<PAGE>
As filed with the Securities and Exchange Commission on November 12, 1999
Registration No. 333-86293
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
AMENDMENT NO. 3 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)
<TABLE>
<S> <C> <C>
DELAWARE 4812 13-3585278
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification Number)
</TABLE>
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>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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, issuable as
dividends on the Preferred 4,260,842 shares $52.625(2) $224,226,804 $62,335.00
Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$.01 per share underlying 4,900,000 shares $61.96(3) $303,604,000 $84,401.91
Preferred Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock to be resold by 902,263 shares $41.31(4) $ 37,272,485 $10,361.75
certain persons
- ----------------------------------------------------------------------------------------------------------------------------------
Total $157,098.66
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* $94,763.66 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) Based on the last sale price of a share of common stock as reported by
Nasdaq on November 10, 1999.
(3) Represents the conversion price ($61.96) for a share of common stock.
(4) Based on the last sale price 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 12, 1999
Subject to Completion
WINSTAR COMMUNICATIONS, INC.
-----------------------------
300,000 Shares of Series F 7 1/4% Senior Cumulative Convertible Preferred Stock
and up to
10,063,105 shares of Common Stock
This prospectus covers:
o the resale by persons from time to time of an aggregate of
300,000 shares of our outstanding Series F preferred stock;
o the resale by persons of up to an aggregate of 4,260,842 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.
We will not receive any proceeds from the sale of these shares of
Series F preferred stock or the sale or issuance of these shares of common
stock.
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 10, 1999 was $52.63 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 date of this prospectus is November , 1999
<PAGE>
----------------------------
TABLE OF CONTENTS
Page
----
Summary ......................................................................3
Risk Factors...................................................................8
Price Range of Our Common Stock...............................................17
Capitalization................................................................18
Certain United States Federal Income Tax Considerations.......................20
Description of the Series F Preferred Stock...................................29
Description of Certain Indebtedness and Capital Stock.........................34
Selling Stockholders and Plan of Distribution.................................45
Legal Matters.................................................................50
Experts .....................................................................50
Where You Can Find More Information...........................................51
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. Our local networks allow us to offer
our customers a variety of individual and bundled services. These services
include 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. All of our services are delivered with a high degree of customer care
and at competitive prices. We believe that our services offer our customers an
attractive alternative to the incumbent local exchange carriers and other
service providers.
Our local networks are based on our wireless transmission capability.
Specifically, we utilize capacity in the 38 GHz, 28 GHz and other portions of
the radio spectrum to carry voice, data and video transmissions. These
transmissions are made with the same quality as transmissions made over fiber
optic cable. Our transmission rates are at speeds up to 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.
We are interconnecting our local network in each of our cities with
fiber running between each city. By connecting our local networks we are
creating a national network. This seamless national network will operate as a
true high-capacity alternative to the existing public telephone networks that
are owned and controlled by the incumbent service providers. Our national
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.
This national network will reduce our reliance on the facilities of other
providers, allowing us to reduce our costs and giving us greater control over
the quality of service we provide.
We currently provide service in more than 30 major U.S. markets,
including:
o Atlanta, o New York City,
o Boston, o San Diego,
o Chicago, o San Francisco, and
o Dallas, o Washington, D.C.
o Los Angeles,
We 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 high-capacity networks
and to drive a high volume of customer traffic across this network. We believe
that our wireless capacity 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. 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 networks;
o Interconnecting our local networks to create a national network;
o Targeting customers located in buildings that are already served
by our local networks;
o Offering attractive pricing and superior customer care; and
o Providing a bundle of 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 information presented on the next two
pages have been derived from audited and unaudited financial statements that are
incorporated by reference into this prospectus. In our opinion, the unaudited
financial statements have been prepared on the same basis as the audited
financial statements. Further, the unaudited financial statements include normal
recurring accrual adjustments that are necessary for a fair presentation of the
results of operations for the periods presented.
The summary as adjusted financial information presented on the next two
pages have been derived from unaudited pro forma financial statements that are
included elsewhere in this prospectus. The pro forma adjustments are based upon
available information and certain assumptions that we believe are reasonable.
These pro forma financial statements do not represent what our results of
operations would actually have been during the periods indicated.
The as adjusted financial information gives effect to certain
financings as if they occurred at the beginning of the periods indicated. These
financings are discussed in the notes to the pro forma financial statements
beginning on page F-4.
