3,360,000 Shares
WINSTAR COMMUNICATIONS, INC.
Common Stock ($0.01 par value)
U.S. UNDERWRITING AGREEMENT
January [o], 1999
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
As Representatives of the Several Underwriters
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
1. Introductory. WinStar Communications, Inc., a Delaware corporation
(the "Issuer" or "WinStar"), and WinStar Multichannel Corp., a Delaware
corporation and a wholly-owned subsidiary of the Issuer ("WMC", and, together
with the Issuer, the "Sellers"), have agreed, subject to the terms and
conditions stated herein, to issue and sell (the "U.S. Offering") to the
several underwriters named in Schedule A hereto (the "Underwriters") an
aggregate of 3,360,000 shares (the "Firm Securities") of the Issuer's Common
Stock, $0.01 par value per share ("Common Stock"). The Issuer also proposes to
grant to the Underwriters an option, exercisable by ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
("Salomon"), to purchase an aggregate of not more than 630,000 additional
shares (the "Optional Securities"). The Firm Securities and the Optional
Securities are herein collectively called the "U.S. Offered Securities". The
United States Securities Act of 1933 is herein referred to as the "Securities
Act".
It is understood that the Issuer is concurrently entering into an
International Underwriting Agreement, dated the date hereof (the "International
Underwriting Agreement"), with Salomon Brothers International Limited ("Salomon
International") and the other international underwriters named therein
(together with Salomon International, the "International Underwriters"),
relating to the concurrent offering and sale of 840,000
shares (the "International Securities") of Common Stock outside the United
States and Canada (the "International Offering"). The U.S. Offered Securities
and the International Securities are collectively referred to as the "Offered
Securities". To provide for the coordination of their activities, the
Underwriters and the International Underwriters have entered into an Agreement
Between U.S. Underwriters and International Underwriters which permit them,
among other things, to sell the Offered Securities to each other for purposes
of resale.
The Sellers hereby agree with the several Underwriters as follows:
2. Representations and Warranties of the Sellers. (a) The Sellers
represent and warrant to, and agree with, the several Underwriters that:
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(i) A registration statement on Form S-3 (No. 333-70263)
relating to the Offered Securities, including a form of prospectus
relating to the U.S. Offered Securities and a form of prospectus
relating to the International Securities, has been filed with the
Securities and Exchange Commission (the "Commission") and either (A)
has been declared effective under the Securities Act and is not
proposed to be amended or (B) is proposed to be amended by amendment
or post-effective amendment. If such registration statement ("Initial
Registration Statement") has been declared effective, either (A) an
additional registration statement ("Additional Registration
Statement") relating to the Offered Securities may have been filed
with the Commission pursuant to Rule 462(b) ("Rule 462(b)") under the
Securities Act and, if so filed, has become effective upon filing
pursuant to such Rule and the Offered Securities all have been duly
registered under the Securities Act pursuant to the Initial
Registration Statement and, if applicable, the Additional Registration
Statement or (B) such an Additional Registration Statement is proposed
to be filed with the Commission pursuant to Rule 462(b) and will
become effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly registered under
the Securities Act pursuant to the Initial Registration Statement and
such Additional Registration Statement. If the Issuer does not propose
to amend the Initial Registration Statement or if an Additional
Registration Statement has been filed and the Issuer does not propose
to amend it, and if any post-effective amendment to either such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent amendment
(if any) to each such registration statement has been declared
effective by the Commission or has become effective upon filing
pursuant to Rule 462(c) ("Rule 462(c)") under the Securities Act or,
in the case of the Additional Registration Statement, Rule 462(b). For
purposes of this Agreement, "Effective Time" with respect to the
Initial Registration Statement or, if filed prior to the execution and
delivery of this Agreement, the Additional Registration Statement
means (A) if the Issuer has advised Salomon and Credit Suisse First
Boston Corporation (collectively, the "Representatives") that it does
not propose to amend such registration statement, the date and time as
of which such registration statement, or the most recent
post-effective amendment thereto (if any) filed prior to the execution
and delivery of this Agreement, was declared effective by the
Commission or has become effective upon filing pursuant to Rule
462(c), or (B) if the Issuer has advised the Representatives that it
proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such
registration statement, as amended by such amendment or post-effective
amendment, as the case may be, is declared effective by the
Commission. If an Additional Registration Statement has not been filed
prior to the execution and delivery of this Agreement but the Issuer
has advised the Representatives that it proposes to file one,
"Effective Time" with respect to such Additional Registration
Statement means the date and time as of which such registration
statement is filed
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and becomes effective pursuant to Rule 462(b). "Effective Date" with
respect to the Initial Registration Statement or the Additional
Registration Statement (if any) means the date of the Effective Time
thereof. The Initial Registration Statement, as amended at its
Effective Time, including (A) all information contained in the
Additional Registration Statement (if any) and deemed to be a part of
the Initial Registration Statement as of the Effective Time of the
Additional Registration Statement pursuant to the General Instructions
of the Form on which it is filed, (B) all information (if any) deemed
to be a part of the Initial Registration Statement as of its Effective
Time pursuant to Rule 430A(b) ("Rule 430A(b)") under the Securities
Act and (C) all other material incorporated by reference therein, is
hereinafter referred to as the "Initial Registration Statement". The
Additional Registration Statement, as amended at its Effective Time,
including (A) the contents of the Initial Registration Statement
incorporated by reference therein, (B) all information (if any) deemed
to be a part of the Additional Registration Statement as of its
Effective Time pursuant to Rule 430A(b) and (C) all other material
incorporated by reference therein, is hereinafter referred to as the
"Additional Registration Statement". The Initial Registration
Statement and the Additional Registration Statement are hereinafter
referred to collectively as the "Registration Statements" and
individually as a "Registration Statement". The form of prospectus
relating to the U.S. Offered Securities and the form of Prospectus
relating to the International Securities, each of which shall be
deemed to include all material incorporated by reference therein and
as first filed with the Commission pursuant to and in accordance with
Rule 424(b) ("Rule 424(b)") under the Securities Act or (if no such
filing is required) as included in a Registration Statement, are
hereinafter referred to as the "U.S. Prospectus " and the
"International Prospectus ", respectively, and collectively as the
"Prospectuses". No document has been or will be prepared or
distributed in reliance on Rule 434 under the Securities Act.
