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Filed Pursuant to Rule 424(b)(3)
SEC File No. 333-40964
WINSTAR COMMUNICATIONS, INC.
We hereby offer:
o up to $325.0 million aggregate principal amount of our 12-1/2%
senior exchange notes due 2008 in exchange for up to $325.0
million aggregate principal amount of our outstanding 12-1/2%
senior notes due 2008;
o up to $637.7 million aggregate principal amount of our 12-3/4%
senior exchange notes due 2010 in exchange for up to $637.7
million aggregate principal amount of our outstanding 12-3/4%
senior notes due 2010;
o up to $927.0 million aggregate principal amount at maturity of
our 14-3/4% senior discount exchange notes due 2010 in
exchange for up to $927.0 million aggregate principal amount
at maturity of our outstanding 14-3/4% senior discount notes
due 2010;
o up to (euro)200.0 million aggregate principal amount of our
euro-denominated 12-3/4% senior exchange notes due 2010 in
exchange for up to (euro)200.0 million aggregate principal
amount of our outstanding euro-denominated 12-3/4% senior
notes due 2010; and
o up to $1.3 million aggregate principal amount of our 12-3/4%
senior exchange notes due 2010 and up to $3.9 million
aggregate principal amount at maturity of our 14-3/4% senior
discount exchange notes due 2010, in combination, in exchange
for up to $2.2 million aggregate principal amount of our
outstanding 14-1/4% senior subordinated deferred interest
notes due 2007.
The outstanding notes listed above are referred to collectively in this
prospectus as the outstanding notes. The notes listed above which we are
offering in the exchange for the outstanding notes are referred to collectively
in this prospectus as the exchange notes.
Other than the exchange notes issued directly in exchange for our
senior subordinated deferred interest notes due 2007, the terms of the exchange
notes will be identical to the terms of the outstanding notes for which they are
exchanged, except that the exchange notes, including those exchanged for the
senior subordinated deferred interest notes due 2007, will be free of
restrictive legends.
The exchange offer will expire at 5:00 p.m., New York City time on
September 20, 2000 unless extended by us.
--------------------------------------------
See "Risk Factors" beginning on Page 14 for a discussion of certain
information that should be considered in connection with the exchange offer and
an investment in the exchange notes.
--------------------------------------------
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 8, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY ...........................................................................3
RISK FACTORS.......................................................................14
THE EXCHANGE OFFER.................................................................16
DESCRIPTION OF NOTES...............................................................28
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS AND PREFERRED STOCK......................42
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS............................52
CERTAIN LUXEMBOURG TAX CONSIDERATIONS FOR EURO EXCHANGE NOTES......................63
LEGAL MATTERS......................................................................64
EXPERTS............................................................................64
WHERE YOU CAN FIND MORE INFORMATION................................................64
</TABLE>
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SUMMARY
Winstar's business
We provide our customers with broadband services. These services
include traditional telephone services, high-speed Internet access and data
transmission, web design and hosting applications, 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. This market is projected to grow from
approximately $178.0 billion in 1999 to approximately $360.0 billion by 2009.
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.
Lucent facility
In May 2000, our subsidiary, WVF-I LLC, entered into a new credit
facility with Lucent Technologies Inc. in an aggregate amount of $2.0 billion.
This facility replaced our then existing facility with Lucent. We and WCI
Capital Corp., our subsidiary and the borrower under the Bank facility described
below, are guarantors of this facility. 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. Lucent and its transferees are entitled under certain
circumstances to convert loans outstanding under the Lucent facility into notes
identical, other than as to interest rates, to the senior notes due 2010.
Bank facility
In May 2000, 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. We and certain of our other subsidiaries are guarantors
under that agreement. We have fully drawn down all available loans under the
Bank facility and used those proceeds to pay all of the outstanding loans under
our former facility with Lucent.
Issuance of outstanding 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 additional
transactions discussed below. We undertook the refinancing in order to simplify
our financial structure, provide us with additional capital and increase our
operational and financial flexibility.
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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 14-3/4% 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 12-1/2% 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 12-3/4% senior notes due 2010. 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 exchanged for $107.2 million principal amount of senior notes
due 2010 and $313.0 million
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principal amount at maturity of senior discount notes due 2010 and $2.2 million
principal amount of the 14-1/4% senior subordinated deferred interest notes due
2007 remain outstanding.
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.
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Summary of the Exchange Offer
Terms of the exchange offer
The exchange offer................... In the exchange offer, we will issue:
o up to $325.0 million aggregate
principal amount of our senior
exchange notes due 2008 in
exchange for up to $325.0
million aggregate principal
amount of our outstanding senior
notes due 2008;
o up to $637.7 million aggregate
principal amount of our senior
exchange notes due 2010 in
exchange for up to $637.7
million aggregate principal
amount of our outstanding senior
notes due 2010;
o up to $927.0 million aggregate
principal amount at maturity of
our senior discount exchange
notes due 2010 in exchange for
up to $927.0 million aggregate
principal amount at maturity of
our outstanding senior discount
notes due 2010;
o up to (euro)200.0 million
aggregate principal amount of
our euro exchange notes in
exchange for up to (euro)200.0
million aggregate principal
amount of our outstanding euro
notes;
o up to $1.3 million aggregate
principal amount of our senior
exchange notes due 2010 and up
to $3.9 million aggregate
principal amount at maturity
of our senior discount exchange
notes due 2010, in combination,
in exchange for up to $2.2
million of our outstanding
senior subordinated deferred
interest notes due 2007;
Resale............................... Based on an interpretation by the staff
of the SEC set forth in no-action letters
issued to third parties, we believe that,
after issuance, the exchange notes may be
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<PAGE>
offered for resale, resold and otherwise
transferred by you (unless you are a
broker-dealer as discussed below) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act. The outstanding notes,
however, must have been acquired by you
in the ordinary course of your business
and you must have no arrangement or
understanding with any person to
participate in the distribution of the
exchange notes.
Each broker-dealer that receives exchange
notes issued in this exchange offer for
its own account in exchange for the
outstanding notes that were acquired as a
result of market-making or other trading
activity must follow the procedures set
forth in the section of this prospectus
called "The Exchange Offer - Purpose and
effect of the exchange offer."
The exchange offer is not being made to,
nor will tenders be accepted from,
holders of outstanding notes in any
jurisdiction in which this exchange offer
would not be in compliance with the
securities laws of such jurisdiction.
Expiration date...................... 5:00 p.m., New York City time, September
20, 2000, unless the exchange offer is
extended. Any extension, if made, will be
publicly announced through a release to
the Dow Jones News Service and as
otherwise required by applicable law or
regulations. We may extend the expiration
date in our sole and absolute discretion.
Conditions to the exchange offer..... The only conditions to the exchange offer
are that it not violate applicable law,
any applicable interpretation of the
staff of the SEC or any standing order or
judgment. The exchange offer is not
conditioned upon any minimum principal
amount of outstanding notes being
tendered.
Procedures for tendering outstanding
senior notes due 2008, senior
notes due 2010 and senior discount
notes............................. If you wish to accept the exchange offer,
you must complete, sign and date the
letter of transmittal, or a facsimile
copy, in accordance with the instructions
contained in this prospectus and the
letter of
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transmittal, and mail or otherwise
deliver the letter of transmittal
together with the outstanding notes to be
exchanged and any other required
documentation to United States Trust
Company of New York.
Procedures for tendering outstanding
euro notes......................... If you wish to accept the exchange offer,
in lieu of delivering a letter of
transmittal to Citibank, N.A., you must
notify Euroclear or Clearstream,
Luxembourg, as the case may be, and cause
the applicable transfer facility to
deliver a computer generated message in
which you acknowledge and agree to be
bound by the terms of the letter of
transmittal to Citibank, N.A. prior to
5:00 p.m., New York City time on the
expiration date.
Special procedures for beneficial
owners............................. If you are a beneficial owner whose
outstanding notes are registered in the
name of a broker, commercial bank, trust
company or other nominee, and you wish to
tender in the exchange offer, you should
contact your registered holder promptly
and instruct the registered holder to
tender on your behalf. If you wish to
tender on your own behalf, you must,
prior to completing and executing the
letter of transmittal and delivering your
outstanding notes, either make
appropriate arrangements to register
ownership of the outstanding notes in
your name or obtain a properly completed
bond power from the registered holder.
You should be aware that the transfer of
registered ownership may take
considerable time and may not be able to
be completed prior to the expiration
date.
Guaranteed delivery procedures for
outstanding senior notes due 2008,
senior notes due 2010 and senior
discount notes..................... If you wish to tender your notes and your
outstanding notes are not immediately
available or you cannot otherwise deliver
your outstanding notes and the required
documentation to the applicable exchange
agent prior to the expiration date, you
may tender your outstanding notes
according to certain delivery procedures.
In such situations, you must deliver to
the exchange agent a letter stating that
a tender is being made and guaranteeing
that all the required documentation will
be delivered to the exchange agent within
three New York Stock Exchange trading
days.
The guaranteed delivery procedures are
not available to holders of outstanding
euro notes.
Acceptance of outstanding notes and
delivery of exchange notes.......... Subject to certain qualifications, we
will accept for exchange any and all
outstanding notes which are properly
tendered in this exchange offer and not
withdrawn, prior to 5:00 p.m., New York
City time, on the expiration date.
Withdrawal rights.................... Subject to the conditions set forth in
this prospectus, you may withdraw your
tender of outstanding notes at any time
prior to 5:00 p.m., New York City time on
the expiration date.
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<PAGE>
Certain federal income tax
considerations....................... The exchange of outstanding notes for
exchange notes in this exchange offer
does not constitute a taxable exchange
for federal income tax purposes. Each
exchange note will be treated as having
been originally issued as of the date the
outstanding note being exchanged was
originally issued. However, you should
consult your own tax advisor.
Paying and exchange agents........... United States Trust Company of New York,
the trustee under the applicable
indentures, is serving as exchange agent
and paying agent with respect to the
senior notes due 2008, the senior notes
due 2010 and the senior discount notes.
Citibank, N.A. is serving as the exchange
agent and principal paying agent with
respect to the euro notes. Banque
Internationale A Luxembourg S.A. is
serving as the paying agent in Luxembourg
with respect to the euro notes.
9
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The Exchange Notes
Other than the exchange notes issued directly in exchange for our
senior subordinated deferred interest notes due 2007, the form and terms of each
series of exchange notes will be the same as the form and terms of the series of
outstanding notes for which they are exchanged, except that the exchange notes
(including those exchanged for senior subordinated deferred interest notes due
2007) will be registered under the Securities Act and, therefore, will not bear
legends restricting their transfer. The exchange notes will evidence the same
debt as the outstanding notes for which they are exchanged and the exchange
notes will be entitled to the benefits of the applicable indentures. Upon
consummation of the exchange offer, any outstanding notes that have not been
exchanged for exchange notes will not be entitled to further registration rights
under the registration rights agreements which apply to certain of the
outstanding notes.
Maturity dates:
Senior exchange notes due 2008.... April 15, 2008
Senior exchange notes due 2010
and euro exchange notes......... April 15, 2010
Senior discount exchange notes due
2010............................ April 15, 2010
Interest payment dates:
Senior exchange notes due 2008.... April 15 and October 15, commencing
October 15, 2000
Senior exchange notes due 2010
and euro exchange notes......... April 15 and October 15, commencing
October 15, 2000
Senior discount exchange notes due
2010............................ April 15 and October 15, commencing
October 15, 2005
Optional redemption...................... The senior exchange notes due 2008 are
not redeemable prior to maturity.
Until April 15, 2003, we can choose to
redeem up to an aggregate of 35% of
the sum of the original principal
amount or accreted value of the senior
exchange notes due 2010, the senior
discount exchange notes due 2010 and
the euro exchange
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notes, and the original principal
amount or accreted value of any other
notes issued under the same indentures
with money we raise in certain equity
offerings, if:
o we pay a redemption price of
112.75%, 114.75% and 112.75% of
the principal amount or accreted
value of the senior exchange
notes due 2010, the senior
discount exchange notes due 2010
and the euro exchange notes,
respectively, we redeem, plus
accrued but unpaid interest to
the date of redemption;
o at least 65% of the original
aggregate principal amount or
accreted value of the senior
exchange notes due 2010, the
senior discount exchange notes
due 2010 and the euro exchange
notes, and any other notes
issued under the same
indentures, remains outstanding
after each redemption; and
o the redemption is made within 90
days of the closing of the
related equity offering.