5
<PAGE>
<TABLE>
<CAPTION>
Nine
Year Ended Year Ended Months Nine Months Ended
December 31, December 31, 1998 Ended September 30, 1999
------------------ -------------------- September ----------------------
As 30, As
1996 1997 Actual Adjusted 1998 Actual Adjusted
---- ---- ------ -------- --------- ------ --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenues:
Telecommunications services:
Core $ 604 $ 22,653 $ 141,466 $ 141,466 $ 85,858 $ 243,061 $ 243,061
Other 3,883 7,143 49,643 49,643 40,276 21,369 21,369
--------- --------- --------- --------- --------- --------- ---------
Total telecommunications services 4,487 29,796 191,109 191,109 126,134 264,430 264,430
Information services 14,650 41,354 53,338 53,338 37,220 39,703 39,703
--------- --------- --------- --------- --------- --------- ---------
Total operating revenues 19,137 71,150 244,447 244,447 163,354 304,133 304,133
Operating loss:
Telecommunications services (40,731) (147,134) (231,017) (231,017) (165,534) (300,179) (300,179)
Information services (1,409) (4,092) (10,167) (10,167) (7,036) (13,368) (13,368)
General corporate (11,373) (27,312) (57,225) (57,225) (20,336) (28,186) (28,186)
--------- --------- --------- --------- --------- --------- ---------
Total operating loss (53,513) (178,538) (298,409) (298,409) (192,906) (341,733) (341,733)
Interest expense (36,748) (77,257) (156,599) (167,356) (111,704) (154,011) (154,011)
Interest income 10,515 17,577 29,758 29,758 24,043 16,759 16,759
Other income, net -- 4,719 5,500 5,500 4,000 3,000 3,000
--------- --------- --------- --------- --------- --------- ---------
Loss from continuing operations (79,746) (233,499) (419,750) (430,507) (276,567) (475,985) (475,985)
Loss from discontinued operations (3,977) (15,985) (24,974) (24,974) (25,031) -- --
--------- --------- --------- --------- --------- --------- ---------
Net loss (83,723) (249,484) (444,724) (455,481) (301,593) (475,985) (475,985)
Preferred stock dividends -- (5,879) (42,968) (67,712) (31,195) (43,364) (53,739)
--------- --------- --------- --------- --------- --------- ---------
Net loss applicable to
common stockholders $ (83,723) $(255,363) $(487,692) $(523,193) $(332,793) $(519,349) $(529,724)
========= ========= ========= ========= ========= ========= =========
Basic and diluted loss per share:
Actual and pro forma:
Loss per share from
continuing operations $ (2.86) $ (7.20) $ (11.96) $ (12.70) $ (8.10) $ (10.47) $ (10.63)
Loss per share from
discontinued operations (0.14) (0.48) (0.65) (0.64) (0.66) -- --
--------- --------- --------- --------- --------- --------- ---------
Loss per share $ (3.00) $ (7.68) $ (12.61) $ (13.34) $ (8.76) $ (10.47) $ (10.63)
========= ========= ========= ========= ========= ========= =========
Weighted average common shares
outstanding 27,911 33,249 38,681 39,213 37,970 49,606 49,836
========= ========= ========= ========= ========= ========= =========
Other Financial Data:
Capital expenditures $ 46,651 $ 222,196 $ 402,206 $ 402,206 $ 222,852 $ 863,500 $ 863,500
Depreciation and amortization 3,764 25,102 74,953 74,953 48,666 106,252 106,252
</TABLE>
(footnotes on next page)
6
<PAGE>
<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>
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. Investors should also read 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 may not ever achieve profitability. We will continue to incur losses
in the near term as we invest further in the growth of our telecommunications
business. Our losses may not decrease over time as we have planned. Our ability
to stem our losses and achieve and maintain profitability is dependent on many
factors, including:
o our ability to execute our business plan over time,
o the general state of the telecommunications markets,
o competition in our markets,
o the success of competing technologies, and
o the general state of the financial markets.
If we fail to reduce the amount of our losses and achieve and maintain
profitability, the value of our securities will diminish significantly.
Our financial obligations place significant constraints on how we operate. If we
cannot satisfy these obligations, we will not be able to eliminate these
constraints and our growth will be impeded.
We have a large amount of indebtedness, preferred stock and other
payment obligations outstanding. The instruments governing these obligations
contain extensive covenants restricting our activities. We will not be free of
these restrictions until such time as we can repay or redeem all of these
obligations. We may never have the financial ability to do so. Further, the
agreements governing our indebtedness allow us to incur additional indebtedness
in some circumstances. Instruments governing any additional indebtedness would
likely contain similar restrictions.
These restrictions 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;
8
<PAGE>
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 capital to invest in
their operations.
If we are unable to generate cash from our operations that is sufficient to
service our financial obligations, we may default on these obligations.
If our business is not successful, we will not be able to generate
enough cash from our operations to repay our debts or redeem our preferred stock
when required. If we do not generate the necessary cash from our operations, we
would have to either:
o refinance our debt,
o access other sources of capital, if they are even available to
us, or
o default on our obligations.
Any refinancing or raising of additional capital might be on unfavorable terms
in these circumstances. Any default on our financial obligations could force us
to diminish or halt our operations or liquidate our assets.
We will need to spend significant capital to fund our future growth. If we
cannot access this capital when we need it, we will not be able to 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 growing operating losses as we grow our business. If we cannot
generate sufficient cash from our operations or otherwise obtain capital as
needed, we will not be able to continue the expansion of our operations.
Risks relating to our operations
Our business is subject to extensive regulations. These regulations could
change in an unpredictable manner which might disrupt our business or cause us
to change how we operate.
Regulatory changes could adversely impact our financial performance and
growth. The telecommunications business is highly regulated domestically at the
federal, state and local levels. It is also regulated abroad by foreign
governments. In addition, our ability to acquire and use the radio spectrum
rights that are an important part of our business is subject to extensive
regulation. The regulatory environment directly affects the
9
<PAGE>
breadth of services we are able to offer our customers and the rates we charge
for these services. It also affects the rates, terms and conditions of the
services we obtain from other telecommunications providers. The regulations
which govern our operations could change at any time in an unpredictable
manner. These changes could substantially increase our costs of providing
services, which could make it uneconomical for us to continue to provide them.
