SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 2, 1997
---------------
WINSTAR COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-10726 13-3585278
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
230 Park Avenue, New York, New York 10169
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 687-7577
Not Applicable
(Former Name or former Address, if Changed Since Last Report)
Exhibit Index -- Page 18
Page 1 of 39 Pages
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On June 28, 1996, WinStar Communications, Inc. ("WinStar"),
WinStar Milliwave, Inc., a wholly-owned subsidiary of WinStar ("WinStar
Milliwave"), the partners ("Partners") of Milliwave Limited Partnership
("Milliwave"), the holders of the capital stock ("Stockholders") of the Partners
of Milliwave and Milliwave executed an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which the Partners were to be merged with and into
WinStar Milliwave ("Merger"). Milliwave is a holder of 38 GHz licenses (the
"Milliwave Licenses") that allow for the provision of services in more than 80
major markets, encompassing an aggregate population of greater than 160 million.
The following chart sets forth the change in WinStar's existing 38 GHz license
asset base after giving effect to the consummation of the Merger:
<TABLE>
<CAPTION>
WinStar Milliwave Total
<S> <C> <C> <C>
Population Coverage (millions) ............. 109 160 170(1)
Channel Pops (millions) .................... 413 160 573
Licensed Areas with ........................ 30 0 39(2)
Multiple Channels
<FN>
(1) Total population coverage is not additive because of overlapping
licensed areas.
(2) Milliwave had only one channel in each of its licensed areas; however,
when combined with WinStar, the overlapping single channel licensed
areas have increased WinStar's total multiple channel coverage by nine
licensed areas, bringing the aggregate population covered by multiple
channels to over 100 million.
</FN>
</TABLE>
The cities covered by the Milliwave Licenses include many
already serviceable by WinStar under its existing 38 GHz licenses, such as
Boston, Chicago, Dallas, Los Angeles and New York, among others, which will
increase WinStar's aggregate bandwidth capacity in each such city. The Milliwave
Licenses also cover many cities which currently are not serviceable by WinStar
under its existing 38 GHz licenses, including, among others, Honolulu,
Nashville, Orlando, Raleigh/Durham and Rochester (New York).
The parties consummated the Merger on January 2, 1997 ("Closing Date"). On
the Closing Date, WinStar paid to the Stockholders an aggregate of $40 million
in cash and issued to the Stockholders an aggregate of approximately 3.6 million
shares of common stock of WinStar ("WinStar Shares"). Pursuant to a registration
rights agreement, dated the Closing Date ("Registration Rights Agreement")
between WinStar and each of the Stockholders, WinStar agreed to register the
WinStar Shares for resale under a registration statement filed with the
Securities and Exchange Commission ("Commission") prior to January 1, 1998.
WinStar has agreed to use its best efforts to have such registration statement
declared effective by the Commission by March 31, 1998. Effective as of the
Closing Date, Dennis Patrick, Chief Executive Officer of Milliwave and a former
Chairman of the Federal Communications Commission, became a member of the Board
of Directors of WinStar.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired.
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
The Partners
Milliwave Limited Partnership
We have audited the accompanying balance sheet of Milliwave Limited
Partnership (a Florida limited partnership) as of December 31, 1995 and the
related statement of changes in partners' capital for the period April 25, 1995
(inception) through December 31, 1995. These financial statements are the
responsibility of the management of Milliwave Limited Partnership. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Milliwave Limited
Partnership as of December 31, 1995, in conformity with generally accepted
accounting principles.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
New York, New York
June 27, 1996
3
<PAGE>
Milliwave Limited Partnership
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------ -----
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .......................... $2,956,935 $ 11,222
Other current assets ............................... 65,439 --
---------- ----------
Total current assets ........................... 3,022,374 11,222
Property and equipment, net ........................ 1,108,935 --
Licenses ........................................... 899,444 317,581
Other assets ....................................... 130,540 --
---------- ----------
Total assets ................................... $5,161,293 $ 328,803
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Loan Payable ....................................... $ 1,500 $ --
Accounts payable and accrued expenses .............. 726,392 53,803
---------- ----------
Total current liabilities ..................... 727,892 53,803
PARTNERS' CAPITAL .................................... 4,433,401 275,000
---------- ----------
Total liabilities and partners' capital ....... $5,161,293 $ 328,803
========== ==========
</TABLE>
The accompanying notes are an integral part of these
statements.
4
<PAGE>
Milliwave Limited Partnership
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<S> <C> <C>
Revenues ................................................... $ 662
Operating expenses
Consulting and contracted services ...................... $ 252,707
Professional fees ....................................... 294,330
Depreciation and amortization ........................... 66,622
Travel .................................................. 29,571
Salaries ................................................ 46,600
Office and sundry ....................................... 31,241
---------
721,071
Net loss from operations ................................... (720,409)
Interest income ......................................... 63,746
Interest expense ........................................ (3,679)
---------
Net loss ................................................... $(660,342)
=========
</TABLE>
The accompanying notes are an integral part of these
statements.
5
<PAGE>
Milliwave Limited Partnership
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
April 25, 1995 (inception) through December 31, 1995
and the nine months ended September 30, 1996
(unaudited)
<TABLE>
<S> <C>
Cost of contributed license applications ..................... $ 122,654
Cash contributed ............................................. 152,346
-----------
Partners' capital at December 31, 1995 ....................... 275,000
Cash contributed ............................................. 5,000,000
Syndication costs ............................................ (181,257)
Net loss ..................................................... (660,342)
-----------
Partners' capital at September 30, 1996 (unaudited) .......... $ 4,433,401
===========
</TABLE>
The accompanying notes are an integral part of these
statements.