On or after April 15, 2005, we can
redeem some or all of the senior
exchange notes due 2010, the senior
discount exchange notes due 2010 and
the euro exchange notes at various
prices plus accrued but unpaid
interest to the date of redemption.
Change of control....................... Upon a change of control, each holder
of exchange notes may require us to
repurchase his, her or its notes at
101% of the relevant principal amounts
of the notes on the date of
repurchase, plus accrued and unpaid
interest, if any, on such amount to
the date of repurchase.
Ranking................................. The exchange notes will be our senior
obligations, ranking equally in right
of payment with any of our
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senior indebtedness, and will be
senior in right of payment to all of
our existing and any future
subordinated indebtedness. As of March
31, 2000, after giving pro forma
effect to the exchange offer and
consent solicitation, the private
placement and the tender offer and
consent solicitation which occurred in
April 2000, the borrowing of $1.15
billion under the Bank facility, the
payment of outstanding debt under our
former facility with Lucent and the
exchange of 98.7% of our Series C
preferred stock for senior notes due
2010 and senior discount notes due
2010, our senior indebtedness was
approximately $2,771.2 million, of
which $1,150.3 million was secured.
The exchange notes will be our
unsecured obligations. Our secured
indebtedness, including:
o the Lucent facility and
o the Bank facility
will be effectively senior to the
exchange notes, to the extent of the
value of the assets securing such
indebtedness.
The exchange notes will be effectively
subordinated to all existing and
future liabilities, including trade
payables, of our subsidiaries. At
March 31, 2000, after giving effect to
the exchange offer and consent
solicitation, private placement and
tender offer and consent solicitation
consummated in April 2000, the Series
C preferred stock exchange, the Bank
facility and the repayment of
outstanding debt under the former
Lucent facility, our subsidiaries had
approximately $1,843.4 million of
liabilities (excluding intercompany
payables to us and each other),
including $1,415.0 million of
indebtedness.
Restrictive covenants................... Other than with respect to the
indenture governing the senior
subordinated deferred interest notes
due 2007, the indentures governing the
outstanding notes shall be the same
indentures governing the exchange
notes for which the outstanding notes
are
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exchanged. The indentures 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.
The indenture governing the
outstanding series subordinated
deferred interest notes due 2007 does
not contain most of the restrictive
covenants that are contained in the
indentures governing the other
outstanding notes.
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RISK FACTORS
The exchange notes offered hereby involve a high degree of risk. Each
prospective purchaser should carefully consider the risks set forth in our
Annual Report on Form 10-K for the year ended December 31, 1999, as amended, and
the following risk factors.
Because we are a holding company, we will be dependent on dividends from our
operating subsidiaries and financings to make payments on the notes.
We will not be able to make required payments on the notes unless we
derive the necessary proceeds from our subsidiaries or financings. We are a
holding company with no business operations of our own and our only material
assets are the stock of our operating subsidiaries and the proceeds raised from
sales of our securities, most of which we have loaned or contributed, or intend
to loan or contribute, to our subsidiaries. We will have to rely upon dividends
and other payments from our subsidiaries or proceeds from future sales of our
securities to generate the funds necessary to pay the principal of and interest
on the notes. Our subsidiaries, however, are not obligated to pay amounts due on
the notes or to make funds available for these payments. Our subsidiaries may
not be able to generate cash flow sufficient to pay a dividend or distribute
funds to us. Further, applicable state law and contractual restrictions, such as
restrictions in our subsidiaries' debt instruments including the Lucent facility
and the Bank facility, could prohibit such dividends or distributions.
We will not be able to fulfill our financial obligations under the notes if our
business does not grow as planned.
If our business is not successful, we will not be able to generate
enough cash from our operations to repay our debt, including the notes, when
required. If we do not grow our business as planned and generate the necessary
cash from this business, 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, if available, 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 must satisfy our obligations to our subsidiaries' creditors before we will be
able to satisfy our obligations to the holders of the notes.
Claims of creditors of our subsidiaries, including trade creditors and
creditors under our credit facilities, will have priority as to substantially
all of the assets of our subsidiaries over the holders of our indebtedness,
including the notes. Accordingly, the notes will be effectively subordinated to
all liabilities (including trade payables) of our subsidiaries. At March 31,
2000, after giving effect to the exchange offer and consent solicitation, the
private placement and
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tender offer and consent solicitation consummated in April 2000, and the Series
C preferred stock exchange, the Bank facility and the repayment of outstanding
debt under our the former Lucent facility, our subsidiaries had approximately
$1,843.4 million of liabilities (excluding intercompany payables to us and each
other), including $1,415.0 million of indebtedness.
Virtually all of our assets are pledged to secure the obligations of our
subsidiaries under the Bank facility and the Lucent facility.
To secure the obligations of our subsidiaries under the Bank facility
and the Lucent facility, (i) we and most of our subsidiaries have pledged their
assets to the Bank lenders and (ii) the borrower under the Lucent facility has
granted the lenders under the Lucent facility a security interest in all
equipment and other items purchased with the proceeds of loans under that
facility. The pledges to the Bank lenders include pledges by each of such
subsidiaries that owns stock of another subsidiary of that stock (other than the
stock of the borrower under the Lucent facility, which has been pledged to the
lenders thereunder). As the notes are our unsecured obligations, in the event of
a default, the holders of the notes would participate only in the residual value
of the pledged assets after satisfaction of the obligations to the respective
lenders under the Bank facility and the Lucent facility.
If we undergo a change of control, we may not have the ability to raise the
funds necessary to finance the change of control offer required by the
indentures governing the notes.
If we undergo a change of control, we may need to refinance large
amounts of our debt, including the notes and borrowings under the Lucent
facility and the Bank facility. Under the indentures governing the notes, if a
change of control occurs, we must offer to buy back the notes for a price equal
to 101% of the relevant principal amount of the notes plus any accrued and
unpaid interest. We cannot assure you that there will be sufficient funds
available for us to make any required repurchases of the notes upon a change of
control. In addition, our credit facilities will prohibit us from repurchasing
the notes until we first repay such obligations in full. If we fail to
repurchase the notes in that circumstance, we will go into default under the
indenture governing the notes, the Lucent facility and the Bank facility. Any
future debt which we incur may also contain restrictions on repayment upon a
change of control. If any change of control occurs, we cannot assure you that we
will have sufficient funds to satisfy all of our debt obligations. These buyback
requirements may also delay or make it harder for others to effect a change of
control.
Do not place undue reliance on forward-looking statements contained in this
prospectus.
Some of the statements under "Summary" and "Risk Factors" and elsewhere
in this prospectus are forward-looking statements that involve risks and
uncertainties. 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 might
cause such a discrepancy include those discussed
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in "Risk Factors" and elsewhere in this prospectus. You are cautioned not to
place undue reliance on any forward-looking statements.
THE EXCHANGE OFFER
Purpose and effect of the exchange offer
We are making this exchange offer to comply with the requirements of
registration rights agreements which apply to certain of the outstanding notes.
Although not obligated to do so, we are also extending this exchange offer to
the other outstanding notes to which this prospectus relates. Other than the
exchange notes issued directly in exchange for our senior subordinated deferred
interest notes due 2007, the exchange notes will have terms substantially
identical to the outstanding notes, except that the exchange notes will not
contain terms with respect to transfer restrictions, registration rights and
additional interest for failure to observe specified obligations in the
registration rights agreements.
Following the consummation of the exchange offer, any outstanding notes
not tendered will no longer have registration rights and will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for the outstanding notes could be adversely affected.
Resale of exchange notes
We are not requesting, and do not intend to request, an interpretation
by the staff of the SEC with respect to whether the exchange notes issued in
exchange for the outstanding notes may be offered for sale, resold or otherwise
transferred by you without compliance with the registration and prospectus
delivery provisions of the Securities Act. Based on interpretations by the staff
of the SEC set forth in no-action letters issued to third parties, we believe
that the exchange notes may be offered for resale, resold and otherwise
transferred by you unless you are a broker-dealer, as set forth below, without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that, among other things:
o you acquire the exchange notes in the ordinary course of your
business; and
o you have no arrangement or understanding with any person to
participate in the distribution of the exchange notes.
If you tender in the exchange offer for the purpose of participating in
a distribution of the exchange notes, you may not rely on the interpretations by
the staff of the SEC and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
the broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes.
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Terms of the exchange offer
Upon the terms set forth in this prospectus and in the letter of
transmittal, we will accept any and all outstanding notes properly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on the expiration date.
You may tender some or all of your outstanding notes in the exchange offer.
However, outstanding notes may be tendered only in multiples of $1,000 principal
amount ((euro)1,000 in the case of the euro notes). Except with respect to
exchange notes issued in exchange for our 14-1/4% senior subordinated deferred
interest notes due 2007, we will issue $1,000 of principal amount of exchange
notes ((euro)1,000 in the case of the euro exchange notes) in exchange for each
$1,000 principal amount of outstanding notes ((euro)1,000 in the case of the
euro notes) accepted in the exchange offer. Holders of senior subordinated
deferred interest notes due 2007 who elect to exchange such notes for senior
exchange notes due 2010 and senior discount exchange notes due 2010 will
receive, for each $1,000 principal amount of senior subordinated deferred
interest notes due 2007, $1,545.91 principal amount of senior exchange notes due
2010 and $1,545.91 principal amount at issuance of senior discount notes due
2010, a portion of which may constitute taxable income for U.S. holders as
discussed under "Certain United States Federal Income Tax Considerations." Such
exchange is at the same rate received by holders of our Series C preferred stock
who are parties to the agreements relating to the preferred stock transaction
described elsewhere in this prospectus.
Other than the exchange notes issued in exchange for our senior
subordinated deferred interest notes due 2007, the form and terms of the
exchange notes will be substantially identical to the form and terms of the
outstanding notes for which they are exchanged, except that the exchange notes
(including those issued in exchange for the senior subordinated deferred
interest notes due 2007) will be registered under the Securities Act, will not
bear legends restricting their transfer and, for those outstanding notes subject
to a registration rights agreement, will not provide for any additional interest
upon the failure on our part to fulfill our obligations under the registration
rights agreements to file, and cause to be effective, a registration statement.
Except with respect to exchange notes issued in exchange for senior subordinated
deferred interest notes due 2007, the exchange notes will evidence the same debt
as the outstanding notes. Except with respect to exchange notes issued in
exchange for senior subordinated deferred interest notes due 2007, the exchange
notes will be issued under and entitled to the benefits of the same indentures
that authorized the issuance of the outstanding notes.
The exchange offer is not conditioned upon any minimum amount of
outstanding notes of any series being tendered for exchange.
We intend to conduct the exchange offer in accordance with the
applicable provisions of the registration rights agreements, the applicable
requirements of the Securities Act and the Securities Exchange Act of 1934 and
the rules and regulations of the SEC.
We will be deemed to have accepted properly tendered outstanding notes
when we have given oral or written notice of the acceptance to the applicable
exchange agent. The applicable exchange agent will act as agent for you for the
purpose of receiving the exchange notes from us and delivering them to you. If
any of the outstanding notes that you tender are not accepted for exchange, they
will be returned, without expense, to you promptly after the expiration date.
17
<PAGE>
You will not be required to pay brokerage commissions or fees or,
subject to the instructions in the letter of transmittal, transfer taxes with
respect to the exchange offer. We will pay all charges and expenses, other than
certain taxes, in connection with the exchange offer.
Expiration date
The expiration date shall be 5:00 p.m., New York City time, on
September 20, 2000 unless we, in our sole discretion, extend the exchange offer.
Although we have no current intention to extend the exchange offer, we reserve
the right to extend the exchange offer at any time and from time to time by
giving oral or written notice to the exchange agents and by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the exchange offer, all outstanding notes previously tendered in
the exchange offer and not withdrawn will remain subject to the exchange offer.
The date of the exchange for outstanding notes that are validly tendered will be
the first New York Stock Exchange trading day following the expiration date.
