this
Article 5, have the following meanings:
"Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving the
Issuer or any Subsidiary or the acquisition of any equity interest in, or a
substantial portion of the assets of, the Issuer or any Subsidiary, including
engaging in any tender offer or exchange offer for Voting Securities.
"Daily Price" means, as of any date, (i) if the Common Shares then are
listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the closing
price on such date as reported on the NYSE Composite Transactions Tape; (ii) if
the Common Shares then are not listed and traded on the NYSE, the closing price
on such date as reported by the principal national securities exchange on which
- --------
13 CSFB Agreement only.
14 WCAS Agreement only.
22
<PAGE>
the shares are listed and traded; (iii) if the Common Shares then are not listed
and traded on any such securities exchange, the last reported sale price on such
date on the National Market of the National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ"); or (iv) if the Common Shares then
are not traded on the NASDAQ National Market, the average of the highest
reported bid and lowest reported asked price on such date as reported by NASDAQ.
"Market Price Per Common Share" means, as of any date, the average
(weighted by daily trading volume) of the Daily Prices per Common Share for the
20 consecutive trading days immediately prior to such date.
"Voting Securities" means all securities of the Issuer entitled, in the
ordinary course, to vote in the election of directors of the Issuer.
SECTION 5.02. Acquisition of Voting Securities. (a) Each Holder agrees
that, until the earlier of (i) the tenth anniversary of the date hereof or (ii)
the date on which such Holder owns less than 20% of its Initial Holdings, such
Holder will not, directly or indirectly, purchase or otherwise acquire, or agree
or offer to purchase or otherwise acquire, beneficial ownership of any Voting
Securities without the Issuer's prior written consent, except (x) for Voting
Securities owned by such Holder on the date hereof, (y) upon conversion or
exchange of securities outstanding on the date hereof or (z) for Voting
Securities acquired as a dividend or in connection with any transaction
described in Section 6.10.
[(b) Notwithstanding anything to the contrary herein, the parties
hereto agree that the provisions of this Section 5.02 shall apply only to the
[CSFB] [WCAS] Entities and not to any of their Partners, other Affiliates or
portfolio companies that are not otherwise a holder of Shares and a Holder under
this Agreement.]15
SECTION 5.03. Certain Actions. [(a)] Each Holder agrees that, until the
earlier of (x) the tenth anniversary of the date hereof, (y) the date on which
such Holder owns less than 20% of its Initial Holdings and (z) from and after
the third anniversary of the date hereof, such time as the Market Price Per
Common Share has been less than $15.00 for any continuous 90-day period, without
the Issuer's prior written consent, such Holder will not, directly or
indirectly:
(i) make, or take any action to solicit, initiate or encourage,
either alone or in conjunction with another Person, an Acquisition
Proposal;
- --------
15 WCAS and CSFB Agreements only.
23
<PAGE>
(ii) "solicit", or become a "participant" in any "solicitation"
of, any "proxy" (as such terms are defined in Regulation 14A under the
Exchange Act) from any holder of Voting Securities in connection with
any vote on any matter, or agree or announce its intention to vote
with any Person undertaking a "solicitation" in opposition to any
matter which has been approved by the Issuer's Board of Directors;
(iii) initiate, support or in any way participate in a "group" with
respect to any Voting Securities (other than a group comprised solely
of such Holder and its Affiliates);
(iv) grant any proxies with respect to any Voting Securities to any
Person (other than as recommended by the Board of Directors) or
deposit any Voting Securities in a voting trust or enter into any
other arrangement or agreement with respect to the voting thereof
(other than a proxy granted to, or a voting trust or arrangement with,
one or more of its Affiliates); or
(v) except as otherwise provided in Article 4, take any action to
seek to control or influence the management, policies or affairs, of
the Issuer;
(vi) initiate, support or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to the
Issuer as described in Rule 14a-8 under the Exchange Act, or induce or
attempt to induce any other Person to initiate any such stockholder
proposal; or
(vii) propose any amendment to or waiver of this Article 5 that is
or may be required to be publicly disclosed or publicly announce such
Holder's intentions, views or opinions in favor of any of the
foregoing.
[(b) Notwithstanding anything to the contrary herein, the parties
hereto agree that the provisions of this Section 5.03 shall apply only to the
[CSFB]16 [WCAS]17 Entities and not to any of their financial partners, portfolio
companies or other Affiliates that are not otherwise a holder of Shares and a
Holder under this Agreement.]18
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16 CSFB Agreement only.