6
<PAGE>
Milliwave Limited Partnership
STATEMENT OF CASH FLOWS
For the nine months ended September 30, 1996
(unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss ................................................... $ (660,342)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation ............................................... 66,622
Increase in other current assets ........................... (23,049)
Increase in other assets ................................... (42,390)
Increase in accounts payable and accrued expense ........... 672,589
-----------
Net cash provided by operating activities .................... 13,430
-----------
Cash flows from investing activities:
Purchases of equipment ..................................... (1,125,349)
Licenses ................................................... (758,026)
Organizational costs ....................................... (4,585)
-----------
Net cash used in investing activities ........................ (1,887,960)
-----------
Cash flows from financing activities:
Proceeds from partners' loans .............................. 201,500
Repayment of partners' loans ............................... (200,000)
Capital contributions ...................................... 5,000,000
Syndication costs .......................................... (181,257)
-----------
Net cash provided by financing activities .................... 4,820,243
-----------
Net increase in cash and cash equivalents .................... 2,945,713
Cash and cash equivalents at beginning of period ............. 11,222
-----------
Cash and cash equivalents at end of period ................... $ 2,956,935
===========
</TABLE>
The accompanying notes are an integral part of these
statements.
7
<PAGE>
Milliwave Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and September 30, 1996 (unaudited)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Milliwave Limited Partnership (a Florida limited partnership, hereinafter
referred to as the "Partnership") was formed on April 25, 1995 to apply for and
obtain licenses from the Federal Communications Commission ("FCC") and to
exploit such licenses for commercial purposes. As of October 1996, the
Partnership had met its minimum construction requirements for all of its
licensed service areas. From inception through December 31, 1995, the
Partnership had no operations.
A summary of the significant accounting policies applied in the preparation
of the accompanying balance sheet follows
1. Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated
using the straight line method over the estimated useful lives of the related
assets.
2. Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
3. Income Taxes
No provision for Federal, state or local income taxes has been provided
as the Partnership is not a taxable entity and the partners are individually
liable for the taxes on their shares of the Partnership's income.
4. Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, the Partnership is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual results
could differ from those estimates.
5. Unaudited Financial Statements
The unaudited financial statements, as of September 30, 1996, are a
condensed presentation and omit certain details contained in full financial
statements. In the opinion of the Partnership, the accompanying unaudited
balance sheet as of September 30, 1996 and the unaudited statements of
operations, changes in partners' capital, and cash flows for the nine months
ended September 30, 1996 include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
Partnership as of September 30, 1996 and the results of operations and cash
flows for the nine months ended September 30, 1996.
8
<PAGE>
Milliwave Limited Partnership
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 2--NATURE OF BUSINESS AND LICENSES
The Partnership holds 88 licenses granted by the FCC. These licenses
allow the Partnership to deliver communication services over the 38 GHz band
specified in the licenses. The licenses were issued at various dates through
March 15, 1996. Under the terms of the licenses, the Partnership must construct
a minimum of one radio link per licensed service area within eighteen months of
the date of grant or risk revocation of the licenses by the FCC. The Partnership
is required to complete its minimum construction requirement for the licenses
granted at various dates from August 1996 through September 1997. As of October
1996, construction requirements have been completed on all the licenses. At
September 30, 1996 and December 31, 1995, the Partnership has capitalized
$899,444 and $317,581, respectively, of license costs consisting of filing,
application and legal fees relative to the licenses.
NOTE 3--LOANS PAYABLE-PARTNERS
In March 1996 the Partnership issued two $100,000 promissory notes to
two limited partners bearing interest at 5.86% per annum. These notes were to
mature on December 31, 1996 but were repaid out of the proceeds of a sale of
limited partnership interests. (Reference is made to Note 4).
In May 1996, the Partnership borrowed $1,500 from a limited partner for
short-term cash requirements. This amount is unsecured without a stated interest
rate. As of September 30, 1996, this amount is outstanding and due the limited
partner.
NOTE 4--PARTNERS' CAPITAL
For the period May 1994 through the formation of the Partnership in
April 1995, one of the partners incurred $122,654 in license application costs,
which were contributed to the Partnership at cost and included in the capital of
the Partnership.
The balance of the capital contributed during the period ended December
31, 1995 represented cash contributed of $152,346.
On May 30, 1996, the Partnership amended and restated its limited
partnership agreement to provide for Series A and Series B Limited Partners.
Concurrent with the amendment, the Partnership sold $5,000,000 of Series B
Limited Partnership interests. Syndication costs relating to the sale amounted
to $181,257.
The general partner provides management services to the partnership.
Management fees for the nine months ended September 30, 1996 totaled $87,991.
NOTE 5--COMMITMENTS AND CONTINGENCIES
The Partnership has entered into site license and service agreements
with WinStar Communications, Inc. ("WinStar") in conjunction with the
installation and operation of up to a total of seventy-eight 38 GHz radio links.
For each link, the agreements call for payment from the Partnership to WinStar
of: a one-time fee of $8,500 for site identification, survey and equipment
installation; a monthly fee of $150 for monitoring and maintenance of radio
system equipment; and, a monthly fee of $200 or access to and use of radio
system sites. As of September 30, 1996, these charges had been applied towards
48 links. In addition, WinStar makes monthly payments to the Partnership for
capacity leased under a two-year transmission path lease agreement. Such amounts
vary from $10-$75 per link.
9
<PAGE>
Milliwave Limited Partnership
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Partnership leases office space under a lease agreement which
expires in December 1996. Rent expense for the nine months ended September 30,
1996 totaled $6,492.
In 1996, the Partnership accepted the assignment of contingent sublease
and personal property sale agreements from a company owned by a limited partner.
The total amount due under these agreements is $100,000.
Subsequent to December 31, 1995, the Partnership entered into purchase
orders to purchase radio links from P-Com, Inc. amounting to approximately
$570,000. As of September 30, 1996, the purchase commitment has been satisfied.
On November 13, 1995, the FCC released an order freezing the acceptance
for filing of new applications for 38 GHz frequency licenses. On December 15,
1995, the FCC announced the issuance of an NPRM, pursuant to which it proposed
to amend its current rules relating to 38 GHz including, among other items, the
imposition of minimum construction requirements and an auction procedure for
issuance of licenses in the 37-40 GHz band. In addition, the FCC ordered that
those applications that are subject to mutual exclusivity with other applicants
or that were placed on public notice by the FCC after September 13, 1995 would
be held in abeyance and not processed by the FCC pending the outcome of the
proceeding initiated by the NPRM. Final rules with respect to the changes
proposed by the NPRM have not been adopted and the changes proposed by the NPRM
have been, and are expected to continue to be, the subject of numerous comments
by members of the telecommunications industry and others. Consequently, there
can be no assurance that the NPRM will result in the issuance of rules
consistent with the rules initially proposed in the NPRM. Until final rules are
adopted, the rules currently in existence remain in effect with respect to
outstanding licenses.