Amendments
We expressly reserve the right to:
o delay acceptance for exchange any outstanding notes;
o terminate the exchange offer and not accept for exchange any
outstanding notes if any of the events set forth below under
"--Conditions to the exchange offer" shall have occurred and
shall not have been waived by us; and
o amend the terms of the exchange offer in any manner which, in
our good faith judgment, is advantageous to the holders of the
outstanding notes, whether before or after any tender of the
outstanding notes.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of outstanding notes. If we amend the exchange offer in a manner that we
determine to constitute a material change, we will promptly disclose the
amendment in a manner reasonably calculated to inform the holders of outstanding
notes of the amendment.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we shall have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
Conditions to the exchange offer
Despite any other term of the exchange offer, we will not be required
to accept for exchange, or exchange any exchange notes for, any outstanding
notes, and we may terminate the
18
<PAGE>
exchange offer as provided in this prospectus before accepting any outstanding
notes for exchange if in our reasonable judgment:
o the exchange notes to be received will not be tradeable by the
holder, without restriction under the Securities Act, the
Securities Exchange Act of 1934 and without material
restrictions under the blue sky or securities laws of
substantially all of the states of the United States;
o the exchange offer, or the making any exchange by a holder of
outstanding notes, would violate applicable law or any
applicable interpretation of the staff of the SEC; or
o any action or proceeding has been instituted or threatened in
any court or by or before any governmental agency with respect
to the exchange offer that, in our judgment, would reasonably
be expected to impair our ability to proceed with the exchange
offer.
These conditions are for our sole benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them, in
whole or in part, at any or at various times. A failure on our part to exercise
any of the foregoing rights will not constitute a waiver of such right.
Procedures for tendering
General
Your tender to us of outstanding notes under one of the procedures set
forth below will constitute an agreement between you and Winstar in accordance
with the terms of this prospectus and the letter of transmittal.
We will determine in our sole discretion all questions as to the
validity, form, eligibility, including time of receipt, and acceptance and
withdrawal of tendered outstanding notes. Our determination will be final and
binding on all parties. We reserve the absolute right to reject any outstanding
notes not properly tendered or any outstanding notes our acceptance of which
would, in the opinion of our counsel, be unlawful. We also reserve the right to
waive any defects, irregularities or conditions of tender as to any outstanding
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties.
19
<PAGE>
Neither the exchange agents, us, nor any other person will be under any
duty to give notification of any defects or irregularities in tenders or incur
any liability for failure to give any such notification. If any outstanding
notes received by the applicable exchange agent are not validly tendered by you
and as to which the defects or irregularities have not been cured or waived, or
if outstanding notes are submitted in a principal amount greater than the
principal amount of outstanding notes being tendered by you, such unaccepted or
non-exchanged outstanding notes will be returned to you by the applicable
exchange agent, unless otherwise provided in the letter of transmittal, as soon
as practicable following the expiration date.
We reserve the right in our sole discretion, to the extent permitted by
the indentures and applicable law to:
o purchase or make offers for any outstanding notes that remain
outstanding subsequent to the expiration date; and
o purchase outstanding notes in the open market, in privately
negotiated transactions or otherwise.
The terms of any purchases or offers made after the expiration of the
exchange offer may differ from the terms of the exchange offer.
Senior notes due 2008, senior notes due 2010 and senior discount notes
To tender your outstanding senior notes due 2008, senior notes due 2010
or senior discount notes, you must:
o complete, sign and date the letter of transmittal, or a
facsimile copy; have the signature on the letter of
transmittal guaranteed if the letter of transmittal so
requires; and mail or deliver the letter of transmittal or
facsimile to United States Trust Company of New York at one of
the addresses set forth below prior to the expiration date; or
o comply with the procedure for book-entry transfer described
below.
In addition:
o United States Trust Company of New York must have received
your outstanding notes along with the letter of transmittal;
or
o United States Trust Company of New York must have received,
prior to the expiration date, a timely confirmation of
book-entry transfer of your outstanding notes into its account
at DTC according to the procedure for book-entry transfer
described below; or
o you must comply with the guaranteed delivery procedures
described below.
20
<PAGE>
If tendered outstanding notes are registered in the name of the signer
of the letter of transmittal and the exchange notes are to be issued, and any
untendered outstanding notes are to be reissued, in the name of the registered
holder, the signature of such signer need not be guaranteed.
In any other case, the tendered outstanding notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to us and
duly executed by the registered holder and the signature on the endorsement or
instrument of transfer must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an eligible guarantor institution as
defined by Rule 17Ad-15 under the Exchange Act. If the exchange notes and any
outstanding notes not exchanged are to be delivered to an address other than
that of the registered holder appearing on the register for the outstanding
notes, the signature in the letter of transmittal must be guaranteed.
The method of delivery of outstanding notes, letter of transmittal and
all other documents is at your election and risk. If delivery is made by mail,
it is recommended that registered mail, properly insured, with return receipt
requested, be used. In all cases, sufficient time should be allowed to assure
timely delivery. No letter of transmittal or outstanding notes should be sent to
us.
Your tender will be deemed to have been received as of the date when:
o your properly completed and duly signed letter of transmittal
accompanied by your outstanding notes, or a confirmation of
book-entry transfer of your outstanding notes into United
States Trust Company of New York's account at DTC is received
by United States Trust Company of New York, or
o your notice of guaranteed delivery or letter, telegram or
facsimile transmission to similar effect from an eligible
institution is received by United States Trust Company of New
York.
Euro notes
To tender your outstanding euro notes, you must transfer such
outstanding notes into Citibank, N.A.'s account in accordance with either
Euroclear's or Clearstream, Luxembourg's standard transfer procedures.
In lieu of delivering a letter of transmittal to Citibank, N.A., you
must notify Euroclear or Clearstream, Luxembourg, as the case may be, and cause
the applicable transfer facility to deliver a computer generated message in
which you acknowledge and agree to be bound by the terms of the letter of
transmittal to Citibank, N.A. prior to 5:00 p.m., New York City time on the
expiration date. In addition, Citibank, N.A. must have received, prior to the
expiration date, confirmation from Euroclear or Clearstream, Luxembourg, as the
case may be, that your account with the outstanding euro notes has been blocked.
21
<PAGE>
Any beneficial holder whose outstanding notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should promptly contact the registered holder and instruct
them to tender the outstanding notes on his or her behalf.
The method of delivery of outstanding notes, letter of transmittal and
all other documents is at your election and risk. No letter of transmittal or
outstanding notes should be sent to us.
Your tender will be deemed to have been received as of the date when
Citibank, N.A. receives a computer generated message from Euroclear or
Clearstream, Luxembourg, as the case may be, in which you acknowledge and agree
to be bound by the terms of the letter of transmittal.
Book-entry transfer
Senior notes due 2008, senior notes due 2010 and senior discount notes
United States Trust Company of New York will make a request to
establish an account with respect to the outstanding notes at DTC for purposes
of the exchange offer promptly after the date of this prospectus; and any
financial institution participating in DTC's system may make book-entry delivery
of outstanding notes by causing DTC to transfer the outstanding notes into
United States Trust Company of New York's account at DTC in accordance with
DTC's procedures for transfer. Holders of outstanding notes who are unable to
deliver confirmation of the book-entry tender of their outstanding notes into
United States Trust Company of New York's account at DTC or all other documents
required by the letter of transmittal to United States Trust Company of New York
on or prior to the expiration date must tender their outstanding notes according
to the guaranteed delivery procedures described below.
Euro notes
The registered holder of the outstanding notes on the records of
Euroclear or Clearstream, Luxembourg must contact either Euroclear or
Clearstream, Luxembourg, as the case may be, to arrange to block your account
with the outstanding notes. In order for the exchange offer to be accepted,
Citibank, N.A. must have received, prior to the expiration date, a confirmation
from Euroclear or Clearstream, Luxembourg, as the case may be, that your account
has been blocked.
Guaranteed delivery procedures for senior notes due 2008, senior notes due 2010
and senior discount notes
If you desire to accept the exchange offer and time will not permit a
letter of transmittal or outstanding notes to reach United States Trust Company
of New York before the expiration date or the procedure for book-entry transfer
cannot be completed on a timely basis, a tender may be effected if United States
Trust Company of New York has received at its office, on or prior to the
expiration date, a letter, telegram or facsimile transmission from an eligible
institution setting forth:
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<PAGE>
o the name and address of the tendering holder;
o the name(s) in which the outstanding notes are registered;
o the certificate number(s) of the outstanding notes to be
tendered; and
o a statement that the tender is being made and guaranteeing
that, within three New York Stock Exchange trading days after
the date of execution of the letter, telegram or facsimile
transmission by the eligible institution, the outstanding
notes, in proper form for transfer, or a confirmation of
book-entry transfer of such outstanding notes into the
exchange agent's account at DTC will be delivered by the
eligible institution, together with a properly completed and
duly executed letter of transmittal as well as any other
required documents.
Unless you tender your outstanding notes by one of the above-described
methods within the time period set forth above accompanied or preceded by a
properly completed letter of transmittal as well as any other required
documents, we may, at our option, reject the tender. Copies of a notice of
guaranteed delivery which may be used by eligible institutions for the purposes
described in this paragraph are available from United States Trust Company of
New York.
Issuances of exchange notes in connection with a notice of guaranteed
delivery or letter, telegram or facsimile transmission to similar effect by an
eligible institution will be made only against submission of a duly signed
letter of transmittal, and any other required documents, and deposit of the
tendered outstanding notes.
The guaranteed delivery procedures described above are not available
for holders of outstanding euro notes.
Terms and conditions of the letter of transmittal
Under the terms of the letter of transmittal, if you tender outstanding
notes:
o you agree to exchange, assign and transfer the outstanding
notes to us;
o you represent and warrant that you have full power and
authority to tender, exchange, assign and transfer the
outstanding notes and to acquire exchange notes issued in the
exchange offer;
o you represent and warrant that when the outstanding notes are
accepted for exchange, Winstar will acquire good and
unencumbered title to the tendered outstanding notes, free and
clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim;
o you represent and warrant that you will, upon request, execute
and deliver any additional documents deemed by us to be
necessary or desirable to complete the exchange, assignment
and transfer of tendered outstanding notes or transfer
ownership of such outstanding notes on the account books
maintained by DTC, Euroclear or Clearstream, Luxembourg; and
23
<PAGE>
o you agree that all authority conferred by you pursuant to the
letter of transmittal will survive your death, bankruptcy or
incapacity and each of your obligations will be binding upon
your heirs, legal representatives, successors, assigns,
executors and administrators.
Withdrawal of tenders
Tenders of outstanding notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the expiration date.
To be effective, a written, telegraphic, or facsimile transmission
notice of withdrawal must be received by the applicable exchange agent or, in
the case of the euro notes, at Euroclear or Clearstream, Luxembourg at the
address set forth in the letter of transmittal prior to 5:00 p.m., New York City
time on the expiration date. Any notice of withdrawal must specify:
o the name of the holder originally listed in the letter of
transmittal;
o the certificate numbers of the outstanding notes to be
withdrawn, and the principal amount of outstanding notes
delivered for exchange;
o a statement that the holder is withdrawing election to have
the applicable outstanding notes exchanged; and
o the name of the registered holder of the outstanding notes.
The notice must be signed by the holder in the same manner as the
original signature on the letter of transmittal, including any required
signature guarantees, or be accompanied by evidence satisfactory to us that the
person withdrawing the tender has succeeded to the beneficial ownership of the
outstanding notes being withdrawn. The applicable exchange agent will return the
properly withdrawn outstanding notes promptly following the receipt of notice of
withdrawal.
If outstanding notes have been tendered following the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn outstanding notes and otherwise comply with the procedures of that
facility.
Exchange agents
United Trust Company of New York has been appointed as exchange agent
for the exchange of the senior notes due 2008, the senior notes due 2010 and the
senior discount notes. You should direct questions and requests for assistance
with regard to these notes, requests for additional copies of this prospectus or
of the letter of transmittal and requests for notices of guaranteed delivery to
the exchange agent addressed as follows:
24
<PAGE>
<TABLE>
<S> <C>
Registered, Certified or Regular Mail: By Overnight Courier and By Hand Delivery
after 4:30 p.m. on Expiration Date:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 112 30 Broad Street, 14th Floor
Bowling Green Station New York, New York 10276-0844
New York, New York 10274-0112 Attn: Corporate Trust Operations Department
By Hand Delivery to 4:30 p.m.: By Facsimile (for Eligible Institutions only):
United States Trust Company of New York United States Trust Company of New York
30 Broad Street, B-Level (212) 422-0183 or (646) 458-8104
New York, New York 10004-2304 Confirm by telephone (800) 543-6565
Attn: Corporate Trust Services
</TABLE>
Citibank, N.A. is serving as the exchange agent with respect to the
euro notes. You should direct questions and requests for assistance with regard
to these notes, requests for additional copies of this prospectus or of the
letter of transmittal to the exchange agent addressed as follows:
<TABLE>
<S> <C>
Registered, Certified or Regular Mail and By Facsimile (Reference: Winstar
By Hand Delivery: Communications Exchange Offer)
Citibank, N.A. Citibank, N.A.