Other changes could prohibit us from providing certain services. Regulatory
changes which prohibit us from providing services, or make it more costly for us
to provide those services, could cause a serious disruption of our business.
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 to 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 will not achieve the financial results we expect.
We may not grow as we anticipate or may not be successful in managing our
expansion if we do grow. If we do not achieve and effectively manage our growth,
our operations could be disrupted and our financial condition could be impaired.
If we are unable to grow as we anticipate, or if we are not
successful in managing our growth, our financial performance will not meet our
expectations. We are pursuing a strategy of rapid growth. This strategy includes
numerous elements which may be difficult or costly to execute. These elements
include:
o the accelerated rollout of our telecommunications services,
o acquisitions of businesses related to our operations, and
o hiring and managing a large number of additional personnel.
Executing each of these elements will require us to make significant
expenditures and to incur additional expenses. We may not be
successful in implementing these elements.
10
<PAGE>
If we are able to grow our operations, the demand for our services
may not increase as planned. If demand does not increase, we will not generate
sufficient revenues to offset the increased expenditures associated with our
growth. In this event, our net losses would increase. If demand for our
services does increase, numerous factors could prevent us from successfully
managing this growth. These factors include:
o our inability to maintain the quality of our services and satisfy
our customers;
o the inability of our accounting and financial management systems
to handle increased customer billing and service inquiries; and
o our inability to economically integrate assets we acquire into
our operations.
We are expanding our operations into foreign markets. In each foreign market, we
will face all of the risks we face in connection with our operations in the
United States. In addition, we may be subject to additional risks particular to
that foreign market.
We are expanding the offering of our telecommunications services into
parts of Europe, Asia and South America. We may not be able to successfully
compete in any of these markets. In each foreign market, we will face all of the
risks we face in connection with our operations in the United States. We also
will face additional risks particular to that foreign market. These additional
risks could include:
o losses from currency fluctuations;
o the imposition of tariffs, customs or other regulatory
requirements that make it uneconomical for us to provide certain
services in that market; and
o the implementation of government subsidies that enable certain
competitors in that market to offer their services at rates
cheaper than ours.
Furthermore, we expect prices for telecommunications services outside
of the United States to decrease in the future. This pricing pressure could
have a significant impact upon the profitability of our operations abroad.
11
<PAGE>
We need to obtain rights to access buildings to build our network and service
our customers. This requirement could make it more difficult and costly for us
to expand our business.
In order to build our network and access our customers, we need access
to each building where our antennas will be placed. We may not be able to obtain
access to enough buildings to successfully build our network as planned. If we
cannot obtain access where and when needed, we will not be able to expand at
the rate currently planned. In order to obtain these rights, we must negotiate
separate deals with the landlords of each building we seek to access. In
addition, we may need to obtain zoning or other governmental approvals in order
to buildout in a particular building or area. In the event we are not able to
build our network at the pace required to meet our business plan, our financial
performance would suffer.
Fixed wireless telecommunications services are relatively new and are not widely
used. Our services may not achieve wide market acceptance.
Fixed wireless technology is not yet widely used for the provision of
telecommunications services. Given the wide variety of technologies available
for the provision of telecommunications services, our fixed wireless-based
services may not achieve wide market acceptance. There are a number of
technologies in the marketplace that are used to provide or will be used to
provide high-speed telecommunications services in addition to fixed wireless
technology. These include:
o digital subscriber line technology, commonly referred to as DSL,
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;
o fiber optic lines; and
o satellite-based systems.
It is possible that these or other as yet undeveloped technologies
could render our services less profitable or less attractive to customers. If
our technology is not widely accepted in the future, we may not be able to meet
our operational or financial objectives.
We rely in 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 rely in part on services provided by other
telecommunications companies. In the future, one or more of these companies may
be motivated or required to curtail the provision of their services to us. This
could disrupt our business. In some instances, these providers compete with us
for the same customers. Accordingly, in the future, they may become unwilling to
provide us with the services we require. Further, our providers are seeking to
achieve their own growth. As they grow, they may want to dedicate their
resources and their networks to their own needs or to other more profitable
telecommunications companies.
12
<PAGE>
In that case, they may elect to scale back or terminate the services they
provide to us.
Examples of the services we receive from third parties include:
o Our use of the facilities of fiber providers, such as Williams
Communications and Metromedia Fiber Networks, 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
network. Our expansion and the buildout of our network could be
delayed if Lucent does not 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 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.
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. However, we may not be able to hire enough qualified
personnel to successfully meet our growth objectives. 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. The failure to recruit and retain
qualified personnel could significantly impede our ability to expand
domestically and abroad.
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. This could result in system failures or
miscalculations.
We are currently reviewing whether the systems on which we rely are
vulnerable to potential errors and failures after December 31, 1999. If the
systems do experience these errors or failures, our operations could be
diminished or halted until the errors and failures are remedied. These errors
and failures could occur as a result of computer programs being written using
two digits, rather than four digits, to define the applicable year.
Specifically, some computer programs have time-sensitive software which
recognizes a date using "00," such as January 1, 2000, as January 1, 1900. This
type of error could result in system failures or miscalculations. The long-term
impact of any failure of this type is not certain. However, the impact could be
material, causing us to lose customers.
13
<PAGE>
Emissions from our antennas may be a health risk.