NOTE 6--WINSTAR COMMUNICATIONS, INC. AGREEMENT
In June 1996, the Partnership entered into an agreement with WinStar whereby
WinStar would acquire the Partnership for a purchase price of $40 million in
cash and 3.4 million shares of WinStar common stock. At the date of signing the
agreement, the market value of the common stock was approximately $85,000,000.
The number of shares issued is subject to adjustment, depending on WinStar's
stock price on the date of closing of the transaction with a maximum of 4.5
million shares and an ability for WinStar to issue fewer than 3.4 million shares
if the stock price exceeds certain levels. The acquisition is subject to FCC
approval, but is expected to be consummated in the second quarter of calendar
year 1997. The Partnership also has entered into a (i) services agreement with
WinStar pursuant to which WinStar has agreed to provide services to the
Partnership in connection with the buildout of its licensed areas in
consideration for payment of monthly site access and management fees, as well as
installation fees, and (ii) a two-year transmission path lease agreement with
WinStar permitting its use of up to 488 radio links in the Partnerships'
licensed areas.
10
<PAGE>
(b) Pro Forma Financial Information.
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet
has been prepared by taking the September 30, 1996 consolidated balance sheet of
WinStar Communications, Inc. and subsidiaries (the "Company") and the balance
sheet of Milliwave Limited Partnership ("Milliwave"), as if the acquisition of
Milliwave had been consummated at September 30, 1996. The unaudited pro forma
condensed consolidated balance sheet has been prepared for information purposes
only and does not purport to be indicative of the financial condition that
necessarily would have resulted had the acquisition of Milliwave taken place on
September 30, 1996.
The following unaudited pro forma condensed consolidated statements of
operations for the ten month period ended December 31, 1995 and for the nine
months ended September 30, 1996 give effect to the Company's acquisition of
Milliwave as if it had occurred as of the beginning of the respective periods.
The revenues and results of operations included in the following unaudited pro
forma condensed consolidated statements of operations are not indicative of
anticipated results of operations for periods subsequent to the acquisitions,
nor are they considered necessarily to be indicative of the results of
operations for the periods specified had the acquisitions actually been
completed at the beginning of each respective period.
These financial statements should be read in conjunction with the notes
to the unaudited pro forma condensed consolidated financial statements, which
follow, the consolidated financial statements of the Company and the financial
statements of Milliwave and the related notes thereto.
11
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Pro Forma
Adjustments
The Company, Milliwave, Increase/
Historical Historical (Decrease) Pro Forma
ASSETS
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents .......................... $ 54,467,888 $ 2,956,935 (35,000,000)(a) $ 22,424,823
Short term investments ............................. 108,510,243 -- -- 108,510,243
------------- ------------- ------------- -------------
Cash, cash equivalents and short-term investments 162,978,131 2,956,935 (35,000,000) 130,935,066
Investments in marketable equity securities ........ 1,068,800 -- -- 1,068,800
Accounts receivable, net ........................... 14,750,130 662 -- 14,750,792
Notes receivable ................................... 218,818 -- -- 218,818
Inventories ........................................ 12,450,043 -- -- 12,450,043
Prepaid expenses and other current assets .......... 15,242,599 64,777 (5,000,000) (a) 10,307,376
------------- ------------- ------------- -------------
Total current assets ........................ 206,708,521 3,022,374 (40,000,000) 169,730,895
Property and equipment, net ........................ 44,162,410 1,108,935 -- 45,271,345
Notes receivable ................................... 333,778 -- -- 333,778
Investments and advances ........................... 399,729 -- -- 399,729
Licenses, net ...................................... 12,885,294 899,444 137,070,592 (a) 150,855,330
Intangible assets, net ............................. 10,271,905 -- -- 10,271,905
Deferred financing costs ........................... 10,896,527 -- -- 10,896,527
Other assets ....................................... 2,499,988 130,540 -- 2,630,528
------------- ------------- ------------- -------------
Total assets ................................ $ 288,158,152 $ 5,161,293 $ 97,070,592 $ 390,390,037
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Loans payable ...................................... $ 1,839,404 $ 1,500 $ -- $ 1,840,904
Accounts payable and accrued expenses .............. 32,855,042 726,392 -- 33,581,434
Capitalized lease obligations ...................... 1,803,591 -- -- 1,803,591
------------- ------------- ------------- -------------
Total current liabilities ................... 36,498,037 727,892 -- 37,225,929
Senior notes payable ................................. 170,356,225 -- -- 170,356,225
Convertible notes payable ............................ 85,178,112 -- -- 85,178,112
Other notes payable .................................. 10,680,478 -- -- 10,680,478
Capitalized lease obligations ........................ 5,980,970 -- -- 5,980,970
Deferred income taxes ................................ -- -- 26,500,000 (a) 26,500,000
------------- ------------- ------------- -------------
Total liabilities ........................... 308,693,822 727,892 26,500,000 335,921,714
------------- ------------- ------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; authorized
75,000,000 shares, issued and outstanding
28,290,525 shares, pro forma issued and
outstanding 31,885,145 shares .................... 282,906 -- 35,946 (a) 318,852
Partners Capital ..................................... -- 4,433,401 (4,433,401)(a) --
Additional paid-in capital ........................... 70,501,060 -- 74,968,047 (a) 145,469,107
Accumulated deficit .................................. (91,338,436) -- -- (91,338,436)
------------- ------------- ------------- -------------
(20,554,470) 4,433,401 70,570,592 54,449,523
Unrealized gain on investments in
marketable securities ........................... 18,800 -- -- 18,800
------------- ------------- ------------- -------------
Total stockholders' equity .................. (20,535,670) 4,433,401 70,570,592 54,468,323
------------- ------------- ------------- -------------
Total liabilities and stockholders' equity ........... $ 288,158,152 $ 5,161,293 $ 97,070,592 $ 390,390,037
============= ============= ============= =============
</TABLE>
12
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Pro Forma
Adjustments
