<PAGE>
Filed pursuant to Rule 424(b)(3)
SEC File No. 333-43106
WINSTAR COMMUNICATIONS, INC.
$2,000,000,000 OF COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES AND
DEPOSITARY SHARES
By this prospectus, we will offer and sell from time to time our common
stock, preferred stock, debt securities or depositary shares. We will provide
the specific terms of these securities in supplements to this prospectus. You
should read this prospectus and any supplements carefully before you invest.
We expect to use the net proceeds from the sale of shares of common stock,
preferred stock, debt securities or depositary shares to fund working capital,
capital expenditures, operating losses and other general corporate purposes,
including acquisitions and investments.
--------------------
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 August 29, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
About This Prospectus.......................................................3
Where You Can Find More Information.........................................3
Forward-looking Statements..................................................4
Winstar's Business..........................................................5
Risk Factors................................................................5
Ratio of Earnings to Fixed Charges .........................................5
Use of Proceeds.............................................................5
Description of Shelf Securities.............................................6
Plan of Distribution of Shelf Securities...................................19
Description of Certain Other Indebtedness and Stock........................20
Legal Matters..............................................................35
Experts....................................................................35
2
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may, from time to time, sell any combination of the
securities described in this prospectus in one or more offerings up to a total
dollar amount of $2,000,000,000 or the equivalent of this amount in foreign
currencies.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement, together with the additional information described below
under the heading "Where You Can Find More Information."
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, 1999;
o Quarterly Report on Form 10-Q filed May 15, 2000;
3
<PAGE>
o Proxy Statement for the Annual Meeting of Stockholders held on June
28, 2000, filed May 23, 2000;
o Current Report on Form 8-K filed June 1, 2000;
o Quarterly Report on Form 10-Q filed August 14, 2000; and
o The description of our common stock contained in our registration
statement on Form 8-A, as amended (File No. 1-10726), under the
Exchange Act.
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 at Winstar Communications, Inc., 685 Third Avenue, New York,
New York, 10017, Attention: Investor Relations, 212-792-9800.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
forward-looking statements include statements about our plans, objectives,
expectations, intentions and assumptions and other statements contained in this
prospectus that are not statements of historical fact. You can identify these
statements by words such as "may," "will," "should," "estimates," "plans,"
"expects," "believes," "intends" and similar expressions. We cannot guarantee
future results, levels of activity, performance or achievements. Our actual
results and the timing of certain events may differ significantly from the
results discussed in the forward-looking statements. Factors that may cause
actual results to differ materially from those contemplated by the forward-
looking statements include, without limitation:
o our ability to service our debt or to obtain financing for the
buildout of our domestic and international telecommunications
networks;
o our ability to attract and retain a sufficient revenue-generating
customer base;
o competitive pressures in the telecommunications and technology
industries;
o general economic conditions in the markets in which we operate;
o other risks detailed from time to time in our SEC filings; and
o those items identified under "Risk Factors" in any prospectus
supplement.
We do not undertake to update or revise our forward-looking statements
or risk factors to reflect future events or circumstances.
4
<PAGE>
WINSTAR'S BUSINESS
We provide our customers with broadband services. These services
include high-speed Internet and data, Web hosting and design, phone services,
Web-based applications, e-commerce, professional services and Office.com(R), a
Service From Winstar, the top-ranked online business service for small- and
medium-sized businesses. We offer a comprehensive suite of these services across
our own end-to-end broadband network in the top 60 markets in the United States.
We also offer services in 12 overseas markets, including Amsterdam, Brussels,
Buenos Aires, London and Tokyo.
We are also rapidly building a widely available broadband network which
we believe will enable us to offer broadband services to a majority of the
business market in the United States. Our domestic network combines local and
long-haul capacity with voice and data switching facilities and is capable of
carrying a substantial portion of our customers' communications traffic from
point of origin to point of termination.
CORPORATE INFORMATION
We were incorporated under the laws of the State of Delaware in
September 1990. Our principal executive offices are located at 685 Third Avenue,
New York, New York 10017 and our telephone number is (212) 792-9800.
RISK FACTORS
Potential investors are urged to read and consider the risk factors
relating to an investment in Winstar set forth in our SEC filings, including our
Annual Report on Form 10-K for the year ended December 31, 1999, as amended.
RATIO OF EARNINGS TO FIXED CHARGES
For the ten months ended December 31, 1995, the years ended December
31, 1996, 1997, 1998 and 1999 and the six months ended June 30, 2000, earnings
from continuing operations were insufficient to cover fixed charges by
approximately $13.3 million, $80.1 million, $240.2 million, $427.0 million,
$665.8 million and $357.6 million, respectively.
For the same periods, earnings from continuing operations were
insufficient to cover combined fixed charges and preferred stock dividends by
approximately $13.5 million, $80.1 million, $246.1 million, $469.9 million,
$727.3 million and $415.3 million, respectively.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, the
net proceeds from the sale of shares of common stock, preferred stock, debt
securities or depositary shares will be used to fund working capital, capital
expenditures, operating losses and other general corporate purposes, including
acquisitions and investments.
5
<PAGE>
DESCRIPTION OF SHELF SECURITIES
This prospectus is part of a shelf registration statement. Under this
shelf registration statement, we may offer from time to time up to
$2,000,000,000 of any of the following securities, either separately or in
combination with each other:
o Common stock;
o Preferred stock;
o Debt securities, including senior debt, senior subordinated debt and
subordinated debt; and
o Depositary shares.
The following is a general description of each type of security that we may
issue and sell.
COMMON STOCK
We may elect to issue, either separately or together with other
securities, shares of our common stock. Under our certificate of incorporation,
we are authorized to issue up to 400,000,000 shares of our common stock.
Holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Cumulative
voting is not permitted. Subject to preferences of any preferred stock, holders
of our 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 our
common stock are entitled to share in all assets remaining after payment of
liabilities and liquidation preference of our preferred stock. Holders of our
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 shares of common stock
offered will, when issued, be fully paid and nonassessable.
Our common stock is listed for trading on the Nasdaq National Market
System under the symbol "WCII."
PREFERRED STOCK
We may elect to issue a series of preferred stock. Our certificate of
incorporation and the Delaware General Corporation Law give our board of
directors the authority, without further stockholder action, to issue a maximum
of 30,000,000 shares of preferred stock.
Our board of directors has the authority to create one or more series
of preferred stock, to issue shares of preferred stock up to the maximum number
of shares of preferred stock authorized, and to determine the preferences,
rights, privileges and restrictions of any series, including the dividend
rights, voting rights, rights and terms of redemption, liquidation preferences,
the number of shares constituting any such series and the designation of such
series.
6
<PAGE>
The applicable prospectus supplement will describe the terms of any
preferred stock being offered, including:
o the number of shares and designation or title of the shares;
o any liquidation preference per share;
o any date of maturity;
o any redemption, repayment or sinking fund provisions;
o any dividend rate or rates payable with respect to the shares;
o any voting rights;
o the terms and conditions upon which the preferred stock is
convertible or exchangeable, if it is convertible or exchangeable;
o any conditions or restrictions on the creation of indebtedness by us or
upon the issuance of any additional stock; and
o any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.
All shares of preferred stock offered will, when issued, be fully paid
and non-assessable. Any shares of preferred stock that are issued will have
priority over the common stock with respect to dividend or liquidation rights or
both.
