WINSTAR COMMUNICATIONS INC
S-3, 2000-06-02
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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<PAGE>

      As filed with the Securities and Exchange Commission on June 2, 2000
                                                           Registration No. 333-
--------------------------------------------------------------------------------



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                          -----------------------------


                             REGISTRATION STATEMENT
                                    UNDER THE
                             SECURITIES ACT OF 1933
                                       ON
                                    FORM S-3

                          -----------------------------


                          WINSTAR COMMUNICATIONS, INC.
             (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<CAPTION>

<S>                                                  <C>                                     <C>
         Delaware                                             4812                                13-3585278
(State or Other Jurisdiction of                      (Primary Standard Industrial              (I.R.S. Employer
Incorporation or Organization)                       Classification Code Number)             Identification Number)
</TABLE>

                                685 Third Avenue
                            New York, New York 10017
                                 (212) 792-9800
  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)


                          -----------------------------


                             William J. Rouhana, Jr.
                Chief Executive Officer and Chairman of the Board
                          Winstar Communications, Inc.
                                685 Third Avenue
                            New York, New York 10017
                                 (212) 792-9800
 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
                             of Agent for Service)


                          -----------------------------


                                   Copies to:

                             David Alan Miller, Esq.
                            Graubard Mollen & Miller
                                600 Third Avenue
                            New York, New York 10016
                            Telephone: (212) 818-8800
                               Fax: (212) 818-8881

         Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.

         If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|

         If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|

         If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|

         If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|

         If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|




<PAGE>



(Cover Page Continued)

                         CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>

                                                                            Proposed               Proposed
                                                                             Maximum                Maximum
             Title of Each Class of                 Amount to be       Offering Price Per          Aggregate             Amount of
          Securities to be Registered                Registered             Security            Offering Price      Registration Fee
================================================ ===================  =====================  =====================  ================
<S>                                              <C>                  <C>                    <C>                    <C>
Senior notes due 2010                                 2,000,000             $1,000(1)           $2,000,000,000(2)     $528,000.00

         Total                                                                                  $2,000,000,000        $528,000.00
================================================ ===================  =====================  =====================  ================
</TABLE>

(1)      The notes being registered for resale hereby are issuable in
         denominations of $1,000 and integral multiples of $1,000.

(2)      Represents the maximum principal amount of such notes that will be
         issued. The notes being offered for sale from time to time under this
         registration statement will be sold by Lucent Technologies Inc. and its
         transferees and are the notes which may be issued to them by us upon
         their conversion of loans under our credit facility with Lucent.

         The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.



<PAGE>







                             Preliminary Prospectus
                   Subject To Completion, Dated June 2, 2000

                                                                          [Logo]

                          WINSTAR COMMUNICATIONS, INC.

                     $2,000,000,000 of Senior Notes due 2010


         Our notes are being offered for resale from time to time by Lucent
Technologies Inc. and its transferees in an aggregate principal amount of up to
$2.0 billion. We will pay interest on the notes each April 15 and October 15. We
may redeem the notes on and after April 15, 2005. There is no sinking fund for
the notes.

         We will not receive any proceeds from the sale of the notes under this
prospectus. All net proceeds from the sale of the notes will go to the persons
who offer and sell the notes.

                  --------------------------------------------


         See "Risk Factors" beginning on page 9 for a discussion of certain
information that should be considered in connection with an investment in our
securities.

                  --------------------------------------------


         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

                      ------------------------------------



                 The date of this prospectus is ______ __, 2000



The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.




<PAGE>



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                               Page

<S>                                                                                                            <C>
SUMMARY  .........................................................................................................3
RISK FACTORS......................................................................................................9
RATIO OF EARNINGS TO FIXED CHARGES...............................................................................12
USE OF PROCEEDS..................................................................................................12
DESCRIPTION OF NOTES.............................................................................................13
PLAN OF DISTRIBUTION OF NOTES....................................................................................64
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS ANDSTOCK...............................................................65
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..........................................................81
LEGAL MATTERS....................................................................................................85
EXPERTS..........................................................................................................85
WHERE YOU CAN FIND MORE INFORMATION..............................................................................86
</TABLE>




                                        2


<PAGE>



                                     SUMMARY

Winstar's business

         We provide our customers with broadband services. We offer a
comprehensive suite of these services across our own end-to-end broadband
network in 60 major markets in the United States, including each of the top 30
U.S. markets. We also offer services in 12 overseas markets, including
Amsterdam, Brussels, Buenos Aires, London and Tokyo.

         We believe that our rapidly expanding network will enable us to offer
broadband services to a majority of the business market in the United States.
This market is projected to grow from approximately $178.0 billion in 1999 to
approximately $360.0 billion by 2009. Our domestic network combines local and
long-haul capacity with voice and data switching facilities and is capable of
carrying a substantial portion of our customers' communications traffic from
point of origin to point of termination.

Lucent facility

         In May 2000, our subsidiary, WVF-I LLC, entered into a new credit
facility with Lucent in an aggregate amount of $2.0 billion. This facility
replaced our then existing facility with Lucent. We and WCI Capital Corp., our
subsidiary and the borrower under the Bank facility described below, are
guarantors of this facility. Up to $1.0 billion of our new Lucent facility is
available to us at any one time for the purchase of network equipment and
related services. The balance will become available as the first $1.0 billion is
refinanced or syndicated. Lucent and its transferees are entitled under certain
circumstances to convert loans outstanding under the Lucent facility into the
notes being offered for resale under this prospectus.

Bank facility

         In May 2000, WCI Capital Corp. entered into a $1.15 billion revolving
credit and term loan agreement with a group of commercial banks and other
financial institutions. We and certain of our other subsidiaries are guarantors
under that agreement. We have fully drawn down all available loans under the
Bank facility and used those proceeds to pay all of the outstanding loans under
our former facility with Lucent.

Issuance of outstanding notes

         We issued substantially all of our currently outstanding notes in April
2000 as part of a plan of refinancing. The refinancing was comprised of the new
Lucent facility and the Bank facility discussed above and the additional
transactions discussed below. We undertook the refinancing in order to simplify
our financial structure, provide us with additional capital and increase our
operational and financial flexibility.


                                        3


<PAGE>



         Exchange offer

         We issued approximately $467.2 million principal amount of our 12-3/4%
senior notes due 2010 and approximately $920.6 million principal amount at
maturity ($451.0 million initial principal amount) of our 14-3/4% senior
discount notes due 2010 in exchange for:

         o        100.0% of our outstanding 15% senior subordinated deferred
                  interest notes due 2007;

         o        96.4% of our outstanding 10% senior subordinated notes due
                  2008; and

         o        99.9% of our outstanding 11% senior subordinated deferred
                  interest notes due 2008.

         The 12-3/4% senior notes due 2010 that we issued in the exchange offer
are identical in form and terms (other than interest rates) to the notes being
offered for resale under this prospectus.

         Cash tender offer

         We purchased for an aggregate of $753.3 million in cash:

         o        96.4% of our outstanding 14% senior discount notes due 2005;

         o        100.0% of our outstanding 14-1/2% senior deferred interest
                  notes due 2005;

         o        99.8% of the outstanding 12-1/2% guaranteed senior secured
                  notes due 2004 of our subsidiary, Winstar Equipment Corp.; and

         o        100.0% of the outstanding 12-1/2% guaranteed senior secured
                  notes due 2004 of our subsidiary, Winstar Equipment II Corp.

         Private placement

         We also completed a cash offering of $325.0 million aggregate principal
amount of our 12-1/2% senior notes due 2008, an additional $168.3 million of our
12-3/4% senior notes due 2010 and (U)200 million aggregate principal amount of
our euro-denominated 12-3/4% senior notes due 2010. The proceeds of this
offering, together with additional cash drawn from available funds, were used to
fund the cash tender offer.


                                        4


<PAGE>



         Preferred stock transaction

         We also entered into agreements with the holders of more than 96% of
the outstanding shares of our Series C 14-1/4% senior cumulative exchangeable
preferred stock due 2007, including:

         o        an agreement by the holders to waive any defaults under the
                  certificate of designation governing the Series C preferred
                  stock resulting from the refinancing and other events;

         o        our agreement to issue on June 15, 2000, 14-1/4% senior
                  subordinated deferred interest notes due 2007 in exchange for
                  all of the Series C preferred stock, as provided by the terms
                  of the Series C preferred stock certificate of designation;

         o        an agreement by the holders that various restrictive covenants
                  and default provisions in the indenture that will govern the
                  senior subordinated deferred interest notes will be
                  eliminated; and

         o        our agreement to exchange all of the senior subordinated
                  deferred interest notes issued under these agreements for a
                  combination of our 12-3/4% senior notes due 2010 and 14-3/4%
                  senior discount notes due 2010 and the holders' agreement to
                  participate in the exchange.

Corporate Information

         We were incorporated under the laws of the State of Delaware in
September 1990. Our principal executive offices are located at 685 Third Avenue,
New York, New York 10017 and our telephone number is (212) 792-9800.


                                        5


<PAGE>



                                    The Notes

         The form and terms of the notes are:

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<CAPTION>

<S>                                                                             <C>
Maturity date..............................................................     April 15, 2010

Interest...................................................................     Interest on the notes will accrue at a fixed annual
                                                                                rate equal to: (i) the "Yield to Worst Call" on our
                                                                                12-3/4% senior notes due 2010 which were issued
                                                                                pursuant to an indenture dated as of April 10, 2000
                                                                                plus (ii) 2.00%.   The "Yield to Worst Call" will be
                                                                                as published by Bloomberg L.P. under the heading
                                                                                "Yields to Call" at 4.p.m. on the date of the
                                                                                issuance of the notes (or as of such other time on
                                                                                such date as shall be agreed by us and the holders
                                                                                of the notes) and as calculated using a bid price as
                                                                                of 4.p.m. on such date (or as of such other time on
                                                                                such date as shall be agreed by us and the holders
                                                                                of the notes).

Interest payment date........................................................   April 15 and October 15, commencing the first such
                                                                                date after the issuance of the notes

Optional redemption..........................................................   Until April 15, 2003, we can choose to redeem up
                                                                                to an aggregate of 35% of the sum of the original
                                                                                principal amount of the notes with money we raise
                                                                                in certain equity offerings, if:

                                                                                o        we pay a redemption premium equal to the
                                                                                         applicable interest rate multiplied by
                                                                                         the principal amount of the notes we
                                                                                         redeem, plus the sum of the principal
                                                                                         amount so redeemed and accrued but unpaid
                                                                                         interest thereon to the date of
                                                                                         redemption;

                                                                                o        at least 65% of the original aggregate
                                                                                         principal amount of the notes remains
                                                                                         outstanding after each redemption; and

                                                                                o        the redemption is made within 90 days of
                                                                                         the closing of the related equity
                                                                                         offering.
</TABLE>





                                        6


<PAGE>


<TABLE>
<CAPTION>


<S>                                                                             <C>
                                                                                On or after April 15, 2005, we can redeem some or
                                                                                all of the notes at varying prices plus accrued but
                                                                                unpaid interest to the date of redemption.

Change of control..........................................................     Upon a change of control, each holder of the notes
                                                                                may require us to repurchase its notes at 101% of
                                                                                the principal amount of the notes on the date of
                                                                                repurchase, plus accrued and unpaid interest, if
                                                                                any, on such amount to the date of repurchase.

Ranking.....................................................................    The notes will be our senior obligations, ranking
                                                                                equally in right of payment with our other senior
                                                                                indebtedness and will be senior in right of payment
                                                                                to all of our existing and any future subordinated
                                                                                indebtedness. As of March 31, 2000, after giving pro
                                                                                forma effect to the exchange offer and consent
                                                                                solicitation, the private placement and the tender
                                                                                offer and consent solicitation which occurred in
                                                                                April 2000, and the borrowing of $1.15 billion under
                                                                                the Bank facility and payment of outstanding debt
                                                                                under our former facility with Lucent and assuming
                                                                                that 96.7% of the Series C preferred stock is
                                                                                exchanged for 12-3/4% senior notes due 2010 and
                                                                                senior discount notes due 2010, our senior
                                                                                indebtedness was approximately $2,762.1 million, of
                                                                                which $1,150.3 million was secured.

                                                                                The notes will be our unsecured obligations. Our
                                                                                secured indebtedness, including:

                                                                                o      the Lucent facility and

                                                                                o       the Bank facility

                                                                                will be effectively senior to the notes to the
                                                                                extent of the value of the assets securing such
                                                                                indebtedness. The notes will be effectively
                                                                                subordinated to all existing and future liabilities,
                                                                                including trade payables, of our subsidiaries.

                                                                                At March 31, 2000, after giving effect to the
                                                                                exchange offer and consent solicitation, private
                                                                                placement and tender offer and consent solicitation
                                                                                consummated in April 2000, and the preferred
</TABLE>


                                        7


<PAGE>

<TABLE>
<CAPTION>

<S>                                                                             <C>

                                                                                stock transaction (assuming the exchange of 96.7% of
                                                                                our outstanding Series C preferred stock for
                                                                                exchange notes), the Bank facility and the repayment
                                                                                of outstanding debt under the former Lucent
                                                                                facility, our subsidiaries had approximately
                                                                                $2,093.1 million of liabilities (excluding
                                                                                intercompany payables to us and each other),
                                                                                including $1,664.7 million of indebtedness.

Restrictive covenants......................................................     The indenture governing the notes contains
                                                                                covenants that limit our ability to, among other
                                                                                things:

                                                                                o      incur additional indebtedness;

                                                                                o      create liens;

                                                                                o      engage in sale-leaseback transactions;

                                                                                o      pay dividends or make distributions in
                                                                                       respect of our capital stock;

                                                                                o      redeem capital stock;

                                                                                o      make various types of investments and other
                                                                                       restricted payments;

                                                                                o      sell assets;

                                                                                o      issue or sell stock of our restricted
                                                                                       subsidiaries; and

                                                                                o      enter into transactions with stockholders or
                                                                                       affiliates or effect a consolidation or
                                                                                       merger.
</TABLE>





                                        8


<PAGE>



                                  RISK FACTORS

         The notes offered hereby involve a high degree of risk. Each
prospective purchaser should carefully consider the risks set forth in our
Annual Report on Form 10-K for the year ended December 31, 1999, as amended, and
the following risk factors.

Because we are a holding company, we will be dependent on dividends from our
operating subsidiaries and financings to make payments on the notes.

         We will not be able to make required payments on the notes unless we
derive the necessary proceeds from our subsidiaries or financings. We are a
holding company with no business operations of our own and our only material
assets are the stock of our operating subsidiaries and the proceeds raised from
sales of our securities, most of which we have loaned or contributed, or intend
to loan or contribute, to our subsidiaries. We will have to rely upon dividends
and other payments from our subsidiaries or proceeds from future sales of our
securities to generate the funds necessary to pay the principal of and interest
on the notes. Our subsidiaries, however, are not obligated to pay amounts due on
the notes or to make funds available for these payments. Our subsidiaries may
not be able to generate cash flow sufficient to pay a dividend or distribute
funds to us. Further, applicable state law and contractual restrictions, such as
restrictions in our subsidiaries' debt instruments including the Lucent facility
and the Bank facility, could prohibit such dividends or distributions.

We will not be able to fulfill our financial obligations under the notes if our
business does not grow as planned.

         If our business is not successful, we will not be able to generate
enough cash from our operations to repay our debt, including the notes, when
required. If we do not grow our business as planned and generate the necessary
cash from this business, we would have to either:

                  o        refinance our debt;

                  o        access other sources of capital, if they are even
                           available to us; or

                  o        default on our obligations.

         Any refinancing or raising of additional capital, if available, might
be on unfavorable terms in these circumstances. Any default on our financial
obligations could force us to diminish or halt our operations or liquidate our
assets.

We must satisfy our obligations to our subsidiaries' creditors before we will be
able to satisfy our obligations to the holders of the notes.

         Claims of creditors of our subsidiaries, including trade creditors and
creditors under our credit facilities, will have priority as to substantially
all of the assets of our subsidiaries over the holders of our indebtedness,
including the notes. Accordingly, the notes will be effectively subordinated to
all liabilities (including trade payables) of our subsidiaries. At March 31,
2000, after giving effect to the exchange offer and consent solicitation,
private placement and tender offer and consent solicitation


                                        9


<PAGE>



consummated in April 2000, and the preferred stock transaction (assuming the
exchange of 96.7% of our outstanding Series C preferred stock for exchange
notes), the Bank facility and the repayment of outstanding debt under our the
former Lucent facility, our subsidiaries had approximately $2,093.1 million of
liabilities (excluding intercompany payables to us and each other), including
$1,664.7 million of indebtedness.

Virtually all of our assets are pledged to secure the obligations of our
subsidiaries under the Bank facility and the Lucent facility.

         To secure the obligations of our subsidiaries under the Bank facility
and the Lucent facility, (i) we and most of our subsidiaries have pledged their
assets to the Bank lenders and (ii) the borrower under the Lucent facility has
granted the lenders under the Lucent facility a security interest in all
equipment and other items purchased with the proceeds of loans under that
facility. The pledges to the Bank lenders include pledges by each of such
subsidiaries that owns stock of another subsidiary of that stock (other than the
stock of the borrower under the Lucent facility, which has been pledged to the
lenders thereunder). As the notes are our unsecured obligations, in the event of
a default, the holders of the notes would participate only in the residual value
of the pledged assets after satisfaction of the obligations to the respective
leaders under the Bank facility and the Lucent facility.

If we undergo a change of control, we may not have the ability to raise the
funds necessary to finance the change of control offer required by the
indentures governing the notes.

         If we undergo a change of control, we may need to refinance large
amounts of our debt, including the notes and borrowings under the Lucent
facility and the Bank facility. Under the indentures governing the notes, if a
change of control occurs, we must offer to buy back the notes for a price equal
to 101% of the principal amount of the notes plus any accrued and unpaid
interest. We cannot assure you that there will be sufficient funds available for
us to make any required repurchases of the notes upon a change of control. In
addition, our credit facilities will prohibit us from repurchasing the notes
until we first repay such obligations in full. If we fail to repurchase the
notes in that circumstance, we will go into default under the indenture
governing the notes, the Lucent facility and the Bank facility. Any future debt
which we incur may also contain restrictions on repayment upon a change of
control. If any change of control occurs, we cannot assure you that we will have
sufficient funds to satisfy all of our debt obligations. These buyback
requirements may also delay or make it harder for others to effect a change of
control.


                                       10


<PAGE>


Do not place undue reliance on forward-looking statements contained in this
prospectus.

         Some of the statements under "Summary" and "Risk Factors" and elsewhere
in this prospectus are forward-looking statements that involve risks and
uncertainties. These forward-looking statements include statements about our
plans, objectives, expectations, intentions and assumptions and other statements
contained in this prospectus that are not statements of historical fact. You can
identify these statements by words such as "may," "will," "should," "estimates,"
"plans," "expects," "believes," "intends" and similar expressions. We cannot
guarantee future results, levels of activity, performance or achievements. Our
actual results and the timing of certain events may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such a discrepancy include those discussed in "Risk Factors" and elsewhere
in this prospectus. You are cautioned not to place undue reliance on any
forward-looking statements.


                                       11


<PAGE>


                       RATIO OF EARNINGS TO FIXED CHARGES

         For the ten months ended December 31, 1995, the years ended December
31, 1996, 1997, 1998 and 1999 and the three months ended March 31, 1999 and
2000, earnings from continuing operations were insufficient to cover fixed
charges by approximately 13.3 million, $80.1 million, $240.2 million, $427.0
million, $665.8 million, $154.3 million and $160.9 million, respectively. On a
pro forma basis, earnings from continuing operations were insufficient to cover
fixed charges by approximately $788.5 million and $176.3 million for the year
ended December 31, 1999 and the three months ended March 31, 2000, respectively.

                                 USE OF PROCEEDS

         We will not receive any proceeds from the sale of the notes. All net
proceeds from the sale of the notes will go to the persons who offer and sell
the notes.


                                       12


<PAGE>

                            DESCRIPTION OF THE NOTES

         We will issue the notes under an indenture between us and United States
Trust Company of New York, as trustee. The terms of the notes include those
stated in the indenture and those made part of that indenture by reference to
the Trust Indenture Act of 1939. The notes will initially be issued to Lucent or
its transferees upon conversion of loans outstanding under the Lucent facility.

         The notes:

         o        represent our unsecured senior obligations; and

         o        are senior in right of payment to all of our present and
                  future subordinated obligations.

         The meaning of certain defined terms used in this description of the
notes are defined in the subsection entitled "Certain Definitions." As used in
this section, "we," "our," "us" and similar pronouns refer to Winstar
Communications, Inc. on an unconsolidated basis without inclusion of or
reference to any of our subsidiaries.

          The following description is only a summary of the material provisions
of the indenture. We urge you to read the indenture because it, not this
description, defines your rights as holders of these notes. A copy of the
indenture has been filed as an exhibit to the registration statement of which
this prospectus forms a part.

Principal, maturity and interest

         We will issue notes to Lucent and its transferees from time to time, up
to a maximum aggregate principal amount of $2.0 billion. The notes will be
issued in denominations of $1,000 and integral multiple of $1,000. The notes
will mature on April 15, 2010.

          Interest on the notes will accrue at an annual rate equal to: (i) the
"Yield to Worst Call" on our 12-3/4% senior notes due 2010 which were issued
pursuant to an indenture dated as of April 10, 2000 plus (ii) 2.00%. The "Yield
to Worst Call" will be as published by Bloomberg L.P. under the heading "Yields
to Call" at 4.p.m. on the date of the issuance of the notes (or as of such other
time on such date as shall be agreed by us and the holders of the notes) and as
calculated using a bid price as of 4.p.m. on such date (or as of such other time
on such date as shall be agreed by us and the holders of the notes).