The Company, Milliwave, Increase/
Historical Historical (Decrease) Pro Forma
<S> <C> <C> <C> <C>
Net sales $ 47,980,633 $ 662 $(1,264,036) (c) $ 46,717,259
Cost of sales 28,273,656 -- (1,090,480) (c) 27,183,176
------------- ----------- ----------- ----------
Gross profit 19,706,977 662 (173,556) 19,534,083
Selling, general and administrative expenses 47,741,812 654,449 (29,712) (c) 48,366,549
Depreciation 1,754,540 66,622 -- 1,821,162
-------------- ----------- --------------- --------------
Operating loss (29,789,375) (720,409) (143,844) (30,653,628)
Other expense (income)
Interest expense 27,388,356 3,679 -- 27,392,035
Interest income (8,174,077) (63,746) 1,560,000 (a) (6,677,823)
Amortization of intangibles 762,193 -- 2,570,074 (b) 3,332,267
------------- ----------- ----------- -------------
Net loss before income taxes (49,765,847) (660,342) (4,273,918) (54,700,107)
Income taxes 261,514 -- 261,514
-------------- ------------ -------------- --------------
Net loss $(50,027,361) $(660,342) $(4,273,918) $(54,961,621)
============ ========= =========== ============
Net loss per share $ (1.81) $ (1.76)
=============== ===============
Weighted average shares outstanding $ 27,691,452 3,594,620 (d) 31,286,072
============ =========== ============
</TABLE>
13
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TEN MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Pro Forma
Adjustments
The Company, Milliwave, Increase/
Historical Historical (Decrease) Pro Forma
<S> <C> <C> <C> <C>
Net sales............................. $ 29,771,472 $ -- $ -- $ 29,771,472
Cost of sales......................... 19,546,351 -- -- 19,546,351
------------- ------------- ------------- -------------
Gross profit...................... 10,225,121 -- -- 10,225,121
Selling, general and administrative
expenses............................ 19,266,466 -- -- 19,266,466
Depreciation.......................... 770,284 -- -- 770,284
-------------- ------------- ------------- -------------
Operating loss........................ (9,811,629) -- -- (9,811,629)
Other expense (income)
Interest expense.................... 7,630,079 -- -- 7,630,079
Interest income..................... (2,889,813) -- -- (2,889,813)
Amortization of intangibles......... 439,888 -- 2,855,637 (a) 3,295,525
Equity in loss of AGT............... 865,676 -- -- 865,676
-------------- ------------- ------------- --------------
Net loss.............................. $(15,857,459) $ -- $(2,855,637) $(18,713,096)
============ ============ ===========
Net loss per share.................... $ (0.70) $ (0.71)
=============== ===============
Weighted average shares outstanding... 22,769,770 -- 3,594,620 (d) 26,364,390
============ ============ =========== ============
</TABLE>
14
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The adjustments below were prepared based on data currently available
and in some cases are based on estimates or approximations. It is possible that
the actual amounts to be recorded may have an impact on the results of
operations and the balance sheet different from that reflected in the
accompanying unaudited pro forma condensed consolidated financial statements. It
is therefore possible that the entries presented below will not be the amounts
actually recorded at the closing date. Amortization of licenses has been
recorded on the proforma licenses from the Milliwave Acquisition even though
such licenses are not yet in full commercial service.
Balance Sheet at September 30, 1996
(a) To record the acquisition of Milliwave Limited Partnership as follows:
<TABLE>
<CAPTION>
Increase/
(Decrease)
<S> <C>
Record cash payment to Milliwave partners ...................... $ (35,000,000)
Apply payment of escrow deposit to Milliwave partners .......... (5,000,000)
Allocate excess purchase price to licenses ..................... 137,070,592
-------------
Total asset adjustments ................................... 97,070,592
=============
Record deferred taxes related to acquisition ................... 26,500,000
Eliminate Partners' Capital accounts ........................... (4,433,401)
Record the issuance of 3,594,620 shares of the
Company's Common Stock at $20.87 per share ................... 35,946
Additional Paid in Capital ................................ 74,968,047
-------------
Total equity adjustments ..................................... $ 97,070,592
=============
</TABLE>
Statements of Operations for the Ten Months Ended December 31, 1995
and For the Nine Months Ended September 30, 1996
(a) To eliminate interest income, at an assumed rate of 5.2% per annum,
on $40 million cash, assuming such cash was paid at the beginning of the period
in connection with the Milliwave acquisition.
(b) To record amortization of licenses acquired in the Milliwave
transaction.
(c) To eliminate sales, management fees, and cost of sales recorded by
the Company pursuant to management and other agreements with Milliwave.
(d) To record 3,594,620 shares of the Company's Common Stock
issued in connection with the Milliwave acquisition.
15
<PAGE>
(c) Exhibits
Exhibit Number Description
1 Agreement and Plan of Merger among WinStar, WinStar Milliwave, the
Partners, the Stockholders and Milliwave (Incorporated by reference to
Exhibit 10.79 to WinStar's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996)
2 Registration Rights Agreement, dated January 2, 1997, by and among WinStar
and each of the Stockholders (filed herewith)
3 Press Release (filed herewith)
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: January 16, 1997 WINSTAR COMMUNICATIONS, INC.
----------------------------
(Registrant)
/s/ Fredric E. von Stange
-----------------------------
Fredric E. von Stange
Executive Vice President
17
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EXHIBIT INDEX
Exhibit Number Description
1 Agreement and Plan of Merger among WinStar, WinStar Milliwave, the
Partners, the Stockholders and Milliwave (Incorporated by reference to
Exhibit 10.79 to WinStar's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996)
2 Registration Rights Agreement, dated January 2, 1997, by and among WinStar
and each of the Stockholders (filed herewith)
3 Press Release (filed herewith)
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EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of January 2,
1997 by and among WinStar Communications, Inc., a Delaware corporation (the
"Company"), and each of the several Holders (as hereinafter defined) that are
signatories hereto.
This Agreement is made pursuant to a certain Agreement and Plan of
Merger dated as of June 28, 1996 by and among the Company, Milliwave Limited
Partnership, a Florida limited partnership (the "Partnership"), the partners of
the Partnership, WinStar Milliwave, Inc., a Delaware corporation, and the
Holders (the "Merger Agreement"). In order to induce the Holders to enter into
the Merger Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement.