DEBT SECURITIES
We may elect to issue debt securities, either separately or together
with, or upon the conversion of or in exchange for, other securities. The debt
securities are to be issued in one or more series. Each series of debt
securities will be issued pursuant to an indenture, to be entered into by us and
a trustee, who will be legally obligated to carry out the terms of the
indenture. The name(s) of the trustee(s) will be set forth in the applicable
prospectus supplement. We may issue all the debt securities under the same
indenture or under separate indentures, as specified in the applicable
prospectus supplements.
We expect that the indentures governing our debt securities will
contain a number of fairly standard provisions, which are summarized below. The
summary is not complete and particular terms may vary from indenture to
indenture or not be included in a specific indenture. Each indenture will be
filed as an exhibit to the registration statement of which this prospectus is a
part at the time of issuance of the applicable prospectus supplement or will be
incorporated by reference into the prospectus supplement. The indentures will be
subject to and governed by the Trust Indenture Act of 1939, as amended. You
should refer to the applicable indenture for the provisions which may be
important to you.
7
<PAGE>
General
We may issue debt securities up to an aggregate principal amount as we
may authorize from time to time and as limited by the applicable indenture. The
applicable prospectus supplement will describe the terms of any debt securities
being offered, including:
o the designation, aggregate principal amount and authorized
denominations;
o the maturity date;
o the interest rate, if any, and the method for calculating the
interest rate;
o the interest payment dates and the record dates for the interest
payments;
o any mandatory or optional redemption terms or prepayment, conversion,
sinking fund or exchangeability or convertibility provisions;
o the places where the principal and interest will be payable;
o if other than denominations of $1,000 or multiples of $1,000, the
denominations the debt securities will be issued in;
o whether the debt securities will be issued in the form of global
securities, as defined below, or certificates;
o additional provisions, if any, relating to the defeasance and
covenant defeasance of the debt securities;
o whether the debt securities will be senior debt securities, senior
subordinated debt securities or subordinated debt securities and, if
senior subordinated debt securities or subordinated debt securities,
the subordination provisions and the applicable definition of "senior
indebtedness";
o any applicable material federal tax consequences;
o the dates on which premium, if any, will be payable;
o our right, if any, to defer payment of interest and the maximum
length of the deferral period;
o any listing on a securities exchange;
o if convertible into common stock or preferred stock, the terms on
which the debt securities are convertible;
8
<PAGE>
o the terms of any guarantee of the payment of principal of, and
premium, if any, and interest on debt securities of the series and
any corresponding changes to the provisions of the indenture as
currently in effect;
o the terms of the transfer, mortgage, pledge, or assignment as
security for the debt securities of the series of any properties,
assets, moneys, proceeds, securities or other collateral, including
whether certain provisions of the Trust Indenture Act are applicable,
and any corresponding changes to provisions of the indenture as
currently in effect;
o the initial public offering price; and
o other specific terms.
We may issue debt securities where the purchase price or amount of
principal or premium or interest, if any, payable is denominated in a foreign
currency. In that case, the restrictions, elections, general tax considerations,
specific terms and other information with respect to the debt securities and the
foreign currency will be set forth in the applicable prospectus supplement.
We will comply with Section 14(e) under the Securities Exchange Act, to
the extent applicable, and any other tender offer rules under the Exchange Act
which may then be applicable, in connection with any obligation we might have to
purchase debt securities at the option of the holders. Any obligation applicable
to a series of debt securities will be described in the applicable prospectus.
We may issue debt securities as original issue discount securities to
be sold at a substantial discount below their principal amount. Original issue
discount securities may include zero coupon securities that do not pay any cash
interest for the entire term of the securities. The amount payable to the holder
of an original issue discount security upon an acceleration will be determined
in the manner described in the applicable prospectus supplement. Conditions
pursuant to which principal payments on the debt securities may be accelerated,
as well as any material federal income tax and other considerations applicable
to original issue discount securities, will be set forth in the applicable
prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement, the
terms of any series of debt securities may differ and we may, without the
consent of the holders of any of the debt securities, reopen a previous series
of debt securities and issue additional debt securities or establish additional
terms for the series.
Covenants
Under the indentures, we will be required to:
o pay the principal, interest and any premium on the debt securities
when due;
o maintain a place of payment;
9
<PAGE>
o deliver a report to the trustee(s) at the end of each fiscal year
reviewing our obligations under the indentures; and
o deposit sufficient funds with any paying agent on or before the due
date for any principal, interest or premium.
Any additional covenants will be described in the applicable prospectus
supplement.
Registration, transfer, payment and paying agent
Unless otherwise indicated in a prospectus supplement, each series of
debt securities will be issued in registered form only, without coupons, and
will be issued in denominations of $1,000 or any integral multiple.
Unless otherwise indicated in a prospectus supplement, the principal of
the debt securities and any applicable premium or interest will be payable, and
debt securities may be surrendered for registration of transfer or exchange, at
an office or agency to be maintained by us in the Borough of Manhattan, The City
of New York. Payments of interest with respect to any registered security,
however, may be made at our option by check mailed to the address of the person
entitled to payment or by transfer to an account maintained by the payee with a
bank located in the United States. No service charge shall be made for any
registration of transfer or exchange of debt securities, but we may require
payment of a sum sufficient to cover any tax or other governmental charge and
any other expenses that may be imposed in connection with the exchange or
transfer.
Unless otherwise indicated in the applicable prospectus supplement, we
will not be required to:
o issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business fifteen
days before any selection of debt securities of that series of like
tenor to be redeemed and ending at the close of business on the day
of that selection;
o register the transfer of or exchange any registered security called
for redemption, except the unredeemed portion of any registered
security being redeemed in part; or
o issue, register the transfer of or exchange any debt security which
has been surrendered for repayment at the option of the holder,
except the portion, if any, of the debt security not to be repaid.
Ranking
We will issue debt securities as either senior debt securities, senior
subordinated debt securities, or subordinated debt securities. The senior debt
securities will be our senior unsubordinated obligations and will rank equally
in right of payment with all other unsubordinated indebtedness of ours. The
senior subordinated debt securities and subordinated
10
<PAGE>
debt securities will be our general obligations and will be subordinated in
right of payment to all existing and future senior indebtedness. The prospectus
supplement will describe the subordination provisions and set forth the
definition of senior indebtedness applicable to the senior subordinated debt
securities or subordinated debt securities, as the case may be, and the
approximate amount of the senior indebtedness outstanding as of a recent date.
Global debt securities
The debt securities of a series may be issued in whole or in part in
the form of one or more global securities that will be deposited with, or on
behalf of, a depositary identified in the applicable prospectus supplement.
Global debt securities may be issued in either registered or bearer form and in
either temporary or permanent form. Unless and until it is exchanged in whole or
in part for individual certificates evidencing debt securities, a global debt
security may not be transferred except as a whole:
o by the depositary to a nominee of the depositary;
o by a nominee of the depositary to the depositary or another nominee
of the depositary; or
o by the depositary or any nominee to a successor of the depositary or
a nominee of the successor.
The specific terms of the depositary arrangement with respect to a
series of global debt securities will be described in the prospectus supplement.
Outstanding debt securities
In determining whether the holders of the requisite principal amount of
outstanding debt securities have given any request, demand, authorization,
direction, notice, consent or waiver under the relevant indenture, the amount of
outstanding debt securities will be calculated based on the following:
o the portion of the principal amount of an original issue discount
security that shall be deemed to be outstanding shall be the portion
of the principal amount that could be declared to be due and payable
upon a declaration of acceleration pursuant to the terms of the
original issue discount security as of the date of the determination;
o the principal amount of a debt security denominated in a currency
other than U.S. dollars shall be the U.S. dollar equivalent of the
debt security's principal amount, determined on the date of its
original issue; and
o any debt security owned by us, an affiliate of ours or any obligor
shall be deemed not to be outstanding.