         Interest on the notes will be payable semiannually in arrears on April
15 and October 15, commencing on the first October 15 or April 15 following
issuance of the notes. We will make each interest payment to the holders of
record of the notes on the immediately preceding April 1 and October 1. We will
pay interest on overdue principal at 1% per annum in excess of the applicable
interest rate and will pay interest on overdue installments of interest at such
higher rate to the extent lawful.




                                       13
<PAGE>

         Interest on the notes will accrue from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.

Optional redemption

         Except as set forth below, we will not be entitled to redeem the notes
at our option prior to April 15, 2005. On and after April 15, 2005, we will be
entitled at our option to redeem all or a portion of the notes upon not less
than 30 nor more than 60 days' notice. These redemptions will be made at a
redemption price equal to:

         o        the principal amount being redeemed, plus

         o        accrued interest thereon to the redemption date, plus

         o        a redemption premium equal to the principal amount so redeemed
                  multiplied by the percentage determined by multiplying the
                  applicable interest rate by the percentage set forth below
                  opposite the period during which such redemption date occurs:


          12-Month Period
      Commencing on April 15                Redemption
       of the Year Indicated            Premium Percentage
       ---------------------            ------------------
               2005                             50%
               2006                           33-1/3%
               2007                           16-2/3%
               2008                            0.00%
          and thereafter

         Redemptions made in the foregoing manner will be subject to the right
of holders of record on the relevant record date to receive interest due on the
relevant interest payment date. Applicable interest rates used to calculate
redemption prices shall be exclusive of any increase thereto as a result of late
payment.

         Before April 15, 2003, we may at our option on one or more occasions
redeem notes in an aggregate principal amount not to exceed 35% of the aggregate
principal amount of the notes originally issued with the net cash proceeds from
one or more Public Equity Offerings; provided, however, that:

         o        at least 65% of such aggregate principal amount of notes
                  remains outstanding immediately after the occurrence of each
                  such redemption (other than notes held, directly or
                  indirectly, by us or our Affiliates); and



                                       14
<PAGE>

         o        each such redemption occurs within 90 days after the closing
                  date of the related Public Equity Offering.

         The redemption price with respect to any such redemption shall be the
sum of the principal amount so redeemed, plus accrued and unpaid interest
thereon to the redemption date, plus a redemption premium equal to the principal
amount so redeemed multiplied by a percentage equal to the applicable interest
rate (exclusive of any increase thereto as a result of late payment).

Selection and notice of redemption

         If we are redeeming less than all the notes at any time, the trustee
will select notes on a pro rata basis, by lot or by such other method as the
trustee in its sole discretion shall deem to be fair and appropriate.

         We will redeem notes of $1,000 or less in whole and not in part. We
will cause notices of redemption to be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each holder of notes to
be redeemed at its registered address.

         If any note is to be redeemed in part only, the notice of redemption
that relates to that note shall state the portion of the principal amount
thereof to be redeemed. We will issue a note in principal amount equal to the
unredeemed portion of the original note in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on notes or portions of them called for redemption.

No mandatory redemption; offers to purchase; open market purchases

         We are not required to make any mandatory redemption or sinking fund
payments with respect to the notes. However, under certain circumstances, we may
be required to offer to purchase notes as described under the subsections
entitled "Change of Control" and "Certain Covenants--Limitation on Sales of
Assets and Subsidiary Stock." We may at any time and from time to time purchase
notes in the open market or otherwise.

Ranking

         Senior Indebtedness versus notes

         The indebtedness evidenced by the notes will rank pari passu in right
of payment to all of our Senior Indebtedness, including our outstanding 14%
senior discount notes due 2005, senior notes due 2008, 12-3/4% senior notes due
2010, senior discount notes due 2010 and euro-denominated notes and our
guarantee of the remaining 12-1/2% senior secured notes due 2004 of Winstar
Equipment Corp. As of March 31, 2000, after giving pro forma effect to the
exchange offer and consent solicitation, the private placement and the tender
offer and consent solicitation which occurred in April 2000, and the borrowing
of $1.15 billion under the Bank facility and payment of outstanding debt under
our former facility with Lucent and assuming that 96.7% of



                                       15
<PAGE>

the Series C Preferred Stock is exchanged for our 12-3/4% senior notes due 2010
and senior discount notes due 2010, our Senior Indebtedness would have been
approximately $2,762.1 million, of which $1,150.0 million was secured.

         The notes are our unsecured obligations. Our secured debt and other
secured obligations incurred from time to time (including obligations with
respect to the Bank facility and the Lucent facility) will be effectively senior
to the notes to the extent of the value of the assets securing such debt or
other obligations.

         Liabilities of subsidiaries versus the notes

         Winstar Communications, Inc. is a holding company. Substantially all
our operations are conducted through our subsidiaries. Claims of creditors of
such subsidiaries, including trade creditors and creditors holding indebtedness
or guarantees issued by such subsidiaries, and claims of preferred stockholders
of such subsidiaries generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of our creditors, including
holders of the notes. Accordingly, the notes will be effectively subordinated to
creditors (including trade creditors) and preferred stockholders, if any, of our
subsidiaries.

         As of March 31, 2000, after giving pro forma effect to the exchange
offer and consent solicitation, the private placement and the tender offer and
consent solicitation consummated in April 2000 and the borrowing of $1.15
billion under the Bank facility and payment of outstanding debt under our former
facility with Lucent and assuming that 96.7 % of the Series C Preferred Stock is
exchanged for our 12-3/4% senior notes due 2010 and senior discount notes due
2010, the total liabilities of our subsidiaries would have been approximately
$2,093.1 million, including trade payables. Although the indenture limits the
incurrence of Indebtedness and preferred stock of certain of our subsidiaries,
such limitations are subject to a number of significant qualifications.
Moreover, the indenture does not impose any limitation on the incurrence by such
subsidiaries of liabilities that are not considered Indebtedness under the
indenture.

Book-Entry, Delivery and Form

         Holders of notes may request notes to be issued in the form of
definitive, fully registered certificates or as one or more definitive, fully
registered permanent global notes without interest coupons with the global
securities legend and restricted legend provided for by the indenture.

         Global notes shall be deposited on behalf of the purchasers of the
notes represented thereby with the trustee, at its principal corporate trust
office, as custodian for the Depository (or with such other custodian as the
Depository may direct), and registered in the name of the Depository or a
nominee of the Depository, duly executed by us and authenticated by the trustee,
and shall be delivered by the trustee to such Depository or pursuant to such
Depository's instructions or held by the trustee as custodian for the
Depository. The aggregate principal amount of the global notes may from time to
time be increased or decreased by adjustments made on the records of the trustee
and the Depository or its nominee as provided in the indenture.




                                       16
<PAGE>

         The Depository has advised us as follows: the Depository is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies (collectively, the "indirect participants")
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly.

         We expect that pursuant to procedures established by the Depository,
upon the deposit of a global note with the Depository, the Depository will
credit, on its book-entry registration and transfer system, the principal amount
of notes represented by such global note to the accounts of participants. The
accounts to be credited shall be designated by Lucent or its transferees.
Ownership of beneficial interests in a global note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in a global note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depository (with respect to participants' interests), the participants and
the indirect participants (with respect to the owners of beneficial interests in
the global note other than participants). The laws of some jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
transfer or pledge beneficial interests in a global note.

         So long as the Depository, or its nominee, is the registered holder and
owner of the global notes, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of any related notes
evidenced by the global notes for all purposes of the notes and the indenture.
Except as set forth below, as an owner of a beneficial interest in a global
note, you will not be entitled to have the notes represented by such global note
registered in your name, will not receive or be entitled to receive physical
delivery of certificated notes and will not be considered to be the owner or
holder of any notes under such global note. Each global note shall be
transferred to the beneficial owners thereof in the form of certificated notes
in an aggregate principal amount equal to the principal amount of such global
note, in exchange for such global note, if (i) the Depository notifies us that
it is unwilling or unable to continue as Depository for such global note or if
at any time the Depository ceases to be a "clearing agency" registered under the
Exchange Act and a successor depositary is not appointed by us within 90 days of
such notice, (ii) an Event of Default under the indenture has occurred and is
continuing or (iii) we, in our sole discretion, notify the trustee in writing
that we elect to cause the issuance of certificated notes under the indenture.

         We understand that under existing industry practice, in the event an
owner of a beneficial interest in a global note desires to take any action that
the Depository, as the holder of such global note, is entitled to take, the
Depository would authorize the participants to take such



                                       17
<PAGE>

action, and the participants would authorize beneficial owners owning through
such participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.

         We will make payments of principal of, premium, if any, and interest on
notes represented by the global notes registered in the name of and held by the
Depository or its nominee to the Depository or its nominee, as the case may be,
as the registered owner and holder of the global notes.

         We expect that the Depository or its nominee, upon receipt of any
payment of principal of, premium, if any, or interest on a global note will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global note as
shown on the records of the Depository or its nominee. We also expect that
payments by participants or indirect participants to owners of beneficial
interests in a global note held through such participants or indirect
participants will be governed by standing instructions and customary practices
and will be the responsibility of such participants or indirect participants. We
will not have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership interests in
the global notes for any note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depository and its participants or indirect
participants or the relationship between such participants or indirect
participants and the owners of beneficial interests in a global note owning
through such participants.

         Although the Depository has agreed to the foregoing procedures in order
to facilitate transfers of interests in the global notes among participants of
the Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither we nor
the trustee will have any responsibility or liability for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.

Payment

         We will pay interest on the notes (except defaulted interest) to the
persons who are registered holders of notes at the close of business on the
April 1 or October 1 next preceding the interest payment date even if notes are
canceled after the record date and on or before the interest payment date.
Holders must surrender notes to a paying agent to collect principal payments.
Payments in respect of the notes represented by a global note (including
principal, premium and interest) will be made by wire transfer of immediately
available funds to the accounts specified by the Depository. We will make all
payments in respect of a certificated note (including principal, premium and
interest) by mailing a check to the registered address of each thereof,
provided, however, that payments on a certificated note will be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such holder elects payment by wire transfer by giving written
notice to the trustee or the paying agent to such effect designating such
account no later than 30 days immediately preceding the relevant due date for
payment (or such other date as the trustee may accept in its discretion).



                                       18
<PAGE>

Change of Control

         Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that we repurchase such
Holder's notes at a purchase price in cash equal to 101% of the principal amount
thereof as of the date of purchase, plus, in each case, accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):

                  (1) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (1) such person shall be
deemed to have "beneficial ownership" of all shares that any 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 35% of the total
voting power of our Voting Stock; provided, however, that the Permitted Holders
beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, in the aggregate a lesser percentage of the total voting
power of our Voting Stock than such other person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors (for the purposes of this clause
(1), such other person shall be deemed to beneficially own any Voting Stock of a
Person (the "specified person") held by any other Person (the "parent entity"),
if such other person is the beneficial owner (as defined above in this clause
(1)), directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent entity and the Permitted Holders beneficially own (as
defined in this proviso), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent entity and do
not have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
entity);

                  (2) individuals who on the Issue Date constituted the Board of
Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by our shareholders was approved by a
vote of 66-2/3% of our directors then still in office who were either directors
on the Issue Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office;

                  (3) the adoption of a plan relating to our liquidation or
dissolution; or

                  (4) our merger or consolidation with or into another Person or
the merger of another Person with or into us, or the sale of all or
substantially all our assets (determined on a consolidated basis) to another
Person (other than, in all such cases, a Person that is controlled by the
Permitted Holders), other than a transaction following which in the case of a
merger or consolidation transaction, securities that represented 100% of our
Voting Stock immediately prior to such transaction (or other securities into
which such securities are converted as part of such merger or consolidation
transaction) constitute at least a majority of the voting power of the Voting
Stock of the surviving Person in such merger or consolidation transaction.




                                       19
<PAGE>

         Within 30 days following any Change of Control, we will mail a notice
to each Holder with a copy to the trustee (the "Change of Control Offer")
stating:

                  (1) that a Change of Control has occurred and that such Holder
has the right to require us to purchase such Holder's notes at a purchase price
in cash equal to 101% of the principal amount thereof on the date of purchase,
plus accrued and unpaid interest, if any, to the date of purchase (subject to
the right of holders of record on the relevant record date to receive interest
on the relevant interest payment date);

                  (2) 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);

                  (3) the purchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and

                  (4) the instructions, as determined by us, consistent with the
covenant described hereunder, that a Holder must follow in order to have its
notes purchased.

         We will not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture and purchases all notes validly tendered and not withdrawn
under such Change of Control Offer.

         We will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of notes as a result of a Change of Control.
To the extent that the provisions of any securities laws or regulations conflict
with the provisions of the covenant described hereunder, we will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached our obligations under the covenant described hereunder by virtue of our
compliance with such securities laws or regulations.

         The Change of Control purchase feature of the notes may in certain
circumstances make more difficult or discourage a sale or takeover of us and,
thus, the removal of incumbent management. The Change of Control purchase
feature is a result of negotiations between us and Lucent. We have no present
intention to engage in a transaction involving a Change of Control, although it
is possible that we could decide to do so in the future. Subject to the
limitations discussed below, we could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect our capital structure or credit ratings. Restrictions on our ability to
Incur additional Indebtedness are contained in the covenants described under the
subsections entitled "Certain Covenants -- Limitation on Indebtedness,"
"Limitation on Liens" and "Limitation on Sale/Leaseback Transactions." Such
restrictions can only be waived with the consent of the holders of a majority in
principal amount of the notes then outstanding. Except for the limitations
contained in such covenants, however, the indenture will not contain any
covenants or



                                       20
<PAGE>

provisions that may afford holders of the notes protection in the event of a
highly leveraged transaction.

         The Lucent facility, the Bank facility and certain other indebtedness
limit our ability to purchase any notes and also provide that the occurrence of
certain change of control events with respect to us would constitute a default
thereunder. In the event a Change of Control occurs at a time when we are
prohibited from purchasing notes, we may seek the consent of our lenders to the
purchase of notes or may attempt to refinance the borrowings that contain such
prohibition. If we do not obtain such a consent or repay such borrowings, we
will remain prohibited from purchasing notes. In such case, our failure to offer
to purchase notes would constitute a Default under the indenture, which would,
in turn, likely constitute a default under the Lucent facility, the Bank
facility and certain other indebtedness.

         Future indebtedness that we may incur may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require the repurchase of such indebtedness upon a Change of Control. Moreover,
the exercise by the holders of their right to require us to repurchase the notes
could cause a default under such indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on us. Finally,
our ability to pay cash to the holders of notes following the occurrence of a
Change of Control may be limited by our then existing financial resources. There
can be no assurance that sufficient funds will be available when necessary to
make any required repurchases.

         The provisions under the indenture relative to our obligation to make
an offer to repurchase the notes as a result of a Change of Control may be
waived or modified with the written consent of the holders of a majority in
principal amount of the notes.

Certain Covenants

         The indenture contains covenants including, among others, the
following:

         Limitation on Indebtedness

                  (a) We will not, and will not permit any Restricted Group
Member to, Incur, directly or indirectly, any Indebtedness; provided, however,
that we will be entitled to Incur Indebtedness if, on the date of such
Incurrence and after giving effect thereto on a pro forma basis, the
Consolidated Leverage Ratio would be less than 6.0 to 1.

                  (b) Notwithstanding the foregoing paragraph (a), so long as no
Default has occurred and is continuing, we and the Restricted Group Members will
be entitled to Incur any or all of the following Indebtedness:

                           (1)      Indebtedness Incurred pursuant to one or
more Permitted Credit Facilities; provided, however, that, after giving effect
to any such Incurrence, the aggregate principal amount of such Indebtedness then
outstanding does not exceed (A) the greater of (x) $1.15 billion and (y) 85% of
Eligible Receivables less (B) the sum of (i) all principal payments with respect
to such Indebtedness (other than Indebtedness Incurred pursuant to the revolving



                                       21
<PAGE>

loan portion of a Permitted Credit Facility) pursuant to paragraph (a)(3)(A) of
the covenant described under "--Limitation on Sales of Assets and Subsidiary
Stock" and (ii) the principal amount of such Indebtedness assumed by a
transferee in any Asset Disposition;

                           (2)      Indebtedness owed to and held by us or a
Restricted Group Member; provided, however, that (A) any subsequent issuance or
transfer of any Capital Stock or the occurrence of any other event which results
in any such Restricted Group Member ceasing to be a Restricted Group Member or
any subsequent transfer of such Indebtedness (other than to us or another
Restricted Group Member) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the obligor thereon and (B) if we are the
obligor on such Indebtedness, such Indebtedness is not secured and is expressly
subordinated to the prior payment in full in cash of all obligations with
respect to the notes;

                           (3)      the notes, the senior notes due 2008, the
12-3/4% senior notes due 2010, the senior discount notes due 2010 issued on
April 10, 2000 and the euro-denominated notes issued on April 10, 2000;

                           (4)      Indebtedness outstanding on the Issue Date
(other than Indebtedness described in clause (1), (2) or (3) of this covenant)
and exchange debentures issued in exchange for the Series C Preferred Stock in
accordance with its terms or any 12-3/4% senior notes due 2010 or senior
discount notes due 2010 issued in exchange for such exchange debentures or the
Series C Preferred Stock;

                           (5)      Purchase Money Indebtedness; provided,
however, that, to the extent such Purchase Money Indebtedness is Incurred by a
Restricted Group Member, such Purchase Money Indebtedness shall be Incurred
pursuant to a Permitted Credit Facility or a Vendor Financing; provided further,
however, that the amount of such Purchase Money Indebtedness does not exceed
100% of the cost and directly related expenses of the construction,
installation, acquisition, lease, insurance, shipping, development or
improvement of, or any service agreement, maintenance agreement, warranty
agreement or similar agreement in respect of, the applicable Telecommunications
Assets;

                           (6)      Indebtedness in an amount which, when taken
together with the amount of all of our other Indebtedness Incurred pursuant to
this clause (6) and then outstanding, does not exceed two times the sum of (x)
the aggregate Net Cash Proceeds received by us from the issuance or sale of our
Capital Stock (other than Disqualified Stock) (other than an issuance or sale to
a Subsidiary of us or a Permitted International Joint Venture and other than an
issuance or sale to an employee stock ownership plan or to a trust established
by us, any of our Subsidiaries or any Permitted International Joint Venture for
the benefit of their employees) and (y) the fair market value of any of our
Capital Stock (other than Disqualified Stock) issued to any Person (other than a
Subsidiary of us or a Permitted International Joint Venture) (i) in exchange for
Telecommunications Assets or (ii) in exchange for Capital Stock of another
Person a substantial majority of the assets of which consist of
Telecommunications Assets in a transaction pursuant to which such other Person
becomes a Restricted Group Member, in each case received or issued, as the case
may be, on or subsequent to February 1, 2000; provided, however, that such Net
Cash Proceeds or fair market value have not served as a basis for making a
Restricted



                                       22
<PAGE>

Payment pursuant to paragraph (a)(3)(B) or paragraphs (b)(1) or (b)(5) of the
covenant described under " -- Limitation on Restricted Payments";

                           (7)      Indebtedness of a Restricted Group Member
Incurred and outstanding on or prior to the date on which such Subsidiary (in
the case of a Restricted Subsidiary) or an interest in such entity (in the case
of a Permitted International Joint Venture) was acquired by us (other than
Indebtedness Incurred in connection with, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary (in the case of a
Restricted Subsidiary) or an interest in such entity (in the case of a Permitted
International Joint Venture) was acquired by us); provided, however, that on the
date of such acquisition and after giving pro forma effect thereto, we would
have been able to Incur at least $1.00 of additional Indebtedness pursuant to
paragraph (a) of this covenant;

                           (8)      Refinancing Indebtedness in respect of
Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3), (4),
(5) or (7) or this clause (8); provided, however, that any Refinancing
Indebtedness Incurred by a Restricted Group Member in respect of Indebtedness
Incurred pursuant to clause (5) is Incurred pursuant to a Permitted Credit
Facility or a Vendor Financing;

                           (9)      Hedging Obligations consisting of (A)
Interest Rate Agreements or Currency Agreements directly related to Indebtedness
permitted to be Incurred by us pursuant to the indenture; provided, however,
that the notional amount of any such Hedging Obligation does not exceed the
amount of Indebtedness to which such Hedging Obligation relates or (B) Currency
Agreements used to hedge non-U.S. dollar currency exposures of us and our
Restricted Group Members, entered into in accordance with customary industry
practices for companies in the Telecommunications Business with international
operations and not for purposes of speculation;

                           (10)     Indebtedness solely in respect of letters of
credit, bank guarantees, banker's acceptances, cash deposits, surety bonds, bid
bonds and performance bonds Incurred in the ordinary course of business;
provided, however, that such instruments or deposits do not support any
Indebtedness other than Indebtedness which, if Incurred by us, would be
permitted to be Incurred pursuant to another provision of this covenant;

                           (11)     Indebtedness of us or a Restricted Group
Member consisting of a Guaranty of Indebtedness of a Restricted Group Member
permitted to be Incurred under the indenture; provided, however, that the entity
providing the Guaranty would have been able to Incur such Indebtedness under the
indenture; and

                           (12)     Indebtedness of us or a Restricted Group
Member in an aggregate principal amount which, when taken together with all of
our other Indebtedness and the Restricted Group Members outstanding on the date
of such Incurrence (other than Indebtedness permitted by clauses (1) through
(11) above or paragraph (a)) does not exceed $50.0 million.


                                       23
<PAGE>

                  (c) Notwithstanding the foregoing, we will not Incur any
Indebtedness pursuant to the foregoing paragraph (b) (other than the Incurrence
of (1) any exchange debentures issued in exchange for the Series C Preferred
Stock in accordance with its terms or senior discount notes due 2010 or 12-3/4%
senior notes due 2010 issued in exchange for such exchange debentures or Series
C Preferred Stock and (2) any Indebtedness issued in exchange for the Existing
Subordinated Notes) if the proceeds thereof are used, directly or indirectly, to
Refinance any Subordinated Obligations unless such Indebtedness shall be
subordinated to the notes to at least the same extent as such Subordinated
Obligations.

