-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JojPUdWVRrYt1+tn2baPRO/EFXPIk4gwweKg3iYMQmcnWbRikdDR/2tKoFV2t+G9 gJNrlMcPK0RnNm3JhVdoUg== 0001094891-00-000001.txt : 20000104 0001094891-00-000001.hdr.sgml : 20000104 ACCESSION NUMBER: 0001094891-00-000001 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991215 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WINSTAR COMMUNICATIONS INC CENTRAL INDEX KEY: 0000868797 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 133585278 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10726 FILM NUMBER: 500282 BUSINESS ADDRESS: STREET 1: 230 PARK AVE STE 2700 CITY: NEW YORK STATE: NY ZIP: 10169 BUSINESS PHONE: 2125844000 FORMER COMPANY: FORMER CONFORMED NAME: ROBERN INDUSTRIES INC DATE OF NAME CHANGE: 19930328 FORMER COMPANY: FORMER CONFORMED NAME: ROBERN APPAREL INC DATE OF NAME CHANGE: 19600201 8-K 1 CURRENT REPORT ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) December 15, 1999 ----------------- WINSTAR COMMUNICATIONS, INC. -------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-10726 13-3585278 - ---------------------------- ------------ ------------------ (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 685 Third Avenue, New York, New York 10017 - ---------------------------------------- --------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (212) 792-9800 --------------- Not Applicable ------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) ITEM 5. OTHER EVENTS General On December 15, 1999, Winstar Communications, Inc. ("Company" or "Winstar") and its wholly-owned subsidiary, WinStar Credit Corp. ("WCC"), entered into a Securities Purchase Agreement ("Purchase Agreement") with Credit Suisse First Boston Equity Partners, L.P. ("CSFBEP"), Welsh, Carson, Anderson & Stowe VIII, L.P. ("WCAS"), Microsoft Corporation ("Microsoft") and the other purchasers listed on the signature pages thereto (collectively and together with certain other purchasers to be identified prior to closing, the "Purchasers"), pursuant to which the Company and WCC agreed to sell to the Purchasers an aggregate of 900,000 shares of the Company's Series G Senior Cumulative Participating Convertible Preferred Stock ("Series G Stock") for an aggregate purchase price of $900,000,000. The closing of the purchase is expected to take place in January 2000 after the expiration of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of certain other customary closing conditions. The Series G Stock, which will vote on an as-converted basis with the Company's Common Stock, will represent, on an after-issued basis, ownership of approximately 19.4% of the Company's outstanding common shares (18.3% of the Company's outstanding voting shares) and approximately 13.3% of the Company's fully diluted common shares. Hartley R. Rogers, Managing Director and Co-Head of Credit Suisse First Boston Private Equity Division, and Lawrence B. Sorrel, a General Partner of WCAS, will join the Company's Board of Directors upon the closing of the transaction. Concurrently with the execution of the Purchase Agreement, Winstar and Microsoft also entered into a Master Agreement and certain software licenses and other agreements under which they will work cooperatively to deliver and promote broadband applications, including general business, e-commerce and multimedia applications services. Included in this arrangement are a joint sales and marketing program and licenses of Microsoft's branded applications, including Office 2000 and other application services, to Winstar on an Application Service Provider (ASP) basis. The focus of this arrangement will be on developing new bandwidth-intensive services such as on-demand IP videoconferencing, based on Microsoft software. The companies also plan to collaborate with respect to Microsoft's BizTalk e-commerce and media streaming initiatives. These applications will be delivered over Winstar's high-speed broadband network. Dividends If any cash dividends are paid on the Common Stock, the holders of Series G Stock shall be entitled to receive such cash dividends on an as-converted basis. In addition, the Series G Stock pays cumulative dividends at a rate equal to the excess (if any) of (i) 5.75% per annum on its liquidation preference over (ii) the amount of any regular cash dividends per share of Series G Stock that have been paid during the applicable dividend period on the Common Stock. Such dividends shall be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year to the record holders of the Series G Stock as of March 1, June 1, September 1 and December 1. The Company has the option to pay dividends in cash or by adding the amount of the dividend to the liquidation preference of the Series G Stock. 2 Conversion Each share of Series G Stock is convertible, at the option of the holder, into shares of Common Stock ("Conversion Shares") at a conversion price ("Conversion Price") of $67.50 per Conversion Share, subject to certain adjustments (i.e., for a stock split, stock dividend, combination, merger, consolidation, reclassification or other similar event involving the Company's Common Stock). The Company will have the option to convert all of the shares of Series G Stock into Common Stock at the Conversion Price if on any date after the third anniversary of the date of issuance of the Series G Stock, the volume-weighted average trading price of the Common Stock on Nasdaq for the 20 consecutive trading days immediately prior to such date is at least equal to 155% of the Conversion Price on such date. Liquidation, Dissolution or Winding up In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, before any payment or distribution of the Company's assets are made to the holders of Junior Securities (as defined below), holders of Series G Stock will be entitled to receive an amount per share equal to the greater of (i) the accreted value of the Series G Stock on such date, plus all dividends accrued to such date (whether or not earned or declared) since the end of the previous dividend period and (ii) the amount that would have been payable on a number of shares of Common Stock equal to the number of Conversion Shares into which a share of Series G Stock was convertible immediately prior to such date. Holders of Series G Stock will not be entitled to any further payment. If the assets of the Company distributable among the holders of Series G Stock are insufficient to pay in full the preferential amount and liquidating payments on any Parity Securities (as defined below), then such assets will be distributed among the holders of Series G Stock and any such Parity Securities ratably in accordance with the respective amounts that would be payable if all amounts payable thereon were paid in full. Ranking With respect to dividend rights and rights on liquidation, dissolution and winding up, the Series G Stock will rank (i) senior to the Company's Common Stock, 6% Series A Cumulative Convertible Preferred Stock, Series E Junior Convertible Preferred Stock and each other class or series of capital stock established in the future by the Company's Board of Directors, the terms of which do not expressly provide that it ranks senior to, or on a parity with, the Series G Stock (collectively, the "Junior Securities") and (ii) on a parity with the Company's Series C 14 1/4% Senior Cumulative Exchangeable Preferred Stock Due 2007, Series D 7% Senior Cumulative Convertible Preferred Stock Due 2010, Series F 7 1/4% Senior Cumulative Convertible Preferred Stock and each other class or series of capital stock established in the future by the Company's Board of Directors, the terms of which expressly provide that such class or series will rank on a parity with the Series G Stock (collectively, the "Parity Securities"). The Company may not issue any securities that are senior to the Series G Stock without the consent of the holders of the Series G Stock. 3 Redemption On April 1, 2010, the Company will be required to redeem all of the outstanding shares of Series G Stock at a redemption price per share equal to the greater of (i) the accreted value of the Series G Stock on such date, plus all dividends accrued to such date (whether or not earned or declared) since the most recent dividend payment date and (ii) the volume-weighted average trading price per share of Common Stock on Nasdaq for the 20 consecutive trading days immediately prior to April 1, 2010 multiplied by the number of Conversion Shares into which the Series G Stock is convertible on such date. The Company has the option to pay the redemption price in cash or in shares of Common Stock. If the Company elects to pay the redemption price, in whole or in part, in shares of Common Stock, such shares will be valued at 97% of the volume- weighted average trading price per share of Common Stock on Nasdaq for the 20 consecutive trading days immediately prior to April 1, 2010. If the Company determines to pay the redemption price in shares of Common Stock, the Company has agreed to use its best efforts to register such shares under the Securities Act of 1933, as amended, prior to the delivery of such shares. Change of Control In the event of a change in control of the Company, the Company will make an offer to purchase all outstanding shares of Series G Stock at a purchase price ranging from 102% to 108% of the accreted value per share on such date, plus all dividends accrued to such date (whether or not earned or declared) since the end of the previous dividend period. The Company has the option to pay the change of control amount in cash or shares of Common Stock. If the Company elects to pay the applicable change of control amount in shares of Common Stock, such shares will be valued at the volume-weighted average trading price per share of Common Stock on Nasdaq for the 20 consecutive trading days immediately prior to the date the change of control amount is paid. The Company has agreed to use its best efforts to register such shares prior to the delivery of such shares. Voting Rights Each holder of Series G Stock will be entitled to vote on all matters and will be entitled to that number of votes equal to the number of Conversion Shares into which such holder's shares of Series G Stock could be converted on the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, on the date such vote is taken or any written consent of shareholders is solicited. In addition, so long as any of the Series G Stock is outstanding, the affirmative vote of the holders of a majority of the outstanding shares of Series G Stock, voting together as a single class, will be necessary to: (i) amend, alter or repeal any provision of the Company's Restated Certificate of Incorporation or By-laws so as to adversely affect the Series G Stock, (ii) issue any additional Series G Stock or create, authorize or issue any capital stock that ranks prior (whether with respect to dividends or upon liquidation, dissolution, winding up or otherwise) to the Series G Stock or (iii) redeem for cash any Junior Securities, subject to certain exemptions. Shareholders Agreement Simultaneous with the closing of the transaction, each of (i) CSFBEP and its affiliated co-investment partners, (ii) WCAS and its affiliated co-investment partners and (iii) Microsoft (collectively, the "Holders") will separately enter into a Shareholders Agreement with the Company, pursuant to which (a) each of the Holders will agree that until the earlier of the tenth anniversary of the closing or the date on which such Holder owns less than 20% of its initial holdings on an as-converted basis, such Holder will not purchase any additional voting securities of the Company without the Company's prior written consent and (b) the Company will grant to each of the Holders customary demand and "piggyback" registration rights. 4 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits 4.1 Purchase Agreement, dated as of December 15, 1999, among the Company, WCC and the Purchasers (without exhibits) 4.2 Form of Certificate of Designations, Preferences and Rights of Series G Senior Cumulative Participating Convertible Preferred Stock 4.3 Form of Shareholders Agreement to be entered into separately with the Company by each of (i) CSFBEP and its affiliated co-investment partners, (ii) WCAS and its affiliated co-investment partners and (iii) Microsoft 99.1 Press Release, dated December 15, 1999 5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: December 30, 1999 WINSTAR COMMUNICATIONS, INC. By: /s/ Kenneth J. Zinghini ------------------------- Kenneth J. Zinghini Senior Vice President 6 EXHIBIT INDEX The following exhibits are filed as part of this report: Exhibit Document ------- --------- 4.1 Purchase Agreement, dated as of December 15, 1999, among the Company, WCC and the Purchasers (without exhibits) 4.2 Form of Certificate of Designations, Preferences and Rights of Series G Senior Cumulative Participating Convertible Preferred Stock 4.3 Form of Shareholders Agreement to be entered into separately with the Company by each of (i) CSFBEP and its affiliated co-investment partners, (ii) WCAS and its affiliated co-investment partners and (iii) Microsoft 99.1 Press Release, dated December 15, 1999 7 EX-4.1 2 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT dated as of December 15, 1999 among WINSTAR COMMUNICATIONS, INC., WINSTAR CREDIT CORP., CREDIT SUISSE FIRST BOSTON EQUITY PARTNERS, L.P., WELSH, CARSON, ANDERSON & STOWE VIII, L.P., MICROSOFT CORPORATION and THE OTHER PURCHASERS LISTED ON THE SIGNATURE PAGES HEREOF TABLE OF CONTENTS ---------------------- PAGE ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions.................................................1 ARTICLE 2 PURCHASE AND SALE OF SECURITIES SECTION 2.01. Commitment to Purchase......................................6 SECTION 2.02. The Closing.................................................6 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE ISSUER SECTION 3.01. Corporate Existence and Power...............................7 SECTION 3.02. Corporate Authorization.....................................7 SECTION 3.03. Governmental Authorization..................................8 SECTION 3.04. Noncontravention............................................8 SECTION 3.05. Capitalization..............................................9 SECTION 3.06. Subsidiaries................................................9 SECTION 3.07. Financial Statements.......................................10 SECTION 3.08. Absence of Certain Changes.................................10 SECTION 3.09. No Material Undisclosed Liabilities........................10 SECTION 3.10. Litigation.................................................11 SECTION 3.11. Compliance with Laws.......................................11 SECTION 3.12. SEC Reports................................................11 SECTION 3.13. Material Contracts.........................................12 SECTION 3.14. Finders' Fees..............................................12 SECTION 3.15. Offering of Securities.....................................12 SECTION 3.16. Intellectual Property......................................12 SECTION 3.17. Environmental Compliance...................................13 SECTION 3.18. Compliance with ERISA......................................13 SECTION 3.19. Taxes......................................................13 SECTION 3.20. Regulatory Matters..........................................14 PAGE ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS SECTION 4.01. Corporate Existence and Power..............................16 SECTION 4.02. Authorization..............................................17 SECTION 4.03. Governmental Authorization.................................17 SECTION 4.04. Noncontravention...........................................17 SECTION 4.05. Finders' Fees..............................................17 SECTION 4.06. Private Placement..........................................18 ARTICLE 5 COVENANTS OF THE ISSUER SECTION 5.01. Access to Information......................................19 SECTION 5.02. Certificate of Designations................................20 SECTION 5.03. Restrictions Pending the Closing...........................20 SECTION 5.04. Reservation of Shares......................................20 SECTION 5.05. Amendment to Rights Agreement..............................20 ARTICLE 6 COVENANTS OF THE PURCHASERS SECTION 6.01. Confidentiality............................................21 SECTION 6.02. Agreement to Assign........................................21 SECTION 6.03. Tax Consistency............................................22 ARTICLE 7 COVENANTS OF THE ISSUER AND THE PURCHASERS SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts; Further Assurances.........................................22 SECTION 7.02. Certain Filings............................................22 SECTION 7.03. Public Announcements.......................................23 ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING SECTION 8.01. Conditions to Each Party's Obligations.....................23 SECTION 8.02. Conditions to Each Purchaser's Obligations.................24 SECTION 8.03. Conditions to Seller's Obligations.........................25 ii PAGE ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices....................................................26 SECTION 9.02. No Waivers; Amendments.....................................26 SECTION 9.03. Survival...................................................26 SECTION 9.04. Indemnification............................................27 SECTION 9.05. Procedures.................................................28 SECTION 9.06. Expenses; Documentary Taxes................................28 SECTION 9.07. Termination................................................28 SECTION 9.08. Several Obligations........................................29 SECTION 9.09. Successors and Assigns.....................................29 SECTION 9.10. Governing Law..............................................29 SECTION 9.11. Jurisdiction...............................................29 SECTION 9.12. Counterparts...............................................30 SECTION 9.13. Entire Agreement...........................................30 EXHIBITS, ANNEX AND SCHEDULE Annex I -- Securities to be Purchased Exhibit A -- Form of Certificate of Designations for Series G Preferred Stock Exhibit B -- Form of Shareholders Agreements Exhibit C -- Form of Opinion of Counsel Exhibit D -- Form of Opinion of FCC Counsel Exhibit E -- Form of Management Sideletter Disclosure Schedule iii SECURITIES PURCHASE AGREEMENT AGREEMENT dated as of December 15, 1999 among Winstar Communications, Inc., a Delaware corporation (the "Issuer"), Winstar Credit Corp., a Delaware corporation and wholly owned subsidiary of the Issuer ("WCC" and together with the Issuer, the "Sellers"), Credit Suisse First Boston Equity Partners, L.P., a Delaware limited partnership ("CSFB"), Welsh, Carson, Anderson & Stowe VIII, L.P., a Delaware limited partnership ("WCAS"), Microsoft Corporation, a Washington corporation ("Microsoft"), and the other purchasers listed on the signature pages hereof (together with CSFB, WCAS and Microsoft, the "Purchasers"). WHEREAS, the Sellers desire to sell the Securities (as defined below) to the Purchasers, and the Purchasers desire to purchase the Securities from the Sellers, upon the terms and subject to the conditions hereinafter set forth; NOW THEREFORE, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person; provided that none of the Purchasers or any of their Subsidiaries shall be considered an Affiliate of any Seller. "Agreement" means this Agreement, as it may be amended from time to time. "Applicable Law" means any applicable constitution, treaty, statute, rule, regulation, ordinance, order, directive, code, interpretation, judgment, decree, injunction, writ, determination, award, permit, license, authorization, directive, requirement, ruling or decision of, agreement with, or by any Governmental Authority. "Balance Sheet" means the audited consolidated balance sheet of the Issuer and its Subsidiaries as of the Balance Sheet Date. "Balance Sheet Date" means September 30, 1999. "Benefit Arrangement" means any employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized by law to close. "Certificate of Designations" means the Certificate of Designations, Preferences and Rights of Series G Senior Cumulative Participating Convertible Preferred Stock, substantially in the form attached as Exhibit A hereto. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the U.S. Securities and Exchange Commission or any governmental body succeeding to the functions thereof. "Common Stock" means the common stock, par value $.01 per share, of the Issuer. "Communications Act" means the Communications Act of 1934, as amended. "Disclosure Schedule" means the Disclosure Schedule attached hereto, dated as of the date hereof and delivered by the Issuer to the Purchasers hereunder. "Environmental Laws" means any federal, state, local or foreign law (including, without limitation, common law), treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or requirement or any agreement with any governmental authority or other third party, whether now or hereafter in effect, relating to human health and safety, the environment or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials. "Environmental Liabilities" means all liabilities of the Issuer and each of its Subsidiaries, whether contingent or fixed, known or unknown, which (i) arise under or relate to matters covered by Environmental Laws and (ii) relate to actions occurring or conditions existing on or prior to the Closing Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 2 "ERISA Group" means the Issuer and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Issuer, are treated as a single employer under Section 414 of the Code. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "FCC" means the U.S. Federal Communications Commission or any governmental body succeeding to the functions thereof. "FCC Rules" means Title 47 of the Code of Federal Regulations, as amended at any time and from time to time, and FCC decisions issued pursuant to the adoption of such regulations and otherwise in accordance with and pursuant to the Communications Act. "Governmental Authority" means any governmental body, agency or official of any country or political subdivision of any country, including, but not limited to, federal, state, county and local governments, administrative agencies and courts. "Hazardous Substance" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics, including, without limitation, any substance regulated under Environmental Laws. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Licenses" means all licenses, permits, construction permits, certificates of public convenience and necessity and other authorizations issued by the FCC pursuant to the Communications Act, the Federal Aviation Administration, or any other federal, state, county or local Governmental Authorities to Issuer and its Subsidiaries and used or useful in connection with the operation and conduct of the business or provision of the Broadband Services, including any certificates issued by a Governmental Authority required for the provision of competitive local exchange or exchange access services within such state or locality, and including any applications for any such licenses, permits, construction permits and other authorizations applied for by the Issuer and its Subsidiaries that are currently pending. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, any Person shall be deemed to own subject to Lien any asset that it has acquired or holds subject to the interest of a vendor 3 or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Management Sideletter" means the letter agreement substantially in the form attached as Exhibit E hereto. "Material Adverse Effect" means any change or effect (or aggregation of changes and effects) that is materially adverse to the business, assets, condition (financial or otherwise) or results of operations of the Issuer and its Subsidiaries, taken as a whole. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Person" means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Preferred Stock" means the preferred stock, par value $.01 per share, of the Issuer. "Regulated Activity" means any generation, treatment, storage, recycling, transportation or disposal of any Hazardous Substance. "SEC Reports" means the forms, reports and documents filed with the Commission. "Securities" means the Issuer's Series G Senior Cumulative Participating Convertible Preferred Stock, par value $.01 per share. "Securities Act" means the Securities Act of 1933, as amended. 