11
<PAGE>
Redemption and repurchase
The debt securities may be redeemable at our option, may be subject to
mandatory redemption pursuant to a sinking fund or otherwise, or may be subject
to repurchase by us at the option of the holders. In each case, the redemption
or repurchase will be upon the terms, at the times and at the prices set forth
in the applicable prospectus supplement.
Conversion and exchange
The terms, if any, on which any series of debt securities is
convertible into or exchangeable for common stock, preferred stock or other debt
securities will be set forth in the applicable prospectus supplement. These
terms may include provisions for conversion or exchange, either mandatory, at
the option of the holders or at our option.
Limitation on indebtedness and liens
The applicable prospectus supplement will specify any prohibitions on
the amount of indebtedness, guarantees or other liabilities that we may incur
and any prohibitions on our ability to create or assume liens on our property.
Unless otherwise provided in a prospectus supplement, the indentures will not
require us to maintain any financial ratios or specified levels of net worth,
revenues, income, cash flow or liquidity. The indentures may contain provisions
that would give holders of the debt securities the right to require us to
repurchase their debt securities in the event of a takeover, recapitalization or
similar restructuring or change in our control.
Consolidation, merger and sale of assets
The indentures generally limit our ability to consolidate or merge with
another corporation or sell, assign, transfer, lease or otherwise dispose of all
or substantially all of our property and assets without protecting the debt
holders in an appropriate manner. This protection could include mandatory
repayment or requiring the surviving or acquiring corporation to assume all of
our responsibilities and liabilities under the indentures.
Limitation on certain subsidiary stock sales and distributions
The indentures may limit the ability of our subsidiaries to sell stock
to third parties. The indentures also may limit the ability of our subsidiaries
to pay dividends or make other distributions or asset transfer to Winstar, as
the holding company of the subsidiaries, and to other subsidiaries.
Limitation on transactions with affiliates
The indentures may limit our ability to enter into transactions with
our subsidiaries and our directors, officers and other affiliates unless the
terms of any such transaction are no less favorable than those that could be
obtained from third parties and unless such transaction meets other criteria.
12
<PAGE>
Events of default
Unless otherwise specified in the applicable prospectus supplement,
each of the following would constitute an event of default, as defined in the
indentures, with respect to the debt securities of any series:
o failure to pay the principal of any debt security of a series when
due upon maturity, redemption, repurchase at the option of the holder
or otherwise;
o failure to pay interest on any debt security of a series when due and
the default continues for a period of time to be specified in the
applicable prospectus supplement;
o failure to make a deposit of any sinking fund payment when due;
o the breach of, or our failure to perform, any other covenant or
warranty in the indenture, other than a covenant or warranty included
solely for the benefit of other series of debt securities. This will
only constitute an event of default, however, if the default has not
been cured for a period to be specified in the applicable prospectus
supplement after notice to us by the applicable trustee(s) or the
holders of not less than a fixed percentage in aggregate principal
amount of the debt securities of all series issued under the applicable
indenture;
o certain events of bankruptcy, insolvency or reorganization; or
o any other event of default that may be set forth in the applicable
prospectus supplement, including, but not limited to, an event of
default based on other debt being accelerated.
An event of default with respect to one series of debt securities will
not necessarily constitute an event of default with respect to any other series
of debt securities. Each indenture will provide that the trustee(s) may withhold
notice of the occurrence of a default, other than a default in payment of
principal or of any applicable premium, interest, or of sinking fund payments,
if the trustee(s) considers it in the interest of the holders to do so.
Each indenture will provide that if an event of default with respect to
any series of debt securities shall have occurred and is continuing, either the
relevant trustee or the holders of at least a fixed percentage in principal
amount of the debt securities then outstanding may declare the principal amount,
or in the case of original issue discount securities, such lesser amount as may
be specified in the applicable prospectus supplement, of all the debt securities
of such series to be due and payable immediately. Under certain conditions, such
a declaration and its consequences may be rescinded and annulled by the holders
of a majority in principal amount of the debt securities of all series issued
under the applicable indenture.
The applicable prospectus supplement will provide the terms pursuant to
which an event of default shall result in acceleration of the payment of
principal of senior subordinated debt securities or subordinated debt
securities.
13
<PAGE>
In the case of a default in the payment of principal or of any
applicable premium or interest on any senior subordinated or subordinated debt
securities, the applicable trustee, subject to certain limitations and
conditions, may institute a judicial proceeding for collection.
No holder of any debt securities has a right to institute a proceeding
with respect to the indenture or any of its remedies unless:
o the holders of at least a fixed percentage in principal amount of the
outstanding debt securities of the series have made written request,
and offered reasonable indemnity, to the trustee(s) to institute the
proceeding as trustee(s),
o the trustee(s) has failed to institute the proceeding within a
specified period after receipt of the notice, and
o the trustee(s) has not within the specified period received
directions inconsistent with the holders' written request.
Such limitations do not apply, however, to a suit instituted by a holder of a
debt security for the enforcement of the payment of the principal, interest or
premium on the debt security on or after the respective due dates expressed in
the debt security.
During the existence of an event of default under an indenture, the
trustee(s) is required to exercise the rights and powers vested in it under the
indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs. Subject to the provisions of the indenture relating to the duties
of the trustee, if an event of default shall occur and be continuing, the
trustee(s) is not under any obligation to exercise any of its rights or powers
under the indenture at the request or direction of any of the holders unless the
holders have offered to the trustee(s) reasonable security or indemnity. Subject
to certain provisions concerning the rights of the trustee(s), the holders of a
majority in principal amount of the outstanding debt securities of any series
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee(s), or exercising any trust, or power
conferred on the trustee(s).
Each indenture will provide that the trustee(s) will, within five
business days after the occurrence of any default, give notice of the default to
the holders of the defaulted debt securities, unless the default shall have been
cured or waived. The trustee(s) will be protected, however, in withholding
notice if it determines in good faith that withholding the notice was in the
interest of the holders, with the exception of defaults in payment of principal
or of any applicable interest or premium.
We are required to provide the trustee(s) with annual statements as to
our compliance with all conditions and covenants under the indentures.
14
<PAGE>
Modification and waivers
When authorized by resolutions of our board of directors, and the
trustee(s), we may amend, waive or supplement the indentures and the relevant
debt securities without the consent of the holders for certain specified
purposes, including, among other things:
o to cure ambiguities, defects or inconsistencies;
o to provide for the assumption of our obligations in the case of a
merger or consolidation;
o to add to our events of default or our covenants or to make any
change that would provide any additional rights or benefits to
the holders of the debt securities;
o to establish the form or terms of debt securities of any series and
any related coupons;
o to add guarantors;
o to secure the debt securities;
o to maintain the qualification of the indenture under the Trust
Indenture Act; or
o to make any change that does not adversely affect the rights of any
holder.