                  (d) For purposes of determining compliance with this covenant,
(1) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, we, in our sole discretion,
will classify such item of Indebtedness at the time of Incurrence and only be
required to include the amount and type of such Indebtedness in one of the above
clauses and (2) we will be entitled to divide and classify an item of
Indebtedness in more than one of the types of Indebtedness described above.

         Limitation on Restricted Payments

                  (a) We will not, and will not permit any Restricted Group
Member, directly or indirectly, to make a Restricted Payment if at the time we
or such Restricted Group Member makes such Restricted Payment:

                           (1)      a Default shall have occurred and be
continuing (or would result therefrom);

                           (2)      after giving effect thereto on a pro forma
basis, we are not entitled to Incur an additional $1.00 of Indebtedness pursuant
to paragraph (a) of the covenant described under the subsection entitled
"Limitation on Indebtedness"; or

                           (3)      the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed the
sum of (without duplication):

                                    (A)     the amount of (x) cumulative EBITDA
during the period (taken as a single accounting period) beginning on the first
day of our fiscal quarter beginning after the Issue Date and ending on the last
day of the most recent fiscal quarter ending at least 45 days prior to the date
of such Restricted Payment minus (y) the product of 1.5 times cumulative
Consolidated Interest Expense during such period; plus

                                    (B)     subject to paragraph (c) below, 100%
of the aggregate Net Cash Proceeds received by us from the issuance or sale of
our Capital Stock (other than Disqualified Stock) subsequent to the Issue Date
(other than an issuance or sale to a Subsidiary of us or a Permitted
International Joint Venture and other than an issuance or sale to an employee
stock ownership plan or to a trust established by us or by any of our
Subsidiaries or any Permitted International Joint Venture for the benefit of
their employees); provided, however, that such Net Cash Proceeds have not served
as a basis to make a Restricted Payment pursuant to clauses (b)(1) or (b)(5)
below; plus




                                       24
<PAGE>

                                    (C)     the amount by which Indebtedness of
us or a Restricted Group Member is reduced on our consolidated balance sheet
upon the conversion or exchange (other than by a Subsidiary of us or a Permitted
International Joint Venture) subsequent to the Issue Date of any Indebtedness of
us or a Restricted Group Member for or into our Capital Stock (other than
Disqualified Stock) (less the amount of any cash, or the fair value of any other
property (other than our Capital Stock that is not Disqualified Stock),
distributed by us or a Restricted Group Member upon such conversion or
exchange); plus

                                    (D)     an amount equal to the sum of (x)
the net reduction in the Investments (other than Permitted Investments) made by
us or any Restricted Group Member in any Person resulting from repurchases,
repayments or redemptions of such Investments by such Person, proceeds realized
on the sale of such Investment, proceeds representing the return of capital
(excluding dividends and distributions), in each case received by us or any
Restricted Group Member, and (y) if an Unrestricted Subsidiary is designated as
a Restricted Group Member or an Investee is designated as a Restricted Group
Member or becomes a Restricted Subsidiary, the portion (proportionate to our
equity interest in such Subsidiary or Investee) of the fair market value of the
net assets of such Unrestricted Subsidiary or Investee at the time such
Unrestricted Subsidiary is designated a Restricted Group Member or such Investee
is designated as a Restricted Group Member or becomes a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in the case of any
such Person, Unrestricted Subsidiary or Investee, the amount of Investments
(excluding Permitted Investments) previously made (and treated as a Restricted
Payment and included in the calculation of the amount of Restricted Payments) by
us or any Restricted Group Member in such Person, Unrestricted Subsidiary or
Investee.

                  (b)      The preceding provisions will not prohibit:

                           (1)      subject to paragraph (c) below, any
Restricted Payment made out of the Net Cash Proceeds of the substantially
concurrent sale of (or specified with particularity at the time of the sale of,
and subsequently made with such Net Cash Proceeds of), or made by exchange for,
our Capital Stock (other than Disqualified Stock) (other than Capital Stock
issued or sold to a Subsidiary of us or a Permitted International Joint Venture
or an employee stock ownership plan or to a trust established by us or by any of
our Subsidiaries or any Permitted International Joint Venture for the benefit of
their employees); provided, however, that such Net Cash Proceeds have not served
as a basis for making any other Restricted Payment; provided further, however,
that (A) such Restricted Payment shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from any such sale
(to the extent so used for such Restricted Payment) shall be excluded from the
calculation of amounts under clause (3)(B) of paragraph (a) above;

                           (2)      any purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value of Subordinated
Obligations made by exchange for, or out of the proceeds of the substantially
concurrent sale of (or specified with particularity at the time of the sale of,
and subsequently made with such proceeds of), Indebtedness which is permitted to
be Incurred pursuant to the covenant described under " -- Limitation on
Indebtedness"; provided,



                                       25
<PAGE>

however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of the
amount of Restricted Payments;

                           (3)      dividends paid within 60 days after the date
of declaration thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend shall be included in
the calculation of the amount of Restricted Payments;

                           (4)      so long as no Default has occurred and is
continuing, the repurchase or other acquisition of shares of our Capital Stock
from employees, former employees, directors or former directors of us, any of
our Subsidiaries or any Permitted International Joint Venture (or permitted
transferees of such employees, former employees, directors or former directors),
pursuant to the terms of agreements (including employment agreements) or plans
(or amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or sell,
shares of such Capital Stock; provided, however, that the aggregate amount of
such repurchases and other acquisitions (other than repurchases and acquisitions
made pursuant to agreements in effect on the Issue Date) shall not exceed $5.0
million in any calendar year (with unused amounts being carried forward
indefinitely); provided further, however, that such repurchases and other
acquisitions shall be included in the calculation of the amount of Restricted
Payments;

                           (5)      subject to paragraph (c) below, Investments
in any Person a substantial majority of the assets of which consist of
Telecommunications Assets; provided, however, that the Fair Market Value of all
such Investments made pursuant to this clause (5) (measured on the date each
such Investment was made) and then outstanding, does not exceed the sum of
$100.0 million, plus the sum of (x) the aggregate Net Cash Proceeds received by
us from the issuance or sale of our Capital Stock (other than Disqualified
Stock) (other than an issuance or sale to a Subsidiary of us or a Permitted
International Joint Venture and other than an issuance or sale to an employee
stock ownership plan or to a trust established by us, any of our Subsidiaries or
any Permitted International Joint Venture for the benefit of their employees)
and (y) the fair market value of any of our Capital Stock (other than
Disqualified Stock) issued to any Person (other than a Subsidiary of us or a
Permitted International Joint Venture) (i) in exchange for Telecommunications
Assets or (ii) in exchange for Capital Stock of another Person a substantial
majority of the assets of which consist of Telecommunications Assets in a
transaction pursuant to which such other Person becomes a Restricted Group
Member, in each case received or issued, as the case may be, subsequent to
February 1, 2000; provided, however, that such Net Cash Proceeds or fair market
value have not served as a basis for making any other Restricted Payment;
provided further, however, that (A) such Investments shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds
from any such issuance or sale of Capital Stock (to the extent so used for such
Restricted Payment) shall be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above;

                           (6)      Investments in any Person whose primary
business it is to directly (or indirectly through subsidiaries) own or hold
licenses granted by the Federal Communications Commission or any other
governmental entity with authority to grant telecommunications or



                                       26
<PAGE>

radio frequency licenses or authorizations; provided, however, that we or a
Restricted Group Member shall, at the time of making such Investment, have an
active role in the management or operation of such Person and in the provision
of telecommunications services by such Person; provided further, however, that
such Investment shall be included in the calculation of the amount of Restricted
Payments;

                           (7)      the exchange or purchase and retirement of
(A) the Series C Preferred Stock for (i) exchange debentures in accordance with
the terms of the Series C Preferred Stock or (ii) cash or our Indebtedness or
(B) the Existing Subordinated Notes for cash or our Indebtedness; provided,
however, that such exchange or purchase and retirement shall be excluded in the
calculation of the amount of Restricted Payments;

                           (8)      cash payments in lieu of the issuance of
fractional shares in connection with stock splits or upon the conversion into
our Capital Stock (other than Disqualified Stock) of any of our securities or
any of our convertible Indebtedness; provided, however, that such exchange and
retirement shall be excluded in the calculation of the amount of Restricted
Payments;

                           (9)      Investments in Office.com, the fair market
value of which (measured on the date each such Investment is made) does not
exceed (x) in the case of an Investment to be made on or immediately after the
Issue Date, $50.0 million, and (y) during each of the three 12-month periods
following the Issue Date, $25.0 million per year (with unused annual amounts
being carried over to future periods even if such periods occur after the third
anniversary of the Issue Date); provided, however, that such Investments shall
be excluded in the calculation of the amount of Restricted Payments; and

                           (10)     Investments, the aggregate Fair Market Value
(measured on the date each such Investment was made) of which, when taken
together with the Fair Market Value of all other Investments made pursuant to
this clause (10) then outstanding, does not exceed $10.0 million; provided,
however, that such Investment shall be included in the calculation of the amount
of Restricted Payments.

                  (c) The amounts determined pursuant to paragraphs (a)(3)(B),
(b)(1) and (b)(5) based on Net Cash Proceeds received from the issuance or sale
of Capital Stock (or the Fair Market Value of Capital Stock issued) shall be
reduced to the extent such Net Cash Proceeds or Fair Market Value have served as
the basis for Incurring any Indebtedness pursuant to paragraph (b)(6) of the
covenant described under " -- Limitation on Indebtedness" and such Indebtedness
(including any Refinancings thereof) remains outstanding.

         Limitation on Restrictions on Distributions from Restricted Group
Members

         We will not, and will not permit any Restricted Group Member to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Group Member to (a)
pay dividends or make any other distributions on its Capital Stock to us or a
Restricted Group Member or pay any Indebtedness owed to us, (b)



                                       27
<PAGE>

make any loans or advances to us or a Restricted Group Member or (c) transfer
any of its property or assets to us or a Restricted Group Member, except:

                  (1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;

                  (2) any encumbrance or restriction with respect to a
Restricted Group Member pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Group Member on or prior to the date on which such
Subsidiary (in the case of a Restricted Subsidiary) or an interest in such
entity (in the case of a Permitted International Joint Venture) was acquired by
us (other than Indebtedness Incurred as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Subsidiary
(in the case of a Restricted Subsidiary) or entity (in the case of a Permitted
International Joint Venture) became a Restricted Group Member or was acquired by
us) and outstanding on such date;

                  (3) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) or (2) of this covenant or this clause (3) or
contained in any amendment to an agreement referred to in clause (1) or (2) of
this covenant or this clause (3); provided, however, that the encumbrances and
restrictions with respect to such Restricted Group Member contained in any such
refinancing agreement or amendment are no less favorable to the Noteholders than
encumbrances and restrictions with respect to such Restricted Group Member
contained in such predecessor agreements;

                  (4) any encumbrance or restriction pursuant to a Permitted
Credit Facility; provided, however, that (a) the outstanding Indebtedness under
such Permitted Credit Facility does not exceed the amounts permitted under
clauses (1), (5) and (8) (but with respect to such clause (8) only to the extent
such Indebtedness constitutes Refinancing Indebtedness of Purchase Money
Indebtedness) of paragraph (b) in the covenant described under " -- Limitation
on Indebtedness," (b) such restrictions (other than following an event of
default under such Permitted Credit Facility) permit dividends and distributions
necessary to permit us to satisfy our obligations on the notes, and (c) our
chief financial officer determines in good faith that (1) any such restrictions
contained in any such Permitted Credit Facility are no more restrictive, taken
as a whole, than those contained in a credit facility with terms that are
commercially reasonable for a borrower engaged in a business comparable to ours
that has substantially comparable Indebtedness, and (2) any such restrictions
will not materially affect our ability to make principal, premium or interest
payments on the notes;

                  (5) any encumbrance or restriction arising under any
applicable law or action or at the request of a governmental regulatory
authority;

                  (6) in the case of clause (c) above, any such encumbrance or
restriction consisting of customary non assignment provisions in leases,
including leases in respect of data centers and indefeasible rights of use,
governing leasehold interests to the extent such provisions restrict the
transfer of the lease or the property leased thereunder;



                                       28
<PAGE>

                  (7) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of us or a Restricted
Group Member to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages;

                  (8) in the case of clause (c) above, restrictions imposed in
connection with the grant or acquisition of radio frequency spectrum (to the
extent such restrictions restrict the transfer of such radio frequency spectrum)
or common carrier licenses or their equivalent (to the extent such restrictions
restrict the transfer of such licenses);

                  (9) in the case of clause (c) above, restrictions relating to
the property or assets of an unconsolidated Permitted International Joint
Venture, not relating to any Indebtedness, and that do not, individually or in
the aggregate, detract from the value of the property or assets of the Permitted
International Joint Venture in any material respect;

                  (10) in the case of clause (c) above, customary provisions
arising or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of the property or assets of us or any Restricted Group Member in any
material respect; and

                  (11) any restriction with respect to a Restricted Group Member
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted Group Member
pending the closing of such sale or disposition.

         Limitation on Sales of Assets and Subsidiary Stock

                  (a) We will not, and will not permit any Restricted Group
Member to, directly or indirectly, consummate any Asset Disposition unless:

                           (1)      we or such Restricted Group Member receives
consideration at the time of such Asset Disposition at least equal to the Fair
Market Value (including as to the value of all non-cash consideration), of the
shares and assets subject to such Asset Disposition;

                           (2)      at least 75% of the consideration thereof
received by us or such Restricted Group Member is in the form of cash or cash
equivalents, Marketable Securities or Telecommunications Assets; and

                           (3)      an amount equal to 100% of the Net Available
Cash from such Asset Disposition is applied by us (or such Restricted Group
Member, as the case may be).

                                    (A)     first, to the extent we or such
Restricted Group Member elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase our Senior Indebtedness that
is either secured Indebtedness or has a Stated Maturity prior to the Stated
Maturity of the notes or Indebtedness (other than any Disqualified Stock) of a
Restricted



                                       29
<PAGE>

Group Member (in each case other than Indebtedness owed to us or an Affiliate of
us) within one year from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash;

                                    (B)     second, to the extent of the balance
of such Net Available Cash after application in accordance with clause (A), to
the extent we elect, to acquire Telecommunications Assets within one year from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; and

                                    (C)     third, to the extent of the balance
of such Net Available Cash after application in accordance with clauses (A) and
(B), to make an offer to the holders of the notes (and to holders of other
Senior Indebtedness that have a right to be included in such offer) to purchase
notes (and such other Senior Indebtedness) pursuant to and subject to the
conditions contained in the indenture;

provided, however, that in connection with any prepayment, repayment or purchase
of Indebtedness pursuant to clause (A) or (C) above, we or such Restricted Group
Member shall permanently retire such Indebtedness (other than Indebtedness
Incurred pursuant to the revolving loan portion of a Permitted Credit Facility)
and shall cause the related loan commitment (if any) to be permanently reduced
in an amount equal to the principal amount so prepaid, repaid or purchased.

         Notwithstanding the foregoing provisions of this covenant, we and the
Restricted Group Members will not be required to apply any Net Available Cash in
accordance with this covenant except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which are not applied in accordance
with this covenant exceeds $5.0 million. Pending application of Net Available
Cash pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments.

         For the purposes of this covenant, the following are deemed to be cash
or cash equivalents:

                           (1)      the assumption of Indebtedness of us or any
Restricted Group Member and the release of us or such Restricted Group Member
from all liability on such Indebtedness in connection with such Asset
Disposition; and

                           (2)      securities received by us or any Restricted
Group Member from the transferee that are promptly converted by us or such
Restricted Group Member into cash or cash equivalents.

                  (b) In the event of an Asset Disposition that requires the
purchase of the notes (and other Senior Indebtedness) pursuant to clause
(a)(3)(C) above, we will purchase notes tendered pursuant to an offer by us for
the notes (and such other Senior Indebtedness) at a purchase price of 100% of
their principal amount (or, in the event such other Senior Indebtedness was
issued with significant original issue discount, 100% of the accreted value
thereof), without premium, plus accrued but unpaid interest (or, in respect of
such other Senior Indebtedness, such



                                       30
<PAGE>

lesser price, if any, as may be provided for by the terms of such Senior
Indebtedness) in accordance with the procedures (including prorating in the
event of oversubscription) set forth in the indenture. If the aggregate purchase
price of the securities tendered exceeds the Net Available Cash allotted to
their purchase, we will select the securities to be purchased on a pro rata
basis but in round denominations, which in the case of the notes will be
denominations of $1,000 principal amount or multiples thereof. We shall not be
required to make such an offer to purchase notes pursuant to this covenant if
the Net Available Cash available therefor is less than $10.0 million (which
lesser amount shall be carried forward for purposes of determining whether such
an offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition). Upon completion of such an offer to purchase, the amount of
Net Available Cash that served as the basis for such offer will be reset at zero
for purposes of clause (3) of paragraph (a) of this covenant.

                  (c) We will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, we will comply with the
applicable securities laws and regulations and will not be deemed to have
breached our obligations under this clause by virtue of our compliance with such
securities laws or regulations.

         Limitation on Affiliate Transactions

                  (a) We will not, and will not permit any Restricted Group
Member to, enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangements or the rendering of any service) with, or for the benefit of, any
Affiliate of us (an "Affiliate Transaction") unless:

                           (1)      the terms of the Affiliate Transaction are
no less favorable to us or such Restricted Group Member than those that could be
obtained at the time of the Affiliate Transaction in arm's-length dealings with
a Person who is not an Affiliate;

                           (2)      if such Affiliate Transaction or series of
related Affiliate Transactions involves an amount in excess of $12.5 million,
the terms of the Affiliate Transaction are set forth in writing and either (A) a
committee of the Board of Directors a majority of whose members are
disinterested with respect to such transaction or (B) a majority of our
non-employee directors disinterested with respect to such Affiliate Transaction
have determined in good faith that the criteria set forth in clause (1) are
satisfied and that the relevant Affiliate Transaction is in the best interest of
us or such Restricted Group Member and have approved the relevant Affiliate
Transaction as evidenced by a Board resolution; and

                           (3)      if such Affiliate Transaction or series of
related Affiliate Transactions involves an amount in excess of $25.0 million,
the Board of Directors shall also have received a written opinion from an
investment banking firm, accounting firm or appraisal firm of national
prominence that is not an Affiliate of us to the effect that such Affiliate
Transaction is fair, from a financial standpoint, to us and our Restricted Group
Members.




                                       31
<PAGE>

                  (b)      The provisions of the preceding paragraph (a) will
not prohibit:

                           (1)      any Investment (other than a Permitted
Investment) or other Restricted Payment, in each case permitted to be made
pursuant to the covenant described under the subsection entitled "Limitation on
Restricted Payments;"

                           (2)      the entering into, maintaining or
performance of any employment contract, collective bargaining agreement, benefit
plan, program or arrangement, related trust agreement or any other similar
arrangement for or with any employee, officer or director heretofore or
hereafter entered into in the ordinary course of business, including vacation,
health, insurance, deferred compensation, retirement, savings or other similar
plans;

                           (3)      the payment of compensation, performance of
indemnification or contribution obligations, or an issuance, grant or award of
stock, options, or other equity-related interests or other securities, to
employees, officers or directors in the ordinary course of business;

                           (4)      the payment of reasonable fees to our
directors and directors of Restricted Group Members who are not employees of us
or our Restricted Group Members;

                           (5)      any transaction with a Restricted Group
Member or joint venture or similar entity that would constitute an Affiliate
Transaction solely because we or a Restricted Group Member owns an equity
interest in or otherwise controls such Restricted Group Member, joint venture or
similar entity;

                           (6)      the issuance or sale of any of our Capital
Stock (other than Disqualified Stock); and

                           (7)      transactions with respect to the provision
of Telecommunications Business services, including wireline or wireless
transmission capacity, the lease or sharing or other use of cable or fiber optic
lines, equipment, rights-of-way or other access rights between us or any
Restricted Group Member and any other Person; provided, however, that, in the
case of this clause (7), such transaction complies with clause (1) of paragraph
(a) of this covenant and is in the best interest of us or such Restricted Group
Member.

         Limitation on the Sale or Issuance of Capital Stock of Restricted Group
Members

         We will not

(i) permit any Restricted Group Member to issue, transfer, convey, sell or
otherwise dispose of any Capital Stock of any Restricted Group Member other than
to us or a Restricted Group Member and

(ii) permit any Person other than ourselves or a Restricted Group Member to own
any Capital Stock of any Restricted Group Member, other than directors'
qualifying shares or shares required by applicable law to be held by a Person
other than us or a Restricted Group Member except, in each case, for:



                                       32
<PAGE>

                  (a) a sale, transfer, conveyance or other disposition by us or
a Restricted Group Member of 100% of the Capital Stock of a Restricted Group
Member sold in a transaction not prohibited by the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock";

                  (b) an issuance, sale, transfer, conveyance or other
disposition of the Capital Stock of a Restricted Group Member sold in a
transaction not prohibited by the covenant described under "--Limitation on
Sales of Assets and Subsidiary Stock" if, after giving effect thereto, such
Restricted Group Member remains a Restricted Group Member and the Net Cash
Proceeds of such issuance (other than an issuance by a Permitted International
Joint Venture), sale, transfer, conveyance or other disposition are applied in
accordance with the covenant described under "--Limitation on Sales of Assets
and Subsidiary Stock";

                  (c) an issuance, sale, transfer, conveyance or other
disposition of Capital Stock of a Restricted Group Member such that,

                           (1)      immediately after giving effect thereto,
such Restricted Group Member would no longer constitute a Restricted Group
Member,

                           (2)      any remaining Investment in such Restricted
Group Member by us or any other Restricted Subsidiary would have been permitted
to be made at such time under the covenant described under "-- Limitation on
Restricted Payments" (and for purposes of that covenant, such Investment will be
deemed to have been made at such time) and

                           (3)      the Net Cash Proceeds of such issuance
(other than an issuance by a Permitted International Joint Venture), sale,
transfer, conveyance or other disposition are applied in accordance with the
covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock";

                  (d) Capital Stock of a Restricted Group Member issued and
outstanding on the Issue Date or the date of formation of such Restricted Group
Member and, in each case, held by Persons other than us or any Restricted Group
Member and any additional Capital Stock (other than Disqualified Stock) issued
as dividends or distributions on such Capital Stock or pursuant to preemptive or
similar rights;

                  (e) Capital Stock of a Restricted Group Member issued and
outstanding prior to the time that such Person becomes a Restricted Group
Member; and

                  (f) any non-convertible Preferred Stock constituting
Indebtedness and permitted to be Incurred under the covenant described under "--
Limitation on Indebtedness".