(ii) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement:
(A) on the Effective Date of the Initial Registration Statement, the
Initial Registration Statement conformed in all respects to the
requirements of the Securities Act and the rules and regulations of
the Commission ("Rules and Regulations") and did not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (B) on the Effective Date of the Additional
Registration Statement (if any), each Registration Statement
conformed, or will conform, in all respects to the requirements of the
Securities Act and the Rules and Regulations and did not include, or
will not include, any untrue statement of a material fact and did not
omit, or will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading and (C) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
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Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at
the time of filing of each of the Prospectuses pursuant to Rule 424(b)
or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectuses are
included, each Registration Statement and each of the Prospectuses
will conform in all respects to the requirements of the Securities Act
and the Rules and Regulations, and none of such documents includes, or
will include, any untrue statement of a material fact or omits, or
will omit, to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. If the
Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement: on the Effective Date of
the Initial Registration Statement, the Initial Registration Statement
and each of the Prospectuses will conform in all respects to the
requirements of the Securities Act and the Rules and Regulations, none
of such documents will include any untrue statement of a material fact
or will omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and no
Additional Registration Statement has been or will be filed. The two
preceding sentences do not apply to statements in or omissions from a
Registration Statement or either of the Prospectuses based upon
written information furnished to the Issuer by any Underwriter through
the Representatives or by any International Underwriter through
Salomon International specifically for use therein, it being
understood and agreed that the only such information is that described
as such in Section 7(c) hereof. The Issuer's Annual Report on Form
10-K most recently filed with the Commission and all subsequent
reports (collectively, the "Exchange Act Reports") which have been
filed by WinStar with the Commission or sent to stockholders pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act"), when they
were filed with the Commission, conformed in all material respects to
the requirements of the Exchange Act and the Rules and Regulations of
the Commission thereunder.
(iii) The Issuer has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in each of the Prospectuses; and the
Issuer is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the condition (financial or other), business, properties or
results of operations of the Issuer and its subsidiaries, taken as a
whole (a "Material Adverse Effect"). The Issuer is qualified to do
business as a foreign corporation in the State of New York.
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(iv) Each subsidiary of the Issuer (including WMC) has been
duly incorporated and is an existing corporation in good standing
under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own its properties and conduct its
business as described in each of the Prospectuses; and each subsidiary
of the Issuer (including WMC) is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its
business requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
Material Adverse Effect; all of the issued and outstanding capital
stock of each subsidiary of the Issuer (including WMC) has been duly
authorized and validly issued and is fully paid and nonassessable; and
the capital stock of each subsidiary owned by the Issuer (including
WMC), directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
(v) The Offered Securities and all other outstanding shares
of capital stock of the Issuer have been duly authorized; all
outstanding shares of capital stock of the Issuer are, and, when the
Offered Securities have been delivered and paid for in accordance with
this Agreement and the International Underwriting Agreement on each
Closing Date (as defined below), such Offered Securities will have
been validly issued, fully paid and nonassessable and will conform in
all material respects to the description thereof contained in the
Prospectuses; and the stockholders of the Issuer have no preemptive
rights with respect to the Offered Securities.
(vi) Except as contemplated by this Agreement or as disclosed
in the Prospectuses, there are no contracts, agreements or
understandings between either of the Sellers and any person that would
give rise to a valid claim against either of the Sellers or any
Underwriter for a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated by this
Agreement.
(vii) Except as disclosed in the Prospectuses or in the
schedule previously provided to you, there are no contracts,
agreements or understandings between the Issuer and any person
granting such person the right to require the Issuer to file a
registration statement under the Securities Act with respect to any
securities of the Issuer owned or to be owned by such person or to
require the Issuer to include such securities in the securities
registered pursuant to a Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Issuer under the Securities Act.
(viii) The Offered Securities have been approved for listing
on The Nasdaq National Market.
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(ix) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this
Agreement or the International Underwriting Agreement in connection
with the issuance and sale of the Offered Securities by the Sellers,
other than as may be required under the Securities Act and the Rules
and Regulations of the Commission thereunder and such as may be
required by securities or blue sky laws of any state of the United
States or of any foreign jurisdiction in connection with the offer and
sale of the Offered Securities.
(x) The execution, delivery and performance of this Agreement
and the International Underwriting Agreement, and the issuance and
sale of the Offered Securities will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, (A) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Sellers or any subsidiary of the Issuer or any
of their properties, (B) any agreement or instrument to which either
of the Sellers or any such subsidiary is a party or by which either of
the Sellers or any such subsidiary is bound or to which any of the
properties of the Sellers or any such subsidiary is subject, or (C)
the charter or by-laws of either of the Sellers or any such
subsidiary, except, in the case of clause (A) or (B), such breaches,
violations or defaults that individually or in the aggregate would not
have a Material Adverse Effect; and the Issuer has full corporate
power and authority to authorize, issue and sell the Offered
Securities to be sold by the Sellers as contemplated by this Agreement
and the International Underwriting Agreement.
(xi) This Agreement has been duly authorized, executed and
delivered by each of the Sellers and the International Underwriting
Agreement has been duly authorized, executed and delivered by the
Issuer.
(xii) Except as disclosed in the Prospectuses, the Issuer and
its subsidiaries have good and marketable title to all real properties
and all other properties and assets owned by them, in each case free
from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made
thereof by them; and, except as disclosed in the Prospectuses, the
Issuer and its subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would
materially interfere with the use made or to be made thereof by them.
(xiii) The Issuer and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now
operated by them and have not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authority or permit that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
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(xiv) No labor dispute with the employees of the Issuer or
any of its subsidiaries exists or, to the knowledge of the Issuer, is
imminent that could reasonably be expected to have a Material Adverse
Effect.
(xv) The Issuer and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and
other rights to inventions, know-how, patents, copyrights,
confidential information and other intellectual property
(collectively, "intellectual property rights") necessary to conduct
the business as now operated by them, or used in the conduct of the
business as now operated by them, except to the extent that the
failure to own or possess or the inability to acquire such
intellectual property rights would not individually or in the
aggregate have a Material Adverse Effect; and the Issuer has not
received any notice of infringement of or conflict with asserted
rights of others with respect to any intellectual property rights
that, if determined adversely to the Issuer or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(xvi) Except as disclosed in the Prospectuses, neither the
Issuer nor any of its subsidiaries is in violation of any statute,
rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "environmental laws"), owns or
operates any real property contaminated with any substance that is
subject to any environmental laws, is liable for any off-site disposal
or contamination pursuant to any environmental laws, or is subject to
any claim relating to any environmental laws, which violation,
contamination, liability or claim would individually or in the
aggregate have a Material Adverse Effect; and the Issuer is not aware
of any pending investigation which might lead to such a claim.
(xvii) Except as disclosed in the Prospectuses, there are no
pending actions, suits or proceedings against or affecting the Issuer,
any of its subsidiaries or any of their respective properties that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect, or to materially and adversely affect the
ability of the Issuer to perform its obligations under this Agreement
or the International Underwriting Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and, to
the Issuer's knowledge, no such actions, suits or proceedings are
threatened or contemplated.
(xviii) The financial statements included in each
Registration Statement and the Prospectuses present fairly the
financial position of the Issuer and its consolidated subsidiaries as
of the dates shown and their results of operations and
9
cash flows for the periods shown, such financial statements have been
prepared in conformity with the generally accepted accounting
principles in the United States applied on a consistent basis, the
schedules included in each Registration Statement present fairly the
information required to be stated therein, the assumptions used in
preparing the pro forma financial statements included in each
Registration Statement and the Prospectuses provide a reasonable basis
for presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma
adjustments give appropriate effect to those assumptions, and the pro
forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
(xix) Except as disclosed in the Prospectuses, since the date
of the latest audited financial statements included in the
Prospectuses, there has been no material adverse change, nor any
development or event involving a prospective material adverse change,
in the condition (financial or other), business, properties or results
of operations of the Issuer and its subsidiaries taken as a whole (it
being understood that a change in the price of the Common Stock or the
continuation of operating losses consistent with the Issuer's
historical results shall be deemed not to be, in and of themselves,
such a material adverse change), and, except as disclosed in or
contemplated by the Prospectuses, there has been no dividend or
distribution of any kind declared, paid or made by the Issuer on any
class of its capital stock.