Other amendments and modifications of the indentures or the relevant
debt securities may be made by us and the trustee(s) with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding debt securities of each series that is affected, with each series
voting as a separate class. We cannot modify or amend the indentures or the
relevant debt securities to do any of the following without the consent of the
holder of each outstanding debt security that is affected:
o reduce the principal amount of, or extend the fixed maturity of the
debt securities, or alter or waive any redemption, repurchase or
sinking fund provisions of the debt securities;
o reduce the amount of principal of any original issue discount
securities that would be due and payable upon an acceleration of its
maturity;
o change the currency in which any debt securities or any premium or
accrued interest is payable;
o reduce the percentage in principal amount outstanding of debt
securities of any series which must consent to an amendment,
supplement or waiver or consent to take any action under the
indenture or the debt securities;
15
<PAGE>
o impair the right to institute suit for the enforcement of any payment
on or with respect to the debt securities;
o waive a default in payment with respect to the debt securities or any
guarantee;
o reduce the rate or extend the time for payment of interest on the
debt securities;
o adversely affect the ranking of the debt securities of any series;
o release any guarantor from any of its obligations under its guarantee
or the indenture, except in compliance with the terms of the
indenture; or
o solely in the case of a series of senior subordinated debt securities
or subordinated debt securities, modify any of the applicable
subordination provisions or the applicable definition of senior
indebtedness in a manner adverse to any holders.
The holders of a majority in aggregate principal amount of the
outstanding debt securities of any series may waive compliance by us with
certain restrictive provisions of the applicable indenture to the extent set
forth in the applicable prospectus supplement. The holders of a majority in
aggregate principal amount of the outstanding debt securities of any series may,
on behalf of all holders of debt securities of that series, waive any past
default under the applicable indenture with respect to debt securities of that
series and its consequences, except a default in the payment of the principal of
or of any applicable premium or interest on any debt securities of the series or
in respect of a covenant or provision which cannot be modified or amended
without the consent of a larger fixed percentage.
Discharge, defeasance and covenant defeasance
When we establish a series of debt securities, we may provide that the
series is subject to the defeasance and discharge provisions of the applicable
indenture. If those provisions are made applicable, we may elect to either:
o defease and be discharged from, subject to some limitations, all of
our obligations with respect to those debt securities; or
o be released from our obligations to comply with specified covenants
relating to those debt securities as described in the applicable
prospectus supplement.
To effect a defeasance or covenant defeasance, we must irrevocably
deposit in trust with the relevant trustee an amount in any combination of funds
or government obligations, which, through the payment of principal and interest
in accordance with their terms, will provide money sufficient to make payments
on those debt securities and any mandatory sinking fund or analogous payments on
those debt securities. We will not be released from any obligations that are
specified in the applicable prospectus supplement.
To establish this trust, we must, among other things, deliver to the
relevant trustee an opinion of counsel to the effect that the holders of those
debt securities:
16
<PAGE>
o will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of the defeasance or covenant defeasance; and
o will be subject to U.S. federal income tax on the same amounts, in
the same manner and at the same times as would have been the case
if the defeasance or covenant defeasance had not occurred. In the
case of defeasance, the opinion of counsel must be based upon a
ruling of the IRS or a change in applicable U.S. federal income tax
law occurring after the date of the applicable indenture.
If we effect a covenant defeasance with respect to any debt securities,
and the debt securities are declared due and payable because of the occurrence
of an event of default or with respect to some other breach, the amount of
deposit with the relevant trustee may not be sufficient to pay amounts due on
the debt securities at the time of any acceleration. However, we would remain
liable to make payment of the amounts due at the time of acceleration.
The applicable prospectus supplement may further describe the
provisions, if any, permitting defeasance or covenant defeasance, including any
modifications to the provisions described above.
Governing law
The indentures and the debt securities will be governed by, and
construed in accordance with, the laws of the State of New York.
Regarding the trustees
The Trust Indenture Act contains limitations on the rights of a
trustee, should it become a creditor of ours, to obtain payment of claims or to
realize on certain property received by it in respect of any claims, as security
or otherwise. Each trustee is permitted to engage in other transactions with us
and our subsidiaries from time to time, provided that if the trustee acquires
any conflicting interest, it must either eliminate the conflict upon the
occurrence of an event of default under the relevant indenture or resign as
trustee.
DEPOSITARY SHARES
We may elect to issue depositary receipts evidencing depositary shares.
Each depositary share will represent a fraction of a share of common or
preferred stock. Shares of common stock and each class or series of preferred
stock represented by depositary shares will be deposited under a separate
deposit agreement among us, the depositary for the common or preferred stock and
the holders of the depositary receipts. Subject to the terms of the deposit
agreement, each owner of a depositary receipt will be entitled, in proportion to
the fraction of a share of common or preferred stock represented by the
depositary shares evidenced by the depositary receipt, to all the rights and
preferences of the common or preferred stock represented by the depositary
shares. In the case of shares of preferred stock represented by depositary
shares, our board of directors determine the preferences, rights, privileges and
restrictions of any class or series of preferred stock, including the dividend
rights, voting rights, rights and terms of redemption or conversion, liquidation
preferences, the number of shares constituting any such class or series and the
17
<PAGE>
designation of such class or series. Immediately following the issuance and
delivery of the common or preferred stock to the applicable depositary, we will
cause the depositary to issue the depositary receipts on our behalf.
We expect that the deposit agreements, the depositary shares and the
receipts representing depositary shares will contain a number of fairly standard
provisions, which are summarized below. The summaries are not complete and
particular terms may vary from each issue of depositary shares. Each deposit
agreement will be filed as an exhibit to the registration statement of which
this prospectus is a part at the time of issuance of the applicable prospectus
supplement or will be incorporated by reference into the prospectus supplement.
You should refer to the applicable deposit agreement for the provisions which
may be important to you.
If depositary shares are offered, the applicable prospectus supplement
will describe the terms of the depositary shares, the deposit agreement and the
depositary receipts, where applicable, including the following:
o the payment of dividends or other cash distributions to the holders
of depositary receipts when dividends or other cash distributions are
made with respect to the common or preferred stock;
o the voting by a holder of depositary shares of the common or
preferred stock underlying the depositary shares at any meeting
called for that purpose;
o if applicable, the redemption of depositary shares upon a redemption
by us of shares of preferred stock held by the preferred stock
depositary;
o if applicable, the exchange of depositary shares upon an exchange by
us of shares of preferred stock held by the preferred stock
depositary for debt securities or common stock;
o if applicable, the conversion of the shares of preferred stock
underlying the depositary shares into shares of our common stock,
other shares of our preferred stock or our debt securities;
o the terms upon which the deposit agreement may be amended and
terminated;
o a summary of the fees to be paid by us to the applicable depositary;
o the terms upon which a depositary may resign or be removed by us; and
o any other terms of the depositary shares, the deposit agreement and
the depositary receipts.
If a holder of depositary receipts surrenders the depositary receipts
at the corporate trust office of the applicable depositary, other than in the
case of a previous redemption, conversion or exchange, the holder will be
entitled to receive at this office the number of shares of common or preferred
stock and any money or other property represented by the depositary shares.
Holders of
18
<PAGE>
depositary receipts will be entitled to receive whole and, to the extent
provided by the applicable prospectus supplement, fractional shares of the
common or preferred stock on the basis of the proportion of the shares
represented by each depositary share as specified in the applicable prospectus
supplement. Holders of shares of common or preferred stock received in exchange
for depositary shares will no longer be entitled to receive depositary shares in
exchange for shares of common or preferred stock. If the holder delivers
depositary receipts evidencing a number of depositary shares that is more than
the number of depositary shares representing the number of shares of stock to be
withdrawn, the depositary will issue the holder a new depositary receipt
evidencing the excess number of depositary shares at the same time.
Prospective purchasers of depositary shares should be aware that
special tax, accounting and other considerations may be applicable to depositary
shares.