In consideration of the foregoing, the parties hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
"Advice" shall have the meaning set forth in Section 4.
"Affiliate" means, with respect to any specified Person, any other
Person who, directly or indirectly, controls, is controlled by, or is under
common control with such specified Person.
"Business Day" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per share, of
the Company.
"Company" shall have the meaning set forth in the preamble and shall
include the Company's successors by merger, acquisition, reorganization or
otherwise.
"Controlling Persons" shall have the meaning set forth in Section 6(a).
"Damages" shall have the meaning set forth in Section 6(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
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"Holder" means (i) each Person (other than the Company) who is a
signatory to this Agreement and (ii) each Person (other than the Company and its
Affiliates) to whom a Holder transfers Securities if such Person is (a) the
spouse or a direct descendant, parent or sibling of such transferring Holder or
his or her spouse, (b) the trustee of a trust established for the benefit of
such transferring Holder, his or her spouse, or a direct descendant, parent or
sibling of such transferring Holder or his or her spouse, or (c) a partner,
member or stockholder of such transferring Holder; provided, however, that the
total number of Holders shall not exceed one hundred (100).
"Holders' Counsel" means Goodwin, Procter & Hoar LLP, special counsel
to the Holders, or any successor counsel selected by Holders of a majority in
interest of the Registrable Securities.
"Inspectors" shall have the meaning set forth in Section 4(j).
"NASD" shall have the meaning set forth in Section 4(l).
"Nasdaq" shall have the meaning set forth in Section 4(k).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or other agency or political
subdivision thereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.
"Records" shall have the meaning set forth in Section 4(j).
"Registrable Securities" means the Securities; provided, however, that
any Securities shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
Registration Statement or (ii) such Registrable Securities are transferred to
any Person other than a Holder.
"Registration Expenses" shall have the meaning set forth in Section 5.
"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement (including any Shelf Registration Statement), and all
amendments and supplements to any such registration statement, including
post-effective amendments, in each case including the Prospectus, all
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exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Requested Party" has the meaning set forth in Section 8(k).
"Securities" means the Common Stock issued to the Holders pursuant to
the Merger Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Shelf Registration Statement" shall have the meaning set forth in
Section 2(a).
"Suspension Notice" has the meaning set forth in Section 4.
"Suspension Period" has the meaning set forth in Section 4.
"Target Effective Date" means March 31, 1998.
"Target Filing Date" means January 1, 1998.
Section 2. Shelf Registration.
(a) Filing; Effectiveness. Not later than the Target Filing
Date, the Company shall prepare and file with the Commission a "shelf"
registration statement (the "Shelf Registration Statement") on the appropriate
form for an offering to be made by the Holders on a continuous basis pursuant to
Rule 415 under the Securities Act (or such successor rule or similar provision
then in effect) covering all of the Registrable Securities. The Company shall
use its best efforts to have the Shelf Registration Statement declared effective
on or before the Target Effective Date and to keep such Shelf Registration
Statement continuously effective until each Holder can freely sell, in the open
market, all of his, her or its Registrable Securities under an exemption from
the registration requirements of the Securities Act. The Holders of Registrable
Securities shall be permitted to withdraw all or any part of the Registrable
Securities from a Shelf Registration Statement at any time, but the Company's
registration obligations with respect to such withdrawn securities shall then
terminate. The Company may, at its option, include other securities of the
Company on the Shelf Registration Statement.
(b) Supplements; Amendments. The Company agrees, if necessary,
to supplement or amend the Shelf Registration Statement as required by the
rules, regulations or instructions applicable to the registration form used by
the Company for such Shelf Registration Statement or by the Securities Act or as
reasonably requested (which request shall result in the filing of a supplement
or amendment) by any Holder of Registrable Securities to which such Shelf
Registration Statement relates (provided that such request is made with respect
to information regarding the ownership or method of distribution of the
Registrable Securities by such requesting Holder), and the Company agrees to
furnish to the Holders and Holders'
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Counsel copies of any such supplement or amendment prior to or simultaneously
with its being filed with the Commission.
Section 3. Holders' Obligations.
It shall be a condition precedent to the obligation of the Company to
take any action with respect to the registration of any Registrable Securities
that the Holder thereof shall (i) furnish to the Company in writing such
information regarding the Registrable Securities and any other shares of Common
Stock held by such Holder and the intended method of disposition of the
Registrable Securities held by such Holder as is required by the applicable
Securities Act form and (ii) take such actions as may be required of such Holder
under the Securities Act.
Section 4. Registration Procedures.
In connection with the obligations of the Company to effect or cause
the registration of any Registrable Securities pursuant to the terms and
conditions of this Agreement:
(a) The Company shall prepare and file with the Commission a
Registration Statement on the appropriate form under the Securities
Act, which form shall comply as to form in all material respects with
the requirements of the applicable form and include all financial
statements required by the Commission to be filed therewith, and use
its best efforts to cause such Registration Statement to become
effective and remain effective in accordance with the provisions of
this Agreement; provided that, at least three Business Days prior to
the initial filing of the Registration Statement, the Company shall
furnish to Holders' Counsel a draft copy of the Registration Statement
proposed to be filed.
(b) The Company shall promptly prepare and file with the
Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep such Registration
Statement effective for as long as such registration is required to
remain effective pursuant to the terms hereof; shall cause the
Prospectus to be supplemented by any required Prospectus supplement or
filing under the Exchange Act, and, as so supplemented, to be filed
pursuant to Rule 424 under the Securities Act, if required; and shall
comply with the provisions of the Securities Act applicable to it with
respect to the disposition of all Registrable Securities covered by
such Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders set forth in
such Registration Statement or supplement to the Prospectus.
(c) The Company shall promptly furnish to any Holder, without
charge, such reasonable number of conformed copies of such Registration
Statement and any post-effective amendment thereto and such reasonable
number of copies of the Prospectus (including each preliminary
Prospectus) and any amendments or supplements thereto, any documents
incorporated by reference therein and such other documents as such
Holder may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities being sold by such
Holder.