4 "Shareholders Agreements" means the three Shareholders Agreements among the Issuer and each Purchaser, each substantially in the form attached as Exhibit B hereto, as the same may be amended from time to time. "Subsidiary" means, with respect to any Person, any other Person of which a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. "Tax" (and, with correlative meaning, "Taxes") means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, withholding on amounts paid by the Issuer or any of its Subsidiaries, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount due from, or in respect of the Issuer or any of its Subsidiaries, as the case may be, imposed by any governmental authority (a "Taxing Authority") responsible for the imposition of any such tax (domestic or foreign) and (ii) any liability of the Issuer or any of its Subsidiaries for the payment of any amount as a result of being a party to any tax sharing agreement or with respect to the payment of any amount of the type described in (i) as a result of any existing express or implied agreement or arrangement (including, but not limited to, an indemnification agreement or arrangement). (b) Each of the following terms is defined in the Section set forth opposite such term: Term Section 10-K 3.09 10-Qs 3.09 Broadband Services 3.20(a) Closing 2.02(a) Closing Date 2.02(a) Closing Failure 9.07(a) CSFB Preamble Damages 9.04(a) Indemnified Party 9.05 Indemnifying Party 9.05 Intellectual Property 3.16 Issuer Preamble Issuer Securities 3.05(b) Material Contract 3.13 5 Term Section Microsoft Preamble Purchasers Preamble Regulatory Authorities 3.03 Representatives 6.01 Returns 3.19 Sellers Preamble Subsidiary Securities 3.06(b) WCAS Preamble ARTICLE 2 PURCHASE AND SALE OF SECURITIES SECTION 2.01. Commitment to Purchase. Upon the basis of the representations and warranties herein contained of each Purchaser, but subject to the terms and conditions hereinafter stated, the Sellers agree on a joint and several basis to sell to each Purchaser, and each Purchaser, upon the basis of the represen tations and warranties herein contained of the Issuer, but subject to the terms and conditions hereinafter stated, agrees, severally but not jointly, to purchase from the Sellers at the Closing, the Securities in the amount and for the purchase price set forth opposite the name of such Purchaser on Annex I hereto. Each Purchaser shall purchase 80% of the Securities from the Issuer and 20% from WCC to the extent practicable. SECTION 2.02. The Closing. (a) The closing (the "Closing") of the purchase and sale of the Securities hereunder shall take place at 10:00 a.m. at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible, but in no event later than ten Business Days, after satisfaction of the conditions set forth in Article 8, or at such other time and place as the Issuer and the Purchasers shall agree. The date and time of closing are referred to herein as the "Closing Date." (b) At the Closing, each Purchaser shall deliver to each Seller, by wire transfer to an account designated by such Seller not later than three Business Days prior to the Closing Date, an amount, in immediately available funds, equal to the aggregate purchase price of the Securities being purchased by such Purchaser from such Seller. (c) At the Closing, each Seller shall deliver to each Purchaser, against payment of the purchase price by such Purchaser to such Seller, certificates evidencing the Securities being purchased by such Purchaser from 6 such Seller in definitive form and registered in such names as such Purchaser shall request not later than two Business Days prior to the Closing Date. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE ISSUER The Issuer represents and warrants to each Purchaser as of the date hereof and as of the Closing Date that, except as disclosed in the Disclosure Schedule: SECTION 3.01. Corporate Existence and Power. The Issuer is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. The Issuer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified or in good standing could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Issuer has heretofore made available to each Purchaser or its counsel true and complete copies of the certificate of incorporation and bylaws of each Seller as currently in effect. SECTION 3.02. Corporate Authorization. The execution, delivery and performance by each Seller of this Agreement and by the Issuer of the Shareholders Agreements, and the consummation of the transactions contemplated hereby and thereby are within such Person's corporate powers and have been duly authorized by all necessary corporate action on the part of such Person. The execution, delivery and performance by each Seller of this Agreement and by the Issuer of the Shareholders Agreements, and the consummation of the transactions contemplated hereby and thereby do not require the approval of the stockholders of either Seller. This Agreement constitutes and, when executed and delivered in accordance with its terms, each Shareholder Agreement will constitute, a legal, valid and binding agreement of the Seller or Sellers party thereto, enforceable against each such Seller in accordance with its terms, except (i) as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally, (ii) for limitations imposed by general principles of equity and (iii) that rights to indemnity may be limited by federal and state securities laws and public policy considerations. The Securities issued to the Purchasers in accordance with the terms of the Certificate of Designations, when issued and delivered in accordance with the terms of this Agreement, will be validly issued and outstanding, fully paid and nonassessable, and free and clear of any Liens other than Liens arising as a result of the status of the Purchasers. The shares of Common Stock issuable upon conversion of the Securities will, when issued, be 7 validly issued and outstanding, fully paid and nonassessable, and free and clear of any Liens other than Liens arising as a result of the status of the Purchasers. SECTION 3.03. Governmental Authorization. The execution, delivery and performance by each Seller of this Agreement and by the Issuer of the Shareholders Agreements, and the consummation of the transactions contemplated hereby and thereby require no consent, approval, authorization or other action by or in respect of any Governmental Authority or other party except (i) compliance with any applicable requirements of the HSR Act, (ii) the filing of the Certificate of Designations in accordance with the law of the State of Delaware, (iii) the filings with, the notifications to and the consents from the FCC, franchising authorities, state public utility commissions and other similar governmental entities (collectively, "Regulatory Authorities") set forth on Section 3.03 to the Disclosure Schedule, (iv) the filing of the listing application referred to in Section 8.01(f), (v) any filing required pursuant to the securities laws of the State of New York and (vi) other filings, notifications and consents that are immaterial to the consummation of the transactions contemplated hereby and thereby. SECTION 3.04. Noncontravention. The execution, delivery and performance by each Seller of this Agreement and by the Issuer of the Shareholders Agreements, and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate the certificate of incorporation or bylaws of such Seller or any Subsidiary of such Seller, (ii) assuming compliance with the matters referred to in Section 3.03, violate any Applicable Law, (iii) require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration of any material right or obligation of such Seller or any Subsidiary of such Seller or to a loss of any material benefit to which such Seller or any Subsidiary of such Seller is entitled under any provision of any agreement or other instrument binding upon such Seller or any Subsidiary of such Seller or (iv) result in the creation or imposition of any Lien on any material asset of such Seller or any Subsidiary of such Seller, except for, in the case of clauses (ii), (iii) and (iv), such matters that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 3.05. Capitalization. (a) The authorized capital stock of the Issuer consists of 200,000,000 shares of Common Stock and 15,000,000 shares of Preferred Stock. The outstanding shares of Common Stock and Preferred Stock of the Issuer as well as all securities convertible into or exchangeable for shares of the Issuer's Common Stock are set forth on the Disclosure Schedule. (b) All of the outstanding shares of capital stock of the Issuer have been duly authorized and validly issued and are fully paid and non-assessable. Except as set forth in Section 3.05(a), there are no outstanding (i) shares of 8 capital stock or voting securities of the Issuer, (ii) securities of the Issuer or any Subsidiary of the Issuer convertible into or exchangeable for shares of capital stock or voting securities of the Issuer or (iii) options or other rights to acquire from the Issuer or any Subsidiary of the Issuer, or other obligation of the Issuer to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Issuer (the items in clauses 3.05(b)(i), 3.05(b)(ii) and 3.05(b)(iii) being referred to collectively as the "Issuer Securities"). There are no outstanding obligations of the Issuer or any Subsidiary of the Issuer to repurchase, redeem or otherwise acquire any Issuer Securities. SECTION 3.06. Subsidiaries. (a) Each Subsidiary of the Issuer is a corporation or limited liability company duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation and has all powers (corporate or otherwise) and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Each Subsidiary of the Issuer is duly qualified to do business as a foreign corporation or limited liability company and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified or in good standing could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (b) All of the outstanding capital stock or other voting securities or other equity interests of each Subsidiary of the Issuer is owned by the Issuer, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or other equity interests). There are no outstanding (i) securities of the Issuer or any Subsidiary of the Issuer convertible into or exchangeable for shares of capital stock or voting securities or other equity securities of any Subsidiary of the Issuer or (ii) options or other rights to acquire from the Issuer or any Subsidiary of the Issuer, or other obligation of the Issuer or any Subsidiary of the Issuer to issue, any capital stock, voting securities, other equity interests or securities convertible into or exchangeable for capital stock or voting securities or other equity interests of any Subsidiary of the Issuer (the items in clauses 3.06(b)(i) and 3.06(b)(ii) being referred to collectively as the "Subsidiary Securities"). There are no outstanding obligations of the Issuer or any Subsidiary of the Issuer to repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities. SECTION 3.07. Financial Statements. The audited consolidated balance sheet as of December 31, 1998 and the related audited consolidated statement of income and cash flows for the year ended December 31, 1998 and the unaudited interim consolidated balance sheet for the nine months ended September 30, 1999 and the related unaudited interim consolidated statements of income and cash flows for the nine months ended September 30, 1999 of the Issuer and its Subsidiaries have been delivered by the Issuer to the Purchasers. Such financial 9 statements fairly present, in conformity with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Issuer and its Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). SECTION 3.08. Absence of Certain Changes. Since the Balance Sheet Date, the business of the Issuer and its Subsidiaries has been conducted in the ordinary course consistent with past practices and there has not been any event, occurrence, development or state of circumstances or facts which has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or an adverse effect on the ability of either Seller to perform its obligations under this Agreement and the Shareholders Agreements. SECTION 3.09. No Material Undisclosed Liabilities. There are no liabilities of the Issuer or any Subsidiary of the Issuer of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected, individually or in the aggregate, to result in such a liability, other than: (i) liabilities provided for in the Balance Sheet or disclosed in the notes thereto or in the Form 10-K of the Issuer for the year ended December 31, 1998 (the "10-K"), or in the Forms 10-Q of the Issuer for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 (the "10-Qs"); (ii) liabilities incurred since the Balance Sheet Date in the ordinary course of business consistent with past practices; (iii) liabilities under this Agreement and the Shareholders Agreements or incurred in connection with the transactions contemplated by this Agreement and the Shareholders Agreements; and (iv) other undisclosed liabilities which, individually or in the aggregate, are not material to the Issuer and its Subsidiaries, taken as a whole. SECTION 3.10. Litigation. There is no action, suit, investigation or proceeding (or any basis therefor) pending against, or to the knowledge of the Issuer, threatened against or affecting, the Issuer or any Subsidiary of the Issuer or any of their respective properties before any court or arbitrator or any governmental body, agency or official which could reasonably be expected to 10 have, individually or in the aggregate, a Material Adverse Effect or which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement. SECTION 3.11. Compliance with Laws. Neither the Issuer nor any Subsidiary of the Issuer is in violation of, or has since January 1, 1997 violated, or to the best knowledge of the Issuer, is under investigation with respect to or been threatened to be charged with or given notice of any violation of, any Applicable Law, in each case other than any such violations that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 3.12. SEC Reports. Since January 1, 1996, the Issuer has filed all required SEC Reports when due (or within permitted extension periods) in accordance with the Exchange Act. As of their respective dates (or, in the case of any amended SEC Report, as of the date of the amendment), the SEC Reports complied in all material respects with all applicable requirements of the Exchange Act or the Securities Act, as the case may be. As of their respective dates (or, in the case of any amended SEC Report, as of the date of the amendment), none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. SECTION 3.13. Material Contracts. Each of the agreements, contracts, leases and commitments listed as an exhibit to the 10-K, any of the 10-Qs or any Form 8-K filed with the Commission since January 1, 1999 (each, a "Material Contract") is a legal, valid and binding agreement of the Issuer or a Subsidiary of the Issuer, as the case may be, and is in full force and effect, and none of the Issuer, such Subsidiary or, to the knowledge of the Issuer, any other party thereto is in default or breach, in each case except for any such default or breach that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and, to the best knowledge of the Issuer, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute any event of default thereunder. SECTION 3.14. Finders' Fees. The fees and commissions of any investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of any Seller in connection with the transactions contemplated by this Agreement or the Shareholders Agreements will be paid by the Issuer. SECTION 3.15. Offering of Securities. Neither Seller nor any Person acting on their behalf has taken or will take any action (including, without limitation, any offering of any securities of the Issuer under circumstances which would require, under the Securities Act, the integration of such offering 11 with the offering and sale of the Securities) which might subject the offering, issuance or sale of the Securities to the registration requirements of Section 5 of the Securities Act. SECTION 3.16. Intellectual Property. The Issuer and each of its Subsidiaries owns, or has the legal right to use, all material patents, patent applications, trademarks, trademark applications, tradenames, copyrights, technology, know-how and processes and other intellectual property rights necessary for each of them to conduct its business as currently conducted (the "Intellectual Property"). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Issuer know of any facts or circumstances that could provide a reasonable basis for any such claim. To the best knowledge of the Issuer, the use of such Intellectual Property by the Issuer and its Subsidiaries does not infringe on the rights of any Person, except for such infringements which could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 3.17. Environmental Compliance. (a) No notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending, or to the Issuer's best knowledge, threatened by any governmental or other entity (i) with respect to any alleged material violation by the Issuer or any of its Subsidiaries of any Environmental Law, (ii) with respect to any alleged failure by the Issuer or any of its Subsidiaries to have any material permit, certificate, license, approval, registration or authorization required under any Environmental Law in connection with the conduct of their businesses or (iii) with respect to any Regulated Activity or any release, as defined in 42 U.S.C. 9601(22), of any Hazardous Substance which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (b) (i) Neither the Issuer nor any of its Subsidiaries has engaged in any Regulated Activity other than in compliance in all material respects with all applicable Environmental Laws and (ii) to the best knowledge of the Issuer, no release, as defined in 42 U.S.C. 9601(22), of any Hazardous Substance has occurred at or on any property now or previously owned or leased by the Issuer or any of its Subsidiaries which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (c) To the best knowledge of the Issuer, there are no Environmental Liabilities that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 12 SECTION 3.18. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations, if any, under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan to the extent the ERISA Group maintains such plans. No member of the ERISA Group has (a) sought a waiver of the minimum funding standards under Section 412 of the Code in respect of any Plan, (b) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (c) incurred any liability under Title IV of ERISA other than a liability to the Pension Benefit Guaranty Corporation for premiums under Section 4007 of ERISA. SECTION 3.19. Taxes. (a) The Issuer and each of its Subsidiaries has filed in accordance with Applicable Law, all material Tax returns, statements, reports and forms (collectively, "Returns") required to be filed with any Taxing Authority when due (taking into account any extension of a required filing date); (b) at the time filed, such Returns were true, correct and complete in all material respects; (c) the Issuer and each of its Subsidiaries has timely paid all Taxes shown as due and payable on the Returns that have been filed; (d) the charges, accruals and reserves for Taxes reflected on the Balance Sheet (excluding any provision for deferred income taxes) are adequate under United States generally accepted accounting principles, consistently applied, to cover the Tax liabilities accruing through the date thereof; (e) there is no action, suit, proceeding, investigation, audit or claim pending or, to the knowledge of the Issuer, threatened against or with respect to it in respect of any Tax; (f) all Returns filed with the City of New York with respect to Tax years of the Issuer and its Subsidiaries through the Tax year ended December 31, 1993 have been examined and closed or are Returns with respect to which the applicable period for assessment under Applicable Law, after giving effect to extensions or waivers, has expired; no Returns filed with any other Taxing Authority with respect to any Tax years of the Company and its Subsidiaries have been examined, and all Returns filed with any other Taxing Authority with respect to Tax years of the Issuer and its Subsidiaries through the Tax year ended December 31, 1992 are Returns with respect to which the applicable period for assessment under Applicable Law, after giving effect to extensions or waivers, has expired; (g) neither the Issuer nor any of its Subsidiaries has any obligation under any Tax sharing agreement, Tax allocation agreement or Tax indemnity agreement or any other agreement or arrangement in respect of any Tax with any Person other than the Issuer or its Subsidiaries; (h) neither the Issuer nor any of its Subsidiaries has been a member of an affiliated, consolidated, combined or unitary group other than one of which the Issuer was the common parent; (i) proper and adequate amounts have been withheld by the Issuer and its Subsidiaries from their respective employees and other Persons for all periods in compliance in all material respects with the Tax, social security and 13 unemployment, excise and other withholding provisions of all federal, state, local and foreign laws; (j) there is no Tax lien, whether imposed by any federal, state, local, or foreign taxing authority, outstanding against the assets, properties or business of the Issuer or any of its Subsidiaries, other than any liens that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (k) the Issuer is not now, has never been and does not contemplate becoming a "United States Real Property Holding Corporation" as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Treasury regulations thereunder. SECTION 3.20. Regulatory Matters. (a) The Issuer and its Subsidiaries have all requisite power and authority and hold or have applied for all Licenses required under the Communications Act, the FCC Rules, state law or any other Applicable Law to own and operate their properties and their Licenses and to carry on the business of the Issuer and its Subsidiaries with respect to the local exchange, exchange access and Internet access services (collectively "Broadband Services"), as such business is conducted on the date hereof, except to the extent that the failure to have such power or authority or to hold any such Licenses could not reasonably be expected to have a Material Adverse Effect. Each material License issued to the Issuer or its Subsidiaries is validly issued and is in full force and effect. The Issuer and its Subsidiaries have taken such actions, performed all of their obligations and entered into all contracts with telecommunications carriers to the extent that are necessary to maintain such Licenses without Material Adverse Effect, and complete and correct copies of the Licenses of the Issuer and its Subsidiaries have been made available to the Purchasers. Neither the Issuer nor any Subsidiary knows of any reason why any Governmental Authority might revoke any material License. Except as described in the legal opinion of Issuer's counsel delivered at Closing, neither the Issuer nor any Subsidiary knows of any party who has a current filing pending in specific opposition to or expressed an interest in opposing the grant of the Licenses held or applied for by the Issuer or its Subsidiaries, or of any reason why any Governmental Authority might not grant any of the Licenses. (b) None of the Issuer and its Subsidiaries is a party to nor, to the best knowledge of the Issuer and each Subsidiary, is there threatened any investigation, notice of apparent liability, violation, show cause order, forfeiture or other notice, order or complaint issued by or before any Governmental Authority, or of any other proceeding (other than proceedings of general applicability) that could in any manner threaten or adversely affect the validity, future grant or continued effectiveness of the Licenses of the Issuer and its Subsidiaries, except for such matters as could not reasonably be expected to result in a Material Adverse Effect. None of the Issuer and its Subsidiaries has any reason to believe that each of the Licenses will not be renewed in the ordinary course. The Issuer and each Subsidiary has filed in a substantially timely manner all material reports, applications, documents, 14 instruments and information required to be filed by it pursuant to the Communications Act, the FCC Rules or other Applicable Law, including, but not limited to, employment reports, and all such filings are accurate and complete in all material respects, except for such omissions as could not reasonably be expected to result in a Material Adverse Effect. (c) The Issuer and its Subsidiaries are in compliance with the Licenses, the Communications Act, the FCC Rules and other Applicable Law, and are operating their physical facilities, electrical and mechanical systems and transmitting equipment and are providing the Broadband Services in compliance with the Licenses, the Communications Act, the FCC Rules and other Applicable Law, except for any noncompliance which could not reasonably be expected to result in a Material Adverse Effect. The Issuer and its Subsidiaries, in their ownership and operation of the business of the Issuer and the Subsidiaries and the provision of the Broadband Services, are operating only those facilities for which an appropriate License, waiver, consent or other authorization has been obtained and is in effect, except for any such failures which could not reasonably be expected to result in a Material Adverse Effect. (d) Except for such matters as could not reasonably be expected to result in a Material Adverse Effect, none of the Issuer and its Subsidiaries is aware of any facts, and none of the Issuer and its Subsidiaries has received any notice or other communication, indicating that the Issuer and the Subsidiaries, in their ownership and operation of the Licenses, the business of the Issuer and the Subsidiaries and the provision of the Broadband Services, are not in compliance with all requirements of the Communications Act, FCC Rules or other Applicable Law. Except for such matters as could not reasonably be expected to result in a Material Adverse Effect, none of the Issuer and its Subsidiaries is aware of any facts, and none of the Issuer and its Subsidiaries has received any notice or communication, formal or informal, indicating that any Governmental Authority is considering modifying, revoking, suspending, canceling, rescinding or terminating any License. (e) Based upon the FCC Rules in place as of the date of this Agreement, the Issuer is or will be eligible to participate in the 39 GHz Auction (Auction 30) for licenses of radio spectrum that could be used to provide the Broadband Services or similar services, scheduled under the FCC Rules for April 11, 2000, and the transaction contemplated by this Agreement will not interfere with the Issuer's ability to participate in that spectrum auction. 