5 Carmelite Street +44-20-7508-3867
London Confirm by telephone
EC4Y OPA +44-20-7508-3894
</TABLE>
Delivery of a letter of transmittal to any address or facsimile number
other than one set forth above will not constitute a valid delivery.
Fees and expenses
We will bear the expense of soliciting tenders. The principal
solicitation is being made by mail. However, additional solicitations may be
made by telegraph, telephone or in person by our officers and regular employees
of our affiliates. No additional compensation will be paid to any of these
officers and employees who engage in soliciting tenders.
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<PAGE>
We have not retained any dealer-manager or other soliciting agent in
connection with the exchange offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the exchange offer. We, however,
will pay the exchange agents reasonable and customary fees for their services
and will reimburse them for their reasonable out-of-pocket expenses in
connection with the exchange. We may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus, the letter of
transmittal and related documents to the beneficial owners of the outstanding
notes and in handling or forwarding tenders for exchange.
We will pay all the cash expenses to be incurred by us in connection
with the exchange offer, including fees and expenses of each exchange agent and
trustee and accounting and legal fees, will be paid by us. We will not, however,
pay the costs incurred by a holder in delivering its outstanding notes to the
exchange agent, underwriting fees, commissions or transfer taxes.
Transfer taxes
Holders who tender their outstanding notes for exchange will not be
required to pay any transfer taxes. However, holders who instruct us to register
exchange notes in the name of, or request that outstanding notes not tendered or
not accepted in the exchange offer be returned to, a person other than the
registered tendering holder will be required to pay any applicable transfer tax.
Consequences of failure to exchange
If you do not exchange your outstanding notes for exchange notes, you
will remain subject to the restrictions on transfer of the outstanding notes:
o as set forth in the legend printed on the notes as a
consequence of the issuance of the outstanding notes pursuant
to the exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable
state securities laws; and
o otherwise set forth in the offering circular distributed in
connection with the private offering of the outstanding notes
(or, in the case of the senior subordinated deferred interest
notes due 2007, the offering circular distributed in
connection with the private offering of the Series C preferred
stock).
In general, you may not offer or sell the outstanding notes unless they
are registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the registration rights agreements, we do not intend to
register resales of the outstanding notes under the Securities Act. Based on
interpretations of the SEC, the exchange notes may be freely offered for resale,
resold or otherwise transferred by their holders, subject to certain
requirements discussed above.
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<PAGE>
Accounting treatment
Except with respect to the senior subordinated deferred interest notes
due 2007, the exchange notes will generally be recorded at the same carrying
value as the outstanding notes as reflected in our accounting records on the
date of the exchange because the exchange of the outstanding notes for the
exchange notes is the completion of the selling process contemplated in the
issuance of the outstanding notes. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the exchange offer and the
unamortized expenses related to the issuance of the outstanding notes will be
amortized over the term of the exchange notes.
Use of proceeds
We will not receive any cash proceeds from the issuance of the exchange
notes offered in this registration statement. In consideration for issuing the
exchange notes as contemplated in this prospectus, we will receive the
corresponding outstanding notes or senior subordinated deferred interest notes
due 2007 in the case of the exchange of such notes for senior notes due 2010 and
senior discount notes due 2010. Outstanding notes surrendered in exchange for
exchange notes will be retired and canceled and cannot be reissued. The issuance
of the exchange notes (other than the senior exchange notes due 2010 and senior
discount exchange notes due 2010 exchanged for senior subordinated deferred
interest notes due 2007) will not result in a change in our indebtedness. The
exchange of senior exchange notes due 2010 and senior discount exchange notes
due 2010 for senior subordinated deferred interest notes due 2007 will increase
our indebtedness by $3.3 million (assuming all $2.2 million principal amount of
the latter notes not previously exchanged are exchanged in the exchange offer).
Other matters
Participation in the exchange offer is voluntary and you should
carefully consider whether to accept. You are urged to consult your financial
and tax advisors in making your decisions on what action to take.
No person has been authorized to give any information or to make any
representations in connection with the exchange offer other than those contained
in this prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by us. Neither the delivery of this
prospectus nor any exchange made hereunder shall, under any circumstances,
create any implication that there has been no change in our affairs since the
dates as of which information is given. The exchange offer is not being made to,
nor will tenders be accepted from or on behalf of, holders of outstanding notes
in any jurisdiction in which the making of the exchange offer or its acceptance
would not be in compliance with the laws of such jurisdiction. However, we may,
at our discretion, take such action as we may deem necessary to make the
exchange offer in any such jurisdiction and extend the exchange offer to holders
of outstanding notes in such jurisdiction.
As a result of the making of the exchange offer, we will have fulfilled
a covenant contained in some of the registration rights agreements. Holders of
the outstanding notes to which registration rights agreements apply who do not
tender their outstanding notes in the exchange offer will continue to hold
outstanding notes and will be entitled to all the rights and
27
<PAGE>
limitations applicable under the indentures except for certain rights under the
registration rights agreements. All untendered outstanding notes will continue
to be subject to the restrictions on transfer set forth in the indentures and
the outstanding notes.
DESCRIPTION OF NOTES
The outstanding notes were issued and the exchange notes will be 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. Copies of the indentures have been filed as
exhibits to the registration statement of which this prospectus is a part. The
indentures are subject to and governed by the Trust Indenture Act of 1939. The
terms of the exchange notes will include those stated in the indentures and
those made part of the indentures by reference to the Trust Indenture Act.
The following description is a summary of the material provisions of
the exchange notes and the indentures. It does not describe every aspect of the
exchange notes. We urge you read the indentures because they, and not this
description, define your rights as holder of the exchange notes.
Other than the exchange notes issued directly in exchange for our
senior subordinated deferred interest notes due 2007, the terms of the exchange
notes will be identical to the terms of the outstanding notes for which they are
exchanged, except that the exchange notes will be free of restrictive legends.
Principal, maturity and interest
Senior exchange notes due 2008
In exchange for our outstanding senior notes due 2008 we will issue up
to a maximum aggregate principal amount of $325.0 million of our senior exchange
notes due 2008. The senior exchange notes due 2008 will mature on April 15,
2008.
Interest on the senior exchange notes due 2008 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 exchange 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 exchange notes due 2008 will accrue from the
date of original issuance. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
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<PAGE>
Senior exchange notes due 2010
In exchange for our outstanding senior notes due 2010, we will issue up
to a maximum aggregate principal amount of $637.7 million of our senior exchange
notes due 2010. The senior exchange notes due 2010 will mature on April 15,
2010.
We also will issue up to $1.3 million aggregate principal amount of our
senior exchange notes due 2010 and up to $3.9 million aggregate principal amount
of our senior discount exchange notes due 2010, in combination, in exchange for
up to $2.2 million of our outstanding senior subordinated deferred interest
notes due 2007.
Interest on the senior exchange notes due 2010 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 senior exchange 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 senior exchange notes due 2010 will accrue from the
date of original issuance. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months
Senior discount exchange notes due 2010
In exchange for our outstanding senior discount notes due 2010, we will
issue up to a maximum aggregate accreted value, determined as of the issue date,
of $454.1 million of our senior discount exchange notes due 2010. As noted in
the preceding section, we will also issue senior discount exchange notes due
2010 upon the exchange of our senior subordinated deferred interest notes due
2007. The senior discount exchange notes due 2010 will mature on April 15, 2010.
No cash interest will accrue on the senior discount exchange 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 OID,
as the original issue discount accrues. See "Certain United States Federal
Income Tax Considerations" for a discussion regarding the taxation of OID.
Interest on the senior discount exchange notes due 2010 will accrue at
the annual rate of 14.75% from April 10, 2000. Cash interest on the senior
discount exchange 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 exchange notes due 2010
on the immediately preceding April 1 and October 1. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
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<PAGE>
Euro exchange notes
In exchange for our outstanding euro notes, we will issue up to a
maximum aggregate principal amount of (euro)200.0 million of our euro exchange
notes. The principal, maturity and interest terms of the euro exchange notes are
the same as the senior exchange notes due 2010.
Optional redemption
Senior exchange notes due 2008
The senior exchange notes due 2008 are not redeemable prior to
maturity.
Senior exchange notes due 2010, senior discount exchange notes due 2010
and euro exchange notes
Except as set forth below, we will not be entitled to redeem the senior
exchange notes due 2010, the senior discount exchange notes due 2010 or the euro
exchange 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 due 2010, 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>
<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 senior exchange notes due 2010, the senior discount
exchange notes due 2010 and the euro exchange notes, which includes 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, which includes
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 senior exchange notes due 2010, the
senior discount exchange notes due 2010 and the euro exchange 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 senior
exchange notes due 2010, the senior discount exchange notes
due 2010 and the euro exchange notes, which includes
additional notes of each series, if any, remains outstanding
immediately
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after the occurrence of each such redemption, other than any
of such 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.
Selection and notice of redemption
If we are redeeming less than all of the senior exchange notes due
2010, senior discount exchange notes due 2010 or euro exchange notes, at any
time, the applicable trustee will select senior exchange notes due 2010, senior
discount exchange notes due 2010 or euro exchange 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 exchange notes of $1,000 ((euro)1,000 in the case of the
euro exchange 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 exchange notes to be redeemed
at its registered address.
If any exchange 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 exchange note in the name of the holder upon
cancellation of the original exchange note. Exchange notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on exchange notes or portions of them called for
redemption.
Mandatory redemption
We are not required to make any mandatory redemption or sinking fund
payments with respect to the exchange notes. However, under certain
circumstances, we may be required to offer to purchase exchange notes.
Open market purchases
We may at any time, and from time to time, purchase the exchange notes
in the open market or otherwise.
Ranking
Senior indebtedness versus exchange notes
The indebtedness evidenced by the exchange notes will rank pari passu
in right of payment to all of our senior indebtedness, including any senior
notes due 2008, senior notes due 2010, senior discount notes due 2010, euro
notes and any 14% senior discount notes due 2005 not tendered in the tender
offer. As of March 31, 2000, after giving pro forma effect to the exchange offer
and consent solicitation, the private placement and the tender offer and consent
solicitation which occurred in April 2000, the borrowing of $1.15 billion under
the Bank facility,
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the payment of outstanding debt under our former facility with Lucent, and the
Series C preferred stock exchange, our Senior Indebtedness would have been
approximately $2,771.2 million, of which $1,150.3 million was secured.
The exchange notes 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 exchange notes to the extent of the value of the
assets securing such debt or other obligations.
Liabilities of subsidiaries versus exchange 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 exchange notes. Accordingly, the exchange notes will be effectively
subordinated to creditors, including trade creditors, and preferred
stockholders, if any, of our subsidiaries.
Although the indentures 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. As of March 31, 2000, after
giving pro forma effect to the exchange offer and consent solicitation, the
private placement and the tender offer and consent solicitation consummated in
April 2000, the borrowing of $1.15 billion under the Bank facility, the payment
of outstanding debt under our former facility with Lucent, and the Series C
preferred stock exchange, the total liabilities of our subsidiaries would have
been approximately $1,843.4 million, including trade payables. Although the
indenture limits the incurrence of Indebtedness and preferred stock of certain
of our subsidiaries, such limitations are subject to a number of significant
qualifications. Moreover, the indenture does not impose any limitation on the
incurrence by such subsidiaries of liabilities that are not considered
Indebtedness under the indenture.
Important differences between exchange notes and senior subordinated deferred
interest notes due 2007
In addition to differences in interest rates, maturity and redemption
terms, there are other important differences between the senior subordinated
deferred interest notes due 2007 and the exchange notes being offered in
exchange therefor, including differences in restrictive covenants and default
provisions. The indenture governing the senior subordinated deferred interest
notes due 2007 has been amended to eliminate substantially all of the
restrictive covenants that are contained in the indentures governing the senior
exchange notes due 2010 and the senior discount exchange notes due 2010. Also,
as a result of such amendment, only the first four of the events described below
that constitute events of default with respect to such exchange notes constitute
events of default with respect to the senior subordinated deferred interest
notes due 2007.