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(d) The Company shall, on or prior to the date on which a
Registration Statement is declared effective, if the Common Stock is
not traded on a securities exchange that provides for secondary market
trading in substantially all states and jurisdictions of the United
States, (i) use its best efforts to register or qualify the Registrable
Securities covered by such Registration Statement under the securities
or "blue sky" laws of each state or jurisdiction in which such
registration or qualification is necessary; (ii) do any and all other
acts and things required by such "blue sky" laws which may be
reasonably necessary to enable such Holder to consummate the
disposition of such Registrable Securities owned by such Holder in such
jurisdictions; (iii) use its best efforts to keep each such
registration or qualification (or exemption therefrom) effective during
the period in which the Registration Statement is required to be kept
effective; and (iv) use reasonable efforts to do any and all other acts
or things required by such "blue sky" laws to enable the disposition in
such jurisdictions of such Registrable Securities; provided, however,
that the Company shall not be required (x) to qualify generally to do
business in any jurisdiction where it would not otherwise be required
to qualify but for this Section 4(d) or (y) to file any general consent
to service of process.
(e) The Company shall use its best efforts to cause the
Registrable Securities covered by a Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable the Holders to consummate the
disposition of such Registrable Securities.
(f) The Company shall promptly notify Holders' Counsel and (if
so requested) confirm such notice in writing, (i) when a Prospectus or
any Prospectus supplement or post-effective amendment has been filed
and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by
the Commission or any state securities authority for amendments or
supplements to a Registration Statement or Prospectus or for additional
information after the Registration Statement has become effective,
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the issuance
by any state securities commission or other regulatory authority of any
order suspending the qualification or exemption from qualification of
any of the Registrable Securities under state securities or "blue sky"
laws or the initiation of any proceedings for that purpose, and (v) of
the happening of any event which requires the making of any changes in
such Registration Statement or Prospectus so that they will not contain
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 in light of the circumstances under which they were made not
misleading; and, as promptly as practicable thereafter, prepare and
file with the Commission and furnish a supplement or amendment to such
Prospectus or make an appropriate filing under the Exchange Act so
that, as thereafter deliverable to the purchasers of such Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
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statements therein, in light of the circumstances under which they were
made, not misleading.
(g) The Company shall promptly use its best efforts to prevent
the issuance of any order suspending the effectiveness of a
Registration Statement and, if one is issued, use its best efforts to
obtain the withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment.
(h) The Company shall, as promptly as practicable after the
filing with the Commission of any document which is incorporated by
reference into a Registration Statement, deliver a copy of each such
document (in the form in which it was incorporated) to Holders'
Counsel.
(i) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates (which shall not
bear any restrictive legends unless required under applicable law)
representing securities sold under a Registration Statement, and enable
such securities to be in such denominations and registered in such
names as such Holders may request and keep available and make available
to the Company's transfer agent prior to the effectiveness of such
Registration Statement a supply of such certificates.
(j) The Company shall promptly make available to each Holder
and any attorney, accountant or other agent or representative retained
by any such Holder (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all
information requested by any such Inspector in connection with such
Registration Statement; provided that the obligations of the Company
under this Section 4(j) are conditioned upon the execution by such
Inspectors of a confidentiality agreement in form reasonably
satisfactory to the Company.
(k) The Company shall use its best efforts to cause the
Registrable Securities included in a Registration Statement to be (i)
listed on each securities exchange, if any, on which the Company's
Common Stock is then listed, or (ii) authorized to be quoted and/or
listed, as applicable, on any other automated quotation system on which
the Common Stock is then listed, including the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or the
National Market System of Nasdaq.
(l) The Company shall cooperate with each Holder participating
in the disposition of Registrable Securities and Holders' Counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. ("NASD"); provided that any and
all fees associated with such NASD filings shall be the sole
responsibility of such Holder.
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(m) The Company shall, during the period when the Prospectus
is required to be delivered under the Securities Act, promptly file all
documents required to be filed with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act.
Each Holder, upon receipt of any notice (a "Suspension Notice") from
the Company of the happening of any event of the kind described in Section
4(f)(v), shall forthwith discontinue disposition of the Registrable Securities
pursuant to the Shelf Registration Statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(f) or until it is advised in
writing (the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus, and, if so directed by the
Company, such Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice; provided, however, that the Company shall not give a
Suspension Notice until after the Shelf Registration Statement has been declared
effective and shall not give more than two Suspension Notices during any period
of twelve consecutive months and in no event shall the period from the date on
which any Holder receives a Suspension Notice to the date on which any Holder
receives either the Advice or copies of the supplemented or amended Prospectus
contemplated by Section 4(f) (the "Suspension Period") exceed 45 days; and
provided, further, that in the event that the Company gives two Suspension
Notices during any period of twelve consecutive months, such two Suspension
Periods shall not, in the aggregate, exceed 60 days. In the event that the
Company shall give any Suspension Notice, the Company shall use its best efforts
and take such actions as are reasonably necessary to render the Advice and end
the Suspension Period as promptly as practicable.
If any Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (i) the insertion therein of language, in form and substance
reasonably satisfactory to such Holder, to the effect that the holding by such
Holder of such securities is not to be construed as a recommendation by such
Holder of the investment quality of the Company's securities covered thereby and
that such holding does not imply that such Holder will assist in meeting any
future financial requirements of the Company, or (ii) in the event that such
reference to such Holder by name or otherwise is not required by the Securities
Act or any similar Federal or state "blue sky" statute and the rules and
regulations thereunder then in force, the deletion of the reference to such
Holder.
Section 5. Registration Expenses. Any and all expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation, all Commission and securities exchange, Nasdaq registration and
filing fees, all filing fees and expenses incurred in connection with compliance
with state securities or "blue sky" laws, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or accounting duties), all
expenses for word processing and distributing to the Holders any Registration
Statement, any Prospectus and any amendments or supplements thereto, any other
documents relating to the performance of and compliance with this Agreement by
the Company, the fees and expenses incurred in connection
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with the listing of the Registrable Securities, the fees and disbursements of
counsel for the Company and of the independent certified public accountants of
the Company, and Securities Act liability insurance (if the Company elects to
obtain such insurance), but excluding commissions, transfer taxes, if any,
relating to the sale or disposition of Registrable Securities and any fees and
expenses of any counsel and accountants which may be retained by the Holders
(all such expenses being herein called "Registration Expenses"), will be borne
by the Company whether or not the Shelf Registration Statement to which such
expenses relate becomes effective.