The use of wireless equipment, including antennas, has been alleged to
pose health risks due to radio frequency emissions. The FCC recently adopted new
guidelines and methods 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. Any future
findings that our antennas pose a health risk could result in significant
liability on our part. This type of finding would also reduce public acceptance
of wireless systems and adversely affect our financial condition or results of
operations. In addition, we could be required to change the way we operate or
engineer our networks in order to reduce emissions from our antennas to
acceptable levels. These changes 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 make it difficult
for a third party to acquire us. This could conflict with the short-term
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 may
discourage potential buyers of Winstar. The rights plan grants certain of our
stockholders the right to buy shares of our Series B preferred stock at a
reduced price if a person acquires 10% or more of our outstanding common stock
without our consent.
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.
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. 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 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.
Sales in the public market of additional shares of our common stock
would increase the number of shares of common stock available for purchase in
the market. As a matter of supply and demand, this could adversely affect the
prevailing market price of our common stock. As of November 10, 1999, there were
outstanding options and warrants to purchase approximately 17,954,000 shares of
our common stock. We will grant more options in the future under our employee
benefit plans. Additionally, certain of our outstanding securities,
14
<PAGE>
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 securities are or will be registered for
resale under the Securities Act.
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.
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. Some of these factors have been related to our
performance and financial condition and others have not. Some of these factors
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, in recent years the stock market has experienced broad
price and volume fluctuations. These fluctuations have often been unrelated to
the operating performance of companies, particularly telecommunications and
technology companies. These broad market fluctuations may adversely affect the
market price of our common stock.
15
<PAGE>
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 statements may be
identified by our use of words such as:
o "anticipate," o "intend,"
o "believe," o "predict,"
o "estimate," o "project,"
o "expect," o "will,"
o "plan," o "could"
and similar terms and expressions. These statements reflect our current views
with respect to future events and are subject to numerous risks, uncertainties
and assumptions. Our expectations may not be realized.
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<PAGE>
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 10, 1999 55.63 37.00
The last sale price of our common stock on November 10, 1999 was $52.63
per share. As of November 10, 1999, 54,760,789 shares of our common stock were
held by more than 1,000 beneficial holders.
DIVIDEND POLICY
We never have paid any dividends on our common stock and we do not
intend to pay any dividends in the foreseeable future. In addition, the terms of
the instruments governing our indebtedness and preferred stock restrict our
ability to pay cash dividends. We intend to retain our cash for the continued
expansion of our business.
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<PAGE>
CAPITALIZATION
The table on the following page sets forth our cash and capitalization
as of September 30, 1999. The table should be read in conjunction with the
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
under our 1992 performance equity plan,
o 13,774,000 shares of common stock issuable upon exercise of
options 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 1/2senior 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 ......................................................... 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:
o a citizen or resident of the United States,
o a corporation created or organized under the laws of the United
States or of any State, including the District of Columbia, or
o an estate or trust that is described in Section 7701(a)(30) of
the Internal Revenue Code.
Distributions in general
Distributions of money or other property made by us with respect to our
Series F preferred stock will be treated as dividends. The amount of these
dividends will be equal to:
o the amount of cash distributed, or
o 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:
o Winstar has earnings and profits for the current taxable year, or
o Winstar has accumulated earnings and profits throughout its years
of existence as calculated for United States federal income tax
purposes.
If the amount of any dividend exceeds Winstar's current and accumulated
earnings and profits, it will be treated:
o first as a tax-free return of capital to the extent of the
holder's tax basis in the Series F preferred stock, and
o 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."
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<PAGE>
We do 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.
The holding period for these shares of common stock will commence on the day
following the date of distribution. The holding period will not include any
portion of the holding period for the shares of Series F preferred stock.
Dividends to corporate holders
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. However, these holders will not be entitled to this deduction with
respect to amounts treated as a return of capital or capital gain. In addition,
the benefit of this deduction may be reduced by the corporate alternative
minimum tax.
In determining whether they are entitled to this deduction, corporate
holders should consider:
o the provisions of Sections 246(c), 246A and 1059 of the Internal
Revenue Code,
o Treasury regulations issued under those provisions, and
o Internal Revenue Service rulings and administrative
pronouncements relating to those provisions.
Section 246(c) disallows this deduction in its entirety if the holder
has not held our Series F preferred stock for certain periods of time. A holder
may not count toward this holding period any period in which the holder:
o has 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 exercise of our option to redeem Series F
preferred stock is not considered a contractual obligation to
sell by a 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 security or
property.
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<PAGE>
Section 246A contains rules under which the deduction described above
could be reduced to the extent that a corporate holder incurs indebtedness
directly attributable to its investment in the Series F preferred stock.
Under Section 1059, a corporate holder is required to reduce its tax
basis in shares of Series F preferred stock it has held less than two years as a
result of the deduction described above. The amount of this reduction is equal
to the amount of the dividend which was not taxed because of the deduction
described above. To the extent that this reduction would reduce the holder's tax
basis of the Series F preferred stock below zero, Section 1059 requires
immediate recognition of gain. This gain would generally be treated as gain from
the sale or exchange of stock. In the case of the Series F preferred stock, a
reduction in the tax basis would also be required for any amount treated as a
dividend with respect to a redemption that is not applied equally to all
stockholders, or meets certain other requirements. This reduction would be
applied without regard to either the relative amount of the dividend or the
holder's holding period for the Series F preferred stock.