                                       33
<PAGE>

         Limitation on Liens

         We will not, and will not permit any Restricted Group Member to,
directly or indirectly, Incur or suffer to exist or become effective any Lien
(the "Initial Lien") of any nature whatsoever on any of our or its property
(including Capital Stock), whether owned at the Issue Date or thereafter
acquired, or upon any income or profits therefrom (other than Permitted Liens)
to secure any Indebtedness, without effectively providing that the notes shall
be secured (1) equally and ratably with (or prior to) the Indebtedness so
secured for so long as such Indebtedness is so secured or (2) in the event such
Indebtedness constitutes Subordinated Obligations, prior to such Indebtedness
for so long as such Indebtedness is so secured.

         Any Lien created for the benefit of the Holders of the notes pursuant
to this covenant shall provide by its terms that such Lien shall be
automatically and unconditionally released and discharged upon the release and
discharge of the Initial Lien.

         Limitation on Sale/Leaseback Transactions

         We will not, and will not permit any Restricted Group Member to,
directly or indirectly, enter into, assume, guarantee or otherwise become liable
with respect to any Sale/Leaseback Transaction with respect to any property
unless:

                  (1) we or such Restricted Group Member would be entitled to
(A) Incur Indebtedness in an amount equal to the Attributable Debt with respect
to such Sale/Leaseback Transaction pursuant to the covenant described under
"--Limitation on Indebtedness" and (B) create a Lien on such property securing
such Attributable Debt without equally and ratably securing the notes pursuant
to the covenant described under "--Limitation on Liens";

                  (2) the net proceeds received by us or any Restricted Group
Member in connection with such Sale/Leaseback Transaction are at least equal to
the Fair Market Value of such property; and

                  (3) we apply the proceeds of such transaction in compliance
with the covenant described under "-- Limitation on Sales of Assets and
Subsidiary Stock."

         Merger and Consolidation

         We will not consolidate with or merge with or into, or convey, transfer
or lease, in one transaction or a series of transactions, directly or
indirectly, all or substantially all our assets to, any Person, unless:

                  (1) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not us) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the trustee, in form
satisfactory to the trustee, all of our obligations under the notes and the
indenture;




                                       34
<PAGE>

                  (2) immediately after giving pro forma effect to such
transaction (and treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as having
been Incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;

                  (3) immediately after giving pro forma effect to such
transaction, the Consolidated Leverage Ratio of the Successor Company shall be
no worse than our Consolidated Leverage Ratio determined immediately prior to
such transaction;

                  (4) if, as a result of any such transaction, property or
assets of the Successor Company would become subject to a Lien subject to the
covenant described under "-- Limitation on Liens" above, the Successor Company
shall have secured the notes as required by said covenant; and

                  (5) we shall have delivered to the trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
indenture;

provided, however, that clauses (3) and (4) will not be applicable to (A) a
Restricted Subsidiary consolidating with, merging into or transferring all or
part of its properties and assets to us or (B) us merging with an Affiliate of
ours solely for the purpose and with the sole effect of reincorporating us in
another jurisdiction.

         The Successor Company will be the successor to us and shall succeed to,
and be substituted for, and may exercise every right and power of, us under the
indenture, but the predecessor company in the case of a conveyance, transfer or
lease shall not be released from the obligation to pay the principal of and
interest on the notes.

         SEC Reports

         Notwithstanding that we may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, we will file with the
SEC and provide the trustee and Noteholders with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filings of such information, documents
and reports under such Sections.

Defaults

         Each of the following is an "Event of Default" with respect to the
notes:

                  (1) a default in the payment of interest on the notes
when due, continued for 30 days;

                  (2) a default in the payment of principal of any note when due
at its Stated Maturity, upon optional redemption, upon required purchase, upon
declaration or otherwise;




                                       35
<PAGE>

                  (3) the failure by us to comply with our obligations under
"--Certain Covenants-- Merger and Consolidation" above;

                  (4) the failure by us to comply for 30 days after notice with
any of our obligations in the covenants described above under "Change of
Control" (other than a failure to purchase notes) or under "-- Certain
Covenants" under "-- Limitation on Indebtedness", "--Limitation on Restricted
Payments", "-- Limitation on Restrictions on Distributions from Restricted Group
Members", "-- Limitation on Sales of Assets and Subsidiary Stock" (other than a
failure to purchase notes), "-- Limitation on Affiliate Transactions", "--
Limitation on the Sale or Issuance of Capital Stock of Restricted Group
Members", "-- Limitation on Liens", "-- Limitation on Sale/Leaseback
Transactions" or "-- SEC Reports";

                  (5) the failure by us to comply for 60 days after notice with
our other agreements contained in the indenture;

                  (6) Indebtedness of us or any Restricted Group Member is not
paid within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $25.0 million (the "cross
acceleration provision");

                  (7) certain events of bankruptcy, insolvency or reorganization
of us or a Significant Restricted Group Member (the "bankruptcy provisions"); or

                  (8) any judgment or decree for the payment of money in excess
of $25.0 million is entered against us or a Restricted Group Member, remains
outstanding for a period of 60 consecutive days following such judgment and is
not discharged, waived or stayed (the "judgment default provision");

However, a default under clauses (4), (5) and (8) will not constitute an Event
of Default until the trustee or the holders of 25% in principal amount of the
outstanding notes notify us of the default and we do not cure such default
within the time specified after receipt of such notice.

         If an Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the outstanding notes may declare
the principal of and accrued but unpaid interest on all the notes to be due and
payable (collectively, the "Default Amount"). Upon such a declaration, the
Default Amount shall be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization occurs
and is continuing, the Default Amount on all the notes will ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the trustee or any holders of the notes. Under certain circumstances,
the holders of a majority in principal amount of the outstanding notes may
rescind any such acceleration with respect to the notes and its consequences.

         Subject to the provisions of the indenture relating to the duties of
the trustee, in case an Event of Default under the indenture occurs and is
continuing, the trustee will be under no obligation to exercise any of the
rights or powers under the indenture at the request or direction



                                       36
<PAGE>

of any of the holders of the notes unless such holders have offered to the
trustee reasonable indemnity or security against any loss, liability or expense.
Except to enforce the right to receive payment of principal, premium (if any) or
interest when due, no holder of a note may pursue any remedy with respect to the
indenture or notes unless:

                  (1)      such holder has previously given the trustee notice
that an Event of Default is continuing;

                  (2)      holders of at least 25% in principal amount of the
outstanding notes have requested the trustee to pursue the remedy;

                  (3)      such holders have offered the trustee reasonable
security or indemnity against any loss, liability or expense;

                  (4)      the trustee has not complied with such request within
60 days after the receipt thereof and the offer of security or indemnity; and

                  (5)      holders of a majority in principal amount of the
outstanding notes have not given the trustee a direction inconsistent with such
request within such 60-day period.

Subject to certain restrictions, the holders of a majority in principal amount
of the outstanding notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or of
exercising any trust or power conferred on the trustee. The trustee, however,
may refuse to follow any direction that conflicts with law or the indenture or
that the trustee determines is unduly prejudicial to the rights of any other
holder of the notes or that would involve the trustee in personal liability.

         If a Default under the indenture occurs, is continuing and is known to
the trustee, it must mail to each holder of the notes notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any note, the trustee may withhold notice if and
so long as a committee of its trust officers determines that withholding notice
is not opposed to the interest of the holders of the notes. In addition, we are
required to deliver to the trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
under the indenture that occurred during the previous year. We are required to
deliver to the trustee, within 30 days after the occurrence thereof, written
notice of any events which would constitute certain Defaults, their status and
what action we are taking or proposes to take in respect thereof.

Amendments and Waivers

         Subject to certain exceptions, the indenture may be amended with the
consent of the holders of a majority in principal amount of the notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the notes) and any past default or compliance with any provisions
may also be waived with the consent of the holders of a majority in principal
amount of the notes then outstanding. However, without the consent of each
holder of an outstanding note affected thereby, an amendment may not, among
other things:



                                       37
<PAGE>

                  (1) reduce the amount of notes whose holders must consent to
an amendment;

                  (2) reduce the rate of or extend the time for payment of
interest on any note;

                  (3) reduce the principal of or extend the Stated Maturity of
any note;

                  (4) reduce the amount payable upon the redemption of any
note or change the time at which any note may be redeemed as described under
"--Optional Redemption";

                  (5) make any note payable in money other than that stated
in the note;

                  (6) impair the right of any holder of the notes to receive
payment of principal of and interest on such holder's notes on or after the due
dates therefor or to institute suit for the enforcement of any payment on or
with respect to such holder's notes;

                  (7) make any change in the amendment provisions which require
each holder's consent or in the waiver provisions; or

                  (8) make any change in the ranking or priority of any note
that would adversely affect the Noteholders.

         Notwithstanding the preceding, without the consent of any holder of the
notes, we and the trustee may amend the indenture:

                  (1) to cure any ambiguity, omission, defect or inconsistency;

                  (2) to provide for the assumption by a successor corporation
of our obligations under the indenture;

                  (3) to provide for uncertificated notes in addition to or in
place of certificated notes (provided that the uncertificated notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated notes are described in Section 163(f)(2)(B) of the
Code);

                  (4) to add guarantees with respect to the notes or to secure
the notes;

                  (5) to add to the covenants for the benefit of the holders of
the notes or to surrender any right or power conferred upon us;

                  (6) to make any change that does not adversely affect the
rights of any holder of the notes; or

                  (7) to comply with any requirement of the SEC in connection
with the qualification of the indenture under the Trust Indenture Act.




                                       38
<PAGE>

         The consent of the holders of notes is not necessary under the
indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.

         After an amendment under the indenture becomes effective, we are
required to mail to holders of the notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the notes,
or any defect therein, will not impair or affect the validity of the amendment.

Transfer

         The notes will be issued in registered form and will be transferable
only upon the surrender of the notes being transferred for registration of
transfer. We may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.

Defeasance

         At any time, we may terminate all of our obligations under the notes
and the indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the notes, to replace mutilated, destroyed, lost or
stolen notes and to maintain a registrar and paying agent in respect of the
notes.

         In addition, at any time we may with respect to the notes terminate our
obligations that are described under "-- Change of Control" and under the
covenants described under "-- Certain Covenants" (other than the covenant
described under "-- Merger and Consolidation"), the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Significant
Restricted Group Members and the judgment default provision described under "--
Defaults" above and the limitations contained in clauses (3) and (4) under "--
Certain Covenants-- Merger and Consolidation" above ("covenant defeasance").

         We may exercise our legal defeasance option notwithstanding our prior
exercise of our covenant defeasance option. If we exercise our legal defeasance
option, payment of the notes may not be accelerated because of an Event of
Default with respect thereto. If we exercise our covenant defeasance option,
payment of the notes may not be accelerated because of an Event of Default
specified in clause (4), (6), (7) (with respect only to Significant Restricted
Group Members) or (8) under "-- Defaults" above or because of our failure to
comply with clauses (3) and (4) under "-- Certain Covenants -- Merger and
Consolidation" above.

         In order to exercise either of our defeasance options with respect to
the notes, we must irrevocably deposit in trust (the "defeasance trust") with
the trustee money or U.S. Government Obligations for the payment of principal
and interest on the notes to redemption or maturity, as the case may be, and
must comply with certain other conditions, including delivery to the trustee of
an Opinion of Counsel to the effect that holders of the notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amounts and
in the same manner and at the same times



                                       39
<PAGE>

as would have been the case if such deposit and defeasance had not occurred
(and, in the case of legal defeasance only, such Opinion of Counsel must be
based on a ruling of the Internal Revenue Service or other change in applicable
Federal income tax law).

         Notwithstanding the foregoing, we may not exercise either our legal
defeasance option or our covenant defeasance option so long as any loans are
outstanding under the Lucent facility or any commitments to make loans
thereunder remain in effect.

Concerning the trustee

         United States Trust Company of New York is to be the trustee under the
indenture. We also have appointed United States Trust Company of New York as
registrar and paying agent with regard to the notes.

         The indenture contains certain limitations on the rights of the
trustee, should it become a creditor of us, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
either eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.

         The Holders of a majority in principal amount of the outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. If an Event of Default under the indenture occurs (and is
not cured), the trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the trustee will be under no obligation to exercise any of
its rights or powers under the indenture at the request of any Holder of the
notes, unless such Holder shall have offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the indenture.

No personal liability of directors, officers, employees and stockholders

         None of our directors, officers, employees, incorporators or
stockholders will have any liability for any of our obligations under the notes
or the indenture or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the notes by accepting a note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. Such waiver and release may not be
effective to waive liabilities under the U.S. Federal securities laws, and it is
the view of the SEC that such a waiver is against public policy.

Governing law

         The indenture and the notes will be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.



                                       40
<PAGE>

Certain definitions

         "Acquired Indebtedness" means Indebtedness of an entity outstanding on
the date on which an interest in such entity is acquired, by merger or otherwise
(other than Indebtedness Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of transactions pursuant to which such entity was acquired).

          "Affiliate" of any specified Person means:

                  (1) any other Person, directly or indirectly, controlling or
controlled by; or

                  (2) under direct or indirect common control with such
specified Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For purposes of the
covenants described under "--Certain Covenants--Limitation on Restricted
Payments", "--Certain Covenants--Limitation on Affiliate Transactions" and
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only,
"Affiliate" shall also mean any beneficial owner (other than Credit Suisse First
Boston Private Equity Division and any Affiliate of Credit Suisse First Boston
Private Equity Division) of Capital Stock representing 10% or more of the total
voting power of the Voting Stock (on a fully diluted basis) of Winstar
Communications, Inc. or of rights or warrants to purchase such Capital Stock
(whether or not currently exercisable) and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.

         "Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
Winstar Communications, Inc. or any Restricted Group Member, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of:

                  (1)      any shares of Capital Stock of a Restricted Group
Member (other than directors' qualifying shares or shares required by applicable
law to be held by a Person other than Winstar Communications, Inc. or a
Restricted Group Member);

                  (2)      all or substantially all the assets of any division
or line of business of Winstar Communications, Inc. or any Restricted Group
Member; or

                  (3)      any other assets of Winstar Communications, Inc. or
any Restricted Group Member outside of the ordinary course of business of
Winstar Communications, Inc. or such Restricted Group Member (other than, in the
case of clauses (1), (2) and (3)

                                    (A)     a disposition by a Restricted Group
Member to Winstar Communications, Inc. or by Winstar Communications, Inc. or a
Restricted Group Member to a Restricted Group Member;



                                       41
<PAGE>

                                    (B)     for purposes of the covenant
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, a disposition that constitutes a Restricted Payment
permitted by the covenant described under "--Certain Covenants--Limitation on
Restricted Payments" or a Permitted Investment;

                                    (C)     for purposes of the covenant
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, a sale of shares of Capital Stock of an Unrestricted
Subsidiary for Fair Market Value;

                                    (D)     for purposes of the covenant
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, a disposition of Receivables in a Qualified Receivables
Transaction; and

                                    (E)     a disposition of assets with a fair
market value of less than $250,000 in a single transaction or series of related
transactions).

         "Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).

         "Average Life" means, as of the date of determination, with respect to
any Indebtedness, the quotient obtained by dividing:

                  (1) the sum of the products of numbers of years from the date
of determination to the dates of each successive scheduled principal payment of
or redemption or similar payment with respect to such Indebtedness multiplied by
the amount of such payment by

                  (2) the sum of all such payments.

         "Board of Directors" means the Board of Directors of Winstar
Communications, Inc. or any committee thereof duly authorized to act on behalf
of such Board.

         "Business Day" means each day which is not a Legal Holiday.

         "Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.

         "Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated)



                                       42
<PAGE>

equity of such Person, including any Preferred Stock, but excluding any debt
securities convertible into such equity.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Consolidated Interest Expense" means, for any period, the total
interest expense of Winstar Communications, Inc. and its Restricted Group
Members (including the total interest expense of unconsolidated Permitted
International Joint Ventures), plus, to the extent not included in such total
interest expense, and to the extent incurred by Winstar Communications, Inc. or
its Restricted Group Members, without duplication:

                  (1)      interest expense attributable to capital leases and
the interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction;

                  (2)      amortization of debt discount and debt issuance cost;

                  (3)      capitalized interest;

                  (4)      non-cash interest expenses;

                  (5)      commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing;

                  (6)      net payments pursuant to Hedging Obligations;

                  (7)      Preferred Stock dividends in respect of all Preferred
Stock of Restricted Group Members held by Persons other than Winstar
Communications, Inc. or a Restricted Group Member (other than dividends payable
solely in Capital Stock (other than Disqualified Stock) of the issuer of such
Preferred Stock);

                  (8)      interest incurred in connection with Investments in
discontinued operations;

                  (9)      interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) Winstar Communications, Inc. or any Restricted Group Member; and

                 (10)      the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than Winstar
Communications, Inc.) in connection with Indebtedness Incurred by such plan or
trust;

excluding, however, a portion of any such interest expense or other item listed
in clauses (1) through (10) above to the extent included therein solely as an
expense or other item of an unconsolidated Permitted International Joint Venture
and equal to the Third Party Ownership Interest in such Permitted International
Joint Venture.



                                       43
<PAGE>

         "Consolidated Leverage Ratio" as of any date of determination means the
ratio of (x) the aggregate amount of Indebtedness of Winstar Communications,
Inc. and its Restricted Group Members as of such date of determination to (y)
EBITDA for the most recent four consecutive fiscal quarters ending at least 45
days prior to such date of determination (the "Reference Period"); provided,
however, that:

                  (1) if the transaction giving rise to the need to calculate
the Consolidated Leverage Ratio is an Incurrence of Indebtedness, the amount of
such Indebtedness shall be calculated after giving effect on a pro forma basis
to such Indebtedness as if such Indebtedness had been Incurred on the first day
of the Reference Period;

                  (2) if Winstar Communications, Inc. or any Restricted Group
Member has repaid, repurchased, defeased or otherwise discharged any
Indebtedness that was outstanding as of the end of such fiscal quarter or if any
Indebtedness is to be repaid, repurchased, defeased or otherwise discharged on
the date of the transaction giving rise to the need to calculate the
Consolidated Leverage Ratio (other than, in each case, Indebtedness Incurred
under any revolving credit agreement), the aggregate amount of Indebtedness
shall be calculated on a pro forma basis and EBITDA shall be calculated as if
Winstar Communications, Inc. or such Restricted Group Member had not earned the
interest income, if any, actually earned during the Reference Period in respect
of cash or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness;

                  (3) if since the beginning of the Reference Period Winstar
Communications, Inc. or any Restricted Group Member shall have made any Asset
Disposition, the EBITDA for the Reference Period shall be reduced by an amount
equal to the EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for the Reference Period or increased by
an amount equal to the EBITDA (if negative) directly attributable thereto for
the Reference Period;

                  (4) if since the beginning of the Reference Period Winstar
Communications, Inc. or any Restricted Group Member (by merger or otherwise)
shall have made an Investment in any Restricted Group Member (or any Person
which becomes a Restricted Group Member) or an acquisition of assets which
constitutes all or substantially all of a business or one or more operating
units of a business, EBITDA for the Reference Period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of the Reference
Period; and

                  (5) if since the beginning of the Reference Period any Person
that subsequently became a Restricted Group Member or was merged with or into
Winstar Communications, Inc. or any Restricted Group Member since the beginning
of such Reference Period shall have made any Asset Disposition, any Investment
or acquisition of assets that would have required an adjustment pursuant to
clause (3) or (4) above if made by Winstar Communications, Inc. or a Restricted
Group Member during the Reference Period, EBITDA for the Reference Period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of the
Reference Period.




                                       44
<PAGE>

         "Consolidated Net Income" means, for any period, the net income (or
loss) of Winstar Communications, Inc. and its consolidated Restricted Group
Members and (without duplication) Winstar Communications, Inc.'s equity in the
net income (or loss) of any unconsolidated Permitted International Joint
Ventures; provided, however, that there shall not be included in such
Consolidated Net Income:

                  (1)      any net income (or loss) of any Person (other than
Winstar Communications, Inc.) if such Person is not a Restricted Group Member,
except that:

                                    (A)     subject to the exclusions contained
in clauses (4) and (7) below, Winstar Communications, Inc.'s equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to Winstar Communications, Inc. or a Restricted Group
Member as a dividend or other distribution (subject, in the case of a dividend
or other distribution paid to a Restricted Group Member, to the limitations
contained in clause (3) below); and

                                    (B)     Winstar Communications, Inc.'s
equity in a net loss of any such Person for such period shall be included in
determining such Consolidated Net Income;

                  (2) any net income (or loss) of any Person acquired by Winstar
Communications, Inc., a Subsidiary or a Permitted International Joint Venture in
a pooling of interests transaction for any period prior to the date of such
acquisition;

                  (3) any net income (or loss) of any Restricted Group Member if
such Restricted Group Member is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such Restricted
Group Member, directly or indirectly, to Winstar Communications, Inc., except
that:

                                    (A)     subject to the exclusions contained
in clauses (4) and (7) below, Winstar Communications, Inc.'s equity in the net
income of any such Restricted Group Member for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash distributed or
capable of being distributed by such Restricted Group Member during such period
to Winstar Communications, Inc. or another Restricted Group Member as a dividend
or other distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Group Member, to the limitation contained in this
clause); and

                                    (B)     Winstar Communications, Inc.'s
equity in a net loss of any such Restricted Group Member for such period shall
be included in determining such Consolidated Net Income;

                  (4) any gain (or loss) realized upon the sale or other
disposition of any assets of Winstar Communications, Inc., its consolidated
Subsidiaries or any other Person (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (or loss) realized upon the sale or other disposition
of any Capital Stock of any Person;



                                       45
<PAGE>

                  (5)      extraordinary gains or losses;

                  (6)      the cumulative effect of a change in accounting
principles after the Issue Date; and

                  (7) to the extent not otherwise excluded in accordance with
GAAP, the net income (or loss) of any unconsolidated Permitted International
Joint Venture in an amount that corresponds to the Third Party Ownership
Interest in the income of such Permitted International Joint Venture on the last
day of such period.