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Book-entry, delivery and form
Senior exchange notes due 2008, senior exchange notes due 2010 and
senior discount exchange notes due 2010
We will issue the senior exchange notes due 2008, the senior exchange
notes due 2010 and the senior discount exchange notes due 2010 in the form of
one or more global notes. The global notes will be deposited with, or on behalf
of, the depository and registered in the name of the depository or its nominee.
Except as set forth below, the global notes may be transferred, in whole and not
in part, only to the depository or a nominee of the depository. You may hold
your beneficial interests in a global note directly through the depository if
you have an account with the depository or indirectly through organizations
which have accounts with the depository.
We expect that pursuant to procedures established by the depository,
upon the deposit of a global note with the depository, the depository will
credit, on its book-entry registration and transfer system, the principal amount
of notes represented by such global note to the accounts of participants.
So long as the depository, or its nominee, is the registered holder and
owner of the global notes, the depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of any related notes
evidenced by the global notes for all purposes of such notes and the applicable
indenture.
We will make payments of principal of, premium, if any, and interest on
exchange notes represented by the global notes registered in the name of and
held by the depository or its nominee to the depository or its nominee, as the
case may be, as the registered owner and holder of the global notes.
Euro exchange notes
The euro exchange notes will be represented by one or more global
notes. Each of the global notes will be issued in registered form without
coupons and the global notes in aggregate represent the aggregate principal
amount of the euro exchange notes. Each global note will be deposited with, or
on behalf of, Citibank, N.A. as common depositary for the Euroclear System and
for Clearstream, Luxembourg, and will be, registered in the name of a nominee of
the common depositary.
Upon the issuance of a global note, Euroclear or Clearstream,
Luxembourg, as the case may be, will credit the accounts of persons holding
through it with the respective principal amounts represented by the global note.
These accounts will be limited to persons who have accounts with Euroclear or
Clearstream, Luxembourg or persons who may hold interests through participants.
Ownership of beneficial interests in a global note will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by Euroclear or Clearstream, Luxembourg (with respect to
participants' interests) and such participants (with respect to the owners of
beneficial interests in such global notes other than participants). The global
notes will not be eligible for clearance through the depositary, except
indirectly through the depositary's participation in Euroclear and Clearstream,
Luxembourg.
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Payment of principal and interest on euro exchange notes represented by
a global note will be made in immediately available funds to the common
depositary for Euroclear and Clearstream, Luxembourg or its nominee, as the case
may be, as the sole registered owner and the sole holder of the global notes
represented thereby for all purposes under the indenture. We have been advised
by Euroclear and Clearstream, Luxembourg that upon receipt of any payment of
principal of or interest on any global note, Euroclear and Clearstream,
Luxembourg will immediately credit, on its book-entry registration and transfer
system, the accounts of participants with payments in amounts proportionate to
their respective beneficial interests in the principal or face amount of such
global note as shown on the records of Euroclear and Clearstream, Luxembourg.
Payments by participants to owners of beneficial interests in a global note held
through such participants will be governed by standing instructions and
customary practices as is now the case with securities held for customer
accounts registered in "street name" and will be the sole responsibility of such
participants.
Owners of beneficial interests in a global note who receive payment in
any currency other than euro must make foreign exchange conversion arrangements
at their own expense. Investors may be subject to foreign exchange risks that
may have important economic and tax consequences for them.
So long as the common depositary for Euroclear and Clearstream,
Luxembourg or its nominee, as the case may be, is the registered owner of a
global note, Citibank, N.A. or such successor depositary or such party will be
considered the sole owner or holder of the euro exchange notes represented by
such global note for all purposes under the indenture and the notes. Except as
set forth above, owners of beneficial interests in a global note will not be
entitled to have the notes represented by such global note registered in their
names, will not receive or be entitled to receive physical delivery of
certificated euro exchange notes in definitive form and will not be considered
to be the owners or holders of any notes under such global note. Accordingly,
each person owning a beneficial interest in a global note must rely on the
procedures of Euroclear or Clearstream, Luxembourg, as the case may be, and, if
such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a holder under
the indenture. We understand that under existing industry practices, in the
event that we request any action of holders or that an owner of a beneficial
interest in a global note desires to give or take any action which a holder is
entitled to give or take under the indenture, Euroclear or Clearstream,
Luxembourg, as the case may be, would authorize the participants holding the
relevant beneficial interest to give or take such action and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
We understand that Euroclear and Clearstream, Luxembourg each hold
securities for their account holders and facilitate the clearance and settlement
of securities transactions by electronic book-entry transfer between their
respective account holders, thereby eliminating the need for physical movements
of certificates and any risks from lack of simultaneous transfers of securities.
Euroclear and Clearstream, Luxembourg each provide various services
including safekeeping, administration, clearance and settlement of
internationally traded securities and
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securities lending and borrowing. Euroclear and Clearstream, Luxembourg each
also deals with domestic securities markets in several countries through
established depository and custodial relationships. The respective systems of
Euroclear and Clearstream, Luxembourg have established and electronic bridge
between their two systems which enables their respective account holders to
settle trades with each other.
Account holders in Euroclear and Clearstream, Luxembourg are world-wide
financial institutions including underwriters, securities brokers, and dealers,
banks, trust companies and clearing corporations. Indirect access to both
Euroclear and Clearstream, Luxembourg is available to other institutions that
clear through or maintain a custodial relationship with an account holder of
either system.
An account holder's overall contractual relations with either Euroclear
or Clearstream, Luxembourg are governed by the respective rules and operating
procedures of Euroclear or Clearstream, Luxembourg and any applicable laws. Both
Euroclear and Clearstream, Luxembourg act under those rules and operating
procedures only on behalf of their respective account holders, and have no
record of or relationship with persons holding through their respective holders.
Euroclear and Clearstream, Luxembourg, acting on behalf of their
respective participants, are expected, prior to each payment date, to elect to
receive payments of principal and interest and any other amounts owing
thereunder in respect of the book-entry interests in the global note in euro. In
the event that Euroclear and Clearstream, Luxembourg become unwilling or unable
to make such an election on behalf of their participants, each individual holder
of a beneficial interest in the global note representing euro exchange notes
will be required to make its own currency election in order to avoid payment in
U.S. dollars.
Same-day payment
Each indenture for the senior exchange notes due 2008, the senior
exchange notes due 2010 and the senior discount exchange notes due 2010 requires
us to make payments in respect of the applicable notes, including principal,
premium and interest, by wire transfer of immediately available funds to the
U.S. dollar accounts with banks in the U.S. specified by the holders thereof or,
if no such account is specified, by mailing a check to each such holder's
registered address. Similar provisions apply with respect to the euro exchange
notes.
Change of control
Upon the occurrence of certain events, each holder shall have the right
to require that we repurchase its exchange notes at a purchase price in cash
equal to 101% of the principal amount and, in the case of the senior discount
exchange notes due 2010, 101% of the accreted value, in each case as of the date
of purchase, plus in each case accrued and unpaid interest, if any, to the date
of purchase. This right is subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date.
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Certain covenants
The indentures governing the exchange notes 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 with respect
to the exchange notes:
o a default in the payment of interest on the notes of any
series when due, continued for 30 days;
o a default in the payment of principal of any note of any
series 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 any judgment or decree for the payment of money in excess of
$25.0 million is entered against us or to certain of our
subsidiaries, remains outstanding for a
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period of 60 consecutive days following such judgment and is
not discharged, waived or stayed;
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 $25.0 million (the "cross acceleration
provision");
o the failure by us to comply for 60 days after notice with our
other agreements contained in the applicable indenture; or
o the failure by us to comply for 30 days after notice with any
of our obligations with respect to change of control events
(other than a failure to purchase the exchange notes) or with
respect to various other covenants.
However, a default under the last three clauses will not constitute an event of
default until the applicable trustee or the holders of 25% in principal amount
of the outstanding exchange notes of the applicable series notify us of the
default and we do not cure the default within the time specified after receipt
of such notice.
If an event of default occurs and is continuing, the applicable trustee
or the holders of at least 25% in principal amount of the outstanding exchange
notes of the applicable series may declare the principal or accreted value of
and accrued but unpaid interest on all the applicable notes to be due and
payable. Upon such a declaration, the default amount shall be due and payable
immediately. If an event of default relating to certain events of bankruptcy,
insolvency or reorganization of us occurs and is continuing, the amount due on
all the applicable exchange notes will ipso facto become and be immediately due
and payable without any declaration or other act on the part of the applicable
trustee or any holders of such notes. Under certain circumstances, the holders
of a majority in principal amount of any series of outstanding exchange notes
may rescind any such acceleration with respect to such notes and its
consequences.
Amendments and waivers
Subject to certain exceptions, each indenture may be amended with the
consent of the holders of a majority in principal amount of the applicable
exchange notes then outstanding (including consents obtained in connection with
a tender offer or exchange for such notes) and any past default or compliance
with any provisions may also be waived with the consent of the holders of a
majority in principal amount of such notes then outstanding. However, without
the consent of each holder of an outstanding exchange note affected thereby, an
amendment may not, among other things:
o reduce the amount of notes whose holders must consent to an
amendment;
o reduce the rate of or extend the time for payment of interest
on any note;
o reduce the principal or accreted value of or extend the stated
maturity of any note;
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o reduce the amount payable upon the redemption of any note or
change the time at which any note may be redeemed as described
under "--Optional redemption";
o make any note payable in money other than that stated in the
note;
o impair the right of any holder of the notes to receive payment
of principal of and interest on such holder's notes on or
after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such holder's
notes;
o make any change in the amendment provisions which require each
holder's consent or in the waiver provisions; or
o make any change in the ranking or priority of any note that
would adversely affect the noteholders.
Notwithstanding the preceding, without the consent of any holder of the
notes of a series, we and relevant trustee may amend the indenture governing
that series:
o to cure any ambiguity, omission, defect or inconsistency;
o to provide for the assumption by a successor corporation of
our obligations under such indenture;
o to provide for uncertificated notes in addition to or in place
of certificated notes (provided that the uncertificated notes
are issued in registered form for purposes of Section 163(f)
of the Code, or in a manner such that the uncertificated notes
are described in Section 163(f)(2)(B) of the Code);
o to add guarantees with respect to the related notes or to
secure such notes;
o to add to our covenants for the benefit of the holders of such
notes or to surrender any right or power conferred upon us;
o to make any change that does not adversely affect the rights
of any holder of such notes; or
o to comply with any requirement of the SEC in connection with
the qualification of such indenture under the Trust Indenture
Act.
The consent of the holders of exchange notes is not necessary under an
indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under an indenture becomes effective, we are
required to mail to holders of the related exchange notes a notice briefly
describing the amendment. However, the
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failure to give notice to all holders of the notes, or any defect, will not
impair or affect the validity of the amendment.
Transfer
The exchange notes will be issued in registered form and will be
transferable only upon the surrender of the outstanding notes being transferred
for registration. We may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
Defeasance
At any time, we may terminate all our obligations under a series of
exchange notes and the related indenture, except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of such notes, to replace mutilated, destroyed, lost or
stolen exchange notes and to maintain a registrar and paying agent in respect of
the exchange notes.
In addition, at any time we may, with respect to a series of exchange
notes, terminate our obligations that are described under "--Change of control"
and under the covenants described under "--Certain covenants" (other than the
covenant relating to mergers and consolidations, the operation of certain cross
acceleration provisions, bankruptcy provisions with respect to us and certain of
our subsidiaries and certain judgment default provisions described covenant
defeasance).
We may exercise our right to terminate our obligations under the
exchange notes and related indenture notwithstanding the prior exercise of our
covenant defeasance option. We may exercise either option with respect to one
series of exchange notes without exercising any option with respect to any other
series of exchange notes. If we exercise our right to terminate our obligations
under the exchange notes and related indenture, payment of the applicable
exchange notes may not be accelerated because of an event of default. If we
exercise our covenant defeasance option, payment of the applicable exchange
notes may not be accelerated, in some situations, because of certain events of
default.