(xx) Neither of the Sellers is an open-end investment
company, unit investment trust or face-amount certificate company that
is or is required to be registered under Section 8 of the United
States Investment Company Act of 1940 (the "Investment Company Act");
neither of the Sellers is a closed-end investment company required to
be registered, but not registered, thereunder; and neither of the
Sellers is and, after giving effect to the offering and sale of the
Offered Securities and the application of the proceeds thereof as
described in the Prospectuses, nor will be an "investment company" as
defined in the Investment Company Act.
(xxi) WMC has, and on each Closing Date hereinafter mentioned
will have, valid unencumbered title to the Offered Securities to be
sold by WMC on such date and the legal right and power, and all
authorization and approval required by law, to enter into this
Agreement and to sell, assign, transfer and deliver the Offered
Securities to be sold by WMC.
(xxii) Upon delivery of the Offered Securities to be sold by
WMC pursuant to this Agreement and payment therefor as contemplated by
this Agreement, marketable title to the Offered Securities will pass
to the Underwriters
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free and clear of any security interests, claims, liens, equities and
other encumbrances, other than security interests, liens, equities or
other encumbrances arising solely from the actions of the
Underwriters.
(xxiii) There are no material agreements or arrangements
relating to the Issuer or its subsidiaries to which WMC, or to the
best of WMC's knowledge, to which any direct or indirect stockholder
of WMC is a party, which are required to be described in the
Registration Statements or the Prospectus or to be filed as exhibits
thereto that are not so described or filed.
(xxiv) The Issuer is subject to Section 13 or 15(d) of the
Exchange Act.
(xxv) The Issuer and its subsidiaries are in compliance in
all material respects with the Communications Act of 1934 (as amended
by the Telecommunications Act of 1996, the "Communications Act") and
with all applicable rules, regulations and policies of the Federal
Communications Commission (the "FCC").
(xxvi) The Issuer has provided to the Underwriters a complete
and accurate list of all licenses granted to the Issuer and its
subsidiaries [(other than experimental licenses in the 38 GHz portions
of the radio spectrum and licenses granted to the Issuer or its
subsidiaries or acquired from Local Area Telecommunications, Inc. that
are not in the 38 GHz portion of the radio spectrum)] by the FCC (the
"Licenses"). All of the Licenses are currently valid and in full force
and effect. Neither the Issuer nor any of its subsidiaries has any
knowledge of any investigation, notice of apparent liability,
violation, forfeiture or other order or complaint issued by or before
any court or regulatory body, including the FCC, or of any other
proceedings (other than proceedings relating to the wireless
communications industries generally) which could in any manner
materially threaten or adversely affect the validity or continued
effectiveness of any of the Licenses, except that (A) on March 9,
1998, several parties filed petitions for reconsideration (the
"Petitions") of the 38 GHz Order (as defined in the Prospectuses)
alleging, among other things, that the February 10, 1998 License
grants to the Issuer of additional channels in each of Atlanta,
Buffalo, Cincinnati, Dallas, Houston, Miami, New York, St. Louis,
Seattle, Spokane and Tampa were in violation of the rules of the FCC
and (B) on December 31, 1998, two parties filed petitions for
clarification and reconsideration of two December 1, 1998 License
correction grants to the Issuer in Atlanta and Dallas alleging that
such grants were in violation of the rules of the FCC.
(xxvii) No event has occurred which (A) results in, or after
notice or lapse of time or both would result in, revocation,
suspension, adverse modification, nonrenewal, impairment, restriction
or termination of, or order of forfeiture with
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respect to, any License or (B) materially and adversely affects or
could reasonably be expected in the future to materially adversely
affect any of the rights of the Issuer or any of its subsidiaries
thereunder.
(xxviii) The Issuer and its subsidiaries have duly filed in a
timely manner all material filings, reports, applications, documents,
instruments and information required to be filed by them under the
Communications Act, and all such filings are true, correct and
complete in all material respects.
(xxix) Neither the Issuer nor any of its subsidiaries has any
reason to believe that any of the Licenses will not be renewed in the
ordinary course.
3. Purchase, Sale and Delivery of Offered Securities; Payment of
Underwriting Discount. On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, each of the Sellers agrees, severally and not jointly, to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase, at a purchase price of U.S. $[ o ] per share: (a) from the Issuer,
that number of Firm Securities (rounded up or down, as determined by Salomon in
its discretion, in order to avoid fractions) obtained by multiplying the number
of Firm Securities set forth opposite the name of the Issuer in Schedule B
hereto by a fraction the numerator of which is the number of Firm Securities
set forth opposite the name of such Underwriter in Schedule A hereto and the
denominator of which is the total number of Firm Securities; and (b) from WMC,
that number of Firm Securities (rounded up or down, as determined by Salomon in
its discretion, in order to avoid fractions) obtained by multiplying the number
of Firm Securities set forth opposite the name of WMC in Schedule B hereto by a
fraction the numerator of which is the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule A hereto and the denominator
of which is the total number of Firm Securities.
Each of the Sellers will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters, against payment of the
purchase price in Federal (same day) funds by wire transfer to accounts
previously designated to Salomon by the Sellers at one or more financial
institutions acceptable to Salomon at the office of Cravath, Swaine & ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 9:00 A.M., New York time, on
February [ o ], 1999, or at such other time not later than seven full business
days thereafter as Salomon and the Issuer determine, such time being herein
referred to as the "First Closing Date". For purposes of Rule 15c6-1 under the
Securities Exchange Act, the First Closing Date (if later than the otherwise
applicable settlement date) shall be the settlement date for payment of funds
and delivery of securities for all the Offered Securities sold pursuant to the
offering. The certificates for the Firm Securities so to be delivered will be
in definitive form, in such denominations and registered in such names
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as Salomon requests and will be made available for checking and packaging at
the above office of Cravath, Swaine & ▇▇▇▇▇ at least 24 hours prior to the
First Closing Date.