PLAN OF DISTRIBUTION OF SHELF SECURITIES
We may sell the shelf securities in any one or more of the following
ways:
o through underwriters or dealers;
o directly to a limited number of purchasers or to a single purchaser;
or
o through agents.
A prospectus supplement will set forth the terms of the offering of the
shelf securities, including:
o the name or names of any underwriters and the respective amounts of
any securities underwritten or purchased by each of them;
o the initial public offering price and the proceeds we will receive;
o any discounts, commissions or concessions allowed or paid to dealers;
and
o any securities exchanges on which the securities may be listed.
Only underwriters named in the prospectus supplement are deemed to be
underwriters in connection with the shelf securities offered.
If underwriters are used in the sale of any shelf securities, the
securities will be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The securities may be either offered to the public through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the applicable prospectus
supplement, the obligations of the underwriters to purchase the securities will
be subject to certain conditions precedent and the underwriters will be
obligated to purchase all of a series if any are purchased. Any initial public
19
<PAGE>
offering price and any discounts or concessions allowed or paid to dealers may
be changed from time to time.
The shelf securities may be sold directly by us or through agents
designated by us from time to time. Any agent involved in the offer or sale of
the securities in respect of which a prospectus supplement is delivered will be
named, and any commissions payable by us to such agent will be set forth, in the
prospectus supplement. Unless otherwise indicated in the prospectus supplement,
any agent will be acting on a best efforts basis for the period of its
appointment.
We may authorize underwriters, dealers or agents to solicit offers by
institutional investors, such as commercial banks and investment companies, to
purchase the shelf securities from us at the public offering price set forth in
the prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. The conditions to these
contracts and the commissions payable for solicitation of the contracts will be
set forth in the applicable prospectus supplement.
Shelf securities other than common stock may be a new issue of
securities with no established trading market. Any underwriters to whom these
securities are sold by us for public offering and sale may make a market in the
securities, but the underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. We cannot predict the
activity or liquidity of any trading in these securities.
Stockholders may sell their shares through various arrangements
involving mandatorily exchangeable securities, and this prospectus may be
delivered in conjunction with those sales.
Agents and underwriters may be entitled to indemnification by us
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or to contribution with respect to payments which the agents or
underwriters may be required to make in respect of their liabilities. Agents and
underwriters may be our customers, engage in transactions with us, or perform
services for us in the ordinary course of business.
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS AND STOCK
LUCENT FACILITY
In May 2000, our subsidiary, WVF-I LLC, entered into a new credit
facility with Lucent in an aggregate amount of $2.0 billion. This secured
facility replaced our former facility with Lucent. Up to $1.0 billion of our new
Lucent facility is available to us at any one time for the purchase of network
equipment and related services, of which we had borrowed $248.1 million as of
June 30, 2000. The balance will become available as the first $1.0 billion is
refinanced or syndicated. We and WCI Capital Corp., our subsidiary and the
borrower under the Bank facility described below, are guarantors of this
facility. Amounts borrowed under the facility are secured by a pledge of the
equity of WVF-I and any additional or substitute borrower thereunder and by a
purchase money security interest in the equipment financed under the Lucent
facility.
20
<PAGE>
Interest on loans under the Lucent facility accrues at rates based on
the prime rate or LIBOR, as the borrower under the Lucent facility may elect,
plus an applicable margin. Amounts borrowed under the Lucent facility are to be
repaid in equal quarterly installments beginning on March 31, 2005 and ending on
the maturity of the facility on December 31, 2006. We are to pay an up front
commitment fee equal to a specified percentage of the amount borrowed and an
unused facility fee equal to a percentage of the unused available commitment.
At any time that outstanding loans under the Lucent facility exceed
$500.0 million, Lucent may request that we refinance such loans. If the loans
are not refinanced within a specified period after notice is given, among other
potential adjustments, the interest rate on the outstanding loans will be
increased by a specified percentage per year. Alternatively, after appropriate
notice is given, Lucent and its transferees are entitled under certain
circumstances to convert the loans outstanding under the Lucent facility into
notes of Winstar that will be identical, except for interest rates, to the
senior notes due 2010.
A portion of the proceeds of certain equity offerings by us are
required to be utilized to repay outstanding indebtedness under the Lucent
facility. The Lucent facility contains customary covenants restricting or
limiting our ability to engage in certain activities, including limitations on
debt, liens, investments, restricted payments, transactions with affiliates,
asset sales and dispositions and changes in corporate existence. At varying
times over the term of the Lucent facility, we are required to meet certain
financial, operational and network build out tests.
BANK FACILITY
In May 2000, our subsidiary, WCI Capital Corp., entered into a $1.15
billion revolving credit and term loan agreement with a group of commercial
banks and other financial institutions. This Bank facility provides for a $300.0
million revolving credit facility and two term loans aggregating $850.0 million.
We and certain of our subsidiaries are guarantors under the agreement. We have
fully drawn down the available loans under the Bank facility and used the
proceeds to pay all of the outstanding loans under our former facility with
Lucent.
The Bank facility bears interest at rates based on the prime rate or
LIBOR, as the borrower under the Bank facility may elect, plus applicable
margins. The revolving line of credit will be reduced beginning on December 31,
2004 and is to be fully paid on March 31, 2007. The term loans are to be repaid
in quarterly payments commencing March 31, 2004 and ending on March 31, 2007 in
one instance and on September 30, 2007 in the other instance.
The amounts drawn under the Bank facility are secured by substantially
all of our current and future assets and certain of our subsidiaries, excluding
assets financed under the Lucent facility described above. The Bank facility
contains covenants similar to those governing the Lucent facility described
above.
2000 NOTES
We issued substantially all of our currently outstanding notes in April
and June 2000, as part of a plan of refinancing. The refinancing was comprised
of the new Lucent facility and the Bank facility discussed above and the
following transactions. We undertook the refinancing in
21
<PAGE>
order to simplify our financial structure, provide us with additional capital
and increase our operational and financial flexibility.
Exchange offer
We issued approximately $362.2 million principal amount of our 12-3/4%
senior notes due 2010 and approximately $613.9 million principal amount at
maturity ($300.8 million initial principal amount) of our senior discount notes
due 2010 in exchange for:
o 100.0% of our outstanding 15% senior subordinated deferred
interest notes due 2007;
o 96.4% of our outstanding 10% senior subordinated notes due
2008; and
o 99.9% of our outstanding 11% senior subordinated deferred
interest notes due 2008.
Cash tender offer
We purchased for an aggregate of $753.3 million in cash:
o 97.0% of our outstanding 14% senior discount notes due 2005;
o 100.0% of our outstanding 14 1/2% senior deferred interest
notes due 2005;
o 99.8% of the outstanding 12 1/2% guaranteed senior secured
notes due 2004 of our subsidiary, Winstar Equipment Corp.; and
o 100.0% of the outstanding 12 1/2% guaranteed senior secured
notes due 2004 of our subsidiary, Winstar Equipment II Corp.
Private placement
We also completed a cash offering of $325.0 million aggregate principal
amount of our senior notes due 2008, an additional $168.3 million of our 12-3/4%
senior notes due 2010 and (Euro) 200 million aggregate principal amount of our
euro-denominated senior notes. The proceeds of this offering, together with
additional cash drawn from available funds, were used to partially fund the cash
tender offer.