Section 6. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each Holder,
its partners, officers, directors, trustees, stockholders, employees, agents and
investment advisers, and each Person who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or
is under common control with, or is controlled by, such Holder, together with
the partners, officers, directors, trustees, stockholders, employees, agents and
investment advisers of such controlling Person (collectively, the "Controlling
Persons"), from and against all losses, claims, damages, liabilities and
expenses (including without limitation any legal or other fees and expenses
incurred by any Holder or any such Controlling Person in connection with
defending or investigating any action or claim in respect thereof)
(collectively, the "Damages") to which such Holder, its partners, officers,
directors, trustees, stockholders, employees, agents and investment advisers,
and any such Controlling Person may become subject under the Securities Act or
otherwise, insofar as such Damages (or proceedings in respect thereof) arise out
of or are based upon any untrue or alleged untrue statement of material fact
contained in any Registration Statement (or any amendment thereto) pursuant to
which Registrable Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, except insofar as such Damages arise out of or are
based upon any such untrue statement or omission based upon information relating
to such Holder furnished in writing to the Company by such Holder expressly for
use therein; provided, however, that the Company shall not be liable to any
Holder under this Section 6(a) to the extent that any such Damages were caused
by the fact that such Holder sold Securities to a Person as to whom it shall be
established that there was not sent or given, or deemed sent or given pursuant
to Rule 153 under the Securities Act, at or prior to the written confirmation of
such sale, a copy of the Prospectus as then amended or supplemented if, and only
if, (i) the Company has previously furnished copies of such amended or
supplemented Prospectus to such Holder and (ii) such Damages were caused by any
untrue statement or omission or alleged untrue statement or omission contained
in the Prospectus so delivered which was corrected in such amended or
supplemented Prospectus.
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(b) Indemnification by the Holders. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, its
directors, officers, trustees, stockholders, employees, agents and investment
advisers and each Person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, or is
under common control with, or is controlled by, the Company, together with the
partners, officers, directors, trustees, stockholders, employees, agents and
investment advisers of such controlling Person, to the same extent as the
foregoing indemnity from the Company to such Holder, but only with reference to
information relating to such Holder furnished to the Company in writing by such
Holder expressly for use in any Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto); provided,
however, that such Holder shall not be obligated to provide such indemnity to
the extent that such Damages result from the failure of the Company to promptly
amend or take action to correct or supplement any such Registration Statement or
Prospectus on the basis of corrected or supplemental information provided in
writing by such Holder to the Company expressly for such purpose. In no event
shall the liability of any Holder of Registrable Securities hereunder be greater
in amount than the amount of the proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
(c) Indemnification Procedures. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to either paragraph
(a) or (b) above, such Person (the "indemnified party") shall promptly notify
the Person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party may, unless in the indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such proceeding, retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceedings
and shall pay the fees and disbursements of such counsel relating to such
proceeding. The failure of an indemnified party to notify an indemnifying party
with respect to a particular proceeding shall not relieve the indemnifying party
from any obligation or liability which it may have pursuant to this Agreement if
the indemnifying party is not substantially prejudiced by the failure to notify.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, or (ii) the
indemnifying party elects not to promptly assume the defense of such proceeding
or fails to employ counsel reasonably satisfactory to such indemnified party or
parties, or (iii) the indemnifying party is not entitled to assume the defense
of such proceeding due to the indemnified party's reasonable conclusion that a
conflict of interest between such indemnified and indemnifying parties may exist
with respect to such proceeding, (A) the named parties to any such proceeding
(including any impleaded parties) include both such indemnified party or parties
and any indemnifying party or an Affiliate of such indemnified party or parties
or of any indemnifying party, (B) there may be one or more defenses available to
such indemnified party or parties or such Affiliate of such indemnified party or
parties that are different from or additional to those available to any
indemnifying party or such Affiliate of any indemnifying party and (C) such
indemnified party or parties shall have been advised by such counsel that there
may exist a conflict of interest between or among such indemnified party or
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parties or such Affiliate of such indemnified party or parties and any
indemnifying party or such Affiliate of any indemnifying party, in which case,
if such indemnified party or parties notifies the indemnifying party or parties
in writing that it elects to employ separate counsel of its choice at the
expense of the indemnifying parties, the indemnifying parties shall not have the
right to assume the defense thereof and in which case such counsel shall be at
the expense of the indemnifying party or parties, it being understood, however,
that unless there exists a conflict among indemnified parties, the indemnifying
party or parties shall not, in connection with any one such proceeding or
separate but substantially similar or related proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent (which consent shall not be
unreasonably withheld) but, if settled with such consent (or upon a
determination that such consent was unreasonably withheld) or if there be a
final judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party or parties from and against any loss or liability by reason of
such settlement or judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which such indemnified party is 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 claims that are the subject matter of such proceeding.
(d) Contribution. To the extent that the indemnification
provided for in paragraph (a) or (b) of this Section 6 is unavailable to an
indemnified party or insufficient in respect of any Damages, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such Damages in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Holders on the other hand in connection with the statements or omissions that
resulted in such Damages, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Holders on the other hand 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 Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Notwithstanding the provisions of this Section 6(d), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Holder were offered to the
public (less any underwriting discounts and commissions) exceeds the amount of
any damages which such Holder has otherwise been required to pay by reason of
such untrue statement or omission. Each Holder's obligation to contribute
pursuant to this Section 6(d) is several in the proportion that the proceeds of
the offering received by such Holder bears to the total proceeds of the offering
received by all the Holders and not joint.
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If indemnification is available under paragraph (a) or (b) of this
Section 6, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in such paragraphs without regard to the relative fault
of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 6(d).
The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 6(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to herein. The amount paid or payable
by an indemnified party as a result of the Damages referred to in this Section 6
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred (and not otherwise reimbursed) by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 6 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
Section 7. Rule 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
(or, if the Company is not required to file such reports, it will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales under Rule 144 under the Securities Act), and it will
take such further action as any Holder may request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder, the Company will deliver to such
Holder a written statement as to whether it has complied with such requirements.