In addition, upon written notice from Salomon given to the Issuer up
to two times and not more than 30 days subsequent to the date of the
Prospectuses, the Underwriters may purchase all or less than all of the
Optional Securities at the purchase price per Security to be paid for the Firm
Securities. The Issuer agrees to sell to the Underwriters the number of
Optional Securities obtained by multiplying the number of Optional Securities
specified in such notice by a fraction the numerator of which is the number of
shares set forth opposite the name of the Issuer in Schedule B hereto under the
caption "Number of Optional Securities to be Sold" and the denominator of which
is the total number of Optional Securities (subject to adjustment by Salomon to
eliminate fractions). Such Optional Securities shall be purchased from the
Issuer for the account of each Underwriter in the same proportion as the number
of Firm Securities set forth opposite such Underwriter's name bears to the
total number of Firm Securities (subject to adjustment by Salomon to eliminate
fractions) and may be purchased by the Underwriters only for the purpose of
covering over-allotments made in connection with the sale of the Firm
Securities. No Optional Securities shall be sold or delivered unless the Firm
Securities previously have been, or simultaneously are, sold and delivered. The
right to purchase the Optional Securities or any portion thereof may be
exercised up to two times and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by Salomon to the Issuer.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by
Salomon but shall be not later than five full business days after written
notice of election to purchase Optional Securities is given. The Issuer will
deliver the Optional Securities being purchased on each Optional Closing Date
to the Representatives for the accounts of the several Underwriters, against
payment of the purchase price therefor in Federal (same day) funds by wire
transfer to accounts previously designated to Salomon by the Issuer at one or
more financial institutions acceptable to Salomon at the above office of
Cravath, Swaine & ▇▇▇▇▇. The certificates for the Optional Securities being
purchased on each Optional Closing Date will be in definitive form, in such
denominations and registered in such names as Salomon requests upon reasonable
notice prior to such Optional Closing Date and will be made available for
checking and packaging at the above office of Cravath, Swaine & ▇▇▇▇▇ at a
reasonable time in advance of such Optional Closing Date.
4. Representation of Underwriters. The Representatives will act for
the several Underwriters in connection with this financing, and any action
under this Agreement taken by the Representatives jointly or by Salomon will be
binding upon all the Underwriters.
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5. Certain Agreements of the Sellers and the Underwriters. The Sellers
and the several Underwriters agree that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Issuer will file
each of the Prospectuses with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by Salomon,
subparagraph (4)) of Rule 424(b) not later than the earlier of (i) the second
business day following the execution and delivery of this Agreement or (ii) the
fifteenth business day after the Effective Date of the Initial Registration
Statement. The Issuer will advise Salomon promptly of any such filing pursuant
to Rule 424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an Additional
Registration Statement is necessary to register a portion of the Offered
Securities under the Securities Act but the Effective Time thereof has not
occurred as of such execution and delivery, the Issuer will file the Additional
Registration Statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b) on
or prior to 10:00 P.M., New York time, on the date of this Agreement or, if
earlier, on or prior to the time either Prospectus is printed and distributed
to any Underwriter, or will make such filing at such later date as shall have
been consented to by Salomon.
(b) The Issuer will advise Salomon promptly of any proposal to amend
or supplement the Initial Registration Statement, the Additional Registration
Statement (if any) and either the Prospectuses and will not effect such
amendment or supplementation without Salomon's prior consent (which consent
shall not be unreasonably withheld); and the Issuer will also advise Salomon
promptly of the effectiveness of each Registration Statement (if its Effective
Time is subsequent to the execution and delivery of this Agreement) and of any
amendment or supplement to a Registration Statement or either of the
Prospectuses and of the institution by the Commission of any stop order
proceedings in respect of a Registration Statement and will use its best
efforts to prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Securities Act in connection
with sales by any Underwriter, International Underwriter or dealer, any event
occurs as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the Securities Act, the
Issuer will promptly notify Salomon of such event and will promptly prepare and
file with the Commission, at its own expense, an amendment or supplement which
will correct such statement or omission or an amendment which will effect such
compliance. Neither Salomon's
14
consent to, nor the Underwriters' delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), the Issuer will make generally available to its
securityholders an earnings statement covering a period of at least 12 months
beginning after the Effective Date of the Initial Registration Statement (or,
if later, the Effective Date of the Additional Registration Statement) which
will satisfy the provisions of Section 11(a) of the Securities Act. For the
purpose of the preceding sentence, "Availability Date" means the 45th day after
the end of the fourth fiscal quarter following the fiscal quarter that includes
such Effective Date, except that, if such fourth fiscal quarter is the last
quarter of the Issuer's fiscal year, "Availability Date" means the 90th day
after the end of such fourth fiscal quarter.
(e) The Issuer will furnish to the Representatives copies of each
Registration Statement (five of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a prospectus
relating to the Offered Securities is required to be delivered under the
Securities Act in connection with sales by any Underwriter or dealer, the U.S.
Prospectus and all amendments and supplements to such documents, in each case
in such quantities as Salomon reasonably requests. The U.S. Prospectus shall be
so furnished on or prior to 3:00 P.M., New York time, on the business day
following the later of the execution and delivery of this Agreement or the
Effective Time of the Initial Registration Statement. All other documents shall
be so furnished as soon as available. The Issuer will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) The Issuer will use its best efforts to arrange for the
qualification of the Offered Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions in the United
States and Canada as Salomon reasonably designates and will continue such
qualifications in effect so long as required for the resale of the Offered
Securities by the Underwriters; provided, however, that the Issuer will not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any such jurisdiction.
(g) During the period of five years after the Closing Date, the Issuer
will furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a copy
of the Issuer's annual report to stockholders for such year; and the Issuer
will furnish to the Representatives and, upon request, to each of the other
Underwriters (i) as soon as available, a copy of each report and any definitive
proxy statement of the Issuer filed with the Commission under the Exchange Act
or mailed to stockholders and (ii) from time to time, such other publicly
available information concerning the Issuer as Salomon may reasonably request.
15
(h) The Issuer will pay all expenses incident to the performance of
its obligations and the obligations of WMC under this Agreement, for any filing
fees and other expenses (including fees and disbursements of counsel) incurred
in connection with qualification of the Offered Securities for sale under the
laws of such jurisdictions as Salomon designates and the printing of memoranda
relating thereto, for any travel expenses of the Issuer's officers and
employees and any other expenses of the Issuer approved in advance by the
Issuer in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities, for any transfer taxes on the sale of the
Offered Securities and for expenses incurred in distributing preliminary
prospectuses and the Prospectuses (including any amendments and supplements
thereto) to the Underwriters.
(i) The Issuer agrees that no Common Stock other than the Offered
Securities will be included for sale in the Registration Statement.