In order to exercise either of our defeasance options with respect to a
series of exchange notes, we must irrevocably deposit in trust with the related
trustee, money, U.S. governmental obligations or European governmental
obligations for the payment of principal and interest on such notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to such trustee of an opinion of counsel to the
effect that holders of such notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred. In the case of legal defeasance only, such opinion of counsel must
be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law. Money denominated in currency other than
euros and U.S. governmental obligations deposited pursuant to this paragraph
shall be subject in their entirety, including principal, interest and premium,
if any, to a customary currency agreement that is of a duration
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not less than the defeasance period that fixes the exchange rate of such money
or U.S. governmental obligations into euros for the benefit of the trustee.
The amount of such money and U.S. governmental obligations expressed in
euros will be as provided in such currency agreement. The counterparty to such
currency agreement shall be a commercial bank organized in the United States
having capital and surplus in excess of $500.0 million or a commercial bank
organized under the laws of any country that is a member of the OECD having
total assets in excess of $500.0 million, or its foreign currency equivalent at
the time. Such counterparty may obtain from us an opinion of counsel to the
effect that the currency agreement has been duly authorized and entered into by
us.
Concerning the trustee
United States Trust Company of New York is the trustee under the
applicable indentures. We also have appointed United States Trust Company of New
York as registrar with regard to the exchange notes and paying agent with regard
to the senior exchange notes due 2008 under the senior exchange notes due 2008
indenture, the senior exchange discount notes due 2010 under the senior discount
exchange notes due 2010 indenture and the senior exchange notes due 2010 under
the senior exchange notes due 2010 indenture.
Each indenture contains certain limitations on the rights of the
related trustee, should it become our creditor, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
either eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The holders of a majority in principal amount of the outstanding
exchange notes of each series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
related trustee, subject to certain exceptions. If an event of default under an
indenture occurs and is not cured, the applicable trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, such trustee will be
under no obligation to exercise any of its rights or powers under the related
indenture at the request of any holder of such notes, unless such holder shall
have offered to such trustee security and indemnity satisfactory to it against
any loss, liability or expense and then only to the extent required by the terms
of such indenture.
Paying agent and registrar for the euro exchange notes
With respect to the euro exchange notes, we have appointed Citibank,
N.A. as registrar and principal paying agent in respect of the global
notes. Banque Internationale A Luxembourg S.A. has been appointed paying agent
and transfer agent in Luxembourg in respect of the global notes. We will ensure
that for as long as any euro exchange notes are outstanding, there will always
be a registrar and a paying agent to perform the functions assigned to them in
the related indenture.
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Listing of the euro exchange notes
Application has been made to list the euro exchange notes on the
Luxembourg Stock Exchange. So long as the euro exchange notes are listed on the
Luxembourg Stock Exchange and the rules of such exchange so require, we will
maintain a paying agent and transfer agent in Luxembourg. If the euro exchange
notes are listed on any other securities exchange, we will satisfy any
requirement at such securities exchange as to paying agents.
In connection with the application to list the euro exchange notes on
the Luxembourg Stock Exchange, copies of our by-laws and a legal notice relating
to our issue of the notes will be deposited prior to listing with the Greffier
en Chef du Tribunal d'Arrondissement de et a Luxembourg, where they may be
inspected and copies obtained upon request.
Notices for the euro exchange notes
So long as the euro exchange notes are listed on the Luxembourg Stock
Exchange and it is required by the rules of the Luxembourg Stock Exchange, we
will make publication of notices to the holders of the euro exchange notes in a
leading newspaper having general circulation in Luxembourg or, if such
publication is not practicable, in one other leading daily newspaper with
general circulation in Europe, such newspaper being published on each business
day in morning editions, whether or not it is published in Saturday, Sunday or
holiday editions. For so long as the euro exchange notes are listed on the
Luxembourg Stock Exchange, a copy of all notices will be provided by us to the
Luxembourg Stock Exchange.
Documents available
So long as the euro exchange notes are listed on the Luxembourg Stock
Exchange, copies of the following documents will be available during usual
business hours at the office of Banque Internationale A Luxembourg S.A., 69
route d'Esch, I2953 Luxembourg: (a) the indenture, incorporating the forms of
the notes; and (b) our audited annual financial statements.
No personal liability of directors, officers, employees and stockholders
None of our directors, officers, employees, incorporators or
stockholders will have any liability for any of our obligations under the
exchange notes or the indentures or for any claim based on, in respect of, or by
reason of such obligations or their creation. Each holder of the exchange notes,
by accepting a note, waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the exchange notes. Such
waiver and release may not be effective to waive liabilities under the U.S.
Federal securities laws, and it is the view of the SEC that such a waiver is
against public policy.
Governing law
Each exchange notes indenture and the exchange notes will be governed
by, and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS AND PREFERRED 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.
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.
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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 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.
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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 exchanged for $107.2 million principal amount of senior notes
due 2010 and $313.0 million principal amount at maturity of senior discount
notes due 2010 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.
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 March 31, 2000, we owed
an aggregate of $306.3 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,
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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 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.
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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 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.
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The Series A preferred stock ranks senior to our common stock and
junior to any other series of our outstanding preferred stock. As of March 31,
2000, there were approximately 4,471,000 shares of Series A preferred stock
outstanding.
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;
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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;
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.
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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 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
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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.
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;
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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
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;
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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
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.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. Federal income tax
consequences associated with the ownership and disposition of the exchange
notes.
This discussion deals only with exchange notes held as capital assets
within the meaning of section 1221 of the Internal Revenue Code of 1986, as
amended, and does not deal with special situations, such as those of dealers in
securities or currencies, traders in securities that elect to mark to market,
financial institutions, life insurance companies, tax-exempt organizations,
persons that hold the notes as a hedge or part of a straddle or conversion
transaction, or that have a functional currency other than the U.S. dollar, and
investors in pass-through entities. It does not describe any tax consequences
arising out of the tax laws of any state, local or foreign jurisdiction. This
discussion is based upon the provisions of the Code, and regulations, rulings
and judicial decisions under the Code as of the date of this filing. At any time
and without prior notice, these authorities may be repealed, revoked or modified
so as to result in Federal income tax consequences different from those
discussed below.
For purposes of this discussion, a U.S. holder is:
o a citizen or resident of the United States;
o a corporation or other entity taxable as a corporation created
or organized in or under the laws of the United States or any
political subdivision thereof;
o an estate the income of which is subject to United States
Federal income taxation regardless of its source; or
o a trust, if a U.S. court can exercise primary supervision over
the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the
trust.
The term "Non-U.S. holder" means any person other than a U.S. holder.
If an entity treated as a partnership for U.S. Federal income tax purposes owns
an exchange note, the tax
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treatment of a partner would generally depend upon the status of the partner and
upon the activities of the partnership. Partners of partnerships owning exchange
notes should consult their tax advisors.
You should consult your tax advisor concerning the application of U.S.
Federal income tax laws, as well as the laws of any state, local or foreign
taxing jurisdiction, to your particular situation.
Euro notes and euro exchange notes
Except with respect to the discussion of backup withholding below, the
discussion with respect to euro notes and euro exchange notes is limited to tax
considerations applicable to a holder which is a "U.S. holder."
Exchange offer. The exchange of outstanding euro notes for euro
exchange notes pursuant to the exchange offer should not be a taxable exchange.
Consequently, a U.S. holder should not recognize taxable income or loss as a
result of exchanging an outstanding euro note for a euro exchange note pursuant
to the exchange offer. The holding period of a euro exchange note will include
the holding period of the outstanding euro note and the basis of the euro
exchange note will be the same as the basis of the outstanding euro note
immediately before the exchange.
Payment of interest. Interest on the euro exchange notes will be
taxable to a U.S. holder as ordinary interest income in accordance with the U.S.
holder's method of tax accounting. Such interest will generally be U.S. source
income for purposes of computing the foreign tax credit limitation.
The euro exchange notes will be denominated in a currency unit other
than the U.S. dollar, i.e., in euro (sometimes referred to as the "foreign
currency"). Accordingly, any interest income will be determined in euros and
will be translated into U.S. dollars as follows:
o if the U.S. holder uses the cash method of accounting, the
interest income will be translated at the exchange rate in
effect on the date of receipt of the interest payment;
o if the U.S. holder uses the accrual method of accounting, the
U.S. dollar value of the accrued interest income will be
determined by translating such income at the average rate of
exchange for the accrual period, or with respect to an accrual
period that spans two taxable years, at the average rate for
the partial period within the taxable year; and
o if the U.S. holder uses the accrual method of accounting, it
can elect to translate the accrued interest income using the
rate of exchange on the last day of the accrual period or,
with respect to an accrual period that spans two taxable
years, using the rate of exchange on the last day of the
taxable year. If the last day of an accrual period is within
five business days of the receipt of the accrued income, a
U.S. holder may translate such income using the rate of
exchange on the date of
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receipt of the interest income. This election will apply to
other debt obligations held by the U.S. holder and may not be
changed without the consent of the Internal Revenue Service.
A U.S. holder that uses the accrual method of accounting may recognize
exchange gain or loss (which will be treated as ordinary income or loss)
attributable to fluctuations in exchange rates with respect to accrued interest
income on the date such income is received. The amount of ordinary income or
loss recognized will equal the difference, if any, between:
o the U.S. dollar value of the euro payment received (determined
on the date such payment is received) in respect of such
accrual period; and
o the U.S. dollar value of income that has accrued during such
accrual period (as determined above).
A U.S. holder on the cash basis method of accounting will not recognize
exchange gain or loss with respect to the receipt of interest income.
Sale, exchange or retirement of euro exchange notes. Upon the sale,
exchange or retirement of euro exchange notes, a U.S. holder will generally
recognize gain or loss equal to the difference between:
o the amount realized upon the disposition (as determined
below), other than amounts attributable to accrued interest;
and
o the U.S. holder's adjusted tax basis in the euro exchange
notes (as determined below).
Except with respect to any foreign currency gain or loss (as described
below), such gain or loss will be capital gain or loss. The deductibility of
capital losses is subject to limitations.
The amount realized by a U.S. holder that receives foreign currency
(including euros) on a sale, exchange (other than pursuant to an exchange
offer), retirement or other disposition of a euro exchange note will be based
on:
o the U.S. dollar value of the foreign currency on the date of
disposition in the case of an accrual basis U.S. holder;
o the U.S. dollar value of the foreign currency on the date
payment is received in the case of a cash basis U.S. holder;
or
o the U.S. dollar value of the foreign currency on the date of
settlement if the euro exchange notes are traded on an
established securities market and the holder is a cash basis
U.S. holder. An accrual basis U.S. holder may elect the same
treatment required of cash basis taxpayers with respect to
purchases and sales of publicly traded notes, provided the
election is applied consistently. Any such election cannot be
changed without the consent of the IRS.
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A U.S. holder's adjusted tax basis in a euro exchange note will equal
the U.S. dollar cost of the outstanding euro note (determined on the date of
purchase) to such U.S. holder. If a U.S. holder purchased an outstanding euro
note with previously owned foreign currency, the U.S. holder will recognize
ordinary income or loss in an amount equal to the difference, if any, between
such U.S. holder's tax basis in the foreign currency and the U.S. dollar fair
market value of the foreign currency used to purchase the outstanding euro note,
determined on the date of purchase.
Foreign currency gain or loss upon sale, exchange or retirement of euro
exchange notes. Upon the sale, exchange or retirement of euro exchange notes, a
U.S. holder may recognize foreign currency gain or loss attributable to
fluctuation in currency exchange rates equal to the difference between:
o the U.S. dollar value of the principal amount of the euro
exchange note, determined on the date of such sale, exchange
or retirement (determined on a cash or accrual basis as
described above); and
o the U.S. dollar value of the principal amount of such note,
determined on the date the U.S. holder acquired the
outstanding euro note.
For this purpose, the principal amount of a euro exchange note is the
U.S. holder's purchase or acquisition cost of the outstanding euro note in
euros. Such foreign currency gain or loss will be taxable as ordinary income or
loss and will not be treated as interest income or expense. Such foreign
currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. holder on the sale, exchange or retirement of the euro
exchange note.
U.S. information reporting and backup withholding. Under the Internal
Revenue Code, a holder of euro exchange notes may be subject, under certain
circumstances, to "backup withholding" at a 31% rate with respect to interest
payments thereon or the gross proceeds thereof. This withholding generally
applies only if the holder:
o in the case of a U.S. holder, fails to furnish a correct
social security or other taxpayer identification number within
a reasonable time after the request therefor; or
o in the case of a non-U.S. holder, fails to furnish proper
certification of foreign status.
