<PAGE>
As filed with the Securities and Exchange Commission on November 5, 1999
Registration No. 333-83293
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
AMENDMENT NO. 2 TO
REGISTRATION STATEMENT ON FORM S-3
UNDER THE
SECURITIES ACT OF 1933
-----------------------------
WINSTAR COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
4812
(Primary standard industrial
classification code number)
13-3585278
(I.R.S. Employer
Identification Number)
685 Third Avenue
New York, New York 10017
(212) 792-9800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
-----------------------------
Timothy R. Graham
Executive Vice President and General Counsel
WinStar Communications, Inc.
685 Third Avenue
New York, New York 10017
(212) 792-9800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------------
Copies to:
David Alan Miller, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Telephone: (212) 818-8800
Fax: (212) 818-8881
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
======================================================================================================================
Proposed Maximum Proposed Maximum
Title of Security Amount to be Aggregate Price Aggregate Amount of
to be Registered Registered Per Share Offering Price Registration Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series F 7 1/4% Cumulative
Convertible Preferred Stock 300,000 shares (1) (1) (1)
("Preferred Stock")
- ----------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01
per share underlying Preferred 4,900,000 shares(2) $61.96(3) $303,604,000 $84,401.91
Stock
- ----------------------------------------------------------------------------------------------------------------------
Common Stock to be resold 902,263 shares $41.31(4) $ 37,272,485 $10,361.75
by certain persons
- ----------------------------------------------------------------------------------------------------------------------
Total $94,763.66
======================================================================================================================
</TABLE>
* $88,688.92 of this fee was previously paid. The balance is paid herewith.
(1) Filing fee being paid with respect to underlying shares of Common Stock.
(2) Pursuant to Rule 416(b) promulgated under the Securities Act of 1933, as
amended, this Registration Statement also covers a presently
indeterminable number of additional shares of Common Stock which may be
issued in lieu of cash dividends during the term of the Preferred Stock.
Pursuant to Rule 416, this Registration Statement also covers a presently
indeterminable number of additional shares of Common Stock issuable by the
Company in the event the Preferred Stock is converted in connection with a
change of control of the Company.
(3) Represents the conversion price ($61.96) for a share of Common Stock.
(4) Based on the average of the high and low prices of a share of Common Stock
as reported by Nasdaq on November 1, 1999, based on Rule 457(c).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
Preliminary Prospectus dated November 5, 1999
Subject to Completion
WINSTAR COMMUNICATIONS, INC.
-------------------------
300,000 Shares of Series F 7 1/4% Senior Cumulative Convertible Preferred Stock
and
5,802,263 shares of Common Stock
This prospectus covers :
o the resale by certain persons from time to time of an aggregate of
300,000 shares of our outstanding Series F preferred stock.
o the resale by holders of an indeterminable number of shares of
common stock that may be issued instead of cash as payment of
dividends on the Series F preferred stock;
o our issuance of up to approximately 4,900,000 shares of our common
stock to holders of Series F preferred stock upon conversion of the
Series F preferred stock; and
o the resale by holders of an aggregate of 902,263 shares of our
common stock that we previously issued in connection with various
transactions.
Our Series F preferred stock is eligible for trading in The Portal Market,
a subsidiary of The Nasdaq Stock Market, Inc.
Our common stock is traded on the Nasdaq National Market under the symbol
"WCII." The last sale price of our common stock on the Nasdaq National Market on
November 1, 1999 was $41.31 per share.
See "Risk Factors" beginning on page 8 of this prospectus for information
that should be considered by prospective investors.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. No
holder may sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this prospectus is November , 1999
<PAGE>
----------------------------
TABLE OF CONTENTS
Page
SUMMARY .................................................................... 3
RISK FACTORS ............................................................... 8
PRICE RANGE OF OUR COMMON STOCK ............................................ 18
CAPITALIZATION ............................................................. 19
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS .................... 21
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION .............................. 46
EXPERTS .................................................................... 52
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS ........................................ F-1
----------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
General
We provide telecommunications services primarily to businesses in a
growing number of major U.S. markets. Our telecommunication services are
delivered through our own local networks. These networks are capable of carrying
high volumes of data and voice traffic and are commonly referred to as
"broadband networks." Our local broadband networks allow us to offer our
customers a variety of individual and bundled services, including local and long
distance voice services, high-speed data transport, Internet access and other
enhanced communications services. We also provide Internet-based information
content and services, such as online business resources. Our services are
delivered with a high degree of customer care and at competitive prices, which
affords our customers an attractive alternative to the incumbent local exchange
carriers and other service providers.
Our local broadband networks are based on our wireless transmission
capability, which we call "Wireless Fiber(ServiceMark)". Our Wireless Fiber
services use the 38 GHz, 28 GHz and other portions of the radio spectrum to
carry voice, data and video transmissions. Our Wireless Fiber services can
provide fiber-quality transmission at speeds more than 350 times faster than the
fastest service currently in general use on copper-based, wireline networks. We
hold licenses that provide us with the largest amount of 38 GHz radio spectrum
in the country, as well as a large amount of 28 GHz spectrum and other various
spectrum rights. Our spectrum holdings cover markets encompassing more than 200
million people and more than 80% of the business market in the United States.
As part of our network buildout, we are interconnecting our local
broadband network in each of our cities by using fiber connections between each
city. These city-to-city fiber connections are allowing us to create a national
broadband network. This seamless national network will operate as a true
broadband alternative to the existing public telephone networks that are owned
and controlled by the incumbent service providers. Our national broadband
network will enable us to carry a substantial portion of our customers' voice,
data and video transmissions, from point of origination to point of termination,
thereby forming an end-to-end broadband network. Since this end-to-end network
will reduce our reliance on the facilities of other providers, we will be able
to substantially reduce our costs and have greater control over the quality of
service we provide.
We currently provide service in more than 30 major U.S. markets, including
Atlanta, Boston, Chicago, Dallas, Los Angeles, New York City, San Diego, San
Francisco and Washington, D.C., and anticipate that we will be providing our
telecommunications services in a total of 60 U.S. markets by the end of 2000.
Additionally, we are expanding internationally and intend to enter into up to 50
foreign markets by the end of 2004.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Business Strategy and Strengths
Our goal is to create one of the first national broadband networks and to
drive a high volume of customer traffic across this network. We believe that our
Wireless Fiber and switch-based infrastructure provides us with significant
competitive advantages. These advantages are particularly significant with
respect to other service providers that rely on wireline for the final
connection to the customer location, commonly referred to as the "last mile."
Our strategy is to exploit these advantages in order to attain our goal. Key
elements of our strategy include:
o Rapidly and cost-effectively deploying our local infrastructure;
o Interconnecting our local networks to create a national broadband
network;
o Targeting customers located in "on-net" buildings, which are
buildings that are already served by our local broadband networks;
o Offering attractive pricing and superior customer care; and
o Providing integrated voice and data telecommunications and
information services.
Corporate Information
Winstar was incorporated under the laws of the State of Delaware in
September 1990. Our principal office is located at 685 Third Avenue, New York,
New York 10017 and our telephone number is (212) 792-9800.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Summary Financial Information
The summary historical financial data presented on the next two pages for
the years ended December 31, 1996, 1997 and 1998 have been derived from our
audited consolidated financial statements incorporated by reference into this
prospectus. The summary historical financial data presented on the next two
pages for the nine months ended September 30, 1998 and 1999 have been derived
from our unaudited condensed consolidated financial statements incorporated by
reference into this prospectus. In our opinion, the unaudited condensed
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments, which
consist of only normal recurring accrual adjustments, necessary for a fair
presentation of the results of operations for the periods presented.
The summary as adjusted data presented on the next two pages for the year
ended December 31, 1998 and for the nine months ended September 30, 1999 have
been derived from the unaudited pro forma condensed consolidated financial
statements included elsewhere in this prospectus. The pro forma adjustments are
based upon available information and certain assumptions that we believe are
reasonable.
The pro forma financial statements and summary data do not purport to
represent what our results of operations would actually have been had the
financing transactions occurred on the dates discussed in footnotes (a) through
(c) below, or to project our results of operations or financial condition for
any future period or date. The financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the unaudited pro forma condensed consolidated
financial statements included elsewhere in this prospectus and the consolidated
and condensed consolidated financial statements incorporated by reference into
this prospectus from our Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q set forth under the "Where You Can Find More Information" section of
this prospectus.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31, 1998
------------ -----------------
As
1996 1997 Actual Adjusted(a)
---- ---- ------ -----------
----------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenues:
Telecommunications services:
Core $ 604 $ 22,653 $ 141,466 $ 141,466
Other 3,883 7,143 49,643 49,643
--------- --------- --------- ---------
Total telecommunications services 4,487 29,796 191,109 191,109
Information services 14,650 41,354 53,338 53,338
--------- --------- --------- ---------
Total operating revenues 19,137 71,150 244,447 244,447
Operating loss:
Telecommunications services (40,731) (147,134) (231,017) (231,017)
Information services (1,409) (4,092) (10,167) (10,167)
General corporate (11,373) (27,312) (57,225) (57,225)
--------- --------- --------- ---------
Total operating loss (53,513) (178,538) (298,409) (298,409)
Interest expense (36,748) (77,257) (156,599) (167,356)
Interest income 10,515 17,577 29,758 29,758
Other income, net(c) -- 4,719 5,500 5,500
--------- --------- --------- ---------
Loss from continuing operations (79,746) (233,499) (419,750) (430,507)
Loss from discontinued operations (3,977) (15,985) (24,974) (24,974)
--------- --------- --------- ---------
Net loss (83,723) (249,484) (444,724) (455,481)
Preferred stock dividends -- (5,879) (42,968) (67,712)
--------- --------- --------- ---------
Net loss applicable to common stockholders $ (83,723) $(255,363) $(487,692) $(523,193)
========= ========= ========= =========
Basic and diluted loss per share:
Actual and pro forma:
Loss per share from continuing operations $ (2.86) $ (7.20) $ (11.96) $ (12.70)
========= ========= ========= =========
Loss per share from discontinued operations (0.14) (0.48) (0.65) (0.64)
========= ========= ========== =========
<CAPTION>
Nine Nine Months Ended
Months September 30, 1999
Ended ------------------
September
30,
1998 As
---- Actual Adjusted(b)
------ -----------
-------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Operating revenues:
Telecommunications services:
Core $ 85,858 $ 243,061 $ 243,061
Other 40,276 21,369 21,369
--------- --------- ---------
Total telecommunications services 126,134 264,430 254,430
Information services 37,220 39,703 39,703
--------- --------- ---------
Total operating revenues 163,354 304,133 304,133
Operating loss:
Telecommunications services (165,534) (300,179) (300,179)
Information services (7,036) (13,368) (13,368)
General corporate (20,336) (28,186) (28,186)
--------- --------- ---------
Total operating loss (192,906) (341,733) (341,733)
Interest expense (111,704) (154,011) (154,011)
Interest income 24,043 16,759 16,759
Other income, net(c) 4,000 3,000 3,000
--------- --------- ---------
Loss from continuing operations (276,567) (475,985) (475,985)
Loss from discontinued operations (25,031) -- --
--------- --------- ---------
Net loss (301,593) (475,985) (475,985)
Preferred stock dividends (31,195) (43,364) (53,739)
--------- --------- ---------
Net loss applicable to common stockholders $(332,793) $(519,349) $(529,724)
========= ========= =========
Basic and diluted loss per share:
Actual and pro forma:
Loss per share from continuing operations $ (8.10) $ (10.47) $ (10.63)
========= ========= =========
Loss per share from discontinued operations (0.66) -- --
========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31, 1998
------------ -----------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Loss per share $ (3.00) $ (7.68) $ (12.61) $ (13.34)
Weighted average common shares =========== =========== =========== ===========
outstanding 27,911 33,249 38,681 39,213
=========== =========== =========== ===========
Other Financial Data:
Capital expenditures $ 46,651 $ 222,196 $ 402,206 $ 402,206
Depreciation and amortization 3,764 25,102 74,953 74,953
<CAPTION>
Nine Nine Months Ended
Months September 30, 1999
Ended ------------------
September
30,
1998 As
---- Actual Adjusted(b)
------ -----------
-------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Loss per share $ (8.76) $ (10.47) $ (10.63)
========= ========= =========
Weighted average common shares 37,970 49,606 49,836
========= ========= =========
outstanding
Other Financial Data:
Capital expenditures $ 222,852 $ 863,500 $ 863,500
Depreciation and amortization 48,666 106,252 106,252
</TABLE>
<TABLE>
<CAPTION>
September 30, 1999
(in thousands)
<S> <C>
Balance Sheet Data:
Cash, cash equivalent and short-term investments $ 476,921
Property and equipment, net 1,415,464
Total assets 2,767,405
Current portion of long-term debt and capital lease obligations 149,371
Long-term debt and capital lease obligations, less current portion 2,078,593
Total debt 2,227,964
Series C cumulative exchangeable redeemable preferred stock 223,477
Series D senior cumulative convertible redeemable preferred stock 200,000
Common and other preferred stock and additional paid-in capital 1,004,163
Stockholders' deficit (308,924)
</TABLE>
- ----------------------------
(a) Gives effect to certain financings that occurred prior to June 30, 1999
as if they each occurred on January 1, 1998. These financings are
described under the section of this prospectus entitled "Description of
Certain Indebtedness and Capital Stock."
(b) Gives effect to a private placement we completed in June 1999 as if it had
occurred on January 1, 1999. This private placement is described under the
section of this prospectus entitled "Description of Certain Indebtedness
and Capital Stock."
(c) The years ended December 31, 1997 and 1998 and the nine months ended
September 30, 1998 and 1999 include a deferred income tax benefit of $2.5
million, $5.5 million, $4.0 million and $3.0 million, respectively.