15 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser hereby severally represents and warrants to the Issuer as of the date hereof and as of the Closing Date that: SECTION 4.01. Corporate Existence and Power. Such Purchaser (if not an individual) is an entity duly organized, validly existing and in good standing (in such jurisdiction is where the concept of good standing exists) under the laws of its jurisdiction of organization and has all corporate or partnership powers and all material governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Such Purchaser (if not an individual) is duly qualified to do business and is in good standing (in such jurisdiction is where the concept of good standing exists) in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on such Purchaser. SECTION 4.02. Authorization. The execution, delivery and performance by such Purchaser (if such Purchaser is not an individual) of this Agreement and the Shareholders Agreement to which such Purchaser is a party and the consummation of the transactions contemplated hereby and thereby are within such Purchaser's corporate or partnership powers and have been duly authorized by all necessary corporate or partnership action on the part of such Purchaser. This Agreement constitutes and, when executed and delivered in accordance with its terms, the Shareholders Agreement to which such Purchaser is a party will constitute, a legal, valid and binding agreement of such Purchaser, enforceable against such Purchaser in accordance with its terms, except (i) as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors' rights generally and (ii) for limitations imposed by general principles of equity. SECTION 4.03. Governmental Authorization. The execution, delivery and performance by such Purchaser of this Agreement and the Shareholders Agreement to which such Purchaser is a party and the consummation of the transactions contemplated hereby and thereby require no action by or in respect of, or filing with, any governmental body, agency or official other than (i) compliance with any applicable requirements of the HSR Act, (ii) the filings with, notifications to and the consents from the Regulatory Authorities set forth on Section 3.03 to the Disclosure Schedule and (iii) other filings, notifications and consents that are immaterial to the consummation of the transactions contemplated hereby. SECTION 4.04. Noncontravention. The execution, delivery and performance by such Purchaser of this Agreement and the Shareholders Agreement to which such Purchaser is a party and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate the organizational documents, 16 if any, of such Purchaser, (ii) assuming compliance with the matters referred to in Section 4.03, violate any Applicable Law, except for any such violation which would not have a material adverse effect on the ability of such Purchaser to consummate the transactions contemplated hereby and thereby or (iii) require any consent or other action by any Person, or constitute a default, under any provision of any agreement or other instrument binding upon such Purchaser, except as to matters which would not be material to such Purchaser. SECTION 4.05. Finders' Fees. The fees and commissions of any investment banker, broker, finder or other intermediary (other than JP Morgan & Co. Inc., whose customary fees will be paid by the Issuer) which has been retained by or is authorized to act on behalf of any Purchaser in connection with the transactions contemplated by this Agreement or the Shareholders Agreements will be paid by such Purchaser. SECTION 4.06. Private Placement. (a) Such Purchaser understands that the offering and sale of the Securities is intended to be exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act and any applicable state securities or blue sky laws. (b) The Securities to be acquired by such Purchaser pursuant to this Agreement are being acquired for its own account and without a view to the resale or distribution of such Securities or any interest therein other than in a transaction exempt from registration under the Securities Act. (c) Such Purchaser is an "Accredited Investor" as such term is defined in Regulation D under the Securities Act. (d) Such Purchaser has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Securities and such Purchaser is capable of bearing the economic risks of such investment, including a complete loss of its investment in the Securities. Such Purchaser understands that Purchaser's investment in the Securities involves a high degree of risk. (e) Such Purchaser has been furnished with and carefully read a copy of the Form 10-K, each of the Form 10-Qs, the prospectus dated November 15, 1999 and this Agreement and has been given the opportunity to ask questions of, and receive answers from, the Issuer concerning the terms and conditions of the Securities and other related matters. The Issuer has made available to such Purchaser or its agents all documents and information relating to an investment in the Securities requested by or on behalf of such Purchaser. 17 (f) Such Purchaser understands that the Securities have not been and, except as provided in the Shareholders Agreements, are not being registered under the Securities Act or any state securities laws, and may not be offered, sold, pledged or otherwise transferred except as permitted pursuant to the Shareholders Agreements. (g) Such Purchaser understands that the Securities shall bear a restrictive legend substantially in the form set forth in the Shareholders Agreements. (h) If such Purchaser is an individual, such Purchaser is a citizen of the United States and is a resident of the State of New York unless otherwise indicated on the signature pages to this Agreement. If such Purchaser is an entity, such Purchaser's principal place of business is in the State of New York unless otherwise indicated on the signature pages to this Agreement. (i) Such Purchaser acknowledges and understands that the Sellers intend to use the proceeds derived from the sale of the Securities for working capital for the Issuer's telecommunications and non-telecommunications businesses and to make investments in, acquire, make loans to, or otherwise enter into business arrangements with companies that may or may not be involved in the telecommunications business. In that connection, the Sellers may contribute such proceeds to Subsidiaries of the Issuer that acquire, produce and distribute information and entertainment content or engage in other non-telecommunication business. (j) Immediately following the Closing, such Purchaser will not beneficially own any voting securities of the Issuer other than the Securities. (k) Such Purchaser does not have any agreements, arrangements or understandings with any other Person (other than with other Purchasers who are Affiliates of such Purchaser) with regard to acquiring, holding, voting or disposing of the securities of the Issuer other than as set forth in this Agreement and in the Shareholders Agreement to which such Purchaser is a party. ARTICLE 5 COVENANTS OF THE ISSUER The Issuer agrees that: SECTION 5.01. Access to Information. From the date hereof until the Closing Date, the Issuer will (i) furnish to each Purchaser and its authorized representatives such financial and operating data and other information relating 18 to the Issuer and its Subsidiaries as such Persons may reasonably request and (ii) instruct its counsel, independent accountants and financial advisors to cooperate with such Purchaser and its authorized representatives in its investigation of the Issuer and its Subsidiaries. Any investigation pursuant to this Section shall be conducted in a manner that does not interfere unreasonably with the conduct of the business of the Issuer and its Subsidiaries. SECTION 5.02. Certificate of Designations. Prior to the Closing, the Issuer shall cause to be filed the Certificate of Designations as required pursuant to the law of the State of Delaware. SECTION 5.03. Restrictions Pending the Closing. After the date hereof and prior to the Closing Date, except as expressly provided for in this Agreement or as consented to in writing by each Purchaser, the Issuer will not: (i) amend its certificate of incorporation or bylaws; (ii) split, combine or reclassify any shares of its capital stock without appropriately adjusting the conversion price and/or ratio applicable to the Securities prior to their issuance at the Closing; (iii) declare or pay any dividend or distribution (whether in cash, stock or property) in respect of its Common Stock; (iv) take any action, or knowingly omit to take any action, that could reasonably be expected to result in (A) any of the representations and warranties of the Issuer set forth in Article 3 becoming untrue or (B) any of the conditions to the obligations of the Purchasers set forth in Section 8.01 or 8.02 not being satisfied; or (v) enter into any agreement or commitment to do any of the foregoing. SECTION 5.04. Reservation of Shares. For so long as any of the Securities are outstanding, the Issuer shall keep reserved for issuance a sufficient number of shares of Common Stock to satisfy its conversion obligations under the Certificate of Designations. SECTION 5.05. Amendment to Rights Agreement. The Issuer agrees that at the next meeting of its Board of Directors, all necessary action (including any amendment thereof) under the Rights Agreement, dated as of July 2, 1997 between the Issuer and Continental Stock Transfer & Trust Company, as Rights Agent (the "Rights Agreement"), will be taken so that the accretion of the liquidation preference (in lieu of payment of cash dividends) on the Securities purchased by the CSFB Entities pursuant hereto will not, at any time after the date hereof, 19 cause (i) the rights issued pursuant to the Rights Agreement to become exercisable under the Rights Agreement, or (ii) any Purchaser or any of its Affiliates to be deemed an "Acquiring Person" (as defined in the Rights Agreement). ARTICLE 6 COVENANTS OF THE PURCHASERS SECTION 6.01. Confidentiality. Each Purchaser will hold, and will use its reasonable best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors, financing sources, financial institutions, and agents (the "Representatives") to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law or national stock exchange, all confidential documents and information concerning the Issuer or any of its Affiliates that are furnished to such Purchaser, except to the extent that such information can be shown to have been (i) previously known on a nonconfidential basis by such Purchaser or such Representatives, (ii) in the public domain through no fault of such Purchaser or its Representatives (with respect to information received in their capacity as such) or (iii) later acquired by such Purchaser or such Representatives from sources other than the Issuer or any of its Affiliates not known by such Purchaser or such Representatives, as applicable, to be bound by any confidentiality obligation; provided that such Purchaser may disclose such information to any of its Representatives in connection with the transactions contemplated by this Agreement and the Shareholders Agreements so long as such Persons are informed by such Purchaser of the confidential nature of such information and are directed by such Purchaser to treat such information confidentially. The obligation of each Purchaser to hold and to cause its Representatives to hold any such information in confidence shall be satisfied if such Purchaser exercises the same care with respect to such information as such Purchaser would take to preserve the confidentiality of its own similar information. If any Purchaser or any of its Representatives is requested to disclose any confidential information by judicial or administrative process or by other requirements of law or a national stock exchange, such Purchaser will promptly notify the Issuer of such request so that the Issuer may seek an appropriate protective order. Each Purchaser agrees that it will not, and will use its reasonable best efforts to cause its Representatives not to, use any confidential documents or information for any purpose other than monitoring and evaluating its investment in the Issuer and in connection with the transactions contemplated by this Agreement and the Shareholders Agreements. If this Agreement is terminated, each Purchaser will, and will use its reasonable best 20 efforts to cause its Representatives to, destroy or deliver to the Issuer, upon request, all documents and other materials, and all copies thereof, obtained by such Purchaser or on its behalf from the Issuer, or any of the Representatives, in connection with this Agreement that are subject to such confidence. SECTION 6.02. Agreement to Assign. CSFB agrees that it will use its reasonable best efforts to assign, prior to the Closing, to any third party or parties the right to purchase Securities hereunder having an aggregate purchase price of up to $150,000,000. Any such assignment shall be made pursuant to documents to be executed by CSFB and the assignees in form and substance reasonably satisfactory to the Issuer. SECTION 6.03. Tax Consistency. The Issuer acknowledges that the Purchasers intend for the Securities to be treated as "common stock" for Tax purposes, and the Issuer agrees not to take any voluntary action inconsistent with such intention. SECTION 6.04. Schedule 13D and 13G. Each Purchaser agrees to provide the Issuer with a copy of any Schedule 13D or 13G that it intends to file with the Commission in connection with their purchase of Securities in advance of such filing. ARTICLE 7 COVENANTS OF THE ISSUER AND THE PURCHASERS SECTION 7.01. Required Regulatory Approvals; Reasonable Best Efforts; Further Assurances. The Issuer and the Purchasers acknowledge that certain regulatory or governmental approvals may be required to lawfully consummate the transactions contemplated by this Agreement and the Shareholders Agreements. Subject to the terms and conditions of this Agreement, the Issuer and each Purchaser will, and will cause their Affiliates to, use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement and the Shareholders Agreements. The Sellers and each Purchaser agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement and the Shareholders Agreements. SECTION 7.02. Certain Filings. The Issuer and each Purchaser will, and will cause their Affiliates to, cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any governmental body, 21 agency, official or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and the Shareholders Agreements or the conversion by such Purchaser of such Purchaser's Securities and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers. Without limiting the generality of the foregoing, the Issuer and each Purchaser obligated to file a notification under the HSR Act shall promptly after the date of this Agreement prepare and file the notifications required under the HSR Act in connection with the transactions contemplated by this Agreement. The Issuer and each Purchaser shall (A) give the other parties prompt notice of the commencement of any action, suit, litigation, arbitration, preceding or investigation by or before any governmental body with respect to the transactions contemplated by this Agreement and the Shareholders Agreements, (B) keep the other parties informed as to the status of any such action, suit, litigation, arbitration, preceding or investigation, and (C) promptly inform the other parties of any communication to or from the Federal Trade Commission, the Department of Justice or any other governmental body regarding the transactions contemplated by this Agreement and the Shareholders Agreements. SECTION 7.03. Public Announcements. In connection with the execution of this Agreement, the Issuer shall issue a press release (a "Signing Release") and shall file with the Commission a Report on Form 8-K with respect to the transactions contemplated hereby (the "Signing 8-K" and together with the Signing Release, the "Agreed Disclosure"). The Signing Release shall in form and substance as previously agreed by the parties hereto. The Signing 8-K shall be provided to the Purchasers prior to filing and the Purchasers shall be given a reasonable opportunity to comment thereon. The Issuer shall accept all reasonable changes suggested by the Purchasers. If the Issuer does not accept any changes suggested in good faith by a Purchaser, the provisions of this Section 7.03 shall immediately terminate and be of no further force or effect as to such Purchaser. If the Issuer accepts all such changes, the Agreed Disclosure shall serve as the basis for any public disclosure by the parties of the transactions contemplated hereby and neither the Issuer nor any Purchaser shall make any statement or representation regarding the transactions contemplated hereby, publicly or in a manner which could reasonably be expected to result in its public dissemination, which is materially inconsistent with the Agreed Disclosure. Except as otherwise permitted pursuant to this Section 7.03, the Issuer shall not use or refer to the name of any Purchaser in any public statement or disclosure without the consent of such Purchaser. 22 ARTICLE 8 CONDITIONS PRECEDENT TO CLOSING SECTION 8.01. Conditions to Each Party's Obligations. The obligation of each party hereto to consummate the Closing is subject to the satisfaction, at or prior to the Closing Date, of the following conditions: (a) All filings with, notifications to and consents from Regulatory Authorities required for the consummation of the Closing shall have been made or obtained, as applicable; (b) No provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Closing; (c) The expiration of any applicable waiting period under the HSR Act; (d) The Certificate of Designations shall have been filed with the Secretary of State of the State of Delaware in accordance with the law of the State of Delaware; (e) To the extent required by Applicable Law or the rules of the Nasdaq Stock Market, the issuance of the Securities contemplated by this Agreement shall have been duly approved and adopted by the shareholders of the Issuer; and (f) The shares of Common Stock issuable upon conversion of the Securities shall have been approved for listing on the Nasdaq Stock Market. SECTION 8.02. Conditions to Each Purchaser's Obligations. The obligation of each Purchaser to consummate the Closing is further subject to the satisfaction, at or prior to the Closing Date, of the following additional conditions: (a) The representations and warranties of the Issuer contained herein that are qualified as to materiality or Material Adverse Effect shall be true and correct in all respects on and as of the Closing Date and the representations and warranties of the Issuer contained herein that are not so qualified shall be true and correct in all material respects on and as of the Closing Date, in each case as if made on and as of such date; the Issuer shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by it at or prior to the Closing Date; and such Purchaser shall have received a certificate dated the Closing Date signed by an authorized officer of the Issuer to the foregoing effect; (b) The Management Sideletter shall have been executed and delivered by Mr. Rouhana and the Shareholders Agreements shall have been executed and delivered by the parties thereto other than such Purchaser; 23 (c) In the case of each of CSFB and WCAS, such Purchaser's nominee shall have been elected or appointed to the Issuer's Board of Directors. (d) Such Purchaser shall have received an opinion, dated the Closing Date, of counsel to the Issuer, substantially in the form attached as Exhibit C; (e) Such Purchaser shall have received an opinion, dated the Closing Date, of FCC counsel to the Issuer, substantially in the form attached as Exhibit D; (f) No proceeding challenging this Agreement or the transactions contemplated hereby or seeking to prohibit, alter, prevent or materially delay the Closing shall have been instituted by any Governmental Authority before any court, arbitrator or governmental body, agency or official binding on any party hereto and be pending; (g) Such Purchaser shall have received all documents reasonably requested by it relating to the existence of each Seller, the corporate authority for such Seller's entering into, and the validity of, this Agreement, the Shareholders Agreements and the Securities, all in form and substance reasonably satisfactory to it. SECTION 8.03. Conditions to Seller's Obligations. The obligation of the Sellers to consummate the Closing is further subject to the satisfaction, at or prior to the Closing Date, of the following additional conditions: (a) The representations and warranties of each Purchaser contained herein that are qualified as to materiality or material adverse effect shall be true and correct in all respects on and as of the Closing Date and the representations and warranties of each Purchaser contained herein that are not so qualified shall be true and correct in all material respects on and as of the Closing Date, in each case as if made on and as of such date; each Purchaser shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by such Purchaser at or prior to the Closing Date; and the Sellers shall have received a certificate dated the Closing Date signed by an authorized officer of such Purchaser to the foregoing effect; (b) The Shareholders Agreements shall have been executed and delivered by the parties thereto other than the Issuer; and (c) The Issuer shall have received all documents reasonably requested by it relating to the existence of the Purchasers, the authority for their 24 entering into, and the validity of, this Agreement and the Shareholders Agreements, all in form and substance reasonably satisfactory to it. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth on the signature page hereof, or such other address or telecopier number as such party may hereinafter specify for the purpose to the party giving such notice. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified pursuant to this Section 9.01 and the appropriate confirmation is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section 9.01. SECTION 9.02. No Waivers; Amendments. (a) No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (b) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by all the parties hereto. SECTION 9.03. Survival. The representations and warranties contained in this Agreement shall survive the Closing until the 18-month anniversary of the Closing Date, except that (i) the representations and warranties contained in Sections 3.01, 3.02, 3.03, 3.05, 4.01, 4.02, and 4.03 shall survive indefinitely and (ii) the representations and warranties contained in Sections 3.17, 3.18 and 3.19 shall survive until the expiration of the statute of limitations applicable to the matters covered thereby (giving effect to any waiver, mitigation or extension thereof, if applicable). Notwithstanding the preceding sentence, any representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given in reasonable detail to the party against whom such indemnity may be sought prior 25 to such time. The covenants and agreements of the parties contained in this Agreement shall survive the Closing in accordance with their terms or, if no term is specified, indefinitely. SECTION 9.04. Indemnification. (a) Effective upon the Closing, the Issuer hereby indemnifies each Purchaser and its Affiliates against and agrees to hold such Purchaser and its Affiliates harmless (on an after-Tax basis) from any and all damage, loss (including by reason of a diminution in value of the Securities), liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding) ("Damages") incurred or suffered by such Purchaser or its Affiliates arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by a Seller pursuant to this Agreement; provided that (i) the Issuer shall not be liable under this Section 9.04 unless the aggregate amount of Damages with respect to all matters referred to in this Section 9.04 (determined without regard to any materiality qualification contained in any representation, warranty or covenant giving rise to the claim for indemnity hereunder) exceeds $10,000,000 (in which case all Damages in excess of $1.00 shall be made subject to indemnification hereunder) and (ii) the Issuer's maximum liability under this Section 9.04 shall not exceed the amount of the aggregate purchase price paid for all Securities purchased by the Purchasers pursuant to this Agreement. (b) Effective upon the Closing, each Purchaser hereby indemnifies the Issuer and its Affiliates against and agrees to hold the Issuer and its Affiliates harmless from any and all Damages incurred or suffered by the Issuer or its Affiliates arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by such Purchaser pursuant to this Agreement; provided that (i) such Purchaser shall not be liable under this Section 9.04 unless the aggregate amount of Damages with respect to all matters referred to in this Section 9.04 (determined without regard to any materiality qualification contained in any representation, warranty or covenant giving rise to the claim for indemnity hereunder) exceeds 2% of the amount of the purchase price paid for the Securities purchased by such Purchaser pursuant to this Agreement (in which case all Damages in excess of $1.00 shall be made subject to indemnification hereunder) and (ii) such Purchaser's maximum liability under this Section 9.04 shall not exceed the amount of the purchase price paid for the Securities purchased by such Purchaser pursuant to this Agreement. SECTION 9.05. Procedures. The party seeking indemnification under Section 9.04 (the "Indemnified Party") agrees to give prompt notice to the party against whom indemnity is sought (the "Indemnifying Party") and to all other Purchasers of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under such Section. The Indemnifying Party may at its election participate in and control the defense of any such suit, action or proceeding at its own expense. The 26 Indemnifying Party shall not be liable under Section 9.04 for any settlement effected without its consent of any claim, litigation or proceeding in respect of which indemnity may be sought hereunder. SECTION 9.06. Expenses; Documentary Taxes. The Issuer shall reimburse the Purchasers for all of their respective reasonable out-of-pocket expenses, including fees and reasonable disbursements of counsel, incurred in connection with the consummation of the transactions contemplated by this Agreement. The Issuer shall pay any and all stamp, transfer and other similar taxes payable or determined to be payable in connection with the execution and delivery of this Agreement or the Shareholders Agreements or the issuance of the Securities. SECTION 9.07. Termination. (a) This Agreement may be terminated a any time prior to the Closing: (i) by mutual written agreement of the Issuer and each Purchaser; (ii) by the Issuer or any Purchaser if the Closing shall not have been consummated on or before March 15, 2000 (or, if approval of the Issuer's stockholders is required to consummate the transactions contemplated hereby, May 1, 2000); (iii) by the Issuer or any Purchaser if there shall be any law or regulation that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or if consummation of the transactions contemplated hereby would violate any nonappealable, final order, decree or judgment of any court or governmental body having competent jurisdiction; or (iv) by the Issuer or any Purchaser if one or more of the other Purchasers (who collectively are obligated to purchase at least 25,000 shares of the Securities) defaults in its or their obligations to purchase such Securities ("Closing Failure"). The party desiring to terminate this Agreement pursuant to clauses 9.07(a)(ii), (iii) or (iv) shall give notice of such termination to the other parties hereto. (b) If this Agreement is terminated as permitted by Section 9.07(a), such termination shall be without liability of either party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other parties to this Agreement; provided that if such termination shall result from the willful (i) failure by any party to fulfill a condition to the performance of the obligations of the other parties, (ii) failure by any party to perform a covenant of this Agreement or (iii) breach by any party hereto of any representation, warranty, covenant or agreement contained herein, or a 27 Closing Failure by any party, such party shall be fully liable for any and all Damages incurred or suffered by the other parties as a result of such failure or breach. The provisions of Sections 6.01, 9.01, 9.06, 9.07, 9.10, 9.11 and 9.13 shall survive any termination hereof pursuant to Section 9.07(a). SECTION 9.08. Several Obligations. The obligations of the Purchasers hereunder are several. No Purchaser shall be responsible for the obligations of, or any action taken or omitted by, any other Purchaser hereunder. SECTION 9.09. Successors and Assigns. Except as contemplated by Section 6.02, no party may assign any of its rights and obligations hereunder without the prior written consent of the other parties hereto. This Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns. SECTION 9.10. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. SECTION 9.11. Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may only be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, and each of the parties hereby consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 9.01 shall be deemed effective service of process on such party. SECTION 9.12. Counterparts. This Agreement may be executed in any number of counterparts each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 9.13. Entire Agreement. This Agreement, the Shareholders Agreements, the Management Sideletter, the Certificate of Designations and any other documents executed concurrently herewith constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, written or oral, relating to the subject matter hereof. 28 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first above written. WINSTAR COMMUNICATIONS, INC. /s/ Timothy R. Graham By: _________________________________ Name: Timothy R. Graham Title:Executive Vice President Address for notices: ------------------- 685 Third Avenue New York, New York 10017 Facsimile: (212) 792-9348 Attention: Timothy R. Graham MICROSOFT CORPORATION /s/ Gregory B. Maffei By: _________________________________ Name: Gregory B. Maffei Title:Senior Vice President, Chief Financial officer Address for notices: ------------------ One Microsoft Way Redmond, WA 98052 Facsimile: (425) 936-7329 Attention: Chief Financial Officer CREDIT SUISSE FIRST BOSTON EQUITY PARTNERS, L.P. By: Credit Suisse First Boston Advisory Partners, LLC, as Investment Advisor /s/ Hartley R. Rogers By: _________________________________ Name: Hartley R. Rogers Title: Managing Director Address for notices: ------------------- 11 Madison Avenue New York, NY 10010 Facsimile: (212) 325-2291 Attention: Hartley R. Rogers CREDIT SUISSE FIRST BOSTON EQUITY PARTNERS (BERMUDA), L.P. By: Credit Suisse First Boston Advisory Partners, LLC, as Investment Advisor /s/ Hartley R. Rogers By: _________________________________ Name: Hartley R. Rogers Title: Managing Director Address for notices: ------------------- 11 Madison Avenue New York, NY 10010 Facsimile: (212) 325-2291 Attention: Hartley R. Rogers EMA PRIVATE EQUITY FUND 1999, L.P. By: Credit Suisse First Boston (Bermuda) Limited, as General Partner /s/ Hartley R. Rogers By: _________________________________ Name: Hartley R. Rogers Title: Attorney-in-fact Address for notices: ------------------- 11 Madison Avenue New York, NY 10010 Facsimile: (212) 325-2291 Attention: Hartley R. Rogers WELSH, CARSON, ANDERSON & STOWE VIII, L.P. By: WCAS VIII Associates LLC, as General Partner /s/ Lawrence B. Sorrel By: _________________________________ Name: Lawrence B. Sorrel Title: Member Address for notices: ------------------- 320 Park Avenue, Suite 2500 New York, NY 10010 Facsimile: (212) 893-9575 Attention: Lawrence B. Sorrel or Sanjay Swani WCAS INFORMATION PARTNERS, L.P. By: WCAS Info Partners, as General Partner /s/ Jonathan M. Rather By: _________________________________ Name: Jonathan M. Rather Title: Attorney-in-fact Address for notices: ------------------- c/o Welsh, Carson, Anderson & Stowe VIII, L.P. 320 Park Avenue, Suite 2500 New York, NY 10010 Facsimile: (212) 893-9575 Attention: Jonathan M. Rather Individual investors: /s/ Jonathan M. Rather By: _________________________________ Jonathan M. Rather as Attorney-in-fact for the individual investors listed below: Patrick J. Welsh New Jersey Russell L. Carson New York Bruce K. Anderson New Jersey Andrew M. Paul New York Thomas E. McInerney New York Robert A. Minicucci Connecticut Anthony J. de Nicola New Jersey Paul B. Queally Connecticut Lawrence B. Sorrel New York Rudolph E. Rupert New York D. Scott Mackesy New York Sanjay Swani New York Sean Traynor New York John Almeida New York Eric J. Lee New York Jonathan M. Rather Connecticut Laura VanBuren New York Address for notices: ------------------- c/o Welsh, Carson, Anderson & Stowe VIII, L.P. 320 Park Avenue, Suite 2500 New York, NY 10010 Facsimile:(212) 893-9575 Attention: Jonathan M. Rather WINSTAR CREDIT CORP. /s/ Kenneth J. Zinghini By: _________________________________ Name: Kenneth J. Zinghini Title: Vice President Address for notices: ------------------- 685 Third Avenue New York, New York 10017 Facsimile: (212) 792-9348 Attention: Timothy R. Graham Annex I Securities to be Purchased1 Purchaser Number of Shares Purchase Price Microsoft Corporation 250,000 $250 million The CSFB Entities (with 400,000 $400 million the intention to allocate up to $150 million to co-investors) The WCAS Entities 250,000 $250 million - -------- 1 Securities to be allocated as among any affiliated group of Purchasers in the manner designated by then no later than 2 Business Days prior to the Closing. EX-4.2 3 FORM OF CERTIFICATE OF DESIGNATIONS CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES G SENIOR CUMULATIVE PARTICIPATING CONVERTIBLE PREFERRED STOCK of WINSTAR COMMUNICATIONS, INC. Pursuant to Section 151 of the General Corporation Law of the State of Delaware Winstar Communications, Inc., a Delaware corporation (hereinafter called the "Company"), hereby certifies that, pursuant to the authority expressly vested in the Board of Directors of the Company by the Restated Certificate of Incorporation, as amended (the "Restated Certificate of Incorporation"), and in accordance with the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware, the Board of Directors has duly adopted the following resolutions. RESOLVED, that, pursuant to Article Fourth of the Restated Certificate of Incorporation (which authorizes 15,000,000 shares of preferred stock, $.01 par value per share ("Preferred Stock")), the Board of Directors hereby fixes the powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of a series of Preferred Stock. RESOLVED, that each share of such series of Preferred Stock shall rank equally in all respects and shall be subject to the following provisions: 1. Number and Designation. 900,000 shares of the Preferred Stock of the Company shall be designated as Series G Senior Cumulative Participating Convertible Preferred Stock (the "Series G Preferred Stock"). 2. Rank. The Series G Preferred Stock shall, with respect to dividend rights and rights on liquidation, dissolution and winding up, rank (i) senior to all classes of the Company's common stock, $.01 par value per share ("Common Stock"), the Company's 6% Series A Cumulative Convertible Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), and the Company's Series E Junior Convertible Preferred Stock, $.01 par value per share (the "Series E Preferred Stock"), and to each other class of capital stock of the Company or series of Preferred Stock of the Company established hereafter by the Board of Directors of the Company, the terms of which do not expressly provide that it ranks senior to, or on a parity with, the Series G Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company (the securities in this clause (i) collectively referred to as "Junior Securities"); and (ii) on a parity with the Company's Series C 14 1/4% Senior Cumulative Exchangeable Preferred Stock Due 2007, $.01 par value per share (the "Series C Preferred Stock"), the Company's Series D 7% Senior Cumulative Convertible Preferred Stock Due 2010, $.01 par value per share (the "Series D Preferred Stock"), the Company's Series F 7 1/4% Senior Cumulative Convertible Preferred Stock, $.01 par value per share (the "Series F Preferred Stock"), and each other class of capital stock of the Company or series of Preferred Stock of the Company established hereafter by the Board of Directors of the Company, the terms of which expressly provide that such class or series will rank on a parity with the Series G Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution (the securities in this clause (ii) collectively referred to as "Parity Securities"). The respective definitions of Junior Securities and Parity Securities shall also include any rights or options exercisable for or convertible into any of the Junior Securities and Parity Securities, as the case may be. 3. Dividends. (a) In addition to any amounts to which a holder of Series G Preferred Stock is entitled to receive pursuant to paragraph 3(d), such holder shall be entitled to receive, in respect of each Dividend Period, when, as and if declared by the Board of Directors of the Company, out of funds legally available for the payment of dividends, cumulative dividends in an amount per share equal to the excess (if any) of (i) the Applicable Percentage of the Accreted Value as of the immediately preceding Dividend Payment Date (or, for the initial Dividend Period, as of the date of issuance) over (ii) the amount of any regular cash dividends per share of Series G Preferred Stock that have been paid during such Dividend Period pursuant to paragraph 3(d). Subject to the provisions of Section 3(b), dividends paid pursuant to this paragraph 3(a) shall be payable in cash in arrears quarterly on March 15, June 15, September 15 and December 15 of each year (each of such dates being a "Dividend Payment Date" and each such quarterly period being a "Dividend Period"). Such dividends shall accrue from the date of issue (except that dividends on any amounts added to Accreted Value pursuant to paragraph 3(b) shall accrue from the date such amounts are added to Accreted Value), whether or not in any Dividend Period or Periods there shall be funds of the Company legally available for the payment of such dividends. Each such dividend shall be payable to the holders of record of shares of the Series G Preferred Stock on March 1, June 1, September 1 and December 1, as they appear on the stock records of the Company at the close of business on such record dates. (b) If dividends are not paid in cash on any Dividend Payment Date for the immediately preceding Dividend Period (or portion thereof if less than a full Dividend Period), the unpaid amount shall be added to the Accreted Value for purposes of calculating succeeding periods' dividends. Notwithstanding anything else contained herein, once any dividends for the immediately preceding 2 Dividend Period (or portion thereof if less than a full Dividend Period) are so added to Accreted Value, such dividends will no longer be payable in cash. (c) The Applicable Percentage for each full Dividend Period for the Series G Preferred Stock shall be 1.4375%. The Applicable Percentage for the initial Dividend Period, or any other period shorter or longer than a full Dividend Period, on the Series G Preferred Stock shall be computed on the basis of a per annum rate of 5.75% and the actual number of days elapsed over 12 30-day months and a 360-day year. Holders of shares of Series G Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of dividends on the Series G Preferred Stock provided for in this paragraph 3. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series G Preferred Stock that may be in arrears. (d) In case the Company shall fix a record date for the making of any dividend or distribution to holders of Common Stock (other than dividends or distributions payable solely in Common Stock), the holder of each share of Series G Preferred Stock on such record date shall be entitled to receive an equivalent dividend or distribution based on the number of shares of Common Stock into which such share of Series G Preferred Stock is convertible on such record date. (e) So long as any shares of the Series G Preferred Stock are outstanding, no dividends, except as described in the next succeeding sentence, shall be declared or paid or set apart for payment on Parity Securities, for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series G Preferred Stock (or the unpaid amount shall have been added to the Accreted Value pursuant to paragraph 3(b)) for all Dividend Periods terminating on or prior to the date of payment of the dividend on such class or series of Parity Securities. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the Series G Preferred Stock and all dividends declared upon any other class or series of Parity Securities shall be declared ratably in proportion to the respective amounts of dividends accrued on the Series G Preferred Stock and accrued and unpaid on such Parity Securities. (f) So long as any shares of the Series G Preferred Stock are outstanding, no dividends (other than dividends paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company, directly or indirectly (except by conversion into or exchange for Junior Securities), unless in each case (i) the full 3 dividends on all outstanding shares of the Series G Preferred Stock and any Parity Securities shall have been paid or set apart for payment for all past Dividend Periods with respect to the Series G Preferred Stock and all past dividend periods with respect to such Parity Securities (or, in the case of the Series G Preferred Stock, the unpaid amount shall have been added to the Accreted Value pursuant to paragraph 3(b)) and (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series G Preferred Stock and the current dividend period with respect to such Parity Securities. Notwithstanding the foregoing, the Company may (i) pay cash in lieu of fractional shares of Common Stock to be issued upon conversion of convertible Preferred Stock constituting Junior Securities and (ii) redeem for cash convertible Preferred Stock that constitutes Junior Securities if, as of the date of the giving of the redemption notice thereunder, the applicable conversion price of such convertible Preferred Stock is less than the Current Market Price Per Common Share. 4. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, the holder of each share of Series G Preferred Stock shall be entitled to receive an amount per share equal to the Liquidation Value of such share on the date of distribution, and such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the shares of Series G Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any Parity Securities, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Series G Preferred Stock and any such Parity Securities ratably in accordance with the respective amounts that would be payable on such shares of Series G Preferred Stock and any such Parity Securities if all amounts payable thereon were paid in full. Solely for the purposes of this paragraph 4, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company nor the consolidation or merger of the Company with or into one or more other entities shall be deemed to be a liquidation, dissolution or winding-up of the Company. (b) Subject to the rights of the holders of any Parity Securities, after payment shall have been made in full to the holders of the Series G Preferred Stock, as provided in this paragraph 4, any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed to holders of capital stock of the Company, and the holders of the Series G Preferred Stock shall not be entitled to share therein. 4 5. Conversion. (a) Conversion at the Option of the Company. If on any date after the third anniversary of the date of issuance of the Series G Preferred Stock, the Current Market Price Per Common Share is at least equal to 155% of the Conversion Price on such date, the Company may elect, by written notice delivered to the Transfer Agent (with a copy to each holder of Series G Preferred Stock), no later than five Market Days after such date, to cause all outstanding shares of Series G Preferred Stock to be converted into fully paid and nonassessable shares of Common Stock. Any such conversion shall be deemed to have been effected, without further action by any party, immediately prior to the close of business on the date such notice is received by the Transfer Agent. The number of shares of Common Stock deliverable upon conversion of one share of Series G Preferred Stock shall be equal to (i) the Accreted Value of such share on the date of conversion, plus any dividends accrued to such date (whether or not earned or declared) since the end of the previous Dividend Period, divided by (ii) the Conversion Price on such date. (b) Conversion at the Option of the Holder. Subject to the provisions of this paragraph 5, each holder of shares of Series G Preferred Stock shall have the right, at any time and from time to time, at such holder's option, to convert its outstanding shares of Series G Preferred Stock, in whole or in part, into fully paid and non-assessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion of one share of Series G Preferred Stock shall be equal to (i) the Accreted Value of such share on the date of conversion, plus any dividends accrued to such date (whether or not earned or declared) since the end of the previous Dividend Period, divided by (ii) the Conversion Price on such date. No notice delivered by the Company pursuant to paragraph 5(h), 5(j) or 6 will limit in any way the holders' rights to convert pursuant to this paragraph 5(b). In order to exercise the conversion privilege set forth in paragraph 5(b), the holder of the shares of Series G Preferred Stock to be converted shall surrender the certificate representing such shares at the office of the Company, with a written notice of election to convert completed and signed, specifying the number of shares to be converted. Each conversion pursuant to paragraph 5(b) shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Series G Preferred Stock shall have been surrendered and such notice received by the Company as aforesaid, and the person in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder of record of the shares of Common Stock represented thereby at such time on such date. Effective upon such conversion, the shares of Series G Preferred Stock so converted shall no longer be deemed to be outstanding, and all rights of a holder with respect to such shares surrendered for conversion shall immediately terminate except the right to receive the Common Stock and other amounts payable pursuant to this paragraph 5. 