(j) For a period of 90 days after the date hereof (the "Applicable
Period"), the Issuer and its executive officers and directors will not sell
(except that the executive officers and directors may, with the consent of the
Underwriters (which consent shall not be unreasonably withheld), sell
securities out of their customary margin accounts), contract to sell, pledge or
otherwise dispose of, directly or indirectly, or (except pursuant to agreements
executed on or prior to the date hereof) arrange to have declared effective
during the Applicable Period a registration statement under the Securities Act
covering the sale by the Issuer or its executive officers and directors of (i)
any shares of Common Stock of the Issuer or any other capital stock of the
Issuer or (ii) any other securities which are convertible into, or exercisable
or exchangeable for, Common Stock or other capital stock of the Issuer
(collectively, "Derivative Securities"), without the prior written consent of
Salomon, which shall not be unreasonably withheld, except (A) with respect to
the Issuer (1) Common Stock or preferred stock issued or delivered as payment
of dividends on, or upon conversion, of any preferred stock of the Issuer, (2)
securities issued or delivered upon conversion, exchange or exercise of any
other securities (including notes and debentures) of the Issuer outstanding on
the date of the Prospectuses or which become outstanding after the date hereof
without violating this section 5(j), (3) capital stock, options and other
equity-based awards issued pursuant to benefit or incentive plans maintained
for the officers, directors or employees of, or persons providing services to,
the Issuer or its subsidiaries, or pursuant to the Issuer's dividend
reinvestment, 401(k), stock purchase or similar plans, (4) securities issued in
connection with, or in furtherance of, mergers, acquisitions of assets or
equity of others (including spectrum licenses and application therefor and
interests in entities with spectrum licenses and application therefor) or
similar transactions, (5) securities representing a minority interest in the
Issuer issued to a strategic investor who agrees not to resell such securities
during the Applicable Period or (6) Common Stock, preferred stock, other
capital stock or Derivative Securities in a transaction not registered under
the Securities Act, if the Issuer does not arrange to have a registration
statement covering the resale of any such securities declared effective during
the Applicable Period, and (B) with respect to the Issuer's
16
executive officers and directors, (i) securities transferred by an executive
officer or director in a private transaction where the transferee receiving
such securities agrees to be bound by this section 5(j), (ii) the transfer of
no more than 70,000 securities per each of the four inside directors or (iii)
the transfer of no more than 25,000 securities per each of the four independent
directors.
(k) Each Underwriter agrees that (i) it is not purchasing any of the
U.S. Offered Securities for the account of anyone other than a U.S. or Canadian
Person, (ii) it has not offered or sold, and will not offer or sell, directly
or indirectly, any of the U.S. Offered Securities or distribute any U.S.
Prospectus to any person outside the United States or Canada, or to anyone
other than a U.S. or Canadian Person and (iii) any dealer to whom it may sell
any of the U.S. Offered Securities will represent that it is not purchasing for
the account of anyone other than a U.S. or Canadian Person and agree that it
will not offer or resell, directly or indirectly, any of the U.S. Offered
Securities outside the United States or Canada, or to anyone other than a U.S.
or Canadian Person or to any other dealer who does not so represent and agree;
provided, however, that the foregoing shall not restrict (A) purchases and
sales between the International Underwriters on the one hand and the
Underwriters on the other hand pursuant to the Agreement Between U.S.
Underwriters and International Underwriters, (B) stabilization transactions
contemplated under the Agreement Between U.S. Underwriters and International
Under writers, conducted through Salomon (or through the Representatives and
Salomon International) as part of the distribution of the Offered Securities
and (C) sales to or through (or distributions of U.S. Prospectuses or the
related preliminary prospectuses to) U.S. or Canadian Persons who are
investment advisors, or who otherwise exercise investment discretion, and who
are purchasing for the account of anyone other than a U.S. or Canadian Person.
17
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Sellers herein, to the accuracy of the
certificates of officers of the Sellers delivered pursuant to the provisions
hereof, to the performance by the Sellers of their obligations hereunder and to
the following additional conditions precedent:
(a) The Representatives shall have received a letter, dated the date
of delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall be on
or prior to the date of this Agreement or, if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the amendment or post-effective
amendment to the registration statement to be filed shortly prior to such
Effective Time), of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, in agreed form, confirming that they
are independent public accountants within the meaning of the Securities Act and
the applicable published Rules and Regulations thereunder and stating to the
effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements comply as
to form in all material respects with the applicable accounting
requirements of the Securities Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements included in the Registration Statements;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of the Issuer, inquiries of certain officials of the Issuer who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that caused them
to believe that:
(A) the unaudited financial statements and schedules
included in the Registration Statements do not comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act and the related published
Rules and Regulations or any material modifications should be
made to such unaudited financial statements and schedules for
them to be in conformity with generally accepted accounting
principles;
18
(B) at January 27, 1999, there was any change in the
capital stock or paid-in capital, increase in long-term debt
or any decreases in consolidated net current assets or
stockholders' equity of the Issuer and its subsidiaries, on a
consolidated basis, as compared with amounts shown on the
December 31, 1997 audited consolidated balance sheet included
in the Prospectuses; or
(C) for the period from October 1, 1998 to January
27, 1999, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated
operating revenues or in the total or per-share amounts of
net loss;
(D) the unaudited pro forma condensed consolidated
financial statements included in the Prospectuses do not
comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
the related published Rules and Regulations thereunder or the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements.
except in all cases set forth in clauses (A) and (B) above for
changes, increases or decreases which the Prospectuses disclose have
occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each case to
the extent that such dollar amounts, percentages and other financial
information are derived from the general accounting records of the
Issuer and its subsidiaries subject to the internal controls of the
Issuer's accounting system or are derived directly from such records
by analysis or computation) with the results obtained from inquiries,
a reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, "Registration Statements" shall mean the Initial Registration
Statement as proposed to be amended by the amendment or post-effective
amendment to be filed shortly prior to its Effective Time, (ii) if the
Effective Time of the Initial Registration Statement is prior to the execution
and delivery of this Agreement but the Effective Time of the Additional
Registration Statement is subsequent to such execution and delivery,
"Registration Statements" shall mean the Initial Registration Statement and the
Additional Registration Statement as proposed to be filed or as proposed to be
amended by the post-effective
19
amendment to be filed shortly prior to its Effective Time and (iii)
"Prospectuses" shall mean the prospectuses included in the Registration
Statements. All financial statements and schedules included in material
incorporated by reference into the Prospectuses shall be deemed included in the
Registration Statements for purposes of this subsection.
(b) The Representatives shall have received a letter, dated the date
of delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall be on
or prior to the date of this Agreement or, if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the amendment or post-effective
amendment to the registration statement to be filed shortly prior to such
Effective Time), of Ernst & Young LLP with respect to the financial statements
and other financial information of MIDCOM Communications Inc. included in the
Registration Statements, in a form to be agreed upon.
(c) If the Effective Time of the Initial Registration Statement is not
prior to the execution and delivery of this Agreement, such Effective Time
shall have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or such later date as shall have been consented to by Salomon.
If the Effective Time of the Additional Registration Statement (if any) is not
prior to the execution and delivery of this Agreement, such Effective Time
shall have occurred not later than 10:00 P.M., New York time, on the date of
this Agreement or, if earlier, the time either Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later date as
shall have been consented to by Salomon. If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, each of the Prospectuses shall have been filed with the Commission
in accordance with the Rules and Regulations and Section 5(a) of this
Agreement. Prior to such Closing Date, no stop order suspending the
effectiveness of a Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Issuer or the Representatives, shall be contemplated by the Commission.
(d) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) a change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange
controls as would, in the reasonable judgment of Salomon, be likely to
prejudice materially the success of the proposed issue, sale or distribution of
the Offered Securities, whether in the primary market or in respect of dealings
in the secondary market, or (ii) (A) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Issuer or its subsidiaries
which, in the reasonable judgment of Salomon, is material and adverse and makes
it impractical or inadvisable to proceed with completion of the offering or the
sale of and payment for the Offered Securities; (B) any downgrading in the
rating of any debt securities of the Issuer by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
20
the Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of any debt securities of the Issuer
(other than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of such rating); (C) any
suspension or limitation of trading in securities generally on the New York
Stock Exchange, or any setting of minimum prices for trading on such exchange,
or any suspension of trading of any securities of the Issuer on any exchange or
in the over-the-counter market; (D) any banking moratorium declared by U.S.
