SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
February 6, 1997, by and among WinStar Communications, Inc., a Delaware
corporation (the "Company"), WinStar Credit Corp., a Delaware corporation and
wholly owned subsidiary of the Company ("WCC" and, together with the Company,
the "Sellers"), and each of the purchasers (individually, a "Purchaser" and,
collectively, the "Purchasers") set forth on the execution pages hereof (the
"Execution Pages").
WHEREAS, the Company, WCC and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation D"), as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, each of the Purchasers desires to purchase, upon the
terms and conditions stated in this Agreement, the number of units (the "Units")
set forth on Schedule 1(a) hereto, each Unit consisting of (a) one thousand
shares of the Company's 6% Series A Cumulative Convertible Preferred Stock, par
value $0.01 per share (the "Preferred Stock"), and (b) warrants (the
"Warrants"), in the form attached hereto as Exhibit B, to purchase 400 shares of
the Company's common stock, par value $0.01 per share (the Common Stock), at an
exercise price of $25.00 per share, subject to adjustment as provided therein.
The rights, preferences and privileges of the Preferred Stock, including the
terms upon which such Preferred Stock is convertible into shares of Common Stock
are set forth in the form of Certificate of Designations, Preferences and Rights
attached hereto as Exhibit A (the "Certificate of Designation"). The shares of
Preferred Stock to be issued and sold hereunder are hereinafter referred to as
the "Preferred Shares";
WHEREAS, immediately prior to the Closing Date the Company
will make a contribution to the capital of WCC consisting of 416,670 shares of
Preferred Stock and 166,668 Warrants to provide for WCC's sale of such Preferred
Stock and Warrants to the Purchasers pursuant to this Agreement;
WHEREAS, contemporaneous with the execution and delivery of
this Agreement the parties hereto are executing and delivering a Registration
Rights Agreement, in the form attached hereto as Exhibit C (the "Registration
Rights Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws;
NOW, THEREFORE, the Company, WCC and the Purchasers hereby
agree as follows:
1. Purchase and Sale of the Units.
(a) Purchase of the Units. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, on February 11,
1997 (the "Closing Date") the Company shall issue and the Sellers shall sell to
each Purchaser and each Purchaser shall purchase from the Sellers that number of
Units set forth next to such Purchaser's name on Schedule 1(a) attached hereto.
The purchase price for each Unit shall be $25,000.
(b) Form of Payment. On the Closing Date each Purchaser shall pay the
aggregate purchase price for the Units purchased by such Purchaser by wire
transfer to the Company or WCC, as the case may be, in accordance with the
appropriate Seller's written wiring instructions, against delivery of duly
executed certificates representing the Preferred Shares and the Warrants
comprising the Units, and the Sellers shall deliver such certificates against
delivery of such aggregate purchase price.
2. Purchasers' Representations and Warranties. Each Purchaser, solely with
respect to such Purchaser, represents and warrants to the Sellers that:
(a) Investment Purpose. Purchaser is purchasing the Preferred Shares, the
shares of Common Stock issuable upon conversion of the Preferred Shares or
otherwise pursuant to the Certificate of Designation (the "Conversion Shares"),
the Warrants and the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares" and, collectively with the Preferred Shares, the
Conversion Shares and the Warrants, the "Securities")) for Purchaser's own
account, for investment purposes only and not with a view towards the public
sale or distribution thereof, except pursuant to sales that are exempt from the
registration
requirements of the Securities Act or sales registered under the Securities Act.
Purchaser understands that Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered pursuant to the
Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering any such Securities other than as contemplated
by the Registration Rights Agreement.
(b) Accredited Investor Status. Purchaser is an "Accredited Investor" as
that term is defined in Rule 501(a)(1), (2), (3) (5) or (7) of Regulation D.
(c) Reliance on Exemptions. Purchaser understands that the Units are being
offered and sold to Purchaser in reliance upon specific exemptions from the
registration requirements of United States Federal and state securities laws and
that the Sellers are relying upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Preferred Shares and the Warrants.
(d) Information. Purchaser and its counsel, if any, have been furnished all
materials relating to the business, finances and operations of the Company
(including without limitation, the SEC Documents (as hereinafter defined))and
materials relating to the offer and sale of the Securities which have been
requested by Purchaser or its counsel. Purchaser and its counsel, if any, have
been afforded the opportunity to ask questions of the Company and have received
what Purchaser believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
Purchaser or its counsel or any of its representatives shall modify, amend or
affect Purchaser's right to rely on the Sellers'
representations and warranties contained in Section 3 below. Purchaser
understands that Purchaser's investment in the Securities involves a high degree
of risk.