         Notwithstanding the foregoing, for the purposes of the covenant
described under "Certain Covenants--Limitation on Restricted Payments" only,
there shall be excluded from Consolidated Net Income any repurchases, repayments
or redemptions of Investments, proceeds realized on the sale of the Investments
or return of capital to Winstar Communications, Inc. or a Restricted Group
Member to the extent such repurchases, repayments, redemptions, proceeds or
returns increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (a)(3)(D) thereof.

         "Currency Agreement" means, in respect of a Person, any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.

         "Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.

         "Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder) or upon
the happening of any event:

                  (1)      matures or is mandatorily redeemable (other than for
Capital Stock that is not Disqualified Stock) pursuant to a sinking fund
obligation or otherwise;

                  (2)      is convertible or exchangeable at the option of the
holder for Indebtedness or Disqualified Stock; or

                  (3)      is mandatorily redeemable or must be purchased upon
the occurrence of certain events or otherwise, in whole or in part;

in each case on or prior to the ninety-first day after the Stated Maturity of
the notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the right
to require such Person to purchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
ninety- first day after the Stated Maturity of the notes shall not constitute
Disqualified Stock if:




                                       46
<PAGE>

                  (1) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the notes and described under "--
Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" and
"Change of Control"; and

                  (2) any such requirement only becomes operative after
compliance with such terms applicable to the notes, including the purchase of
any notes tendered pursuant thereto.

         "EBITDA" for any period means the sum of Consolidated Net Income, plus
the following to the extent deducted in calculating such Consolidated Net
Income:

                  (1) all income tax expense of Winstar Communications, Inc. and
its consolidated Restricted Group Members; provided, however, that a portion of
the income tax expense of an unconsolidated Permitted International Joint
Venture equal to the percentage of the net income (net loss) of such Permitted
International Joint Venture allocated to Winstar Communications, Inc. and its
Restricted Subsidiaries in accordance with GAAP shall be included in EBITDA
regardless of whether deducted in calculating Consolidated Net Income;

                  (2) Consolidated Interest Expense; provided, however, that the
portion of Consolidated Interest Expense attributable to an unconsolidated
Permitted International Joint Venture shall be included in EBITDA regardless of
whether deducted in calculating Consolidated Net Income;

                  (3) depreciation and amortization expense of Winstar
Communications, Inc. and its consolidated Restricted Group Members (excluding
amortization expense attributable to a prepaid operating activity item that was
paid in cash in a prior period); provided, however, that a portion of the
depreciation and amortization expense of an unconsolidated Permitted
International Joint Venture equal to the percentage of the net income (net loss)
of such Permitted International Joint Venture allocated to Winstar
Communications, Inc. and its Restricted Subsidiaries in accordance with GAAP
shall be included in EBITDA regardless of whether deducted in calculating
Consolidated Net Income; and

                  (4) all other non-cash charges of Winstar Communications, Inc.
and its consolidated Restricted Group Members (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for cash
expenditures in any future period); provided, however, that a portion of all
other non-cash charges of an unconsolidated Permitted International Joint
Venture equal to the percentage of the net income (net loss) of such Permitted
International Joint Venture allocated to Winstar Communications, Inc. and its
Restricted Subsidiaries in accordance with GAAP shall be included in EBITDA
regardless of whether deducted in calculating Consolidated Net Income;

in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Group Member shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Group Members was included in
calculating Consolidated Net Income and only if a corresponding amount would be



                                       47
<PAGE>

permitted at the date of determination to be dividended to Winstar
Communications, Inc. by such Restricted Group Members without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Group Members or its
stockholders.

         "Eligible Receivables" means, at any time, Receivables of Winstar
Communications, Inc. and its Restricted Subsidiaries, as evidenced on the most
recent monthly consolidated balance sheet of Winstar Communications, Inc.,
arising in the ordinary course of business of Winstar Communications, Inc. or
any Restricted Subsidiary.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Existing Subordinated Notes" means the 10% Senior Subordinated Notes
due 2008 of Winstar Communications, Inc., the 15% Senior Subordinated Deferred
Interest Notes due 2007 of Winstar Communications, Inc. and the 11% Senior
Subordinated Deferred Interest Notes due 2008 of Winstar Communications, Inc.

         "Fair Market Value" means, with respect to any Property (other than
cash), the price that could be negotiated in an arm's-length free market
transaction for cash, between a willing seller and a willing buyer, neither of
whom is under pressure or compulsion to complete the transaction. Unless
otherwise specified, (1) in the case of items with a Fair Market Value in excess
of $1,000,000 but less than or equal to $12.5 million, Fair Market Value shall
be determined by the chief financial officer or treasurer of Winstar
Communications, Inc. acting in good faith and, if such Fair Market Value is in
excess of $2.0 million, shall be evidenced by an Officers' Certificate and (2)
in the case of items with a Fair Market Value in excess of $12.5 million, Fair
Market Value shall be determined by the Board of Directors acting in good faith
and shall be evidenced by a resolution of the Board of Directors.

         "GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in:

                  (1) the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants;

                  (2) statements and pronouncements of the Financial
Accounting Standards Board;

                  (3) such other statements by such other entity as
approved by a significant segment of the accounting profession; and

                  (4) the rules and regulations of the SEC governing the
inclusion of financial statements (including pro forma financial statements) in
periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.




                                       48
<PAGE>

         "Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person:

                  (1) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such Person (whether arising by
virtue of partnership arrangements, or by agreements to keep-well, to purchase
assets, goods, securities or services, to take-or-pay or to maintain financial
statement conditions or otherwise); or

                  (2) entered into for the purpose of assuring in any other
manner the obligee of such Indebtedness of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part);

provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.

         "Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.

         "Holder" or "Noteholder" means the Person in whose name a note is
registered on the Registrar's books.

         "Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Group Member
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Person at the time it becomes a Restricted Group Member. The
term "Incurrence" when used as a noun shall have a correlative meaning. The
accretion of principal of a non-interest bearing or other discount security
shall not be deemed the Incurrence of Indebtedness.

         "Indebtedness" means, with respect to any Person on any date of
determination (without duplication):

                  (1) the principal in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such indebtedness
to the extent such premium has become due and payable;

                  (2) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into by such
Person;

                  (3) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of such
Person and all obligations of such



                                       49
<PAGE>

Person under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business);

                  (4) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, bank guarantee, banker's acceptance, surety
bond or performance bond;

                  (5) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock of
such Person or, with respect to any Preferred Stock of any Subsidiary or
Restricted Group Member of such Person, the principal amount of such Preferred
Stock to be determined in accordance with the indenture (but excluding, in each
case, any accrued dividends);

                  (6) all obligations of the type referred to in clauses (1)
through (5) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;

                  (7) all obligations of the type referred to in clauses (1)
through (6) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets and the amount of the obligation so secured; and

                  (8) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.

                  (9) The amount of Indebtedness of any Person at any date shall
be the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at such
date; provided, however, that the amount of Indebtedness of any unconsolidated
Permitted International Joint Venture shall be reduced by an amount that
corresponds to the Third Party Ownership Interest in such Permitted
International Joint Venture.

         "Interest Rate Agreement" means, in respect of a Person, any interest
rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.

         "Investee" means any Person (other than Winstar Communications, Inc. or
any Restricted Group Member) in which Winstar Communications, Inc. or any
Restricted Group Member has an Investment.

         "Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as Receivables on the balance sheet of the lender) or other extensions
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or



                                       50
<PAGE>

any purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person.

         For purposes of the definitions of "Unrestricted Subsidiary",
"Restricted Payment" and "Permitted International Joint Venture", and for
purposes of the covenants described under "--Certain Covenants--Limitation on
Restricted Payments" and "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock":

                  (1) "Investment" shall include the portion (proportionate to
Winstar Communications, Inc.'s equity interest in such Subsidiary or other
entity) of the Fair Market Value of the net assets of any (A) Subsidiary of
Winstar Communications, Inc. at the time that such Subsidiary is designated an
Unrestricted Subsidiary or (B) Permitted International Joint Venture at the time
that such entity is designated an Investee; provided, however, that if any
Permitted International Joint Venture shall cease to satisfy the definition of
"Permitted International Joint Venture" and is not designated as a Restricted
Subsidiary or an Unrestricted Subsidiary, it shall be deemed to have been
designated as an Investee; provided further, however, that upon a redesignation
of such Subsidiary as a Restricted Subsidiary or such Investee as a Permitted
International Joint Venture, Winstar Communications, Inc. shall be deemed to
continue to have a permanent "Investment" in an Unrestricted Subsidiary or
Investee, as applicable, equal to an amount (if positive) equal to (A) Winstar
Communications, Inc.'s "Investment" in such entity at the time of such
redesignation less (B) the portion (proportionate to Winstar Communications,
Inc.'s equity interest in such entity) of the Fair Market Value of the net
assets of such entity at the time of such redesignation; and

                  (2) any property transferred to or from an Unrestricted
Subsidiary or Investee shall be valued at its Fair Market Value at the time of
such transfer.

         "Issue Date" means April 10, 2000.

         "Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).

         "Marketable Securities" means, with respect to any Asset Disposition,
any readily marketable equity securities of a corporation whose primary business
is the Telecommunications Business that are (i) traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market and (ii)
issued by a corporation having a total equity market capitalization of not less
than $250.0 million; provided, however, that the excess of (A) the aggregate
amount of securities of any one such corporation held by Winstar Communications,
Inc. and any Restricted Group Member over (B) 20 times the average daily trading
volume of such securities during the 20 immediately preceding trading days shall
be deemed not to be Marketable Securities, as determined on the date of the
contract relating to such Asset Disposition.

         "Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal



                                       51
<PAGE>

pursuant to a note or installment receivable or otherwise and proceeds from the
sale or other disposition of any securities received as consideration, but only
as and when received, but excluding any other consideration received in the form
of assumption by the acquiring Person of Indebtedness or other obligations
relating to such properties or assets or received in any other noncash form), in
each case net of:

                  (1) all legal, title and recording tax expenses, commissions
and other fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be accrued as a liability under GAAP, as a
consequence of such Asset Disposition;

                  (2) all payments made on any Indebtedness which is secured by
any assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary consent to
such Asset Disposition, or by applicable law, be repaid out of the proceeds from
such Asset Disposition;

                  (3) all distributions and other payments required to be made
to minority interest holders in Restricted Group Members as a result of such
Asset Disposition; and

                  (4) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed in such Asset Disposition and
retained by Winstar Communications, Inc. or any Restricted Group Member after
such Asset Disposition.

         "Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

         "Office.com" means Office.com Inc. and its successors.

         "Permitted Credit Facility" means one or more credit agreements, loan
agreements, lease agreements, commercial paper facilities, Receivables
facilities or similar facilities, secured or unsecured, providing for revolving
credit loans, term loans, sales of receivables or letters of credit, entered
into from time to time by Winstar Communications, Inc. or its Restricted Group
Members, and including any related notes, Guarantees, collateral documents,
instruments and agreements executed in connection therewith, as the same may be
amended, supplemented, modified, restated or replaced from time to time. A
Vendor Financing that otherwise satisfies the foregoing definition will also
constitute a Permitted Credit Facility.

         "Permitted Holders" means William J. Rouhana, Jr. (or in the event of
his incompetence or death, his estate, heirs, executor, administrator, committee
or other personal representative (collectively, "heirs")) or any Person
controlled, directly or indirectly, by William J. Rouhana, Jr. or his heirs.


                                       52
<PAGE>

         "Permitted International Joint Venture" means any entity (other than a
Subsidiary of Winstar Communications, Inc.) all or substantially all of whose
business is outside the U.S. and that (i) based on a determination of the Board
of Directors, Winstar Communications, Inc. has, directly or indirectly, the
requisite control over such entity to prevent it from Incurring Indebtedness, or
taking any other action at any time, in contravention of any of the provisions
of the indenture that apply to a Permitted International Joint Venture, (ii)
Winstar Communications, Inc. or a Restricted Subsidiary owns at least 331/3% of
the Voting Stock of such entity and the Third Party Ownership Interest of such
entity does not exceed 662/3%, (iii) such entity is engaged primarily in aspects
of the Telecommunications Business directly related to Winstar Communications,
Inc.'s business and (iv) Winstar Communications, Inc. has designated such entity
as a Permitted International Joint Venture pursuant to a resolution of the Board
of Directors.

         Any such designation by the Board of Directors shall be evidenced to
the trustee by promptly filing with the trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions. The Board of Directors may designate any Permitted International
Joint Venture to no longer be a Permitted International Joint Venture and to be
treated as an Investee; provided, however, that such designation would be
permitted under the covenant described under "--Certain Covenants--Limitation on
Restricted Payments". Any such designation by the Board of Directors shall be
evidenced to the trustee by promptly filing with the trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.

         "Permitted Investment" means an Investment by Winstar Communications,
Inc. or any Restricted Group Member in:

                  (1)      Winstar Communications, Inc., a Restricted Group
Member or a Person that will, upon the making of such Investment, become a
Restricted Group Member; provided, however, that the primary business of such
Restricted Group Member is the Telecommunications Business;

                  (2)      another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, Winstar Communications, Inc. or a Restricted
Group Member; provided, however, that such Person's primary business is the
Telecommunications Business;

                  (3)      cash and Temporary Cash Investments;

                  (4)      Receivables owing to Winstar Communications, Inc. or
any Restricted Group Member;

                  (5)      Capital Stock of customers of Winstar Communications,
Inc. or any Restricted Group Member received in exchange for products and
services provided in the ordinary course of business; provided, however, that
the value of such products and services (calculated as the consideration
received by Winstar Communications, Inc. or such Restricted



                                       53
<PAGE>

Group Member for such products and services in a comparable arm's-length
transaction) shall not exceed $50.0 million during each successive 12-month
period following the Issue Date;

                  (6) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;

                  (7) loans or advances to employees made in the ordinary course
of business consistent with past practices of Winstar Communications, Inc. or
such Restricted Group Member or as part of a compensation scheme approved by the
Board of Directors in an amount not to exceed $5.0 million at any one time
outstanding;

                  (8) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to Winstar
Communications, Inc. or any Restricted Group Member or in satisfaction of
judgments or settlement of claims or disputes;

                  (9) shares of Capital Stock of an Unrestricted Subsidiary;
provided, however, that such shares are being acquired from Winstar
Communications, Inc. or a Restricted Group Member; and

                  (10) any Person to the extent such Investment represents the
non-cash portion (other than Marketable Securities) of the consideration
received for an Asset Disposition as permitted pursuant to the covenant
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock".

         "Permitted Liens" means, with respect to any Person:

                  (1) pledges or deposits by such Person under worker's
compensation laws, unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or deposits
to secure public or statutory obligations of such Person or deposits of cash or
United States government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or import duties
or for the payment of rent or similar operational requirements, in each case
Incurred in the ordinary course of business;

                  (2) Liens imposed by law, such as carriers', warehousemen's
and mechanics' Liens, in each case for sums not yet due or being contested in
good faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review and Liens arising
solely by virtue of any statutory or common law provision relating to banker's
Liens, rights of set-off or similar rights and remedies as to deposit accounts
or other funds maintained with a creditor depository institution; provided,
however, that (A) such deposit account is not a dedicated cash collateral
account and is not subject to restrictions against access by Winstar
Communications, Inc. in excess of those set forth by regulations promulgated by
the Federal Reserve Board and (B) such deposit account is not intended by
Winstar



                                       54
<PAGE>

Communications, Inc. or any Restricted Group Member to provide collateral to the
depository institution;

                  (3) Liens for taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings promptly instituted and diligently concluded; provided, however,
that such Person has created a reserve or other appropriate provision therefor
as may be required by GAAP;

                  (4) Liens in favor of issuers of letters of credit, bank
guarantees, bankers' acceptances, surety bonds, bid bonds and performance bonds
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; provided, however, that the Indebtedness in
respect thereto is permitted to be Incurred by the covenant described under
"--Certain Covenants--Limitation on Indebtedness";

                  (5) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real property or Liens incidental
to the conduct of the business of such Person or to the ownership of its
properties which were not Incurred in connection with Indebtedness and which do
not in the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person;

                  (6) Liens to secure Indebtedness permitted under the
provisions described in clauses (1), (5), (8) (but with respect to such clause
(8) only to the extent such Indebtedness constitutes Refinancing Indebtedness of
Purchase Money Indebtedness) and (10) of paragraph (b), under "--Certain
Covenants--Limitation on Indebtedness"; provided, however, that any such Liens
securing Indebtedness (other than Indebtedness pursuant to a Permitted Credit
Facility) described in clause (5) (or Refinancing Indebtedness thereof) of such
paragraph (b) may not extend to any property owned by Winstar Communications,
Inc. or any of the Restricted Group Members other than the property acquired
with the proceeds from Indebtedness Incurred under such clause (5) and the
proceeds therefrom;

                  (7) Liens existing on the Issue Date;

                  (8) Liens on property or shares of Capital Stock of another
Person at the time such other Person becomes a Subsidiary of such Person or a
Permitted International Joint Venture; provided, however, that the Liens may not
extend to any other property owned by such Person or any of its Restricted Group
Members (other than assets and property affixed or appurtenant thereto);

                  (9) Liens on property at the time such Person or any of its
Subsidiaries or Permitted International Joint Ventures acquires the property,
including any acquisition by means of a merger or consolidation with or into
such Person or a Subsidiary of such Person; provided, however, that the Liens
may not extend to any other property owned by such Person or any of its
Restricted Group Members (other than assets and property affixed or appurtenant
thereto);




                                       55
<PAGE>

                  (10) Liens in favor of Winstar Communications, Inc. or any
Restricted Group Member on any property other than property of Winstar
Communications, Inc.;

                  (11) Liens securing Hedging Obligations consisting of (A)
Interest Rate Agreements or Currency Agreements directly related to Indebtedness
that is, and is permitted to be incurred under the indenture or (B) Currency
Agreements used to hedge non-U.S. dollar currency exposures of Winstar
Communications, Inc. and its Restricted Group Members, entered into in
accordance with customary industry practices for companies in the
Telecommunications Business with international operations and not for purposes
of speculation, in each case secured by a Lien on the same property securing
such Hedging Obligations;

                  (12) Liens incurred in the ordinary course of business of
Winstar Communications, Inc. or any of its Restricted Group Members with respect
to obligations that do not exceed $10.0 million at any one time outstanding;
provided, however, that

                                    (A)     such obligations are not Incurred in
connection with the borrowing of money; and

                                    (B)     such Liens do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by Winstar Communications, Inc. or such
Restricted Group Member;

                  (13) Liens on the Capital Stock of an Unrestricted Subsidiary;
and

                  (14) Liens to secure any Refinancing (or successive
Refinancings) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (7), (8) or (9); provided, however, that:

                                    (A)     such new Lien shall be limited to
all or part of the same property and assets that secured or, under the written
agreements pursuant to which the original Lien arose, could secure the original
Lien (plus improvements and accessions to, such property or proceeds or
distributions thereof); and

                                    (B)     the Indebtedness secured by such
Lien at such time is not increased to any amount greater than the sum of (x) the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clauses (7), (8) or (9) at the time the original
Lien became a Permitted Lien and (y) an amount necessary to pay any fees and
expenses, including premiums and defeasance costs, related to such refinancing,
refunding, extension, renewal or replacement.

For purposes of this definition, the term "Indebtedness" shall be deemed to
include interest, fees and other amounts due on such Indebtedness.

         "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.



                                       56
<PAGE>

         "Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.

         "Preferred Stock Exchange Offer" means an offer by Winstar
Communications, Inc. to exchange any and all of its Series C Preferred Stock (or
the exchange debentures issuable in respect of such Series C Preferred Stock in
accordance with its terms) for 12-3/4% senior notes due 2010 and senior discount
notes due 2010.

         "principal" of a note means the principal of the note plus the premium,
if any, payable on the note which is due or overdue or is to become due at the
relevant time.

         "Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including Capital Stock in, and other securities of, any
other Person. For purposes of any calculation required pursuant to the indenture
the value of any Property shall be its Fair Market Value.

         "Public Equity Offering" means an underwritten primary public offering
of common stock of Winstar Communications, Inc. pursuant to an effective
registration statement under the Securities Act.

         "Purchase Money Indebtedness" means Indebtedness (including Capital
Lease Obligations, Acquired Indebtedness, mortgage financings and purchase money
obligations) Incurred for the purpose of financing all or any part of the cost
of construction, installation, acquisition, lease, development or improvement by
Winstar Communications, Inc. or any Restricted Group Member of any
Telecommunications Assets of Winstar Communications, Inc. or any Restricted
Group Member, including any related note, Guarantees, collateral documents,
instruments and agreements executed in connection therewith, as the same may be
amended, supplemented, modified or restated from time to time.

         "Qualified Receivables Transaction" means an Incurrence of Indebtedness
of Winstar Communications, Inc. or any Restricted Group Member pursuant to
either (1) credit facilities secured by Receivables or (2) Receivables purchase
facilities.

         "Receivables" means receivables, chattel paper, instruments, documents
or intangibles evidencing or relating to the right to payment of money and
proceeds and products thereof in each case generated in the ordinary course of
business.