- --------------------------------------------------------------------------------
7
<PAGE>
RISK FACTORS
Before making an investment in any of the securities offered under this
prospectus, investors should carefully consider the risk factors set forth
below, as well as the other information appearing in or incorporated by
reference into this prospectus.
Risks relating to our financial condition
We expect to continue to incur losses in the future and may never become a
profitable company.
Since our inception, we have incurred significant and growing net losses.
We will continue to incur losses as we invest further in the growth of our
telecommunications business. Our losses may not decrease over time as we have
planned, and we may not ever achieve profitability. If we are unable to
substantially reduce our losses over time as planned, or if we fail to achieve
and maintain profitability, the value of our securities would likely diminish
significantly. Our ability to stem our losses and achieve and maintain
profitability is dependent on many factors, many of which we cannot predict or
control. These include our ability to execute our business plan over time, the
general state of the telecommunications markets, competition in our markets, the
success of competing technologies and the general state of the financial
markets.
Our debt and outstanding preferred stock places significant constraints on how
we operate, and we may never be able to repay our debt or redeem our preferred
stock.
We have a large amount of indebtedness, preferred stock and other payment
obligations outstanding, many of which contain extensive covenants restricting
our activities. These obligations could have important consequences for our
business, including:
o limiting our ability to access the additional capital we will need
to sustain and grow our business;
o limiting our flexibility in planning for, or reacting to, changes in
our business; and
o placing us at a competitive disadvantage to less leveraged
competitors, which could have more free cash flow to invest in their
operations.
If our business is not successful, we may not be able to repay our debts
as they become due or redeem our preferred stock when required, which would
force us to either refinance the debt, access other sources of capital, if
available, in order to fund these required payments, or default on our
obligations. Any refinancing or raising of additional capital might be on
unfavorable terms in these circumstances. Any default on these obligations could
force us to diminish or halt our operations or liquidate our assets. Any of
these events would significantly impair the value of our securities.
8
<PAGE>
We may not be able to generate the cash necessary to service our indebtedness
and outstanding preferred stock, which could cause us to default on our
obligations.
A large portion of our debt requires cash interest payments beginning in
2001 and principal repayment beginning in 2004. In addition, under certain
circumstances, we could be required to redeem some of our preferred stock for
cash. If our business is not successful, we might not be able to make these
payments when they become due. If we default on one or more of these payment
obligations, we would, under cross-default provisions, of this indebtedness be
in default under substantially all of our outstanding indebtedness. If we
default under certain circumstances, the debt holders could accelerate our
obligation to repay their debt. In this event, it is very unlikely that we would
be able to repay all of this debt in full. Therefore, we would need to refinance
this debt. However, our ability to do refinance would probably be constrained at
that time by our financial condition. If we could not refinance on acceptable
terms, we could be forced to seek protection from our creditors in bankruptcy or
to diminish or cease our operations.
We have the ability to incur substantially more debt, which would exacerbate the
risks described above.
Although the agreements governing our indebtedness place limitations on
our ability to incur more debt, in some circumstances we can incur substantial
amounts of additional indebtedness. For example, we will continue to borrow
substantial amounts under our $2.0 billion Lucent credit facility and could
borrow additional sums to finance the purchase of equipment. As we incur
additional debt, the risks discussed in the risk factors above would intensify.
If we cannot access significant capital, we cannot sustain the growth of our
operations.
The expansion of our telecommunications operations domestically and abroad
requires substantial additional capital investments. In addition, we must
continue to fund our growing operating losses, as described above, as we grow
our business.
To execute this high-growth strategy, we may make acquisitions of assets,
businesses, spectrum licenses or license holders which also could require
substantial capital investment. To the extent our resources are insufficient to
fund our operations and capital requirements, we will be required to seek
additional sources of capital, including through the sale of debt or equity
securities. The availability of sufficient capital will be dependent on numerous
factors, including the performance of our business over time and the general
state of the telecommunications markets and financial markets. Adequate capital
may not be available when needed. If we cannot obtain capital when needed, we
will not be able to continue the expansion of our operations, either internally
or through strategic acquisitions. If we fail to grow our business in accordance
with our current plans, the value of our securities could diminish
significantly.
9
<PAGE>
Risks relating to our operations
We are subject to extensive federal and state laws, rules and regulations. These
laws, rules and regulations could change at any time in an unpredictable manner
causing a change to or disruption of our business.
The telecommunications services business is highly regulated domestically
at the federal, state and local levels, and abroad by foreign governments. Our
continued ability to acquire and use the spectrum rights needed to operate and
grow our fixed wireless business in accordance with our plans is extremely
important to our success and also is subject to extensive regulation. This
regulatory environment directly affects the breadth of services we are able to
offer, the rates, terms and conditions of those services and the rates, terms
and conditions of necessary underlying services we must secure from other
telecommunications providers.
The regulatory environment also impacts other telecommunications carriers
and therefore the level of competition in the marketplace. Regulatory changes
which negatively impact our ability to use our spectrum rights or offer a broad
variety of services to our customers or which provide a competitive advantage to
other service providers could adversely impact our financial performance and
growth. This, in turn, would diminish the value of our securities. This
regulatory environment changes constantly, and often in ways that we cannot
predict, as a result of new legislation, regulations and judicial
interpretations of these laws and regulations.
We may not be able to effectively compete in our markets, all of which are
highly competitive.
We face intense competition in each of the markets where we operate and
may not be able to effectively compete in these markets. We compete with
regional, national and global companies. Moreover, the growing consolidation of
companies and formation of strategic alliances within the telecommunications and
media industries could give rise to significant new competitors.
Most of our competitors are well-established and have larger and better
developed networks and systems, longer-standing relationships with customers and
suppliers, greater name recognition and significantly greater financial,
technical and marketing resources. Many of these companies have the ability to
subsidize competing services with revenues from a variety of their other
services. As competition increases in domestic and international
telecommunications markets, we anticipate a significant increase in general
pricing pressures which will require competitors increase their sales volume and
to be successful in selling higher margin value added services. If we are not
successful in growing the volume of our sales and in selling higher margin
products and services, we might not achieve the financial results we expect.
Such a failure would diminish the value of our securities.
10
<PAGE>
If we grow rapidly and do not effectively manage this growth, our operations
could be disrupted or our financial condition could be impaired.
We are pursuing a strategy of aggressive and rapid growth, including the
accelerated rollout of our telecommunications services, acquisitions of
businesses and assets and the hiring of additional management and technical and
marketing personnel, all of which will result in higher capital expenditures and
operating expenses. If we are not able to grow as we anticipate, or if we are
not successful in managing our growth, whether internally or through expansion,
in an efficient manner, our financial performance will not meet our expectations
and the value of our securities will be diminished.
We will be subject to many additional risks as we seek to enter foreign markets.
We are expanding the offering of our telecommunications services into
parts of Europe, Asia and South America. We expect to incur losses and to make
capital expenditures to develop these markets. Certain additional risks are
inherent in entering and conducting business in foreign markets, including:
o uncertain regulatory environments which could delay our progress or
limit our ability to acquire or use spectrum;
o fluctuations in currency exchange rates;
o unanticipated changes in tariffs, customs, duties, regulatory
requirements and other trade barriers;
o longer payment cycles and problems in collecting accounts
receivable; and
o potentially adverse tax consequences resulting from operating in
multiple countries with different laws and regulations.
Furthermore, we expect prices for telecommunications services outside of
the United States to decrease in the future for many reasons, including
increased competition among existing and new carriers and additional strategic
alliances or joint ventures among large international carriers. This pricing
pressure could have a significant impact upon the profitability of our
operations abroad.
The need to obtain rights to access buildings in order to build our network
could make it more difficult and costly to expand our business.
In order to build our network and access our customers, we need access to
each building or structure where our antennas will be placed. These include hub
site buildings and customer buildings. We will not be able to expand at the rate
currently planned if we do not obtain these access rights in a timely manner. In
order to obtain these rights we must negotiate separate deals with the landlords
of each building we seek access to. In addition, we may need to obtain zoning or
other governmental approvals in order to build out in a particular building or
area. We may not be successful in obtaining the access rights necessary
11
<PAGE>
to expand our Wireless Fiber services as planned or in obtaining any
construction, zoning, franchises or other governmental permits that may be
necessary for us to provide Wireless Fiber service to our customers at
reasonable costs or on favorable terms, or at all. In the event we are not able
to build our network at the pace required to meet our business plan, our
financial performance could suffer, which could diminish the value of our
securities.
Fixed wireless telecommunications services are relatively new and are not widely
used. Therefore, our Wireless Fiber services may not achieve wide market
acceptance.
There are a number of competing technologies in the marketplace for high
speed telecommunications services in addition to fixed wireless technology.
These include:
o digital subscriber line technology, which is commonly referred to as
DSL and which allows for high speed transmissions over traditional
copper lines,
o cable television infrastructure which is being converted for use as
a two-way communications medium, and
o fiber optic lines.
It is possible that these or other as yet undeveloped technologies could
render our Wireless Fiber services less profitable or less viable. The use of
fixed wireless services such as our 38 GHz and 28 GHz Wireless Fiber services to
provide voice and data telecommunications services is an emerging sector of the
telecommunications industry and has not yet been widely accepted. Neither we nor
any other fixed wireless provider has obtained significant market share and a
substantial market for these services may not develop. If this technology is not
widely accepted in the future, we may not be able to meet our operational or
financial objectives, which would diminish the value of our securities.
We rely in large part on third parties with whom we have business arrangements.
The failure of any of these parties to meet our requirements could harm our
operations.
Our business operations and growth rely in part on services provided by
third parties. Examples of these services include:
o Our use of the facilities of fiber providers, such as Williams and
Metromedia Fiber, and major long distance companies to carry
portions of our customers' traffic.
o Our use of third party vendors such as Lucent Technologies to
provide extensive services in connection with the buildout of our
broadband network. Our expansion and the buildout of our network
could be delayed if Lucent does not
12
<PAGE>
adequately perform these services or if we are required to find an
alternative to Lucent.
The failure of any of these third parties to perform under their
respective agreements or the termination or discontinuance of any of these
agreements could delay our buildout, limit the types or services we can provide
to our customers or cause service problems with existing customers. Any of these
occurrences could adversely impact our ability to meet our operational and
financial goals, which would diminish the value of our securities.
If we are unable to hire and retain qualified personnel to operate our business
our growth would be curtailed.
We believe that our growth and future success will depend in large part on
our continued ability to attract and retain highly skilled and qualified
personnel. Largely due to deregulation and the significant increase in the
number of companies providing telecommunications services, competition for
qualified personnel in the telecommunications industry is more intense than it
has ever been. We therefor may not be able to hire enough qualified personnel to
successfully meet our growth objectives. The failure to recruit and retain
qualified personnel could significantly impede our ability to expand
domestically and abroad and to meet our business objectives.
Computer programs and microprocessors that have time-sensitive software may
recognize a date using "00" as the year "1900" rather than the year "2000," or
not recognize the date at all, which could result in major system failures or
miscalculations.
We are currently addressing the issue of whether or to what extent our
systems and those of other telecommunications companies with which we
interconnect our network will be vulnerable to potential errors and failures
after December 31, 1999. These errors and failures could occur as a result of
certain computer programs being written using two digits, rather than four
digits, to define the applicable year. Computer programs and microprocessors
that have time-sensitive software may recognize a date using "00," such as
January 1, 2000, as January 1, 1900, or not recognize the date at all, which
could result in major system failures or miscalculations.
If we or our suppliers or vendors experience any of these problems, our
ability to service our customers or otherwise carry on our business, could be
materially diminished for a period of time, resulting in lost revenues and
diminished financial performance. The longer term impact of any such failures is
not certain, but could be materially adverse if we lose a significant number of
customers or are unable to continue to do business with one or more key vendors.
Any significant operational and financial problems resulting from the year 2000
problem could cause our securities to diminish in value.
Emissions from our antennas may be a health risk.
The use of wireless equipment, such as antennas, has been alleged to pose
health risks due to radio frequency emissions. The FCC recently adopted new
guidelines and methods
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for evaluating the environmental effects of such emissions from FCC-regulated
transmitters, including wireless antennas, which are generally more stringent
than those previously in effect. While we do not believe that our antennas pose
a health risk, any future findings to the contrary could result in liability on
our part. This could also result in reduced public acceptance of wireless
systems and adversely affect our financial condition or results of operations.
In addition, we could be required to reduce power in our transmissions or
otherwise change the way we operate in order to reduce emissions to acceptable
levels. This could cause us to revise the manner in which we engineer our
wireless network which could add substantially to the cost of our buildout,
thereby adversely impacting our financial performance.
Risks relating to our corporate and capital structure
Certain provisions of our certificate of incorporation could have effects that
conflict with the interests of our stockholders.
Certain provisions of our certificate of incorporation could make it more
difficult for a third party to acquire control of us, even if such change in
control would be beneficial to our stockholders in the short term. For example,
our certificate of incorporation allows us to issue preferred stock without
stockholder approval. We also have adopted a rights plan that grants certain of
our stockholders the right to buy shares of our Series B preferred stock if a
person acquires 10% or more of our outstanding common stock. Any such issuances
of preferred stock could make it more difficult for a third party to acquire us.
Our ability to issue senior preferred stock in the future could adversely affect
the rights of holders of Series F preferred stock and our common stock.
We are authorized to issue preferred stock from time to time on terms that
may be determined at the time of issuance by our board of directors. In certain
instances, a series of preferred stock could include voting rights, preferences
as to dividends and liquidation, conversion and redemption rights senior to the
Series F preferred stock, and in all instances, senior to our common stock. The
future issuance of preferred stock could effectively diminish or supersede the
dividends and liquidation preferences of the Series F preferred stock and
adversely affect our common stock.
The exercise or conversion of our outstanding options, warrants and other
convertible securities into common stock will dilute the percentage ownership of
our stockholders. The sale of such common stock in the open market could
adversely affect the market price of our common stock.