Series C preferred stock exchange
As part of the refinancing, we entered into agreements with the holders
of 98.7% of our then outstanding Series C preferred stock to provide for the
conversion of that stock into our 14- 1/4% senior subordinated deferred interest
notes due 2007 and then for the exchange by those holders of such notes for
senior notes due 2010 and senior discount notes due 2010. As a result of these
transactions, no shares of Series C preferred stock remain outstanding, $172.8
million principal amount of the 14-1/4% senior subordinated deferred interest
notes due 2007 was
22
<PAGE>
exchanged for $107.2 million principal amount of senior notes and $313.0 million
principal amount at maturity of senior discount notes and $2.2 million principal
amount of the 14-1/4% senior subordinated deferred interest notes due 2007
remain outstanding.
Terms of new notes
Our notes issued in April and June 2000 were issued under indentures
between us and United States Trust Company of New York, as trustee. The
indentures contain the full legal text of the matters described in this section
and other matters. The indentures are subject to and governed by the Trust
Indenture Act of 1939. These notes have identical terms as the notes for which
they are being exchanged, except with respect to certain rights and penalties
relating to registration under the Securities Act.
Principal, Maturity and Interest
Senior notes due 2008. The senior notes due 2008 will mature on April
15, 2008. Interest on these notes will accrue at the annual rate of 12-1/2% and
will be payable semiannually in arrears on April 15 and October 15, commencing
on October 15, 2000. We will make each interest payment to the holders of record
of the senior notes due 2008 on the immediately preceding April 1 and October 1.
We will pay interest on overdue principal at 1% per annum in excess of the above
rate and will pay interest on overdue installments of interest at such higher
rate to the extent lawful. Interest on the senior notes due 2008 will accrue
from the date of original issuance and will be computed on the basis of a
360-day year comprised of twelve 30- day months.
12-3/4% senior notes due 2010. The 12-3/4% senior notes due 2010 will
mature on April 15, 2010. Interest on these notes will accrue at the annual rate
of 12-3/4% and will be payable semiannually in arrears on April 15 and October
15, commencing on October 15, 2000. We will make each interest payment to the
holders of record of the 12-3/4% senior notes due 2010 on the immediately
preceding April 1 and October 1. We will pay interest on overdue principal at 1%
per annum in excess of the above rate and will pay interest on overdue
installments of interest at such higher rate to the extent lawful. Interest on
the 12-3/4% senior notes due 2010 will accrue from the date of original issuance
and will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
Senior discount notes due 2010. The senior discount notes due 2010 will
mature on April 15, 2010. No cash interest will accrue on the senior discount
notes due 2010 prior to April 15, 2005, although, for U.S. Federal income tax
purposes, holders will recognize a significant amount of original issue
discount, or an original issue discount as it accrues. Interest on the senior
discount notes due 2010 will accrue at the annual rate of 14.75% from April 10,
2000. Cash interest on the senior discount notes due 2010 will be payable
semiannually in arrears on April 15 and October 15, commencing October 15, 2005.
We will make each interest payment to the holders of record of the senior
discount notes due 2010 on the immediately preceding April 1 and October 1
computed on the basis of a 360-day year of twelve 30-day months.
23
<PAGE>
Euro-denominated notes. The principal, maturity and interest terms of
the euro-denominated notes are the same as the 12-3/4% senior notes due 2010.
Optional redemption
Senior notes due 2008. The senior notes due 2008 are not redeemable
prior to maturity.
12-3/4% senior notes due 2010, senior discount notes due 2010 and
euro-denominated notes. Except as set forth below, we will not be entitled to
redeem the 12-3/4% senior notes due 2010, the senior discount notes due 2010 or
the euro-denominated notes at our option prior to April 15, 2005. On and after
April 15, 2005, we will be entitled at our option to redeem all or a portion of
these notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices, expressed in percentages of principal amount, or in the case
of senior discount notes, in percentages of accreted value on the redemption
date, plus accrued interest to the redemption date, subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date, if redeemed during the 12-month period
commencing on April 15 of the years set forth below:
</TABLE>
<TABLE>
<CAPTION>
12-3/4% senior notes due
2010 and euro-denominated Senior discount notes due
Redemption Period notes redemption price 2010 redemption price
----------------- ---------------------- ---------------------
<S> <C> <C>
2005.................................. 106.375% 107.375%
2006.................................. 104.250 104.917
2007.................................. 102.125 102.458
2008 and thereafter................... 100.000 100.000
</TABLE>
In addition, before April 15, 2003, we may at our option on one or more
occasions redeem the 12-3/4% senior notes due 2010, the senior discount notes
due 2010 and the euro- denominated notes (including additional notes of each
series, if any) in an aggregate principal amount not to exceed 35% of the
aggregate principal amount of the notes of each series (including additional
notes of each series, if any) originally issued at a redemption price, expressed
as a percentage of principal amount, or in the case of the senior discount notes
due 2010, expressed as a percentage of accreted value, of 112.750%, 114.750% and
112.750% for the 12-3/4% senior notes due 2010, the senior discount notes due
2010 and the euro-denominated notes, respectively, plus accrued and unpaid
interest to the redemption date, with the net cash proceeds from one or more
public equity offerings; provided, however, that
o at least 65% of the aggregate principal amount of 12-3/4%
senior notes due 2010, the senior discount notes due 2010 and
the euro-denominated notes (including additional notes of each
series, if any) remains outstanding immediately after the
occurrence of each such redemption, other than 12-3/4% senior
notes due 2010, the senior discount notes due 2010 and the
euro-denominated notes held, directly or indirectly, by us or
our affiliates; and
o each redemption occurs within 90 days after the closing date
of the related public equity offering.
24
<PAGE>
Selection and notice of redemption
If we are redeeming less than all of the 12-3/4% senior notes due 2010,
senior discount notes due 2010 or euro-denominated notes at any time, the
applicable trustee will select 12-3/4% senior notes due 2010, senior discount
notes due 2010 or euro-denominated notes, as the case may be, on a pro rata
basis, by lot or by such other method as that trustee, in its sole discretion,
shall deem to be fair and appropriate.
We will redeem notes of $1,000 (or 'E'1,000 in the case of the
euro-denominated notes) or less in whole and not in part. We will cause notices
of redemption to be mailed by first-class mail at least 30 but not more than 60
days before the redemption date to each holder of notes to be redeemed at its
registered address.
If any note is to be redeemed in part only, the notice of redemption
that relates to that note shall state the portion of the principal amount to be
redeemed. We will issue a note in principal amount equal to the unredeemed
portion of the original note in the name of the holder upon cancellation of the
original note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on notes
or portions of them called for redemption.
No mandatory redemption
We are not required to make any mandatory redemption or sinking fund
payments with respect to the notes issued in April 2000 and June 2000. However,
under certain circumstances, we may be required to offer to purchase the notes.
Ranking
Senior Indebtedness versus new notes. The indebtedness evidenced by the
outstanding notes issued in April 2000 and June 2000 will rank pari passu in
right of payment to one another and to all of our senior indebtedness, including
any 14% senior discount notes due 2005 not tendered in the tender offer and our
guaranty of $323,000 principal amount of Winstar Equipment Corp.'s notes that
remain outstanding. As of June 30, 2000, our senior indebtedness was
approximately $2,773.9 million, of which $1,150.3 million was secured.
The notes issued in April 2000 and June 2000 are our unsecured
obligations. Secured debt and other secured obligations incurred by us from time
to time, including obligations with respect to the Lucent facility and the Bank
facility will be effectively senior to the outstanding notes to the extent of
the value of the assets securing such debt or other obligations.