Receipt of shares of common stock 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 shares of common stock,
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 exchanged the fractional
share for cash in a redemption. This deemed exchange 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 these shares of common stock will be
equal to:
o the adjusted tax basis of the converted Series F preferred stock,
less
o the portion of the tax basis attributable to any fractional
shares the holder is deemed to have exchanged.
The holding period of these shares of common stock 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 securities or assets to holders of common
stock may be deemed a distribution to the holders of the Series F preferred
stock. This 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. These
accrued dividends will be payable upon the optional or mandatory redemption of
the Series F preferred stock. The tax treatment of 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
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<PAGE>
general." Winstar intends to take this position and will report to the Internal
Revenue Service on that basis.
Prior to an optional or mandatory redemption of our Series F preferred
stock, we would be obligated to declare a dividend on the Series F preferred
stock. The amount of this dividend would be equal to any accrued dividends on
the Series F preferred stock.
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:
o the sum of the amount of cash and the fair market value of any
property received upon the sale or other taxable disposition of
the Series F preferred stock, and
o the holder's adjusted tax basis in the Series F preferred stock
being sold or disposed.
This 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 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.
The entire amount of the cash or property received on a redemption may be
treated as a distribution. This treatment will be made without offset of the
holder's tax basis in the redeemed shares. Rather, this offset will be treated
in the same manner as distributions described above under "Distributions in
general." The holder's basis in the redeemed Series F preferred stock would be
transferred to the holder's remaining shares of our stock, if any.
However, the redemption may be treated as a sale or exchange, with tax
obligations based on capital gains, if:
o the holder's ownership 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 the 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.
A person generally will be treated as the owner of our stock if:
23
<PAGE>
o the stock is owned by related parties in which the person owns an
interest; or
o that person or related parties could acquire the stock through
exercise of an option. For this purpose, an option would include
the conversion rights under our Series F preferred stock.
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. It may also apply 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:
o a taxpayer identification number, certified under penalties of
perjury, and
o certain other information.
Alternatively, beneficial owners may be able to establish, 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% of the entire sales price,
unless:
o the broker determines that the seller is a corporation or other
exempt recipient, or
o the seller provides, in the required manner, certain identifying
information.
In either case, the sale must be reported by the broker to the Internal Revenue
Services, unless the broker determines that the seller is an exempt recipient.
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. This may entitle the holder to a refund, provided that it 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.
This tax will be at a 30% rate or
24
<PAGE>
a lower rate if 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 certain documentation in accordance with the
terms of the applicable treaty.
No withholding tax will apply if:
o the dividends 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
o a tax treaty applies and the dividends are attributable to a U.S.
permanent establishment maintained by the foreign holder.
However, these dividends remain subject to United States federal income tax.
This tax would apply after allowance for applicable deductions, at applicable
graduated individual or corporate rates.
The branch profits tax treats a U.S. branch business as if it had been
a U.S. subsidiary that paid a dividend. Accordingly, in certain instances,
dividends received by a foreign corporation may be subject to an additional
federal income tax at a 30% rate or a lower rate if an income tax treaty
applies.
Dividends paid to an address outside the United States are generally
presumed to be paid to a resident of such country for purposes of the
withholding discussed above. For purposes of determining the applicability of a
tax treaty, this same address rule applies. However, in the case of dividends
paid after December 31, 2000, a foreign holder generally will be subject to
United States withholding tax at a 31% rate under backup withholding rules.
This rate would be imposed instead of the 30% rate or a reduced rate under an
income tax treaty.
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. This
refund would be obtained by filing an appropriate claim for refund with the
Internal Revenue Services.
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 the gain is attributable to a
United States permanent establishment maintained by the foreign holder;
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<PAGE>
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 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. 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 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 the
holder is a corporation, it generally will be taxed on its net gain under
regular graduated United States federal income tax rates. In addition, it will
be subject to branch profits tax equal to 30% of its connected earnings and
profits for the taxable year, unless it qualifies for a lower rate under an
applicable income tax treaty.
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. This tax may be offset by certain capital losses. The
foregoing will apply even if the individual is not considered a resident of the
United States. 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.
No United States federal income tax will be imposed on a foreign holder
upon receipt of conversion shares if no cash is received.
Federal estate tax
Series F preferred stock owned by an individual foreign holder at the
time of death will be included in the individual's gross estate for United
States federal estate tax purposes. However, 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
We must report annually to the Internal Revenue Service and to each
foreign holder the amount of dividends paid to the holder and the tax withheld
with respect to those dividends. These reporting requirements apply even if
withholding was not required or was reduced or eliminated by an applicable
income tax treaty. This information may also be made available to the tax
authorities in the country in which the foreign holder is a resident.
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<PAGE>
With respect to foreign holders not governed by the rules described
above, United States backup withholding at the rate of 31% will apply to
dividends if the foreign holder fails to furnish certain information about its
foreign status under the United States information reporting requirements. In
the case of dividends paid after December 31, 2000, a foreign holder generally
would be subject to backup withholding at 31% rate, unless it complies with
certain procedures.
Payment by a United States office of a broker of the proceeds of a sale
or redemption of Series F preferred stock that are not treated as a dividend, is
subject to both backup withholding and information reporting. The beneficial
owner may avoid these requirements if it certifies under penalties of perjury
that it is a foreign holder or establishes an exemption.