As of November 1, 1999, there were outstanding options and warrants to
purchase approximately 17,954,000 shares of our common stock and more options
will be granted in the future under our employee benefit plans. Additionally,
certain of our outstanding securities, including the Series F preferred stock,
are currently convertible into approximately 13,465,000 shares of our common
stock. Substantially all of the shares of common stock underlying such
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<PAGE>
securities are or will be registered for resale under the Securities Act. The
exercise or conversion of outstanding stock options, warrants or other
convertible securities will dilute the percentage ownership of our other
stockholders. As a matter of supply and demand, any sales in the public market
of shares of our common stock issuable upon the exercise or conversion of such
stock options, warrants or convertible securities would increase the number of
shares of common stock available for purchase on the market. As a matter of
supply and demand, this could adversely affect the prevailing market price of
our common stock.
Because we are a holding company, we have no significant assets other than stock
of our subsidiaries and the proceeds generated from sales of our securities.
Once these proceeds are spent, we will depend on our subsidiaries to generate
the funds needed to operate our business.
Winstar Communications, Inc. is a holding company with no independent
business operations. Our only material assets consist of the stock of our
subsidiaries and the proceeds raised from the sale of our equity and debt
securities, all of which we have loaned or contributed, or intend to loan or
contribute, to our subsidiaries to fund the buildout and development of our
business. We will have to rely upon dividends and other payments from our
subsidiaries to generate the funds necessary to repurchase the Series F
preferred stock or make cash dividend payments, if any. Our subsidiaries,
however, are legally distinct from us and have no obligation, contingent or
otherwise, to pay amounts due on the Series F preferred stock or to make funds
available for these payments. Our subsidiaries have not guaranteed the Series F
preferred stock.
The ability of our subsidiaries to make dividend and other payments to us
is subject to, among other things, the availability of funds, the terms of our
subsidiaries' indebtedness and applicable state laws. Furthermore, in the event
of a liquidation of Winstar Communications, Inc. and its subsidiaries, our
obligation to make payment to holders of the Series F preferred stock or our
common stock will be subordinated to the rights of all creditors of our
subsidiaries as well as all creditors of Winstar Communications, Inc.
An active trading market may not develop or continue for our Series F preferred
stock.
An active trading market may not develop or continue for the Series F
preferred stock. No holder of our Series F preferred stock is obligated to
develop any market for our Series F preferred stock. If any holder should
undertake market-making activities for our Series F preferred stock, it may
cease these market-making activities at any time. In addition, the liquidity of
any trading market in our Series F preferred stock, and the market price quoted
for our Series F preferred stock, may be adversely affected by changes in the
overall market for convertible securities and by changes in our financial
performance or prospects or in the prospects for companies in our industry
generally.
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<PAGE>
The market price of our common stock could fluctuate significantly, sometimes in
a manner unrelated to our performance.
In the past, the market price of our common stock has varied widely in
response to various factors and events, some of which have related to our
performance and financial condition and others of which have not. Some of these
factors and events include:
o the number of shares of our common stock being sold and purchased in
the marketplace during a given period;
o variations in our operating results, particularly where there is a
difference between our actual results and the results expected by
investors and analysts.;
o press reports and publications of reports by industry analysts;
o regulation and industry trends; and
o rumors of significant events which can circulate quickly in the
marketplace, particularly over the Internet.
Since our common stock has been publicly traded, its market price has
fluctuated over a wide range and we expect it to continue to do so in the
future. In addition, the stock market in recent years has experienced broad
price and volume fluctuations that have often been unrelated to the operating
performance of companies, particularly telecommunications and technology
companies. These broad market fluctuations also may adversely affect the market
price of our common stock. We cannot assure you that the market price of the
common stock will exceed the effective conversion price of our Series F
preferred stock.
Special Note About Forward-Looking Statements
This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 with respect to our
financial condition, results of operations and business. The words "anticipate,"
"believe," "estimate," "expect," "plan," "intend," "predict," "project," "will,"
"could" and similar terms and expressions, as they relate to us, are intended to
identify forward-looking statements. These statements reflect our current views
with respect to future events and are subject to numerous risks, uncertainties
and assumptions. We cannot assure you that any of our expectations will be
realized. Factors that may cause actual results to differ materially from those
contemplated by forward-looking statements include, without limitation:
o our ability to service our debt or to obtain financing for the
buildout of our domestic and international telecommunications
networks;
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o our ability to attract and retain a sufficient revenue-generating
customer base;
o competitive pressures in the telecommunications and technology
industries; and
o general economic conditions.
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PRICE RANGE OF OUR COMMON STOCK
Our common stock has been quoted on the Nasdaq National Market since June
1994 under the symbol "WCII."
The following table sets forth, for the three-month periods indicated, the
high and low last sale prices of our common stock as reported on the Nasdaq
National Market.
Period Ended High Low
- ------------ ---- ---
March 31, 1997 $20.25 $11.63
June 30, 1997 14.63 10.13
September 30, 1997 19.19 14.25
December 31, 1997 29.25 21.25
March 31, 1998 44.81 24.63
June 30, 1998 47.38 36.63
September 30, 1998 41.75 18.25
December 31, 1998 39.00 13.00
March 31, 1999 44.44 29.75
June 30, 1999 59.00 37.00
September 30, 1999 62.44 43.25
October 1, 1999 through November 1, 1999 46.08 37.00
The last sale price of our common stock on November 1, 1999 was $41.31 per
share. As of November 1, 1999, 54,760,789 shares of our common stock were held
by more than 1,000 beneficial holders.
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<PAGE>
CAPITALIZATION
The table on the following page sets forth our cash and capitalization as
of September 30, 1999 and should be read in conjunction with the consolidated
and condensed consolidated financial statements incorporated by reference into
this prospectus.
References in the table to our common stock do not include:
o 837,000 shares of common stock issuable upon exercise of options
granted or which may be granted under our 1992 performance equity
plan,
o 13,774,000 shares of common stock issuable upon exercise of options
granted or which may be granted under our 1995 performance equity
plan,
o 8,636,000 shares of common stock issuable upon exercise of other
outstanding options and warrants,
o 642,000 shares of common stock issuable under our employee stock
purchase plan, and
o approximately 13,259,000 shares of common stock issuable upon
conversion of our preferred stock, including our Series F preferred
stock.
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<TABLE>
<CAPTION>
(in thousands,
except share data)
<S> <C>
Cash, cash equivalents and short-term investments ........................................ $ 476,921
===========
Long term debt and capital lease obligations:
12 1/2% guaranteed senior secured notes due 2004 ................................ $ 200,000
12 1/2% guaranteed senior secured notes due 2004 ................................ 50,000
14% senior discount notes due 2005 .............................................. 255,553
14 1/2 senior deferred interest notes due 2005 .................................. 142,636
15% senior subordinated deferred interest notes due 2007 ........................ 133,298
10% senior subordinated notes due 2008 .......................................... 200,000
11% senior subordinated deferred interest notes due 2008 ........................ 294,494
Lucent financing agreement ...................................................... 599,848
Capital lease obligations and other notes (including current
portion) ........................................................................ 352,135
-----------
Total long term debt and capital lease obligations ..................... 2,227,964
-----------
Series C 14 1/4% senior cumulative exchangeable preferred stock
due 2007(a) .............................................................................. 223,477
-----------
Series D 7% senior cumulative convertible preferred stock due 2010(a) .................... 200,000
-----------
Stockholders' equity (deficit):
Series F 7 1/4% senior cumulative convertible preferred stock,
$.01 par value, 300,000 shares authorized, 300,000 issued and outstanding ....... 3
Series A 6% cumulative convertible preferred stock, $.01 par
value, 6,000,000 shares authorized, 4,212,000 issued and
outstanding(a) .................................................................. 42
Series E non-redeemable junior convertible preferred stock,
$.01 par value, 75,100 shares authorized, issued and outstanding ................ 1
Common stock, $.01 par value, 200,000,000 shares authorized,
54,771,000 shares issued and outstanding ........................................ 548
Additional paid-in-capital ...................................................... 1,003,569
Accumulated deficit ............................................................. (1,295,227)
Accumulated other comprehensive loss ............................................ (17,860)
-----------
Total stockholders' deficit ............................................ (308,924)
-----------
Total capitalization .......................................... $ 2,342,517
===========
</TABLE>
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<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The material United States federal income tax consequences that are
generally applicable to holders of our Series F preferred stock are as follows:
Tax Consequences for U.S holders
U.S. holder is any person or entity which is (a) a citizen or resident of
the United States, (b) a corporation or other entity taxable as a corporation
created or organized in or under the laws of the United States or of any state
thereof, including the District of Columbia, or (c) an estate or trust that is
described in Section 7701(a)(30) of the Internal Revenue Code. Section
7701(b)(1) of the Internal Revenue Code defines who is a resident of the United
States for federal income tax purposes.
Distributions in general
Distributions of money or other property made by Winstar with respect to
its Series F preferred stock will be treated as dividends. The amount of any
distribution with respect to our Series F preferred stock will be equal to the
amount of cash distributed or, in the case of a distribution in the form of
common stock, the fair market value of the shares of common stock on the date of
the distribution.
These dividends will be taxable as ordinary income to the extent that
Winstar has earnings and profits for the current taxable year or has accumulated
earnings and profits throughout Winstar's years of existence as calculated for
United States federal income tax purposes.
If the amount of a distribution with respect to our Series F preferred
stock exceeds our current and accumulated earnings and profits, it will be
treated first as a tax-free return of capital to the extent of the holder's tax
basis in the Series F preferred stock, and thereafter as capital gain from the
sale of our Series F preferred stock. This capital gain will be taxable as
described below under "Sale, redemption or other taxable disposition of Series F
preferred stock."
Winstar does not have any current or accumulated earnings and profits. So
long as this situation continues any distributions with respect to our Series F
preferred stock will be treated as a return of capital or capital gain as
described above.
A holder's tax basis in shares of common stock received as a dividend will
be the fair market value of such shares on the date of the distribution. A
holder's holding period for these shares of common stock will commence on the
day following the date of distribution and will not include any portion of the
holding period for the shares of Series F preferred stock with respect to which
the dividend shares were distributed.
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<PAGE>
Dividends to corporate holders
U.S. holders of our Series F preferred stock that are corporations are
entitled to a special dividends-received deduction under Section 243 of the
Internal Revenue Code. Corporate holders will generally be entitled to a
deduction equal to 70% of distributions which are treated as dividends on the
Series F preferred stock, but will not be entitled to that deduction with
respect to amounts treated as a return of capital or capital gain. The benefit
of a dividends-received deduction may be reduced by the corporate alternative
minimum tax.
In determining entitlement to the dividends-received deduction, corporate
holders should also consider the provisions of Sections 246(c), 246A and 1059 of
the Internal Revenue Code and Treasury regulations issued under these sections,
and Internal Revenue Service rulings and administrative pronouncements relating
to these Internal Revenue Code provisions.
Section 246(c) disallows the dividends-received deduction in its entirety
if the holder does not satisfy the applicable holding period requirement for the
dividend-paying stock for a period immediately before or immediately after such
holder becomes entitled to receive each dividend on the stock. Section 246(c)(4)
further provides that a holder may not count toward this minimum holding period
any period in which the holder:
o has, among other things, an option to sell Series F preferred stock
which it owns.
o is under a contractual obligation to sell Series F preferred stock
which it owns. For purposes of Section 246(c)(4), the obligation to
sell upon Winstar's exercise of our option to redeem Series F
preferred stock is not considered a contractual obligation to sell
by a corporate holder.
o has made and not closed a short sale of substantially identical
stock or securities.
o has diminished its risk of loss by holding one or more positions
with respect to substantially similar or related property.
Under certain circumstances, Section 1059 reduces the tax basis of stock
by a portion of any "extraordinary dividends" that are eligible for the
dividends-received deduction and to the extent that the basis reduction would
otherwise reduce the tax basis of the Series F preferred stock below zero,
requires immediate recognition of gain, which is treated as gain from the sale
or exchange of the stock. In the case of the Series F preferred stock, an
"extraordinary dividend" would include any amount treated as a dividend with
respect to a redemption that is not pro rata to all stockholders, or meets
certain other requirements, without regard to either the relative amount of the
dividend or the holder's holding period for the Series F preferred stock.
Section 246A contains so-called "debt-financed portfolio stock" rules,
under which the dividends-received deduction could be reduced to the extent that
a holder incurs indebtedness directly attributable to its investment in the
Series F preferred stock.
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<PAGE>
Receipt of conversion shares upon conversion of the Series F preferred
stock
A holder of Series F preferred stock will not recognize gain or loss upon
the conversion of the Series F preferred stock into conversion shares if no cash
is received. A holder who receives cash instead of a fractional share of common
stock will in general be treated as having received such fractional share and
having exchanged it for cash in a redemption. This deemed exchange of fractional
shares for cash would be treated in the manner described under "Sale, redemption
or other taxable disposition of the Series F preferred stock."
Generally, a holder's basis in the conversion shares will equal the
adjusted tax basis of the converted Series F preferred stock, less the portion
of the tax basis attributable to any fractional shares the holder is deemed to
have exchanged. The holding period of the conversion shares received will
include the holding period of the converted Series F preferred stock.
Adjustment of conversion ratio in respect of Series F preferred stock
Adjustments to the conversion ratio applicable to our Series F preferred
stock to take into account a stock dividend or stock split effecting our common
stock will not be taxable. However, an adjustment to this conversion ratio
resulting from our issuance of certain rights, warrants, debt securities or
certain other securities or assets to holders of common stock may result in
constructive distributions to the holders of the Series F preferred stock.
The amount of any such constructive distribution would be the fair market
value, on the date of the adjustment, of the number of shares of common stock
which, if actually distributed to holders of Series F preferred stock, would
produce the same increase in the proportionate interests of such holders in our
assets or earnings and profits as that produced by the adjustment. The
distribution would be treated in the manner described above under "Distributions
in general" and "Dividends to corporate holders."