17 WCAS Agreement only.
18 CSFB Agreement and WCAS Agreement only.
24
<PAGE>
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 6.02. No Inconsistent Agreements. The Issuer will not hereafter
enter into or amend any agreement with respect to its securities which prevents
the Issuer from discharging its obligations under this Agreement or grant rights
superior to the rights granted to the Holders in this Agreement.
SECTION 6.03. Entire Agreement. The Transaction Agreements constitute
the entire agreement and understanding of the parties hereto and thereto in
respect of the subject matter contained herein and therein, and there are no
restrictions, promises, representations, warranties, covenants, or undertakings
with respect to the subject matter hereof or thereof, other than those expressly
set forth or referred to herein or therein. The Transaction Agreements supersede
all prior agreements and understandings between the parties hereto and thereto
with respect to the subject matter hereof and thereof.
SECTION 6.04. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopier) and shall be
deemed to have been duly given or made if sent by telecopy, delivered personally
or sent by registered or certified mail (postage prepaid, return receipt
requested) to such party at its address or telecopier number set forth on the
signature pages hereof, or such other address or telecopier number as such party
may hereinafter specify for the purpose to the party giving such notice. All
such notices, requests and other communications shall be deemed received on the
date of receipt by the recipient thereof if received prior to 5:00 p.m. in the
place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding Business Day in the place of receipt.
SECTION 6.05. Applicable Law; Submission to Jurisdiction. This
Agreement shall be construed in accordance with and governed by the laws of the
State of Delaware, without regard to the conflicts of law rules of such state.
Each of the parties hereto hereby consents to the exclusive jurisdiction of the
United States District Court for the District of Delaware and the Chancery Court
of the State of Delaware (and of the appropriate appellate courts therefrom)
over any suit, action or proceeding arising out of or relating to this
Agreement. Each party hereto irrevocably waives, to the fullest extent permitted
by law, any objection which it may now or hereafter have to the laying of venue
in any such court or that any such proceeding which is brought in accordance
with this Section has been brought in an inconvenient forum. Subject to
applicable law, process in any such 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 and subject to applicable law, each party
agrees that service of process on such party as provided in Section 6.04 shall
be deemed effective service of process on such party. Nothing herein shall
25
<PAGE>
affect the right of any party to serve legal process in any other manner
permitted by law or at equity or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction. WITH RESPECT TO A
PROCEEDING IN ANY SUCH COURT, EACH OF THE PARTIES IRREVOCABLY WAIVES AND
RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY JURY, AND AGREES THAT IT WILL NOT
SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING.
SECTION 6.06. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
SECTION 6.07. Successors, Assigns, Transferees. The provisions of this
Agreement shall be binding upon and accrue to the benefit of the parties hereto
and their respective heirs, executors, administrators, successors and permitted
assigns. Notwithstanding the foregoing, neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Issuer or any Holder, except (i) as specifically provided
pursuant to the terms hereof and (ii) in connection with a Transfer of
securities of the Issuer described in Section 2.02 and otherwise permitted
pursuant to the terms hereof. Nothing in this Agreement, expressed or implied,
is intended to confer on any Person other than the parties hereto, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION 6.08. Amendments; Waivers. (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, in the case of an
amendment, by the parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
26
<PAGE>
SECTION 6.09. 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 6.10. Recapitalization, etc. In the event that any capital
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any Shares by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the Shares or any other change in capital
structure of the Issuer, appropriate adjustments shall be made with respect to
the relevant provisions of this Agreement so as to fairly and equitably
preserve, as far as practicable, the original rights and obligations of the
parties hereto under this Agreement.
SECTION 6.11. Remedies. The parties hereto acknowledge and agree that
in the event of any breach of this Agreement, the parties would be irreparably
harmed and could not be made whole by monetary damages. Each party hereto
accordingly agrees (i) not to assert by way of defense or otherwise that a
remedy at law would be adequate, and (ii) that the parties agree, in addition to
any other remedy to which they may be entitled, that the remedy of specific
performance of this Agreement is appropriate in any action in court.
SECTION 6.12. Fees and Expenses. Unless otherwise provided herein or in
the other Transaction Agreements, all costs and expenses incurred in connection
with the transactions contemplated by the Transaction Agreements shall be paid
by the party incurring such costs and expenses.
SECTION 6.13. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, the Issuer and each of the Holders will use its
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 give effect to the terms and conditions of the Transaction
Agreements.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
WINSTAR COMMUNICATIONS, INC.