(e) Governmental Review. Purchaser understands that no United States
Federal or state agency or any other government or governmental agency has
passed upon the merits of or made any recommendation or endorsement of the
Securities.
(f) Transfer or Resale. Purchaser understands that (i) the Securities have
not been and, except as provided in the Registration Rights Agreement, are not
being registered under the Securities Act or any state securities laws, and may
not be offered, sold, pledged or otherwise transferred unless (a) subsequently
registered thereunder, or (b) Purchaser shall have delivered to the Company an
opinion of counsel (which opinion and counsel shall be reasonably acceptable to
the Company) to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration (together
with, if requested by the Company, a certificate from the transferee containing
representations consistent with the conclusions contained in such opinion in
form and substance reasonably acceptable to the Company) or (c) sold pursuant to
Rule 144 promulgated under the Securities Act (or a successor rule) ("Rule
144"); (ii) any sale of such Securities made in reliance on Rule 144 may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder, in each case, other than pursuant to the Registration
Rights Agreement.
(g) Legends. Purchaser understands that the Preferred Shares, the Warrants
and the certificates for the Conversion Shares and Warrant Shares (until such
time as the Conversion Shares and Warrant Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser pursuant to Rule 144 without any restriction as to the
public resale thereof) shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
(A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAW, (B) AN OPINION OF COUNSEL, IN
FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR ANY APPLICABLE
STATE SECURITIES LAW OR (C) RULE 144 UNDER THE SECURITIES ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
reasonably acceptable to the Company, to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act or (c) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144 without any restriction as to the
number of Securities acquired as of a particular date that can then be
immediately sold. Purchaser agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, pursuant
to an effective registration statement and in accordance with the prospectus
delivery requirements set forth in the rules promulgated by the SEC or in
compliance with an exemption from the registration requirements of applicable
securities law. In the event the above legend is removed from any Security and
thereafter the effectiveness of a registration statement covering such Security
is suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance notice to
Purchaser the Company may require that the above legend be placed on any such
Security that cannot then be sold pursuant to an effective registration
statement or Rule 144 (without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold), which
legend shall be removed when such Security may again be sold pursuant to an
effective registration statement or Rule 144 (without the aforementioned
restriction).
(h) Authorization; Enforcement. Purchaser has full right, power and
authority to enter into this Agreement and the Registration Rights Agreement and
to consummate the transactions contemplated hereunder and thereunder. This
Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of Purchaser and are valid and
binding agreements of Purchaser enforceable in accordance with their terms.
(i) Residency; Citizenship. Purchaser is a resident of the state and a
citizen of the country set forth next to Purchaser's name on Schedule 1(a).
(j) Acknowledgments Regarding Placement Agent. Purchaser acknowledges that
Credit Suisse First Boston Corporation is acting as placement agent (the
"Placement Agent") for the Securities being offered hereby and will be
compensated by the Company for acting in such capacity. Purchaser further
acknowledges that the Placement Agent has acted solely as placement agent in
connection with the offering of the Securities by the Sellers, that the
information and data provided to Purchaser and referred to in subsection (d)
above have not been subjected to independent verification by the Placement
Agent, and that the Placement Agent makes no representation or warranty with
respect to the accuracy or completeness of such information, data or other
related disclosure material. Purchaser further acknowledges that in making its
decision to enter into this Agreement and purchase the Securities it has relied
on its own examination of the Company and the terms of, and the risks and
consequences, of holding, the Securities.
(k) Acknowledgment of Use of Proceeds. The Purchaser acknowledges and
understands that the Company and WCC intend to use the proceeds derived from the
sale of the Securities for working capital for the Company's telecommunications
and non-telecommunications businesses and to make investments in, acquire, make
loans to, or otherwise enter into business arrangements with, companies which
may or may not be involved in the telecommunications business. In that
connection, the Company and/or WCC may contribute such proceeds to WinStar New
Media Company, Inc. and other subsidiaries of the Company which acquire, produce
and distribute information and entertainment content or engage in other
non-telecommunication businesses.
(l) 10% Owner. After giving effect to the purchase of Preferred Stock and
Warrants hereunder, such Purchaser will not own 10% or more of the voting
securities of the Company.
3. Representations and Warranties of the Company. The Company represents
and warrants to each Purchaser that:
(a) Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on the
operations, properties, financial condition or prospects of the Company and its
direct and indirect subsidiaries on a consolidated basis or on the transactions
contemplated hereby.