Accrued dividends on the Series F preferred stock
Any unpaid dividends on the Series F preferred stock will accrue and will
be payable upon the optional or mandatory redemption of the Series F preferred
stock. The tax treatment of such accrued dividends is not free from doubt. Under
current law, it appears that accrued dividends would not be treated as having
been received by holders of the Series F preferred stock until these accrued
dividends were actually paid in cash. At the time these accrued dividends are
actually paid, they would be taxable for United States federal income tax
purposes in the same manner as distributions described above under
"Distributions in general." Winstar intends to take this position and will
report to the Internal Revenue Service on that basis.
In addition, to the extent of available funds therefor, Winstar is
obligated under the certificate of designation governing our Series F preferred
stock, to declare a dividend on the Series F preferred stock prior to an
optional or mandatory redemption thereof in an amount equal to any accrued
dividends on the Series F preferred stock.
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<PAGE>
Sale, redemption or other taxable disposition of the Series F preferred
stock
Except in certain circumstances described below, upon a sale or other
taxable disposition a holder generally will recognize capital gain or loss for
United States federal income tax purposes. The amount of this gain or loss will
be measured by the difference between (i) the sum of the amount of cash and the
fair market value of any property received upon such sale or other taxable
disposition and (ii) the holder's adjusted tax basis in the Series F preferred
stock being sold or disposed. Such gain or loss will be long-term capital gain
or loss if the Series F preferred stock has been held by the holder for more
than one year at the time of sale or other disposition.
A holder's initial tax basis in the Series F preferred stock generally
will be the price the holder paid for the Series F preferred stock.
A redemption of Series F preferred stock may be treated differently. Gain
or loss recognized by a holder on a redemption of the Series F preferred stock
would be treated as a sale or exchange if, taking into account stock that is
actually or constructively owned under the constructive ownership rules of
Section 318 of the Code by such holder:
o the holder's interest in our stock is completely terminated as
a result of the redemption,
o the holder's percentage ownership of our voting stock
immediately after the redemption is less than 80% of such
holder's percentage ownership immediately before the
redemption, or
o the redemption is not essentially equivalent to a dividend as
defined in Section 302(b)(1) of the Internal Revenue Code.
Under Section 318 of the Internal Revenue Code, a person generally will be
treated as the owner of our stock owned by certain related parties or certain
entities in which the person owns an interest and stock that a holder could
acquire through exercise of an option. For this purpose, an option would include
the conversion right under the Series F preferred stock. Whether a redemption is
not essentially equivalent to a dividend depends on each holder's facts and
circumstances, but in any event requires a "meaningful reduction" in such
holder's equity interest in Winstar. A holder of the Series F preferred stock
who sells some or all of the stock owned by it may be able to take such sales
into account to satisfy one of the foregoing conditions. Conversely, a holder
who purchases additional shares of our stock may be required to take such shares
into account in determining whether any of the foregoing conditions are
satisfied.
If none of the above conditions is satisfied for a redemption to qualify
for sale or exchange treatment, the entire amount of the cash or property
received on a redemption will be treated as a distribution without offset by the
holder's tax basis in the redeemed shares, which will be treated in the same
manner as distributions described above under "Distributions in general." In
such case, the holder's basis in the redeemed the Series F preferred stock would
be transferred to the holder's remaining shares of our stock, if any.
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<PAGE>
If the holder does not retain any shares of our stock, but dividend
treatment arises because of the constructive ownership rules, the holder's basis
in the redeemed Series F preferred stock will be entirely lost to the holder.
Information reporting and backup withholding
Information reporting and backup withholding may apply with respect to our
payments of dividends on the Series F preferred stock and to certain payments of
proceeds on the sale or redemption of the Series F preferred stock. These
payments will be subject to backup withholding at a rate of 31% unless the
beneficial owner of the Series F preferred stock furnishes the payor or its
agent with a taxpayer identification number, certified under penalties of
perjury, and certain other information, or otherwise establishes, in the manner
prescribed by law, an exemption from backup withholding.
In addition, if the Series F preferred stock is sold to or through a
broker, the broker may be required to withhold 31 percent of the entire sales
price, unless either (i) the broker determines that the seller is a corporation
or other exempt recipient or (ii) the seller provides, in the required manner,
certain identifying information. Such a sale must also be reported by the broker
to the Internal Revenue Services, unless the broker determines that the seller
is an exempt recipient. Under applicable Treasury regulations, brokers include
all persons who, in the ordinary course of their business, stand ready to effect
sales made by others.
Any amount withheld under the backup withholding rules from a payment to a
holder is allowable as a credit against the holder's United States federal
income tax, which may entitle the holder to a refund, provided that the holder
furnishes the required information to the Internal Revenue Services. In
addition, certain penalties may be imposed by the Internal Revenue Services on a
holder who is required to supply information but does not do so in the proper
manner.
Tax Considerations for Foreign holders
A foreign holder is any holder of our Series F preferred stock that is not
a U.S. holder.
Dividends
Dividends paid to a foreign holder of our Series F preferred stock or
common stock will be subject to withholding of United States federal income tax
at a 30% rate or such lower rate as may be provided by an income tax treaty
between the United States and the country of which the foreign holder is a tax
resident. In order to claim the benefit of an applicable tax treaty rate, a
foreign holder may have to file with us or our dividend paying agent an
exemption or reduced treaty rate certificate or letter in accordance with the
terms of such treaty.
No withholding tax will apply if a foreign holder receives dividends which
(i) are effectively connected with the conduct of a trade or business of the
foreign holder within the United States and the foreign holder provides Winstar
with proper documentation or (ii) if
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<PAGE>
a tax treaty applies, the dividends are attributable to a U.S. permanent
establishment maintained by the foreign holder.
Dividends that are effectively connected with the conduct of a trade or
business within the United States or, if a tax treaty applies, are attributable
to such a United States permanent establishment, are subject to United States
federal income tax, after allowance for applicable deductions, at applicable
graduated individual or corporate rates. Any such effectively connected
dividends received by a foreign corporation may, under certain circumstances, be
subject to an additional federal income tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty under the branch profits tax
which treats a U.S. branch business as if it had been a U.S. subsidiary that
paid a dividend.
Under current Treasury regulations, dividends paid to an address outside
the United States are presumed to be paid to a resident of such country for
purposes of the withholding discussed above, unless the payor has knowledge to
the contrary. Further, under the current interpretation of applicable Treasury
regulations, for purposes of determining the applicability of a tax treaty, this
same address rule applies. However, under final Treasury regulations issued
October 6, 1997, in the case of dividends paid after December 31, 2000, a
foreign holder generally would be subject to United States withholding tax at a
31% rate under the backup withholding rules described below, rather than at a
30% rate or a reduced rate under an income tax treaty, unless certain procedures
are complied with, directly or through an intermediary. Certain certification
and disclosure requirements must be complied with in order to be exempt from
withholding under the effectively connected income exemption.
A foreign holder of our Series F preferred stock or common stock eligible
for a reduced rate of United States withholding tax on dividends under any
income tax treaty may obtain a refund of any excess amounts withheld by filing
an appropriate claim for refund with the Internal Revenue Services, provided
that the required information is furnished to the Internal Revenue Service.
See above "Tax Consequences for U.S. holders" for when distributions will
be treated as dividends.
Gain on disposition of Series F preferred stock
A foreign holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other taxable
disposition of Series F preferred stock unless:
o the gain is effectively connected with a trade or business conducted
by the foreign holder within the United States or, if a tax treaty
applies, the gain is attributable to a United States permanent
establishment maintained by the foreign holder;
o in the case of a foreign holder who is an individual and holds the
Series F preferred stock as a capital asset, such holder is present
in the United States for
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<PAGE>
183 or more days in the taxable year of the sale or other
disposition and certain other conditions are met;
o the foreign holder is subject to tax under certain provisions of the
Internal Revenue Code applicable to United States expatriates and
former residents; or
o we are or have been a U.S. real property holding corporation for
United States Federal income tax purposes at any time within the
shorter of the five-year period preceding such disposition or the
period such foreign holder held the Series F preferred stock.
A U.S. real property holding corporation in general is a corporation in
which the fair market value of its real property interests is 50% or more of the
fair market value of all of its business assets. We believe that we are not
currently, and do not anticipate becoming, a U.S. real property holding
corporation for United States federal income tax purposes.
If we currently are, or were to become, a U.S. real property holding
corporation, gains realized upon a disposition of Series F preferred stock by a
foreign holder who did not directly or indirectly own more than 5% of the Series
F preferred stock during the shorter of the periods described in the last bullet
point above generally would not be subject to United States federal income tax
so long as the Series F preferred stock is traded on an established securities
market within the meaning of the applicable Treasury regulation. It is not clear
whether the Series F preferred stock will be deemed to be trading on an
established securities market for purposes of the aforementioned rule.
If an individual foreign holder falls under the first bullet point above,
such individual generally will be taxed on the net gain derived from a sale
under regular graduated United States federal income tax rates. If an individual
foreign holder falls under the second bullet point above, such individual
generally will be subject to a flat 30% tax on the gain derived from a sale,
which may be offset by certain United States capital losses. The foregoing will
apply even if the individual is not considered a resident of the United States.
Thus, individual foreign holders who have spent (or expect to spend) 183 days or
more in the United States in the taxable year in which they contemplate a sale
of Series F preferred stock are urged to consult their tax advisors as to the
tax consequences of such sale.
If a foreign holder that is a foreign corporation falls under the first
bullet point above, it generally will be taxed on its net gain under regular
graduated United States federal income tax rates and, in addition, will be
subject to the branch profits tax equal to 30% of its "effectively connected
earnings and profits" within the meaning of the Internal Revenue Code for the
taxable year, as adjusted for certain items, unless it qualifies for a lower
rate under an applicable income tax treaty.
No United States federal income tax will be imposed on a foreign holder
upon receipt of conversion shares if no cash is received.
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Federal estate tax
Series F preferred stock owned or treated as owned by an individual who is
neither a United States citizen nor a United States resident (as defined for
United States federal estate tax purposes) at the time of death will be included
the individual's gross estate for the United States Federal estate tax purposes
and, therefore, may be subject to United States federal estate tax. An
applicable estate tax treaty between the United States and the country of which
the individual is a tax resident may provide for an exemption from United States
federal estate tax.
Information reporting and backup withholding tax
Under applicable Treasury regulations, we must report annually to the
Internal Revenue Service and to each foreign holder the amount of dividends paid
to such holder and the tax withheld with respect to such dividends. These
information reporting requirements apply even if withholding was not required
because the dividends were effectively connected with a trade or business in the
United States of the foreign holder or withholding was reduced or eliminated by
an applicable income tax treaty. Copies of the information returns reporting
such dividends and withholding may also be made available to the tax authorities
in the country in which the foreign holder is a resident under the provisions of
an applicable income tax treaty or agreement.
There will be no additional United States backup withholding tax at the
31% rate on dividends paid to foreign holders that are subject to the 30%
withholding on dividends discussed above under "Dividends," or that are not so
subject because a tax treaty applies that reduces or eliminates such 30%
withholding.
With respect to foreign holders not governed by the above rules, United
States backup withholding at the rate of 31% will apply to dividends paid if the
foreign holder fails to furnish certain information about their foreign status
under the United States information reporting requirements.
However, under final Treasury regulations issued October 6, 1997, in the
case of dividends paid after December 31, 2000, a foreign holder generally would
be subject to backup withholding at 31% rate, unless certain procedures are
complied with, directly or through an intermediary.
Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Series F
preferred stock to beneficial owners that are not exempt recipients and that
fail to provide in the manner required certain identifying information.
Payment by a United States office of a broker of the proceeds of a sale of
Series F preferred stock, or the proceeds of a redemption of Series F preferred
stock that are not treated as a dividend, is subject to both backup withholding
and information reporting unless the beneficial owner certifies under penalties
of perjury that it is a foreign holder, or otherwise establishes an exemption.
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Backup withholding and information reporting generally will not apply to
payment of the proceeds of a sale effected at a foreign office of a broker. If,
however, such broker is, for United States federal income tax purposes, a U.S.
person, a controlled foreign corporation or a foreign person 50% or more of
whose gross income for certain periods is derived from activities that are
effectively connected with the conduct of a trade or business in the United
States, such payments will not be subject to backup withholding but will be
subject to information reporting unless (i) such broker has documentary evidence
in its records that the beneficial owner is a foreign holder and certain other
certification conditions are met, or (ii) the beneficial owner otherwise
establishes an exemption, provided such broker does not have actual knowledge
that the payee is a United States person.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be allowed as a credit against such holder's
United States federal income tax liability, which may entitle such holder to a
refund, provided the required information is furnished to the Internal Revenue
Service.
Notes about the foregoing tax discussion
This United States federal income tax discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, applicable Treasury
regulations, current administrative interpretations and court decisions, all of
which are subject to change. Any change, which may or may not be retroactive,
could alter the tax consequences to holders of Series F preferred stock as
described above.
Holders of Series F preferred stock should be aware that this discussion
does not deal with all aspects of federal income taxation that may be important
to a holder of Series F preferred stock in light of that holder's particular
circumstances, such as a holder who:
o is a financial institution or insurance company,
o is a tax-exempt organization,
o is a dealer or broker in securities,
o holds our Series F preferred stock as part of a hedge,
appreciated financial positions, straddle or conversion
transaction, or
o does not hold their Series F preferred stock and conversion
shares as capital assets.
Prospective holders should consult their own tax advisors as to any
federal, state, local, foreign or other specific tax consequences to them of
purchasing, owning and disposing of Series F preferred stock.
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DESCRIPTION OF THE SERIES F PREFERRED STOCK
The following is a summary of certain provisions of the Series F preferred
stock and the certificate of designations governing the Series F preferred
stock. A copy of the certificate of designations and the form of Series F
preferred stock share certificate is available upon request to Winstar at the
address set forth under "Where You Can Find More Information."