Federal or New York authorities; or (E) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the reasonable judgment of Salomon, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical
or inadvisable to proceed with completion of the offering or sale of and
payment for the Offered Securities.
(e) The Representatives shall have received an opinion, dated the
Closing Date, of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the Sellers,
substantially to the effect set forth in (i)-(viii) below, and of ▇▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, regulatory counsel for the Issuer, substantially to the effect set
forth in (vii) and (ix)-(xvi) below, that:
(i) Each of the Sellers has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectuses;
(ii) The Offered Securities delivered on such Closing Date
and all other outstanding shares of Common Stock of the Issuer have
been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in the
Prospectuses; and the stockholders of the Issuer have no preemptive
rights with respect to the Securities;
(iii) Each of the Sellers is not and, after giving effect to
the offering and sale of the Offered Securities and the application of
the proceeds thereof as described in the Prospectuses, will not be an
"investment company" as defined in the Investment Company Act;
(iv) Except as disclosed in the Prospectuses or in the
schedule previously provided to you, there are no contracts,
agreements or understandings known to such counsel between the Issuer
and any person granting such person the right to require the Issuer to
file a registration statement under the Securities Act with respect to
any securities of the Issuer owned or to be owned by such person or to
require the Issuer to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Issuer under the Securities Act;
21
(v) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this
Agreement or the International Underwriting Agreement in connection
with the issuance or sale of the Offered Securities by the Sellers,
other than as may be required under the Securities Act and the Rules
and Regulations of the Commission thereunder, and such as may be
required by securities or blue sky laws of the various states of the
United States and of foreign jurisdictions in connection with the
offer and sale of the Offered Securities;
(vi) The execution, delivery and performance of this
Agreement and the International Underwriting Agreement, and the
issuance and sale of the Offered Securities will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, (A) any statute, rule or regulation or any
order known to such counsel of any governmental agency or body or any
court having jurisdiction over the Sellers or any subsidiary of the
Issuer or any of its properties, (B) any agreement or instrument
listed as an exhibit to the Issuer's Annual Report on Form 10-K most
recently filed with the Commission or listed as an exhibit to or filed
with any subsequent reports filed by the Issuer under the Exchange Act
through December 31, 1998, to which either of the Sellers or any such
subsidiary of the Issuer is a party or by which either of the Sellers
or any such subsidiary of the Issuer is bound or to which any of the
properties of the Issuer or any such subsidiary is subject or (C) the
charter or by-laws of either of the Sellers or any such subsidiary of
the Issuer, except, in the case of clause (A) or (B), breaches,
violations or defaults that individually or in the aggregate would not
have a Material Adverse Effect; and the Issuer has full power and
corporate authority to authorize, issue and sell the Offered
Securities to be sold by the Sellers as contemplated by this Agreement
and the International Underwriting Agreement, respectively;
(vii) The Initial Registration Statement was declared
effective under the Securities Act as of the date and time specified
in such opinion, the Additional Registration Statement (if any) was
filed and became effective under the Securities Act as of the date and
time (if determinable) specified in such opinion, each of the
Prospectuses either were filed with the Commission pursuant to the
subparagraph of Rule 424(b) specified in such opinion on the date
specified therein or were included in the Initial Registration
Statement or the Additional Registration Statement (as the case may
be), and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of a Registration Statement or any part
thereof has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act,
and each Registration Statement and each of the Prospectuses, and each
amendment or supplement thereto, as of their respective effective or
issue dates, complied as to form in all material respects with the
requirements of the Securities Act and the
22
Rules and Regulations; such counsel have no reason to believe that any
part of a Registration Statement or any amendment thereto, as of its
effective date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that either of the Prospectuses or any
amendment or supplement thereto, as of its issue date or as of such
Closing Date, contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; the descriptions in the Registration
Statements and Prospectuses of statutes, legal and governmental
proceedings and contracts and other documents are accurate and fairly
present the information required to be shown; and such counsel do not
know of any legal or governmental proceedings required to be described
in a Registration Statement or the Prospectuses which are not
described as required or of any contracts or documents of a character
required to be described in a Registration Statement or the
Prospectuses or to be filed as exhibits to a Registration Statement
which are not described and filed as required; it being understood
that such counsel need express no opinion as to the financial
statements or other financial data contained in the Registration
Statements or the Prospectuses;
(viii) This Agreement has been duly authorized, executed and
delivered by each of the Sellers and the International Underwriting
Agreement has been duly authorized, executed and delivered by the
Issuer;
(ix) No prior or subsequent consent, approval, authorization
or order of the FCC is required to be obtained, and no prior or
subsequent notice to or filing with the FCC is required to be made, in
connection with the offering of Offered Securities;
(x) To the best of such counsel's knowledge, the Issuer and
its subsidiaries are in compliance in all material respects with all
material terms and conditions of each License;
(xi) To the best of such counsel's knowledge, all of the
Licenses are currently valid and in full force and effect, and there
is no investigation, notice of apparent liability, violation,
forfeiture or other order of complaint issued by or before any court
or regulatory body, including the FCC, or of any other proceedings
(other than proceedings relating to the wireless communications
industries generally) which could in any manner materially threaten or
adversely affect the validity or continued effectiveness of any of the
Licenses; provided, however, that (A) on March 9, 1998, several
parties (at least one of which stated that it would be filing a
separate pleading on this issue) filed petitions for reconsideration
of the 38 GHz Order, alleging, among other things, that the
23
February 10, 1998, license grants to the Issuer were in violation of
the FCC's processing rules, which petitions for reconsideration were
made available to the public on March 10, 1998 and (B) on December 31,
1998, two parties filed petitions for clarification and
reconsideration of two December 1, 1998 License correction grants to
the Issuer in Atlanta and Dallas alleging that such grants were in
violation of the rules of the FCC;
(xii) Such counsel is not aware of any event or instance in
which the Issuer was not in compliance with all applicable and
material rules, regulations and policies of the FCC pertaining to the
Licenses;
(xiii) Such counsel is not aware of the occurrence of any
event which (i) results in, or after notice or lapse of time or both
would result in, revocation, suspension, adverse modification,
nonrenewal, impairment, restriction or termination of, or order of
forfeiture with respect to, any License or (ii) materially and
adversely affects or could reasonably be expected in the future to
materially adversely affect any of the rights of the Issuer or any of
its subsidiaries thereunder;
(xiv) To the best of such counsel's knowledge, the Issuer and
its subsidiaries have duly filed in a timely manner all material
filings, reports, applications, documents, instruments and information
required to be filed by them under the Communications Act pertaining
to the Licenses;
(xv) Such counsel has no reason to believe that any of the
Licenses will not be renewed in the ordinary course; and
(xvi) The FCC has the authority, under certain circumstances,
to modify radio licenses that it has issued. On November 3, 1997, the
FCC adopted rules to auction unlicensed portions of the 38.6 - 40.0
GHz band for commercial use. On March 24, 1997, the FCC proposed rules
to segment the 38.6 - 40.0 GHz band for terrestrial wireless services.