By: _________________________________
Name:
Title:
Address for notices:
[TO COME]
Facsimile:
Attention:
[HOLDER]
By: _________________________________
Name:
Title:
Address for notices:
[TO COME]
Facsimile:
Attention:
28
<PAGE>
[HOLDER]
By: _______________________________
Name:
Title:
Address for notices:
[TO COME]
Facsimile:
Attention:
[HOLDER]
By: _______________________________
Name:
Title:
Address for notices:
[TO COME]
Facsimile:
Attention:
29
<PAGE>
EXHIBIT A
FORM OF AGREEMENT TO BE BOUND
[Date]
To the Parties to the Shareholders
Agreement dated as of [ ], 2000
Ladies and Gentlemen:
Reference is made to the Shareholders Agreement dated as of [ ],
2000 (the "Shareholders Agreement") among Winstar Communications, Inc., a
Delaware corporation, [ ], [ ], and the other Persons listed
on the signature pages thereof and each other Person who has or shall become a
party to the Shareholders Agreement as provided therein. Capitalized terms used
herein and not defined have the meanings ascribed to them in the Shareholders
Agreement to the same extent and in the same manner as the assignor.
In consideration of the covenants and agreements contained in the
Shareholders Agreement, the undersigned hereby confirms and agrees that it shall
be bound as a "Holder" by all of the provisions of the Shareholders Agreement.
This letter shall be construed and enforced in accordance with the
internal laws of the State of Delaware.
Very truly yours,
___________________________
A-1
Winstar Enters Into $900 Million Investment Agreement With Microsoft and Leading
Investment Firms
NEW YORK--(BUSINESS WIRE)--Dec. 15, 1999--
Microsoft and Winstar Announce Agreement to Deliver Broadband Applications
WINSTAR COMMUNICATIONS, INC. (NASDAQ: WCII) today announced that it has entered
into an agreement under which Microsoft Corporation and several leading
investment firms including Credit Suisse First Boston Equity Partners, L.P. and
associated investment vehicles; Welsh, Carson, Anderson and Stowe, VIII, L.P;
and Cascade Investments - will invest $900 million in Winstar to fund the
company's business plan and expand its network, products and services.
The investment is in the form of convertible preferred stock which converts into
common stock at $67.50 per share, a premium of 20 and 25 percent over Winstar's
average share price for the last 20 and 30 trading days, respectively.
Winstar and Microsoft also announced a commercial relationship to deliver and
promote broadband applications. Microsoft and Winstar will market new and
existing general business, e-commerce and multimedia applications services
which will help small and medium-sized businesses adopt an Internet-centered
business style. The companies will pursue a joint sales and marketing program,
which will include building-specific marketing events, a national seminar
program, generating sales referrals and participation at trade shows.
Microsoft will license its leading, branded applications to Winstar on an
Application Service Provider (ASP) basis. Winstar, which is already a member of
the Microsoft Office Online beta pilot, will provide Office 2000 and other
application services to Winstar customers using its "national-local,"
end-to-end, high-speed broadband network and its locally distributed Internet
data centers. This will allow Winstar customers to access economically the
remotely hosted application software with the same speeds and performance that
they have come to expect from software installed at their desktops.
Microsoft and Winstar will pursue a multifaceted technology relationship.
Winstar will participate in the Microsoft Partner Solution Center (MPSC) on the
Microsoft campus in Redmond, WA. The focus of this participation will be on
developing new bandwidth-intensive services such as on-demand IP
videoconferencing, based on Microsoft software. The companies also plan to
collaborate with respect to Microsoft's BizTalk e-commerce and media streaming
initiatives. These applications will be delivered over Winstar's high-speed
broadband network.
"This partnership and the related capital investment accomplishes several goals
for Winstar," said William J. Rouhana, Jr., Winstar's chairman and chief
executive officer. "It validates our business model and strategy; significantly
strengthens our balance sheet; adds valuable strategic agreements that give us a
special advantage in developing new products and services that make the
broadband network more useful to our customers; and brings us new synergies,
expertise and insight. This is an exciting time in Winstar's history, and we
<PAGE>
look forward to working with these world-class partners as we grow our business
worldwide."
"Microsoft and Winstar share a mutual vision of how to deliver applications over
the broadband network, especially to small and medium-sized companies," said
Thomas Koll, vice president, Network Solutions Group, Microsoft. "Winstar's
broadband network and expertise make it a great partner for Microsoft, as we
expand the number of ways that applications are delivered and used by knowledge
workers. We look forward to a long and successful relationship with Winstar."