Liabilities of subsidiaries versus new notes. We are a holding company.
Substantially all our operations are conducted through our subsidiaries. Claims
of creditors of our subsidiaries, including trade creditors and creditors
holding indebtedness or guarantees issued by our subsidiaries, and claims of
preferred stockholders of our subsidiaries generally will have priority with
respect to the assets and earnings of our subsidiaries over the claims of our
creditors, including holders of the outstanding notes. Accordingly, the notes
issued on April 2000 and June
25
<PAGE>
2000 will be effectively subordinated to creditors, including trade creditors,
and preferred stockholders, if any, of our subsidiaries.
At June 30, 2000, our subsidiaries had approximately $2,208.6 million
of liabilities (excluding intercompany payables to us and each other), including
$1,728.1 million of indebtedness. Although the indentures governing the notes
issued in April 2000 and June 2000 limit the incurrence of indebtedness and
preferred stock of certain of our subsidiaries, such limitations are subject to
a number of significant qualifications. Moreover, the indentures do not impose
any limitation on the incurrence by such subsidiaries of liabilities that are
not considered indebtedness under the indentures.
COVENANTS
The indentures and agreements governing our outstanding notes, Lucent
facility and Bank facility contain covenants that limit our ability to, among
other things:
o incur additional indebtedness;
o create liens;
o engage in sale-leaseback transactions;
o pay dividends or make distributions in respect of our capital
stock;
o redeem capital stock;
o make various types of investments and other restricted
payments;
o sell assets;
o issue or sell stock of our restricted subsidiaries; and
o enter into transactions with stockholders or affiliates or
effect a consolidation or merger.
These covenants are subject to important exceptions and qualifications,
which are described in detail in the indentures.
DEFAULTS
Each of the following would constitute an event of default under one or
more of our outstanding series of notes, Lucent facility and/or Banking
facility:
o a default in the payment of interest when due and continued
for a proscribed period of time;
26
<PAGE>
o a default in the payment when due at its stated maturity, upon
optional redemption, upon required purchase, upon declaration
or otherwise;
o the failure by us to comply with our obligations respecting
merger and consolidation transactions;
o certain events of bankruptcy, insolvency or reorganization of
ours or to certain of our subsidiaries;
o indebtedness of us or certain of our subsidiaries that is not
paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default
and the total amount of such indebtedness unpaid or
accelerated exceeds certain proscribed amounts;
o any judgment or decree for the payment of money in excess of
certain proscribed amounts is entered against us or to certain
of our subsidiaries, remains outstanding for a proscribed
period of consecutive days following such judgment and is not
discharged, waived or stayed; or
o the failure by us to comply within a proscribed period of time
after notice with any of our obligations with respect to
change of control events (other than a failure to purchase the
outstanding notes) or with respect to various other covenants.
OTHER FINANCINGS
Equipment lease financings and credit lines
Our subsidiaries have entered into certain other financing arrangements
and capital leases of equipment, including fiber. As of June 30, 2000, we owed
an aggregate of $291.0 million under these financing arrangements.
Debt placements
Between October 1995 and March 1998, we issued various series of notes,
most of which were reacquired and canceled in the cash tender offer and the
exchange offer described above. Such notes that remain outstanding are $8.7
million principal amount at maturity of our 14% senior discount notes due 2005,
$7.2 million principal amount of our 10% senior subordinated notes due 2008,
$323,000 principal amount of 12-1/2% guaranteed senior secured notes due 2004
issued by our subsidiary, Winstar Equipment Corp., and guaranteed by us and
$28,000 principal amount of our 11% senior subordinated deferred interest notes
due 2008. As a result of the consent solicitations made in connection with the
cash tender offer and the exchange offer, the indentures governing these
remaining notes were amended to eliminate most of the restrictive covenants and
certain default provisions.
There also remain outstanding $2.2 million principal amount of our
14-1/4% senior subordinated deferred interest notes due 2007 which were not
exchanged for senior notes due 2010 and senior discount notes due 2010 in the
Series C preferred stock exchange transaction. In
27
<PAGE>
connection with that transaction, the indenture governing these notes was
amended to eliminate most of the restrictive covenants and certain default
provisions.
COMMON STOCK
Our authorized capital stock includes 400,000,000 shares of common
stock, par value $.01 per share. The holders of our 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 cash dividends,
holders of our 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 entitled to share in all assets remaining after payment of
liabilities and liquidation preference of our preferred stock.
Holders of our 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 the
holders of at least a majority of our capital stock.
o requires an affirmative vote of the holders of at least
two-thirds of our capital stock to alter, amend or repeal the
provisions of our certificate of incorporation relating to
specified matters.
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 for election as director only if the stockholder
provides written notice of his intent to make a nomination 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.
Common stock dividend
In February 2000, we declared a three-for-two stock split, effected in
the form of a 50% common stock dividend. The common stock dividend was
distributed on March 2, 2000 to
28
<PAGE>
holders of record as of the close of business on February 16, 2000. The
information in this prospectus gives effect to the common stock dividend.
PREFERRED STOCK
Our certificate of incorporation and the Delaware General Corporation
Law gives our board of directors the authority, without stockholder approval, to
issue up to 30,000,000 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;
o the number of shares;
o the dividend rate or rates payable with respect to the shares;
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;
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 our Series A preferred stock. 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 year equal to 6% of the stated value.
Dividends accrue and are cumulative from the date of issuance and are payable in
arrears on 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 equal to the aggregate stated value of the Series
A preferred stock being converted by $16.67, subject to adjustment. On February
11, 2002, any shares of 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.
The Series A preferred stock ranks senior to our common stock and
junior to any other series of our outstanding preferred stock. As of June 30,
2000, there were 4,519,573 shares of Series A preferred stock outstanding.
29
<PAGE>
Series B preferred stock
We have a rights agreement under which the 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 a person or group acquires 10% or more of our
outstanding voting stock, or a person launches a tender or exchange offer that
would result in ownership of 10% or more of our outstanding voting 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 are involved in a business combination in which we are not the surviving
entity, or 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 voting 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 D preferred stock
On March 17, 1998, we sold an aggregate of $200.0 million of our Series
D preferred stock in a private placement.
Dividends at the rate of 7% per year 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 of each year, commencing
September 15, 1998. Dividends shall be payable, at our option, in cash, or
through the issuance of shares of our common stock.
Holders of the Series D preferred stock have the option to convert
their shares of Series D preferred stock at any time after the issue date into
shares of our common stock at a rate of 1.5119 shares of our common stock for
each share of Series D preferred stock. This is equivalent to a conversion price
of $33.07 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 and
Series E preferred stock;
o equal with our Series F and Series G preferred stock and all
future capital stock that is specifically designated by our
board of directors as ranking equally with our Series D
preferred stock;
30
<PAGE>
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 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 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 at the rate of three shares of common stock for two shares of
Series E preferred stock at any time and we may require them to do so upon the
occurrence of certain conditions.
Series F preferred stock
On June 17, 1999, we and a subsidiary of ours sold an aggregate of
300,000 shares of Series F preferred stock for an aggregate purchase price of
$300.0 million, less customary discounts and expenses.
Each share of Series F preferred stock has a liquidation preference of
$1,000 and entitles the holder to receive dividends at an annual rate of 7-1/4%,
or $72.50, per share. Dividends are payable quarterly on March 15, June 15,
September 15 and December 15 of each year to the record holders of the Series F
preferred stock as of the close of business on the business day next preceding
the date of such dividend payment.