5 (c) (i) Unless the shares issuable on conversion pursuant to this paragraph 5 are to be issued in the same name as the name in which such shares of Series G Preferred Stock are registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the holder or the holder's duly authorized attorney and an amount sufficient to pay any transfer or similar tax. (ii) As promptly as practicable after the surrender by the holder of the certificates for shares of Series G Preferred Stock as aforesaid, the Company shall issue and shall deliver to such holder, or on the holder's written order to the holder's transferee, a certificate or certificates for the whole number of shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this paragraph 5. (iii) All shares of Common Stock delivered upon conversion of the Series G Preferred Stock will upon delivery be duly and validly issued and fully paid and non-assessable, free of all liens and charges and not subject to any preemptive rights. (d) (i) Upon delivery to the Company by a holder of shares of Series G Preferred Stock of a notice of election to convert pursuant to paragraph 5(b) above, the right of the Company to redeem such shares of Series G Preferred Stock shall terminate, regardless of whether a notice of redemption has been mailed pursuant to paragraph 6. (ii) From the date of delivery by a holder of shares of Series G Preferred Stock of such notice of election to convert, in lieu of dividends on such Series G Preferred Stock pursuant to paragraph 3, such Series G Preferred Stock shall participate equally and ratably with the holders of shares of Common Stock in all dividends paid on the Common Stock. (iii) Except as provided herein, the Company shall make no payment or adjustment for accrued dividends on shares of Series G Preferred Stock, whether or not in arrears, on conversion of such shares or for dividends in cash on the shares of Common Stock issued upon such conversion. (e) (i) The Company covenants that it will at all times reserve and keep available, free from preemptive rights, such number of its authorized but unissued shares of Common Stock as shall be required for the purpose of effecting conversion of the Series G Preferred Stock. (ii) Prior to the delivery of any securities which the Company shall be obligated to deliver upon conversion of the Series G 6 Preferred Stock, the Company shall comply with all applicable federal and state laws and regulations which require action to be taken by the Company. (f) The Company will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversion of the Series G Preferred Stock pursuant hereto; provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of the Series G Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid. (g) In connection with the conversion of any shares of Series G Preferred Stock, no fractional shares of Common Stock shall be issued, but in lieu thereof the Company shall round up any fractional shares to the nearest whole number of shares of Common Stock. (h) (i) In case the Company shall at any time after the date of issue of the Series G Preferred Stock (A) declare a dividend or make a distribution on Common Stock payable in Common Stock, (B) subdivide or split the outstanding Common Stock, (C) combine or reclassify the outstanding Common Stock into a smaller number of shares or (D) consolidate with, or merge with or into, any other Person, or engage in any reorganization, reclassification or recapitalization which, in the case of any such transaction is effected in such a manner that the holders of Common Stock are entitled to receive stock, securities, cash or other assets with respect to or in exchange for Common Stock (other than as a dividend or distribution referred to in paragraph 3(d)), the Conversion Price and the kind and amount of stock, securities, cash or other assets issuable upon conversion of the Series G Preferred Stock in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, split, combination, consolidation, merger, reorganization, reclassification or recapitalization shall be adjusted so that the conversion of the Series G Preferred Stock after such time shall entitle the holder to receive the aggregate number of shares of Common Stock or securities, cash and other assets which, if the Series G Preferred Stock had been converted immediately prior to such time, such holder would have owned upon such conversion and been entitled to receive by virtue of such dividend, distribution, subdivision, split, combination, consolidation, merger, reorganization, reclassification or recapitalization, assuming such holder of Common Stock (x) is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such reorganization, reclassification, recapitalization, sale or transfer was made, as the case may be ("constituent person"), or an affiliate of a constituent person and (y) failed to exercise any rights of election as to the kind or amount of securities, cash and other property receivable upon such reclassification, change, consolidation, merger, reorganization or recapitalization (provided, that if the kind or amount of securities, cash and other property receivable upon such reclassification, 7 change, consolidation, merger, reorganization or recapitalization is not the same for each share of Common Stock held immediately prior to such reclassification, change, consolidation, merger, reorganization or recapitalization by other than a constituent person or an affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purpose of this paragraph 5(h) the kind and amount of securities, cash and other property receivable upon such reorganization, reclassification, change, consolidation, merger or recapitalization by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Such adjustment shall be made successively whenever any event listed above shall occur. (ii) All calculations under this paragraph 5(h) shall be made to the nearest four decimal points. (iii) In the event that, at any time as a result of the provisions of this paragraph 5(h), the holder of this Series G Preferred Stock upon subsequent conversion shall become entitled to receive any securities other than Common Stock, the number and kind of such other securities so receivable upon conversion of this Series G Preferred Stock shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions contained herein. (i) All adjustments pursuant to this paragraph 5 shall be notified to the holders of this Series G Preferred Stock promptly following the making thereof and such notice shall be accompanied by a schedule of computations of the adjustments. (j) Change of Control Offer. (i) Promptly after the occurrence of a Change of Control (the date of such occurrence being the "Change of Control Date"), the Company shall commence (or cause to be commenced) an offer to purchase all outstanding shares of Series G Preferred Stock pursuant to the terms described in paragraph (j) (iv) (the "Change of Control Offer") at a purchase price equal to the Change of Control Amount on the Change of Control Payment Date, and shall purchase (or cause the purchase of) any shares of Series 8 G Preferred Stock tendered in the Change of Control Offer pursuant to the terms hereof. (ii) At the Company's option, the Change of Control Amount shall be payable in cash or in shares of Common Stock (or the securities of the entity into which the Common Stock became converted in connection with the Change of Control) having a Current Market Price Per Common Share on the Change of Control Payment Date equal to the Change of Control Amount. (iii) If the Company elects to pay the Change of Control Amount in cash, prior to the mailing of the notice referred to in paragraph (j)(iv), but in any event within 30 days following the date on which a Change of Control has occurred, the Company shall (A) promptly determine if the purchase of the Series G Preferred Stock for cash would violate or constitute a default under the indebtedness of the Company or the terms of any other series of the Company's outstanding preferred stock and (B) either shall repay to the extent necessary all such indebtedness or preferred stock of the Company that would prohibit the repurchase of the Series G Preferred Stock pursuant to a Change of Control Offer or obtain any requisite consents or approvals under instruments governing any indebtedness or preferred stock of the Company to permit the repurchase of the Series G Preferred Stock for cash. The Company shall first comply with this paragraph (j)(ii) before it shall repurchase for cash any Series G Preferred Stock pursuant to this paragraph (j). (iv) Within 30 days following the date on which a Change in Control has occurred, the Company shall send, by first-class mail, postage prepaid, a notice to each holder of Series G Preferred Stock. If applicable, such notice shall contain all instructions and materials necessary to enable such holders to tender Series G Preferred Stock pursuant to the Change of Control Offer. Such notice shall state: (A) that a Change of Control has occurred, that a Change of Control Offer is being made pursuant to this paragraph (j) and that all Series G Preferred Stock validly tendered and not withdrawn will be accepted for payment; (B) the purchase price (including the amount of accrued dividends, if any) and the purchase date (which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law) (the "Change of Control Payment Date"); 9 (C) that any shares of Series G Preferred Stock not tendered will continue to accrue dividends; (D) that, unless the Company defaults in making payment therefor, any share of Series G Preferred Stock accepted for payment pursuant to the Change of Control Offer shall cease to accrue dividends after the Change of Control Payment Date; (E) that holders electing to have any share of Series G Preferred Stock purchased pursuant to a Change of Control Offer will be required to surrender stock certificates representing such shares of Series G Preferred Stock, properly endorsed for transfer, together with such other customary documents as the Company and the Transfer Agent may reasonably request to the Transfer Agent and registrar for the Series G Preferred Stock at the address specified in the notice prior to the close of business on the business day prior to the Change of Control Payment Date; (F) that holders will be entitled to withdraw their election if the Company receives, not later than five business days prior to the Change of Control Payment Date, a telegram, facsimile transmission or letter setting forth the name of the holder, the number of shares of Series G Preferred Stock the holder delivered for purchase and a statement that such holder is withdrawing its election to have such shares of Series G Preferred Stock purchased; (G) that holders who tender only a portion of the shares of Series G Preferred Stock represented by a certificate delivered will, upon purchase of the shares tendered, be issued a new certificate representing the unpurchased shares of Series G Preferred Stock; and (H) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control). (v) The Company will comply with any tender offer rules under the Exchange Act which then may be applicable in connection with any offer made by the Company to repurchase the shares of Series G Preferred Stock as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Certificate of Designations, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligation under this Certificate of Designations by virtue thereof. 10 (vi) On the Change of Control Payment Date, the Company shall (A) accept for payment the shares of Series G Preferred Stock validly tendered pursuant to the Change of Control Offer, (B) pay to the holders of shares so accepted the purchase price therefor in cash or Common Stock (or the securities of the entity into which the Common Stock became converted in connection with the Change of Control) as provided above and (C) cancel each surrendered certificate and retire the shares represented thereby. Unless the Company defaults in the payment for the shares of Series G Preferred Stock tendered pursuant to the Change of Control Offer, dividends will cease to accrue with respect to the shares of Series G Preferred Stock tendered and all rights of holders of such tendered shares will terminate, except for the right to receive payment therefor on the Change of Control Payment Date. (vii) To accept the Change of Control Offer, the holder of a share of Series G Preferred Stock shall deliver, prior to the close of business on the business day prior to the Change of Control Payment Date, written notice to the Company (or an agent designated by the Company for such purpose) of such holder's acceptance, together with certificates evidencing the shares of Series G Preferred Stock with respect to which the Change of Control Offer is being accepted, duly endorsed for transfer. (viii) For the avoidance of doubt, nothing in this paragraph 5(j) shall restrict the right of the holders of Series G Preferred Stock, in connection with a Change of Control, to convert and to receive the kind and amount of consideration payable to holders of Common Stock in respect of the Common Stock into which the Series G Preferred Stock may be converted. (k) Certain Mergers. In connection with any consolidation with or merger with or into, any person in a transaction where the Common Stock is converted into or exchanged for securities of such person or an affiliate of such person, the Company covenants that the person issuing such securities will be organized and existing under the laws of a jurisdiction which allows for the issuance of preference stock and that the Series G Preferred Stock shall be converted into or exchanged for and shall become shares of such person having in respect of such person substantially the same powers, preference and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon that the Series G Preferred Stock had immediately prior to such transaction. 6. Redemption. (a) On April 1, 2010, the Company will be required to redeem all of the outstanding shares of Series G Preferred Stock at a redemption price per share equal to the greater of (i) the Accreted Value on such date, 11 plus all dividends accrued to such date (whether or not earned or declared) since the most recent Dividend Payment Date and (ii) the aggregate Current Market Price Per Common Share on such date for the number of shares of Common Stock into which a share of Series G Preferred Stock is convertible on such date. The redemption price will be payable, solely at the Company's option, in cash or in shares of Common Stock, which shares shall be valued for purposes of this paragraph 6 at 97% of the Current Market Price Per Common Share on April 1, 2010, or in some combination thereof. (b) Notice of such redemption shall be given by the Company by first class mail, postage prepaid, mailed not less than 30 days nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed at such holder's address as the same appears on the stock register of the Company; provided that neither the failure to give such notice nor any defect therein shall affect the validity of the giving of notice for the redemption of any share of Series G Preferred Stock to be redeemed except as to the holder to whom the Company has failed to give said notice or except as to the holder whose notice was defective. Each such notice shall state: (i) the redemption date; (ii) the redemption price; (iii) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (iv) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (c) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Company in providing money for the payment of the redemption price of the shares called for redemption), dividends on the shares of Series G Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders thereof as stockholders of the Company (except the right to receive from the Company the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Company shall so require and the notice shall so state), such share shall be redeemed by the Company at the redemption price aforesaid. 7. Voting Rights. (a) Except as otherwise provided in paragraph 7(b) or as required by law, each holder of Series G Preferred Stock shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the number of shares of Common Stock into which such holder's shares of Series G Preferred Stock could be converted, pursuant to the provisions of paragraph 5 hereof, on the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, on the date such vote is taken or any written consent of shareholders is solicited. Except as otherwise expressly provided herein or as required by law, the holders of shares of Series G Preferred Stock and Common Stock shall vote together as a single class on all matters. 12 (b) In addition, so long as any of the Series G Preferred Stock is outstanding, the affirmative vote of the holders of a majority of the outstanding shares of Series G Preferred Stock, voting together as a single class, shall be necessary to: (i) amend, alter or repeal any provision of the Restated Certificate of Incorporation (whether by amendment, merger or otherwise) or the By-laws so as to adversely affect the preferences, rights or powers of the Series G Preferred Stock, including, without limitation, the voting powers and liquidation preference of the Series G Preferred Stock, or change the Series G Preferred Stock into any other securities (other than as required by paragraph 5(k)), cash or other property, (ii) issue any additional Series G Preferred Stock or create, authorize or issue any capital stock that ranks prior (whether with respect to dividends or upon liquidation, dissolution, winding up or otherwise) to the Series G Preferred Stock or (iii) redeem for cash any Junior Securities, other than the redemption of any convertible preferred stock, if at the time of the redemption notice, the applicable conversion price of such convertible preferred stock is less than the Current Market Price Per Common Share. 8. Miscellaneous. (a) If, in connection with a Change of Control Offer pursuant to paragraph 5(j) or a redemption pursuant to paragraph 6, the Company determines to pay the Change of Control Amount or the redemption price in shares of Common Stock ("Stock Election"), the Company will use its best efforts to (i) register such shares of Common Stock under the Securities Act of 1933, as amended, (ii) cause such registration statement to be effective at or prior to the time that the Company will deliver such shares to the holders of Series G Preferred Stock, (iii) have such shares listed on the principal trading market for the Common Stock and (iv) take such other actions as may reasonably be required to register the issuance (or, as appropriate, the re-sale) of the shares of Common Stock to be delivered to the holders of the Series G Preferred Stock. (b) If the Company makes a Stock Election, it shall comply with all statutes, rules and regulations applicable thereto at that time, including any and all regulations of the principal trading market on which the Common Stock is then trading, including, if necessary, any shareholder approval requirement under NASD Rule 4460(i), as it may be amended from time to time. 9. Definitions. The following terms, as used herein, shall have the following meanings: "Accreted Value" equals, with respect to one share of Series G Preferred Stock, $1,000, plus the amount of any dividends added to Accreted Value in accordance with paragraph 3(b) (which aggregate amount shall be subject to adjustment whenever there shall occur a stock split, combination, re-classification or other similar event involving the Series G Preferred Stock). 13 "Change of Control" means: (i) the sale, lease, transfer, conveyance other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction (including any merger or consolidation) the result of which is that any "person" (as defined above), other than William J. Rouhana, Jr., becomes the beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act except that a person will be deemed to have beneficial ownership of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the Voting Securities of the Company, (iii) the first day on which a majority of the members of the board of directors are not Continuing Directors, or (iv) prior to the five-year anniversary of the date of issuance of the Series G Preferred Stock, any transaction or series of related transactions with or involving a regional Bell operating company (Bell Atlantic Corp., SBC Communications, BellSouth and U.S. West/Qwest) if, immediately following such transaction or series of related transactions, holders of the Common Stock outstanding immediately prior to such transaction or series of related transactions own 50% or less of the outstanding voting securities of the surviving or transferee corporation (or its parent corporation). "Change of Control Amount" means, with respect to one share of Series G Preferred Stock, (i) if the Change of Control Date occurs prior to the first anniversary of the issuance of the Series G Preferred Stock, 102% of the Accreted Value per share on the Change of Control Payment Date plus any dividends accrued to such date (whether or not earned or declared) since the end of the previous Dividend Period, (ii) if the Change of Control Date occurs on or after such first anniversary, but prior to the second anniversary of the issuance of the Series G Preferred Stock, 105% of the Accreted Value per share on the Change of Control Payment Date plus any dividends accrued to such date (whether or not earned or declared) since the end of the previous Dividend Period, and (iii) if the Change of Control date occurs on or after such second anniversary, 108% of the Accreted Value per share on the Change of Control Payment Date plus any dividends accrued to such date (whether or not earned or declared) since the end of the previous Dividend Period. "Continuing Directors" means individuals who constituted the Board of Directors of the Company on the date hereof (the "Incumbent Directors"); provided that any individual becoming a director during any year shall be considered to be an Incumbent Director if such individual's election, appointment or nomination was recommended or approved by at least two-thirds of the other Incumbent Directors continuing in office following such election, appointment or nomination present, in person or by telephone, at any meeting of the Board of Directors of the Company, after the giving of a sufficient notice 14 to each Incumbent Director so as to provide a reasonable opportunity for such Incumbent Directors to be present at such meeting. "Conversion Price" means $67.50, subject to adjustment from time to time as provided in paragraph 5. "Current Market Price Per Common Share" means, as of any date, the average (weighted by daily trading volume) of the Daily Prices per share of Common Stock for the 20 consecutive trading days immediately prior to such date. "Daily Price" means, as of any date, (i) if the shares of such class of Common Stock then are listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the closing price on such date as reported on the NYSE Composite Transactions Tape; (ii) if the shares of such class of Common Stock then are not listed and traded on the NYSE, the closing price on such date as reported by the principal national securities exchange on which the shares are listed and traded; (iii) if the shares of such class of Common Stock then are not listed and traded on any such securities exchange, the last reported sale price on such date on the National Market of the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"); or (iv) if the shares of such class of Common Stock then are not traded on the NASDAQ National Market, the average of the highest reported bid and lowest reported asked price on such date as reported by NASDAQ. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Liquidation Value" on any date means, with respect to one share of Series G Preferred Stock, the greater of (i) the Accreted Value on such date, plus all dividends (whether or not earned or declared) accrued since the end of the previous Dividend Period and (ii) the amount that would have been payable on a number of shares of Common Stock equal to the number of shares of Common Stock into which a share of Series G Preferred Stock was convertible immediately prior to such date. "Market Day" means a day on which the principal national securities market or exchange on which the Common Stock is listed or admitted for trading is open for the transaction of business. "Person" as used herein means any corporation, limited liability company, partnership, trust, organization, association, other entity or individual. "Securities Act" means the Securities Act of 1933, as amended. 15 "Transfer Agent" means the transfer agent for the Series G Preferred Stock appointed by the Company. "Voting Securities" means securities of the Company ordinarily having the power to vote for the election of directors of the Company; provided that when the term "Voting Securities" is used with respect to any other Person it means the capital stock or other equity interests of any class or kind ordinarily having the power to vote for the election of directors or other members of the governing body of such Person. 16 IN WITNESS WHEREOF, Winstar Communications, Inc. has caused this Certificate of Designations to be signed and attested by the undersigned this __ day of _________________. WINSTAR COMMUNICATIONS, INC. By: ___________________________________ Name: Title: ATTEST: - -------------------- Name: Assistant Secretary 17 EX-4.3 4 FORM OF SHAREHOLDERS AGREEMENT SHAREHOLDERS AGREEMENT Dated as of [ ], 2000 among WINSTAR COMMUNICATIONS, INC. [ ] [ ] and THE OTHER PERSONS LISTED ON THE SIGNATURES PAGES HEREOF TABLE OF CONTENTS ---------------------- PAGE ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions..............................................1 ARTICLE 2 RIGHTS AND OBLIGATIONS WITH RESPECT TO TRANSFER SECTION 2.01. General Restrictions.....................................5 SECTION 2.02. Agreement to Be Bound....................................6 SECTION 2.03. Legends..................................................6 ARTICLE 3 REGISTRATION RIGHTS SECTION 3.01. Definitions..............................................7 SECTION 3.02. Demand Registration Rights...............................8 SECTION 3.03. Piggy-Back Registration Rights..........................11 SECTION 3.04. Registration Procedures.................................13 SECTION 3.05. Participation in Underwritten Registrations.............16 SECTION 3.06. Holdback Agreements.....................................16 SECTION 3.07. Indemnification.........................................17 SECTION 3.08. Shelf Registration......................................20 ARTICLE 4 CORPORATE GOVERNANCE; COVENANTS SECTION 4.01. Board of Directors......................................21 SECTION 4.02. Financial Information...................................23 ARTICLE 5 STANDSTILL SECTION 5.01. Definitions.............................................23 SECTION 5.02. Acquisition of Voting Securities........................24 SECTION 5.03. Certain Actions.........................................25 i PAGE ARTICLE 6 MISCELLANEOUS SECTION 6.01. Headings................................................26 SECTION 6.02. No Inconsistent Agreements..............................26 SECTION 6.03. Entire Agreement........................................26 SECTION 6.04. Notices.................................................26 SECTION 6.05. Applicable Law; Submission to Jurisdiction..............27 SECTION 6.06. Severability............................................27 SECTION 6.07. Successors, Assigns, Transferees........................27 SECTION 6.08. Amendments; Waivers.....................................28 SECTION 6.09. Counterparts............................................28 SECTION 6.10. Recapitalization, etc...................................28 SECTION 6.11. Remedies................................................28 SECTION 6.12. Fees and Expenses.......................................28 SECTION 6.13. Reasonable Best Efforts.................................29 ii SHAREHOLDERS AGREEMENT SHAREHOLDERS AGREEMENT dated as of [ ], 2000 among Winstar Communications, Inc., a Delaware corporation (the "Issuer"), [ ], [ ], and each of the other Persons listed on the signature pages hereof. Each of the parties to this Agreement (other than the Issuer) and any other Person who, pursuant to the terms hereof, shall become a party to or agree to be bound by the terms of this Agreement after the date hereof is sometimes hereinafter referred to as a "Holder". WHEREAS, the parties hereto are among the parties to a Securities Purchase Agreement dated as of December 15, 1999 (as amended from time to time, the "Subscription Agreement") pursuant to which the Holders purchased Series G Shares (as defined below) from the Issuer; and WHEREAS, the parties hereto desire to provide for certain rights and obligations relating to the capital stock of the Issuer and certain matters relating to the conduct of the business and the affairs of the Issuer following the date hereof. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "Affiliate" means, with respect to any Person, any other Person, directly or indirectly, controlling, controlled by, or under common control with, such Person; provided that, for purposes of this Agreement, (i) the Issuer shall not be treated as an Affiliate of any Holder or its Affiliates, (ii) a Holder and its Affiliates shall not be treated as Affiliates of the Issuer or its Affiliates or as Affiliates of any other Holder or such Holder's Affiliates solely by reason of its ownership interest in the Issuer and (iii) any portfolio company of a Holder shall not be treated as an Affiliate of such Holder. For purposes of this definition, the term "control" (including the correlative terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. "beneficial ownership" and "beneficially own" shall be determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act. "Board of Directors" means the Board of Directors of the Issuer. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized by law to close. ["CSFB" means Credit Suisse First Boston Equity Partners, L.P., a Delaware limited partnership.]1 ["CSFB Bermuda" means Credit Suisse First Boston Equity Partners (Bermuda), L.P., a Bermuda limited partnership.]1 ["CSFB EMA" means EMA Private Equity Fund 1999, L.P., a Delaware limited partnership.]1 ["CSFB Entities " means, collectively, CSFB, CSFB Bermuda and CSFB EMA.]1 "Commission" means the Securities and Exchange Commission or any successor commission or agency having similar powers. "Common Shares" means shares of the common stock of the Issuer, par value $0.01 per share. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Fully-Diluted Basis" means to take into account all outstanding shares of Common Stock, shares issuable in respect of stock appreciation rights or options, warrants and other rights to purchase or subscribe for Common Stock or securities convertible into or exchangeable for Common Stock. "group" shall have the meaning set forth in Section 13(d)(3) of the Exchange Act. "Initial Holdings" means, with respect to any Person, the number of Common Shares that would be received upon conversion of the Series G Shares purchased by such Person pursuant to the Subscription Agreement. - -------- 1 CSFB Agreement only. 2 ["Microsoft" means Microsoft Corporation, a Washington corporation.]2 "Permitted Transferee" means: [(i) with respect to any [ ] Entity, (v) any Affiliate of such [ ] Entity, [(w) any general or limited partner of such [ ] Entity (a "Partner"),]3 (x) any officer, general partner, director or limited partner of such [ ] Entity or Partner (collectively, "Associates"), (y) the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of any Associate and (z) a trust, corporation, partnership or other entity substantially all the economic interests of which are held by or for the benefit of such [ ] Entity or any of its Affiliates, Partners, Associates, and any of their spouses or children (whether by birth or adoption);]4 (ii) with respect to any Holder that is an individual, (x) the spouse, children (whether by birth or adoption) grandparents, grandchildren, aunts, uncles, nieces and nephews of such Holder, (y) a Person to whom Shares are Transferred by such Holder by will or the laws of descent and distribution and (z) a trust established for the exclusive benefit of such Holder or any of the Persons referred to in clause (x); and [(iii) with respect to [ ], any Affiliate of such Holder.]2 "Person" means an individual, partnership, corporation, limited liability company, trust, joint stock company, association, joint venture, or any other entity or organization. "Public Offering" means any underwritten public offering of equity securities of the Issuer pursuant to an effective registration statement under the Securities Act other than pursuant to a registration statement on Form S-4 or Form S-8 or any successor or similar form. "Rouhana Letter Agreement" means a letter agreement dated as of the date hereof among William Rouhana, Jr., the Issuer and the persons listed on the signature pages thereof. "Series G Shares" means shares of Series G Senior Cumulative Participating Convertible Preferred Stock, par value $0.01 per share, of the Issuer. - -------- 2 Microsoft Agreement only. 3 CSFB Agreement and WCAS Agreement only. 4 CSFB Agreement and WCAS Agreement only. 3 "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Shares" means the Common Shares and the Series G Shares. "Subsidiary" means any entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by the Issuer. "Transaction Agreements" means this Agreement, the Subscription Agreement and the Rouhana Letter Agreement. "Transfer" means, with respect to any security, (i) when used as a verb, to sell, assign, dispose of, exchange or otherwise transfer such security or any interest therein, whether directly or indirectly, or agree or commit to do any of the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange or other transfer of such security or any interest therein or any agreement or commitment to do any of the foregoing. ["WCAS Entities" means each of WCAS VIII, WCAS IP and WCAS Individual Investors.]5 ["WCAS Individual Investors" means, collectively, the individual investors that are listed on the signature pages hereof.]5 ["WCAS IP" means WCAS Information Partners, L.P., a Delaware limited partnership.]5 ["WCAS VIII" means Welsh, Carson, Anderson & Stowe VIII, L.P., a Delaware limited partnership.]5 (b) Each of the following terms is defined in the Section set forth opposite such term: Term Section ----------- --------- Acquisition Proposal 5.01 Daily Price 5.01 Disadvantageous Condition 3.02(a)(ii) Holder Preamble Indemnified Party 3.07(c) Indemnifying Party 3.07(c) - -------- 5 WCAS Agreement only. 4 Term Section ----------- --------- Inspectors 3.04(h) Issuer Preamble Majority Requesting Holders 3.02(a)(ii) Market Price Per Common Share 5.01 Maximum Offering Size 3.02(b) Records 3.04(h) Registering Holders 3.01 Registrable Common Shares 3.01 Registration Expenses 3.01 Requesting Holder 3.01 Rule 144 2.01(a) Subscription Agreement Recitals Voting Securities 5.01 ARTICLE 2 RIGHTS AND OBLIGATIONS WITH RESPECT TO TRANSFER SECTION 2.01. General Restrictions. (a) No Holder may Transfer any Shares to any Person or group to the extent that, after giving effect to such Transfer, such Holder knows, or has reason to believe, after asking such Person or group, that such Person or group would beneficially own more than 5% of the outstanding Common Shares calculated on a Fully-Diluted Basis, except (i) pursuant to a Public Offering in which the underwriters have been instructed to pursue a broad distribution or pursuant to Rule 144 (or any successor provision) under the Securities Act (as such rule may be amended from time to time, "Rule 144"), (ii) to the Issuer or to a Permitted Transferee of such Holder or (iii) with the prior written consent of the Issuer. (b) Each Transfer of Shares must be made in compliance with the Securities Act, any applicable state and foreign securities law and this Article 2. Each Holder understands and agrees that the Shares have not been registered under the Securities Act and that they are restricted securities. Any attempt to Transfer, pledge, grant a security interest in, or otherwise encumber any Shares not in compliance with this Agreement shall be null and void and neither the Issuer nor any transfer agent shall give any effect in the Issuer's transfer records to such Transfer, pledge, grant or encumbrance. SECTION 2.02. Agreement to Be Bound. No Transfer of Shares otherwise permitted pursuant to Article 2 (other than Transfers pursuant to a Public Offering or Rule 144 or Transfers to the Issuer) shall be effective unless (i) the certificates representing such Shares delivered to such transferee shall bear the legend set forth in Section 2.03, if required by such Section, and (ii) prior to such Transfer, (A) such transferee (if not already a party to this Agreement) shall have executed and delivered to the Issuer an instrument or 5 instruments substantially in the form of Exhibit A hereto confirming that such transferee has agreed to be bound as a "Holder" by the terms of this Agreement, a copy of which instrument shall be maintained on file with the Secretary of the Issuer and shall include the address of such transferee to which notices hereunder shall be sent and (B) if so requested by the Issuer, upon receipt of an opinion of counsel (which shall be reasonably acceptable to the Issuer) to the effect that such Shares may be sold or transferred pursuant to an exemption from registration under the Securities Act, [ ; provided that the provisions of clause (ii) above shall not be applied to any Transfer by a Holder of any of its Shares to the partners of such Holder pursuant to a distribution in respect of the partnership interests of such Holder].6 SECTION 2.03. Legends. (a) Each certificate evidencing outstanding Shares acquired by any Holder shall bear a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, OR TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SHAREHOLDERS AGREEMENT DATED AS OF [ ], 2000, A COPY OF WHICH WILL BE FURNISHED BY THE ISSUER UPON REQUEST AND WITHOUT CHARGE. (b) If any Shares (i) shall (in the case of Common Shares) cease to be Registrable Common Shares, (ii) may be sold pursuant to Rule 144(k) or otherwise in the public market without being registered under the Securities Act or (iii) are sold pursuant to Rule 144 (other than Rule 144(k)), upon the written request of the holder thereof, the Issuer shall issue, in the case of clauses (i) and (ii) above, to such holder and, in the case of clause (iii), to the purchaser thereof, a new certificate evidencing such Shares without the first sentence of the legend required by Section 2.03(a) hereof endorsed thereon. If any Shares shall cease to be subject to the restrictions on Transfer set forth in this Agreement, the Issuer shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such Shares without the second sentence of the legend (or the reference therein to the applicable agreement) required by Section 2.03(a) hereof endorsed thereon. - -------- 6 CSFB Agreement and WCAS Agreement only. 6 ARTICLE 3 REGISTRATION RIGHTS SECTION 3.01. Definitions. The following terms, as used in this Article 3, have the following meanings: "Piggyback Holders" means Persons (other than the Holders) who hold Series G Shares or Common Shares received upon conversion of Series G Shares and who are entitled to incidental registration rights pursuant to an agreement (other than this Agreement) with the Issuer. "Registering Holders" means Holders and Piggyback Holders whose Registrable Common Shares are covered by or offered pursuant to a registration statement filed pursuant to this Article 3. "Registrable Common Shares" means all Common Shares of the Issuer owned by the Holders and the Piggyback Holders or into which the Series G Shares owned by the Holders and the Piggyback Holders may be converted. Registrable Common Shares shall cease to be Registrable Common Shares when (i) a registration statement with respect to the sale of such Common Shares shall have become effective under the Securities Act and such Common Shares shall have been disposed of pursuant to such registration statement, or (ii) such Common Shares shall have ceased to be outstanding. "Registration Expenses" means all (i) registration, qualification and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of a qualified independent underwriter, if any, counsel in connection therewith and the reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Common Shares), (iii) printing expenses, (iv) internal expenses of the Issuer (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), (v) fees and disbursements of counsel for the Issuer, (vi) customary fees and expenses for independent certified public accountants retained by the Issuer (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters), (vii) fees and expenses of any special experts retained by the Issuer in connection with such registration, (viii) reasonable fees and expenses of one separate firm of attorneys for the Registering Holders (which counsel shall be selected by the Registering Holders selling securities constituting a majority of all securities to be included in such registration in the case of any registration pursuant to Section 3.02) and (ix) fees and expenses of listing the Registrable Common Shares on a securities exchange; but shall not include any underwriting fees or discounts or commissions attributable to the sale of Registrable Common Shares. 7 "Requesting Holder" means [any WCAS Entity] [any CSFB Entity] [Microsoft]. SECTION 3.02. Demand Registration Rights. (a) Registration on Request. Subject to Section 3.08, if one or more Requesting Holders desire to effect the registration under the Securities Act of outstanding Registrable Common Shares pursuant to a Public Offering, such Requesting Holders may make a written request that the Issuer effect such registration; provided that, no Requesting Holder shall make any such written request (1) during the pendency of, and for a period of 90 days after the effective date of, any Public Offering of securities for the account of the Issuer, (2) for a period of six months after the effective date of any Public Offering of Common Shares for the account of any Person other than the Issuer pursuant to the exercise of a demand registration right covering Common Shares acquired upon exercise of Series G Shares and (3) prior to the first anniversary of the date hereof. Each such request will specify the number of shares of Registrable Common Shares proposed to be sold and will also specify the intended method of disposition thereof. The Issuer will promptly give written notice of such requested registration to all other Holders of Registrable Common Shares and all Piggyback Holders of Registrable Common Shares, and thereupon will use its best efforts to effect, as promptly as practicable, the registration under the Securities Act of: (i) the Registrable Common Shares which the Issuer has been so requested to register by such Requesting Holders pursuant to this Section 3.02; and (ii) the Registrable Common Shares which the Issuer has been requested to register by all Holders (other than such Requesting Holders) and all Piggyback Holders by written request given to the Issuer within 15 days after the giving of such written notice by the Issuer; all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Common Shares so to be registered; provided that: (x) the Issuer shall not be obligated to effect a registration pursuant to this Section 3.02 unless the aggregate number of Registrable Common Shares to be sold is greater than or equal to 2,500,000; (y) subject to Section 3.02(f), the Issuer shall not be obligated to effect more than one registration pursuant to this Section 3.02; and (z) at the time of any request to register Registrable Common Shares pursuant to this Section 3.02, if the Board of Directors determines in its good faith reasonable judgment that the Issuer should not file any registration statement otherwise required to be filed pursuant to 8 Section 3.02(a) because the Issuer is engaged in any financing, acquisition or other material transaction which would require the Issuer to disclose material non-public information (a "Disadvantageous Condition"), the Issuer shall be entitled to postpone for the shortest reasonable period of time (but not exceeding 90 days from the date of the request), the filing of such registration statement and shall promptly give the Requesting Holders written notice of such determination, containing a general statement of the reasons for such postponement and an approximation of the anticipated delay. Such right to delay a request for registration pursuant to this Section 3.02 may not be exercised more than twice in any 12-month period. If the Issuer shall so postpone the filing of the registration statement, the Requesting Holders proposing to sell securities constituting a majority of all securities requested to be included by all Requesting Holders (the "Majority Requesting Holders") shall have the right to withdraw (without prejudice to their rights under clause (y) above) the request for registration by giving written notice to the Issuer within 30 days after receipt of the notice of postponement. Promptly after the expiration of the 15-day period referred to in clause (ii) above, the Issuer shall notify each holder of Registrable Common Shares to be included in the registration of the other holders requesting Registrable Common Shares to be included therein and the number of Registrable Common Shares requested to be included therein. The Majority Requesting Holders may, at any time prior to the effective date of the registration statement relating to such registration, revoke such request, without liability to any other holder holding Registrable Common Shares requested to be registered pursuant to clause (ii) above, by providing a written notice to the Issuer revoking such request; provided that, if as a result thereof such registration is abandoned, all Registration Expenses shall be borne by the Requesting Holders revoking such registration pro rata in accordance with the number of securities requested by them to be included in such registration, in which case such revocation shall be without prejudice to the rights of the Holders under clause (y) above. (b) Priority Participation in Requested Registrations. If the managing underwriter shall advise the Issuer that, in its view, the number of securities requested to be included in such registration (including securities which the Issuer may request to be included which are not Registrable Common Shares) exceeds the largest number of securities which can be sold without having a material adverse effect on such offering (the "Maximum Offering Size"), including the price at which such securities can be sold, the Issuer will include in such registration: (i) first, the Registrable Common Shares requested to be included in such registration pursuant to Section 3.02(a)(i) or (ii) by all Holders and their Permitted Transferees and all Piggyback Holders, allocated (if necessary) among such holders pro rata based on the number 9 of Registrable Common Shares requested to be included in such registration; and (ii) second, Common Shares to be sold for the account of other Persons (including the Issuer), with such priorities among them as the Issuer shall determine. (c) Registration Statement Form. Registrations under this Section 3.02 shall be on such appropriate registration form of the Commission (i) as shall be selected by the Issuer, subject to Section 3.02(a), and as shall be reasonably acceptable to the Requesting Holders and (ii) as shall permit the disposition of such Registrable Common Shares in accordance with the method or methods of disposition intended on the part of the Requesting Holders who initiated the request. Notwithstanding anything herein to the contrary, if, pursuant to a registration request under this Section 3.02, the Issuer proposes to effect registration by filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement) and any managing underwriter shall advise the Issuer in writing that, in its opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such registration shall be effected on such other form. (d) Expenses. The Issuer will pay promptly all Registration Expenses in connection with the registration requests made pursuant to this Section 3.02. (e) Underwriters. The managing underwriter or underwriters of any Public Offering effected pursuant to this Section 3.02 shall be selected by the Registering Holders proposing to sell securities constituting a majority of all securities requested to be included by all Registering Holders, which selection shall be reasonably satisfactory to the Issuer, it being understood that the selection of Credit Suisse First Boston Corporation shall be deemed to be satisfactory to the Issuer. The price, terms and provisions of such offering shall be subject to the approval of the Requesting Holders. The Issuer will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Common Shares. The Holders shall not be required by the Issuer to make any representation or warranty in the underwriting agreement in connection with such offering other than as to their ownership and authority to Transfer, free of liens, claims and encumbrances (other than those that arise under the terms of this Agreement). (f) If at least 75% of the Registrable Common Shares requested to be registered by the Requesting Holders are not included in such registration, then the Requesting Holders shall have the right to require the Issuer to effect an 10 additional registration under the Securities Act of all or part of the Requesting Holders' Registrable Common Shares in accordance with this Section 3.02 and the Issuer shall pay the Registration Expenses in connection with such additional registration. SECTION 3.03. Piggy-Back Registration Rights. (a) Right to Include Registrable Common Shares. Subject to Section 3.08, if the Issuer at any time proposes to register any of its equity securities under the Securities Act (other than (i) by a registration on Form S-4, Form S-8 or any successor or similar form, (ii) pursuant to a registration requested pursuant to Section 3.02, (iii) in connection with a direct acquisition by the Issuer of another Person or (iv) pursuant to an employee share purchase plan, dividend reinvestment plan or similar plan of the Issuer), in each case whether or not for sale for its own account, it will at each such time give prompt written notice at least 30 days prior to the anticipated filing date of the registration statement relating to such registration to all Holders of Registrable Common Shares of its intention to do so and of such Holders' rights under this Section 3.03. Any such notice shall offer all such Holders, subject to Section 3.08, the opportunity to include in such registration such number of Registrable Common Shares as each such Holder may request. Upon the written request of any Holder made within 15 days after the receipt of any such notice (which request shall specify the number of Registrable Common Shares intended to be disposed of by such Holder), the Issuer will use its best efforts to effect the registration with the Commission under the Securities Act and any related qualification or other compliance of all Registrable Common Shares which the Issuer has been so requested to register, to the extent required to permit the disposition of the Registrable Common Shares to be so registered; provided that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Issuer shall determine for any reason not to register or to delay registration of such securities, the Issuer shall give written notice of such determination to each Holder and, thereupon, (x) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Common Shares in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Holder entitled to do so, to request that such registration be effected as a registration under Section 3.02, and (y) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Common Shares, for the same period as the delay in registering such other securities. Each Holder holding Registrable Common Shares requesting to be included in such registration may elect, in writing not less than 5 Business Days prior to the effective date of the registration statement filed in connection with such registration, not to register such securities in connection with such registration. No registration effected under this Section 3.03 shall relieve the Issuer of its obligation to effect any registration upon request under Section 3.02. The Issuer will pay 11 promptly all Registration Expenses in connection with each registration of Registrable Common Shares requested pursuant to this Section 3.03. (b) Priority in Incidental Registrations. If a registration pursuant to this Section 3.03 involves a Public Offering and the managing underwriter shall advise the Issuer that, in its view, the number or proposed mix of securities (including all Registrable Common Shares) which the Issuer, the Holders and any other Persons intend to include in such registration exceeds the Maximum Offering Size, the Issuer will include in such registration, in the priority listed below, securities up to the Maximum Offering Size: (i) first, (A) if such registration has been initiated by the Issuer for its own account, the equity securities the Issuer proposes to sell or (B) if such registration has not been initiated by the Issuer or a Piggyback Holder, the equity securities proposed to be sold by the security holder(s) initiating such registration; (ii) second, the Registrable Common Shares requested to be included in such registration by all Holders and their Permitted Transferees and all Piggyback Holders, allocated (if necessary) among such holders pro rata based on the number of Registrable Common Shares requested by them to be included in such registration, subject to any incidental registration rights granted a higher priority under contracts existing on the date hereof; and (iii) third, equity securities to be sold for the account of other Persons having incidental registration rights and, if such registration has not been initiated by the Issuer, the Issuer, with such priorities among them as the Issuer shall determine. SECTION 3.04. Registration Procedures. If the Issuer is required to use its best efforts to effect the registration of any Registrable Common Shares under the Securities Act as provided in Section 3.02 or 3.03, the Issuer will, as promptly as possible: (a) prepare and file with the Commission a registration statement on an appropriate form (subject to 3.02(c)), and thereafter use its best efforts to cause such registration statement to become effective and to remain effective pursuant to the terms of the underwriting agreement and prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified pursuant to the terms of the underwriting agreement and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the Registering Holders thereof set forth in such registration statement; provided that the Issuer will, at least 5 Business Days (or at least 3 Business Days in the case of incidental registrations) prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Registering Holder copies of such registration statement or prospectus (or 12 amendment or supplement) as proposed to be filed (including, upon the request of such Holder, documents to be incorporated by reference therein) which documents will be subject to the reasonable review and comments of such Holder (and its attorneys) during such 5-Business Day period (or 3-Business Day period, as the case may be) and the Issuer will not file any registration statement, any prospectus or any amendment or supplement thereto (or any such documents incorporated by reference) containing any statements with respect to such Holder to which such Holder shall reasonably object in writing; (b) furnish to each Registering Holder and to any underwriter such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 or Rule 430A under the Securities Act, in conformity with the requirements of the Securities Act, documents incorporated by reference in such registration statement, amendment, supplement or prospectus and such other documents (in each case including all exhibits), as a Registering Holder or underwriter may reasonably request; (c) after the filing of the registration statement, promptly notify each Registering Holder of the effectiveness thereof and of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered and promptly notify such Registering Holder of such lifting or withdrawal of such order; (d) use its reasonable best efforts to register or qualify all Registrable Common Shares and other securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as the Registering Holders holding a majority of the Registrable Common Shares to be included in such registration or the underwriter shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable the Registering Holders to consummate the disposition in such jurisdictions of the securities owned by such Registering Holders, except that the Issuer shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this Section 3.04(d) be obligated to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; 13 (e) use its reasonable best efforts to cause all Registrable Common Shares covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Registering Holders to consummate the disposition of such Registrable Common Shares; (f) furnish to each Registering Holder and to each underwriter, if any, a signed counterpart of: (i) an opinion of counsel for the Issuer addressed to such Holder and underwriter on which opinion both Holder and such underwriter are entitled to rely and (ii) a "comfort" letter signed by the independent public accountants who have certified the Issuer's financial statements included in such registration statement, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Registering Holders holding a majority of the Registrable Common Shares included in such registration or the managing underwriter therefor reasonably request. The Issuer will use its best efforts to have such comfort letters addressed to each Registering Holder; (g) immediately notify each Registering Holder at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and promptly prepare and furnish to such Registering Holder a reasonable number of copies of any supplement to or amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make statements therein not misleading in the light of the circumstances under which they were made; (h) make available for inspection by any Registering Holder, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Issuer (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and shall cause (i) the Issuer's officers, directors and employees to supply all information reasonably requested by any Inspectors and (ii) the senior management of the Issuer and its Subsidiaries to participate in any "road show" presentations to investors for such period of time as is reasonably requested by the managing underwriters, in each case in connection with such registration statement. Each such Holder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Issuer or its Affiliates unless and until such information is made generally available to the public. Each such Holder further agrees that it will, upon learning that disclosure of such Records is 14 sought in a court of competent jurisdiction, give notice to the Issuer and allow the Issuer, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; (i) use its reasonable best efforts to list all Registrable Common Shares covered by such registration statement on any securities exchange or quotation system on which any of the Registrable Common Shares is then listed or traded; and (j) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement or such other document that shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. The Issuer may require each Registering Holder to promptly furnish to the Issuer, as a condition precedent to including such Registering Holder's Registrable Common Shares in any registration, such written information regarding such Registering Holder and the distribution of such securities as the Issuer may from time to time reasonably request in writing. Each Holder agrees that upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 3.04(g), such Holder will forthwith discontinue such Holder's disposition of Registrable Common Shares pursuant to the registration statement relating to such Registrable Common Shares until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.04(g) and, if so directed by the Issuer, will deliver to the Issuer (at the Issuer's expense) all copies, other than permanent file copies, then in such Holder's possession, of the prospectus and any amendments or supplements thereto relating to such Registrable Common Shares current at the time of receipt of such notice. In the event the Issuer shall give such notice, the Issuer shall extend the period during which the effectiveness of such registration statement shall be maintained by the number of days during the period from and including the date of the giving of notice pursuant to Section 3.04(g) to the date when the Issuer shall make available to the Holders a prospectus supplemented or amended to conform with the requirements of Section 3.04(g). SECTION 3.05. Participation in Underwritten Registrations. No Person may participate in any Public Offering pursuant to Section 3.02 or 3.03 unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to 15 approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. SECTION 3.06. Holdback Agreements. If any registration or offering of Registrable Common Shares shall be in connection with a Public Offering, the Issuer and each Holder agrees not to effect any public sale or distribution of any Common Shares or any securities convertible into or exchangeable or exercisable for Common Shares (in each case other than as part of such Public Offering), if and to the extent requested by the managing underwriter during the 90-day period beginning on the effective date of such registration statement without the written consent of such managing underwriter; provided that each such Holder has received written notice of such registration at least 5 Business Days prior to the anticipated beginning of the 90-day period referred to above. SECTION 3.07. Indemnification. (a) Indemnification by the Issuer. The Issuer agrees to indemnify and hold harmless each Registering Holder, its officers, directors and agents and each Person, if any, who controls such Registering Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities or expenses caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Common Shares (as amended or supplemented if the Issuer shall have furnished any amendments or supplements thereto) or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Issuer will reimburse such Registering Holders for any legal or any other expenses reasonably incurred by them in connection with investigating or defending such loss, claim, damage, liability or expense, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to the Issuer by such Registering Holder or on such Registering Holder's behalf expressly for use therein; provided that with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, or in any prospectus, as the case may be, the indemnity agreement contained in this paragraph shall not apply to the extent that any such loss, claim, damage, liability or expense results from the fact that a current copy of the prospectus (or the amended or supplemented prospectus, as the case may be) was not sent or given to the Person asserting any such loss, claim, damage, liability or expense at or prior to the written confirmation of the sale of the Registrable Common Shares concerned to such Person if it is determined that the Issuer has provided such prospectus (or amended or supplemented prospectus) and it was the responsibility of such Registering Holder to provide such Person with a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and such current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) would have cured the defect giving rise to such 16 loss, claim, damage, liability or expense. The Issuer also agrees to indemnify any underwriters of the Registrable Common Shares, their officers and directors and each Person who controls such underwriters on substantially the same basis as that of the indemnification of the Registering Holders provided in this Section 3.07(a). (b) Indemnification by the Registering Holders. Each Registering Holder agrees, severally but not jointly, to indemnify and hold harmless the Issuer, its officers, directors and agents and each Person, if any, who controls the Issuer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuer to such Registering Holder, but only (i) with respect to information furnished in writing by such Registering Holder or on such Registering Holder's behalf expressly for use in any registration statement or prospectus relating to the Registrable Common Shares, or any amendment or supplement thereto, or any preliminary prospectus or (ii) to the extent that any loss, claim, damage, liability or expense described in Section 3.07(a) results from the fact that a current copy of the prospectus (or the amended or supplemented prospectus, as the case may be) was not sent or given to the Person asserting any such loss, claim, damage, liability or expense at or prior to the written confirmation of the sale of the Registrable Common Shares concerned to such Person if it is determined that it was the responsibility of such Registering Holder to provide such Person with a current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) and such current copy of the prospectus (or such amended or supplemented prospectus, as the case may be) would have cured the defect giving rise to such loss, claim, damage, liability or expense. Each such Registering Holder also agrees to indemnify and hold harmless the underwriters of the Registrable Common Shares, their officers and directors and each Person who controls such underwriters on substantially the same basis as that of the indemnification of the Issuer provided in this Section 3.07(b). Each Registering Holder's obligation to indemnify pursuant to this Section is several in the proportion that the proceeds of the offering received by such Holder bears to the total proceeds of the offering received by all the Holders and not joint. (c) Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Section 3.07, such Person (an "Indemnified Party") shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Party") in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided that the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Party shall have the right to retain its own 17 counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Party that had the largest number of Registrable Common Shares included in such registration. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding. (d) Contribution. If the indemnification provided for in this Section 3.07 is unavailable to the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Issuer and the Registering Holders on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Issuer and such Registering Holders on the one hand and the underwriters on the other, from the offering of the Registrable Common Shares, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Issuer and such Registering Holders on the one hand and of such underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) as between the Issuer on the one hand and each such Registering Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Issuer and of each such Registering Holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Issuer and such Registering Holders on the one hand and 18 such underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Issuer and such Registering Holders bear to the total underwriting discounts and commissions received by such underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Issuer and such Registering Holders on the one hand and of such underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer and such Registering Holders or by such underwriters. The relative fault of the Issuer on the one hand and of each such Registering Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuer and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 3.07 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 3.07, no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Common Shares underwritten by it and distributed to the public were offered to the public exceeds the aggregate amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Common Shares of such Holder were offered to the public exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each such Holder's obligation to contribute pursuant to this Section 3.07 is several in the proportion that the proceeds of the offering received by such Holder bears to the total proceeds of the offering received by all such Holders and not joint. 