(b) Authorization; Enforcement. (i)(a) The Sellers have the requisite
corporate power and authority to enter into and perform this Agreement, and the
Company has the requisite corporate power and authority to enter into and
perform the Registration Rights Agreement and the Warrants and (b) the Company
has the requisite corporate power and authority to issue and the Sellers have
the requisite corporate power and authority to sell the Preferred Shares and the
Warrants in accordance with the terms hereof and the Company has the requisite
corporate power and authority to issue the Conversion Shares and Warrant Shares
upon conversion of the Preferred Shares and exercise of the Warrants,
respectively, in accordance with the terms thereof; (ii) the execution and
delivery of this Agreement by the Sellers and the execution and delivery by the
Company of the Registration Rights Agreement and the Warrants and the
consummation by the Sellers of the transactions contemplated hereby and thereby
(including without limitation the issuance by the Company of the Preferred
Shares and the Warrants and the issuance and reservation for issuance by the
Company of the Conversion Shares and Warrant Shares issuable upon conversion and
exercise thereof) have been duly authorized by the Company's or WCC's Board of
Directors, as the case may be, and no further consent or authorization of the
Sellers, each of their Board or Directors or its stockholders is required (under
Rule 4460(i) promulgated by the National Association of Securities Dealers (the
"NASD") or otherwise); (iii) this Agreement has been duly executed and delivered
by the Sellers; and (iv) this Agreement constitutes, and, upon execution and
delivery by the Company of the Registration Rights Agreement and the Warrants
such agreements will constitute, valid and binding obligations of the Company
and/or WCC, as the case may be, and will be enforceable against the Company or
WCC, as the case may be, in accordance with their terms.
(c) Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock and the number of shares issued
and outstanding (including the number of shares reserved for issuance pursuant
to the Company's stock option plans and the number of shares reserved for
issuance pursuant to securities (other than the Preferred Shares and the
Warrants) exercisable for, or convertible into or exchangeable for any shares of
Common Stock) is set forth on Schedule 3(c). All of such outstanding shares of
capital stock have been, or upon issuance will be, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company (including the
Preferred Shares, the Conversion Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except as disclosed in Schedule 3(c) or as
contemplated herein, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities under the Securities Act
(except the Registration Rights Agreement and agreements pursuant to which the
Company has already filed registration statements). The Company has furnished to
counsel for the Purchasers true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("Certificate of
Incorporation") and the Company's By-laws as in effect on the date hereof (the
"By-laws"). Prior to the Closing Date, the Certificate of Designation, in the
form attached as Exhibit A hereto, will have been duly filed with the Secretary
of State of Delaware and, on and after the Closing Date, the Purchasers will be
entitled to the rights set forth therein. The Sellers shall provide Purchasers
with a written update of this representation signed by the Seller's Chief
Executive Officer, Chief Financial Officer or Executive Vice President on behalf
of the Company as of the Closing Date.
(d) Issuance of Shares. The Preferred Shares are duly authorized and, upon
issuance in accordance with the terms of this Agreement, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and
encumbrances and will not be subject to or in violation of preemptive rights or
other similar rights of stockholders of the Company. The Conversion Shares and
Warrant Shares are duly authorized and reserved for issuance, and, upon
conversion of the Preferred Shares and exercise of the Warrants in accordance
with the terms thereof, will be validly issued, fully paid and non-assessable,
and free from all taxes, liens, claims and encumbrances and will not be subject
to or in violation of preemptive rights or other similar rights of stockholders
of the Company.
(e) No Conflicts. The execution, delivery and performance of this Agreement
by the Sellers, the execution, delivery and performance of the Registration
Rights Agreement and the Warrants by the Company, the performance by the Company
of its obligations under the Certificate of Designation, and the consummation by
the Sellers of the transactions contemplated hereby and thereby (including
without limitation the issuance by the Company of the Preferred Shares and the
Warrants and the issuance and reservation for issuance by the Company of the
Preferred Shares (as payment of a dividend or otherwise), Conversion Shares and
Warrant Shares) will not (i) conflict with or result in a violation of the
Certificate of Incorporation or By-laws (although Purchaser understands that the
Company currently has 75,000,000 shares of Common Stock authorized and
49,505,119 shares of Common Stock outstanding after giving effect to the
exercise of all outstanding options and warrants and conversion of all
convertible securities as of the date hereof and that, accordingly, if the
market price of the Common Stock decreases significantly, the Company may not
have a sufficient number of shares of Common Stock authorized to issue upon
conversion of the Preferred Stock or exercise of the Warrants, in which case the
Company shall use its best efforts to promptly increase its authorized Common
Stock to accommodate such issuances), (ii) conflict with or result in a breach
or violation of any terms or provisions of, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or other instrument to which the
Company or any of its subsidiaries is a party, or (iii) result in a violation of
any law or any rule, regulation, order, judgment or decree of any court or
governmental agency (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries is bound or
affected (except for, in the case of both (ii) and (iii) above, such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its subsidiaries is in default (and no event has
occurred which, with notice or lapse of time or both, would put the Company or
any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for possible defaults or rights as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable state securities laws,
neither of the Sellers is required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants or to perform its obligations under the Certificate of
Designation, in each case in accordance with the terms hereof or thereof. The
Company is not in violation of the listing requirements of the Nasdaq National
Market ("NASDAQ") and does not reasonably anticipate that the Common Stock will
be delisted from NASDAQ for the foreseeable future.