In either event, the FCC may adopt changes to the existing and
proposed regulations governing 38 GHz licensees, which could have an
impact on the scope of the Licenses and the operations of the Issuer
and its subsidiaries. As of the date of such letter, and except as
otherwise discussed in such letter, such counsel is not aware of any
official FCC action that may permit or is likely to lead to the
revocation, nonrenewal, modification, impairment, restriction, or
suspension of any License or any right or authority thereunder in
whole or in part.
(f) The Underwriters shall have received from Cravath, Swaine & ▇▇▇▇▇,
counsel for the Underwriters, such opinion or opinions, dated the Closing Date,
with respect to the incorporation of the Issuer, the validity of the Offered
Securities, the Registration Statements, the Prospectuses and other related
matters as Salomon may reasonably
24
require, and the Issuer shall have furnished to such counsel such documents as
they reasonably request for the purpose of enabling them to pass upon such
matters.
(g) The Representatives shall have received a certificate, dated the
Closing Date, of the Chief Executive Officer or any Vice President and a
principal financial or accounting officer of the Issuer in which such officers,
to the best of their knowledge after reasonable investigation, shall state that
the representations and warranties of the Issuer in this Agreement are true and
correct, that the Issuer has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of subparagraphs
(1) and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment
of the applicable filing fee in accordance with Rule 111(a) or (b) under the
Securities Act, prior to the time either Prospectus was printed and distributed
to any Underwriter; and, subsequent to the respective dates of the most recent
financial statements in the Prospectuses, there has been no material adverse
change, nor any development or event involving a prospective material adverse
change, in the condition (financial or other), business, properties or results
of operations of the Issuer and its subsidiaries taken as a whole except as set
forth in or contemplated by the Prospectuses or as described in such
certificate (it being understood that a change in the price of the Common Stock
or the continuation of operating losses consistent with the Issuer's historical
results shall be deemed not to be, in and of themselves, such a material
adverse change), and, except as disclosed in or contemplated by the
Prospectuses, there has been no dividend or distribution of any kind declared,
paid or made by the Issuer on any class of its capital stock. The
Representatives shall have received a certificate, dated the Closing Date, of
the Chief Executive Officer or any Vice President and a principal financial or
accounting officer of WMC in which such officers, to the best of their
knowledge after reasonable investigation, shall state that the representations
and warranties of WMC in this Agreement are true and correct, that WMC has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date.
(h) The Representatives shall have received a letter, dated the
Closing Date, of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP which meets the requirements of subsection
(a) of this Section, except that the specified date referred to in such
subsection will be a date not more than three days prior to such Closing Date
for the purposes of this subsection.
(i) The Representatives shall have received a letter, dated the
Closing Date, of Ernst & Young LLP which meets the requirements of subsection
(b) of this Section, except that the specified date referred to in such
subsection will be a date not more than three business days prior to such
Closing Date for the purposes of this subsection.
25
(j) On such Closing Date, the International Underwriters shall have
purchased the International Securities pursuant to the International
Underwriting Agreement.
(k) The Issuer has filed an application and received approval for the
listing of the Offered Securities with the Nasdaq National Market and has paid
the required fee.
(l) Each executive officer and director of the Issuer shall have
furnished to the Representatives a letter substantially in the form of Exhibit
A hereto and addressed to the Representatives relating to sales of shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for such Common Stock, and each such letter shall be in full force and effect
on the Closing Date.
Each of the Sellers will furnish the Representatives with such
conformed copies of such opinions, certificates, letters and documents as the
Representatives reasonably request. Salomon may in its sole discretion waive on
behalf of the Underwriters compliance with any conditions to the obligations of
the Underwriters hereunder, whether in respect of an Initial Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Issuer will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Securities Act or the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any breach of any of the representations and
warranties of the Issuer contained herein or any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
either of the Prospectuses, or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by each Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Issuer will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Issuer by such Underwriter through Salomon specifically for use therein, it
being understood and agreed that the only such information consists of the
information described as such in subsection (c) below; provided further,
however, that with respect to any untrue statement or alleged untrue statement
in or omission or alleged omission from any preliminary prospectus, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Underwriter that sold the Offered Securities concerned to the
person asserting any such losses, claims, damages or liabilities, to the extent
that such sale was an initial resale by
26
such Underwriter and any such loss, claim, damage or liability of such
Underwriter results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Offered
Securities to such person, a copy of the Registration Statement or Prospectus
if the Issuer had previously furnished copies thereof to such Underwriter and
such Registration Statement or Prospectus corrected such untrue statement or
omission or alleged untrue statement or omission.
(b) WMC will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any breach of any of the representations and
warranties of WMC contained herein or any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement, either
of the Prospectuses, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information about WMC (or any direct or indirect
stockholders of WMC) furnished to the Issuer by WMC specifically for use
therein, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that WMC will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with written information furnished to the Issuer by an Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information furnished by any Underwriter consists of the
information described as such in subsection (c) below; provided further,
however, that with respect to any untrue statement or alleged untrue statement
in or omission or alleged omission from any preliminary prospectus, the
indemnity agreement contained in this subsection (b) shall not inure to the
benefit of any Underwriter that sold the Offered Securities concerned to the
person asserting any such losses, claims, damages or liabilities, to the extent
that such sale was an initial resale by such Underwriter and any such loss,
claim, damage or liability of such Underwriter results from the fact that there
was not sent or given to such person, at or prior to the written confirmation
of the sale of such Offered Securities to such person, a copy of the
Registration Statement or Prospectus if the Issuer had previously furnished
copies thereof to such Underwriter and such Registration Statement or
Prospectus corrected such untrue statement or omission or alleged untrue
statement or omission.
27
(c) Each Underwriter will severally and not jointly indemnify and hold
harmless the Sellers against any losses, claims, damages or liabilities to
which the Sellers may become subject, under the Securities Act or the Exchange
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, either of the Prospectuses, or any amendment or supplement thereto,
or any related preliminary offering prospectus, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuer by such Underwriter
through the Representatives specifically for use therein, and will reimburse
any legal or other expenses reasonably incurred by the Sellers in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that the
only such information furnished by any Underwriter consists of the following
information in the U.S. Prospectus furnished on behalf of the Underwriters: (i)
on the cover page, the table and the last paragraph at the bottom concerning
the terms of the U.S. Offering by the Underwriters, (ii) under the caption
underwriting, (A) the list of Underwriters and their respective participation
in the U.S. Offering, (B) the fourth paragraph concerning the concession and
reallowance figures, (C) the seventh paragraph concerning agreements among the
Underwriters and the International Underwriters, (D) the tenth paragraph
concerning over-allotments, syndicate covering transactions, stabilizing
transactions and penalty bids and (E) the eleventh paragraph concerning passive
market making.
