SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM 8-K
ON FORM 8-K/A
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 12, 1998
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) 584-4000
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index -- Page 5
Page 1 of 11 Pages
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Item 2. Acquisition or Disposition of Assets
On January 21, 1998 ("Closing Date"), WinStar Midcom Acquisition Corp.
("WMAC"), a wholly-owned subsidiary of WinStar Communications, Inc. ("Company"),
consummated the acquisition (the "Midcom Acquisition") of substantially all of
the assets and business ("Midcom Business") of MIDCOM Communications Inc. and
certain of its subsidiaries (collectively, "Midcom") for a purchase price of
$92.0 million in cash ("Purchase Price") pursuant to the Amended and Restated
Asset Purchase Agreement dated as of December 17, 1997, as amended by agreement
dated December 23, 1997 ("Purchase Agreement"), among the Company, WMAC and
Midcom. On December 23, 1997, $9.2 million of the Purchase Price ("Initial
Deposit") was placed in escrow. On the Closing Date, $48.5 million of the
Purchase Price was paid in cash to Midcom and its designees and $10.8 million of
the Purchase Price was placed in escrow along with the Initial Deposit to secure
Midcom's obligations to indemnify WMAC and the Company in certain circumstances.
In addition, $23.5 million of the Purchase Price was placed in escrow on the
Closing Date to secure Midcom's obligation to refund a portion of the Purchase
Price in the event of a post-closing adjustment of the Purchase Price under the
Purchase Agreement. The Purchase Price was paid by the Company using a portion
of the $168.3 million of net proceeds it raised in an institutional private
placement of the Company's Series C 14 1/4% Senior Cumulative Exchangeable
Preferred Stock in December 1997.
The Midcom Business provides long distance voice and data
telecommunications services primarily to small and medium-sized businesses at
approximately 100,000 customer locations, most of which are in major
metropolitan areas of California, Florida, Illinois, New York, Ohio and
Washington. Midcom's services include basic "1 plus" and "800" long distance,
frame relay data transmission and dedicated private line. During the nine months
ended September 30, 1997 and 1996, Midcom generated revenues of approximately
$74.3 million and $124.6 million, respectively.
Midcom filed for relief under Chapter 11 of the U.S. Bankruptcy Code
with the U.S. Bankruptcy Court for the Eastern District of Michigan (the
"Bankruptcy Court") in November 1997. Accordingly, consummation of the Midcom
Acquisition was subject to the approval of the acquisition by the Bankruptcy
Court, which was obtained on January 7, 1998.
Item 5. Other Events
On January 12, 1998 ("Closing Date"), WG Acquisition Corp.("WGAC"), a
wholly-owned subsidiary of the Company, consummated the acquisition of the
Internet services subsidiary of Telesoft Corp. ("Telesoft"), commercially known
as GoodNet ("GoodNet"), for a purchase price of approximately $22.0 million,
consisting of $3.5 million cash and 732,784 shares of common stock of the
Company ("Common Stock"), pursuant to a Merger and Reorganization Agreement,
dated as of December 10, 1997, among the Company, WGAC, Telesoft, GoodNet and
the other stockholders of GoodNet.
As of the Closing Date, WGAC changed its name to WinStar GoodNet, Inc.
GoodNet is a national provider of Internet services, offering
high-capacity data communication services to high-bandwidth users including
Internet service providers, universities and colleges, large landlords, RBOCs,
cable television operators and value-added resellers, and dial-up Internet
access to consumers. GoodNet possesses a national network of multi-protocol
asynchronous transfer mode (ATM) switches, with points of presence in 27 cities
and more than 130 peering arrangements with other U.S. and foreign Internet
service providers. During the nine
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months ended August 31, 1997 and 1996, GoodNet generated revenues of
approximately $4.1 million and $1.3 million, respectively.
GoodNet will operate as part of the Company's new division, WinStar
Broadband Services ("WBS"), which was formed by the Company in December 1997 to
facilitate the Company's expansion into the growing data communications market.
WBS will develop the Company's presence in the areas of Internet services and
data transport, local area and wide area network professional services and
network applications.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired.
(i) With respect to Item 2, above, the Company will file
the required financial statements of Midcom within 60
days of the last date on which this Report on Form
8-K was required to be filed.
(ii) With respect to Item 5, above, the Company is not
required to file any financial statements for
GoodNet.
(b) Pro Forma Financial Information.
(i) With respect to Item 2, above, the Company will file
the required pro forma financial statements of Midcom
within 60 days of the last date on which this Report
on Form 8-K was required to be filed.
(ii) With respect to Item 5, above, the Company is not
required to file any pro forma financial statements
for GoodNet.
(c) Exhibits.
10.1 Amended and Restated Asset Purchase Agreement among
WinStar Communications, Inc., WinStar Midcom
Acquisition Corp. and Midcom Communications Inc.,
Cel-Tech International Corp. and PacNet Inc., Chapter
11 debtors in possession (previously filed).