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:
o a U.S. person,
o a controlled foreign corporation, or
o 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. These payments,
however, will be subject to information reporting unless:
o the broker has documentary evidence in its records that the
beneficial owner is a foreign holder and certain other
certification conditions are met, or
o the beneficial owner otherwise establishes an exemption, provided
the 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. This 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:
o currently existing provisions of the Internal Revenue Code of
1986,
o applicable Treasury regulations,
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<PAGE>
o current administrative interpretations, and
o court decisions.
All of these statutes, regulations, interpretations and decisions are subject to
change. Any change 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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<PAGE>
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. Copies of the certificate of designations and the form of
Series F preferred stock certificate are available upon request to Winstar.
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.
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 preferred stock.
However, we may create 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
cumulative dividends at the rate of 7-1/4% per annum based on the liquidation
preference of the shares. Currently, the liquidation preference is $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
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<PAGE>
are cumulative and accrue from the most recent date on which dividends were
paid. If no dividends have yet been paid, these dividends accrue 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 preceding a quarterly dividend payment date. 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, the dollar amount of the dividend is divided by 97% of closing bid
price for our common stock on the fourth trading day preceding the dividend
payment date. The resulting number of shares of common stock is then rounded up
or down to the nearest whole share.
The indentures governing our outstanding debt 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 indentures include:
o the indenture dated October 23, 1995, governing our 14% senior
discount notes due 2005;
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.
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Certain shares of our Series F preferred stock may be deemed securities
that are not freely saleable under the federal securities laws. Common stock
issued as dividends on shares of Series F preferred stock that are not freely
saleable will also not be freely saleable. The certificates evidencing these
shares of common stock will bear a legend and will not be transferable except in
accordance with an effective registration statement or under an exemption from
the registration requirements of the Securities Act.
All shares of common stock issued as a dividend which are not freely
saleable will be issued in physical certificated form. These shares will not
eligible for receipt in global form through the facilities of the depositary.
Certificates for these shares will be mailed or made available to beneficial
holders at the office of the transfer agent for the Series F preferred stock.
Holders who have not made arrangements with the depositary, the transfer agent
and us prior to a dividend payment date for the delivery of certificates may not
receive delivery until several days after such dividend payment date.
All common stock issued as dividends on Series F preferred stock that
is freely saleable on a record date for the payment of dividends will generally
be transferable by the recipient without restriction under the Securities Act.
These shares also will be eligible for receipt in global form through the
facilities of the depository.
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. After that date, each share of the Series F preferred stock will
be redeemable at our option. This redemption would be done at the following
redemption prices, payable in cash, plus accumulated and unpaid dividends, if
any.
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
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In the case of any partial optional redemption, selection of the Series F
preferred stock for redemption will be made fairly among holders based on the
number of shares they own, 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, holders of the Series F preferred stock at
the close of business on such record date will be entitled to receive the
dividend. No payment or allowance will otherwise 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.
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. In
addition, the 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, there may not be sufficient proceeds to
pay all amounts payable with respect to the Series F preferred stock and all
other capital stock that ranks with the same priority. In that case, the
holders of the Series F preferred stock and other capital stock ranking with the
same priority will share in any distribution of assets. Sharing would be in
proportion to the full liquidation preference and accumulated and unpaid
dividends to which each holder is entitled. The sale of all or substantially all
of our assets or our consolidation or merger with one or more entities is not
deemed a liquidation of Winstar for this purpose.
Voting Rights
The holders of Series F preferred stock are not entitled to vote on general
matters. They would be entitled to vote on limited matters as 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, 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 the number of directors elected. These special voting
rights will continue until all dividends in arrears on the Series F preferred
stock are paid in full. Once these dividends are paid in full, the directors
elected under this provision will be automatically removed from office.
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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. This conversion price is subject to adjustment as provided in the
certificate of designations. The 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.
We have the option in certain circumstances to convert all of the shares of
Series F preferred stock into common stock at the conversion price.
Specifically, we may convert the Series F preferred stock 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 trading days.
The date on which our Series F preferred stock may be converted and the
conversion price may be adjusted in the event of certain changes of control of
Winstar. These changes of control are described 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 if:
o the entity that survives the merger or purchases our assets is
organized under the laws of a United States jurisdiction;
o the shares of Series F preferred stock shall become shares of
this entity with the same powers, preferences, limitations and
restrictions as existed prior to the transaction; and
o other conditions set forth in the certificates of designations
are met.
Transfer Agent, Registrar and Dividend Disbursing Agent
The transfer agent, registrar, dividend disbursing agent and redemption
agent for our Series F preferred stock is Continental Stock Transfer & Trust
Company.
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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:
o $150.0 million of 14% senior discount notes due 2005, and
o $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.
The senior notes remain outstanding and are:
o unsecured, senior indebtedness,
o rank with equal priority in right of payment with all of our
existing and future senior indebtedness, and
o are senior in right of payment to all existing and future
subordinated indebtedness.
The senior notes will not accrue interest prior to October 15, 2000. They
will not pay cash interest prior to April 15, 2001. However, the principal value
of the senior notes has accreted since issuance. 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:
o $100.0 million of our 14 1/2% senior deferred interest notes due
2005, ranking in equal priority with the senior notes issued by
us in 1995, and
o $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.
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The senior notes issued by us in 1997 are:
o unsecured senior indebtedness,
o rank in equal priority with all of our existing and future
unsecured senior indebtedness, and
o 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 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. They
are redeemable on or after October 15, 2000, at our option.
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. They are redeemable on or
after March 15, 2002, at our option.