Any amount withheld from a payment to a holder under backup withholding
rules will be refunded or allowed as a credit against such holder's U.S. federal
income tax liability, provided that the required information is furnished to the
U.S. Internal Revenue Service. Holders of euro exchange notes should consult
their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
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Senior exchange notes due 2008, senior exchange notes due 2010 and senior
discount exchange notes due 2010
Tax considerations for U.S. holders
Exchange offer. The exchange of outstanding senior notes due 2008,
senior notes due 2010 and senior discount notes due 2010 for exchange notes in
the exchange offer should not be a taxable exchange. Consequently, a U.S. holder
should not recognize taxable income or loss as a result of exchanging an
outstanding senior note or an outstanding senior discount note for an exchange
note in the exchange offer. The holding period of an exchange note will include
the holding period of the outstanding notes and the basis of the exchange note
will be the same as the basis of the outstanding notes immediately before the
exchange.
Taxation of interest on senior exchange notes. A U.S. holder of a
senior exchange note due 2008 or a senior exchange note 2010 will be required to
include interest payable on such note as ordinary income at the time the
interest is received or accrues, in accordance with the holder's regular method
of tax accounting.
Characterization of the senior discount exchange notes due 2010. We
intend to treat the senior discount exchange notes due 2010 as debt for U.S.
Federal income tax purposes. However, it is possible that the Internal Revenue
Service will contend that the senior discount exchange notes due 2010 should be
treated as an equity interest in, rather than debt of, Winstar, in which case
the tax consequences to holders owning the senior discount exchange notes due
2010 will be different from those described herein. Holders are urged to consult
their own tax advisors with respect to the possibility that the senior discount
exchange notes due 2010 will be determined to be equity rather than debt, and
the potential consequences of any such determination. The remainder of this
summary assumes that the senior discount exchange notes due 2010 will constitute
debt of Winstar for such tax purposes.
Original issue discount on the senior discount exchange notes due 2010.
Because the "issue price" of the outstanding senior discount notes due 2010 was
less than their "stated redemption price at maturity," the senior discount
exchange notes due 2010 will be treated as issued with OID, and each holder will
be required to include in income (regardless of whether such holder is a cash or
accrual basis taxpayer) in each taxable year, in advance of the receipt of
corresponding cash payments on such notes, that portion of the OID, computed on
a constant yield basis as described below, attributable to each day during such
year on which the holder held the notes. The amount of OID with respect to each
senior discount exchange note is $1,247.60 per $1,000 principal amount of each
senior discount exchange note. This amount of OID was equal to the excess of (i)
$1,737.50, its "stated redemption price at maturity" over (ii) $489.90, its
issue price. Under applicable Treasury Regulations, the stated redemption price
at maturity of each senior discount exchange note includes all payments to be
made in respect thereof, including payments of the principal amount and any
stated interest payments other than payments of "qualified stated interest."
Payments of qualified stated interest are payments of interest which are
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a qualifying rate, including a single fixed rate
over the entire term of a discount note. The stated interest on the senior
discount exchange notes due 2010 will not qualify as "qualified stated
interest", and thus the "stated redemption price at maturity" of the
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senior discount exchange notes due 2010 includes all cash payments of principal
and interest through maturity. The "issue price" of the notes was the first
price at which a substantial portion was sold to investors (excluding bond
houses, brokers, or similar persons acting as underwriters, placement agents, or
wholesalers) for cash.
A holder of a debt instrument issued with OID and that does not pay
qualified stated interest generally is required to include in gross income for
U.S. Federal income tax purposes an amount equal to the sum of the "daily
portions" of such OID for all days during the taxable year on which the holder
holds the debt instrument. The daily portions of OID required to be included in
a holder's gross income in a taxable year will be determined upon a
constant-yield basis by allocating to each day during the taxable year on which
the holder holds the debt instrument a pro-rata portion of the OID on such debt
instrument which is attributable to the "accrual period" in which such day is
included. An accrual period with respect to a senior discount exchange note may
be any length and may vary in length over the term of the senior discount
exchange note as long as (i) no accrual period is longer than one year and (ii)
each scheduled payment of interest or principal on the senior discount exchange
note occurs on either the final or first day of an accrual period. The amount of
the OID attributable to any "accrual period" will be an amount equal to the
product of the "adjusted issue price" of the senior discount exchange note at
the beginning of such accrual period and the "yield to maturity" of the debt
instrument (stated in a manner appropriately taking into account the length of
the accrual period). The "yield to maturity" is the discount rate that, when
used in computing the present value of all payments to be made under the notes,
produces an amount equal to the issue price of the notes. The "adjusted issue
price" of a debt instrument at the beginning of an accrual period is defined
generally as the issue price of a debt instrument plus the aggregate amount of
OID that accrued in all prior accrual periods, less any cash payments on the
debt instrument. The yield to maturity on the senior discount exchange note
compounded semiannually on April 15 and October 15 is 14.75%. Accordingly, a
holder of a senior discount exchange note will be required to include OID in
gross income for U.S. Federal income tax purposes in advance of the receipt of
cash in respect of such income. In general, payments on a senior discount
exchange note issued with OID, will be treated first as a payment of accrued but
previously unpaid OID, to the extent thereof, and then as payment of principal.
A holder's tax basis in the notes will be increased by any amounts of OID
included in income by such holder, and will be decreased by any payments
received by such holder with respect to the notes. The amount of OID allocable
to an initial short accrual period may be computed using any reasonable method
if all other accrual periods, other than a final short accrual period, are of
equal length. The amount of OID allocable to the final accrual period at
maturity of the outstanding senior discount note will be the difference between
(i) the amount payable at maturity of the note, and (ii) the note's adjusted
issue price as of the beginning of the final accrual period.
The senior exchange notes due 2008 and the senior exchange notes due
2010 are not being issued with original issue discount because stated interest
is unconditionally payable in cash semi-annually throughout the life of the
instrument.
Applicable high yield discount obligations. As the yield to maturity on
the senior discount exchange notes due 2010 equals or exceeds the sum of (x) the
AFR (as determined under Section 1274(d) of the Internal Revenue Code) in effect
for the month in which the outstanding senior discount notes due 2010 were
issued and (y) five percent, and the OID on the notes is "significant," the
senior discount exchange notes due 2010 will be considered
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"applicable high yield discount obligations" ("AHYDOs"). (The applicable AFR for
the month of March 2000 is 6.64%.) A debt instrument generally has "significant"
OID if, as of the close of any accrual period ending more than five years after
the date of issue, the excess of the interest (including OID) that has accrued
on the obligation over the interest (including OID) that is required to be paid
thereunder exceeds the product of the issue price of the instrument and its
yield to maturity. As the senior discount exchange notes due 2010 are AHYDOs, we
will not be entitled to a deduction for OID accrued on such notes for U.S.
federal income tax purposes until such time as we actually pay the accrued OID.
In addition, as the yield to maturity on the senior discount exchange notes due
2010 exceeds the sum of (x) the AFR and (y) six percent (such excess referred to
as the "disqualified yield"), the deduction for OID accrued on the senior
discount exchange notes due 2010 will be permanently disallowed to the extent
such OID is attributable to disqualified yield on the notes
("dividend-equivalent interest"). Solely for purposes of the dividends-received
deduction (and not for purposes of determining the amount includible in income),
such dividend-equivalent interest will be treated as a dividend to the extent it
is deemed to have been paid out of our current or accumulated earnings and
profits, if any. We believe that we do not presently have any current or
accumulated earnings and profits and we cannot predict whether we will have any
earnings and profits for future years. As such, in any year in which we have no
earnings and profits, the nondeductible portion of such OID relating to such
year would not be eligible for the dividends-received deduction in the case of
corporate holders.
Acquisition premium on senior discount exchange notes due 2010. If a
U.S. holder acquired an outstanding senior discount note at a cost in excess of
its "adjusted issue price" (as defined above) but less than its stated
redemption price at maturity, the senior discount exchange note will have an
acquisition premium to the extent of such excess. Under the acquisition premium
rules of the Code and the Treasury Regulations promulgated thereunder, the
amount of the original issue discount which such U.S. holder must include in its
gross income with respect to such senior discount exchange note for any taxable
year will be reduced by the portion of such acquisition premium properly
allocable to such year.
Market discount. If a U.S. holder purchased an outstanding note for an
amount that is less than the "revised issue price" of the notes at the time of
acquisition, the amount of such difference will be treated as "market discount"
for U.S. federal income tax purposes, unless such difference is less than a
specified de minimis amount ("de minimis market discount"). The "revised issue
price" is the original issue price of the note plus the aggregate amount of
previously accrued original issue discount (in the case of a senior discount
exchange note), without regard to any reductions for acquisition premium, less
payments other than qualified stated interest. Under the market discount rules,
a holder will be required to treat any principal payment on or any gain on the
sale, exchange, retirement or other disposition of, notes as ordinary income to
the extent of the market discount which has not previously been included in
income and is treated as having accrued on such notes at the time of such
payment or disposition. If a holder makes a gift of a note, accrued market
discount, if any, will be recognized as if such holder had sold such note for a
price equal to its fair market value. In addition, the holder may be required to
defer, until the maturity of the notes or the earlier disposition of the notes
in a taxable transaction, the deduction of a portion of the interest expense on
any indebtedness incurred or continued to purchase or carry such notes.
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Any market discount will be considered to accrue on a straight-line
basis during the period from the date of acquisition to the maturity date of the
notes, unless a holder elects to accrue market discount on a constant interest
method. A holder of notes may elect to include market discount in income
currently as it accrues (on either a straight-line basis or constant interest
method), in which the case rules described above regarding the deferral of
interest deductions and ordinary income treatment of gain on disposition will
not apply. This election to include market discount in income currently, once
made, applies to all market discount obligations acquired on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
Amortized bond premium on senior exchange notes due 2008 and 2010.
Generally, if the tax basis of a senior exchange note due 2008 or a senior
exchange note due 2010 (generally, the purchase price of the outstanding note
delivered in exchange therefore) held as a capital asset exceeds the amount
payable at maturity of the obligation, such excess will constitute amortizable
bond premium that the holder may elect, under Section 171 of the Code, to
amortize under the constant yield method over the period from its acquisition
date to the obligation's maturity date. A holder of a senior exchange note due
2008 or senior exchange note due 2010 who elects to amortize bond premium must
reduce its tax basis in the related senior exchange note by the amount of the
aggregate amortization allowable for amortizable bond premium. Amortizable bond
premium will be treated under the Internal Revenue Code as an offset to interest
income on the senior exchange note due 2008 or a senior exchange note due 2010
for U.S. federal income tax purposes. An election to amortize bond premium on a
senior exchange note due 2008 or a senior exchange note due 2010 generally
applies to all bonds held by the holder at the beginning of the first taxable
year to which the election applies or thereafter acquired, and may not be
revoked without the consent of the Internal Revenue Service.
Gain/loss on exchange of senior subordinated deferred interest notes
due 2007. U.S. holders of senior subordinated deferred interest notes due 2007
who exchange them for senior exchange notes due 2010 and senior discount
exchange notes due 2010 will recognize short-term gain or loss to the extent of
the difference between the fair market value of such exchange notes received by
them on the date of the exchange and the adjusted basis of their senior
subordinated deferred interest notes due 2007 relinquished in the exchange.
Elections. A U.S. holder of exchange notes, subject to certain
limitations, may elect to include all stated and unstated interest and discount
on the notes in gross income under the constant yield method. For this purpose,
interest includes original issue discount, de minimis market discount and market
discount, as adjusted by any amortizable bond premium or acquisition premium.
Any such election, if made in respect of a market discount bond, will constitute
an election to include market discount in income currently on all market
discount bonds acquired by such U.S. holder on or after the first day of the
first taxable year to which the election applies. See "--Market Discount." U.S.
holders should consult with their tax advisors regarding any tax elections they
intend to make with respect to any exchange notes.
Optional redemptions. We may redeem the senior discount exchange notes
due 2010, in whole or in part, at certain times and under certain circumstances
described elsewhere herein. The Treasury Regulations issued under the provisions
of the Internal Revenue Code relating to OID contain rules for determining the
yield and maturity of debt instruments that are subject to certain options or
other contingent payments. Pursuant to those regulations, we believe that
neither we nor any holders of senior discount exchange notes due 2010 should be
deemed to exercise any of the options described in this registration statement,
and thus, the existence of these options should not affect the calculation of
the yield and maturity of the senior discount exchange notes due 2010.