The following is only a summary of certain provisions of the certificate
of designations and does not purport to be complete. For a more complete
description of the rights or holders of the Series F preferred stock, you should
refer to the certificate of designations. The definitions of certain capitalized
terms used in the following summary that are not defined in this summary are
defined in the certificate of designations.
General
There are 300,000 shares of our Series F preferred stock outstanding. The
holders of the Series F preferred stock have no preemptive or preferential right
to purchase or subscribe for additional shares of our Series F preferred stock
or any of our other securities. The Series F preferred stock is eligible for
trading in The Portal Market.
Ranking
With respect to dividend rights and rights to receive the proceeds of any
liquidation of Winstar Communications, Inc. the Series F preferred stock ranks
as follows:
o senior to our common stock and our Series A and Series E
preferred stock;
o senior to each class of capital stock which we may create that
does not expressly rank senior to, or with the same priority
as, our Series F preferred stock;
o with the same priority as our Series C and Series D preferred
stock;
o with the same priority as each class of capital stock which we
may create that expressly provides that it ranks with the same
priority as our Series F preferred stock; and
o junior to each class of capital stock which we may create that
expressly provides that it ranks senior to our Series F
preferred stock.
While any shares of Series F preferred stock are outstanding, we may not
create or increase the amount of any class or series of capital stock that ranks
senior to the Series F preferred stock without the consent of the holders of at
least 66-2/3% of the Series F
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preferred stock. However, we may or increase the amount of any class of stock
that ranks with the same priority as, or junior to, the Series F preferred
stock.
Dividends
Holders of shares of Series F preferred stock are entitled to
receive, if and when declared by our board of directors out of funds legally
available for payment, cumulative dividends at the rate of 7-1/4% per annum
based on the liquidation preference of the shares, which is currently $1,000 per
share. This is equivalent to an annual dividend of $72.50 per share.
Dividends on the Series F preferred stock are payable quarterly on
March 15, June 15, September 15 and December 15 of each year, commencing
December 15, 1999. These dividends accrue from the most recent date on which
dividends were paid or, if no dividends have been paid, from the date of the
original issuance of the Series F preferred stock.
Dividends are payable to holders of record as they appear on our
stock records at the close of business on the applicable record date. The record
date is the business day next preceding such quarterly dividend payment date.
Dividends are cumulative from such date. Accumulations of dividends on shares of
our Series F preferred stock do not bear interest. Dividends payable on our
Series F preferred stock for any period greater or less than a full quarterly
dividend period are computed on the basis of a 360-day year consisting of twelve
30-day months.
Any dividend on our Series F preferred stock is payable in one of
the following ways, which may be selected by us in our sole discretion:
o in cash; or
o through the issuance of shares of our common stock.
To determine the number of shares of our common stock to be issued as a dividend
to a holder of Series F preferred stock, the dollar amount of the dividend
payable to that holder should be divided by the "discounted current market
value" of our common stock. The resulting number of shares of common stock is
then rounded up or down to the nearest whole share. The "discounted current
market value" of a share of our common stock on a given dividend payment date is
97% of the closing bid price for our common stock on the fourth trading day
preceding that dividend payment date.
The indentures governing our outstanding bonds and the agreement governing
our credit facility with Lucent each prohibit us from paying cash dividends.
Therefore, we will not pay any cash dividends on the Series F preferred stock
until all amounts under those agreements have been repaid. Our outstanding bond
indentures include:
o the indenture dated October 23, 1995, governing our 14% senior
discount notes due 2005;
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o the indenture dated as of March 1, 1997, governing our 14 1/2%
senior deferred interest notes due 2005;
o the indenture dated as of March 1, 1997, governing the 12 1/2%
senior secured notes due 2004 of our subsidiary, Winstar
Equipment Corp.;
o the indenture dated as of August 1, 1997, governing the 12
1/2% senior secured notes due 2004 of our subsidiary, Winstar
Equipment II Corp.;
o the indenture dated as of October 1, 1997, governing our 15%
senior subordinated deferred interest notes due 2007;
o the indenture dated as of March 15, 1998, governing the 10%
senior subordinated notes due 2008; and
o the indenture dated as of March 15, 1998, governing our 11%
senior subordinated deferred interest notes due 2008.
Certain shares of our Series F preferred stock may be deemed securities
that are not freely saleable. Shares that are not freely saleable are commonly
called "restricted securities." With respect to shares of Series F preferred
stock that are restricted securities on a record date for the payment of
dividends, all common stock issued as dividend shares on the related dividend
payment date will also be restricted securities. The certificates evidencing
these dividend shares will bear a legend to such effect and will not be
transferable by the recipient except in accordance with an effective
registration statement or under an exemption from the registration requirements
of the Securities Act.
All dividend shares that are deemed restricted securities will be issued
in physical certificated form. These shares will not eligible for receipt in
global form through the facilities of the depositary for our Series F preferred
stock. Certificates for these dividend shares are mailed or made available to
rightful beneficial holders at the office of the transfer agent for the Series F
preferred stock on or as soon as possible after the relevant dividend payment
date. As a result of the requirement for physical delivery of these dividend
shares, holders who have not made arrangements with the depositary, the transfer
agent and us prior to a dividend payment date for the delivery of such physical
certificates on such dividend payment date may not receive such physical
delivery until several days after such dividend payment date.
With respect to shares of Series F preferred stock that are not restricted
securities on a record date for the payment of dividends, all common stock
issued as dividend shares on the related dividend payment date will be
transferable by the recipient without restriction under the Securities Act,
other than by affiliates. These shares also will be eligible for receipt in
global form through the facilities of the Depository Trust Company.
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If, on any record date occurring prior to June 17, 2001, a shelf
registration statement has not been declared effective or is not usable for the
resale of common shares issued as dividends:
o payment of such dividends will be deferred to a subsequent
date determined by us; and
o will be made at an increased dividend rate which will accrue
from the regular dividend payment date until the actual
subsequent payment date.
Optional Redemption
The Series F preferred stock is not redeemable at our option prior to June
24, 2002. Thereafter, each share of the Series F preferred stock will be
redeemable, at our option at the following redemption prices, payable in cash,
plus accumulated and unpaid dividends, if any, including a prorated dividend for
any partial dividend period.
If redeemed during the 12-month period commencing on June 15, or, if such
date is a Saturday, Sunday or business holiday, then on the next business day
immediately thereafter, of the years set forth below, the redemption prices
shall be:
Period Redemption Price
- ------ ----------------
2002 ................................................... $1,018.13
2003 ................................................... 1,012.08
2004 ................................................... 1,006.04
2005 and thereafter .................................... 1,000.00
In the case of any partial optional redemption, selection of the Series F
preferred stock for redemption will be made on a pro rata basis, by lot or such
other method as we deem appropriate.
In the case of a redemption date falling after a dividend record date and
prior to the related payment date, the holders of the Series F preferred stock
at the close of business on such record date will be entitled to receive the
dividend . Except as provided for in the preceding sentence, no payment or
allowance will be made for accrued dividends on any shares of Series F preferred
stock called for redemption.
Our ability to redeem the Series F preferred stock at our option is
limited by the terms of our outstanding indebtedness. We may not be able to
redeem the Series F preferred stock at our option unless we simultaneously
redeem or repay such indebtedness.
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Liquidation Preference
Upon any liquidation of Winstar, each holder of Series F preferred stock
is entitled to be paid the liquidation preference of $1,000 per share of Series
F preferred stock held by such holder. In addition, such holder would receive
accumulated and unpaid dividends on the Series F preferred stock to the date
fixed for liquidation. These payments would be made before any distribution is
made on any of our capital stock that is junior in right to the Series F
preferred stock, including our common stock.
Upon any liquidation of Winstar, the amounts payable with respect to the
Series F preferred stock and all other capital stock that ranks with the same
priority as our Series F preferred stock may not be paid in full. In that case,
the holders of the Series F preferred stock and the other capital stock ranking
with the same priority will share in any distribution of assets in proportion to
the full liquidation preference and accumulated and unpaid dividends to which
they are entitled. Neither the sale of all or substantially all of our assets
nor our consolidation or merger with one or more entities shall be a liquidation
of Winstar for this purpose.
The certificate of designations governing our Series F preferred stock
does not contain any provision requiring funds to be set aside to protect the
liquidation preference of the Series F preferred stock even though it is
substantially in excess of the par value thereof.
Voting Rights
The holders of Series F preferred stock are not entitled to vote on any
matter permitted to be voted upon by our stockholders, except to the limited
extent required under Delaware law or as provided in the certificate of
designations governing the Series F preferred stock.
If dividends on the Series F preferred stock are in arrears and unpaid for
six or more dividend periods, whether or not consecutive, then the holders of
the Series F preferred stock, voting together as a class with the holders of any
other series of preferred stock similarly situated, will be entitled to elect up
to two members of our board of directors. In this case, the number of members of
our board of directors will be automatically increased by such number. These
special voting rights will continue until all dividends in arrears on the Series
F preferred stock are paid in full. Once such dividends are paid in full, which
time the directors elected under this provision shall be automatically removed
from office.
Conversion Rights
Shares of Series F preferred stock are convertible, at the option of the
holders, into shares of our common stock at the conversion price of $61.96 per
share, subject to adjustment as provided in the certificate of designations.
Conversion of shares of Series F preferred stock would be effected using the
conversion procedures set out in the certificate of designations. The right to
convert shares of Series F preferred stock called for redemption terminates at
the close of business on the relevant redemption date.
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We have the option to convert all of the shares of Series F preferred
stock into common stock at the conversion price if, on or after June 24, 2002,
the closing price of our common stock has equaled or exceeded 130% of the
conversion price for at least 20 out of 30 consecutive days on which the Nasdaq
National Market is open for the transaction of business.
The date on which our Series F preferred stock may be converted and the
conversion price also may be adjusted in the event of certain changes of control
of Winstar, as provided in the certificate of designations.
Consolidation, Merger and Sale of Assets
The certificate of designations provides that, without the consent of the
holders of any of the outstanding Series F preferred stock, we may consolidate
or merge with any other entity or convey our assets to any third party;
provided, however that (a) the successor, transferee or lessee is organized
under the laws of a United States jurisdiction; (b) the shares of Series F
preferred stock shall become shares of such successor, transferee or lessee,
having in respect of such successor, transferee or lessee the same powers,
preferences and relative participating, optional or other special rights and the
qualification, limitations or restrictions thereon, the Series F preferred stock
had immediately prior to such transaction; and (c) certain other conditions are
met.
Under any consolidation or merger by Winstar or any conveyance of our
properties and assets, the successor resulting from such transaction will
succeed to, and be substituted for, and may exercise every right and power of,
Winstar under the shares of Series F preferred stock. Thereafter, except in the
case of a lease, the predecessor will be released from its obligations and
covenants with respect to the Series F preferred stock.
Transfer Agent, Registrar and Dividend Disbursing Agent
The transfer agent, registrar, dividend disbursing agent and redemption
agent for the shares of Series F preferred stock will be Continental Stock
Transfer & Trust Company.
DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK
Indebtedness
1995 Debt Placement
In October 1995, we issued an aggregate of $225.0 million of notes
consisting of (a) $150.0 million of 14% senior discount notes due 2005 and (b)
$75.0 million of 14% convertible senior subordinated discount notes due 2005. On
June 2, 1999, all of the convertible notes automatically converted into
approximately 5,928,000 shares of our common stock in accordance with their
terms.
The senior notes are unsecured, senior indebtedness, rank with equal
priority in right of payment with all of our existing and future senior
indebtedness and are senior in right of
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payment to all existing and future subordinated indebtedness. The senior notes
will not accrue interest prior to October 15, 2000, nor pay cash interest prior
to April 15, 2001. However, the principal value of the senior notes has accreted
since issuance and, at October 15, 2000, the senior notes will have an aggregate
principal amount of $294.2 million. From and after October 15, 2000, the senior
notes will accrue interest at the rate of 14% per annum, payable semiannually in
cash commencing April 15, 2001. The senior notes mature on October 15, 2005.
1997 Debt Placements
In March 1997, we and Winstar Equipment Corp., one of our subsidiaries
formed to facilitate the purchase of equipment, issued an aggregate of $300.0
million of notes, consisting of (1) $100.0 million of our 14 1/2% senior
deferred interest notes due 2005, ranking pari passu with the senior notes
issued by us in 1995, and (2) $200.0 million of Winstar Equipment Corp.'s 12
1/2% guaranteed senior secured notes due 2004. In August 1997, Winstar Equipment
II Corp., another of our subsidiaries formed to purchase equipment, issued $50.0
million of its 12 1/2% guaranteed senior secured notes due 2004. In October
1997, we issued an aggregate of $100.0 million principal amount of our 15%
senior subordinated deferred interest notes due 2007.
The senior notes issued by us in 1997 are unsecured senior indebtedness,
rank in equal priority with all of our existing and future unsecured senior
indebtedness, and are senior in right of payment to all our existing and future
subordinated indebtedness. Until October 15, 2000, interest on the senior notes
issued by us in 1997 will accrue and compound semiannually at a rate of 14 1/2%,
but will not be payable in cash. Interest on the accumulated amount of the
senior notes issued by us in 1997 as of October 15, 2000 will be payable
semiannually in cash on April 15 and October 15 of each year commencing April
15, 2001. The senior notes mature on October 15, 2005 and are redeemable on or
after October 15, 2000, at our option, in whole or in part, at specified prices.
The notes issued by Winstar Equipment Corp. bear interest at a rate of 12
1/2% per annum, payable on March 15 and September 15, commencing September 15,
1997. The notes will mature on March 15, 2004 and are redeemable on or after
March 15, 2002, at our option, in whole or in part, at specified prices.