(f) SEC Documents, Financial Statements. Since December 31, 1995, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
(other than exhibits) incorporated by reference therein, taken together with,
and as supplemented by, the Company's preliminary prospectus dated December 20,
1996) being hereinafter referred to herein as the "SEC Documents"). The Sellers
have delivered to counsel for the Purchasers true and complete copies of the SEC
Documents, except for such exhibits, schedules and incorporated documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents at the time they were filed with the SEC contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may include footnotes or may be condensed or
summary statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents or except as set forth
on Schedule 3(f), the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company. The Sellers have not
provided to any Purchaser any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Sellers but which
has not been so disclosed; provided; however, that the Purchasers acknowledge
that the Company has disclosed to them preliminary estimates of its operating
results for the year ended December 31, 1996 ("96 Results").
(g) Absence of Certain Changes. Since September 30, 1996, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in the SEC Documents. Purchaser acknowledges
that the 96 Results do not constitute such a material adverse change or
development.
(h) Absence of Litigation. Except as disclosed in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation (collectively,
"Proceedings") before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its subsidiaries, threatened against or affecting the Company, any of
its subsidiaries, or any of their respective directors or officers in their
capacities as such, except for such Proceedings which, if determined adversely
to the Company, would not, singly or in the aggregate, have a Material Adverse
Effect.
(i) Disclosure. All information relating to or concerning the Sellers set
forth in this Agreement, taken together with, and as supplemented by, the SEC
Documents, is true and correct in all material respects and the Sellers have not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to the Company or any of its subsidiaries or their respective
businesses, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(j) Acknowledgment Regarding Purchasers' Purchase of the Securities. The
Sellers acknowledges and agree that the Purchasers are not acting as financial
advisors or fiduciaries of the Sellers (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby, and any advice given
by Purchasers, or any of their respective representatives or agents, in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to the Purchasers' purchase of the Preferred Shares and the
Warrants. The Sellers further represent to the Purchasers that the Sellers'
decision to enter into this Agreement has been based solely on the independent
evaluation of the Sellers and their representatives.
(k) Current Public Information. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the Securities Act.
(l) No General Solicitation. Neither of the Sellers nor, to either of the
Seller's knowledge, any distributor participating on the Sellers' behalf in the
transactions contemplated hereby (if any), nor to either of the Seller's
knowledge any person acting for the Sellers or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
(m) No Integrated Offering. Neither the Sellers, nor any of their
affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act.
(n) No Brokers. Neither of the Sellers has taken any action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with the Placement Agent, whose
customary fee and certain expenses will be paid by the Company.
4. Covenants.
(a) Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this Agreement.
(b) Form D; Blue Sky Laws. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to each Purchaser promptly after such filing. The Company shall, on or before
the Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Preferred Stock and the Warrants for sale to the
Purchasers pursuant to this Agreement under any applicable securities or "blue
sky" laws of the states of the United States or obtain exemption therefrom, and
shall provide evidence of any such action so taken to each Purchaser on or prior
to such Closing Date.
(c) Reporting Status. So long as the Purchasers beneficially own any of the
Securities and such Securities represent more than the right to receive only
cash from the Company (or its successor) upon exercise thereof, the Company
shall timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination.
(d) Use of Proceeds. The Sellers shall use the proceeds from the sale of
the Units for general corporate purposes.
(e) Financial Information. The Company agrees to send the following reports
to each Purchaser until such Purchaser transfers, assigns or sells all of its
interest in the Securities: (i) within ten days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its proxy statements, its Quarterly
Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii) within two
days after their release, copies of all press releases issued by the Company.