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Sale or other disposition. In general, upon the sale, exchange or other
disposition (including a redemption) of an exchange note, a U.S. holder will
recognize taxable gain or loss equal to the difference between (i) the amount of
cash proceeds and the fair market value of any property received (other than any
amount representing accrued but unpaid qualified stated interest or OID, which
will be taxable as ordinary income), and (ii) the holder's adjusted tax basis in
the exchange note.
Except with respect to accrued market discount on the exchange notes,
if any, as described above, gain or loss realized on the sale, exchange or other
disposition of an exchange note will be capital gain or loss, and will be
long-term capital gain or loss if the exchange note is held for more than one
year, or short-term capital gain or loss if the exchange note is held for one
year or less.
Tax considerations for Non-U.S. holders
Payments of Interest. Interest that we pay on the senior exchange note
due 2008 or a senior exchange note due 2010 and payments of OID we make on the
senior discount exchange notes due 2010 to a beneficial owner of an exchange
note that is a Non-U.S. holder will qualify for the "portfolio interest"
exemption and therefore will not be subject to U.S. federal income or
withholding tax if such interest or OID is not effectively connected with the
conduct of a trade or business within the United States by such Non-U.S. holder
and, among other things, (i) such Non-U.S. holder does not own, actually or
constructively, 10% or more of the total combined voting power of all classes of
our stock entitled to vote, within the meaning of Section 871(h)(3) of the
Internal Revenue Code, (ii) such Non-U.S. holder is not a controlled foreign
corporation that is related, directly or indirectly, to Winstar through stock
ownership, (iii) such Non-U.S. Holder is not a bank receiving interest described
in Section 881(c)(3)(A) of the Internal Revenue Code, and (iv) the certification
requirements under Section 871(h) or Section 881(c) of the Internal Revenue Code
and the Treasury Regulations thereunder (summarized below) are satisfied.
Interest or OID on an exchange note that is not effectively connected
with the Non-U.S. holder's conduct of a trade or business within the United
States and does not qualify as portfolio interest, would generally be subject to
United States withholding tax at a flat rate of 30% (or a lower applicable
treaty rate). If interest or OID received by a Non-U.S. holder is effectively
connected with the conduct of a trade or business within the United States, then
the Non-U.S. holder will be subject to U.S. Federal income tax on such interest
income in essentially the same manner as a U.S. holder and, in the case of a
Non-U.S. holder that is a foreign corporation, may also be subject to the branch
profits tax.
Sale, exchange, or disposition. A Non-U.S. holder generally will not be
subject to U.S. federal income tax with respect to gain realized on a sale,
redemption or other disposition of an exchange note (other than amounts
attributable to accrued but unpaid OID on the senior discount exchange notes due
2010, which may be subject to the rules regarding OID described above) unless
(i) the gain is effectively connected with the conduct of a trade or business
within the United States by the Non-U.S. holder or, if certain tax treaties
apply, is attributable to a U.S. permanent establishment maintained by the
Non-U.S. holder, (ii) in the case of a Non-U.S. holder who is a nonresident
alien individual, such holder is present in the United States for 183
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or more days in the taxable year and certain other requirements are met, or
(iii) the Non-U.S. Holder is subject to Internal Revenue Code provisions
applicable to certain U.S. expatriates.
Certification requirements. To satisfy the certification requirements
noted above, (i) the beneficial owner of an exchange note must certify, under
penalties of perjury, to us or our paying agent that the owner is a Non-U.S.
holder and must provide the owner's name and address, and U.S. taxpayer
identification number ("TIN"), if any, which certification may be made on IRS
Form W-8BEN, or (ii) a securities clearing organization, bank or other financial
institution that holds customer securities in the ordinary course of its trade
or business (a "Financial Institution") and holds the exchange note on behalf of
the beneficial owner must certify, under penalties of perjury, to us or our
paying agent that such certificate has been received from the beneficial owner
and must furnish the payor with a copy thereof.
For payments made after December 31, 2000, in the case of exchange
notes held by a foreign partnership that is not a withholding foreign
partnership, the partnership, in addition to providing an IRS Form W-8IMY, must
attach an IRS Form W-8BEN received from each partner.
If a Non-U.S. holder of an exchange note is engaged in a trade or
business in the U.S., and if interest, including OID, on the senior discount
exchange note, or gain realized on the sale, exchange or other disposition of
the exchange note is effectively connected with the conduct of the trade or
business (or, if a tax treaty applies, is attributable to a U.S. permanent
establishment maintained by the Non-U.S. holder), the Non-U.S. holder, although
exempt from U.S. federal withholding tax (provided that certification
requirements are met), will generally be subject to regular U.S. federal income
tax on the interest, including OID, or gain in the same manner as if it were a
U.S. holder. In lieu of the certificate described above (with respect to
non-effectively connected interest), the Non-U.S. holder will be required to
provide us or our paying agent with a properly executed IRS Form 4224 (or, after
December 31, 2000, a Form W-8ECI) in order to claim an exemption from
withholding tax. In addition, if the Non-U.S. holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30% (or such lower rate
provided by an applicable treaty) on its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
Non-U.S. holders should consult with their tax advisors regarding U.S.
and foreign tax consequences with respect to the ownership and disposition of
exchange notes.
Backup withholding and information reporting
Backup withholding at a rate of 31% may apply to payments made in
respect of, and gross proceeds from the sale, exchange or disposition of, an
exchange note to a holder who is not an "exempt recipient" and who fails to
provide certain identifying information (such as the holder's TIN) in the manner
required. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities are exempt recipients. Payments made in respect of an
exchange note must be reported to the Internal Revenue Service, unless the
holder is an exempt recipient or otherwise establishes an exemption.
In the case of payments to a Non-U.S. holder of interest on an exchange
note, backup withholding and information reporting will not apply if the
Non-U.S. holder furnishes a
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certificate of foreign status on IRS Form W-8BEN, W-8ECI or W-8IMY or otherwise
establishes an exemption (provided that neither we nor our paying agent has
actual knowledge, or after December 31, 2000, reason to know, that the holder is
a U.S. holder or that the conditions of any other exemption are not in fact
satisfied).
In general, backup withholding and information reporting will not apply
to a payment of the gross proceeds of a sale of exchange notes effected at a
foreign office of a broker. However, payments of the proceeds of a sale of an
exchange note to or through a foreign office of a broker that is (i) a U.S.
person, (ii) a controlled foreign corporation, (iii) a foreign person 50% or
more of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment was effectively
connected with the conduct of a trade or business within the U.S. or (iv) with
respect to payments made after December 31, 2000, a foreign partnership with
certain connections to the U.S., are currently subject to certain information
reporting requirements, but not back-up withholding, unless the payee is an
exempt recipient or the broker has evidence in its records that the payee is a
Non-U.S. holder and no actual knowledge or, after December 31, 2000, reason to
know that such evidence is false and certain other conditions are met. Payments
of the proceeds of a sale of an exchange note to or through the U.S. office of a
broker will be subject to information reporting and backup withholding unless
the payee certifies under penalties of perjury as to his or her status as a Non-
U.S. holder and satisfies certain other qualifications (and no agent or broker
who is responsible for receiving or reviewing such statement has actual
knowledge or, after December 31, 2000, reason to know that it is incorrect) and
provides his or her name and address or the payee otherwise establishes an
exemption.
Non-U.S. holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations the availability of an exemption therefrom, and the procedure for
obtaining such an exemption, if available. Backup withholding is not an
additional tax. Any amounts withheld under the backup withholding rules from a
payment to a holder of an exchange note will be allowed as a refund or credit
against the holder's U.S. Federal income tax, if the required information is
furnished to the Internal Revenue Service.
THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY
AND DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO A PARTICULAR HOLDER OF EXCHANGE NOTES IN LIGHT OF ITS
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. ACCORDINGLY, EACH HOLDER OF
THE EXCHANGE NOTES SHOULD CONSULT WITH ITS OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES TO SUCH HOLDER FROM THE EXCHANGE OF OUTSTANDING NOTES AND
OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
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CERTAIN LUXEMBOURG TAX CONSIDERATIONS
FOR EURO EXCHANGE NOTES
The information set out below is a summary only of Luxembourg tax laws
in effect on the date hereof and which may change from time to time. Because the
summary does not address all tax considerations, under Luxembourg or other laws,
prospective investors should consult their professional advisors as to the tax
consequences of the exchange, ownership and disposition of the euro exchange
notes, including in particular the effect of tax laws of any other jurisdiction.
The following summary outlines certain Luxembourg tax consequences for
holders of euro exchange notes.
Participation in the exchange offer should not give rise to recognition
of any gain or income for Luxembourg tax purposes.
Under Luxembourg tax laws currently in effect, there is no withholding
tax on payment of principal, interest, nor on accrued but unpaid interest in
respect of the euro exchange notes, nor is any Luxembourg withholding tax
payable upon the redemption, repurchase or exchange of the euro exchange notes.
Holders of euro exchange notes who are non-residents of Luxembourg and who do
not hold euro exchange notes through a permanent establishment in Luxembourg are
not liable for Luxembourg income tax on payments of principal, interest, or
accrued but unpaid interest, nor upon redemption, repurchase or exchange of the
euro exchange notes, nor on capital gains on sale of any euro exchange notes.
Holders of euro exchange notes resident in Luxembourg who are fully
taxable, or who have a permanent establishment in Luxembourg with whom the
holding of the euro exchange notes is connected, must for income tax purposes
include any interest received in their taxable income.
Individual holders of euro exchange notes residing in Luxembourg who
are fully taxable are not subject to taxation on capital gains upon the disposal
of euro exchange notes unless the disposal of notes precedes the acquisition
thereof or the euro exchange notes are disposed of within six months of the date
of acquisition thereof. Upon a sale, repurchase or redemption of euro exchange
notes, individual holders of euro exchange notes residing in Luxembourg who are
fully taxable will, however, need to include the portion of the purchase,
repurchase or redemption price corresponding to accrued but unpaid interest in
their taxable income.
A corporate entity, or societes de capitaux, which is a Luxembourg
resident which is fully taxable or which has a permanent establishment in
Luxembourg and holds euro exchange notes will need to include in its taxable
income the difference between the purchase, repurchase or redemption price
(including accrued but unpaid interest) and the lower of cost or book value of
the euro exchange notes sold, repurchased or redeemed. Such holders should not
be liable for any Luxembourg income tax on payment of principal, on exchange nor
upon redemption of euro exchange notes.
No stamp, value added, issue, registration, transfer or similar taxes
or duties will be payable in Luxembourg by the holders of the euro exchange
notes as a consequence of the
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exchange of the notes, nor will any such tax be payable as a consequence of a
subsequent transfer or redemption of the euro exchange notes.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by
Graubard Mollen & Miller, New York, New York.
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.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 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;
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o Quarterly Report on Form 10-Q filed May 15, 2000;
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; and
o The descripton 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 as at Winstar Communications, Inc., 685 Third Avenue, New York, New
York, 10017, Attention: Investor Relations, 212/792-9800.
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<PAGE>
The exchange agents for the exchange offer are:
For all notes other than the euro notes:
United States Trust Company of New York
<TABLE>
<CAPTION>
By Registered or Certified Mail: By Overnight Courier and By Hand By Hand Delivery to 4:30 p.m.:
Delivery after 4:30 p.m. on
Expiration Date:
<S> <C> <C>
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
P.O. Box 112 30 Broad Street, 14th Floor 30 Broad Street, B-Level
Bowling Green Station New York, New York 10004-2304 New York, New York 10004-2304
New York, New York 10274-0112 Attn: Corporate Trust Operations Attn: Corporate Trust Services
Department
</TABLE>
By Facsimile
(for eligible institutions only):
(212) 422-0183 or (646) 458-8104
Confirm by Telephone:
(800) 543-6565
For the euro notes:
Citibank, N.A.
Registered, Certified or Regular Mail By Facsimile
and By Hand Delivery: (Reference: Winstar Communications
Exchange Offer):
Citibank, N.A. Citibank, N.A,
5 Carmelite Street +44-20-7508-3867
London Confirm by Telephone +44-20-7508-3894
EC4YOPA
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