The notes issued by Winstar Equipment Corp. II bear interest at a rate of
12 1/2% per annum, payable on March 15 and September 15, commencing September
15, 1997. The notes issued by Winstar Equipment Corp. II mature on March 15,
2004 and are redeemable on or after March 15, 2002, at our option, in whole or
in part, at specified prices.
We have unconditionally guaranteed the obligations of Winstar Equipment
Corp. and Winstar Equipment Corp. II under their respective notes and such
obligations are secured by security interests in the equipment and other
property purchased by Winstar Equipment Corp. and Winstar Equipment Corp. II, as
the case may be, with the proceeds thereof.
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The senior subordinated notes we issued in 1997 are unsecured senior
subordinated obligations, rank in equal priority with the certain notes we
issued in 1998, and are junior to all of our existing and future senior
indebtedness. The senior subordinated notes bear interest at a rate of 15% per
annum, payable on March 1 and September 1, commencing September 1, 2002.
Until March 1, 2002, interest on the senior subordinated notes will accrue
and be compounded semiannually, but will not be payable in cash. Interest on the
accumulated amount of the senior subordinated notes as of March 1, 2002 will be
payable semiannually commencing September 1, 2002. The senior subordinated notes
will mature on March 1, 2007 and are redeemable on or after March 1, 2002, at
our option, in whole or in part, at specified prices.
1998 Debt Placement
In March 1998, we issued $200.0 million in aggregate principal amount of
our 10% senior subordinated notes due 2008 and $250.0 million in aggregate
principal amount of our 11% senior subordinated deferred interest notes due
2008. The notes we issued in 1998 are unsecured, senior subordinated
obligations, rank in equal priority with the senior subordinated notes we issued
in 1997, and are junior in right of payment to all of our existing and future
senior indebtedness.
The 10% notes we issued in 1998 bear interest at a rate of 10% per annum,
payable on March 15 and September 15, commencing September 15, 1998. The 10%
notes will mature on March 15, 2008 and are redeemable on or after March 15,
2003, at our option, in whole or in part, at specified prices, plus accrued
interest, if any, to the date of redemption.
The 11% notes we issued in 1998 bear interest at a rate of 11% per annum,
payable on March 15 and September 15, commencing September 15, 2003. Until March
15, 2003, interest on the notes will accrue and be compounded semiannually, but
will not be payable in cash. Interest on the accumulated amount of the 11% notes
as of March 15, 2003 will be payable semiannually commencing September 15, 2003.
The 11% notes will mature on March 15, 2008 and are redeemable on or after March
15, 2003, at our option, in whole or in part, at specified prices, plus accrued
and unpaid interest, if any, to the date of redemption.
Indentures
The indentures relating to our notes and our subsidiaries' notes contain
certain covenants which, among other things, restrict our ability and that of
certain of our subsidiaries to:
o incur additional indebtedness;
o create liens;
o engage in sale-leaseback transactions;
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o pay dividends or make distributions in respect of capital
stock; make investments or certain other restricted payments;
o sell assets; issue or sell stock of such subsidiaries;
o enter into transactions with stockholders or affiliates;
o acquire assets or businesses not constituting
telecommunications assets; or
o consolidate, merge or sell assets.
The covenants contained in these indentures are subject to exceptions and
our new media subsidiaries are not subject to many of the covenants contained
therein, although our ability to make additional investments in such
subsidiaries is limited.
Lucent Credit Agreement
In October 1998, we and Winstar Network Expansion, LLC, a limited
liability company wholly owned by us and formed to facilitate the financing of
equipment purchases, entered into a supply agreement with Lucent. Also in
October 1998, Winstar, Winstar Network Expansion, Lucent, as administrative
agent and lender, and State Street Bank and Trust Company, as collateral agent,
entered into a credit agreement which sets forth the terms and conditions under
which Lucent or its assignee lenders will provide us with purchase money
financing in an aggregate amount of up to $2.0 billion in connection with the
buildout of our domestic and international broadband network. Amounts may be
drawn by Winstar Network Expansion as and when needed during the buildout of the
network. The credit agreement allows for aggregate borrowings of up to $2.0
billion; provided, however, that Lucent is not required to have outstanding at
any one time aggregate loans and commitments in excess of $500.0 million.
During the nine months ended September 30, 1999, we incurred approximately
$522.3 million in indebtedness under our financing agreement with Lucent. As of
September 30, 1999, the total amount outstanding under the Lucent financing
agreement was approximately $599.8 million. In June 1999, a commercial bank
purchased from Lucent, for syndication, $350.0 million of our borrowings under
the financing agreement, thereby creating additional availability in such
amount. Under the terms of this five year agreement, Lucent will provide up to
$2.0 billion to finance the purchase of equipment and related services, not to
exceed $500.0 million at any one time held by Lucent.
Additional amounts under this agreement with Lucent become available on a
dollar-for-dollar basis as the loans or unfunded commitments are syndicated by
Lucent to other lenders. Winstar Network Expansion may draw against available
amounts until they have been fully drawn or the fifth anniversary of the credit
agreement, whichever is earlier. The credit agreement provides that borrowings
will fall into one of five annual tranches. The tranche under which a loan is
drawn will determine when such loan is to be repaid.
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Interest on each loan made under the agreement with Lucent will accrue at
a floating rate equal to, at Winstar Network Expansions' election, either a base
rate determined in relation to the then current prime rate or at the London
Inter-Bank Offered Rate, in each case plus a margin which may vary over the life
of the facility. Interest will be payable quarterly in arrears for base rate
advances and at the end of each interest period. These interest periods can be
one, three or six months in length, at Winstar Network Expansions' election.
However, the interest on loans accruing during the first year of the tranche of
which such loan is a part may, at Winstar Network Expansions' election, be
deferred and the deferred interest shall accrue interest at the same rates as
the principal of the loans.
The principal of any tranche as well as any deferred interest thereon will
be repaid in sixteen equal installments, payable on the last day of each
calendar quarter, commencing on the last day of the first quarter following the
fourth anniversary of the date the applicable tranche first becomes available.
Loans made under the credit agreement are also subject to mandatory
prepayment upon the occurrence of certain events, including (a) receipt by us or
certain of our subsidiaries of proceeds of certain asset sales or casualty
events which are not reinvested in our business and (b) the generation of excess
cash flow as defined in the credit agreement, if any, by us. Winstar Network
Expansion will also be entitled to prepay the loans at its option at any time.
Loans made under the credit agreement will be secured by a purchase money
security interest in the equipment comprising the network, to the extent the
purchase of such equipment is financed under the credit agreement. Additionally,
Winstar Network Expansions' obligations under the credit agreement are
guaranteed by us and certain of our subsidiaries.
The credit agreement contains significant covenants of Winstar Network
Expansion, Winstar and certain of our subsidiaries, including, but not limited
to:
o affirmative covenants with respect to compliance with laws,
inspection rights, performance of other obligations, delivery of
financial statements and other information, interest rate cap
arrangements and maintenance of licenses and certain other assets;
o negative covenants restricting the ability to incur or create liens,
debt and capitalized lease obligations, and otherwise restricting,
mergers or consolidations, disposal of assets, investments, payments
of dividends and distributions, modification of tax-sharing or
management or servicing fee agreements, changes in the nature of the
business conducted, prepayment or redemption of debt, creation of
partnerships and new subsidiaries and transactions with affiliates;
and
o financial covenants.
Winstar currently is in compliance with these covenants, including such
financial covenants as are presently applicable.
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Equipment Lease Financings and Credit Lines
Our subsidiaries have entered into, and will continue to seek, financing
arrangements, including sale/leaseback transactions, with respect to equipment,
including telecommunications switches, radios and other related equipment. As of
September 30, 1999, we owed an aggregate of $327.4 million under such financing
arrangements, all of which are on terms we consider customary in the
telecommunications industry. In addition, Winstar New Media and certain of its
subsidiaries are parties to a $6.5 million term loan facility which they used to
finance a portion of their capital needs. Principal on the term loan is payable
in quarterly installments of $1.0 million each through December 31, 2000, with a
final payment of $0.5 million due January 31, 2001. Interest accrues and is
payable quarterly based on a rate of 1/4% in excess of the prevailing prime
lending rate, with LIBOR elections.
Accounts Receivable Financing
In June 1999, we completed a $35.0 million accounts receivable
securitization financing arrangement. Under this financing, we may borrow up to
the lesser of the maximum amount of the facility, which has been initially set
at $25.0 million, increasing to $35.0 million when certain conditions are met,
and the amount determined under a borrowing base formula. Borrowings under this
facility will bear interest at the London Inter-Bank Offered Rate, plus 1.5%. As
of September 30, 1999, we had $7.5 million outstanding under this financing.
Common Stock
Our authorized capital stock includes 200,000,000 shares of common stock,
$.01 par value. The holders of common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders.
Although we are restricted from paying cash dividends under the terms of the
agreements governing our indebtedness and, even if we were not so restricted, we
do not currently intend to pay any dividends, holders of common stock are
entitled to receive ratably such dividends as may be declared by our board of
directors out of funds legally available therefor. In the event of a liquidation
or dissolution, holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities and liquidation preference of
preferred stock.
Holders of common stock have no preemptive rights and have no rights to
convert their common stock into any other securities. There are no redemption or
sinking fund provisions applicable to the common stock. All of the outstanding
shares of common stock are fully paid and nonassessable.
Our certificate of incorporation:
o provides for a board of directors divided into three classes, each
of which generally serves for a term of three years, with only one
class of directors being elected in each year;
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<PAGE>
o provides that directors may be removed with or without cause and
only by an affirmative vote of holders of at least a majority of our
capital stock entitled to vote thereon; and
o requires an affirmative vote of holders of at least two-thirds of
our capital stock entitled to vote to alter, amend or repeal the
provisions relating to the classification of, and the removal of
members from, the board of directors.
Nominations for our board of directors may be made by our board or by any
stockholder entitled to vote for the election of directors. A stockholder
entitled to vote for the election of directors may nominate a person or persons
for election as director only if written notice of such stockholder's intent to
make such nomination is given to our Secretary not later than sixty days in
advance of the meeting. Our certificate of incorporation and by-laws do not
provide for cumulative voting rights. This means that holders of a majority of
our capital stock who vote in the election of directors can elect all of the
directors and, in such event, the holders of the remaining shares will not be
able to elect any of our directors. A special meeting of our stockholders may be
called at the request of the holders of at least 10% of our outstanding capital
stock entitled to vote generally in all matters.
Preferred Stock
Our certificate of incorporation and Delaware General Corporation Law give
our board of directors the authority, without further stockholder action, to
issue a maximum of 15,000,000 shares of preferred stock. Our board of directors
has the authority to fix the following terms with respect to shares of any
series of preferred stock:
o the designation of the series;
o the number of shares to comprise the series;
o the dividend rate or rates payable with respect to the shares of the
series;
o the redemption price or prices, if any, and the terms and conditions
of any redemption;
o the voting rights;
o any sinking fund provisions for the redemption or purchase of the
shares of the series;
o the terms and conditions upon which the shares are convertible or
exchangeable, if they are convertible or exchangeable; and
o any other relative rights, preferences and limitations pertaining to
the series.
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<PAGE>
Series A Preferred Stock
In February 1997, we and one of our wholly owned subsidiaries sold in a
private placement an aggregate of 4,000,000 shares of Series A 6% preferred
stock and warrants to purchase 1,600,000 shares of our common stock for an
aggregate purchase price of $100.0 million.
Each share of Series A preferred stock has a stated value of $25 and
entitles the holder thereof to receive dividends from us at a rate per annum
equal to 6% of this value. Dividends accrue and are cumulative from the date of
issuance and are payable in arrears quarterly as of March 31, June 30, September
30 and December 31 of each year. We may, at our election, pay such dividends in
cash or through the issuance of additional shares of Series A preferred stock.
The shares of Series A preferred stock are convertible into that number of
shares of our common stock derived by dividing the aggregate Stated Value of the
Series A preferred stock being converted by $25, subject to adjustment. On
February 11, 2002, any Series A preferred stock still outstanding will be
automatically converted into shares of our common stock, unless we elect to pay
cash therefor in an amount equal to the stated value plus all accrued and unpaid
dividends thereon.
The warrants entitle the holders thereof to purchase an aggregate of
1,600,000 shares of our common stock for $25 per share, subject to adjustment,
at any time until February 11, 2002. We may accelerate the expiration date at
any time after February 11, 2000 if our common stock trades at $40 or more for a
period of 20 consecutive days.
As of September 30, 1999, after giving effect to conversions of Series A
preferred stock into our common stock and the issuance of shares of Series A
preferred stock as dividends, there were approximately 4,275,000 shares of
Series A preferred stock outstanding.
Rights to Purchase Series B Preferred Stock
The following is a summary of the rights agreement dated as of July 2,
1997, between us and Continental Stock Transfer & Trust Company, as rights
agent, which was adopted by our board of directors on July 2, 1997. This summary
of the rights agreement does not purport to be complete and is not a substitute
for the complete discussion contained in the rights agreement.
Under the rights agreement, holders of our common stock received, as a
dividend, preferred stock purchase rights at the rate of one right for each
share of our common stock held as of the close of business on July 14, 1997. One
right will also attach to each share of our common stock issued thereafter.
Currently, the rights are not separate from our common stock and are not
exercisable, and the rights will only separate from our common stock and become
exercisable if a person or group acquires 10% or more of our outstanding common
stock or launches a tender or exchange offer that would result in ownership of
10% or more of our outstanding common stock.
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<PAGE>
Each right that is not owned by an acquiring person entitles the holder of
the right to buy one one-thousandth of one share of Series B preferred stock
which we will issue. If any person becomes an acquiring person, or if an
acquiring person engages in certain transactions involving conflicts of interest
or in a business combination in which our common stock remains outstanding, then
the rights agreement provides that each right, other than any right held by the
acquiring person, entitles the holder to purchase, for $225, units of Series B
preferred stock with a market value of $450. However, if we are involved in a
business combination in which we are not the survivor, or if we sell 50% or more
of our assets or earning power to another person, then the rights agreement
provides that each right entitles the holder to purchase, for $225, shares of
the common stock of the acquiring person's ultimate parent having a market value
of $450.