         "Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.

         "Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of Winstar Communications, Inc. or any Restricted Group Member
existing on the Issue Date or



                                       57
<PAGE>

Incurred in compliance with the indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that:

                  (1) such Refinancing Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being Refinanced;

                  (2) such Refinancing Indebtedness has an Average Life at the
time such Refinancing Indebtedness is Incurred that is equal to or greater than
the Average Life of the Indebtedness being Refinanced; and

                  (3) such Refinancing Indebtedness has an aggregate principal
amount (or if Incurred with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if Incurred
with original issue discount, the aggregate accreted value) then outstanding
(plus fees and expenses, including any premium and defeasance costs) under the
Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Subsidiary or a Permitted International Joint Venture that
Refinances Indebtedness of Winstar Communications, Inc. or (B) Indebtedness of
Winstar Communications, Inc. or a Restricted Group Member that Refinances
Indebtedness of an Unrestricted Subsidiary.

         "Restricted Group Member" means collectively each Restricted Subsidiary
and each Permitted International Joint Venture.

         "Restricted Payment" with respect to any Person means:

                  (1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock (including any payment
in connection with any merger or consolidation involving such Person) or similar
payment to the direct or indirect holders of its Capital Stock (other than
dividends or distributions payable solely in its Capital Stock (other than
Disqualified Stock), rights to purchase additional Capital Stock (other than
Disqualified Stock) for cash and dividends or distributions payable solely to
Winstar Communications, Inc. or a Restricted Group Member, and other than pro
rata dividends or other distributions made by a Restricted Group Member that is
not a Wholly Owned Subsidiary to minority stockholders (or owners of an
equivalent interest in the case of a Restricted Group Member that is an entity
other than a corporation) or holders of Third Party Ownership Interests);

                  (2) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of Winstar Communications, Inc. or any
direct or indirect parent of Winstar Communications, Inc. held by any Person or
of any Capital Stock of a Restricted Group Member held by any Affiliate of
Winstar Communications, Inc. (other than a Restricted Group Member), including
the exercise of any option to exchange any Capital Stock (other than into
Capital Stock of Winstar Communications, Inc. that is not Disqualified Stock);

                  (3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund



                                       58
<PAGE>

payment of any Subordinated Obligations of such Person (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of such purchase,
repurchase or other acquisition); or

                  (4)      the making of any Investment (other than a Permitted
Investment) in any Person.

         "Restricted Subsidiary" means any Subsidiary of Winstar Communications,
Inc. that is not an Unrestricted Subsidiary.

         "Sale/Leaseback Transaction" means an arrangement relating to property
owned by Winstar Communications, Inc. or a Restricted Group Member on the Issue
Date or thereafter acquired by Winstar Communications, Inc. or a Restricted
Group Member whereby Winstar Communications, Inc. or a Restricted Group Member
transfers such property to a Person (other than Winstar Communications, Inc. or
a Restricted Group Member) and Winstar Communications, Inc. or a Restricted
Group Member leases it from such Person.

         "SEC" means the Securities and Exchange Commission.

         "Secured Indebtedness" means any Indebtedness of Winstar
Communications, Inc. secured by a Lien on property of Winstar Communications,
Inc. or any Restricted Group Member.

         "Senior Indebtedness" means:

                  (1)      Indebtedness of Winstar Communications, Inc., whether
outstanding on the Issue Date or thereafter Incurred; and

                  (2)      accrued and unpaid interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to Winstar Communications, Inc. to the extent
post-filing interest is allowed in such proceeding) in respect of (A)
indebtedness of Winstar Communications, Inc. for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which Winstar Communications, Inc. is responsible or liable

unless, in the case of clauses (1) and (2), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the notes;
provided, however, that Senior Indebtedness shall not include:

                  (1)      any obligation of Winstar Communications, Inc. to any
Subsidiary or Permitted International Joint Venture;

                  (2)      any liability for Federal, state, local or other
taxes owed or owing by Winstar Communications, Inc.;




                                       59
<PAGE>

                  (3)      any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities);

                  (4)      any Indebtedness of Winstar Communications, Inc. (and
any accrued and unpaid interest in respect thereof) which is subordinate or
junior in any respect to any other Indebtedness or other obligation of Winstar
Communications, Inc.; or

                  (5)      that portion of any Indebtedness which at the time of
Incurrence is Incurred in violation of the indenture.

         "Series C Preferred Stock" means the Series C 14 1/4% Senior Cumulative
Exchangeable Preferred Stock due 2007 of Winstar Communications, Inc. issued and
outstanding on the Issue Date.

         "Significant Restricted Group Member" means any Restricted Group Member
that would be a "Significant Subsidiary" of Winstar Communications, Inc. within
the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC, assuming
for the purpose of this definition that a Permitted International Joint Venture
that is not a Subsidiary of Winstar Communications, Inc. is a Subsidiary of
Winstar Communications, Inc.

         "Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).

         "Subordinated Obligation" means any Indebtedness of Winstar
Communications, Inc. (whether outstanding on the Issue Date or thereafter
Incurred) which is subordinate or junior in right of payment to the notes
pursuant to a written agreement to that effect.

         "Subsidiary" means, with respect to any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by:

                  (1)      such Person;

                  (2)      such Person and one or more Subsidiaries of such
Person; or

                  (3)      one or more Subsidiaries of such Person.

         "Telecommunications Assets" means (a) any Property (other than cash,
cash equivalents and securities) used in the Telecommunications Business; (b)
for purposes of the covenants described under "--Certain Covenants--Limitation
on Indebtedness," "--Limitation on Restricted Payments" and "--Limitation on
Liens" only, Capital Stock of any Person, or (c) for all other purposes of the
indenture, Capital Stock of a Restricted Group Member or a Person that becomes



                                       60
<PAGE>

a Restricted Group Member as a result of the acquisition of such Capital
Stock by Winstar Communications, Inc. or another Restricted Group Member, in
each case, acquired from any Person (other than a Subsidiary of Winstar
Communications, Inc. or a Permitted International Joint Venture) in a bona fide
transaction; provided, however, that, in the case of clause (b) or (c), such
Person is primarily engaged in the Telecommunications Business.

         "Telecommunications Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through transmission facilities, (ii) constructing, creating, developing or
producing communications networks, related network transmission equipment,
software, devices and content for use in a communications or content
distribution business, (iii) data center management, computer and application
outsourcing, computer systems integration, reengineering of computer software,
information services and web hosting and any services related thereto or (iv)
evaluating, participating or pursuing any other activity or opportunity that is
primarily related to those identified in (i), (ii) or (iii) above or in
furtherance thereof, including, without limitation, any business conducted by
Winstar Communications, Inc. or any Restricted Group Member on the Issue Date;
provided, however, that the determination of what constitutes a
Telecommunications Business shall be made in good faith by the Board of
Directors.

         "Temporary Cash Investments" means any of the following:

                  (1) any investment in direct obligations of the United States
of America or any agency thereof or obligations guaranteed by the United States
of America or any agency thereof;

                  (2) investments in time deposit accounts, certificates of
deposit, money market deposits, bankers' acceptances and repurchase obligations
maturing within 365 days of the date of acquisition thereof issued by a bank or
trust company which is organized under the laws of the United States of America,
any state thereof or any foreign country recognized by the United States, and
which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $500,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor;

                  (3) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (1) above
entered into with a bank meeting the qualifications described in clause (2)
above;

                  (4) investments in commercial paper, maturing not more than
270 days after the date of acquisition, issued by a corporation (other than an
Affiliate of Winstar Communications, Inc.) organized and in existence under the
laws of the United States of America, any state thereof or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher)


                                       61
<PAGE>

according to Standard and Poor's Ratings Group;


                  (5) investments in securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc.;

                  (6) auction rate preferred stocks of any corporation maturing
within 90 days after the date of acquisition rated at least "A" by Standard and
Poor's Ratings Group; and

                  (7) any investment in a registered investment company
investing exclusively in investments of the types described in clauses (1)
through (6).

         "Third Party Ownership Interest" in a Permitted International Joint
Venture means a percentage equal to the difference between 100% and the
percentage of the net income (net loss) of such Permitted International Joint
Venture allocated to Winstar Communications, Inc. and its Restricted
Subsidiaries in accordance with GAAP.

         "Unrestricted Subsidiary" means:

                  (1)      Office.com;

                  (2)      Winstar Credit Corp.;

                  (3)      any Subsidiary of Winstar Communications, Inc. that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below; and

                  (4)      any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary of Winstar Communications,
Inc. (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of,
Winstar Communications, Inc. (other than Capital Stock (other than Disqualified
Stock) of Winstar Communications, Inc. contributed to such Unrestricted
Subsidiary and promptly transferred by such Unrestricted Subsidiary in exchange
for Telecommunications Assets) or any other Subsidiary of Winstar
Communications, Inc. that is not a Subsidiary of the Subsidiary to be so
designated or is the obligor on any Indebtedness a default on which would result
in a default on any Indebtedness of Winstar Communications, Inc. or a Restricted
Subsidiary; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $10,000 or less or (B) if such Subsidiary has
assets greater than $10,000, such designation would be permitted under the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments".




                                       62
<PAGE>


         The Board of Directors may designate any Unrestricted Subsidiary to be
a Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (A) the Consolidated Leverage Ratio would be no worse than
the Consolidated Leverage Ratio determined immediately prior to such
designation, (B) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such designation would, if Incurred at such
time, have been permitted to be Incurred at such time for all purposes of the
indenture and (C) no Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the trustee by
promptly filing with the trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.

         "U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.

         "Vendor Financing" means any financing or other credit or deferred
payment arrangement provided by a supplier, manufacturer or lessor of
Telecommunications Assets or any Affiliate thereof.

         "Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.

         "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by Winstar
Communications, Inc. or one or more Wholly Owned Subsidiaries.


                                       63
<PAGE>


                          PLAN OF DISTRIBUTION OF NOTES

                  The notes offered by Lucent or its transferees are to be sold
from time to time, in one or more transactions, in whole or in part, pursuant to
any of the methods listed in this document. Sales may be made in ordinary
brokerage transactions. The commissions payable as a result of such sales will
be the regular commissions of brokers for effecting such sales. Additionally,
Lucent or its transferees may elect from time to time to offer their notes using
the following alternative methods: (1) in privately negotiated transactions
directly with purchasers or (2) through underwriters, dealers or agents, who may
acquire notes as principal (which persons may then resell the notes), or who may
receive compensation in the form of underwriting discounts, commissions, or
commissions from the selling noteholders and/or purchasers of the notes for whom
they may act as agent. Unless disclosed otherwise in a prospectus supplement or
amendment (see below) any sale pursuant to the method described in clause (1) of
the preceding sentence will be negotiated directly between the selling
noteholder and the purchaser, and no finders or agent will be employed nor any
commissions or fees paid.

                  Any offer or sale made pursuant to an alternative method may
be made for a fixed price, which may be changed, or at varying prices determined
at the time of sale or at negotiated prices. Upon notice from a noteholder that
he has elected to use an alternative method of an offer or sale, and to the
extent required by the Securities Act, a prospectus supplement or amendment will
be distributed which will set forth the aggregate principal amount of notes
being offered and the terms of the offering, including the name or names of any
underwriter, dealers or agent, any discounts, commissions, concessions and other
items constituting compensation from the selling noteholders or the purchasers
of the notes, any discounts, commissions or concessions allowed or reallowed or
paid to dealers and any other material information required by the Securities
Act.

                  The selling noteholders and any underwriter, broker, dealer or
other agent that participates in the distribution of the notes offered by this
document may be deemed to be "underwriters," as that term is defined under the
Securities Act or associated rules. Any profit on the sale of the notes by them
and any discounts and commissions received by any such underwriter, broker,
dealer or any other agent may be deemed to be underwriting discounts and
commissions under the Securities Act.

                  We will inform the selling noteholders that the
anti-manipulative rules contained in Regulation M under the Exchange Act may
apply to their sales in the market and of the requirement for delivery of this
document in connection with any sale of notes offered by this document. All
expenses of registration and delivery incurred in connection with the offering
being made of this document are being borne by us, but any brokerage commissions
incurred by a selling noteholder will be borne by such noteholder.


                                       64
<PAGE>


               DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS AND STOCK

Lucent facility

         In May 2000, our subsidiary, WVF-I LLC, entered into a new credit
facility with Lucent in an aggregate amount of $2.0 billion. This facility
replaced our former facility with Lucent. Up to $1.0 billion of our new Lucent
facility is available to us at any one time for the purchase of network
equipment and related services. The balance will become available as the first
$1.0 billion is refinanced or syndicated. We and WCI Capital Corp., our
subsidiary and the borrower under the Bank facility described below, are
guarantors of this facility. Amounts borrowed under the facility are secured by
a pledge of the equity of WVF-I and any additional or substitute borrower
thereunder and by a purchase money security interest in the equipment financed
under the Lucent facility.

         Interest on loans under the Lucent facility accrues at rates based on
the prime rate or LIBOR, as the borrower under the Lucent facility may elect,
plus an applicable margin. Amounts borrowed under the Lucent facility are to be
repaid in equal quarterly installments beginning on March 31, 2005 and ending on
the maturity of the facility on December 31, 2006. We are to pay an up front
commitment fee equal to a specified percentage of the amount borrowed and an
unused facility fee equal to a percentage of the unused available commitment.

         At any time that outstanding loans under the Lucent facility exceed
$500.0 million, Lucent may request that we refinance such loans. If the loans
are not refinanced within a specified period after notice is given, among other
potential adjustments, the interest rate on the outstanding loans will be
increased by a specified percentage per year. Alternatively, after appropriate
notice is given, Lucent and its transferees are entitled under certain
circumstances to convert the loans outstanding under the Lucent facility into
the notes being offered for resale under this prospectus.

         A portion of the proceeds of certain equity offerings by us are
required to be utilized to repay outstanding indebtedness under the Lucent
facility. The Lucent facility contains customary covenants restricting or
limiting our ability to engage in certain activities, including limitations on
debt, liens, investments, restricted payments, transactions with affiliates,
asset sales and dispositions and changes in corporate existence. At varying
times over the term of the Lucent facility, we are required to meet certain
financial, operational and network build out tests.

Bank facility

         In May 2000, our subsidiary, WCI Capital Corp., entered into a $1.15
billion revolving credit and term loan agreement with a group of commercial
banks and other financial institutions. This Bank facility provides for a $300.0
million revolving credit facility and two term loans aggregating $850.0 million.
We and certain of our subsidiaries are guarantors under the agreement. We have
fully drawn down the available loans under the Bank facility and used the
proceeds to pay all of the outstanding loans under our former facility with
Lucent.

         The Bank facility bears interest at rates based on the prime rate or
LIBOR, as the borrower under the Bank facility may elect, plus applicable
margins. The revolving line of credit will be reduced beginning on December 31,
2004 and is to be fully paid on March 31, 2007. The term loans



                                       65
<PAGE>

are to be repaid in quarterly payments commencing March 31, 2004 and ending on
March 31, 2007 in one instance and on September 30, 2007 in the other instance.

         The amounts drawn under the Bank facility are secured by substantially
all of our current and future assets and certain of our subsidiaries, excluding
assets financed under the Lucent facility described above. The Bank facility
contains covenants similar to those governing the Lucent facility described
above.

April 2000 notes

         We issued substantially all of our currently outstanding notes in April
2000, as part of a plan of refinancing. The refinancing was comprised of the new
Lucent facility and the Bank facility discussed above and the following
transactions. We undertook the refinancing in order to simplify our financial
structure, provide us with additional capital and increase our operational and
financial flexibility.

         Exchange offer

         We issued approximately $467.2 million principal amount of our 12-3/4%
senior notes due 2010 and approximately $920.6 million principal amount at
maturity ($451.0 million initial principal amount) of our senior discount notes
due 2010 in exchange for:

         o        100.0% of our outstanding 15% senior subordinated deferred
                  interest notes due 2007;

         o        96.4% of our outstanding 10% senior subordinated notes due
                  2008; and

         o        99.9% of our outstanding 11% senior subordinated deferred
                  interest notes due 2008.

         The 12-3/4% senior notes due 2010 are identical in form and terms
(other than interest rates) to the notes being offered under this prospectus.

         Cash tender offer

         We purchased for an aggregate of $753.3 million in cash:

         o        96.4% of our outstanding senior discount notes due 2005;

         o        100.0% of our outstanding senior deferred interest notes due
                  2005;

         o        99.8% of the outstanding guaranteed senior secured notes due
                  2004 of our subsidiary, Winstar Equipment Corp.; and

         o        100.0% of the outstanding guaranteed senior secured notes due
                  2004 of our subsidiary, Winstar Equipment II Corp.



                                       66
<PAGE>

         Private placement

         We also completed a cash offering of $325.0 million aggregate principal
amount of our senior notes due 2008, an additional $168.3 million of our 12-3/4%
senior notes due 2010 and (U)200 million aggregate principal amount of our
euro-denominated senior notes. The proceeds of this offering, together with
additional cash drawn from available funds, were used to fund the cash tender
offer.

         Terms of new notes

         Our notes issued in April 2000 were issued under indentures between us
and United States Trust Company of New York, as trustee. The indentures contain
the full legal text of the matters described in this section and other matters.
The indentures are subject to and governed by the Trust Indenture Act of 1939.

         Principal, Maturity and Interest.
         --------------------------------

         Senior notes due 2008. The senior notes due 2008 will mature on April
15, 2008. Interest on these notes will accrue at the annual rate of 12-1/2% and
will be payable semiannually in arrears on April 15 and October 15, commencing
on October 15, 2000. We will make each interest payment to the holders of record
of the senior notes due 2008 on the immediately preceding April 1 and October 1.
We will pay interest on overdue principal at 1% per annum in excess of the above
rate and will pay interest on overdue installments of interest at such higher
rate to the extent lawful. Interest on the senior notes due 2008 will accrue
from the date of original issuance and will be computed on the basis of a
360-day year comprised of twelve 30-day months.

         12-3/4% senior notes due 2010. The 12-3/4% senior notes due 2010 will
mature on April 15, 2010. Interest on these notes will accrue at the annual rate
of 12-3/4% and will be payable semiannually in arrears on April 15 and October
15, commencing on October 15, 2000. We will make each interest payment to the
holders of record of the 12-3/4% senior notes due 2010 on the immediately
preceding April 1 and October 1. We will pay interest on overdue principal at 1%
per annum in excess of the above rate and will pay interest on overdue
installments of interest at such higher rate to the extent lawful. Interest on
the 12-3/4% senior notes due 2010 will accrue from the date of original issuance
and will be computed on the basis of a 360-day year comprised of twelve 30-day
months.

         Senior discount notes due 2010. The senior discount notes due 2010 will
mature on April 15, 2010. No cash interest will accrue on the senior discount
notes due 2010 prior to April 15, 2005, although, for U.S. Federal income tax
purposes, holders will recognize a significant amount of original issue
discount, or an original issue discount as it accrues. Interest on the senior
discount notes due 2010 will accrue at the annual rate of 14.75% from April 10,
2000. Cash interest on the senior discount notes due 2010 will be payable
semiannually in arrears on April 15 and October 15, commencing October 15, 2005.
We will make each interest payment to the holders of record of the senior
discount notes due 2010 on the immediately preceding April 1 and October 1
computed on the basis of a 360-day year of twelve 30-day months.



                                       67
<PAGE>

         Euro-denominated notes. The principal, maturity and interest terms of
the euro-denominated notes are the same as the 12-3/4% senior notes due 2010.

         Optional redemption.
         -------------------

         Senior notes due 2008. The senior notes due 2008 are not redeemable
prior to maturity.

         12-3/4% senior notes due 2010, senior discount notes due 2010 and
euro-denominated notes. Except as set forth below, we will not be entitled to
redeem the 12-3/4% senior notes due 2010, the senior discount notes due 2010 or
the euro-denominated notes at our option prior to April 15, 2005. On and after
April 15, 2005, we will be entitled at our option to redeem all or a portion of
these notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices, expressed in percentages of principal amount, or in the case
of senior discount notes, in percentages of accreted value on the redemption
date, plus accrued interest to the redemption date, subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date, if redeemed during the 12-month period
commencing on April 15 of the years set forth below:

<TABLE>
<CAPTION>

                                              12-3/4% senior notes due
                                             2010 and euro-denominated             Senior discount notes due
Redemption Period                              notes redemption price                2010 redemption price
-----------------                              ----------------------                ---------------------
<S>                                          <C>                                   <C>
2005..................................                106.375%                              107.375%
2006..................................                104.250                               104.917
2007..................................                102.125                               102.458
2008 and thereafter...................                100.000                               100.000
</TABLE>

         In addition, before April 15, 2003, we may at our option on one or more
occasions redeem the 12-3/4% senior notes due 2010, the senior discount notes
due 2010 and the euro-denominated notes (including additional notes of each
series, if any) in an aggregate principal amount not to exceed 35% of the
aggregate principal amount of the notes of each series (including additional
notes of each series, if any) originally issued at a redemption price, expressed
as a percentage of principal amount, or in the case of the senior discount notes
due 2010, expressed as a percentage of accreted value, of 112.750%, 114.750% and
112.750% for the 12-3/4% senior notes due 2010, the senior discount notes due
2010 and the euro-denominated notes, respectively, plus accrued and unpaid
interest to the redemption date, with the net cash proceeds from one or more
public equity offerings; provided, however, that

         o        at least 65% of the aggregate principal amount of 12-3/4%
                  senior notes due 2010, the senior discount notes due 2010 and
                  the euro-denominated notes (including additional notes of each
                  series, if any) remains outstanding immediately after the
                  occurrence of each such redemption, other than 12-3/4% senior
                  notes due 2010, the senior discount notes due 2010 and the
                  euro-denominated notes held, directly or indirectly, by us or
                  our affiliates; and

         o        each redemption occurs within 90 days after the closing date
                  of the related public equity offering.