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. They are redeemable on or after March 15, 2002, at our option.
We have unconditionally guaranteed the obligations of Winstar Equipment
Corp. and Winstar Equipment Corp. II under their respective notes. These
obligations are secured by security interests in equipment and other property.
The senior subordinated notes we issued in 1997 are:
o unsecured senior subordinated obligations,
o rank in equal priority with the certain notes we issued in 1998,
and
o 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. They are redeemable on or after March 1, 2002, at our
option.
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1998 Debt Placement
In March 1998, we issued:
o $200.0 million in aggregate principal amount of our 10% senior
subordinated notes due 2008, and
o $250.0 million in aggregate principal amount of our 11% senior
subordinated deferred interest notes due 2008.
The notes we issued in 1998 are:
o unsecured, senior subordinated obligations,
o rank in equal priority with the senior subordinated notes we
issued in 1997, and
o 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. They are redeemable on or after March 15,
2003, at our option.
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. They are redeemable on or after
March 15, 2003, at our option.
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;
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
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o consolidate, merge or sell assets.
The covenants contained in these indentures are subject to exceptions. Our
new media subsidiaries are not subject to many of these covenants. However, our
ability to make additional investments in such subsidiaries is limited.
Lucent Credit Agreement
In October 1998, we entered into a supply agreement with Lucent. Also, in
October 1998, we 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. This financing is in an aggregate amount of up to $2.0
billion and is to be used for the buildout of our domestic and international
network. 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.
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. We 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 determines when
the loan is to be repaid.
Interest on loans with Lucent accrue at a floating rate equal to, at our
election:
o a base rate determined in relation to the then current prime
rate, or
o 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 our election. However, the interest on loans accruing
during the first year of the tranche of which a loan is a part may, at our
election, be deferred. The deferred interest shall then 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. Installments are 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.
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Loans made under the credit agreement are also subject to mandatory
prepayment upon the occurrence of certain events, including:
o 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
o the generation of excess cash flow as defined in the credit
agreement, if any, by us.
We are entitled to prepay the loans at our option, at any time.
Loans are 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.
Equipment Lease Financings and Credit Lines
Our subsidiaries have entered into financing arrangements. These
arrangements include leaseback transactions. As of September 30, 1999, we owed
an aggregate of $327.4 million under these financing arrangements.
In addition, some of our new media subsidiaries are parties to a $6.5
million term loan facility. They use this facility 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.
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:
o 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
o the amount determined under a borrowing base formula.
Borrowings under this facility 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 do not currently intend to pay any dividends, holders of common
stock are entitled to receive dividends as may be declared by our board of
directors. In the event of a liquidation or dissolution, holders of common
stock are
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entitled to share in all assets remaining after payment of liabilities and
liquidation preference of preferred stock.
Holders of common stock have no preemptive rights. They also 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 class generally serves for a term of three years, with only
one class of directors being elected in each year.
o Provides that directors may be removed with or without cause.
Directors may be removed only by an affirmative vote of holders
of at least a majority of our capital stock.
o Requires an affirmative vote of holders of at least two-thirds of
our capital stock to alter, amend or repeal the provisions of our
certificate of incorporation relating to the matters described in
the first two bullet points.
Nominations for our board of directors may be made by our board or by any
holder of common stock. 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;
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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.
Series A Preferred Stock
In February 1997, we sold in a private placement an aggregate of 4,000,000
shares of Series A 6% preferred stock. This preferred stock was sold together
with warrants to purchase 1,600,000 shares of our common stock. The aggregate
purchase price for the securities was $100.0 million.
Each share of Series A preferred stock has a stated value of $25. Each
share entitles the holder to receive dividends from us at a rate per annum equal
to 6% of the stated 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 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 the number of
shares of our common stock derived by dividing:
o the aggregate stated value of the Series A preferred stock being
converted by
o $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. We may, however,
elect to pay cash instead, in an amount equal to the stated value plus all
accrued and unpaid dividends thereon.
The warrants entitle the holders 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.
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Rights to Purchase Series B Preferred Stock
Under our 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 after that date.
Currently, the rights are not separate from our common stock and are not
exercisable. The rights will only separate from our common stock and become
exercisable if:
o a person or group acquires 10% or more of our outstanding common
stock, or
o a person launches a tender or exchange offer that would result in
ownership of 10% or more of our outstanding common stock.
Each right that is not owned by an acquiring person entitles the holder to
buy one one-thousandth of one share of our Series B preferred stock. The rights
agreement provides that each right entitles the holder to purchase, for $225,
units of Series B preferred stock with a market value of $450. However, if we:
o are involved in a business combination in which we are not the
survivor, or
o 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 will be junior to any other series of our preferred stock.
Series C Preferred Stock
On December 17, 1997, we sold in a private placement an aggregate of
175,000 shares of our Series C 14-1/4% senior cumulative preferred stock due
2007. The aggregate purchase price was $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. Dividends are
compounded semiannually on each June 15 and December 15, but will not generally
be payable in cash. However, commencing on the first June 15 or December 15
which is at least six months after the later of:
o December 15, 2002, and
o the specified debt satisfaction date described in the certificate
of designations governing the Series C preferred stock,
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dividends on the Series C preferred stock will be payable in cash at a rate per
annum equal to 14-1/4%. 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
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. On December 15, 2007, we will be
required to redeem the Series C preferred stock.