At any time until ten days following the date on which a person acquires
10% or more of our common stock, we may redeem all, but not less than all, of
the rights for $0.0001 per right. The rights expire in July 2002. The Series B
preferred stock will have dividend and liquidation preferences over our common
stock, but junior to any other series of our preferred stock.
Series C Preferred Stock
On December 17, 1997, we and one of our wholly owned subsidiaries sold in
a private placement an aggregate of 175,000 shares of our Series C 14-1/4%
senior cumulative preferred stock due 2007 for an aggregate purchase price of
$175.0 million.
Dividends on the Series C preferred stock accrue from December 22, 1997 at
the rate per share of 14 1/4% of the accumulated amount per annum, compounded
semiannually on each June 15 and December 15, but will not be payable in cash,
except as set forth in the next sentence. Commencing on the first June 15 or
December 15 which is at least six months after the later of December 15, 2002,
and the specified debt satisfaction date specified in the certificate of
designations governing the Series C preferred stock, dividends on the Series C
preferred stock will be payable in cash at a rate per annum equal to 14-1/4% of
the accumulated amount as of the dividend payment date preceding such date. In
the event that the debt satisfaction date has not occurred before December 15,
2002, the rate otherwise applicable to the Series C preferred stock will be
increased by 150 basis points from December 15, 2002, until the dividend payment
date falling on or after the debt satisfaction date.
The Series C preferred stock ranks:
o senior to all existing and future capital stock that is junior in
right to our Series C preferred stock, including our Series A
preferred stock;
o with equal priority with our Series D preferred stock and Series F
preferred stock and all future capital stock that is specifically
designated by our board of directors as having equal priority with
our Series C preferred stock;
o junior to all future capital stock specifically designated by our
board of directors as being senior to our Series C preferred stock;
and
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<PAGE>
o junior in right of payment to all of our indebtedness and that of
our subsidiaries.
The Series C preferred stock will not be redeemable prior to December 15,
2002. On or after December 15, 2002, the Series C preferred stock will be
redeemable at our option, in whole or in part, at specified redemption prices
plus accumulated and unpaid dividends, if any, to the date of redemption. On
December 15, 2007, we will be required to redeem the Series C preferred stock at
a price equal to the accumulated amount thereof plus accumulated and unpaid
dividends, if any, out of funds legally available therefor.
On any scheduled Dividend Payment Date following the debt satisfaction
date, we may, at our option, exchange all but not less than all of the shares of
Series C preferred stock then outstanding for 14-1/4% senior subordinated
deferred interest notes due 2007 in an aggregate accumulated amount equal to the
aggregate accumulated amount of the shares of Series C preferred stock
outstanding at the time of such exchange, plus accumulated and unpaid dividends
to the date of exchange. Until the date cash payment is made thereon, interest
on these exchange debentures will accrue at a rate of 14-1/4% of the accumulated
amount per annum and will be compounded semiannually on each June 15 and
December 15, but will not be payable in cash except as set forth in the next
sentence. Commencing on the first interest payment date following the later of
the exchange date defined in the indenture governing the exchange debentures or
the date cash payment is made thereon, interest will be payable in cash at a
rate per annum equal to 14 1/4% of the accumulated amount as of the exchange
date.
The exchange debentures, if issued, will be unsecured, senior subordinated
obligations, subordinated in right of payment to all of our senior indebtedness
and to all indebtedness and other liabilities, including trade payables, of our
subsidiaries, and will rank with equal priority with the senior subordinated
notes we issued in 1997. The exchange debentures, if issued, will not be
redeemable prior to December 15, 2002. On or after December 15, 2002, the
exchange debentures are redeemable at our option, in whole or in part, at
certain redemption prices plus accrued and unpaid interest, if any, to the date
of redemption.
Series D Preferred Stock
On March 17, 1998, we and one of our subsidiaries sold an aggregate of
$200.0 million of our Series D 7% senior cumulative convertible preferred stock
due 2010 in a private placement.
Dividends at the rate of 7% per annum on the Series D preferred stock are
cumulative from the date of issuance and are payable quarterly in arrears on
each March 15, June 15, September 15 and December 15, commencing September 15,
1998, out of funds legally available therefor. Dividends shall be, at our
option, payable
o in cash, or
o through the issuance of shares of our common stock. The Series D
preferred stock is convertible at any time after the issue date, at
the option of the holders
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<PAGE>
thereof, into shares of our common stock at a rate of 1.0079 shares
of our common stock for each share of Series D preferred stock,
equivalent to a conversion price of $49.61 for each share of our
common stock.
The Series D preferred stock ranks
o senior to all existing and future capital stock that is junior to
our Series D preferred stock, including our Series A preferred
stock;
o equal in priority with our Series C preferred stock and Series F
preferred stock and all future capital stock that is specifically
designated by our board of directors as having equal priority with
our Series D preferred stock;
o junior to all future capital stock specifically designated by our
board of directors as being senior to our Series D preferred stock;
and
o junior in right of payment to all of our indebtedness and that of
our subsidiaries.
The Series D preferred stock is not redeemable prior to March 20, 2001. On
or after such date, the Series D preferred stock will be redeemable at our
option, in whole or in part, at any time or from time to time, at specified
redemption prices plus accrued and unpaid dividends, if any. The Series D
preferred stock is subject to mandatory redemption on March 15, 2010, at a
redemption price of $50.00 per share plus accrued and unpaid dividends, if any.
Upon the occurrence of a change in control, as defined in the certificate of
designations governing the Series D preferred stock, we will be obligated to
adjust the conversion price as provided in the certificate of designations
governing to the Series D preferred stock.
Series E Preferred Stock
In connection with an acquisition we consummated in August 1998, we issued
an aggregate of 75,100 shares of our Series E preferred stock. The Series E
preferred stock is non-voting, non-redeemable and does not earn dividends. Each
share of Series E preferred stock has a liquidation preference of $59.93 per
share, but is junior in right to receive distributions in liquidation to all
other currently existing preferred stock and any other class of preferred stock
authorized in the future unless such new class is expressly made junior or equal
to the Series E preferred stock. The holders of the Series E preferred stock may
convert all, but not less than all, of their stock into shares of our common
stock on a one-for-one basis any time on or after August 28, 1999. Under certain
conditions, Winstar may require these holders to convert.
Registrar and Transfer Agent
The registrar and transfer agent for the Series A preferred stock, Series
C preferred stock, Series D preferred stock, Series F preferred stock and common
stock is Continental Stock Transfer & Trust Company, 2 Broadway, New York, New
York 10004.
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<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
This prospectus relates to the resale by the selling stockholders of the
shares listed below. All of the shares being registered under the registration
statement of which this prospectus forms a part are being so registered under
the registration rights granted by us to the selling stockholders. None of the
selling stockholders has had a material relationship with us or any of our
predecessors or affiliates within the past three years, except as described in
the footnotes below or otherwise in this prospectus.
Holders of Series F Preferred Stock
The table in this section "Holders of Series F Preferred Stock" sets forth
the record holders of our Series F preferred stock. Generally, these record
holders hold these shares for themselves and/or other beneficial holders.
Accordingly, this prospectus also relates to and covers all beneficial holders
of our Series F preferred stock, including, but not limited to:
o ARBCO Associates, L.P.
o Alexandria Global Investment Fund 1 Ltd.
o Argent Classic Convertible Arbitrage Fund (Bermuda) L.P.
o Argent Convertible Arbitrage Fund Ltd.
o Argent Classic Convertible Arbitrage Fund LP
o Aristeia International, Ltd.
o Aristeia Trading, LLC
o Bank America Pension Plan
o Bank of America Securities LLC
o BNP Arbitrage SNC
o Deeprock & Co.
o Duckbill & Co.
o Federated Insurance Service, on behalf of its Federated Utility Fund II
o Federated Utility Fund, Inc.
o Fidelity Advisor Series VII: Fidelity Advisors Utilities Growth Fund. The
entity is either an investment company or a portfolio of an investment
company registered
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<PAGE>
under Section 8 of the Investment Company Act of 1940, as amended, or a
private investment account advised by Fidelity Management & Research
Company. Fidelity Management & Research Company is a Massachusetts
corporation and an investment advisor registered under Section 203 of the
Investment Advisers Act of 1940, as amended, and provides investment
advisory services to each of the foregoing Fidelity entities identified
above, and to other registered investment companies and to certain other
funds which are generally offered to a limited group of investors.
Fidelity Management & Research Company is a wholly owned subsidiary of FMR
Corp. a Massachusetts corporation.
o Forest Alternative Strategies Fund II LP A-5-I
o Forest Fulcrum Fund LP
o Forest Alternative Strategies Fund II LP A-5-M
o Forest Global Convertible Fund Series A-5
o General Motors Welfare Benefit Trust (L-T VEBA)
o General Motors Welfare Benefit Trust
o HBK Cayman LP
o HBK Investments L.P.
o HBK Offshore Fund Ltd.
o Highbridge International LLC
o JMG Convertible Investments LP, Triton Capital Investments Ltd.
o Kellner, DiLeo & Co.
o Lipper Convertible Series II, L.P.
o Lipper Convertibles, L.P.
o LLT Limited
o McMahon Securities
o MFS Series Trust I: MFS Convertible Securities Fund
o MFS Series IV Trust: MFS Total Return Fund
o MFS Series I Trust: MFS Equity Income Fund
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<PAGE>
o MFS/Sun Life Series Trust: Equity Income Series
o Peoples Benefit Life Insurance Company
o Peoples Benefit Life Insurance Company (Teamsters Separate Account)
o PIMCO Convertible Bond Fund
o Ram Capital LLC
o Retail Clerks Pension Trust
o Ritchie Capital Investments Ltd.
o Salomon Smith Barney Inc.
o SoundShore Opportunity Holding Fund Ltd.
o Sun American Service Trust, on behalf of its Federated Utility Portfolio
o Sylvan IMA (Ltd.) c/o Forest Investment Management LLC
The selling stockholders shall also be entitled to sell, and the
registration statement of which this prospectus forms a part also covers, any
and all dividend shares that may be issued instead of cash dividends on such
Series F preferred stock during the term of the Series F preferred stock and any
and all conversion shares issued upon conversion of the Series F preferred
stock.
<TABLE>
<CAPTION>
Record Ownership Number of Shares of
of Series F preferred stock Series F preferred stock
Name of Selling Security holder as of October 18, 1999 to be Sold
- ------------------------------- --------------------------- ------------------------
<S> <C> <C>
The Bank of New York 3,920 3,920
Bear, Stearns Securities Corp. 60,575 60,575
Boston Safe Deposit & Trust Company 1,925 1,925
BT Alex Brown 150 150
Central Carolina Bank & Trust Company 50 50
Chase Manhattan Bank 360 360
Chase Manhattan Bank (CCS) 5,944 5,944
CBC World Markets Corp. 5,740 5,740
Credit Suisse First Boston Corporation 10,730 10,730
Deutsche Bank Securities Inc. 24,000 24,000
Fiduciary Trust Company International 1,910 1,910
Fiduciary Tennessee Bank N.A.
Memphis 90 90
First Options of Chicago, Inc. 750 750
First Union National Bank 295 295
Goldman, Sachs & Co. 7,800 7,800
Goldman Sachs International 3,200 3,200
Investors Fiduciary Trust Company/SSB 600 600
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Record Ownership Number of Shares of
of Series F preferred stock Series F preferred stock
Name of Selling Security holder as of October 18, 1999 to be Sold
- ------------------------------- --------------------------- ------------------------
<S> <C> <C>
J.P. Morgan Securities Inc. 9,500 9,500
Kellner, DiLeo & Co. 3,000 3,000
Lehman Brothers, Inc. 38,500 38,500
Morgan Stanley & Co. Incorporated 26,400 26,400
The Northern Trust Company 25 25
PNC Bank, National Association 2,000 2,000
Prudential Securities Incorporated 28,000 28,000
Salomon Smith Barney Inc. 29,965 29,965
SSB - Trust Custody 115 115
State Street Bank & Trust Company 19,731 19,731
Suntrust Bank, Atlanta 2,000 2,000
Union Bank of California, N.A. 50 50
Warburg Dillon Read LLC 11,100 11,100
Weiss, Peck & Greer, L.L.C. 1,500 1,500
Wilmington Trust Company 65 65
</TABLE>
Common Stock
The following table sets forth the record holders of Common Stock registered for
resale under this prospectus.
Beneficial Ownership Number of Shares of
of Common Stock Common Stock
Name of Selling Security holder as of October 18, 1999 to be Sold
- ------------------------------- ---------------------- -------------------
Glenn Anderson 181(1) 181(1)
Mark Chestnut 226(1) 226(1)
Brian Clarke 29,573(1) 29,573(1)
Dale Dennis 46(1) 46(1)
Barry Fingerhut 9,571(2) 9,571(2)
Gregory Green 973(1) 973(1)
Irwin Leiber 9,571(2) 9,571(2)
William Lonergan 2,669(1) 2,669(1)
Jared Miller 973(1) 973(1)
Edward A. Morin, Jr. 94,129(1) 94,129(1)
Trevor Parkinson 181(1) 181(1)
MFG Corp. 28,421(3) 28,421(3)
Ed Piersma 90(1) 90(1)
Angela Quinn 253(1) 253(1)
Raptor Global Fund, L.P. 8,614(2) 8,614(2)
Raptor Global Fund Ltd. 24,884(2) 24,884(2)
Reservoir New Media LLC 114,849(2) 114,849(2)
Barry Rubenstein 9,571(2) 9,571(2)
Orlando Saez 9,858(1) 9,858(1)
Seneca Ventures 11,963(2) 11,963(2)
Ralph Sims 94,129(1) 94,129(1)
Chad Skidmore 973(1) 973(1)
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<PAGE>
Beneficial Ownership Number of Shares of
of Common Stock Common Stock
Name of Selling Security holder as of October 18, 1999 to be Sold
- ------------------------------- ---------------------- -------------------
Walter Sonnenfeldt 535(1) 535(1)
Michael Stan 43,444(1) 43,444(1)
Tudor Private Equity Fund, L.P. 191,415(2) 191,415(2)
Brian Vargas 29,573(1) 29,573(1)
Wheatley Foreign Partners, L.P. 6,700(2) 6,700(2)
Wheatley Partners, L.P. 79,437(2) 79,437(2)
Leonard Whitwer 57,925(1) 57,925(1)
Woodland Venture Fund 11,963(2) 11,963(2)
Arthur Zards 29,573(1) 29,573(1)
- -----------------------------
(1) The shares were issued in connection with certain acquisitions.