"Winstar has redefined the broadband connection through superior technology, a
focused business plan and industry leadership," said Lawrence B. Sorrel, a
General Partner of Welsh, Carson, Anderson and Stowe, who will join Winstar's
Board of Directors. "As the largest private equity investor in the information
services and telecommunications industries, we are very excited about this
partnership, and we look forward to helping Winstar build its business by
exploring mutually beneficial opportunities between Winstar and our portfolio
companies."
"Credit Suisse First Boston has had a longstanding relationship with Winstar,"
said David A. DeNunzio, Head of Credit Suisse First Boston's Private Equity
Division. "Winstar has clearly amassed a unique set of assets and a sizeable
lead in bringing broadband services to businesses. We are committed to working
with Winstar to further its broadband vision." Hartley R. Rogers, Managing
Director and Co-Head of Credit Suisse First Boston Equity Partners, L.P., will
join Winstar's Board of Directors.
The cumulative participating senior convertible preferred stock has a 5.75
percent quarterly accreting liquidation preference or, at Winstar's option,
quarterly cash dividend. Winstar can require the preferred stock to be converted
into common stock after three years, based on certain conditions. Winstar will
be required to redeem any remaining shares of the preferred stock then
outstanding after 10 years by paying either common stock or cash at its
election. The combined investment represents ownership of approximately 13
percent of Winstar's fully diluted common shares.
The closing of the transaction is subject to customary conditions, including
approval under the Hart Scott Rodino Antitrust Improvements Act of 1976, as
amended. Winstar anticipates closing in January 2000.
About Credit Suisse First Boston Equity Partners, L.P.
Credit Suisse First Boston Equity Partners, L.P., is a part of Credit Suisse
First Boston Private Equity Division, the global private equity arm of the
Credit Suisse Group, a global financial services company providing a
comprehensive range of banking and insurance products. Together with its
international private equity funds, the Credit Suisse First Boston Private
Equity Division now has committed capital of approximately $3.6 billion, with
dedicated professionals working in five offices around the world.
<PAGE>
About Welsh, Carson, Anderson and Stowe
WCAS, founded in 1979, has $8 billion of assets under management. The firm
focuses exclusively on the information services, communications and healthcare
industries, and invests currently out of a $3.2 billion equity fund and a $1.4
billion subordinated debt fund. In addition to this investment in Winstar, WCAS
has sponsored a number of recent transactions with leading communications
companies, including Amdocs Ltd., BTI Telecom, Bridge Information Systems, Inc.,
Centennial Cellular Corp., SpectraSite Holdings, dba Communications and SAVVIS
Communications. In aggregate, WCAS has committed approximately $1.8 billion of
capital to recent communications investments, making it one of the largest
private investors in the communications industry in the country.
About Winstar
Winstar Communications, Inc., www.Winstar.com, helps companies around the globe
engage in Frictionless Business(SM) through the use of seamless communications
and technology. Winstar provides its customers with a comprehensive set of
high-quality, digital-age broadband communications services, including
high-speed Internet access and data transport, Web-based information and local
and long distance services.
Winstar offers its services in more than 70 markets throughout the U.S. and in
Europe, Asia and South America. It is the largest holder of broadband fixed
wireless spectrum, with licenses in the top 60 U.S. markets and in ten
international markets. Winstar's broadband fixed wireless capabilities
complement and extend the reach of its extensive fiber network. The company's
long-haul fiber network, which supports IP (Internet Protocol), ATM
(Asynchronous Transfer Mode) and frame relay, will extend more than 16,000 route
miles and connect the top 60 U.S. markets. Winstar's intracity fiber network
will consist of nearly 6,000 route miles in over 60 major domestic and
international markets.
Winstar's Tier 1 Internet backbone and enhanced Web service offerings, including
Web hosting and design, make Winstar one of the largest Internet companies in
the U.S. The company's innovative applications enable businesses to take
advantage of the new Internet economy. Recently, the company launched
Office.com, A Service From Winstar(SM), www.office.com, a premier Internet
destination site designed to bring the best of the business Web to the desktop.
Except for any historical information contained herein, the matters discussed in
this press release contain forward-looking statements that involve risks and
uncertainties, which are described in the company's SEC reports, including the
10-K for the year ended December 31, 1998, and the 10-Q for the quarter ended
September 30, 1999.
Winstar is a registered trademark, and Wireless Fiber and Frictionless Business
are service marks of Winstar Communications, Inc. Office.com is a service mark
of Winstar Communications, Inc., and is used under license.
CONTACT: WINSTAR
Financial Community:
Daniel Briggs
Director, Capital Market Relations
212/792-9032
[email protected]
or
Press:
Marianne Steiner, VP, Corporate Communications
212/792-9021
[email protected]