19 SECTION 3.08. Shelf Registration. Notwithstanding anything herein to the contrary, if the Issuer prepares and files with the Commission a shelf registration statement on an appropriate form relating to all (but not less than all) of the Registrable Common Shares of the Holders in accordance with Rule 415 under the Securities Act (the "Shelf Registration Statement"), the registration rights of the Holders pursuant to Sections 3.02 and 3.03 shall be suspended for so long as such Shelf Registration Statement is maintained continuously effective and in compliance with the Securities Act and usable for resale of Registrable Common Shares. The provisions set forth in Section 3.02(d), the last sentence of Section 3.03(a), Section 3.04 and Section 3.07 shall, to the extent relevant, apply to any such Shelf Registration Statement. In the event that the Shelf Registration Statement is withdrawn or ceases to be effective for any reason, the Holder's rights under Sections 3.02 and 3.03 shall be reinstated in accordance with their original terms without any action by any party. ARTICLE 4 CORPORATE GOVERNANCE; COVENANTS SECTION 4.01. Board of Directors. (a) [WCAS VIII]7 [CSFB]8 shall be entitled to designate one director nominee to the Board of Directors for so long as it continues (together with its Permitted Transferees) to beneficially own Shares representing at least 40% of its Initial Holdings. Such director nominee shall be reasonably acceptable to the Issuer (it being understood that without limiting the generality of the foregoing, [Larry Sorrel and each general partner of WCAS VIII]7 [Hartley Rogers]8 shall be deemed to be acceptable.) The Issuer agrees to use its best efforts to take all actions necessary to have such director nominee elected to the Board of Directors. The Issuer shall be deemed to have used its best efforts to elect a nominee director to the Board of Directors if it nominates such designee, includes the designee in the Issuer's proxy statement, recommends a vote for such designee and casts proxies given to the Issuer in favor of such designee. (b) For so long as [WCAS VIII]7 [CSFB]8 has the right to designate a director nominee pursuant to Section 4.01(a), it shall have the right to have such director appointed to either the Audit or Compensation committee of the Board of Directors. Such director initially shall be appointed to the [ ] committee. The Issuer agrees to use its best efforts to take all actions necessary to appoint such committee member. - -------- 7 WCAS Agreement only. 8 CSFB Agreement only. 20 (c) If, as a result of death, disability, retirement, resignation, removal (with or without cause) or otherwise, there shall exist or occur any vacancy on the Board of Directors, [WCAS VIII]9 [CSFB]10 may designate another individual nominee to be appointed by the Board of Directors to fill such capacity and serve as such director. (d) The Issuer hereby agrees to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all reasonable things necessary to give effect to the rights of [WCAS VIII]9 [CSFB]10 hereunder. (e) The director nominated pursuant to Section 4.01(a) shall be entitled to receive the same compensation and benefits (including equity-based compensation) that are provided to the other non-executive members of the Board of Directors. (f) For so long as [WCAS VIII]9 [CSFB]10 retains its right to nominate a director pursuant to Section 4.01(a), the Issuer shall maintain policies of directors and officers liability insurance, with financially sound and reputable insurers, having terms that are customary for companies similarly situated and providing coverage in amounts at least equal to the amounts in effect on the date hereof. (g) Until such time as it shall cease to own [40%]11 [20%]12 of its Initial Holdings, [Microsoft]11, [WCAS VIII]9 [CSFB]10 [but only to the extent that it no longer has the right to designate a director nominee pursuant to Section 4.01(a))]12 shall be entitled to designate one individual as a non-voting observer to the Board of Directors. Such observer shall have the right to (i) receive notice of each meeting of the Board of Directors in the same manner as such notice is provided to the Issuer's directors, (ii) attend and participate in discussions at each such meeting and (iii) receive copies of all materials distributed to the directors in connection with such meetings at the same time as such materials are distributed to the directors. In the event that an observer, for whatever reason, fails to attend a meeting of the Board of Directors, the Chairman of the Board of Directors or his designee shall, upon the observer's request, brief the observer on the matters discussed at such meeting, other than any such matters with respect to which such observer would have been excluded from such meeting pursuant to Section 4.01(h). Any observer will be required to sign appropriate confidentiality and similar agreements as the Issuer shall reasonably request. Each observer shall be entitled to reimbursement from the Issuer for all reasonable and customary expenses associated with attending meetings of the Board of Directors, but shall not be entitled to any other form of compensation or benefits. - -------- 9 WCAS Agreement only. 10 CSFB Agreement only. 11 Microsoft Agreement only. 12 WCAS and CSFB Agreements only. 21 (h) In respect of any director nominated pursuant to Section 4.01(a) and observer designated pursuant to Section 4.01(g), materials relating to any matter may be withheld from such director or observer, and such director or observer may be excluded from a meeting of the Board of Directors during consideration of any matter, if, in the good faith determination of a majority of the members of the Board of Directors excluding any conflicted director, such matter is competitively sensitive. SECTION 4.02. Financial Information. [CSFB]13 [WCAS]14 shall be entitled to (i) receive all information made available to shareholders of the Issuer or members of the Board of Directors, in each case, at the same time as such materials are distributed to the shareholders or directors, as the case may be, (ii) meet on a quarterly basis with members of senior management, (iii) receive copies of management "flash" reports (to be mutually agreed upon), in each such case, for so long as the [CSFB Entities and their Permitted Transferees]12 [WCAS Entities and their Permitted Transferees]13 beneficially own Shares representing at least 20% of their Initial Holdings and (iv) disclose on a confidential basis all such information referred to in clauses (i) and (iii) above to the other [CSFB Entities]12 [WCAS Entities].13 ARTICLE 5 STANDSTILL SECTION 5.01. Definitions. The following terms, as used in this Article 5, have the following meanings: "Acquisition Proposal" means any offer or proposal for, or any indication of interest in, a merger or other business combination involving the Issuer or any Subsidiary or the acquisition of any equity interest in, or a substantial portion of the assets of, the Issuer or any Subsidiary, including engaging in any tender offer or exchange offer for Voting Securities. "Daily Price" means, as of any date, (i) if the Common Shares then are listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the closing price on such date as reported on the NYSE Composite Transactions Tape; (ii) if the Common Shares then are not listed and traded on the NYSE, the closing price on such date as reported by the principal national securities exchange on which - -------- 13 CSFB Agreement only. 14 WCAS Agreement only. 22 the shares are listed and traded; (iii) if the Common Shares then are not listed and traded on any such securities exchange, the last reported sale price on such date on the National Market of the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"); or (iv) if the Common Shares then are not traded on the NASDAQ National Market, the average of the highest reported bid and lowest reported asked price on such date as reported by NASDAQ. "Market Price Per Common Share" means, as of any date, the average (weighted by daily trading volume) of the Daily Prices per Common Share for the 20 consecutive trading days immediately prior to such date. "Voting Securities" means all securities of the Issuer entitled, in the ordinary course, to vote in the election of directors of the Issuer. SECTION 5.02. Acquisition of Voting Securities. (a) Each Holder agrees that, until the earlier of (i) the tenth anniversary of the date hereof or (ii) the date on which such Holder owns less than 20% of its Initial Holdings, such Holder will not, directly or indirectly, purchase or otherwise acquire, or agree or offer to purchase or otherwise acquire, beneficial ownership of any Voting Securities without the Issuer's prior written consent, except (x) for Voting Securities owned by such Holder on the date hereof, (y) upon conversion or exchange of securities outstanding on the date hereof or (z) for Voting Securities acquired as a dividend or in connection with any transaction described in Section 6.10. [(b) Notwithstanding anything to the contrary herein, the parties hereto agree that the provisions of this Section 5.02 shall apply only to the [CSFB] [WCAS] Entities and not to any of their Partners, other Affiliates or portfolio companies that are not otherwise a holder of Shares and a Holder under this Agreement.]15 SECTION 5.03. Certain Actions. [(a)] Each Holder agrees that, until the earlier of (x) the tenth anniversary of the date hereof, (y) the date on which such Holder owns less than 20% of its Initial Holdings and (z) from and after the third anniversary of the date hereof, such time as the Market Price Per Common Share has been less than $15.00 for any continuous 90-day period, without the Issuer's prior written consent, such Holder will not, directly or indirectly: (i) make, or take any action to solicit, initiate or encourage, either alone or in conjunction with another Person, an Acquisition Proposal; - -------- 15 WCAS and CSFB Agreements only. 23 (ii) "solicit", or become a "participant" in any "solicitation" of, any "proxy" (as such terms are defined in Regulation 14A under the Exchange Act) from any holder of Voting Securities in connection with any vote on any matter, or agree or announce its intention to vote with any Person undertaking a "solicitation" in opposition to any matter which has been approved by the Issuer's Board of Directors; (iii) initiate, support or in any way participate in a "group" with respect to any Voting Securities (other than a group comprised solely of such Holder and its Affiliates); (iv) grant any proxies with respect to any Voting Securities to any Person (other than as recommended by the Board of Directors) or deposit any Voting Securities in a voting trust or enter into any other arrangement or agreement with respect to the voting thereof (other than a proxy granted to, or a voting trust or arrangement with, one or more of its Affiliates); or (v) except as otherwise provided in Article 4, take any action to seek to control or influence the management, policies or affairs, of the Issuer; (vi) initiate, support or otherwise solicit stockholders for the approval of one or more stockholder proposals with respect to the Issuer as described in Rule 14a-8 under the Exchange Act, or induce or attempt to induce any other Person to initiate any such stockholder proposal; or (vii) propose any amendment to or waiver of this Article 5 that is or may be required to be publicly disclosed or publicly announce such Holder's intentions, views or opinions in favor of any of the foregoing. [(b) Notwithstanding anything to the contrary herein, the parties hereto agree that the provisions of this Section 5.03 shall apply only to the [CSFB]16 [WCAS]17 Entities and not to any of their financial partners, portfolio companies or other Affiliates that are not otherwise a holder of Shares and a Holder under this Agreement.]18 - -------- 16 CSFB Agreement only. 17 WCAS Agreement only. 18 CSFB Agreement and WCAS Agreement only. 24 ARTICLE 6 MISCELLANEOUS SECTION 6.01. Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof. SECTION 6.02. No Inconsistent Agreements. The Issuer will not hereafter enter into or amend any agreement with respect to its securities which prevents the Issuer from discharging its obligations under this Agreement or grant rights superior to the rights granted to the Holders in this Agreement. SECTION 6.03. Entire Agreement. The Transaction Agreements constitute the entire agreement and understanding of the parties hereto and thereto in respect of the subject matter contained herein and therein, and there are no restrictions, promises, representations, warranties, covenants, or undertakings with respect to the subject matter hereof or thereof, other than those expressly set forth or referred to herein or therein. The Transaction Agreements supersede all prior agreements and understandings between the parties hereto and thereto with respect to the subject matter hereof and thereof. SECTION 6.04. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopier) and shall be deemed to have been duly given or made if sent by telecopy, delivered personally or sent by registered or certified mail (postage prepaid, return receipt requested) to such party at its address or telecopier number set forth on the signature pages hereof, or such other address or telecopier number as such party may hereinafter specify for the purpose to the party giving such notice. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. SECTION 6.05. Applicable Law; Submission to Jurisdiction. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the conflicts of law rules of such state. Each of the parties hereto hereby consents to the exclusive jurisdiction of the United States District Court for the District of Delaware and the Chancery Court of the State of Delaware (and of the appropriate appellate courts therefrom) over any suit, action or proceeding arising out of or relating to this Agreement. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue in any such court or that any such proceeding which is brought in accordance with this Section has been brought in an inconvenient forum. Subject to applicable law, process in any such proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing and subject to applicable law, each party agrees that service of process on such party as provided in Section 6.04 shall be deemed effective service of process on such party. Nothing herein shall 25 affect the right of any party to serve legal process in any other manner permitted by law or at equity or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction. WITH RESPECT TO A PROCEEDING IN ANY SUCH COURT, EACH OF THE PARTIES IRREVOCABLY WAIVES AND RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY JURY, AND AGREES THAT IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING. SECTION 6.06. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. SECTION 6.07. Successors, Assigns, Transferees. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. Notwithstanding the foregoing, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Issuer or any Holder, except (i) as specifically provided pursuant to the terms hereof and (ii) in connection with a Transfer of securities of the Issuer described in Section 2.02 and otherwise permitted pursuant to the terms hereof. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 6.08. Amendments; Waivers. (a) No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. (b) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. 26 SECTION 6.09. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 6.10. Recapitalization, etc. In the event that any capital stock or other securities are issued in respect of, in exchange for, or in substitution of, any Shares by reason of any reorganization, recapitalization, reclassification, merger, consolidation, spin-off, partial or complete liquidation, stock dividend, split-up, sale of assets, distribution to stockholders or combination of the Shares or any other change in capital structure of the Issuer, appropriate adjustments shall be made with respect to the relevant provisions of this Agreement so as to fairly and equitably preserve, as far as practicable, the original rights and obligations of the parties hereto under this Agreement. SECTION 6.11. Remedies. The parties hereto acknowledge and agree that in the event of any breach of this Agreement, the parties would be irreparably harmed and could not be made whole by monetary damages. Each party hereto accordingly agrees (i) not to assert by way of defense or otherwise that a remedy at law would be adequate, and (ii) that the parties agree, in addition to any other remedy to which they may be entitled, that the remedy of specific performance of this Agreement is appropriate in any action in court. SECTION 6.12. Fees and Expenses. Unless otherwise provided herein or in the other Transaction Agreements, all costs and expenses incurred in connection with the transactions contemplated by the Transaction Agreements shall be paid by the party incurring such costs and expenses. SECTION 6.13. Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, the Issuer and each of the Holders will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to give effect to the terms and conditions of the Transaction Agreements. 27 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. WINSTAR COMMUNICATIONS, INC. By: _________________________________ Name: Title: Address for notices: [TO COME] Facsimile: Attention: [HOLDER] By: _________________________________ Name: Title: Address for notices: [TO COME] Facsimile: Attention: 28 [HOLDER] By: _______________________________ Name: Title: Address for notices: [TO COME] Facsimile: Attention: [HOLDER] By: _______________________________ Name: Title: Address for notices: [TO COME] Facsimile: Attention: 29 EXHIBIT A FORM OF AGREEMENT TO BE BOUND [Date] To the Parties to the Shareholders Agreement dated as of [ ], 2000 Ladies and Gentlemen: Reference is made to the Shareholders Agreement dated as of [ ], 2000 (the "Shareholders Agreement") among Winstar Communications, Inc., a Delaware corporation, [ ], [ ], and the other Persons listed on the signature pages thereof and each other Person who has or shall become a party to the Shareholders Agreement as provided therein. Capitalized terms used herein and not defined have the meanings ascribed to them in the Shareholders Agreement to the same extent and in the same manner as the assignor. In consideration of the covenants and agreements contained in the Shareholders Agreement, the undersigned hereby confirms and agrees that it shall be bound as a "Holder" by all of the provisions of the Shareholders Agreement. This letter shall be construed and enforced in accordance with the internal laws of the State of Delaware. Very truly yours, ___________________________ A-1 EX-99.1 5 PRESS RELEASE Winstar Enters Into $900 Million Investment Agreement With Microsoft and Leading Investment Firms NEW YORK--(BUSINESS WIRE)--Dec. 15, 1999-- Microsoft and Winstar Announce Agreement to Deliver Broadband Applications WINSTAR COMMUNICATIONS, INC. (NASDAQ: WCII) today announced that it has entered into an agreement under which Microsoft Corporation and several leading investment firms including Credit Suisse First Boston Equity Partners, L.P. and associated investment vehicles; Welsh, Carson, Anderson and Stowe, VIII, L.P; and Cascade Investments - will invest $900 million in Winstar to fund the company's business plan and expand its network, products and services. The investment is in the form of convertible preferred stock which converts into common stock at $67.50 per share, a premium of 20 and 25 percent over Winstar's average share price for the last 20 and 30 trading days, respectively. Winstar and Microsoft also announced a commercial relationship to deliver and promote broadband applications. Microsoft and Winstar will market new and existing general business, e-commerce and multimedia applications services which will help small and medium-sized businesses adopt an Internet-centered business style. The companies will pursue a joint sales and marketing program, which will include building-specific marketing events, a national seminar program, generating sales referrals and participation at trade shows. Microsoft will license its leading, branded applications to Winstar on an Application Service Provider (ASP) basis. Winstar, which is already a member of the Microsoft Office Online beta pilot, will provide Office 2000 and other application services to Winstar customers using its "national-local," end-to-end, high-speed broadband network and its locally distributed Internet data centers. This will allow Winstar customers to access economically the remotely hosted application software with the same speeds and performance that they have come to expect from software installed at their desktops. Microsoft and Winstar will pursue a multifaceted technology relationship. Winstar will participate in the Microsoft Partner Solution Center (MPSC) on the Microsoft campus in Redmond, WA. The focus of this participation will be on developing new bandwidth-intensive services such as on-demand IP videoconferencing, based on Microsoft software. The companies also plan to collaborate with respect to Microsoft's BizTalk e-commerce and media streaming initiatives. These applications will be delivered over Winstar's high-speed broadband network. "This partnership and the related capital investment accomplishes several goals for Winstar," said William J. Rouhana, Jr., Winstar's chairman and chief executive officer. "It validates our business model and strategy; significantly strengthens our balance sheet; adds valuable strategic agreements that give us a special advantage in developing new products and services that make the broadband network more useful to our customers; and brings us new synergies, expertise and insight. This is an exciting time in Winstar's history, and we look forward to working with these world-class partners as we grow our business worldwide." "Microsoft and Winstar share a mutual vision of how to deliver applications over the broadband network, especially to small and medium-sized companies," said Thomas Koll, vice president, Network Solutions Group, Microsoft. "Winstar's broadband network and expertise make it a great partner for Microsoft, as we expand the number of ways that applications are delivered and used by knowledge workers. We look forward to a long and successful relationship with Winstar." "Winstar has redefined the broadband connection through superior technology, a focused business plan and industry leadership," said Lawrence B. Sorrel, a General Partner of Welsh, Carson, Anderson and Stowe, who will join Winstar's Board of Directors. "As the largest private equity investor in the information services and telecommunications industries, we are very excited about this partnership, and we look forward to helping Winstar build its business by exploring mutually beneficial opportunities between Winstar and our portfolio companies." "Credit Suisse First Boston has had a longstanding relationship with Winstar," said David A. DeNunzio, Head of Credit Suisse First Boston's Private Equity Division. "Winstar has clearly amassed a unique set of assets and a sizeable lead in bringing broadband services to businesses. We are committed to working with Winstar to further its broadband vision." Hartley R. Rogers, Managing Director and Co-Head of Credit Suisse First Boston Equity Partners, L.P., will join Winstar's Board of Directors. The cumulative participating senior convertible preferred stock has a 5.75 percent quarterly accreting liquidation preference or, at Winstar's option, quarterly cash dividend. Winstar can require the preferred stock to be converted into common stock after three years, based on certain conditions. Winstar will be required to redeem any remaining shares of the preferred stock then outstanding after 10 years by paying either common stock or cash at its election. The combined investment represents ownership of approximately 13 percent of Winstar's fully diluted common shares. The closing of the transaction is subject to customary conditions, including approval under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended. Winstar anticipates closing in January 2000. About Credit Suisse First Boston Equity Partners, L.P. Credit Suisse First Boston Equity Partners, L.P., is a part of Credit Suisse First Boston Private Equity Division, the global private equity arm of the Credit Suisse Group, a global financial services company providing a comprehensive range of banking and insurance products. Together with its international private equity funds, the Credit Suisse First Boston Private Equity Division now has committed capital of approximately $3.6 billion, with dedicated professionals working in five offices around the world. About Welsh, Carson, Anderson and Stowe WCAS, founded in 1979, has $8 billion of assets under management. The firm focuses exclusively on the information services, communications and healthcare industries, and invests currently out of a $3.2 billion equity fund and a $1.4 billion subordinated debt fund. In addition to this investment in Winstar, WCAS has sponsored a number of recent transactions with leading communications companies, including Amdocs Ltd., BTI Telecom, Bridge Information Systems, Inc., Centennial Cellular Corp., SpectraSite Holdings, dba Communications and SAVVIS Communications. In aggregate, WCAS has committed approximately $1.8 billion of capital to recent communications investments, making it one of the largest private investors in the communications industry in the country. About Winstar Winstar Communications, Inc., www.Winstar.com, helps companies around the globe engage in Frictionless Business(SM) through the use of seamless communications and technology. Winstar provides its customers with a comprehensive set of high-quality, digital-age broadband communications services, including high-speed Internet access and data transport, Web-based information and local and long distance services. Winstar offers its services in more than 70 markets throughout the U.S. and in Europe, Asia and South America. It is the largest holder of broadband fixed wireless spectrum, with licenses in the top 60 U.S. markets and in ten international markets. Winstar's broadband fixed wireless capabilities complement and extend the reach of its extensive fiber network. The company's long-haul fiber network, which supports IP (Internet Protocol), ATM (Asynchronous Transfer Mode) and frame relay, will extend more than 16,000 route miles and connect the top 60 U.S. markets. Winstar's intracity fiber network will consist of nearly 6,000 route miles in over 60 major domestic and international markets. Winstar's Tier 1 Internet backbone and enhanced Web service offerings, including Web hosting and design, make Winstar one of the largest Internet companies in the U.S. The company's innovative applications enable businesses to take advantage of the new Internet economy. Recently, the company launched Office.com, A Service From Winstar(SM), www.office.com, a premier Internet destination site designed to bring the best of the business Web to the desktop. Except for any historical information contained herein, the matters discussed in this press release contain forward-looking statements that involve risks and uncertainties, which are described in the company's SEC reports, including the 10-K for the year ended December 31, 1998, and the 10-Q for the quarter ended September 30, 1999. Winstar is a registered trademark, and Wireless Fiber and Frictionless Business are service marks of Winstar Communications, Inc. Office.com is a service mark of Winstar Communications, Inc., and is used under license. CONTACT: WINSTAR Financial Community: Daniel Briggs Director, Capital Market Relations 212/792-9032 dbriggs@winstar.com or Press: Marianne Steiner, VP, Corporate Communications 212/792-9021 msteiner@winstar.com -----END PRIVACY-ENHANCED MESSAGE-----