                                       68
<PAGE>

         Selection and notice of redemption.
         ----------------------------------

         If we are redeeming less than all of the 12-3/4% senior notes due 2010,
senior discount notes due 2010 or euro-denominated notes at any time, the
applicable trustee will select 12-3/4% senior notes due 2010, senior discount
notes due 2010 or euro-denominated notes, as the case may be, on a pro rata
basis, by lot or by such other method as that trustee, in its sole discretion,
shall deem to be fair and appropriate.

         We will redeem notes of $1,000 (or (U)1,000 in the case of the
euro-denominated notes) or less in whole and not in part. We will cause notices
of redemption to be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each holder of notes to be redeemed at its
registered address.

         If any note is to be redeemed in part only, the notice of redemption
that relates to that note shall state the portion of the principal amount to be
redeemed. We will issue a note in principal amount equal to the unredeemed
portion of the original note in the name of the holder upon cancellation of the
original note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on notes
or portions of them called for redemption.

         No mandatory redemption.
         -----------------------

         We are not required to make any mandatory redemption or sinking fund
payments with respect to the notes issued in April 2000. However, under certain
circumstances, we may be required to offer to purchase the notes.

         Ranking.
         -------

         Senior Indebtedness versus new notes. The indebtedness evidenced by the
outstanding notes issued in April 2000 will rank pari passu in right of payment
to one another and to all of our senior indebtedness, including any 14% senior
discount notes due 2005 not tendered in the tender offer and our guaranty of
$323,000 principal amount of Winstar Equipment Corp.'s notes that remain
outstanding. As of March 31, 2000, after giving pro forma effect to the exchange
offer and consent solicitation, the private placement and the tender offer and
consent solicitation which occurred in April 2000, and the borrowing of $1.15
billion under the Bank facility and payment of outstanding debt under our former
facility with Lucent and assuming that 96.7% of the Series C preferred stock is
exchanged for senior notes due 2010 and senior discount notes due 2010, our
senior indebtedness was approximately $2,762.1 million, of which $1,150.3
million was secured.

         The notes issued in April 2000 are our unsecured obligations. Secured
debt and other secured obligations incurred by us from time to time, including
obligations with respect to the Lucent facility and the Bank facility will be
effectively senior to the outstanding notes to the extent of the value of the
assets securing such debt or other obligations.



                                       69
<PAGE>

         Liabilities of subsidiaries versus new notes. We are a holding company.
Substantially all our operations are conducted through our subsidiaries. Claims
of creditors of our subsidiaries, including trade creditors and creditors
holding indebtedness or guarantees issued by our subsidiaries, and claims of
preferred stockholders of our subsidiaries generally will have priority with
respect to the assets and earnings of our subsidiaries over the claims of our
creditors, including holders of the outstanding notes. Accordingly, the notes
issued on April 2000 will be effectively subordinated to creditors, including
trade creditors, and preferred stockholders, if any, of our subsidiaries.

         At March 31, 2000, after giving effect to the exchange offer, private
placement and tender offer consummated in April 2000, and the preferred stock
transaction (assuming the exchange of 96.7% of our outstanding Series C
preferred stock for 12-3/4% senior notes due 2010 and senior discount notes due
2010), the Bank facility and the repayment of outstanding debt under our the
former Lucent facility, our subsidiaries had approximately $2,093.1 million of
liabilities (excluding intercompany payables to us and each other), including
$1,664.7 million of indebtedness. Although the indentures governing the notes
issued in April 2000 limit the incurrence of indebtedness and preferred stock of
certain of our subsidiaries, such limitations are subject to a number of
significant qualifications. Moreover, the indentures do not impose any
limitation on the incurrence by such subsidiaries of liabilities that are not
considered indebtedness under the indentures.

         Certain Covenants.
         -----------------

         The indentures governing the outstanding notes issued in April 2000
contain covenants that limit our ability to, among other things:

         o        incur additional indebtedness;

         o        create liens;

         o        engage in sale-leaseback transactions;

         o        pay dividends or make distributions in respect of our capital
                  stock;

         o        redeem capital stock;

         o        make various types of investments and other restricted
                  payments;

         o        sell assets;

         o        issue or sell stock of our restricted subsidiaries; and

         o        enter into transactions with stockholders or affiliates or
                  effect a consolidation or merger.

These covenants are subject to important exceptions and qualifications, which
are described in detail in the indentures.



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<PAGE>

         The indentures governing our other notes which were not acquired in the
tender offer or the exchange offer were amended to eliminate similar covenants.

         Defaults.
         --------

         Each of the following would constitute an event of default with respect
to the outstanding notes issued in April 2000:

         o        a default in the payment of interest on the notes of any
                  series when due, continued for 30 days;

         o        a default in the payment of principal of any note of any
                  series when due at its stated maturity, upon optional
                  redemption, upon required purchase, upon declaration or
                  otherwise;

         o        the failure by us to comply with our obligations respecting
                  merger and consolidation transactions;

         o        certain events of bankruptcy, insolvency or reorganization of
                  ours or to certain of our subsidiaries;

         o        indebtedness of us or to certain of our subsidiaries that is
                  not paid within any applicable grace period after final
                  maturity or is accelerated by the holders thereof because of a
                  default and the total amount of such indebtedness unpaid or
                  accelerated exceeds $25.0 million (the "cross acceleration
                  provision");

         o        any judgment or decree for the payment of money in excess of
                  $25.0 million is entered against us or to certain of our
                  subsidiaries, remains outstanding for a period of 60
                  consecutive days following such judgment and is not
                  discharged, waived or stayed;

         o        the failure by us to comply for 60 days after notice with our
                  other agreements contained in the applicable indenture; or

         o        the failure by us to comply for 30 days after notice with any
                  of our obligations with respect to change of control events
                  (other than a failure to purchase the outstanding notes) or
                  with respect to various other covenants.

However, a default under the last three clauses will not constitute an event of
default until the applicable trustee or the holders of 25% in principal amount
of the outstanding notes of the applicable series notify us of the default and
we do not cure the default within the time specified after receipt of such
notice.

         Under the indentures governing our other outstanding notes which were
not acquired in the tender offer or the exchange offer, as amended, only the
first four events listed above will constitute events of default.



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<PAGE>

         If an event of default occurs and is continuing, the applicable trustee
or the holders of at least 25% in principal amount of the outstanding notes of
the applicable series may declare the principal or accreted value of and accrued
but unpaid interest on all the applicable notes to be due and payable. Upon such
a declaration, the default amount shall be due and payable immediately. If an
event of default relating to certain events of bankruptcy, insolvency or
reorganization of us occurs and is continuing, the amount due on all the
applicable notes will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the applicable trustee or
any holders of such notes. Under certain circumstances, the holders of a
majority in principal amount of the outstanding notes may rescind any such
acceleration with respect to such notes and its consequences.

Other financings

         Equipment lease financings and credit lines

         Our subsidiaries have entered into certain other financing arrangements
and capital leases of equipment, including fiber. As of March 31, 2000, we owed
an aggregate of $306.3 million under these financing arrangements.

         Debt placements

         Between October 1995 and March 1998, we issued various series of notes,
most of which were reacquired and canceled in the cash tender offer and the
exchange offer described above. Such notes that remain outstanding are $8.7
million principal amount at maturity of our 14% senior discount notes due 2005,
$7.2 million principal amount of our 10% senior subordinated notes due 2008,
$323,000 principal amount of 12-1/2% guaranteed senior secured notes due 2004
issued by our subsidiary, Winstar Equipment Corp., and guaranteed by us and
$28,000 principal amount of our 11% senior subordinated deferred interest notes
due 2008. As a result of the consent solicitations made in connection with the
cash tender offer and the exchange offer, the indentures governing these
remaining notes were amended to eliminate most of the restrictive covenants and
certain default provisions.

Common stock

         Our authorized capital stock includes 200,000,000 shares of common
stock, par value $.01 per share. Our board of directors has approved an increase
of this amount to 400,000,000 shares subject to stockholder approval at a
meeting scheduled for June 28, 2000. The holders of our common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. Although we do not currently intend to pay any cash
dividends, holders of our common stock are entitled to receive dividends as may
be declared by our board of directors. In the event of a liquidation or
dissolution, holders of common stock are entitled to share in all assets
remaining after payment of liabilities and liquidation preference of our
preferred stock.

         Holders of our common stock have no preemptive rights. They also have
no rights to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock. All of the
outstanding shares of common stock are fully paid and nonassessable.



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<PAGE>

         Our certificate of incorporation:

         o        provides for a board of directors divided into three classes.
                  Each class generally serves for a term of three years with
                  only one class of directors being elected in each year.

         o        provides that directors may be removed with or without cause.
                  Directors may be removed only by an affirmative vote of the
                  holders of at least a majority of our capital stock.

         o        requires an affirmative vote of the holders of at least
                  two-thirds of our capital stock to alter, amend or repeal the
                  provisions of our certificate of incorporation relating to
                  specified matters.

         Nominations for our board of directors may be made by our board or by
any holder of common stock. A stockholder entitled to vote for the election of
directors may nominate a person for election as director only if the stockholder
provides written notice of his intent to make a nomination to our Secretary not
later than sixty days in advance of the meeting. Our certificate of
incorporation and by-laws do not provide for cumulative voting rights. This
means that holders of a majority of our capital stock who vote in the election
of directors can elect all of the directors and, in such event, the holders of
the remaining shares will not be able to elect any of our directors. A special
meeting of our stockholders may be called at the request of the holders of at
least 10% of our outstanding capital stock entitled to vote generally in all
matters.

         Common stock dividend

         In February 2000, we declared a three-for-two stock split, effected in
the form of a 50% common stock dividend. The common stock dividend was
distributed on March 2, 2000 to holders of record as of the close of business on
February 16, 2000. The information in this prospectus gives effect to the common
stock dividend.

Preferred stock

         Our certificate of incorporation and the Delaware General Corporation
Law gives our board of directors the authority, without stockholder approval, to
issue up to 15,000,000 shares of preferred stock. Our board of directors has
approved an increase of this amount to 30,000,000 shares, subject to stockholder
approval at a meeting scheduled for June 28, 2000. Our board of directors has
the authority to fix the following terms with respect to shares of any series of
preferred stock:

         o        the designation;

         o        the number of shares;

         o        the dividend rate or rates payable with respect to the shares;

         o        the redemption price or prices, if any, and the terms and
                  conditions of any redemption;



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<PAGE>

         o        the voting rights;

         o        any sinking fund provisions for the redemption or purchase of
                  the shares;

         o        the terms and conditions upon which the shares are convertible
                  or exchangeable, if they are convertible or exchangeable; and

         o        any other relative rights, preferences and limitations
                  pertaining to the series.

         Series A preferred stock

         In February 1997, we sold in a private placement an aggregate of
4,000,000 shares of our Series A preferred stock. Each share of Series A
preferred stock has a stated value of $25. Each share entitles the holder to
receive dividends from us at a rate per year equal to 6% of the stated value.
Dividends accrue and are cumulative from the date of issuance and are payable in
arrears on March 31, June 30, September 30 and December 31 of each year. We may,
at our election, pay dividends in cash or through the issuance of additional
shares of Series A preferred stock.

         The shares of Series A preferred stock are convertible into the number
of shares of our common stock equal to the aggregate stated value of the Series
A preferred stock being converted by $16.67, subject to adjustment. On February
11, 2002, any shares of Series A preferred stock still outstanding will be
automatically converted into shares of our common stock. We may, however, elect
to pay cash instead, in an amount equal to the stated value plus all accrued and
unpaid dividends.

         The Series A preferred stock ranks senior to our common stock and
junior to any other series of our outstanding preferred stock. As of March 31,
2000, there were approximately 4,471,000 shares of Series A preferred stock
outstanding.

         Series B preferred stock

         We have a rights agreement under which the holders of our common stock
received, as a dividend, preferred stock purchase rights at the rate of one
right for each share of our common stock held as of the close of business on
July 14, 1997. One right will also attach to each share of our common stock
issued after that date. Currently, the rights are not separate from our common
stock and are not exercisable. The rights will only separate from our common
stock and become exercisable if a person or group acquires 10% or more of our
outstanding voting stock, or a person launches a tender or exchange offer that
would result in ownership of 10% or more of our outstanding voting stock.

         Each right that is not owned by an acquiring person entitles the holder
to buy one one-thousandth of one share of our Series B preferred stock. The
rights agreement provides that each right entitles the holder to purchase, for
$225, units of Series B preferred stock with a market value of $450. However, if
we are involved in a business combination in which we are not the surviving
entity, or sell 50% or more of our assets or earning power to another person,
then the rights agreement provides that each right entitles the holder to
purchase, for $225, shares of the common stock of the acquiring person's
ultimate parent having a market value of $450.



                                       74
<PAGE>

         At any time, until ten days following the date on which a person
acquires 10% or more of our voting stock, we may redeem all, but not less than
all, of the rights for $0.0001 per right. The rights expire in July 2002. The
Series B preferred stock will have dividend and liquidation preferences over our
common stock, but will be junior to any other series of our preferred stock.

         Series C preferred stock

         On December 17, 1997, we sold in a private placement an aggregate of
175,000 shares of our Series C preferred stock. The aggregate purchase price was
$175.0 million.

         Dividends on the Series C preferred stock accrue from December 22, 1997
at a yearly rate per share of 14-1/4% of the accumulated amount. Dividends are
compounded semiannually on each June 15 and December 15, but will not generally
be payable in cash. However, commencing June 15, 2003, dividends on the Series C
preferred stock will be payable in cash at a rate equal to 14-1/4% per year.

         The Series C preferred stock ranks:

         o        senior to all existing and future capital stock that is junior
                  in right to our Series C preferred stock, including our Series
                  A and Series E preferred stock;

         o        equal with our Series D and Series F preferred stock and all
                  future capital stock that is specifically designated by our
                  board of directors as ranking equal with our Series C
                  preferred stock;

         o        junior to all future capital stock specifically designated by
                  our board of directors as being senior to our Series C
                  preferred stock; and

         o        junior to all of our indebtedness and that of our
                  subsidiaries.

         The Series C preferred stock will not be redeemable prior to December
15, 2002. On or after December 15, 2002, the Series C preferred stock will be
redeemable, at our option, in whole or in part. On December 15, 2007, we will be
required to redeem the Series C preferred stock.

         On June 15, 2000, we will exchange the outstanding shares of Series C
preferred stock for senior subordinated deferred interest notes. These notes
will be issued in a principal amount of $175.0 million and will have, at the
time of issuance, an accumulated amount equal to the aggregate accumulated
amount of the shares of Series C preferred stock. Until the senior subordinated
deferred interest notes are repaid, interest will accrue at an annual rate of
14-1/4% on the accumulated amount. This interest will be compounded semiannually
on each June 15 and December 15, but will not generally be payable in cash.

         The senior subordinated deferred interest notes will:

         o        be our unsecured, senior subordinated obligations;




                                       75
<PAGE>

         o        be subordinated in right of payment to all of our senior
                  indebtedness and to all indebtedness and other liabilities,
                  including trade payables, of our subsidiaries; and

         o        rank equal with the senior subordinated notes we issued in
                  1997.

         The senior subordinated deferred interest notes will not be redeemable
prior to December 15, 2002. On or after December 15, 2002, the senior
subordinated deferred interest notes will be redeemable at our option.

         We have entered into agreements with the holders of more than 96% of
the outstanding shares of our Series C preferred stock, including:

         o        an agreement by the holders to waive any defaults under the
                  certificate of designation governing the Series C preferred
                  stock resulting from the refinancing, the private placement
                  discussed above and other events;

         o        our agreement to issue, on June 15, 2000, senior subordinated
                  deferred interest notes in exchange for all of the Series C
                  preferred stock, as provided by the terms of the Series C
                  preferred stock certificate of designation;

         o        an agreement by the holders that various restrictive covenants
                  and default provisions in the indenture that will govern the
                  exchange debentures will be eliminated; and

         o        our agreement to exchange all of the senior subordinated
                  deferred interest notes issued under these agreements for a
                  combination of our 12-3/4% senior notes due 2010 and senior
                  discount notes due 2010 and the holders' agreement to
                  participate in the exchange. As a result of these agreements,
                  no more than $5.7 million principal amount of the senior
                  subordinated deferred interest notes will be outstanding after
                  such exchange.

         Series D preferred stock

         On March 17, 1998, we sold an aggregate of $200.0 million of our Series
D preferred stock in a private placement.

         Dividends at the rate of 7% per year on the Series D preferred stock
are cumulative from the date of issuance and are payable quarterly in arrears on
each March 15, June 15, September 15 and December 15 of each year, commencing
September 15, 1998. Dividends shall be payable, at our option, in cash, or
through the issuance of shares of our common stock.

         Holders of the Series D preferred stock have the option to convert
their shares of Series D preferred stock at any time after the issue date into
shares of our common stock at a rate of 1.5119 shares of our common stock for
each share of Series D preferred stock. This is equivalent to a conversion price
of $33.07 for each share of our common stock.



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<PAGE>

         The Series D preferred stock ranks:

         o        senior to all existing and future capital stock that is junior
                  to our Series D preferred stock, including our Series A and
                  Series E preferred stock;

         o        equal with our Series C, Series F and Series G preferred stock
                  and all future capital stock that is specifically designated
                  by our board of directors as ranking equally with our Series D
                  preferred stock;

         o        junior to all future capital stock specifically designated by
                  our board of directors as being senior to our Series D
                  preferred stock; and

         o        junior to all of our indebtedness and that of our
                  subsidiaries.

         The Series D preferred stock is not redeemable prior to March 20, 2001.
On or after that date, the Series D preferred stock will be redeemable at our
option. The Series D preferred stock is subject to mandatory redemption on March
15, 2010, at a redemption price of $50.00 per share, plus accrued and unpaid
dividends, if any. Upon the occurrence of a change in control, as defined in the
certificate of designations governing the Series D preferred stock, we will be
obligated to adjust the conversion price as provided in the certificate of
designations.

         Series E preferred stock

         In connection with an acquisition we consummated in August 1998, we
issued an aggregate of 75,100 shares of our Series E preferred stock. The Series
E preferred stock is non-voting, non-redeemable and does not earn dividends.
Each share of Series E preferred stock has a liquidation preference of $59.93
per share. The Series E preferred stock is junior in right to receive
distributions in liquidation to all other currently existing preferred stock and
any other class of preferred stock authorized in the future unless such new
class is expressly made junior or equal to the Series E preferred stock. The
holders of the Series E preferred stock may convert their stock into shares of
our common stock at the rate of three shares of common stock for two shares of
Series E preferred stock at any time and we may require them to do so upon the
occurrence of certain conditions.

         Series F preferred stock

         On June 17, 1999, we and a subsidiary of ours sold an aggregate of
300,000 shares of Series F preferred stock for an aggregate purchase price of
$300.0 million, less customary discounts and expenses.

         Each share of Series F preferred stock has a liquidation preference of
$1,000 and entitles the holder to receive dividends at an annual rate of 7-1/4%,
or $72.50, per share. Dividends are payable quarterly on March 15, June 15,
September 15 and December 15 of each year to the record holders of the Series F
preferred stock as of the close of business on the business day next preceding
the date of such dividend payment.



                                       77
<PAGE>

         We have the option to pay dividends in either cash or through the
issuance of shares of our common stock. Dividends paid in shares of our common
stock will be calculated by dividing the dollar amount of the dividend by 97% of
the closing bid price of our common stock on Nasdaq on the fourth trading day
prior to the dividend payment date.

         Each share of Series F preferred stock is convertible into shares of
our common stock at a conversion rate of 24.2087 shares for each share of Series
F preferred stock converted, equivalent to a conversion price of $41.31 per
share. We will have the option to convert all of the shares of the Series F
preferred stock into common stock if, on or after June 24, 2002, the closing
price of our common stock on Nasdaq has equaled or exceeded 130% of the
conversion price for at least 20 out of 30 prior consecutive trading days.

         The Series F preferred stock is not redeemable by us prior to June 24,
2002. Thereafter, each share of Series F preferred stock will be redeemable at
certain prices, at our option, in whole or in part, at any time or from time to
time, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each holder's registered address.

         The Series F preferred stock ranks:

         o        senior to our common stock and our Series A and Series E
                  preferred stock;

         o        senior to each class of capital stock which we may create that
                  does not expressly rank senior to, or with the same priority
                  as, our Series F preferred stock;

         o        equal with our Series C, Series D and Series G preferred
                  stock;

         o        equal with each class of capital stock which we may create
                  that expressly provides that it ranks equally with our Series
                  F preferred stock; and

         o        junior to each class of capital stock which we may create that
                  expressly provides that it ranks senior to our Series F
                  preferred stock.

         We may not create or increase the amount of any class or series of
capital stock that ranks senior to the Series F preferred stock without the
consent of the holders of at least 66-2/3% of the Series F preferred stock.
However, we may create or increase the amount of any class of stock that ranks
with the same priority as, or junior to, the Series F preferred stock.

         Series G preferred stock

         On February 1, 2000, we and one of our wholly-owned subsidiaries,
Winstar Credit Corp., sold an aggregate of 900,000 shares of our Series G
preferred stock in a private placement for an aggregate purchase price of $900.0
million. The shares were purchased by Credit Suisse First Boston Equity
Partners, L.P., Welsh, Carson, Anderson & Stowe VIII, L.P., Microsoft and
certain other purchasers.

         The Series G preferred stock, which votes on an as-converted basis with
our common stock, currently represents ownership of approximately 19.3% of our
outstanding common shares, 18.1% of



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<PAGE>

our outstanding voting shares, and approximately 13.0% of our fully diluted
common shares on a pro forma basis as of December 31, 1999.

         If any cash dividends are paid on our common stock, the holders of our
Series G preferred stock will be entitled to receive such cash dividends on an
as-converted basis. In addition, the Series G preferred stock pays cumulative
dividends at a rate equal to the excess, if any, of 5.75% per year on its
liquidation preference over the amount of any regular cash dividends per share
of Series G preferred stock that have been paid during the applicable dividend
period on our common stock.