(2) The shares to be resalable under this prospectus for this selling
stockholder will be those shares issuable to him under certain
circumstances in connection with his ownership of equity of Winstar New
Media Company, Inc., a subsidiary of our company. The actual number of
shares which may be sold by this selling stockholder will be determined at
the time such shares are issued, if ever, in accordance with the formula
and market price of our common stock at that time. Therefore, the
registration statement of which this prospectus is a part also covers on
indeterminable number of additional shares of our common stock which may
be issued in accordance with such formula.
(3) The shares were issued as compensation for consulting services.
Plan of Distribution
The sale or distribution of the securities may be effected directly to
purchasers by the selling stockholders or by any donee or pledgee or transferee
of any such selling stockholders as principals or through one or more
underwriters, brokers, dealers or agents from time to time in one or more
transactions, including:
o block trades,
o on any exchange or in the over-the-counter market,
o in transactions otherwise than in the over-the-counter market,
o through the writing of put or call options (whether such options are
listed on an options exchange or otherwise) relating to the securities,
the short sales of the securities,
o through the lending of such securities,
o through the distribution of the securities by any selling stockholder to
its partners, members or shareholders, or
o through a combination of any of the above.
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<PAGE>
Any of such transactions may be effected at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at varying
prices determined at the time of sale or at negotiated or fixed prices, in each
case as determined by the selling stockholder or by agreement between the
selling stockholder and underwriters, brokers, dealers or agents, or purchasers.
If the selling stockholders effect such transactions by selling securities to or
through underwriters, brokers, dealers or agents, such underwriters, brokers,
dealers or agents may receive compensation in the form of discounts, concessions
or commissions from the selling stockholders or commissions from purchasers of
securities for whom they may act as agent (which discounts, concessions or
commissions as to particular underwriters, brokers, dealers or agents may be in
excess of those customary in the types of transactions involved).
The selling stockholders and any brokers, dealers or agents that
participate in the distribution of the securities may be deemed to be
underwriters, and any profit on the sale of securities by them and any
discounts, concessions or commissions received by any such underwriters,
brokers, dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.
Under the securities laws of certain states, the securities may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in certain states the securities may not be sold unless the securities have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
Selling stockholders may also resell all or a portion of the securities in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
We will pay all of the costs, expenses and fees incident to the
registration, offering and sale of the securities to the public hereunder other
than commissions, fees and discounts of underwriters, brokers, dealers and
agents. We have agreed to indemnify the selling stockholders and any
underwriters against certain liabilities, including liabilities under the
Securities Act. We will not receive any of the proceeds from the sale of any of
the securities by the selling stockholders.
LEGAL MATTERS
The legality of the issuance of the dividend shares and conversion shares
will be passed upon for us by Graubard Mollen & Miller, New York, New York.
Certain partners and employees of Graubard Mollen & Miller own shares of common
stock.
EXPERTS
The consolidated financial statements of Winstar as of December 31, 1997
and 1998 and for the years ended December 31, 1996, 1997 and 1998 incorporated
by reference into this prospectus, have been audited by Grant Thornton LLP,
independent certified public accountants, to the extent and for the periods
indicated in their reports thereon.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 under the Securities
Act of 1933, as amended, with the SEC. This prospectus is part of that
registration statement and does not contain all of the information included in
the registration statement. For further information about us and our securities
you may refer to the registration statement and its exhibits and schedules as
well as the documents described below. You can review and copy these documents
at the public reference facilities maintained by the SEC or on the SEC's website
as described below.
We also file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. These documents are also available at the
public reference rooms at the SEC's regional offices in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available at the offices
of the Nasdaq National Market in Washington, D.C.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. This
prospectus incorporates by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
o Annual Report on Form 10-K (as amended) for the year ended December
31, 1998;
o Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
o Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
o Proxy Statement regarding the Annual Meeting of Stockholders held on
July 1, 1999, filed May 7, 1999;
o Current Report on Form 8-K, filed June 3, 1999;
o Current Report on Form 8-K, filed June 24, 1999;
o Current Report on Form 8-K, filed July 16, 1999; and
o The description of our common stock contained in our registration
statement on Form 8-A (as amended) under the Exchange Act (File No.
1-10726).
We will provide any person to whom a prospectus is delivered a copy of any
and all of the documents incorporated in this prospectus by reference upon their
written or oral request. If you desire any of these documents, please contact us
as at Winstar Communications, Inc., 230 Park Avenue, New York, New York, 10169,
Attention: Investor Relations, 212-584-4000.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma as adjusted condensed consolidated
statement of operations for the nine months ended September 30, 1999 gives
effect to a private placement we consummated in June 1999 as if it had occurred
on January 1, 1999.
The following unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1998 gives effect to certain
financing transactions consummated in March 1998, as if they occurred on January
1, 1998. The following unaudited pro forma as adjusted condensed consolidated
statement of operations for the year ended December 31, 1998 gives effect to the
financing transactions we consummated in March 1998 and a private placement we
consummated in June 1999, as if they had occurred on January 1, 1998.
The pro forma financing statements do not purport to represent what our
results of operations or financial condition would actually have been had the
financing transactions we consummated in March 1998 and the private placement we
consummated in June 1999 in fact occurred on the dates referenced above or to
project our results of operations for any future period.
These pro forma financial statements should be read in conjunction with
the notes to the unaudited pro forma condensed consolidated financial statements
included herein and our consolidated financial statements and condensed
consolidated financial statements which are incorporated by reference into this
prospectus.
F-1
<PAGE>
WINSTAR COMMUNICATIONS INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Adjustments
for the June
1999 Private
Historical Placement As Adjusted
---------- --------- -----------
<S> <C> <C> <C>
Operating revenues:
Telecommunications services
Core $ 243,061 $ $ 243,061
Other 21,369 21,369
--------- ---------
Total telecommunications services 264,430 264,430
Information services 39,703 39,703
--------- ---------
Total operating revenues 304,133 304,133
Operating expenses
Cost of services and products 224,850 224,850
Selling, general and administrative
expenses 314,764 314,764
Depreciation and amortization 106,252 106,252
--------- ---------
Total operating expenses 645,866 645,866
--------- ---------
Operating loss (341,733) (341,733)
Other expense
Interest expense (154,011) (154,011)
Interest income 16,759 16,759
--------- ---------
Loss from continuing operations
before income tax benefit (478,985) (478,985)
Income tax benefit 3,000 3,000
--------- ---------
Net loss (475,985) (475,985)
Less preferred stock dividends (43,364) (10,375)(a) (53,739)
--------- ------------ ---------
Net loss applicable to common stock $(519,349) $ (10,375) $(529,724)
========= ============ =========
Net loss applicable to common
stockholders per share $ (10.47) $ (10.63)
========= ============ =========
Weighted average shares
outstanding 49,606 230(a) 49,836
========= ============ =========
</TABLE>
F-2
<PAGE>
WINSTAR COMMUNICATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
for the
March 1998 Adjustments for
Financing the June 1999
Historical Transactions Pro Forma Private Placement As Adjusted
---------- ------------ --------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Telecommunications services
Core $ 141,466 $ $ 141,466 $ $ 141,466
Other 49,643 49,643 49,643
---------- ---------- ----------
Total telecommunications services 191,109 191,109 191,109
Information services 53,338 53,338 53,338
---------- ---------- ----------
Total operating revenues 244,447 244,447 244,447
---------- ---------- ----------
Operating expenses
Cost of services and products 204,748 204,748 204,748
Selling, general and administrative expenses 263,155 263,155 263,155
Depreciation and amortization 74,953 74,953 74,953
---------- ---------- ----------
Total operating expenses 542,856 542,856 542,856
---------- ---------- ----------
Operating loss (298,409) (298,409) (298,409)
Other expenses
Interest expense (156,599) (10,757) (a) (167,356) (167,356)
Interest income 29,758 29,758 29,758
---------- ---------- ---------- ----------
Loss from continuing operations before income
tax benefit (425,250) (10,757) (436,007) (436,007)
Income tax benefit 5,500 5,500 5,500
---------- ---------- ---------- ----------
Net loss from continuing operations (419,750) (10,757) (430,507) (430,507)
Loss from discontinued operations (24,974) (24,974) (24,974)
---------- ---------- ---------- ----------
Net loss (444,724) (10,757) (455,481) (455,481)
Less preferred stock dividends (42,968) (2,994) (a) (45,962) (21,750) (b) (67,712)
---------- ---------- ---------- --------- ----------
Net loss applicable to common stock $ (487,692) (13,751) $ (501,443) $ (21,750) $ (523,193)
========== ========== ========== ========= ==========
Net loss applicable to common stock per share: $
From continuing operations $ (11.96) $ (12.30) (12.70)
From discontinued operations (0.65) (0.64) (0.64)
---------- ---------- ----------
Net loss applicable to common stock per share $ (12.61) $ (12.94) $ (13.34)
---------- ---------- ----------
Weighted average shares outstanding 38,681 72 (a) 38,753 460 (b) 39,213
========== ======= ========== ========= ==========
</TABLE>
F-3
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements
(in thousands, except share data)
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
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 that were actually recorded.
Statement of Operations for the Nine Months Ended September 30, 1999
(a) To record the dividends on the Series F convertible preferred stock
as if the June 1999 Private Placement had occurred on January 1,
1999.
Statement of Operations for the Year Ended December 31, 1998
(a) To record the financing transactions we consummated in March 1998 as
if they occurred as of January 1, 1998, including preferred stock
dividends, interest expense and amortization of deferred debt
offering costs and other related fees, but not including interest
income earned on unused cash, as follows:
Dividends on the Series D preferred stock issued in March 1998
($2,994).
Interest expense, including amortization of debt offering costs, on
the 1998 Notes issued in March 1998 ($10,757).
(b) To record the dividends on the Series F convertible preferred stock
as if the June 1999 Private Placement had occurred on January 1,
1998.
F-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the sale of the securities being
registered hereby, are as follows:
SEC registration fee .................................... $ 88,688.92
Legal fees and expenses ................................. 75,000.00
Listing fees ............................................ 30,000.00
Accounting fees and expenses ............................ 75,000.00
Miscellaneous ........................................... 20,000.00
-----------
Total .............................................. $288,688.92
===========
ITEM 15. Indemnification of Directors and Officers
Our certificate of incorporation provides that all of our directors,
officers, employees and agents shall be entitled to be indemnified by us to the
fullest extent permitted by law.
Section 145 of the Delaware General Corporation Law concerning
indemnification of officers, directors, employees and agents is set forth below.
"Section 145. Indemnification of officers, directors, employees and
agents; insurance.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the
II-1
<PAGE>
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under sections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suite or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer, to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
II-2
<PAGE>
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith an in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person in a successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
ITEM 16. Exhibits
Exhibit
Number Description
- ------ -----------
5.1 Opinion of Graubard Mollen & Miller
12.1 Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
23.1 Consent of Grant Thornton LLP
23.2 Consent of Graubard Mollen & Miller (included in its opinion filed
as Exhibit 5.1)
24 Power of Attorney (set forth on signature page)
II-4
<PAGE>
ITEM 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment of this registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a
II-5
<PAGE>
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on form and has duly caused this to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on November 3, 1999.
WINSTAR COMMUNICATIONS, INC.
By: *
-----------------------------------------
William J. Rouhana, Jr.
Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
* Chairman of the Board and Chief Executive Officer November 3, 1999
- ------------------------------------ (and principal executive officer)
William J. Rouhana, Jr.
* President, Chief Operating Officer and Director November 3, 1999
- ------------------------------------
Nathan Kantor
/s/ Timothy R. Graham Executive Vice President, General Counsel and November 3, 1999
- --------------------------- Director
Timothy R. Graham
Ric Uhl Executive Vice President and Chief Financial November 3, 1999
- ------------------------------------ Officer
Ric Uhl
* Director November 3, 1999
- ------------------------------------
Bert W. Wasserman
* Director November 3, 1999
- ------------------------------------
William J. vanden Heuvel
* Director November 3, 1999
- ------------------------------------
Steven B. Magyar
* Director November 3, 1999
- ------------------------------------
James I. Cash
* Senior Vice President-Finance (Principal November 3, 1999
- ------------------------------------ Accounting Officer)
Joseph P. Dwyer
</TABLE>
* By power of attorney
II-7
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated March 25, 1999 accompanying the
consolidated financial statements of WinStar Communications, Inc. and
subsidiaries appearing in the 1998 Annual Report of the Company to its
shareholders and accompanying the schedule included in the Annual Report on Form
10-K/A for the year ended December 31, 1998 which are incorporated by reference
in this Registration Statement and Prospectus. We consent to the incorporation
by reference in the Registration Statement and Prospectus of the aforementioned
reports and to the use of our name as it appears under the caption "Experts."
/s/ GRANT THORNTON LLP
New York, New York
November 4, 1999