Section 8. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this Agreement enter into any
agreement which is in conflict with this Agreement. The rights granted to the
Holders hereunder do not in any way conflict with any other such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in interest of the outstanding Registrable Securities
affected by such amendment, modification, supplement, waiver or consent;
provided, however, that, no amendment, modification, supplement, waiver or
consent to any departure from the provisions of Section 4 hereof (other than any
immaterial amendment, modification, supplement, waiver or consent) shall be
effective as against any Holder of Registrable Securities unless consented to in
writing by such Holder.
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(c) Notices. All notices and other communications provided for
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telecopier, registered or certified
mail (return receipt requested), postage prepaid or courier to the parties at
their respective addresses set forth on the signature pages hereof (or at such
other address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; by confirmed
receipt of transmission, if telecopied; and on the next Business Day if timely
delivered to a courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Company and, subject to the proviso in the definition of "Holder" in Section 1
hereof, any Holder. If any transferee of any Holder shall acquire Registrable
Securities in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to principles of conflicts of law.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Holders shall be enforceable to the fullest extent permitted by law.
(i) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and is intended to be the
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings
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between the parties (including, without limitation, the Merger Agreement) with
respect to such subject matter.
(j) Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall, to the extent permitted by
applicable law, be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
(k) Further Assurances. Each party (a "Requested Party") shall
cooperate and take such action as may be reasonably requested by another party
in order to carry out the provisions and purposes of this Agreement and the
transactions contemplated hereby; provided, however, that such cooperation and
action shall not interfere in any material respect with the business of the
Requested Party.
(l) Remedies. In the event of a breach or a threatened breach
by any party to this Agreement of its obligations under this Agreement, any
party injured or to be injured by such breach will be entitled to specific
performance of its rights under this Agreement or to injunctive relief, in
addition to being entitled to exercise all rights provided in this Agreement and
granted by law. The parties agree that the provisions of this Agreement shall be
specifically enforceable, it being agreed by the parties that remedies at law
for violations hereof (including monetary damages) are inadequate and that the
right to object in any action for specific performance or injunctive relief
hereunder on the basis that a remedy at law would be adequate is waived.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
WINSTAR COMMUNICATIONS, INC.
By:
Name:
Title:
Notice Information:
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STOCKHOLDERS
Thomas A. Domencich
Notice Information:
Dennis R. Patrick
Notice Information:
Alex D. Felker
Notice Information:
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Schuyler Riley
Notice Information:
Donald Domencich
Notice Information:
Susan Dolinar
Notice Information:
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Jon Domencich
Notice Information:
SPECTRUM EQUITY INVESTORS, L.P.
By:
Name: Kevin J. Maroni
Title: Attorney-in-fact
Notice Information:
MWLP Co., Inc.
By:
Name: Kevin J. Maroni
Title: President
Notice Information:
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IAI U.S. VENTURE FUND, L.P.
By:
Name:
Title:
Notice Information:
EAGLE VENTURES, LLC.
By:
Name:
Title:
Notice Information:
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INVESTMENT ADVISERS, INC.
By:
Name:
Title:
Notice Information:
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EXHIBIT 3
WINSTAR COMPLETES MILLIWAVE PURCHASE
Adds Substantially to 38 GHz Spectrum Holdings
Former FCC Chairman Dennis Patrick Joins WinStar Board of Directors
NEW YORK -- JANUARY 3, 1997, WINSTAR COMMUNICATIONS, INC. (NASDAQ-WCII)
announced that it has completed its previously announced acquisition of
Milliwave, L.P., a large holder of 38 GHz licenses, covering 160 million people
in more than 80 major markets. The acquisition significantly expands WinStar's
coverage, adding a new channel in 36 existing WinStar markets, and adding more
than 50 new major markets to WinStar's operating territories.
In 27 of the markets where WinStar currently holds four or more 100 MHz
channels, the Milliwave licenses will add an additional channel, bringing
WinStar's coverage to five channels in most of the top 45 markets, with some
exceptions: 1) WinStar will have seven channels in Manhattan and six in the
wider New York metropolitan area, and 2) WinStar will have six channels in
Dallas, Baltimore, and Philadelphia, assuming completion of another previously
announced acquisition.
In nine of the additional markets where WinStar currently holds single channel
licenses, the Milliwave licenses will bring WinStar's capacity to two channels.
The agreements will also add single channel licenses in more than 50 new cities
covering 62 million people, and including such large markets as Providence,
Hartford, West Palm Beach, Sacramento, and Orlando.
Dennis Patrick, who joined Milliwave as its chief executive officer in June
1996, has joined WinStar's board of directors. Mr. Patrick was the chairman of
the FCC from 1987 to 1989, after serving as an FCC commissioner from 1983 to
1987. He recently was chief executive officer of Time Warner Telecommunications,
from 1990 to 1995.
WinStar paid $40 million in cash and approximately $75 million issued in the
form of 3,594,620 shares of WinStar common stock in consideration for the
acquisition.
"WinStar did an outstanding job in completing this transaction almost a year
ahead of schedule. We had chosen WinStar to be our partner based partly on its
operating management, software systems, and general expertise in super high
frequency engineering, and the company demonstrated its strength in these areas
by assisting in the construction of our licenses," said Dennis Patrick, Chief
Executive Officer, Milliwave. "I look forward to serving on the board of
WinStar, which I believe is positioned to be a major player in local telephony.
The multiple channels we have in our major markets will provide us with the
required capacity to deliver the broadband services which customers are
demanding, and will make us a more effective competitor against the large
incumbent local telephone companies."
WinStar holds 38 GHz licenses in 46 of the top 50 markets, including the top 31,
and more than 160 major market areas in total, covering approximately 170
million people, and approximately 573 million channel pops (population coverage
multiplied by the number of channels).
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WinStar Communications, Inc. is a national local communications company, serving
business customers, long distance carriers, fiber-based competitive access
providers, mobile communications companies, local telephone companies, and other
customers with broadband local communications needs. The company provides its
Wireless Fiber(sm) services using its licenses in the 38 GHz spectrum. The
company also provides long distance services and various information services
and entertainment content.
Wireless Fiber is a service mark of WinStar Communications, Inc.
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