         Such dividends will be payable quarterly in arrears on each March 15,
June 15, September 15 and December 15 of each year to the record holders of the
Series G preferred stock as of each March 1, June 1, September 1 and December 1.
If we do not pay such dividends in cash, the amount of such dividends will be
added to the liquidation preference of the Series G preferred stock.

         Each share of Series G preferred stock is convertible, at the option of
the holder, into shares of our common stock at a conversion price of $45.00 per
share, subject to certain adjustments. We will have the option to convert all of
the shares of Series G preferred 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 preferred stock, the volume-weighted average trading price of our
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.

         In the event of any voluntary or involuntary liquidation, dissolution
or winding up of our operations before any payment or distribution of our assets
are made to the holders of any securities ranking junior to the Series G
preferred stock, holders of Series G preferred stock will be entitled to receive
an amount per share equal to the greater of:

         o        the accreted value of the Series G preferred 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

         o        the amount that would have been payable on the number of
                  shares of common stock into which a share of Series G
                  preferred stock was convertible immediately prior to such
                  date.

Holders of Series G preferred stock will not be entitled to any further payment.
If our assets that are distributable among the holders of Series G preferred
stock are insufficient to pay in full the preferential amount and liquidating
payments on any securities ranking equally with the Series G preferred stock,
then such assets will be distributed among the holders of Series G preferred
stock and any such equally ranked securities ratably in accordance with the
respective amounts that would be payable if all amounts payable thereon were
paid in full.

         With respect to dividend rights and rights on liquidation, dissolution
and winding up, the Series G preferred stock ranks:

         o        senior to our common stock and our Series A and Series E
                  preferred stock;



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<PAGE>

         o        senior to each class of capital stock which we may create that
                  does not expressly rank senior to, or equally with, our Series
                  G preferred stock;

         o        equal with our Series C, Series D and Series F preferred
                  stock;

         o        equal with each class of capital stock which we may create
                  that expressly provides that it ranks equally with our Series
                  G preferred stock; and

         o        junior to each class of capital stock that we may create that
                  expressly provides that it ranks senior to our Series G
                  preferred stock.

         We may not issue any securities that are senior to the Series G
preferred stock without the consent of the holders of a majority of the
outstanding Series G preferred stock.

         On April 1, 2010, we will be required to redeem all of the outstanding
shares of Series G preferred stock. The redemption price per share will be equal
to the greater of the accreted value of the Series G preferred 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 the volume-weighted average
trading price per share of our common stock on Nasdaq for the 20 consecutive
trading days immediately prior to April 1, 2010 multiplied by the number of
shares of common stock into which the Series G preferred stock is convertible on
such date. We have the option to pay the redemption price in cash or in shares
of common stock. If we elect 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 our common stock on Nasdaq
for the 20 consecutive trading days immediately prior to April 1, 2010.

         Each holder of Series G preferred stock will be entitled to vote on all
matters and will 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 on the record date for the determination of
stockholders 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 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, will be necessary to:

         o        amend, alter or repeal any provision of our certificate of
                  incorporation or by-laws so as to adversely affect the Series
                  G preferred stock;

         o        issue any additional Series G preferred stock or create,
                  authorize or issue any capital stock that ranks senior,
                  whether with respect to dividends or upon liquidation,
                  dissolution, winding up or otherwise, to the Series G
                  preferred stock; or

         o        redeem for cash any junior securities, subject to certain
                  exemptions.



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<PAGE>

Registrar and Transfer Agent

         Continental Stock Transfer & Trust Company is the registrar and
transfer agent for our common stock and our Series A, Series C, Series D and
Series F preferred stock. Continental is located at 2 Broadway, New York, New
York 10004.

             CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

         The following is a summary of certain U.S. federal income tax
consequences associated with the ownership and disposition of the notes.

         This discussion deals only with notes held as capital assets within the
meaning of section 1221 of the Internal Revenue Code of 1986, as amended, and
does not deal with special situations, such as those of dealers in securities or
currencies, traders in securities that elect to mark to market, financial
institutions, life insurance companies, tax-exempt organizations, persons that
hold the notes as a hedge or part of a straddle or conversion transaction, or
that have a functional currency other than the U.S. dollar, and investors in
pass-through entities. It does not describe any tax consequences arising out of
the tax laws of any state, local or foreign jurisdiction. This discussion is
based upon the provisions of the Code, and regulations, rulings and judicial
decisions under the Code as of the date of this filing. At any time and without
prior notice, these authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those discussed below.

         For purposes of this discussion, a U.S. holder is:

         o        a citizen or resident of the United States;

         o        a corporation or other entity taxable as a corporation created
                  or organized in or under the laws of the United States or any
                  political subdivision thereof;

         o        an estate the income of which is subject to U.S. federal
                  income taxation regardless of its source; or

         o        a trust, if a U.S. court can exercise primary supervision over
                  the administration of the trust and one or more U.S. persons
                  have the authority to control all substantial decisions of the
                  trust.

         The term "Non-U.S. holder" means any person other than a U.S. holder.
If an entity treated as a partnership for U.S. federal income tax purposes owns
a note, the tax treatment of a partner would generally depend upon the status of
the partner and upon the activities of the partnership. Partners of partnerships
owning notes should consult their tax advisors.

         You should consult your tax advisor concerning the application of U.S.
federal income tax laws, as well as the laws of any state, local or foreign
taxing jurisdiction, to your particular situation.



                                       81
<PAGE>

         Taxation of interest on notes. A U.S. holder of a note will be required
to include interest payable on the note as ordinary income at the time the
interest is received or accrues, in accordance with the holder's regular method
of tax accounting.

         Market discount. If a U.S. holder purchases a note for an amount that
is less than the "revised issue price" of the notes at the time of acquisition,
the amount of such difference will be treated as "market discount" for U.S.
federal income tax purposes, unless such difference is less than a specified de
minimis amount ("de minimis market discount"). The "revised issue price" is the
original issue price of the note without regard to any reductions for
acquisition premium, less payments other than qualified stated interest. Under
the market discount rules, a holder will be required to treat any principal
payment on or any gain on the sale, exchange, retirement or other disposition
of, notes as ordinary income to the extent of the market discount which has not
previously been included in income and is treated as having accrued on such
notes at the time of such payment or disposition. If a holder makes a gift of a
note, accrued market discount, if any, will be recognized as if such holder had
sold such note for a price equal to its fair market value. In addition, the
holder may be required to defer, until the maturity of the notes or the earlier
disposition of the notes in a taxable transaction, the deduction of a portion of
the interest expense on any indebtedness incurred or continued to purchase or
carry such notes.

         Any market discount will be considered to accrue on a straight-line
basis during the period from the date of acquisition to the maturity date of the
notes, unless a holder elects to accrue market discount on a constant interest
method. A holder of notes may elect to include market discount in income
currently as it accrues (on either a straight-line basis or constant interest
method), in which the case rules described above regarding the deferral of
interest deductions and ordinary income treatment of gain on disposition will
not apply. This election to include market discount in income currently, once
made, applies to all market discount obligations acquired on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.

         Amortized bond premium on the notes. Generally, if the tax basis of a
note (generally, the purchase price of the note) held as a capital asset exceeds
the amount payable at maturity of the obligation, such excess will constitute
amortizable bond premium that the holder may elect, under Section 171 of the
Code, to amortize under the constant yield method over the period from its
acquisition date to the obligation's maturity date. A holder of a note who
elects to amortize bond premium must reduce its tax basis by the amount of the
aggregate amortization allowable for amortizable bond premium. Amortizable bond
premium will be treated under the Internal Revenue Code as an offset to interest
income on the note for U.S. federal income tax purposes. An election to amortize
bond premium on a note generally applies to all bonds held by the holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired, and may not be revoked without the consent of the Internal Revenue
Service.

         Elections. A U.S. holder of notes, subject to certain limitations, may
elect to include all stated and unstated interest and discount on the notes in
gross income under the constant yield method. For this purpose, interest
includes de minimis market discount and market discount, as adjusted by any
amortizable bond premium or acquisition premium. Any such election, if made in
respect of a market discount bond, will constitute an election to include market
discount in income currently on all market



                                       82
<PAGE>

discount bonds acquired by such U.S. holder on or after the first day of the
first taxable year to which the election applies. See "--Market discount." U.S.
holders should consult with their tax advisors regarding any tax elections they
intend to make with respect to any notes.

         Sale or other disposition. In general, upon the sale, exchange or other
disposition (including a redemption) of a note, a U.S. holder will recognize
taxable gain or loss equal to the difference between (i) the amount of cash
proceeds and the fair market value of any property received (other than any
amount representing accrued but unpaid qualified stated interest which will be
taxable as ordinary income), and (ii) the holder's adjusted tax basis in the
note.

         Except with respect to accrued market discount on the notes, if any, as
described above, gain or loss realized on the sale, exchange or other
disposition of a note will be capital gain or loss, and will be long-term
capital gain or loss if the note is held for more than one year, or short-term
capital gain or loss if the note is held for one year or less.

Tax considerations for Non-U.S. holders

         Payments of Interest. Interest that we pay on the notes to a beneficial
owner of a note that is a Non-U.S. holder will qualify for the "portfolio
interest" exemption and therefore will not be subject to U.S. federal income or
withholding tax if such interest is not effectively connected with the conduct
of a trade or business within the United States by such Non-U.S. holder and,
among other things, (i) such Non-U.S. holder does not own, actually or
constructively, 10% or more of the total combined voting power of all classes of
our stock entitled to vote, within the meaning of Section 871(h)(3) of the
Internal Revenue Code, (ii) such Non-U.S. holder is not a controlled foreign
corporation that is related, directly or indirectly, to Winstar through stock
ownership, (iii) such Non-U.S. Holder is not a bank receiving interest described
in Section 881(c)(3)(A) of the Internal Revenue Code, and (iv) the certification
requirements under Section 871(h) or Section 881(c) of the Internal Revenue Code
and the Treasury Regulations thereunder (summarized below) are satisfied.

         Interest on a note that is not effectively connected with the Non-U.S.
holder's conduct of a trade or business within the United States and does not
qualify as portfolio interest, would generally be subject to United States
withholding tax at a flat rate of 30% (or a lower applicable treaty rate). If
interest received by a Non-U.S. holder is effectively connected with the conduct
of a trade or business within the United States, then the Non-U.S. holder will
be subject to U.S. federal income tax on such interest income in essentially the
same manner as a U.S. holder and, in the case of a Non-U.S. holder that is a
foreign corporation, may also be subject to the branch profits tax.

         Sale, exchange, or disposition. A Non-U.S. holder generally will not be
subject to U.S. federal income tax with respect to gain realized on a sale,
redemption or other disposition of a note unless (i) the gain is effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. holder or, if certain tax treaties apply, is attributable to a U.S.
permanent establishment maintained by the Non-U.S. holder, (ii) in the case of a
Non-U.S. holder who is a nonresident alien individual, such holder is present in
the United States for 183 or more days in the taxable year and certain other
requirements are met, or (iii) the Non-U.S. Holder is subject to Internal
Revenue Code provisions applicable to certain U.S. expatriates.



                                       83
<PAGE>

         Certification requirements. To satisfy the certification requirements
noted above, (i) the beneficial owner of a note must certify, under penalties of
perjury, to us or our paying agent that the owner is a Non-U.S. holder and must
provide the owner's name and address, and U.S. taxpayer identification number
("TIN"), if any, which certification may be made on IRS Form W-8BEN, or (ii) a
securities clearing organization, bank or other financial institution that holds
customer securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the note on behalf of the beneficial owner
must certify, under penalties of perjury, to us or our paying agent that such
certificate has been received from the beneficial owner and must furnish the
payor with a copy thereof.

         For payments made after December 31, 2000, in the case of notes held by
a foreign partnership that is not a withholding foreign partnership, the
partnership, in addition to providing an IRS Form W- 8IMY, must attach an IRS
Form W-8BEN received from each partner.

         If a Non-U.S. holder of a note is engaged in a trade or business in the
U.S., and if interest or gain realized on the sale, exchange or other
disposition of the note is effectively connected with the conduct of the trade
or business (or, if a tax treaty applies, is attributable to a U.S. permanent
establishment maintained by the Non-U.S. holder), the Non-U.S. holder, although
exempt from U.S. federal withholding tax (provided that certification
requirements are met), will generally be subject to regular U.S. federal income
tax on the interest or gain in the same manner as if it were a U.S. holder. In
lieu of the certificate described above (with respect to non-effectively
connected interest), the Non-U.S. holder will be required to provide us or our
paying agent with a properly executed IRS Form 4224 (or, after December 31,
2000, a Form W-8ECI) in order to claim an exemption from withholding tax. In
addition, if the Non-U.S. holder is a foreign corporation, it may be subject to
a branch profits tax equal to 30% (or such lower rate provided by an applicable
treaty) on its effectively connected earnings and profits for the taxable year,
subject to certain adjustments.

         Non-U.S. holders should consult with their tax advisors regarding U.S.
and foreign tax consequences with respect to the ownership and disposition of
the notes.

Backup withholding and information reporting

         Backup withholding at a rate of 31% may apply to payments made in
respect of, and gross proceeds from the sale, exchange or disposition of, a note
to a holder who is not an "exempt recipient" and who fails to provide certain
identifying information (such as the holder's TIN) in the manner required.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities are exempt recipients. Payments made in respect of a note
must be reported to the Internal Revenue Service, unless the holder is an exempt
recipient or otherwise establishes an exemption.

         In the case of payments to a Non-U.S. holder of interest on a note,
backup withholding and information reporting will not apply if the Non-U.S.
holder furnishes a certificate of foreign status on IRS Form W-8BEN, W-8ECI or
W-8IMY or otherwise establishes an exemption (provided that neither we nor our
paying agent has actual knowledge, or after December 31, 2000, reason to know,
that the holder is a U.S. holder or that the conditions of any other exemption
are not in fact satisfied).

         In general, backup withholding and information reporting will not apply
to a payment of the gross proceeds of a sale of notes effected at a foreign
office of a broker. However, payments of the



                                       84
<PAGE>

proceeds of a sale of a note to or through a foreign office of a broker that is
(i) a U.S. person, (ii) a controlled foreign corporation, (iii) a foreign person
50% or more of whose gross income from all sources for the three-year period
ending with the close of its taxable year preceding the payment was effectively
connected with the conduct of a trade or business within the U.S. or (iv) with
respect to payments made after December 31, 2000, a foreign partnership with
certain connections to the U.S., are currently subject to certain information
reporting requirements, but not back-up withholding, unless the payee is an
exempt recipient or the broker has evidence in its records that the payee is a
Non-U.S. holder and no actual knowledge or, after December 31, 2000, reason to
know that such evidence is false and certain other conditions are met. Payments
of the proceeds of a sale of a note to or through the U.S. office of a broker
will be subject to information reporting and backup withholding unless the payee
certifies under penalties of perjury as to his or her status as a Non-U.S.
holder and satisfies certain other qualifications (and no agent or broker who is
responsible for receiving or reviewing such statement has actual knowledge or,
after December 31, 2000, reason to know that it is incorrect) and provides his
or her name and address or the payee otherwise establishes an exemption.

         Non-U.S. holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available. Backup withholding is not an
additional tax. Any amounts withheld under the backup withholding rules from a
payment to a holder of a note will be allowed as a refund or credit against the
holder's U.S. federal income tax, if the required information is furnished to
the Internal Revenue Service.

         THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY
AND DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF ITS PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. ACCORDINGLY, EACH HOLDER OF THE NOTES
SHOULD CONSULT WITH ITS OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO
SUCH HOLDER FROM THE OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.

                                  LEGAL MATTERS

         The validity of the notes will be passed upon for us by Graubard Mollen
& Miller, New York, New York. Certain partners and employees of Graubard Mollen
& Miller own shares of our common stock.

                                     EXPERTS

         Our consolidated financial statements for December 31, 1998 and 1999
and for each of the years in the three-year period ended December 31, 1999 have
been audited by Grant Thornton LLP, independent certified public accountants, to
the extent and for the periods indicated in their reports thereon.



                                       85
<PAGE>

                       WHERE YOU CAN FIND MORE INFORMATION

         We have filed a registration statement on Form S-3 under the Securities
Act of 1933, as amended, with the SEC. This prospectus is part of that
registration statement and does not contain all of the information included in
the registration statement. For further information about us and our securities,
you may refer to the registration statement and its exhibits and schedules as
well as the documents described below. You can review and copy these documents
at the public reference facilities maintained by the SEC or on the SEC's website
as described below.

         We also file annual, quarterly and special reports, proxy statements
and other information with the SEC. Our SEC filings are available to the public
over the Internet at the SEC's web site at http://www.sec.gov. You may also read
and copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. These documents are also available at the
public reference rooms at the SEC's regional offices in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available at the offices
of the Nasdaq National Market in Washington, D.C.

         The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. This
prospectus incorporates by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:

         o        Annual Report on Form 10-K, as amended, for the year ended
                  December 31, 1999;

         o        Quarterly Report on Form 10-Q filed May 15, 2000; and

         o        Current Report on Form 8-K, filed June 1, 2000.

         We will provide any person to whom a prospectus is delivered a copy of
any and all of the documents incorporated in this prospectus by reference upon
their written or oral request. If you desire any of these documents, please
contact us as at Winstar Communications, Inc., 685 Third Avenue, New York, New
York, 10017, Attention: Investor Relations, 212-792-9800.



                                       86
<PAGE>

                                     PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.  Other Expenses of Issuance and Distribution

         The estimated expenses in connection with the sale of the securities
being registered hereby, are as follows:

SEC registration fee......................................  $528,000.00
Legal fees and expenses...................................    50,000
Accounting fees and expenses..............................    50,000
Miscellaneous.............................................    25,000
                                                           --------------------
     Total................................................  $653,000.00
                                                           ====================


ITEM 15.  Indemnification of Directors and Officers

         Our certificate of incorporation provides that all of our directors,
officers, employees and agents shall be entitled to be indemnified by us to the
fullest extent permitted by law.

         Section 145 of the Delaware General Corporation Law concerning
indemnification of officers, directors, employees and agents is set forth below.

         "Section 145. Indemnification of officers, directors, employees and
agents; insurance.

         (a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

         (b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the


                                      II-1

<PAGE>



corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.

         (c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

         (d) Any indemnification under sections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

         (e) Expenses incurred by an officer or director in defending a civil or
criminal action, suite or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer, to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.

         (f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.


                                      II-2

<PAGE>



         (g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.

         (h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

         (i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith an in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this section.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person in a successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.


                                      II-3

<PAGE>



ITEM 16.          Exhibits

Exhibit
Number            Description
------            -----------

4.1               Indenture governing the notes (including exhibits)

4.2               Conversion Agreement

5.1               Opinion of Graubard Mollen & Miller

12.1              Ratio of earnings to fixed charges

23.1              Consent of Grant Thornton LLP

23.2              Consent of Graubard Mollen & Miller (included in its opinion
                  filed as Exhibit 5.1)

24                Power of attorney (set forth on signature page)

25.1              Statement of Eligibility of United States Trust Company of New
                  York on Form T-1


                                      II-4

<PAGE>



ITEM 17.          Undertakings.

         (a)  The undersigned registrant hereby undertakes:

                  (1)      To file, during any period in which offers or sales
are being made, a post-effective amendment of this registration statement;

                           (iii)    To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.

                  (2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

                  (3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

         (b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

         (c) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.

         (d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a


                                      II-5

<PAGE>

director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

         (e)      The undersigned registrant hereby undertakes that:

                  (1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.

                  (2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.


                                      II-6

<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on this 30th day
of May, 2000.

                                        WINSTAR COMMUNICATIONS, INC.


                                        By:/s/ William J. Rouhana, Jr.
                                           -------------------------------------
                                           William J. Rouhana, Jr.
                                           Chairman of the Board of Directors
                                              and Chief Executive Officer

                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William J. Rouhana, Jr. and Timothy R.
Graham his true and lawful attorneys-in-fact and agents, each acting alone, with
full power of substitution and re-substitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments to this
Registration Statement, including post-effective amendments, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, and hereby ratifies and
confirms all that said attorneys-in-fact and agents, each acting alone, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>

Name                                Position                                                           Date
----                                --------                                                           ----

<S>                                 <C>                                                         <C>



/s/ William J. Rouhana, Jr.         Chairman of the Board and Chief Executive Officer           May 30, 2000
----------------------------------  (principal executive officer)
William J. Rouhana, Jr.


/s/ Nathan Kantor                   President, Chief Operating Officer and Director             May 30, 2000
----------------------------------
Nathan Kantor


/s/ Timothy R. Graham               Executive Vice President,  Secretary and Director           May 30, 2000
----------------------------------
Timothy R. Graham


/s/ Richard J. Uhl                  Group Executive and Chief Financial Officer                 May 30, 2000
----------------------------------  (principal financial officer)
Richard J. Uhl


/s/ Joseph P. Dwyer                 Senior Vice President - Finance (principal                  May 30, 2000
----------------------------------  accounting officer)
Joseph P. Dwyer
</TABLE>



                                      II-7

<PAGE>

<TABLE>
<CAPTION>


Name                                Position                                                  Date
----                                --------                                                  ----
<S>                                 <C>                                                <C>



/s/ Bert W. Wasserman               Director                                           May 30, 2000
---------------------------------
Bert W. Wasserman


/s/ William J. vanden Heuvel        Director                                           May 30, 2000
---------------------------------
William J. vanden Heuvel


/s/ Steven B. Magyar                Director                                           May 30, 2000
---------------------------------
Steven B. Magyar


                                    Director
---------------------------------
Hartley R. Rogers


/s/ Lawrence B. Sorrel              Director                                           May 30, 2000
---------------------------------
Lawrence B. Sorrel


/s/ James I. Cash                   Director                                           May 30, 2000
---------------------------------
James I. Cash
</TABLE>




                                      II-8



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