10.2 Amendment to Amended and Restated Asset Purchase
Agreement, dated December 23, 1997, among WinStar
Communications, Inc., WinStar Midcom Acquisition Corp.
and Midcom Communications Inc., Cel-Tech International
Corp. and PacNet Inc., Chapter 11 debtors in possession
(filed herewith).
10.3 Merger and Reorganization Agreement among WinStar
Communications, Inc., WG Acquisition Corp., Telesoft
Acquisition Corp. II (d/b/a "GoodNet"), Telesoft Corp.
and the other stockholders of GoodNet (previously
filed).
99.1 Press Release regarding Midcom Acquisition (filed
herewith).
99.2 Press Release regarding GoodNet Acquisition (filed
herewith).
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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 29, 1998 WINSTAR COMMUNICATIONS, INC.
----------------------------
(Registrant)
/s/ Frederic E. Rubin
-----------------------------
Frederic E. Rubin
Vice President and Treasurer
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EXHIBIT INDEX
Exhibit Number Description
10.2 Amendment to Amended and Restated Asset Purchase Agreement,
dated December 23, 1997, among WinStar Communications, Inc.,
WinStar Midcom Acquisition Corp. and Midcom Communications
Inc., Cel-Tech International Corp. and PacNet Inc., Chapter
11 debtors in possession.
99.1 Press Release regarding Midcom Acquisition.
99.2 Press Release regarding GoodNet Acquisition.
5
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EXHIBIT 10.2
December 23, 1997
Midcom Communications Inc.
Cel-Tech International Corp.
PacNet Inc.
26899 Northwestern Highway, Suite 120
Southfield, Michigan 48034
Re: Amended and Restated Asset Purchase Agreement --
Amendments Made December 19, 1997 in Open Court
Gentlemen:
This letter will confirm our agreement that in Bankruptcy
Court on December 19, 1997, the following sections of the Amended and Restated
Asset Purchase Agreement, dated as of December 17, 1997, were amended to read as
follows:
Section 1.2:
(m) The stock of Ad Val, Inc. and its wholly-owned
subsidiary, Ad Val Data, Inc., and all assets owned by, used in or relating to
the business of these two companies.
Section 7.2 Assumption of Contracts. No later than two (2) Business
Days prior to the Closing, the Purchaser shall notify the Sellers in writing as
to any Assumed Contracts that were listed in Section 1.1(l) of the Company
Disclosure Letter as of the date hereof that the Purchaser does not desire to
assume at Closing, which Contracts shall be deleted from Section 1.1(l) of the
Company Disclosure Letter. At Closing, the Sellers shall deliver an updated
Company Disclosure Letter pursuant to Section 2.2 hereof that shall reflect such
changes to the Assumed Contracts to be assumed by the Purchaser hereunder at
Closing and add such excluded Contracts to Section 1.2(c) of the Company
Disclosure Letter.
Section 9.4 Termination by WinStar. This Agreement may be terminated at
any time on or prior to the Closing Date by action of the Board of Directors of
WinStar if (a) a condition precedent to the obligations of the Purchaser and
WinStar hereunder to be fulfilled by the Sellers has not been fulfilled by the
time stated herein for such condition to be fulfilled or, if no such time is
stated, by January 31, 1998; (b) there has been a material breach of any of the
representations, warranties, covenants or agreements set forth in this Agreement
on the part of the Sellers, which breach is not curable or, if curable, is not
cured within ten (10) days after written notice of such breach is given by the
Purchaser to the Sellers; (c) the Board of Directors of the Company has
withdrawn, modified, or changed in a manner adverse to the Purchaser its
approval or rec ommendation of this Agreement in order, or the Sellers otherwise
determine, to approve and permit the Company to execute a definitive agreement
relating to an Overbid; (d) since the date hereof, there have been one or more
events causing a Company Material Adverse Effect; (e) the Closing
<PAGE>
Midcom Communications, Inc.
Cel-Tech International Corp.
PacNet Inc.
December 23, 1997
Page 2
does not occur by January 31, 1998, except if such failure is caused by
Purchaser's actions or inactions in breach of its obligations under this
Agreement; or (f) the 363 Order and the 365 Order have not been entered by the
Bankruptcy Court by January 31, 1998.
Section 9.7(b)(ii)
(A) The termination of this Agreement
pursuant to Section 9.3(c) or (d) or Section 9.4
(except for Section 9.4(d) or (e) or solely because
of the non-fulfillment of any of the conditions
specified in Section 8.3(c), (e), (g), (i), (j), (k)
or (l) which non-fulfillment is not caused by any act
or omission of Sellers); or
Section 10.2 Notices. All notices, claims, demands, and other
communications hereunder shall be in writing and shall be deemed given upon (a)
facsimile transmission, (b) confirmed delivery by a standard overnight carrier
or when delivered by hand, or (c) the expiration of five (5) Business Days after
the day when mailed by registered or certified mail (postage prepaid, return
receipt requested), addressed to the respective parties at the following
addresses (or such other address for a party as shall be specified by like
notice):
(a) If to the Purchaser or WinStar, to
WinStar Communications, Inc.