After the debt satisfaction date, we may, at our option, exchange the
shares of Series C preferred stock for 14-1/4% senior subordinated deferred
interest notes due 2007. These notes would be issued in an amount equal to the
aggregate accumulated amount of the shares of Series C preferred stock, plus
accumulated and unpaid dividends to the date of exchange. Until these notes are
repaid, interest will accrue at an annual rate of 14-1/4% of the accumulated
amount. This interest will be compounded semiannually on each June 15 and
December 15, but will not generally be payable in cash.
The notes, if issued, will be:
o unsecured, senior subordinated obligations,
o 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
o will rank with equal priority with the senior subordinated notes
we issued in 1997.
The notes, if issued, will not be redeemable prior to December 15, 2002. On
or after December 15, 2002, the notes will be redeemable at our option.
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Series D Preferred Stock
On March 17, 1998, we 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. 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 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. This is 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 that date, the Series D preferred stock will be redeemable at our
option. 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.
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. The Series E preferred stock is junior in right to receive distributions
in liquidation to all other currently existing preferred stock and any
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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 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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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; Fidelity Financial Trust: Fidelity Convertible Securities
Fund; Fidelity Advisor Series VII: Fidelity Advisor Utilities
Growth Fund. Each entity is either an
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investment company or a portfolio of an investment company
registered under Section 8 of the Investment Company Act of 1940,
as amended, or a private investment account advised by Fidelity
Management & Research Company.
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
o MFS/Sun Life Series Trust: Equity Income Series
o Peoples Benefit Life Insurance Company
o Peoples Benefit Life Insurance Company (Teamsters Separate
Account)
46
<PAGE>
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 any and all shares
of common stock that may be issued instead of cash dividends on the Series F
preferred stock and any and all shares of common stock 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
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
</TABLE>
47
<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>
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.
<TABLE>
<CAPTION>
Beneficial Ownership Number of Shares of
of Common Stock Common Stock
Name of Selling Security holder as of October 18, 1999 to be Sold
- ------------------------------- ---------------------- -------------------
<S> <C> <C>
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)
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)
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership Number of Shares of
of Common Stock Common Stock
Name of Selling Security holder as of October 18, 1999 to be Sold
- ------------------------------- ---------------------- -------------------
<S> <C> <C>
Woodland Venture Fund 11,963(2) 11,963(2)
Arthur Zards 29,573(1) 29,573(1)
</TABLE>
- -----------------------------
(1) The shares were issued in connection with certain acquisitions.
(2) The shares will be those issuable to him under certain circumstances in
connection with his ownership of equity of Winstar New Media Company, Inc.,
a subsidiary of Winstar.
(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
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 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.
Any of these transactions may be effected:
o at market prices prevailing at the time of sale,
o at prices related to such prevailing market prices,
o at varying prices determined at the time of sale, or
o at negotiated or fixed prices.
49
<PAGE>
If the selling stockholders effect transactions by selling securities to or
through underwriters, brokers, dealers or agents, these underwriters, brokers,
dealers or agents may receive compensation in the form of discounts, concessions
or commissions from the selling stockholders or purchasers. These discounts 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. Any profit on the sale of securities by them and any discounts,
concessions or commissions received by any of the underwriters, brokers, dealers
or agents may be deemed to be underwriting discounts and commissions under the
Securities Act.
Under the securities laws of some states, the securities may be sold in
these states only through registered or licensed brokers or dealers. In
addition, in some states, the securities may not be sold unless the securities
have been registered or qualified for sale in the 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. In
these cases, they meet the criteria and conform to the requirements of that
rule.
We will pay all of the costs, expenses and fees incident to the
registration, offering and sale of these securities to the public 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.
50
<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; 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.
51
<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 314,764 314,764
expenses
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,
which were $2,994.
Interest expense, including amortization of debt offering costs,
on the 1998 Notes issued in March 1998, which was $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.............................................. $157,098.66
Legal fees and expenses........................................... 75,000.00
Listing fees...................................................... 30,000.00
Accounting fees and expenses...................................... 75,000.00
Miscellaneous..................................................... 20,000.00
-----------
Total........................................................ $357,098.66
===========
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 corporation to procure a judgment in its favor by
reason of the fact that he is or was a director,
II-1
<PAGE>
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.
(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
II-2
<PAGE>
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.
(c) 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.
(d) 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 director, officer or controlling person of the registrant
in the successful defense of any action, suit
II-5
<PAGE>
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.
(e) 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 11, 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 11, 1999
William J. Rouhana, Jr. (and principal executive officer)
* President, Chief Operating Officer and Director November 11, 1999
- -----------------------------
Nathan Kantor
/s/ Timothy R. Graham Executive Vice President, General Counsel and November 11, 1999
- ----------------------------- Director
Timothy R. Graham
/s/ Ric Uhl Executive Vice President and Chief Financial November 11, 1999
- ----------------------------- Officer
Ric Uhl
* Director November 11, 1999
- -----------------------------
Bert W. Wasserman
* Director November 11, 1999
- -----------------------------
William J. vanden Heuvel
* Director November 11, 1999
- -----------------------------
Steven B. Magyar
* Director November 11, 1999
- -----------------------------
James I. Cash
* Director November 11, 1999
- -----------------------------
*
- ----------------------------- Senior Vice President-Finance (Principal
Joseph P. Dwyer Accounting Officer)
*By power of attorney
</TABLE>
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 11, 1999