We have the option to pay dividends in either cash or through the
issuance of shares of our common stock. Dividends paid in shares of our common
stock will be calculated by dividing the dollar amount of the dividend by 97% of
the closing bid price of our common stock on Nasdaq on the fourth trading day
prior to the dividend payment date.
Each share of Series F preferred stock is convertible into shares of
our common stock at a conversion rate of 24.2087 shares for each share of Series
F preferred stock converted, equivalent to a conversion price of $41.31 per
share. We will have the option to convert all of the shares of the Series F
preferred stock into common stock if, on or after June 24, 2002, the closing
price of
31
<PAGE>
our common stock on Nasdaq has equaled or exceeded 130% of the conversion price
for at least 20 out of 30 prior consecutive trading days.
The Series F preferred stock is not redeemable by us prior to June 24,
2002. Thereafter, each share of Series F preferred stock will be redeemable at
certain prices, at our option, in whole or in part, at any time or from time to
time, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each holder's registered address.
The Series F preferred stock ranks:
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 equal with our Series D and Series G preferred stock;
o equal with each class of capital stock which we may create
that expressly provides that it ranks equally with 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.
Series G preferred stock
On February 1, 2000, we and one of our wholly-owned subsidiaries,
Winstar Credit Corp., sold an aggregate of 900,000 shares of our Series G
preferred stock in a private placement for an aggregate purchase price of $900.0
million. The shares were purchased by Credit Suisse First Boston Equity
Partners, L.P., Welsh, Carson, Anderson & Stowe VIII, L.P., Microsoft and
certain other purchasers.
The Series G preferred stock, which votes on an as-converted basis with
our common stock, currently represents ownership of approximately 19.3% of our
outstanding common shares, 18.1% of our outstanding voting shares, and
approximately 13.0% of our fully diluted common shares on a pro forma basis as
of December 31, 1999.
If any cash dividends are paid on our common stock, the holders of our
Series G preferred stock will be entitled to receive such cash dividends on an
as-converted basis. In addition, the Series G preferred stock pays cumulative
dividends at a rate equal to the excess, if any, of 5.75% per year on its
liquidation preference over the amount of any regular cash dividends per share
of Series G preferred stock that have been paid during the applicable dividend
period on our common stock.
32
<PAGE>
Such dividends will be payable quarterly in arrears on each March 15,
June 15, September 15 and December 15 of each year to the record holders of the
Series G preferred stock as of each March 1, June 1, September 1 and December 1.
If we do not pay such dividends in cash, the amount of such dividends will be
added to the liquidation preference of the Series G preferred stock.
Each share of Series G preferred stock is convertible, at the option of
the holder, into shares of our common stock at a conversion price of $45.00 per
share, subject to certain adjustments. We will have the option to convert all of
the shares of Series G preferred stock into common stock at the conversion price
if, on any date after the third anniversary of the date of issuance of the
Series G preferred stock, the volume-weighted average trading price of our
common stock on Nasdaq for the 20 consecutive trading days immediately prior to
such date is at least equal to 155% of the conversion price on such date.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of our operations before any payment or distribution of our assets
are made to the holders of any securities ranking junior to the Series G
preferred stock, holders of Series G preferred stock will be entitled to receive
an amount per share equal to the greater of:
o the accreted value of the Series G preferred stock on such
date, plus all dividends accrued to such date, whether or not
earned or declared, since the end of the previous dividend
period; and
o the amount that would have been payable on the number of
shares of common stock into which a share of Series G
preferred stock was convertible immediately prior to such
date.
Holders of Series G preferred stock will not be entitled to any further payment.
If our assets that are distributable among the holders of Series G preferred
stock are insufficient to pay in full the preferential amount and liquidating
payments on any securities ranking equally with the Series G preferred stock,
then such assets will be distributed among the holders of Series G preferred
stock and any such equally ranked securities ratably in accordance with the
respective amounts that would be payable if all amounts payable thereon were
paid in full.
With respect to dividend rights and rights on liquidation, dissolution
and winding up, the Series G preferred stock ranks:
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 equally with, our Series
G preferred stock;
o equal with our Series D and Series F preferred stock;
o equal with each class of capital stock which we may create
that expressly provides that it ranks equally with our
Series G preferred stock; and
33
<PAGE>
o junior to each class of capital stock that we may create that
expressly provides that it ranks senior to our Series G
preferred stock.
We may not issue any securities that are senior to the Series G
preferred stock without the consent of the holders of a majority of the
outstanding Series G preferred stock.
On April 1, 2010, we will be required to redeem all of the outstanding
shares of Series G preferred stock. The redemption price per share will be equal
to the greater of the accreted value of the Series G preferred stock on such
date, plus all dividends accrued to such date whether or not earned or declared,
since the most recent dividend payment date and the volume-weighted average
trading price per share of our common stock on Nasdaq for the 20 consecutive
trading days immediately prior to April 1, 2010 multiplied by the number of
shares of common stock into which the Series G preferred stock is convertible on
such date. We have the option to pay the redemption price in cash or in shares
of common stock. If we elect to pay the redemption price, in whole or in part,
in shares of common stock, such shares will be valued at 97% of the
volume-weighted average trading price per share of our common stock on Nasdaq
for the 20 consecutive trading days immediately prior to April 1, 2010. If we
elect to pay the redemption price in shares of common stock, we have agreed to
use our best efforts to register such shares under the Securities Act of 1933
prior to the delivery of such shares.
In the event of a change of control of Winstar, we will make an offer
to purchase all outstanding shares of Series G preferred stock at a purchase
price ranging from 102% to 105% of the accreted value per share on such date,
plus all dividends accrued to such date, whether or not earned or declared,
since the end of the previous dividend period. We have the option to pay the
change of control amount in cash or shares of common stock. If we elect to pay
the applicable change of control amount in shares of common stock, such shares
will be valued at the volume- weighted average trading price per share of our
common stock on Nasdaq for the 20 consecutive trading days immediately prior to
the date the change of control amount is paid. We have agreed to use our best
efforts to register such shares prior to the delivery of such shares.
Each holder of Series G preferred stock will be entitled to vote on all
matters and will be entitled to that number of votes equal to the number of
shares of common stock into which such holder's shares of Series G preferred
stock could be converted on the record date for the determination of
stockholders entitled to vote on such matter or, if no such record date is
established, on the date such vote is taken or any written consent of
shareholders is solicited. In addition, so long as any of the Series G preferred
stock is outstanding, the affirmative vote of the holders of a majority of the
outstanding shares of Series G preferred stock, voting together as a single
class, will be necessary to:
o amend, alter or repeal any provision of our certificate of
incorporation or by-laws so as to adversely affect the
Series G preferred stock;
o issue any additional Series G preferred stock or create,
authorize or issue any capital stock that ranks senior,
whether with respect to dividends or upon liquidation,
dissolution, winding up or otherwise, to the Series G
preferred stock; or
34
<PAGE>
o redeem for cash any junior securities, subject to certain
exemptions.
REGISTRAR AND TRANSFER AGENT
Continental Stock Transfer & Trust Company is the registrar and
transfer agent for our common stock and our Series A, Series D and Series F
preferred stock. Continental is located at 2 Broadway, New York, New York 10004.
LEGAL MATTERS
The validity of the securities offered will be passed on for us by our
counsel, Graubard Mollen & Miller, New York, New York. Certain partners and
employees of Graubard Mollen & Miller own shares of our common stock.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1999
and for the years ended December 31, 1997, 1998 and 1999 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.
35