230 Park Avenue -- Suite 2700
New York, New York 10169
Attention: Timothy R. Graham
Telecopier: 212-922-1637
with copies to
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Attention: David Alan Miller, Esq.
Telecopier: 212-818-8881
(b) If to the Sellers, to
Midcom Communications Inc.
26899 Northwestern Highway, Suite 120
Southfield, Michigan 48034
Attention: Mr. William H. Oberlin
Telecopier: (248) 208-9225
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Midcom Communications Inc.
Cel-Tech International Corp.
PacNet Inc.
December 23, 1997
Page 2-A
with copies to
Midcom Communications Inc.
26913 Northwestern Highway, Suite 165
Southfield, Michigan 48034
Attention: Steven Goldman, Esq.
Telecopier: (248) 945-1904
and
Pepper Hamilton & Scheetz LLP
100 Renaissance Center, Suite 3600
Detroit, Michigan 48243
Attention: Dennis S. Kayes, Esq.
Telecopier: (313) 259-7926
and
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
Attention: Lawrence K. Snider, Esq.
Telecopier: (312) 701-7711
THE NEXT PAGE IS PAGE 3
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Midcom Communications Inc.
Cel-Tech International Corp.
PacNet Inc.
December 23, 1997
Page 3
Please countersign a copy of this letter to confirm your
agreement to the foregoing and return it to the undersigned.
Very truly yours,
WINSTAR MIDCOM ACQUISITION CORP.
By: /s/ Timothy R. Graham
------------------------------
Name: Timothy R. Graham
Title: President
WINSTAR COMMUNICATIONS, INC.
By: /s/ Timothy R. Graham
------------------------------
Name: Timothy R. Graham
Title: Executive Vice President
AGREED:
MIDCOM COMMUNICATIONS INC.
By: /s/ Steven Goldman
-----------------------------------------
Name: Steven Goldman
Title: Vice President & General Counsel
CEL-TECH INTERNATIONAL CORP.
By: /s/ Steven Goldman
-----------------------------------------
Name: Steven Goldman
Title: Vice President & General Counsel
PACNET INC.
By: /s/ Steven Goldman
-----------------------------------------
Name: Steven Goldman
Title: Vice President & General Counsel
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EXHIBIT 99.1
WINSTAR COMPLETES ACQUISITION
OF MIDCOM COMMUNICATIONS INC.
NEW YORK -- JANUARY 22, 1998, WINSTAR COMMUNICATIONS, INC. (NASDAQ-WCII) said
today it has completed its acquisition of the assets of Southfield, Mich.-based
MIDCOM Communications Inc., a national long distance and frame relay provider
that is in bankruptcy proceedings, for $92 million, as detailed in WinStar's
December 17, 1997 announcement.
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, Internet and information services.
Except for any historical information contained herein, the matters discussed in
this press release contain forward-looking statements that involve risks and
uncertainties which are described in the company's SEC reports, including the
10-K for the period ended December 31, 1996, and the 10-Q for the period ended
September 30, 1997.
WinStar is a registered trademark, and Wireless Fiber is a service mark of
WinStar Communications, Inc.
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EXHIBIT 99.2
NEW YORK -- JANUARY 12, 1998, WINSTAR COMMUNICATIONS, INC. (NASDAQ-WCII) said
today it has completed its previously announced acquisition of GoodNet, a
rapidly growing Tier 1 Internet backbone provider based in Phoenix, from
Telesoft Corp. (NASDAQ-TSFT) and certain members of GoodNet management. The
terms were unchanged.
The acquisition, announced December 11, 1997, is part of WinStar's expansion
into the burgeoning data communications business, and offers significant
synergies expected to result in improved utilization of WinStar's technology,
network and sales force with benefits to revenue and EBITDA performance.
GoodNet is one of the leading national Internet service companies in the United
States, with points of presence in 27 cities. The company recently was cited by
WebWeek as having the fourth-highest market share (after MCI/Uunet, Sprint and
GTE/BBN) among U.S. backbone providers serving Internet service providers.
Through its national network of multiprotocol asynchronous transfer mode (ATM)
switches, GoodNet also offers dedicated high-speed Internet access, metropolitan
and wide area network data transport services, including virtual private
networks, to hundreds of commercial clients.
The new WinStar unit will be known as WinStar GoodNet and become part of WinStar
Broadband Services, an organization formed recently to meet increasing data
communications demands.
WinStar paid $3.5 million in cash and $18.5 million in WinStar common stock in
consideration for the acquisition, in addition to assuming approximately
$500,000 in liabilities.
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, Internet and information services.
Except for any historical information contained herein, the matters discussed in
this press release contain forward-looking statements that involve risks and
uncertainties which are described in the company's SEC reports, including the
10-K for the period ended December 31, 1996, and the 10-Q for the period ended
September 30, 1997.
WinStar is a registered trademark and Wireless Fiber is a service mark of
WinStar Communications, Inc.
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