(d) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party (which consent shall not be
unreasonably withheld), be counsel to the indemnifying party), and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof except as set forth below. Notwithstanding the indemnifying party's
election to appoint counsel to
28
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel, if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. No indemnifying party shall, without the prior
written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
action 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 on any claims that are the subject matter of such action.
(e) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers on the one hand and the Underwriters on the other from the offering of
the U.S. Offered Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Sellers on the one hand and the 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. The relative benefits received by the Sellers on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the U.S. Offering (before deducting expenses but
after deducting the Underwriters' discounts and commissions) received by the
Sellers bear to the total discounts and commissions received by the
Underwriters from the Sellers under this Agreement. The relative fault 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 Sellers or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities referred to in the first sentence of this subsection (e) shall
be deemed to include
29
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is the
subject of this subsection (e). Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Offered Securities
purchased by it were resold exceeds the 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. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective purchase obligations and not joint.
(f) The obligations of the Sellers under this Section shall be in
addition to any liability which the Sellers may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Securities Act or the
Exchange Act; and the obligations of the Underwriters under this Section shall
be in addition to any liability which the respective Underwriters may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls the Issuer within the meaning of the Securities Act or the
Exchange Act.
(g) The liability of WMC under its representations and warranties
contained in Section 2 hereof and under the indemnity and contribution
agreements contained in this Section 7 shall be limited to an amount equal to
the initial public offering price of the Firm Securities sold by WMC to the
Underwriters. The Sellers may agree, as between themselves and without limiting
the rights of the Underwriters under this Agreement, as to the respective
amounts of such liability for which they each shall be responsible.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase U.S. Offered Securities hereunder and the
aggregate number of shares of U.S. Offered Securities that such defaulting
Underwriter or Underwriters agreed but failed to purchase does not exceed 10%
of the total number of shares of U.S. Offered Securities, Salomon may make
arrangements satisfactory to the Sellers for the purchase of such U.S. Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by the Closing Date, the nondefaulting Underwriters shall
be obligated severally, in proportion to their respective commitments
hereunder, to purchase the U.S. Offered Securities that such defaulting
Underwriters agreed but failed to purchase. If any Underwriter or Underwriters
so default and the aggregate number of shares of U.S. Offered Securities with
respect to which such default or defaults occur exceeds 10% of the number of
shares of U.S. Offered Securities and arrangements satisfactory to Salomon and
the Sellers for the purchase of such U.S. Offered Securities by other persons
are not made within 36 hours after such default, this Agreement will terminate
without liability on the part of any nondefaulting Underwriter or the Sellers,
except as provided in Section 9. As used in this Agreement, the term
"Underwriter"
30
includes any person substituted for an Underwriter under this Section. Nothing
herein will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
the Sellers, their respective officers or directors and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the Sellers, the
Issuer or any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the Offered
Securities. If for any reason the purchase of the Offered Securities by the
Underwriter is not consummated, the Issuer shall remain responsible for the
expenses to be paid or reimbursed by them pursuant to Section 5 (other than
with respect to a defaulting Underwriter) and the respective obligations of the
Sellers and the Underwriters pursuant to Section 7 shall remain in effect. If
the purchase of the Offered Securities by the Underwriters is not consummated
for any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or solely because of the occurrence of any event
specified in clause (C), (D) or (E) of Section 6(d)(ii), the Issuer will
reimburse the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters will be mailed, delivered or telecopied and confirmed
to the Underwriters, c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ or, if sent to the Issuer, will be mailed, delivered or
electronically transmitted and confirmed to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed, delivered or telecopied and
confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder.
12. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
31
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to
principles of conflicts of laws.
Each of the parties hereby submits to the nonexclusive jurisdiction of
the Federal and state courts in the Borough of Manhattan in The City of New
York in any suit or proceeding arising out of or relating to this Agreement or
the transactions contemplated hereby.
32
If the foregoing is in accordance with the Representatives'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement among the
Issuer, WMC and the Underwriters in accordance with its terms.
Very truly yours,
WinStar Communications, Inc.
By........................................
Name:
Title:
WinStar Multichannel Corp.
By........................................
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written.
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
Credit Suisse First Boston Corporation
Acting on behalf of themselves and as the
Representatives of the several Underwriters
By ▇▇▇▇▇▇▇ ▇▇▇▇▇ BARNEY INC.
By..........................................
Name:
Title:
SCHEDULE A
Number of
Firm Securities
Underwriters to be Purchased
------------ ---------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc...........................
Credit Suisse First Boston Corporation.............
Total.............................................. 3,360,000
==========
A-1
SCHEDULE B
Number of Number of
Firm Optional
Securities to Securities to
be Sold be Sold
------- -------
WinStar Communications, Inc................ 2,410,000 630,000
WinStar Multichannel Corp.................. 950,000 0
------------ -----------
Total...................................... 3,360,000 630,000
============ ===========
B-1
Exhibit A
[DATE]
[The undersigned executive officer or director]
WinStar Communications, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc.
Credit Suisse First Boston Corporation
As Representatives of the Several U.S. Underwriters
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Salomon Brothers International Limited
Credit Suisse First Boston (Europe) Limited
c/o Salomon Brothers International Limited
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Dear Sirs:
As an inducement to the U.S. Underwriters and International
Underwriters to execute, respectively, the U.S. Underwriting Agreement and the
International Underwriting Agreement (collectively, the "Underwriting
Agreements"), pursuant to which an offering will be made of the Common Stock,
$0.01 par value per share (the "Securities") of WinStar Communications, Inc.
(the "Issuer"), the undersigned hereby agrees that, for a period of 90 days
after the date of the Underwriting Agreements (the "Applicable Period") to
which you are or expect to become parties, the undersigned will not offer, sell
(except that the undersigned may, with the consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
(which consent shall not be unreasonably withheld), sell securities out of his
customary margin account), contract to sell, pledge or otherwise dispose of,
directly or indirectly, or (except pursuant to agreements executed on or prior
to the date hereof) arrange to have declared effective during the Applicable
Period a registration statement under the Securities Act covering the sale by
the undersigned of (a) any shares of Common Stock of the Issuer or any other
capital stock of the Issuer or (b) any other securities which are convertible
into, or exercisable or exchangeable for, Common Stock or other capital stock
of the Issuer (collectively, "Derivative Securities"), without the prior
written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc. (which shall not be unreasonably
withheld), except that the foregoing restrictions shall not apply to (i)
securities transferred by the undersigned in a private transaction where the
transferee receiving such securities agrees to be bound, (ii) the transfer of
no more than 70,000 securities per each of the four inside directors or (iii)
the transfer of no more than 25,000 securities per each of the four independent
directors.
In furtherance of the foregoing, the Issuer and its transfer agent and
registrar are hereby authorized to decline to make any transfer of shares of
Securities if such transfer would constitute a violation or breach of this
Agreement.
This Agreement shall be binding on the undersigned and the respective
successors, heirs, personal representatives and assigns of the undersigned.
This Agreement shall lapse and become null and void if the public offering
shall not have occurred on or before the date that is 60 days after the date of
this Agreement.
Very truly yours,
B-2