(f) Reservation of Shares. Except as set forth in Section (3)(e)(i), the
Company shall at all times have authorized and reserved for the purpose of
issuance a sufficient number of shares of Common Stock to provide for the full
conversion of the outstanding Preferred Shares and issuance of the Conversion
Shares in connection therewith and the full exercise of the Warrants and the
issuance of the Warrant Shares in connection therewith. In that regard, a
"sufficient number of shares" with respect to the Preferred Shares shall be
deemed to be equal to such number of Conversion Shares issuable upon conversion
of the outstanding Preferred Shares if the Conversion Price (as defined in the
Certificate of Designation) were 50% of the Conversion Price then in effect. The
Company shall not reduce the number of shares reserved for issuance of the
Conversion Shares and the Warrant Shares without the consent of each of the
Purchasers, which consent will not be unreasonably withheld.
(g) Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which the shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Preferred
Shares and Warrant Shares from time to time issuable upon exercise of the
Warrants.
(h) Corporate Existence. So long as any Purchaser beneficially owns any
Preferred Shares or Warrants and such Securities represent more than the right
to receive only cash from the Company (or its successor) upon exercise thereof,
the Company shall maintain its corporate existence, except in the event of a
merger, consolidation or sale of all or substantially all of the Company's
assets where the surviving or successor entity in such transaction or the parent
thereof assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith regardless of whether or not the
Company would have had a sufficient number of shares of Common Stock authorized
and available for issuance in order to affect the conversion of all Preferred
Shares and exercise in full of all Warrants outstanding as of the date of such
transaction.
(i) Expenses. The Company shall pay all expenses incurred in connection
with the negotiation, execution, delivery and performance of this Agreement,
including the fees and expenses of Cravath, Swaine & Xxxxx, special counsel for
the Purchasers.
5. Transfer Agent Instructions. The Company shall instruct its transfer
agent to issue certificates, registered in the name of the appropriate Purchaser
or its nominee, for the Conversion Shares and Warrant Shares in such amounts as
specified from time to time by such Purchaser to the Company upon conversion of
the Preferred Shares or exercise of the Warrants. Prior to registration of the
Conversion Shares and Warrant Shares under the Securities Act or resale of such
Securities under Rule 144, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than such instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 2(f) hereof, in the case of the
Conversion Shares and Warrant Shares prior to registration of the Conversion
Shares and Warrant Shares under the Securities Act, will be given by the Company
to its transfer agent and that the Securities shall, except as may be limited by
applicable securities laws, otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Purchasers' obligation as set forth in Section 2(f) hereof to resell the
Securities pursuant to an effective registration statement and in accordance
with the prospectus delivery requirements set forth in the rules promulgated by
the SEC or in compliance with an exemption from the registration requirements of
any applicable securities laws. If a Purchaser provides the Company with an
opinion of counsel, which opinion of counsel shall be reasonably acceptable to
the Company, to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from registration, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, shall promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser.
6. Conditions to the Company's Obligation to Sell. The obligation of the
Company hereunder to issue and the obligation of each of the Sellers to sell the
Units to each of the Purchasers on the Closing Date is subject to the
satisfaction, or the waiver by the applicable Seller, on or before such Closing
Date, of each of the following conditions:
(a) Purchaser shall have executed the signature page to this Agreement and
the Registration Rights Agreement, and delivered the same to the Sellers;
(b) Purchaser shall have delivered the aggregate purchase price for the
Units purchased in accordance with Section 1(b) above;
(c) Each representation and warranty of the Purchaser, on and as of the
Closing Date, shall be true and correct in all material respects with the same
effect as though made on and as of the Closing Date (except for representations
and warranties that speak as of a specific date) and Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by Purchaser on or prior to the Closing Date;
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. Conditions to each Purchaser's Obligation to Purchase. The obligation of
each of the Purchasers hereunder to purchase the Units on the Closing Date is
subject to the satisfaction, or waiver by each of the Purchasers, on or before
the Closing Date, of each of the following conditions:
(a) Each of the Sellers shall have executed this Agreement and the Company
shall have executed the Registration Rights Agreement, and delivered the same to
the Purchasers;
(b) The Certificate of Designation shall have been accepted for filing with
the Secretary of State of Delaware, and a copy thereof certified by the
Secretary of State shall have been delivered to counsel for the Purchasers;
(c) The Sellers shall have delivered to each Purchaser duly executed
certificates representing the Preferred Shares and Warrants being purchased in
accordance with Section 1(b) above;
(d) The Common Stock shall continue to be authorized for quotation on
NASDAQ and trading in the Common Stock (or NASDAQ generally) shall not have been
suspended by the SEC or NASD;
(e) (i) Each representation and warranty of the Sellers shall be, on and as
of the Closing Date, true and correct in all material respects with the same
effect as though made on and as of the Closing Date (except for representations
and warranties that speak as of a specific date other than the Closing Date),
(ii) the Sellers shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Sellers on or prior
to the Closing Date and (iii) the Purchasers shall have received a certificate,
executed by an appropriate executive officer of the respective Seller and dated
as of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Purchasers;
(f) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby, which
prohibits the consummation of any of the transactions contemplated by this
Agreement;
(g) The Purchasers shall have received the officer's certificate described
in Section 3(c) above, dated as of the Closing Date; and
(h) The Purchasers shall have received opinions of the Company's counsel,
dated as of the Closing Date, (i) with respect to Federal telecommunications
matters, in form, scope and substance reasonably satisfactory to the Purchasers,
and (ii) with respect to other matters, in substantially the form of Exhibit D-1
attached hereto.
8. Governing Law; Miscellaneous. (a) Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN NEW YORK CITY WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither of the Sellers or the Purchasers make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
each of the Sellers and all of the Purchasers.
(f) Notices. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective three days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed as follows:
If to either of the Sellers:
WinStar Communications, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxxx, Executive
Vice President and General Counsel
with copy to:
Xxxxxxxx Xxxxxx & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxx Xxxxxx, Esq.
If to a Purchaser, to the address set forth immediately below
such Purchaser's name on the Execution Pages.
Each party shall provide notice to the other parties of any
change in address.
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and assigns. Neither of the
Sellers or the Purchasers shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, each of the Purchasers may assign its rights
hereunder to any of such Purchaser's "affiliates", as that term is defined under
the Exchange Act, to the extent such affiliate acquires the Preferred Stock and
Warrants from such Purchaser, without the consent of the appropriate Seller.
This provision shall not limit a Purchaser's right to transfer the Securities
pursuant to the terms of the Certificate of Designation, the Warrants and this
Agreement or to assign such Purchaser's rights under the Certificate of
Designation, the Warrants and the Registration Rights Agreement (but not this 4
Agreement) to any such transferee.
(h) Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
(i) Survival. The representations and warranties of the Sellers and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
Closing Date hereunder notwithstanding any due diligence investigation conducted
by or on behalf of the Purchasers. The Company agrees to indemnify and hold
harmless each of the Purchasers and each of such Purchaser's officers,
directors, employees, partners, agents and affiliates and each of the Purchasers
agrees to indemnify and hold harmless each of the Sellers and each of such
Seller's officers, directors, employees, partners, agents and affiliates for
loss or damage arising as a result of or related to any breach (or, in the case
of a claim by anyone against any such person, any alleged breach) by the Sellers
(for purposes of the Sellers' indemnification) or such Purchaser (for purposes
of such Purchaser's indemnification) of any of its representations or covenants
set forth herein, including advancement of expenses as they are incurred.
(j) Publicity. The Company and each of the Purchasers shall have the right
to approve before issuance any press releases, SEC, NASDAQ, NASD or other
regulatory filings, or any other public statements with respect to the
transactions contemplated hereby or the identity of the Purchasers; provided,
however, that the Company shall be entitled, without the prior approval of the
Purchasers, to make any press release or SEC, NASDAQ, NASD or other regulatory
filings with respect to such transactions as is required by applicable law and
regulations. The parties hereto agree that the press release in the form of
Exhibit E hereto shall be released promptly after execution hereof.
(k) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Personal and Other Liability. The Purchasers understand and acknowledge
that no recourse under or upon any obligation, covenant, representation,
warranty or agreement of the Company hereunder, or in the Warrant, Certificate
of Designations or Registration Rights Agreement, shall be had against WCC or
against any incorporator, shareholder, officer, director, employee or
controlling person of the Company or WCC or of any successor person thereof.
Each Purchaser, by accepting the Preferred Stock and Warrant, waives and
releases all such liability.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.
WINSTAR COMMUNICATIONS, INC.,
by: /s/
-------------------------
Name:
Title:
WINSTAR CREDIT CORP.
by: /s/
--------------------------
Name:
Title:
THE PURCHASERS:
BY CREDIT SUISSE FIRST BOSTON CORPORATION
by: /s/
-------------------------
Name:
Title:
