SPEEDUS COM INC, 10-K, 1999-03-31

SPEEDUS COM INC
10-K, 1999-03-31
CABLE & OTHER PAY TELEVISION SERVICES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998 Commission File No. 000-27582

SPEEDUS.COM, INC.
(Exact name of Registrant as specified in its charter)

Delaware 13-3853788
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

140 58th Street, Suite 7E, Brooklyn, NY 11220
(Address of Principal Executive Offices)

(718) 567-4300
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act: Common Stock, par
value $.01 per share

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|

The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant was $22,905,649 on March 29, 1999, based on
the closing trade price of the Common Stock on the NASDAQ National Market system
on that date.

The number of shares of Common Stock outstanding as of March 29, 1999 was
17,157,357.

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DOCUMENTS INCORPORATED BY REFERENCE

Sections of the Registrant's Definitive Proxy Statement (as defined in Part III
herein) for its Annual Meeting of Stockholders scheduled to be held in May 1999.

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SPEEDUS.COM, INC.

TABLE OF CONTENTS

PART I

Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders

PART II

Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6 Selected Consolidated Financial Data
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8 Consolidated Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

PART III

Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management
Item 13 Certain Relationships and Related Transactions

PART IV

Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K

This Form 10-K contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). These statements appear in a number of
places in this Form 10-K and include statements regarding the intent, belief or
current expectations of the Company or its officers with respect to, among other
things, the ability of the Company to make capital expenditures, the ability to
incur additional debt, as necessary, to service and repay such debt, if any, as
well as other factors that may effect the Company's financial condition or
results of operations. Forward-looking statements may include, but are not
limited to, projections of revenues, income or losses, capital expenditures,
plans for future operations, financing needs or plans, compliance with covenants
in loan agreements, plans for liquidation or sale of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events, and the ability to obtain additional financing,
including the Company's ability to meet obligations as they become due, and
other pending and possible litigation, as well as assumptions relating to the
foregoing. All statements in this Form 10-K regarding industry prospects and the
Company's financial position are forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct. The
Company undertakes no obligation to publicly release the result of any revisions
to these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

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PART I

ITEM 1. BUSINESS

The Company

SPEEDUS.COM owns and operates an Internet broadcast system in New York
City capable of delivering data to customers at extraordinarily high speeds.
While T-1 lines are generally regarded as very high speed connections, suitable
for large enterprises, our SPEED service is 31 times faster downstream. These
data rates can transform the quality of the Internet transmissions from a
text-and-still-graphics environment to entertainment-quality experience, on a
full screen with full-motion video and audio. We are working with content
providers to offer programming uniquely supported by its network, as well as
traditional Internet access. SPEEDUS.COM also provides standard direct dial-up
and ISDN service (which is required as a backchannel for two-way Internet
service) and offers web site hosting and e-mail service.

The heart of THE SPEEDUS.COM Internet Broadband Broadcast System is its
local multipoint distribution service (LMDS) license from the FCC, which covers
a territory where 8.6 million people live or work. While our signals cannot be
received at all locations within our licensed area, we believe that where our
signals penetrate, we offer both business and residential customers the
lowest-cost, highest downstream speed Internet access solution available. We
currently have the right to use 450 MHz of spectrum (300 on a permanent basis
and an additional 150 until the first satellite system using these frequencies
is launched).

Our Network Operations Center (NOC), located at the Brooklyn Army
Terminal, supports traditional high-speed Internet services, and can serve
future content-provider venture partners through its data center, which is
capable of digitizing video feeds from any source for Internet transmission. The
NOC is connected to our satellite downlink facility and dedicated fiber network,
giving us access to media sources from all over the world.

The NOC is connected both to the Internet and to our fourteen Internet
Broadcast Stations by dedicated T-1 lines, dedicated fiber network and microwave
relay distribution backbone. Customers receive super high-speed downstream data
through six-inch square roof or window mounted antennas, and send data through
dial-up or ISDN modems to our Manhattan facility, which houses our receive
modems and where Internet subscribers dialup calls are received and processed
for service.

High Speed Internet Marketplace

SPEEDUS.COM operates in New York City, a concentrated population center in
which the Company believes there is substantial unmet demand for high-speed
Internet service. In this marketplace, neither Digital Subscriber Line (DSL)
service (which runs high-speed data over existing copper phone wires) nor cable
modem service (which run high speed data over existing cable television cables)
are currently widely available. The Company's high-capacity Internet system has
faster downstream data rates than these technologies, and is a rapidly
deployable, economical solution. SPEEDUS.COM service will be particularly
attractive to customers whose location permits them to receive signals from an
antenna mounted inside the subscriber's window, which greatly reduces
installation costs and avoids the need for in-building wiring.

Business Strategy

Our Internet Broadband Broadcast System has a vast, untapped potential for
delivering entertainment-quality streaming video over the Internet. Our strategy
is to offer the unique super high-speed capabilities of our system to a select
group of media and Internet portal companies, enabling our customers to benefit
from this potential. We plan to enter into alliances with these content
providers to establish a "broadband boutique" with unique content, accessible in
real time only over our system. Coupled with our present offering of low-cost,
high downstream-speed Internet access, we believe these additional offerings
will make our service a compelling proposition for our customers, and give us
the opportunity to enhance our revenue. By multicasting these offerings
simultaneously to many customers, we plan to make efficient use of our available
spectrum.

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History and FCC License

CVUSA Merger Corporation ("CVUSA Merger"), a wholly-owned subsidiary of
CellularVision USA, Inc. ("CVUS"), was formed in December 1998. In January 1999,
CVUSA Merger was merged into CVUS with CVUS as the surviving corporation. At the
time of merger, CVUS changed its name to SPEEDUS.COM, INC. ("SPEEDUS.COM").

CVUS was formed in October 1995, as described below, to combine the
ownership of CVNY, a limited partnership, and Hye Crest Management, Inc.
("HCM"), the general partner of CVNY and a wholly-owned subsidiary of CVUS. In
July 1996, HCM changed its name to CellularVision Capital Corporation ("CVCC").
In February 1999, CellularVision of New York, L.P. ("CVNY"), by amendment to its
certificate of limited partnership, changed its name to SPEEDUSNY.COM, L.P.
("SPEEDUSNY"). Unless the context requires otherwise, the term Company includes
SPEEDUS.COM, SPEEDUSNY and CVCC.

From 1992 until November 1998, the Company operated a 49-channel analog
subscription television service utilizing 1,300 MHz of spectrum under a LMDS
license from the FCC. The FCC commercial operating license was awarded to the
Company in recognition of its efforts in developing and deploying LMDS
technology, and for spearheading its regulatory approval at the FCC. In
September 1997, the Company's LMDS license was renewed as a standard LMDS
license through February 1, 2006. The Company is entitled to use its spectrum
for a wide variety of fixed wireless purposes, including wireless local loop
telephony, high-speed Internet access and two-way teleconferencing. The
Company's LMDS license entitled it to utilize 1,150 MHz of spectrum in the 28
GHz range covering the New York Primary Metropolitan Statistical Area ("PMSA"),
a region which covers the 5 boroughs of New York City as well as the New York
Counties of Westchester, Rockland, and Putnam. Under FCC rules, the Company has
the right to use an additional 150 MHz of spectrum until the first Ka band
satellite is launched, an event not expected to occur prior to 2002.

In November 1998, as a result of the assignment of 850 MHz of spectrum to
WinStar Communications, Inc. ("WinStar"), the Company discontinued its
subscription television service. The Company is using its 450 MHz FCC license
and infrastructure to deliver super high-speed Internet service in the Metro New
York area.

Risk Factors

New Industry and Technology Risks and Limitations. The Company's system
utilizes a new technology with a limited operating history whose system
architecture remains subject to further development and refinement. In the past,
the Company has experienced a number of technical difficulties, some of

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which have affected subscriber acceptance of the Company's system. Additional
technical issues may arise in the course of system deployment that could
adversely affect signal availability. The Company recently completed
construction on three new Internet Broadcast Stations as part of the Company's
network development plans to provide continuing improvement in signal
availability in its license territory. Increased signal coverage through
additional Internet Broadcast Stations is crucial to widespread availability of
the SPEED service. The Company now has fourteen fully functional Internet
Broadcast Stations in Metro New York, six in Manhattan, six in Brooklyn and two
in Queens.

Two-Way Services will require the development and mass production of
appropriate equipment. There can be no assurance that such equipment will become
commercially available at a cost acceptable to the Company. While a number of
techniques, including digital compression and frequency reuse technologies, can
expand the effective capacity of the Company's system, the Company's capacity to
support high service volumes will ultimately be limited by its total available
bandwidth and limitations of the technology it employs.

Competition. The market for Internet access and related services is highly
competitive. The Company expects to see competition for its super high-speed
Internet access service from local, regional and national ISPs. This includes
large companies like @Home, America On-Line and ATT World Net. The telephone
companies with Digital Subscriber Line technology, cable operators with
high-speed cable modems and other communication providers also provide
high-speed Internet access. These ISPs, however, do not currently have the
ability to provide the same downstream speed as the Company's Speed modem, or to
provide it on a competitive pricing basis.

Many current and prospective competitors have, or can be expected to have,
greater financial, marketing and other resources than the Company. No assurance
can be given that the Company will be able to compete successfully with these
entities.

Risk of Subscriber Acceptance and Service Cancellation. The success of the
Company's business strategy will depend upon consumer acceptance of the
Company's super high-speed Internet access service. Subscriber acceptance could
be adversely affected by, among other things, customer loyalty to more
established competitors and unfamiliarity with the Company's system. In
addition, there can be no assurance that technical problems will not impede or
delay subscriber acceptance of the Company's service.

Limited Operations; Early Stage Company. Although the Company has been in
operation since 1992, its operations to date have been limited to serving only a
portion of its licensed service area, the New York PMSA. Therefore, historical
financial information is reflective of a company in the early growth stage of
its development. Prospective investors should be aware of the difficulties
encountered by enterprises in development, like the Company, especially in view
of the highly competitive nature of the telecommunications industry and in view
of the fact that the Company's Broadband Wireless telecommunications system
previously has been deployed only in a limited area.

Lack of Profitable Operations. The Company has recorded net losses and
negative operating cash flows in each period of its operations since inception
and, at December 31, 1998, had an accumulated deficit of approximately $36.9
million. Such losses and negative operating cash flows are attributable to the
start-up costs incurred in connection with the commercial roll-out of the
Company's system, and expenses incurred in connection with the LMDS rulemaking
proceeding. While the Company believes that consummation of the spectrum
assignment has provided sufficient liquidity to finance its current level of
operations through 1999, it does not expect to have a positive operating cash
flow until such time as it substantially increases its Internet customer base
and/or forms a strategic alliance for use of its Internet capabilities in the
future. There can be no assurance that the Company will be able to increase the
number of its super high-speed Internet access subscribers to the levels
necessary to attain profitability in future years, or that the Company will
succeed in commercializing any other possible applications of the Company's
system.

Liquidity Risk; Need for Additional Financing. Since the completion of the
Company's initial public offering in February 1996, the proceeds of which were
used primarily to fund the build-out of its LMDS transmission system and
marketing and equipment costs, the Company has sought to raise the additional
capital necessary to execute its business plan. During 1998, the Company entered
into several financing arrangements which provided for, or potentially provided
for, the issuance of equity securities at a discount from market prices at

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the time of funding. In November 1998, the Company consummated the assignment of
850 MHz of spectrum to WinStar Communications, Inc. ("WinStar") for $32,500,000,
in cash before closing costs. At the time of closing, the Company repaid
$3,500,000 which it had borrowed from WinStar in July 1998 to meet outstanding
obligations and finance its operations pending the closing. At the time of
closing or shortly thereafter, the Company repaid or repurchased substantially
all of the debt that was outstanding, including convertible debt, and redeemed a
convertible preferred stock issue.

Increased signal coverage through additional Internet Broadband Broadcast
Stations is crucial to widespread availability of the SPEED service. The Company
has the ability to construct four more Internet Broadband Broadcast Stations
from inventory. Thereafter, to the extent that consumer demand in areas of Metro
New York warrants, the Company would have to acquire transmitters, the keystone
to the IBBS. The Company believes that costs may decrease substantially as
improvements in technology create economies.

While the Company believes that consummation of the spectrum assignment
has provided sufficient liquidity to finance its current level of operations
through 1999, it does not expect to have a positive operating cash flow until
such time as it substantially increases its Internet customer base and/or forms
a strategic alliance for use of its Internet capabilities in the future. The
lack of additional capital could have a material adverse effect on the Company's
financial condition, operating results and prospects for growth. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources".

Ability to Manage Growth; Loss of Key Personnel. Successful implementation
of the Company's business plan will require the management of growth. There can
be no assurance that the Company's existing operating and financial controls
systems and infrastructure will be adequate to manage such growth, or that any
steps taken to improve such systems and controls will be sufficient. Since
December 1997, the Company has instituted four series of layoffs as part of its
capital conservation measures. In addition, since January 1, 1998, both the
President and the chief financial officer have left the Company, although the
duties of these individuals have been assumed by other corporate officers. The
Company's future success will depend in part upon attracting and retaining the
services of current management and technical personnel. There can also be no
assurance that the Company will be successful in attracting, assimilating and
retaining new personnel in the future as future growth takes place. The Company
does not maintain "key person" life insurance policies on any of its key
personnel.

Dependence Upon Sole-Source Suppliers; Inability to Obtain Equipment. The
Company has obtained the transmitters and customer premises equipment comprising
the Company's Internet Broadband Broadcast System either from sole-source third
party suppliers or from CellularVision Technology and Telecommunications, L.P.
("CT&T"), which purchases them from third party sole-source suppliers (see
"Business - Risk Factors - Potential Conflicts of Interest; Dependence on
Technology Licensed from CT&T").The Company is now in negotiations to work
directly with vendors. If the Company was unable to obtain a sufficient supply
of components from these sources, it is likely that the Company would experience
a delay in developing alternative sources. Inability to obtain adequate supplies
of equipment could result in a delay in providing service to new subscribers,
which would adversely affect the Company's operating results and could damage
future marketing efforts. In addition, a significant increase in the price of
the requisite equipment would adversely affect the Company's financial condition
and operating results. Further, if any of the equipment fails or fails to be
supported by its vendors, it could be necessary for the Company or CT&T to
redesign substantial portions of such equipment. Any of these events could have
a material adverse effect on the Company's financial condition and operating
results.

Potential Conflicts of Interest;Dependence on Technology Licensed from
CT&T. Shant S. Hovnanian, the Chairman of the Board, President and Chief
Executive Officer of the Company, Vahak S. Hovnanian, a director of the Company,
and Bernard B. Bossard, a director and former officer of the Company,
(collectively, the "Founders") are 80% controlling owners of CT&T. A subsidiary
of Philips Electronics North America Corporation owns the remaining 20% of CT&T.
Although Mr. Hovnanian's employment agreement with the Company provides that he
will devote substantially all of his working time and efforts to the Company's
affairs, pursuant to the agreement, he may devote such working time and efforts
to its affiliates as the due and faithful performance of his obligations under
the agreement permits. CT&T and these individuals are parties to a number of
agreements with the Company, including the CT&T License Agreement and a reserved
channel rights agreement, which may from

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time to time present conflicts of interest with the Company. See "Related Party
Transactions" and "Employment Agreements" in the "Notes to Consolidated
Financial Statements".

In serving in their respective positions with the Company, the Founders
may experience conflicts of interest involving the Company and CT&T. CT&T has
the right to license the know-how and trade secrets to related or unrelated
entities providing services similar to those provided by the Company outside the
New York BTA, for which it may receive a fee. The Company may in the future be
dependent upon CT&T's ability to enhance its current technology and to respond
to emerging industry standards and other technological changes. See "Notes to
Consolidated Financial Statements - Related Party Transactions."

Bell Atlantic Corporation has the right to designate one member of the
Board of Directors. To date, Bell Atlantic has not exercised this right. Bell
Atlantic currently provides Internet access service in the New York metro area
and may in the future provide other services which could compete with those
offered by the Company.

On May 18. 1998, the Company received an offer from Shant S. Hovnanian.
the Company's Chairman and Chief Executive Officer, to convey to the Company all
of the outstanding shares of VisionStar, Inc. ("VisionStar"), a company
wholly-owned by him, together with related patent application rights. VisionStar
holds a license from the FCC, granted in May 1997, to construct, launch and
operate a geostationary Ka-band telecommunications satellite at 113 degrees West
Longitude, a position overlooking the continental United States. According to
the FCC order granting the license, VisionStar proposes to offer interactive
broadband services covering the nation and in urban areas in conjunction with
broadband service operators such as LMDS operators. These broadband services may
include high-speed Internet access, high-speed data services, video
teleconferencing distance learning and video programming. VisionStar proposes to
offer services on a non-common carrier basis

The FCC requires Ks-band licensees to adhere to a strict timetable for
system implementation, including a requirement that construction must be
commenced within one year of licence grant, and that the satellite be launched
and operational within five years of grant. VisionStar has informed the Company
that it has entered into an agreement with a satellite manufacturer for
construction of its satellite. Mr. Hovnanian's offer contemplated reimbursement
by the Company of his verifiable VisionStar-related, out-of-pocket expenses, in
an amount not to exceed $300,000, which would have been payable in the form of a
note due March 31, 1999, or upon the earlier consummation by the Company of a
financing of $10,000,000 or more. The Company, through a special committee of
the Board of Directors, had been considering Mr. Hovnanian's offer. At a meeting
of the Board of Directors on August 19, 1998, the Board declined to accept Mr.
Hovnanian's offer.

Thereafter, the Board and Mr. Hovnanian have had additional discussions
on the Company pursuing this opportunity but there is currently no open offer
and the matter has been tabled.

Risk of Patent Infringement; Intellectual Property Matters. Given the
rapid development of technology in the telecommunications industry, there can be
no assurance that certain aspects of the Company's system will not infringe on
the proprietary rights of others. The Company believes that if such infringement
were to exist based on the establishment of current or future proprietary rights
of others, it could obtain requisite licenses or rights to use such technology.
However, there can be no assurance that such licenses or rights could be
obtained on terms which would not have a material adverse effect on the Company.

Control by Principal Stockholders. The Founders in the aggregate own
approximately 59% of the outstanding Common Stock at December 31, 1998. As a
result, the Founders will have the power to elect all of the members of the
Company's Board of Directors, amend the Company's Certificate of Incorporation
and By-Laws and, subject to certain limitations imposed by applicable law,
effect or preclude fundamental corporate transactions involving the Company,
including the acceptance or rejection of any proposals relating to a merger of
the Company or an acquisition of the Company by another entity, in each case
without the approval of any of the Company's other stockholders. The Founders
are parties to a Stockholders' Agreement, dated as of January 12, 1996 (the
"Stockholders' Agreement"), which provides that the parties thereto will vote to
elect each of the Founders to the Company's Board of Directors, so long as such
Founder owns 5% or more of the shares of Common Stock outstanding on a fully
diluted basis. Bell Atlantic has the right to appoint a Bell Atlantic Nominee to
the Company's Board of Directors, so long as Bell Atlantic holds at least 1% of
the shares of Common Stock outstanding on a fully diluted basis. The parties to
the Stockholders' Agreement have also agreed not to vote to remove any Founder
or the Bell Atlantic Nominee except for "cause" as defined in Section 141 of the
Delaware General Corporation Law ("Delaware Law"). (See "Directors and Executive
Officers of the Registrant.")

Potential Anti-Takeover Effect and Potential Adverse Impact on Market
Price of Certain Charter and Delaware Law Provisions. The Company's Certificate
of Incorporation and By-Laws, and Delaware Law contain certain provisions that
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, control of the
Company. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of Common Stock. Certain of these
provisions allow the Company to issue preferred stock with rights senior to
those of the Common Stock and impose various procedural and other requirements
which could make it more difficult for stockholders to effect certain corporate
actions. The Company could issue a series of Preferred Stock that could,
depending upon the terms of such series, impede a merger, tender offer or other
transaction that some, or a majority, of the Company's stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then current market price of such stock. In
addition, Section 203 of the Delaware Law, which is applicable to the Company,
contains provisions that restrict certain business combinations with interested
stockholders, which may have the effect of inhibiting a non-negotiated tender
offer or other business combination.

Sales and Marketing

The Company is presently offering its super high-speed Internet access
service to business and residential subscribers in Manhattan, Brooklyn and
Queens. The service is being marketed under the service mark SPEED.

The SPEED service requires the purchase and installation of the SPEED
modem. The SPEED modems are currently only available from the Company for $350.
The Company plans to arrange financing for the cost of the SPEED modem to
consumers and to further increase its signal coverage area before commencing a
major marketing campaign. Increased signal coverage through additional Internet
Broadcast Stations is crucial to

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widespread availability of the SPEED service.

The marketing is limited to a pilot roll out and is not expected to
develop into a mass marketing compaign in the immediate future.

The Company participates in a marketing alliance with Bloomberg
Information Television ("Bloomberg"). As part of the agreement, the Company
delivers the Bloomberg programming to the Company's subscribers. In return,
Bloomberg provides marketing support through its sales force and cross promotion
spots and two minutes per hour of advertising time on Bloomberg is made
available to the Company. The Company is currently testing certain services with
Bloomberg and if such tests are successful may amend its agreements to take
advantage of new technological developments.

Year 2000

See Managements Discussion and Analysis of Financial Conditions - Year
2000 Compliance.

Competition

The market for Internet access and related services is highly competitive.
The Company expects to see competition for its super high-speed Internet access
service from local, regional and national ISPs. This includes large companies
like @Home, America On-Line and ATT World Net. The telephone companies with
Digital Subscriber Line technology, cable operators with high-speed cable modems
and other Broadband Wireless communication providers also provide high-speed
Internet access. These ISPs, however, do not currently have the ability to
provide the same downstream speed as the Company's Speed modem, or to provide it
on a competitive pricing basis.

The poor condition of the telephone infrastructure in New York has limited
the growth of ISDN and T-1 access to the Internet. In addition, long lead times
for installation and high prices are typical for the high-end data users. This
is especially true in the outer boroughs where fiber upgrades have been very
slow to occur. There remains a possibility that over time the plant will be
upgraded and the promise of new technologies like XDSL will come true, but today
the market appears to look to the broadband provider as the most likely to
deliver high-speed data in the immediate future.

Equipment and Facilities

The SPEED service is delivered via the Company's state of the art Internet
Broadband Broadcast System. The completed construction to date of the IBBS
infrastructure combines a dedicated fiber optic backbone with microwave relays
delivering high-speed Internet connectivity to fourteen fully functional IBBS
Stations. Six Internet Broadband Broadcast Stations are located in Manhattan,
six are in Brooklyn and two are in Queens.

The NOC has a complete satellite downlink facility with access to
international media sources and a fully equipped data center along with Cisco
7200 hardware and New Media Communication CyberStream(TM) TRX100 Linux based
gateway transmitter hardware and software. The CyberStream hardware and software
is compliant with Digital Video Broadcast Multi-Protocol Encapsulation (DVB/MPE)
and Motion Picture Experts Group (MPEG) standards. SPEEDUS.COM is capable of
delivering live video streaming at up to 30 frames per second over its Internet
network.

In addition to the NOC, the Company has also completed the construction of
a Manhattan point of presence ("POP"). The POP houses dial-up modems that
support the Company's Internet access services.

The principal physical assets incorporated in the Company's system consist
of headend equipment, 28GHz transmitters, fiber optic transmitters and
receivers, repeaters and customer premise equipment (antennas and the SPEED
modem), as well as office space.

Internet access is obtained through dedicated T-1 lines connecting the NOC
to the Internet "backbone."

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Signals from the NOC are then transmitted via fiber optic cable to Internet
Broadcast Stations. Signal is distributed by the Company's fourteen Internet
Broadcast Stations, six in Manhattan, six in Brooklyn and two in Queens,
although the availability of signal in particular localities varies depending
upon a number of factors. Increased signal coverage through additional Internet
Broadcast Stations is crucial to widespread availability of the SPEED service.

The signal is received at the subscriber's premises by a small flat plate,
high-gain antenna positioned in or outside the window or roof, wherever signal
level is adequate. A co-axial cable connects the antenna to a super high-speed
SPEED modem. The subscriber's system requires an existing modem to maintain the
upstream connection. The two modems work together. The SPEED modem handles the
downstream data and the subscriber's existing modem handles the upstream request
for files.

The Company has obtained its transmitters and customer premises equipment
either from sole-source third party suppliers or from CT&T, which has also
obtained them from sole-source third party suppliers. The Company is now in
negotiations to work directly with vendors.

ITEM 2. PROPERTIES

The Company leases 20,000 square feet of space at the Brooklyn Army
Terminal for its NOC, as well as, executive and administrative offices. This
lease expires in 2004 and provides for 2 five-year renewal options.

The Company also leases approximately 100 square feet of space on each of
15 rooftops for its Internet Broadcast Stations and relays. These leases,
several of which contain seven-year renewal options, expire from 1999 to 2003.
The Company believes that leased space on rooftops in New York City and other
locations in the New York PMSA will be readily available to serve as additional
Internet Broadcast Stations.

ITEM 3. LEGAL PROCEEDINGS

(a) On June 30, 1998, Charles N. Garber, the Company's former Chief
Financial Officer, filed a demand for arbitration with the American Arbitration
Association. Mr. Garber has asserted that his employment agreement was breached
by the Company's failure to pay him guaranteed minimum annual performance
bonuses and certain other matters. In his claim, Mr. Garber seeks damages in an
amount estimated to total $488,000, plus his costs and reasonable attorney's
fees. The Company believes it has substantial defenses to the claims made as
well as a viable counterclaim but cannot make a determination at this time as to
the possible outcome of the action. In the event an adverse judgment is
rendered, the effect could be material to the Company's financial position and
it could have a material effect on operating results in the period in which the
matter is resolved.

(b) On August 27, 1998, M/A-COM, a division of AMP Incorporated, commenced
an arbitration proceeding ("the Arbitration") against the Company and certain
other parties (together, the "Respondents") in Boston, Massachussetts. The claim
alleges that the Respondents have breached their contractual obligations to
purchase certain receiver/antenna assemblies and to pay for approximately
$600,000 worth of receiver/antenna assemblies that were ordered and accepted by
the Respondents. M/A-COM claims to have suffered direct and consequential
damages as a result of such breaches estimated to be in excess of $7,000,000. On
September 3,1998, the Supreme Court of the State of New York (the "New York
Court") issued an order to show cause for order of attachment and temporary
restraining order (the "Order") in response to a Verified Petition of M/A-COM,
which demanded the entry of an order directing the Sheriff of the City of New
York or the Sheriff of any County in the State of New York to seize and attach
any and all property of certain Respondents, including the Company (the "Order
Respondents"), sufficient to satisfy the $7,000,000 amount of M/A-COM's
Arbitration claim ("M/A-COM's Motion"). The Order required the Order Respondents
to appear before the New York Court on September 11, 1998 to show cause why
M/A-COM's Motion should not be granted. In addition, as part of the Order, the
New York Court issued a temporary restraining order enjoining the Order
Respondents and all other persons from transferring or paying any assets of the
Order Respondents pending the New York Court's ruling on M/A-COM's Motion. On
September 11, 1998, the Company filed papers with the New York Court opposing
M/A-COM's Motion and requesting that the New York Court vacate the temporary
restraining order.

On October 2, 1998, the Company made a motion in United States District
Court in New Jersey (the "New Jersey Court") requesting a preliminary injunction
to enjoin the Arbitration against all Respondents, other than CT&T on the ground
that CT&T is the only party to the arbitration agreement with M/A-COM ("the New
Jersey Action"). On November 17, 1998, M/A-COM filed an answer and counterclaims
in the New Jersey Action. On December 18, 1998, the New Jersey Court issued an
order that CT&T is the only proper party to the Arbitration

9
<PAGE>

and permanently enjoined M/A-COM from proceeding in the Arbitration against any
of the Respondents other than CT&T.

M/A-COM filed an amended counterclaim in the New Jersey Action on December
21, 1998 whereby M/A-COM seeks to hold the Company, SPEEDUSNY and certain other
parties (together the "Counterclaim Defendants") liable for any judgment entered
against CT&T in the Arbitration. M/A-COM bases its claim against the Company and
SPEEDUSNY on breach of contract; quantum meruit/implied contract; goods sold and
delivered; third party beneficiary; and piercing the corporate veil of CT&T.
M/A-COM seeks to hold the other Counterclaim Defendants liable for any judgment
against CT&T in the Arbitration on similar grounds. The Counterclaim Defendants
filed a reply to the amended counterclaims on January 11, 1999 and asserted the
following defenses: failure to state a claim, promissory and equitable estoppel,
the absence of any agreement with M/A-COM and failure to perform under the
agreement which it seeks to enforce.

The Company intends to defend vigorously its position that neither the
Company nor SPEEDUSNY is responsible to M/A-COM for any judgment that may be
entered against CT&T in the Arbitration. The Arbitration is currently scheduled
to commence on March 30, 1999. The New Jersey Action will not be scheduled for
trial until sometime in 2000, at the earliest. The Company cannot make a
determination at this time as to the possible outcome of the Arbitration or the
New Jersey Action. In the event an adverse judgment is rendered, the effect
could be material to the Company's financial position and it could have a
material effect on operating results in the period in which the matter is
resolved.

(c) On November 20, 1998, Akcess commenced an action in the United States
District Court Southern District of New York against the Company, SPEEDUSNY, and
Shant S. Hovnanian, the Company's Chairman and Chief Executive Officer, as well
as WinStar and WinStar Wireless Fiber Corp. (the "Akcess Federal Lawsuit"). The
Akcess Federal Lawsuit alleges, among other things, that the Company (i) failed
to convert shares of its Convertible Preferred Stock held by Marshall in
violation of law, (ii) lacked the requisite power and authority to execute the
contract for the assignment of spectrum to WinStar , (iii) did not obtain the
necessary shareholder and director approval for the assignment of spectrum, (iv)
did not obtain adequate consideration for the assignment of spectrum and (v)
tortiously interfered with the contractual agreement between Akcess and MCM.

On November 24, 1998, Akcess commenced an action in the Supreme Court of
the State of New York, County of New York (the "Court") against Marshall, Allan
Weine, Credit Suisse First Boston Corporation, the Company and Shant S.
Hovnanian (the "Akcess State Lawsuit"). The Akcess State Lawsuit sought to
enjoin the redemption of the Convertible Preferred Stock. Akcess withdrew the
Akcess State Lawsuit on December 8, 1998.

On January 15, 1999, the Company, SPEEDUSNY and Shant S. Hovnanian served
their answer and counterclaim in the Akcess Federal Lawsuit. The answer denied
the allegations of wrongdoing in the complaint, and raised certain affirmative
defenses. The counterclaim asserted that Aklcess had tortiously interfered with
the contract and/or economic advantage relating to the Company's solicitation of
shareholder approval for the assignment of spectrum and that Akcess was guilty
of tortious interference with the Company's performance of its own contractual
obligations.

On March 9, 1999, the Court granted Akcess permission to supplement and
amend its complaint. The amendment to the complaint expanded the description of
the claims of tortious interference from one count to three separate counts for
tortious interference with contract, tortious interference with prospective
business and/or contractual relations, and tortious interference with
prospective economic advantage. Finally, the amendment added a count asserting a
breach of contract theory. The Company intends to respond to the Amended
Complaint by denying the material allegations contained therein and reasserting
the counterclaim. The Company believes that the Akcess Federal Lawsuit is
without merit and intends to defend the case vigorously. The Company cannot make
a determination at this time as to the possible outcome of the Akcess Federal
Lawsuit.

(d) The Company has been named in four lawsuits brought in the normal
course of its business in the aggregate amount of approximately $700,000,
exclusive of expenses. The Company believes it has substantial defenses to a
material portion of these claims and is prepared to pursue litigation if a
reasonable and structured settlement cannot be reached with the parties. In the
event adverse judgments are rendered in the same period, the

10
<PAGE>

aggregate effect could be material to the Company's financial position and it
could have a material effect on operating results in the period in which the
matters are resolved.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The following two matters were submitted to, and voted upon by, the
stockholders in conjunction with the Annual Meeting of Stockholders held on May
20, 1998 in New York, New York:

1. The election of six members to the Board of Directors of the Company to
serve until the next Annual Meeting of Stockholders to be held in 1999 or
until their successors are duly elected.

2. The appointment of independent auditors of the Company for the 1998
fiscal year to serve until the 1999 Annual Meeting or until their
successors are duly elected.

With respect to the election of Directors, the Board, at the
recommendation of the Nominating Committee, designated six Nominees for election
as directors of the Board to serve until the 1999 Annual Meeting or until their
successors are duly elected and qualified. The Board unanimously recommended a
vote "FOR" the election of the Nominees to the Board. The stockholders approved
the election of the six Nominees to the Board by the affirmative vote of a
majority of the shares of Common Stock present, in person or by proxy, and
entitled to vote at the Annual Meeting.

With respect to the appointment of independent auditors of the Company,
the Board, at the recommendation of the Audit Committee, proposed that the
stockholders appoint the firm of PricewaterhouseCoopers LLP ("PwC"), formerly
Coopers & Lybrand L.L.P, to serve as the independent auditors of the Company for
the 1998 fiscal year until the 1999 Annual Meeting. PwC served as the Company's
independent auditors for the 1997 fiscal year. The Board unanimously recommended
a vote "FOR" the approval of this proposal. The stockholders approved the
appointment by the affirmative vote of a majority of the shares of Common Stock
present, in person or by proxy, and entitled to vote at the Annual Meeting.

11
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is listed for quotation on the NASDAQ National
Market system under the symbol "SPDE." Prior to January 6, 1999, the Company's
trading symbol was "CVUS". The following table sets forth high, low and closing
trade prices for the Common Stock for the fiscal quarters indicated.

High Sale Low Sale Closing Sale
-------------- -------------- --------------
1998
- - - -----
First Quarter $8.250 $3.375 $5.000
Second Quarter 4.875 0.750 1.000
Third Quarter 1.625 0.094 0.281
Fourth Quarter 2.156 0.188 0.906

1997
- - - -----
First Quarter $11.875 $6.750 $9.000
Second Quarter 10.250 6.875 8.000
Third Quarter 9.000 6.625 7.875
Fourth Quarter 9.750 5.563 6.000

On March 29, 1999, the closing trade price of the Company's Common Stock
was $3.25 per share. As of December 31, 1998, there were 102 registered
shareholders and approximately 3,000 beneficial owners of the Company's Common
Stock. During the year ended December 31, 1998, the Company did not make any
sales of securities that were not registered under the Securities Act of 1933,
as amended (the "Securities Act").

The Company has never declared or paid any cash dividends on its Common
Stock and does not intend to declare or pay cash dividends on the Common Stock
at any time in the foreseeable future. Future earnings, if any, will be used for
the expansion of the Company's Internet business.

12
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and Notes
thereto included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues ................ $ 3,648 $ 4,943 $ 2,190 $ 1,196 $ 51
----------- ----------- ----------- ----------- -----------
Service costs ........... 1,479 2,314 1,175 603 39
Selling, general and
administrative ...... 9,691 13,259 10,223 5,435 2,883
Depreciation and
amortization ........ 6,174 3,881 2,258 1,376 188
Bad debts ............... 730 550 351 202 1
Management fees ......... -- -- -- 2,699 1,546
----------- ----------- ----------- ----------- -----------
Total operating expenses 18,074 20,004 14,007 10,315 4,657
----------- ----------- ----------- ----------- -----------
Operating loss .......... (14,426) (15,061) (11,817) (9,119) (4,606)
Net interest income
(expense) ........... (2,365) (202) 186 (2,184) (1,393)
Gain on assignment
of spectrum ......... 28,066 -- -- -- --

Income taxes ............ (302) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net earnings/(loss) ..... $ 10,973 $ (15,263) $ (11,631) $ (11,303) $ (5,999)
=========== =========== =========== =========== ===========
Per Common Share
Basic earnings/(loss) ... $0.59 ($.95) ($.75) ($.91) (1)
Weighted average
outstanding ......... 16,551,417 16,000,000 15,576,478 12,395,142 (1)

Diluted earnings/(loss) . $0.57 ($.95) ($.75) ($.91) (1)
Weighted average
outstanding ......... 17,612,443 16,000,000 15,576,478 12,395,142 (1)
</TABLE>

December 31,
------------------------------------------------
1998 1997 1996 1995 1994
------- -------- ------- -------- --------
Balance Sheet Data:
Cash and cash
equivalents ............. $12,902 $ 408 $19,600 $ 3,536 $ 12,544
Working capital
(deficiency) ............ 9,312 (7,029) 16,765 (1,647) 10,470
Net property and
equipment ............... 12,836 20,608 14,158 6,322 3,469
Total assets ................ 25,915 23,154 35,924 12,995 16,922
Total debt .................. 338 7,495 6,260 18,871 16,756
Total liabilities ........... 3,868 11,464 8,972 26,314 18,861
Total equity (deficit) ...... 22,047 11,690 26,952 (13,319) (1,939)

(1) Historical loss per common share and weighted average common shares
outstanding for the year ended December 31, 1994 is not presented as they
are not considered indicative of the on-going entity.

13
<PAGE>

Summary of Quarterly Financial Data

<TABLE>
<CAPTION>
Quarters Ended

1998 March 31 June 30 September 30 December 31 Year End

<S> <C> <C> <C> <C> <C>
Revenues $ 1,423,682 $ 1,363,340 $ 1,169,434 $ (308,785) $ 3,647,671

Selling, general and
administrative expenses 2,643,281 2,833,481 2,870,916 1,342,761 9,690,439

Operating (loss) (3,405,661) (3,435,002) (4,455,325) (3,130,583) (14,426,571)

Gain on assignment
of spectrum -- -- -- 28,066,109 28,066,109

Net earnings (loss) $(3,687,749) $(3,691,356) $(5,640,915) $ 23,993,030 $ 10,973,010

Per share - Basic $ (0.23) $ (0.23) $ (0.33) $ 1.38 $ 0.59

- Diluted $ (0.23) $ (0.23) $ (0.33) $ 1.36 $ 0.57

<CAPTION>
1997 March 31 June 30 September 30 December 31 Year End
<S> <C> <C> <C> <C> <C>
Revenues $ 851,630 $ 1,105,833 $ 1,396,403 $ 1,589,344 $ 4,943,210

Selling, general and
administrative expenses 3,035,603 3,425,207 3,284,662 3,513,086 13,258,558

Operating income (loss) (3,607,286) (3,848,435) (3,754,521) (3,850,835) (15,061,077)

Net income (loss) $(3,541,895) $(3,863,620) $(3,815,006) $ (4,042,141) $(15,262,662)

Per share - Basic $ (0.22) $ (0.24) $ (0.24) $ (0.25) $ (0.95)

- Diluted $ (0.22) $ (0.24) $ (0.24) $ (0.25) $ (0.95)
</TABLE>

14
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following should be read in conjunction with the Consolidated
Financial Statements of the Company and Notes thereto and the other financial
information appearing elsewhere in this Form 10-K.

Operations

From 1992 until November 1998, the Company operated a 49-channel analog
subscription television system in Brooklyn, New York utilizing 1,300 MHz of
spectrum under a LMDS license from the FCC. The Company's LMDS license entitled
it to utilize 1,150 MHz of spectrum in the 28 GHz range covering the New York
Primary Metropolitan Statistical Area ("PMSA"), a region which covers the 5
boroughs of New York City as well as the New York Counties of Westchester,
Rockland, and Putnam. Under FCC rules, the Company has the right to use an
additional 150 MHz of spectrum until the first Ka band satellite is launched, an
event not expected to occur prior to 2002.

In November 1998, as a result of the assignment of 850 MHz of spectrum to
WinStar, the Company discontinued its subscription television service.

The Company is using its 450 MHz FCC license and infrastructure to deliver
super high-speed Internet service in the Metro New York area. The Company has
built a full-featured Internet Service Provider (ISP) and configured its IBBS
network to deliver super high-speed Internet service in Metro New York. The
service is being marketed under the service mark SPEED.

Twelve Months Ended December 31, 1998 Compared to Twelve Months Ended December
31, 1997

Revenues decreased $1,295,000 from $4,943,000 for the twelve months ended
December 31, 1997 to $3,648,000 for the twelve months ended December 31, 1998.
This decrease is a result of the termination of subscription television services
in early November 1998 and increased service cancellations during the third
quarter of 1998. The decrease is net of increases during the first six months of
1998 as a result of increases in the average subscriber base compared to 1997
and increases in fees charged to subscribers.

Service costs decreased $835,000 from $2,314,000 for the twelve months
ended December 31, 1997 to $1,479,000 for the twelve months ended December 31,
1998. This decrease is a result of the termination of subscription television
services in early November 1998, increased service cancellations during the
third quarter of 1998 and the termination of service from several premium
program providers. This decrease is net of increases during the first six months
of 1998 as a result of increases in the average subscriber base compared to
1997.

15
<PAGE>

Selling, general and administrative expenses decreased $3,568,000 from
$13,259,000 for the twelve months ended December 31, 1997 to $9,691,000 for the
twelve months ended December 31, 1998. This decrease is primarily attributable
to reduced headcount-related costs as a result of personnel reductions at the
end of 1997 and during the first and third quarters of 1998. This decrease is
net of increases in legal expenses and other costs incurred in connection with
several financings during 1998 and defending against or settling certain claims
brought against the Company.

Depreciation and amortization increased $2,293,000 from $3,881,000 for the
twelve months ended December 31, 1997 to $6,174,000 for the twelve months ended
December 31, 1998. This increase is due primarily to 1998 having a full year of
depreciation on customer premises equipment, equipment for additional
transmitter sites and the continued build-out of the Company's customer
service/administrative facilities in 1997.

Bad debt expense increased $180,000 from $550,000 for the twelve months
ended December 31, 1997 to $730,000 for the twelve months ended December 31,
1998. This increase is a result of the Company's de-emphasis of subscription
television services, the related reductions in force and the termination of
service from several premium channel programmers. Prior to the termination of
subscription television services in early November 1998, the Company experienced
a high level of service cancellations and a drastic decrease in collections from
subscribers. While the Company has significantly increased its allowance for bad
debts at December 31, 1998 to reflect these developments, it is considering
several options to vigorously pursue collection of past due accounts.

Interest income decreased $539,000 from $650,000 for the twelve months
ended December 31, 1997 to $111,000 for the twelve months ended December 31,
1998. This decrease is primarily due to decreases in the Company's cash position
as it continued to fund operations and build out its network.

Interest expense and financing fees increased $1,624,000 from $851,000 for
the twelve months ended December 31, 1997 to $2,475,000 for twelve months ended
December 31, 1998. This increase is a result of a substantial increase in the
level of borrowings by the Company commencing in late 1997, some of which
involved the payment of financing fees, and the costs incurred in connection
with the redemption and repayment of debt.

During the year ended December 31, 1998, the Company recognized a gain of
$28,066,109 from the assignment of a portion of its spectrum to WinStar
Communications.

During the year ended December 31, 1998, the Company recorded a provision
for income taxes in the amount of $302,000.

Twelve Months Ended December 31, 1997 Compared to Twelve Months Ended December
31, 1996

Revenues increased $2,753,000 from $2,190,000 for the twelve months ended
December 31, 1996 to $4,943,000 for the twelve months ended December 31, 1997.
This increase is due primarily to an increase in subscribers.

Service costs increased $1,139,000 from $1,175,000 for the twelve months
ended December 31, 1996 to $2,314,000 for the twelve months ended December 31,
1997. Service costs are fees paid to providers of television programming and
royalties paid to CT&T under a license agreement between CT&T and SPEEDUSNY.
These costs increase as the subscriber count and associated revenues increase.

Selling, general and administrative expense increased $3,036,000 from
$10,223,000 for the twelve months ended December 31, 1996 to $13,259,000 for the
twelve months ended December 31, 1997. This increase is primarily attributable
to headcount-related costs (as the Company's employee base rose from 104 at
December 31, 1996 to 130 at December 31, 1997. At the end of 1997, the Company
elected to focus its immediate efforts on bringing its high-speed Internet
access service to market. Due to the increased focus on such service, the
Company de-emphasized its marketing efforts related to selling subscription
television service in the immediate future. In conjunction with this action, on
December 31, 1997, the Company reduced its workforce by 43 people, most of whom
worked in subscription television sales, marketing and operations. In addition,
during 1997, there were increases in promotion and other sales-related expenses
due to the increase in subscribers and in rent expenses due to the addition of
new facilities and cell sites.

Depreciation and amortization increased $1,623,000 from $2,258,000 for the
twelve months ended December 31, 1996 to $3,881,000 for the twelve months ended
December 31, 1997. This increase is due primarily

16
<PAGE>

to the purchase of customer premises equipment and leasehold improvements at the
Company's new state-of-the-art headend facility, customer care center, and
office complex.

Bad debt expense increased $199,000 from $351,000 for the twelve months
ended December 31, 1996 to $550,000 for the twelve months ended December 31,
1997. These expenses increase as the subscriber count and associated revenues
increase.

Interest income decreased $642,000 from $1,292,000 for the twelve months
ended December 31, 1996 to $650,000 for the twelve months ended December 31,
1997. This decrease is primarily due to a decrease in the Company's cash
position as the Company continued to expend funds to build out its network and
increase its subscriber base.

Interest expense and financing fees decreased $254,000 from $1,105,000 for
the twelve months ended December 31, 1996 to $851,000 for twelve months ended
December 31, 1997. This decrease is due primarily to the repayment of the 1997
principal installment of the note to Morgan Guaranty Trust Company of New York
in June 1997.

Twelve Months Ended December 31, 1996 Compared to Twelve Months Ended December
31, 1995

Revenues increased $994,000 from $1,196,000 for the twelve months ended
December 31, 1995 to $2,190,000 for the twelve months ended December 31, 1996.
This increase is due to an increase in subscribers, and a full year of premium
and pay-per-view services, which were introduced in April and June 1995,
respectively.

Service costs increased $572,000 from $603,000 for the twelve months ended
December 31, 1995 to $1,175,000 for the twelve months ended December 31, 1996.
These costs increase as the subscriber count and associated revenues increase.

Selling, general and administrative expenses increased $4,788,000 from
$5,435,000 for the twelve months ended December 31, 1995 to $10,223,000 for the
twelve months ended December 31, 1996. This increase is primarily attributable
to headcount-related costs (as the Company's employee base rose from 55 at
December 31, 1995 to 104 at December 31, 1996), increased payments in equipment
rentals and increased legal fees associated primarily with the FCC rulemaking,
offset in part by a decrease in contractor sales, as part of the sales force was
brought in-house.

Management fees decreased $2,699,000 from $2,699,000 for the twelve months
ended December 31, 1995. This decrease is attributable to the termination of a
management agreement with Bell Atlantic Corporation as of December 31, 1995.

Depreciation and amortization increased $882,000 from $1,376,000 for the
twelve months ended December 31, 1995 to $2,258,000 for the twelve months ended
December 31, 1996. This increase is due primarily to the purchase of customer
premises equipment and equipment for the Company's transmitter sites.

Bad debt expense increased $149,000 from $202,000 for the twelve months
ended December 31, 1995 to $351,000 for the twelve months ended December 31,
1996. These expenses increase as the subscriber count and associated revenues
increase.

Interest income increased $888,000 from $404,000 for the twelve months
ended December 31, 1995 to $1,292,000 for the twelve months ended December 31,
1996. The increase is due primarily to the interest earned on the proceeds from
the Company's Initial Public Offering in 1996.

Interest expense and financing fees decreased $1,483,000 from $2,588,000
for the twelve months ended December 31, 1995 to $1,105,000 for the twelve
months ended December 31, 1996. This decrease is due primarily to the conversion
of $10,000,000 of convertible exchangeable subordinated notes payable in
conjunction with the Company's Initial Public Offering.

Liquidity and Capital Resources

Since the completion of the Company's initial public offering in February
1996, the proceeds of which were used primarily to fund the build-out of its
LMDS transmission system and marketing and equipment costs, the Company has
sought to raise the additional capital necessary to execute its business plan.
The Company has recorded operating losses and negative operating cash flows in
each year of its operations since inception, primarily due to the start-up costs
in connection with the commercial roll-out of the Company's system, slower

17
<PAGE>

than anticipated consumer acceptance of the Company's subscription television
services and expenses incurred in connection with the LMDS rulemaking
proceeding.

Since the fourth quarter of 1997 and continuing through the end of
November 1998, the Company had experienced a severe liquidity shortfall due to
the postponement or cancellation of several planned financing transactions and
reductions in the subscriber base for its subscription television services.
After several proposed financing arrangements failed to be consummated, in
December 1997, the Company recognized an impending liquidity crisis, instituted
a round of layoffs and ceased active promotion of its subscription television
service. In March and August of 1998, additional layoffs were instituted. During
1998, the Company entered into several financing arrangements, as discussed
below, which provided for, or potentially provided for, the issuance of equity
securities at a discount from market prices at the time of funding.

In December 1997, SPEEDUSNY entered into an agreement with Logimetrics,
Inc. ("Logimetrics") pursuant to which SPEEDUSNY assumed financial
responsibility for certain equipment purchased through its affiliate, CT&T, and
issued a $2,621,695 Secured Promissory Note to Logimetrics. In December 1997,
Logimetrics sold its interest in the Secured Promissory Note to Newstart
Factors, Inc. ("Newstart"). In April 1998, the Secured Promissory Note (the
"Original Note") was restructured on the following terms: (i) the Company made a
$500,000 principal payment under the New Note, as defined below, (ii) the
Original Note was amended and restated as a Secured Convertible Promissory Note
in the principal amount of $2,315,917 (the "New Note"), and (iii) the Company
issued to Newstart a warrant to purchase 125,000 shares of Common Stock at an
exercise price of $5 per share (still outstanding at December 31, 1998). In July
1998, Newstart received an additional $500,000 principal payment under the New
Note. Newstart had the option to convert the New Note, in whole or in part, into
Common Stock of the Company. In connection therewith, Newstart converted
$500,000 in principal amount of the New Note into 883,706 shares of Common
Stock, after which the unpaid principal balance under the New Note was $815,917.
As disclosed in amendments to a Form 13D filed by Newstart in connection with
its beneficial ownership of the Company's Common Stock, on October 19, 1998,
Newstart sold the New Note to Akcess Pacific Group, LLC ("Akcess"). In December
1998, after Akcess apparently failed to pay Newstart for the New Note, the
Company repurchased the New Note from Newstart for an aggregate price of
$1,093,339, including accrued interest and a premium.

In January 1998, the Company issued new Subordinated Exchange Notes, in
the aggregate principal amount of $1,191,147 (the "New Notes"), to Morgan
Guaranty Trust Company of New York ("Morgan Guaranty"), the holder of the
Company's Subordinated Exchange Notes (the "Original Notes"), in exchange for
$1,000,000 in cash and as payment of $191,147 in respect of an interest payment
due on December 28, 1997. As consideration for the purchase of the New Notes,
the waiver of certain defaults under the Original Notes and the consent to the
restructuring of other debt, Morgan Guaranty received warrants to purchase an
aggregate 127,000 shares of the Company's Common Stock at an exercise price of
$.01 per share (still outstanding at December 31, 1998). In order to effectuate
the assignment of spectrum, as discussed below, the Company and SPEEDUSNY paid a
fee of $750,000 to Morgan Guaranty, payable $500,000 in cash and $250,000 by the
issuance of new Subordinated Exchange Notes. The Subordinated Exchange Notes
with an aggregate unpaid principal balance of $6,026,675 were repaid in November
1998 for an aggregate of $6,569,355, including accrued interest and prepayment
penalties, as a result of the assignment of spectrum.

In April 1998, the Company issued 3,500 shares of its Series A Convertible
Preferred Stock ("Convertible Preferred Stock") to Marshall Capital Management,
Inc. ("Marshall") for $3,500,000. Additional issuances of Convertible Preferred
Stock in the amounts of $3,000,000 and $3,500,000 were subsequently waived by
mutual agreement of the parties. The Convertible Preferred Stock was convertible
into Common Stock of the Company at the option of Marshall. In connection
therewith, through November 1998, Marshall had converted 37 shares of
Convertible Preferred Stock into 144,152 shares of Common Stock. As disclosed in
a Form 13D filed by Akcess on October 19, 1998, in addition to acquiring the New
Note from Newstart, Akcess entered into an agreement with Marshall pursuant to
which Akcess would purchase the Common Stock of the Company issued to Marshall
upon conversion of the Convertible Preferred Stock held by Marshall. The Company
informed Marshall of its view that Marshall, by virtue of its apparent
membership in a group including Akcess, already held beneficial ownership (as
defined in certain rules under the Securities Exchange Act of 1934) of more than
4.99% of the Company's Common Stock and that further conversions of the
Convertible Preferred Stock were prohibited. The remaining 3,463 shares of
Convertible Preferred Stock with an aggregate stated value of $3,463,000 were
redeemed in November 1998 as a result of the assignment of spectrum for an
aggregate price of $4,616,560, including accrued dividends and a mandatory
redemption premium.

18
<PAGE>

In April 1998, the Company issued to Marion Interglobal Ltd. ("Marion")
(i) a warrant to purchase up to $2,000,000 worth of shares of Common Stock and
(ii) 110,000 shares of its Common Stock. The shares of Common Stock were issued
for nominal consideration and Marion was required to exercise the warrant at the
request of the Company. In June 1998, following the Company's demand to pay the
warrant exercise price, Marion defaulted. The Company plans to commence
litigation against Marion for non-performance and resulting damages.

In May 1998, the Company entered into an agreement with Wasserstein
Perella & Co. Inc. ("WP&Co.") as its exclusive financial advisor for the purpose
of exploring and evaluating the Company's strategic and financial alternatives.
The Company's primary objective was to capitalize on its exclusive commercial
license to utilize its existing LMDS system in offering telecommunications
services in the New York Primary Metropolitan Statistical Area. WP&Co. and the
Company intended to jointly analyze potential transactions including, but not
necessarily limited to, merger or sale of the Company, a recapitalization, a
joint venture, or a capital infusion.

As a result of the foregoing financing agreements, the Company had
committed sources of capital, coupled with internally generated funds, that it
believed would be adequate to satisfy its minimum anticipated capital needs and
operating expenses for the remainder of 1998. However, certain of these
transactions as originally contemplated were not completed and payments needed
to address accounts payable to equipment vendors, programmers and providers of
professional services, all of whom were critical to the Company's subscription
television services and continued operations, substantially exceeded
expectations. In addition, there were payment obligations to creditors due
throughout the balance of 1998. As a result, the Company decided that it was in
its best interest to enter into the following transaction.

In November 1998, pursuant to an agreement dated July 10, 1998, as
amended, between the Company and WinStar Communications, Inc. ("WinStar"), the
Company consummated the assignment of 850 MHz of spectrum to WinStar for
$32,500,000 in cash. The transaction was subject to regulatory and shareholder
approval, both of which were received. At the time of closing, the Company
repaid $3,500,000 which it had borrowed from WinStar in July 1998. The Company
had used these loan proceeds to meet outstanding obligations and finance its
operations pending the closing. As previously indicated, at the time of closing
or shortly thereafter, the Company also repaid the Subordinated Exchange Notes
held by Morgan Guaranty, redeemed the Convertible Preferred Stock held by
Marshall and repurchased the Secured Convertible Promissory Note held by
Newstart. In connection with the WinStar transaction, the Company paid an
investment banking fee of $1,050,000 to WP&Co.

The SPEED service requires the purchase and installation of the SPEED
modem and signal availability. The SPEED modems are currently only available
from the Company for $350. The signal coverage is currently limited to parts of
Manhattan, Brooklyn and Queens. The Company plans to arrange financing for the
cost of the modem to consumers and to increase its signal coverage area before
commencing a major marketing campaign.

19
<PAGE>

Year 2000 compliance

The "Year 2000" or "Y2K" problem exists because of the potential for
computer programs to recognize a date using "00" as the year 1900 instead of the
year 2000 which could cause disruption of normal business operations.

If not addressed and completed on a timely basis, the Year 2000 problem
could lead to incomplete or inaccurate accounting, billing and customer service
functions with resultant financial loss, legal liability or business
interruption.

The Company has established a project team to address the extent, if any,
to which its systems may be affected by the Year 2000 problem and to establish
procedures to resolve Year 2000 issues. The project team includes Company
personnel and, to the extent necessary, outside consultants. The Company expects
to complete its assessment, as well as modification or replacement of software,
during 1999. At the present time, costs over the 1998-1999 period are estimated
to be less than $75,000 and approximately one-third of this amount has been
incurred and expensed through the end of 1998.

The Company has established that its Internet connectivity systems are
Year 2000 compliant and that the systems remaining subject to completion of
review are involved with accounting and related administrative functions. The
majority of the Company's accounting systems have also been determined to be
Year 2000 compliant. The Company believes that modification or replacement of
the remaining systems, if necessary, would not incur a material cost. During
1999, the Company will be reviewing contingency plans for processes that could
likely be affected by the Year 2000 problem with the primary focus being
unforeseen failures of computer software and hardware.

There are inherent uncertainties as to the extent to which the Year 2000
problem may effect the Company in the future. However, since the Year 2000
problem has been identified on such a broad basis, the Company believes that
relationships with vendors and suppliers, including systems and service
providers, in the future course of its business would only occur after the
Company has satisfied itself that such companies are Year 2000 compliant.

While the Company expects that its Year 2000 efforts will be successful,
failure of the Company's computer systems could have a material adverse effect.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes that its financial instruments as described in
Footnote 2 of this Form 10-K are not subject to material market risk. The
Company's financial instruments at December 31, 1998 and 1997 consist of
short-term investments and long-term debt. The carrying value of each of these
financial instruments approximates its market value, since the investments have
short maturities and the interest rate on the long-term debt periodically
adjusts based on the prime rate.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of the Company and related Notes
thereto and the financial information required to be filed herewith are included
under Item 14 of this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

20
<PAGE>

PART III

The information called for by Item 10, Directors and Executive Officers of
the Registrant; Item 11, Executive Compensation; Item 12, Security Ownership of
Certain Beneficial Owners and Management and Item 13, Certain Relationships and
Related Transactions, is hereby incorporated by reference to the corresponding
sections of the Company's definitive proxy statement for its Annual Meeting of
Stockholders to be held in May 1999.

21
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Financial Schedule

(1) Consolidated Financial Statements Page(s)
------

Report of Independent Accountants................................. 27

Consolidated Balance Sheets as of December 31, 1998 and
December 31, 1997................................................. 28

Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996.................................. 29

Consolidated Statements of Changes in Partners' Capital and
Stockholders' Equity for the years ended December 31, 1998,
1997 and 1996..................................................... 30

Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.................................. 31

Notes to Consolidated Financial Statements........................ 32-39

(2) Financial Statement Schedule

Schedule II -- Valuation and Qualifying Accounts.................. S-1

(b) Reports on Form 8-K

The Company filed Current Reports on Form 8-K, all for events specified in
Item 5 of such reports, on October 2, 1998, October 9, 1998, October 22,
1998 and October 27, 1998.

The Company filed a Current Report on Form 8-K, for an event specified in
Item 2 of such report, on December 9, 1998. This filing included pro forma
financial statements, in narrative form, as required under Item 7(b) of
such report.

3.1a Certificate of Incorporation. (1)

3.1b Certificate of Ownership and Merger of CVUSA Merger Corporation With
and Into Cellularvision USA, Inc. (2)

3.2 By-laws. (1)

4.1 Form of Common Stock Certificate. (1)

4.2 Stockholders Agreement, dated as of January 12, 1996, by and among
CellularVision USA, Inc., Shant S. Hovnanian, Bernard B. Bossard and
Vahak S. Hovnanian. (1)

4.3 Registration Rights Agreement, dated as of January 12, 1996, by and
among CellularVision USA, Inc., Bell Atlantic Ventures XXIII, Inc.,
Philips PGNY Corp., Inc. and Morgan Guaranty Trust Company of New
York, as Trustee of the Commingled Pension Trust Fund (Multi-Market
Special Investment) of Morgan Guaranty Trust Company of New York,
and as Investment Manager and Agent for an Institutional Investor.
(1)

10.1 Amended and Restated License Agreement, together with Addendum to
License Agreement, each dated as of July 7, 1993, by and between
CellularVision Technology & Telecommunications, L.P. and
CellularVision of New York, L.P. and certain amendments and
supplements thereto. (1)

22
<PAGE>

10.2 Reserved Channel Rights Agreement, dated as of July 7, 1993, by and
between Vahak S. Hovnanian, Shant S. Hovnanian, Bernard B. Bossard,
CellularVision of New York, L.P. and Bell Atlantic Ventures XXIII,
Inc. (1)

10.3 Restructuring Agreement, dated as of January 12, 1996, by and among
the Company, CellularVision of New York, L.P., Hye Crest Management,
Inc., Suite 12 Group, Bell Atlantic Ventures XXIII, Inc., Philips
PGNY Corp., Morgan Guaranty Trust Company of New York, as Trustee of
the Commingled Pension Trust Fund (Multi-Market Special Investment)
of Morgan Guaranty Trust Company of New York, and as Investment
Manager and Agent for an Institutional Investor, Shant S. Hovnanian,
Bernard B. Bossard and Vahak S. Hovnanian. (1)

10.4a CellularVision USA, Inc. 1995 Stock Incentive Plan. (1)

10.4b CellularVision USA, Inc. 1995 Stock Incentive Plan. (Amended and
Restated as of December 2, 1998) (2)

10.5 Employment Agreement, dated as of October 18, 1995, between
CellularVision USA, Inc. and Bernard B. Bossard. (1)

10.6 Employment Agreement, dated as of October 18, 1995, between
CellularVision USA, Inc. and Shant S. Hovnanian. (1)

10.7 Employment Agreement, dated as of January 1, 1996, between
CellularVision USA, Inc. and John Walber. (1)

10.8 Employment Agreement, dated as of July 31, 1996, between
CellularVision USA, Inc. and Charles N. Garber. (3)

10.9 Intercompany Agreement, dated January 12, 1996, by and among
CellularVision USA, Inc., CellularVision Technology &
Telecommunications, L.P., CellularVision of New York, L.P., Shant S.
Hovnanian, Bernard B. Bossard and Vahak S. Hovnanian. (1)

10.10 Second Addendum to License Agreement, dated as of January 12, 1996,
by and between CellularVision Technology & Telecommunications, L.P.
and CellularVision of New York, L.P. (1)

10.11 Corporate Name License and Grant of Future Licenses Agreement, dated
as of January 12, 1996, by and between CellularVision Technology &
Telecommunications, L.P. and CellularVision USA, Inc. (1)

10.12 Amended and Restated Agreement of Limited Partnership of
CellularVision of New York, L.P., dated as of July 7, 1993, by and
between Hye Crest Management, Inc., Bell Atlantic Ventures, XXIII,
Inc. and the limited partners set forth on the signature page
thereto. (1)

10.13 Master Amendment Agreement, dated as of October 8, 1993, by and
among Vahak S. Hovnanian, Shant S. Hovnanian, Bernard B. Bossard,
Hye Crest Management, Inc., Suite 12 Group, CellularVision of New
York, L.P., CellularVision Technology & Telecommunications, L.P.,
Bell Atlantic Ventures XIII, Inc. and Philips PGNY Corp. (1)

10.14 Second Master Amendment Agreement, dated as of December 29, 1993, by
and among Hye Crest Management, Inc., Suite 12 Group, CellularVision
of New York, L.P., CellularVision Technology & Telecommunications,
L.P., Bell Atlantic Ventures XXIII, Inc., Philips PGNY Corp., Morgan
Guaranty Trust Company of New York, as trustee of the Commingled
Pension

23
<PAGE>

Trust Fund (Multi-Market Special Investment) of Morgan Guaranty
Trust Company of New York, and as Investment Manager and Agent for
an Institutional Investor. (1)

10.15 Note Purchase Agreement, dated as of December 29, 1993, between
CellularVision of New York, L.P. and Morgan Guaranty Trust Company
of New York, as trustee of the Commingled Pension Trust Fund
(Multi-Market Special Investment) of Morgan Guaranty Trust Company
of New York with respect to the issuance and sale of $12,000,000
principal amount of Convertible Exchangeable Subordinated Notes of
CellularVision of New York, L.P. (1)(4)

10.16 Agreement of Lease, dated May 9, 1994, by and between Cellular
Vision of New York and New York City Economic Development
Corporation and Sublease, dated March 8, 1995, between
CellularVision of New York, L.P. and Harvard Fax, Inc. (1)

10.17 Communications Antenna Site Agreement, dated December 6, 1994,
between CellularVision of New York L.P. and Tower Owners, Inc., as
amended. (1)

10.18 Master Lease Agreement No. 6035, dated December 12, 1995, between
Linc Capital Management, a division of Scientific Leasing Inc., and
CellularVision of New York, L.P., together with the Schedules and
Addendum No. 1thereto; Warrant Certificate Nos. 1, 2 and 3, dated
December 14, 1995, issued to Linc Capital Partners, Inc. by the
Company. (1)

10.19 Master Equipment Lease, dated December 14, 1995 between Boston
Financial & Equity Corporation and CellularVision of New York, L.P.,
together with the Schedules and the Addendum thereto; Warrant
Certificate Nos. 4 and 5, dated December 14, 1995, issued to Boston
Financial &Equity Corporation by the Company. (1)

10.20 Senior Convertible Term Note, dated December 1, 1995, in the
principal amount of $3,521,257 issued to Bell Atlantic Ventures
XXIII, Inc. by CellularVision of New York, L.P. and CellularVision
USA, Inc. and the Agreement, dated as of December 1, 1995, by and
among CellularVision USA, Inc., CellularVision of New York, L.P.,
and Bell Atlantic Ventures XXIII, Inc. (1)

10.21 Warrant, dated June 1, 1994, issued by CellularVision of New York,
L.P. to Alex. Brown & Sons Incorporated. (1)

10.22 Warrant, dated June 1, 1994, issued by CellularVision of New York,
L.P. to Mark B. Fisher. (1)

10.23 Warrant, dated December 29, 1993, issued by CellularVision of New
York, L.P. to Peter Rinfret. (1)

10.24 Warrant, dated October 8, 1993, issued by Vahak S. Hovnanian and
Shant S. Hovnanian to Alex. Brown Financial Corporation. (1)

10.25 Warrant, dated October 8, 1993, issued by Vahak S. Hovnanian and
Shant S. Hovnanian to Mark B. Fisher. (1)

10.26 Non-qualified Stock Option Agreement under the CellularVision USA,
Inc. 1995 Stock Incentive Plan, dated as of January 15, 1996, by and
between the Company and John Walber. (1)

10.27 Agreement, dated as of January 12, 1996, by and among CellularVision
USA, Inc., CellularVision of New York, L.P., Hye Crest Management,
Inc., Shant S. Hovnanian, Vahak S. Hovnanian, Bernard B. Bossard and
Bell Atlantic Ventures XXIII, Inc. (1)

24
<PAGE>

10.28 Exchange Notes, dated as of December 15, 1995, of CellularVision
USA, Inc. issued to Morgan Guaranty Trust Company of New York, as
trustee of the Commingled Pension Trust Fund (Multi-Market Special
Investment) of Morgan Guaranty Trust Company of New York, and as
Investment Manager and Agent for an Institutional Investor, in the
principal amounts of approximately $5.0 million and $1.3 million,
respectively (form of Exchange Note included as Exhibit A-2 to
Exhibit 10.15 above). (1)

10.29 Agreement to Purchase LMDS License, dated as of July 10, 1998 by and
between Winstar Communications, Inc., CellularVision USA, Inc. and
CellularVision of New York, L.P. (5)

10.30 Amendment No. 1 to Agreement to Purchase LMDS License, dated as of
October 6, 1998 among Winstar Communications, Inc., CellularVision
USA, Inc. and CellularVision of New York, L.P. (6)

10.31 Amendment No. 2 to Agreement to Purchase LMDS License, dated as of
October 20, 1998 among Winstar Communications, Inc., CellularVision
USA, Inc. and CellularVision of New York, L.P. (7)

21 Subsidiaries of CellularVision USA, Inc. (1)

23.1 Consent of PricewaterhouseCoopers LLP (2)

27 Financial Data Schedule (2)

- - - ----------
(1) Incorporated by reference to the Company's Registration Statement in
Form S-1 (File No. 33-98340) which was declared effective by the
Commission on February 7, 1996.

(2) Filed herewith.

(3) Incorporated by reference to the Company's Form 10-Q for the quarter
ended June 30, 1996 filed on August 12, 1996.

(4) An identical note purchase agreement has been entered into by
CellularVision of New York, L.P. and Morgan Guaranty Trust Company
of New York, as Investment Manager and Agent for an Institutional
Investor with respect to the issuance and sale of $3,000,000
principal amount of Convertible Exchangeable Subordinated Notes of
CellularVision of New York, L.P.

(5) Incorporated by reference to the Company's Form 8-K filed on July
15, 1998.

(6) Incorporated by reference to the Company's Form 8-K filed on October
9, 1998.

(7) Incorporated by reference to the Company's Form 8-K filed on October
22, 1998.

25
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
SPEEDUS.COM, INC.:

In our opinion, the accompanying consolidated financial statements and financial
statement schedule of SPEEDUS.COM, INC. (the "Company") listed in Item 14(a) of
this Form 10-K, present fairly, in all material respects, the financial position
of the Company at December 31, 1998 and December 31, 1997, and the consolidated
results of its operations and cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP

March 30, 1999

26
<PAGE>

SPEEDUS.COM, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
------------ ------------
ASSETS
<S> <C> <C>

Current assets:
Cash and cash equivalents $ 12,902,085 $ 407,741
Due from affiliates 86,444 181,012
Prepaid expenses and other 23,348 112,058
Accounts receivable, net of allowance for
doubtful accounts of $1,019,933 and $290,984 -- 1,233,501
------------ ------------
Total current assets 13,011,877 1,934,312

Property and equipment, net of accumulated
depreciation of $5,488,766 and $5,277,052 12,836,368 20,607,744
Other assets 67,165 171,811
Intangible assets, net of accumulated
amortization of $147,261 -- 203,388
Notes receivable from related parties -- 171,245
Debt placement fees -- 65,590
------------ ------------
Total assets $ 25,915,410 $ 23,154,090
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 2,519,345 $ 1,873,317
Accrued liabilities 807,499 2,093,148
Other current liabilities 203,812 2,761
Current portion of notes payable 168,750 4,993,997
------------ ------------
Total current liabilities 3,699,406 8,963,223

Notes payable 168,750 2,501,163
------------ ------------
Total liabilities 3,868,156 11,464,386

Commitments and Contingencies -- --

Stockholders' equity:
Common stock ($.01 par value; 40,000,000
shares authorized; 17,131,357 and 16,000,000
shares issued and outstanding) 171,314 160,000
Preferred stock ($.01 par value; 20,000,000
shares authorized):
Series A Convertible ($1,000 stated value;
10,000 shares authorized; no shares issued -- --
and outstanding)
Additional paid-in-capital 58,794,847 58,267,533
Accumulated deficit (36,918,907) (46,737,829)
------------ ------------
Stockholders' equity 22,047,254 11,689,704
------------ ------------
Total liabilities and stockholders' equity $ 25,915,410 $ 23,154,090
============ ============
</TABLE>

The accompanying notes are an integral part of these
consolidated financial statements.

27
<PAGE>

SPEEDUS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------
1998 1997 1996
------------ ------------ ------------

<S> <C> <C> <C>
Revenues $ 3,647,671 $ 4,943,210 $ 2,189,766
------------ ------------ ------------
Expenses:
Service costs 1,479,360 2,314,435 1,174,619
Selling, general and administrative 9,690,439 13,258,558 10,222,523
Depreciation and amortization 6,174,393 3,881,004 2,258,415
Bad debts 730,050 550,290 351,839
------------ ------------ ------------
Total operating expenses 18,074,242 20,004,287 14,007,396
------------ ------------ ------------

Operating loss (14,426,571) (15,061,077) (11,817,630)

Interest income 110,719 649,843 1,291,516
Interest expense and financing fees (2,475,247) (851,428) (1,105,087)
------------ ------------ ------------
Loss before gain on assignment of spectrum
and provision for income taxes (16,791,099) (15,262,662) (11,631,201)

Gain on assignment of spectrum 28,066,109 -- --
------------ ------------ ------------

Earnings/(loss) before provision for
income taxes 11,275,010 (15,262,662) (11,631,201)

Provision for income taxes 302,000 -- --
------------ ------------ ------------
Net earnings/(loss) $ 10,973,010 $(15,262,662) $(11,631,201)
============ ============ ============

Per share:

Basic earnings (loss) per common share $ 0.59 $ (0.95) $ (0.75)
============ ============ ============
Weighted average common shares
outstanding 16,551,417 16,000,000 15,576,478
============ ============ ============

Diluted earnings (loss) per common share $ 0.57 $ (0.95) $ (0.75)
============ ============ ============
Weighted average common shares
outstanding 17,612,443 16,000,000 15,576,478
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these
consolidated financial statements.

28
<PAGE>

SPEEDUS.COM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS'
CAPITAL AND STOCKHOLDERS' EQUITY

For the years ended December 31, 1996, 1997 and 1998

<TABLE>
<CAPTION>
Total Partners'
Capital and
Shareholders'
Partners' Common Preferred Additional Accumulated Equity
Capital Stock Stock Paid-in capital Deficit (Deficit)
-------------- ------------ ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance
January 1, 1996 $ 6,401,454 $ 123,951 $ -- $ -- $ (19,843,966) $ (13,318,561)

Conversion of stock
existing prior to IPO (100) (100)
Common stock issued
at IPO (3,614,858
shares) 36,149 36,149
Conversion of
Partners' Capital to
Additional
Paid-in capital at (6,401,454) 6,401,454 --
IPO
Additional Paid-in 51,866,079 51,866,079
capital
Net loss (11,631,201) (11,631,201)
-------------- ------------ -------------- --------------- --------------- ---------------
Balance
December 31, 1996 -- 160,000 -- 58,267,533 (31,475,167) 26,952,366

Net loss (15,262,662) (15,262,662)
-------------- ------------ -------------- --------------- --------------- ---------------
Balance
December 31, 1997 -- 160,000 -- 58,267,533 (46,737,829) 11,689,704

Issuance of common
stock 1,100 1,100
Issuance of preferred
stock 3,500,000 3,500,000
Conversion of
secured note 8,837 491,163 500,000
Conversion of
preferred stock 1,421 (37,000) 35,579 --
Dividends on
preferred stock 21 507 (88,728) (88,200)
Redemption of
preferred stock (3,463,000) (1,065,360) (4,528,360)
Retirement of common
stock (65) 65 --
Net earnings 10,973,010 10,973,010
-------------- ------------ -------------- --------------- --------------- ---------------
Balance
December 31, 1998 $ -- $ 171,314 $ -- $ 58,794,847 $ (36,918,907) $ 22,047,254
============== ============ ============== =============== =============== ===============
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

29
<PAGE>

SPEEDUS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings/(loss) $ 10,973,010 $(15,262,662) $(11,631,201)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 6,174,393 3,881,004 2,258,415
Amortization of placement fees 65,590 115,479 98,783
Provision for doubtful accounts 730,050 550,290 351,839
Gain on assignment of spectrum (28,066,109) -- --
Noncash increase in notes payable 250,000 -- --
Stock option compensation expense -- -- 150,000
Changes in assets and liabilities:
Due from affiliates 94,568 578,515 (2,054,339)
Prepaid expenses and other 88,710 143,742 (26,997)
Accounts receivable 503,451 (1,253,458) (472,031)
Other assets 104,646 (10,829) (2,388)
Notes receivable 171,245 (79,970) (91,275)
Accounts payable 646,028 979,456 2,766,139
Other current liabilities 201,051 (252,247) 230,209
Accrued liabilities (1,285,649) 530,166 (683,367)
------------ ------------ ------------
Net cash used in operating activities (9,349,016) (10,080,514) (9,106,213)
------------ ------------ ------------

Cash flows from investing activities:
Net proceeds from [assignment of spectrum] 31,041,378 -- --
Property and equipment additions (1,174,898) (10,261,204) (10,191,494)
Intangibles -- (86,106) (127,802)
Proceeds from sale of property and equipment -- -- 135,000
------------ ------------ ------------
Net cash provided by (used in)
investing activities 29,866,480 (10,347,310) (10,184,296)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from sale of stock 3,501,100 -- 41,850,000
Proceeds from notes payable 4,691,147 2,996,695 --
Repayment of notes payable (11,598,807) (1,761,200) (3,521,257)
Redemption of preferred stock (4,616,560) -- --
Distribution -- -- (13,889)
Deferred offering costs -- -- (2,960,629)
------------ ------------ ------------
Net cash (used in) provided by
financing activities (8,023,120) 1,235,495 35,354,225
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents 12,494,344 (19,192,329) 16,063,716

Cash and cash equivalents, beginning of period 407,741 19,600,070 3,536,354
------------ ------------ ------------

Cash and cash equivalents, end of period $ 12,902,085 $ 407,741 $ 19,600,070
============ ============ ============

Supplemental Cash Flow Disclosures:
Cash paid for interest during the period $ 1,161,379 $ 611,900 $ 1,100,133
============ ============ ============
Cash paid for income taxes during the period $ -- $ -- $ --
============ ============ ============
Noncash transactions:
Common stock issued for convertible debt $ 500,000 $ -- $ 12,731,450
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

30
<PAGE>

SPEEDUS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Organization

CVUS was formed in October 1995 to combine the ownership of CVNY, a
limited partnership, and Hye Crest Management, Inc. ("HCM"), the general partner
of CVNY and a wholly-owned subsidiary of CVUS. In July 1996, HCM changed its
name to CellularVision Capital Corporation ("CVCC"). In February 1999,
CellularVision of New York, L.P. ("CVNY"), by amendment to its certificate of
limited partnership, changed its name to SPEEDUSNY.COM, L.P. ("SPEEDUSNY").
Unless the context requires otherwise, the term Company includes SPEEDUS.COM,
SPEEDUSNY and CVCC.

Business and FCC License

From 1992 until November 1998, the Company operated a 49-channel analog
subscription television service utilizing 1,300 MHz of spectrum under a Local
Multipoint Distribution Service ("LMDS") license from the Federal Communications
Commission (the "FCC"). In September 1997, the Company's LMDS license was
renewed as a standard LMDS license through February 1, 2006. The Company is
entitled to use its spectrum for a wide variety of fixed wireless purposes,
including wireless local loop telephony, high-speed Internet access and two-way
teleconferencing. The Company's LMDS license entitled it to utilize 1,150 MHz of
spectrum in the 28 GHz range covering New York City, Westchester, Rockland and
Putnam counties. Under FCC rules, the Company has the right to use an additional
150 MHz of spectrum until the first Ka band satellite is launched, an event not
expected to occur prior to 2002.

In November 1998, as a result of the assignment of 850 MHz of spectrum to
WinStar Communications, Inc., the Company discontinued its subscription
television service. The Company is using its 450 MHz FCC license and
infrastructure to deliver super high-speed Internet service in the Metro New
York area.

2. Summary of Significant Accounting Policies

Financial statements and principles of consolidation

The consolidated financial statements include the accounts of SPEEDUS.COM,
SPEEDUSNY and CVCC. All significant intercompany accounts and transactions have
been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents. Cash
equivalents consist of reverse repurchase agreements and commercial paper.
Exclusive of cash in banks, cash equivalents at December 31, 1998 and 1997 were
approximately $13,132,000 and $100,000, respectively.

Concentrations of Credit Risk

Financial instruments that potentially could subject the Company to
concentrations of credit risk consist largely of trade accounts receivable. The
majority of the Company's revenues since inception have been derived from
subscription television service in New York City, which has been discontinued in
November 1998. Prior to the termination of subscription television services, the
Company experienced a high level of service cancellations and a drastic decrease
in collections from subscribers. While the Company has significantly increased
its allowance for bad debts at December 31, 1998 to reflect these developments,
it is considering several options to vigorously pursue collection of past due
accounts.

The Company's cash equivalents and short-term investments are potentially
subject to concentrations of credit risk but this risk is limited due to these
investments being made in investment grade securities.

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<PAGE>

Revenue Recognition

The majority of the Company's revenues to date have been derived from
subscriber fees, billed one month in advance and recorded as revenue in the
period in which the service was provided. Deferred revenue associated with
advance billings was recorded as a current liability.

Property and Equipment

Transmission and headend equipment, customer premises equipment, office
equipment and leasehold improvements are recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets, ranging from
three to seven years. Fiber optic lines are depreciated over an estimated
service life of 40 years. Transmitters are not depreciated until such assets are
constructed or placed in service. Depreciation on customer premises equipment
commences the month following receipt of the equipment. When assets are fully
depreciated, it is the Company's policy to remove the costs and related
accumulated depreciation from its books and records.

The Company capitalized subcontractor labor and materials incurred in
connection with the installation of customer premises equipment and depreciates
them over the shorter of the estimated average period that the subscribers are
expected to remain connected to the Company's system, or five years.

Long-lived assets

The Company periodically evaluates the net realizable value of long-lived
assets, including fixed assets and other assets, relying on a number of factors
including operating results, business plans, economic projections and
anticipated future cash flows. In addition, the Company's evaluation considers
nonfinancial data such as market trends, product and development cycles, and
changes in management's market emphasis. An impairment in the carrying value of
an asset is recognized when the expected future operating cash flows derived
from the asset are less than its carrying value.

Intangible Assets

The costs of field studies to determine line-of-sight transmission
capabilities are capitalized and amortized over five years by the straight-line
method. If a site is abandoned or deemed inoperable, all costs associated with
that site are charged to expense.

Income Taxes

As required by SFAS No. 109, the Company is required to provide for
deferred tax assets or liabilities arising due to temporary differences between
the book and tax basis of assets and liabilities existing at the time of the
consummation of the incorporation transactions immediately prior to the
Company's initial public offering in 1996.

As of December 31, 1997, the Company recorded a deferred tax asset of
approximately $19.2 million primarily related to operating losses and the
difference between the book and tax basis of the Company's investment in CVNY.
An offsetting valuation allowance of $19.2 million was established as the
Company had no ability to carryback its losses and a limited earnings history.
The Company has recorded a provision for income tax of $302,000 relating to
Federal Alternative Minimum Taxes. This provision was calculated after
recognizing a deferred tax benefit of approximately $5,000,000 relating to
carryforward losses. As of December 31, 1998, the Company has a deferred tax
asset of approximately $14.2 million and an offsetting valuation allowance of
the same amount.

For the year ended December 31, 1998, the difference between the Company's
provision for income taxes and income taxes computed at the Federal statutory
rate of 35% is primarily due to the deferred income tax benefit recognized in
1998.

Debt Placement Fees

Unamortized debt issuance costs are amortized over the term of the related
debt by the effective interest rate method.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities

32
<PAGE>

at the dates of the financial statements and the reported amounts of operating
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.

Fair Value of Financial Instruments

Fair value is a subjective and imprecise measurement that is based on
assumptions and market data which require significant judgment and may only be
valid at a particular point in time.

The Company's financial instruments at December 31, 1998 and 1997 consist
of short-term investments and long-term debt. The carrying value of these
financial instruments approximates market value since the investments have short
maturities and the interest rate on the long-term debt periodically adjusts
based on the prime rate.

Deferred Offering Costs

Expenses associated with the Company's initial public offering were
capitalized as deferred offering costs at December 31, 1995. Upon the successful
completion of the initial public offering in 1996, these costs were deducted
from the proceeds of the initial public offering and recorded as a reduction to
additional paid-in capital.

Earnings Per Share

Basic and diluted earnings/(loss) per common share are determined in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share". Stock options and warrants have been excluded from the diluted loss
per share for the years ended December 31, 1997 and 1996 since their effect
would be antidilutive.

For the year ended December 31, 1998, basic net earnings available for
common shareholders in the amount of $9,818,922 was determined by subtracting an
aggregate of $1,154,088, representing the redemption premium and dividends on
the Convertible Preferred Stock, from net earnings of $10,973,010. Diluted net
earnings available for common stockholders in the amount of $9,981,093 was
determined by subtracting the redemption premium in the amount of $1,065,360
from, and adding interest expense on convertible debt in the amount of $73,443
to, net earnings of $10,973,010. The weighted average common shares for diluted
earnings per share were determined by adding weighted average shares in the
amounts of 1,470, 133,740, 212,578 and 713,238 for the assumed exercise or
conversion of stock options, warrants, convertible debt and Convertible
Preferred Stock, respectively, to the weighted average shares outstanding for
basic earnings per share for a total of 17,612,443 weighted average shares
outstanding for diluted earnings per share.

Reclassifications

Certain prior year amounts have been reclassified to conform to the
current year's presentation.

3. Related Party Transactions

CT&T License Agreement

In July 1993, SPEEDUSNY entered into a license agreement with
CellularVision Technology and Telecommunications, L.P. ("CT&T") for use of
certain patented technologies owned by CT&T and for CT&T know-how related to the
LMDS technology. CT&T is 80% owned by Shant S. Hovnanian, the Chairman of the
Board, President, and Chief Executive Officer of the Company, Vahak S.
Hovnanian, a director of the Company, and Bernard B. Bossard, a director and
former officer of the Company, (collectively, the "Founders"). The license
agreement grants SPEEDUSNY the right to utilize the licensed LMDS technology to
construct and operate its system and sell communications services on an
exclusive basis within the New York PMSA and the New York BTA (to the extent the
Company holds or obtains a commercial license for this territory). CT&T has also
agreed to license the LMDS technology to the Company in other BTAs in which the
Company obtains LMDS licenses. The economic terms and conditions of such
licenses will be, in the aggregate, at least as favorable as the terms of any
other license granted by CT&T within the United States. Under the license
agreement, CT&T earns a royalty equal to 7.5% of gross revenues on a quarterly
basis. The license will remain in effect until either the expiration, revocation
or invalidation of CT&T patent rights directly related to the operation of the
Company's system, or the year 2028, subject to earlier termination upon the
occurrence of certain events. The license fees were $288,000, $324,000 and
$149,000 for the years ended December 31, 1998, 1997 and 1996, respectively.

At December 31, 1998 and 1997, the Company had amounts due from CT&T of
approximately $86,000 and $181,000, respectively, which represent the Company's
allocation of costs to CT&T, reduced by licensing fees. The Company and CT&T
have agreed to apply licensing fees in excess of $80,000 in each calendar year
otherwise due to CT&T to the outstanding amounts due from CT&T, which will bear
interest at the rate of 6% per annum. The Company has paid $80,000 in licensing
fees to CT&T for each of the years ended December 31, 1998, 1997 and 1996.

Under the license agreement, CT&T may charge the Company a fee of up to
2.5% of the value of equipment purchased through CT&T, and the Company's ability
to procure capital equipment relating to its system from sources other than CT&T
had been limited. Pursuant to an amendment dated January 12, 1996, subject to
certain conditions and except for outstanding purchase orders, the Company is
under no obligation to continue to purchase equipment or supplies from CT&T,
although it may continue to do so. The total amount of equipment

33
<PAGE>

purchased from CT&T for the years ended December 31, 1997 and 1996 was
$1,467,000 and $6,198,000, respectively. No equipment was purchased from CT&T
during 1998.

At December 31, 1997, the Company had outstanding long-term orders with
CT&T for the purchase of equipment in the aggregate amount of approximately
$3,200,000, net of deposits in the aggregate amount of approximately $600,000.
Approximately $1,400,000 of this amount, net of deposits, is represented by
set-top converters and head-end equipment which has been delivered to the
Company but have experienced performance problems, as a result of which CT&T is
presently involved in litigation with the vendor of this equipment. The Company
has not accepted billings for this equipment and no amounts are reflected in the
accompanying financial statements. As a result of discontinuing the subscription
television service, if the Company is ultimately forced to accept and pay for
this equipment, the equipment may have little or no value and would be written
off. Approximately $1,800,000 of this amount, net of deposits, represents
long-term orders which are still outstanding for modems that would be usable by
the Company in its high-speed internet access business. The Company is now
dealing directly with this vendor.

Other Transactions

(a) On May 18, 1998, the Company received an offer from Shant S.
Hovnanian, the Company's Chairman and Chief Executive Officer, to convey to the
Company all of the outstanding shares of VisionStar, Inc. ("VisionStar"), a
company wholly-owned by him, together with related patent application rights.
VisionStar holds a license from the FCC, granted in May 1997, to construct,
launch and operate a geostationary Ka-band telecommunications satellite at 113
degrees West Longitude, a position overlooking the continental United States.
According to the FCC order granting the license, VisionStar proposes to offer
interactive broadband service covering the nation and in urban areas in
conjunction with broadband service operators such as LMDS operators. These
broadband services may include high-speed Internet access, high-speed data
services, video teleconferencing, distance learning and video programming.
VisionStar proposes to offer services on a non-common carrier basis.

The FCC requires Ka-band licensees to adhere to a strict timetable for
system implementation, including a requirement that construction must be
commenced within one year of license grant, and that the satellite be launched
and operational within five years of grant. VisionStar has informed the Company
that it has entered into an agreement with a satellite manufacturer for
construction of its satellite. Mr. Hovnanian's offer contemplated reimbursement
by the Company of his verifiable VisionStar-related, out-of-pocket expenses, in
an amount not to exceed $300,000, which would have been payable in the form of a
note due March 31, 1999, or upon the earlier consummation by the Company of a
financing of $10,000,000 or more. The Company, through a special committee of
the Board of Directors, had been considering Mr. Hovnanian's offer. At a meeting
of the Board of Directors on August 19, 1998, the Board declined to accept Mr.
Hovnanian's offer.

Thereafter, the Board and Mr. Hovnanian have had additional discussions on
the Company pursuing this opportunity but there is currently no open offer and
the matter has been tabled.

(b) The Founders are parties to an agreement with SPEEDUSNY, pursuant to
which they have the nontransferable right to require SPEEDUSNY to make available
60 MHz of continuous spectrum per polarization in the spectrum awarded by the
FCC for the purpose of providing certain programming (other than telephony,
two-way voice or data communication services) developed by them.

(c) SPEEDUSNY has had an agreement with the International CellularVision
Association ("ICVA"), to fund, along with all other members of ICVA, operating
expenses of ICVA. SPEEDUSNY funded $209,000, $264,000 and $287,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. The Company had also
subleased certain office space for ICVA on a month-to-month basis which is
included in the foregoing totals. Congressman Matthew J. Rinaldo, a director of
the Company, served as President of ICVA. Congressman Rinaldo is formalizing
the dissolution of ICVA.

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<PAGE>

4. Property and Equipment

Property and equipment consists of the following:

December 31,
------------------------
1998 1997
----------- -----------
Transmission and headend equipment ... $11,519,726 $12,181,152
Customer premises equipment .......... 2,950,976 7,373,321
Leasehold improvements ............... 2,298,610 2,579,690
Office equipment ..................... 553,714 892,057
Fiber optics ......................... 375,000 375,000
Capitalized installation costs ....... -- 1,856,468
Equipment deposits ................... 627,108 627,108
----------- -----------
18,325,134 25,884,796
Less--accumulated depreciation ....... 5,488,766 5,277,052
----------- -----------
Property and equipment $12,836,368 $20,607,744
=========== ===========

Depreciation expense was approximately $6,104,000, $3,811,000 and
$2,221,000 for the years ended December 31, 1998, 1997 and 1996, respectively.

5. Notes Payable

Notes payable consist of the following:

December 31,
------------------------
1998 1997
---------- ----------
Promissory note (a) ........... $ 337,500 $ 337,500
Subordinated exchange notes (b) -- 4,585,528
Convertible promissory note (c) -- 2,572,132
---------- ----------
337,500 7,495,160
Less--current portion ......... 168,750 4,993,997
---------- ----------
Long-term portion ............. $ 168,750 $2,501,163
========== ==========

(a) The promissory note is payable in equal quarterly installments of
principal through December 2000 with interest at the prime rate.

(b) In January 1998, the Company issued new Subordinated Exchange Notes,
in the aggregate principal amount of $1,191,147 (the "New Notes"), to Morgan
Guaranty Trust Company of New York ("Morgan Guaranty"), the holder of the
Company's Subordinated Exchange Notes (the "Original Notes"), in exchange for
$1,000,000 in cash and as payment of $191,147 in respect of an interest payment
due on December 28, 1997. As consideration for the purchase of the New Notes,
the waiver of certain defaults under the Original Notes and the consent to the
restructuring of other debt, Morgan Guaranty received a warrant to purchase an
aggregate 127,000 shares of the Company's Common Stock at an exercise price of
$.01 per share (still outstanding at December 31, 1998). In order to effectuate
the assignment of spectrum, the Company and SPEEDUSNY paid a fee of $750,000 to
Morgan Guaranty, payable $500,000 in cash and $250,000 by the issuance of new
Subordinated Exchange Notes. The Subordinated Exchange Notes with an aggregate
unpaid principal balance of $6,026,675 were repaid in November 1998 for an
aggregate of $6,569,355, including accrued interest of $452,280 and prepayment
penalties of $90,400, as a result of the assignment of spectrum.

(c) In December 1997, SPEEDUSNY entered into an agreement with
Logimetrics, Inc. ("Logimetrics") pursuant to which SPEEDUSNY assumed financial
responsibility for certain equipment purchased through its affiliate, CT&T, and
issued a $2,621,695 Secured Promissory Note to Logimetrics. In December 1997,
Logimetrics sold its interest in the Secured Promissory Note to Newstart
Factors, Inc. ("Newstart"). In April 1998, the Secured Promissory Note (the
"Original Note") was restructured on the following terms: (i) the Company made a
$500,000 principal payment under the New Note, as defined below, (ii) the
Original Note was amended and restated as a

35
<PAGE>

Secured Convertible Promissory Note in the principal amount of $2,315,917 (the
"New Note"), and (iii) the Company issued to Newstart a warrant to purchase
125,000 shares of Common Stock at an exercise price of $5 per share (still
outstanding at December 31, 1998). In July 1998, Newstart received an additional
$500,000 principal payment under the New Note. Newstart had the option to
convert the New Note, in whole or in part, into Common Stock of the Company. In
connection therewith, Newstart converted $500,000 in principal amount of the New
Note into 883,706 shares of Common Stock, after which the unpaid principal
balance under the New Note was $815,917. As disclosed in amendments to a Form
13D filed by Newstart in connection with its beneficial ownership of the
Company's Common Stock, on October 19, 1998, Newstart sold the New Note to
Akcess Pacific Group, LLC ("Akcess"). In December 1998, after Akcess apparently
failed to pay Newstart for the New Note, the Company repurchased the New Note
from Newstart for an aggregate price of $1,093,339, including accrued interest
of $73,443 and a premium of $203,979.

6. Stockholders' Equity

Convertible Preferred Stock

In April 1998, the Company issued 3,500 shares of its Series A Convertible
Preferred Stock ("Convertible Preferred Stock") to Marshall Capital Management,
Inc. ("Marshall") for $3,500,000. Additional issuances of Convertible Preferred
Stock in the amounts of $3,000,000 and $3,500,000 were subsequently waived by
mutual agreement of the parties. The Convertible Preferred Stock was convertible
into Common Stock of the Company at the option of Marshall. In connection
therewith, through November 1998, Marshall had converted 37 shares of
Convertible Preferred Stock into 144,151 shares of Common Stock. As disclosed in
a Form 13D filed by Akcess on October 19, 1998, in addition to acquiring the New
Note from Newstart, Akcess entered into an agreement with Marshall pursuant to
which Akcess would purchase the Common Stock of the Company issued to Marshall
upon conversion of the Convertible Preferred Stock held by Marshall. On October
23, 1998, the Company received a request from Marshall for the conversion of 76
shares of Convertible Preferred Stock into 828,501 shares of Common Stock. The
Company informed Marshall of its view that Marshall, by virtue of its apparent
membership in a group including Akcess, already held beneficial ownership (as
defined in certain rules under the Securities Exchange Act of 1934) of more than
4.99% of the Company's Common Stock and that further conversions of the
Convertible Preferred Stock were prohibited. The remaining 3,463 shares of
Convertible Preferred Stock with an aggregate stated value of $3,463,000 were
redeemed in November 1998, as a result of the spectrum asignment, for an
aggregate price of $4,616,560, including accrued dividends of $88,200 and a
mandatory redemption premium of $1,065,360.

Stock Options

The Company's 1995 Stock Incentive Plan, as amended, (the "Plan") provides
for the grant of various stock-based incentives, including non-qualified and
incentive stock options. The Plan has reserved 1,250,000 shares of Common Stock
of the Company for issuance to employees, directors and consultants.

At December 31, 1995, there were no outstanding options.

During 1996, a total of 213,700 non-qualified stock options were granted
at exercise prices ranging from $9.875 to $15 per share and 13,000 options were
cancelled. All options were granted at the market price per share on the date of
grant and have ten-year terms. The weighted average exercise price for the
200,700 options outstanding at December 31, 1996 was $11.46 per share. At
December 31, 1996, there were 1,049,300 shares available for future grant.

During 1997, a total of 495,000 non-qualified stock options were granted
at exercise prices ranging from $7 to $9.25 per share and 447,550 options were
cancelled. All options were granted at the market price per share on the date of
grant and have ten-year terms. The weighted average exercise price for the
248,150 options outstanding at December 31, 1997 was $9.98 per share. At
December 31, 1997, there were 1,001,850 shares available for future grant.

During 1998, a total of 91,700 non-qualified stock options were granted at
an exercise price of $.89 and 191,600 options were cancelled. All options were
granted at the market price per share on the date of grant and have ten-year
terms. The weighted average exercise price for the 148,250 options outstanding
at December 31, 1998, all of which were exercisable, was $4.06 per share. At
December 31, 1998, there were 1,101,750 shares available for future grant.

36
<PAGE>

The Company accounts for the cost of stock-based compensation plans in
accordance with Accounting Principles Board No. 25, "Accounting for Stock Issued
to Employees." Since all options to date have been granted at the market price
per share on the date of grant, no compensation expense has been recognized by
the Company for its stock-based compensation plans during the years ended
December 31, 1998, 1997 and 1996. If the Company had determined compensation
expense based upon the fair value at the date of grant in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," compensation expense would have been $70,000, $398,000 and
$1,297,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
On a pro forma basis, for the years ended December 31, 1998, 1997 and 1996: (i)
net earnings/(loss) would have been $10,900,000, $($15,661,000) and
$(12,928,000), respectively; (ii) basic earnings/(loss) per share would have
been $.59, ($.98) and ($.83), respectively, and (iii) diluted earnings/(loss)
per share would have been $.57, ($.98) and ($.83), respectively.

In determining fair value, the stock options were valued using the
Black-Scholes option pricing model. Key assumptions used in valuing the options
granted during 1998 included a risk-free interest rate of 4.6%, an expected life
of five years and a volatility factor of 120%.

Warrants

Warrants to purchase up to 190,862 shares of Common Stock of the Company,
issued in 1995, were outstanding at December 31, 1998. Of this amount, an
aggregate of up to 113,256 shares were issuable by the Company, and 77,606
shares were issuable by Vahak S. Hovnanian, a director of the Company, from his
Common Stock holdings. The warrants issued by the Company have a ten-year term
and an exercise price ranging from $12.50 to $15.03 per share. The holders of
all outstanding warrants have registration rights in respect of the shares of
Common Stock issuable upon exercise.

During 1998, a total of 302,000 warrants were issued at exercise prices
ranging from $.01 to $5 per share. All warrants have five-year terms. The
holders of all outstanding warrants have registration rights in respect of the
shares of Common Stock issuable upon exercise.

All warrants are still outstanding at December 31, 1998.

7. Sale of Spectrum

In November 1998, pursuant to an agreement dated July 10, 1998, as
amended, between the Company and WinStar Communications, Inc. ("WinStar"), the
Company consummated the assignment of 850 MHz of spectrum to WinStar for
$32,500,000 in cash. The transaction was subject to regulatory and shareholder
approval, both of which were received. At the time of closing, the Company
repaid $3,500,000 which it had borrowed from WinStar in July 1998. The Company
had used these loan proceeds to meet outstanding obligations and finance its
operations pending the closing. As previously indicated, at the time of closing
or shortly thereafter, the Company also repaid the Subordinated Exchange Notes
held by Morgan Guaranty for an aggregate amount of $6,569,355, redeemed the
Convertible Preferred Stock held by Marshall for an aggregate amount of
$4,616,560 and repurchased the Secured Convertible Promissory Note held by
Newstart for an aggregate amount of $1,093,339. In connection with the WinStar
transaction, the Company paid an investment banking fee of $1,050,000 and
incurred other closing costs in the aggregate amount of approximately $409,000.

The assignment of spectrum required the Company to discontinue its
subscription television services. As a result, the Company wrote off property
and equipment with a carrying value aggregating approximately $2,975,000,
represented by headend equipment, set-top converters and capitalized
installation costs, which amount has been included in `Gain on assignment of
spectrum'.

8. Commitments and Contingencies

Noncancellable Leases

At December 31, 1998, future minimum lease payments due under
noncancellable leases are as follows:

1999................................ $ 733,000
2000................................ 312,000
2001................................ 284,000
2002................................ 262,000
2003................................ 212,000
Thereafter.......................... 368,000
----------
Total.................. $2,171,000
==========

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<PAGE>

Rent expense was approximately $766,000, $695,000 and $432,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.

Employment Contracts

The Company entered into an employment agreement with Shant S. Hovnanian
in October 1995. The agreement provides that Mr. Hovnanian will act as President
and Chief Executive Officer of the Company and will devote substantially all of
his working time and efforts to the Company's affairs. Pursuant to the
agreement, Mr. Hovnanian may devote such working time and efforts to CT&T and
its affiliates as the due and faithful performance of his obligations under the
agreement permits. The agreement has a one year term and provides for an annual
salary of $250,000, effective February 7, 1996. Upon the expiration of the
initial employment term on February 7, 1997, the agreement provides for
automatic extensions on a month-to-month basis, unless terminated by either
party upon 30 days advance written notice. Mr. Hovnanian is continuing to serve
as Chairman, President and Chief Executive Officer pursuant to the terms of this
employment agreement.

10. Legal Proceedings

(b) On August 27, 1998, M/A-COM, a division of AMP Incorporated, commenced
an arbitration proceeding ("the Arbitration") against the Company and certain
other parties (together, the "Respondents") in Boston, Massachussetts. The claim
alleges that the Respondents have breached their contractual obligations to
purchase certain receiver/antenna assemblies and to pay for approximately
$600,000 worth of receiver/antenna assemblies that were ordered and accepted by
the Respondents. M/A-COM claims to have suffered direct and consequential
damages as a result of such breaches estimated to be in excess of $7,000,000. On
September 3,1998, the Supreme Court of the State of New York (the " New York
Court") issued an order to show cause for order of attachment and temporary
restraining order (the "Order") in response to a Verified Petition of M/A-COM,
which demanded the entry of an order directing the Sheriff of the City of New
York or the Sheriff of any County in the State of New York to seize and attach
any and all property of certain Respondents, including the Company (the "Order
Respondents"), sufficient to satisfy the $7,000,000 amount of M/A-COM's
Arbitration claim ("M/A-COM's Motion"). The Order required the Order Respondents
to appear before the New York Court on September 11, 1998 to show cause why
M/A-COM's Motion should not be granted. In addition, as part of the Order, the
New York Court issued a temporary restraining order enjoining the Order
Respondents and all other persons from transferring or paying any assets of the
Order Respondents pending the New York Court's ruling on M/A-COM's Motion. On
September 11, 1998, the Company filed papers with the New York Court opposing
M/A-COM's Motion and requesting that the New York Court vacate the temporary
restraining order.

M/A-COM filed an amended counterclaim in the New Jersey Action on December
21, 1998 whereby M/A-COM seeks to hold the Company, SPEEDUSNY and certain other
parties (together "Counterclaim Defendants") liable for any judgment entered
against CT&T in the Arbitration. M/A-COM bases its claim against the Company and
SPEEDUSNY on breach of contract; quantum meruit/implied contract; goods sold and
delivered; third party beneficiary; and piercing the corporate veil of CT&T.
M/A-COM seeks to hold the other Counterclaim

38
<PAGE>

Defendants liable for any judgment against CT&T in the Arbitration on similar
grounds. The Counterclaim Defendants filed a reply to the amended counterclaims
on January 11, 1999 and asserted the following defenses: failure to state a
claim, promissory and equitable estoppel, the absence of any agreement with
M/A-COM and failure to perform under the agreement which it seeks to enforce.

39
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in New York, New York
on March 31, 1999.

SPEEDUS.COM, INC.

/s/ Shant S. Hovnanian
--------------------------------------
Shant S. Hovnanian
President, Chief Executive Officer and
Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Shant S. Hovnanian Chairman of the Board of Directors, March 31, 1999
- - - ------------------------ President and Chief Executive and
Shant S. Hovnanian Financial Officer

/s/ Angela M. Vaccaro Controller and Chief Accounting March 31, 1999
- - - ------------------------ Officer
Angela M. Vaccaro

Director March 31, 1999
- - - ------------------------
Bernard B. Bossard

/s/ Vahak S. Hovnanian Director March 31, 1999
- - - ------------------------
Vahak S. Hovnanian

/s/ Matthew J. Rinaldo Director March 31, 1999
- - - ------------------------
Matthew J. Rinaldo

40
<PAGE>

SPEEDUS.COM, INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Balance at end
Description of Period Expenses Deductions of Period
------------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
1998
Allowance for doubtful accounts $ 290,984 $ 730,050 $ 1,101 $1,019,933
========== ========== ========== ==========
1997
Allowance for doubtful accounts $ 124,370 $ 550,290 $ 383,676 $ 290,984
========== ========== ========== ==========
1996
Allowance for doubtful accounts $ 133,730 $ 351,839 $ 361,199 $ 124,370
========== ========== ========== ==========
</TABLE>

S-1

CERTIFICATE OF OWNERSHIP AND MERGER
OF
CVUSA MERGER CORPORATION
WITH AND INTO
CELLULARVISION USA, INC.

(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)

Pursuant to the provisions of Section 253 of the Delaware General
Corporation Law (the "DGCL"), CellularVision USA, Inc., a Delaware corporation
(the "Company") does hereby certify:

FIRST: That the Company is incorporated pursuant to the DGCL.

SECOND: That the Company owns all of the outstanding shares of each
class of the capital stock of CVUSA Merger Corporation, a Delaware corporation
(the "Sub").

THIRD: That the Company, by the resolutions of its Board of
Directors, duly adopted on January 4, 1999 and attached hereto as Exhibit A,
approved the merger of the Sub into the Company (the "Merger") and the change in
the corporate name of the Company to SpeedUs.com, Inc.

FOURTH: That the Sub, by the resolutions of its sole director, duly
adopted on January 4, 1999 and attached hereto as Exhibit B, approved the
Merger.

FIFTH: That the effective date of the Merger shall be the date on
which this Certificate of Ownership and Merger is filed with the Secretary of
State of the State of Delaware (the "Effective Date").

SIXTH: That the Company is the surviving corporation, and that its
Certificate of Incorporation (subject to the corporate name change set forth in
Article Seventh below) and by-laws shall survive the Merger in full force, and
that its directors and officers shall be the surviving directors and officers.
<PAGE>

SEVENTH: That, pursuant to Section 253(b) of the DGCL, from and
after the Effective Date of the Merger, the Company's name will be "SpeedUs.com,
Inc."

IN WITNESS WHEREOF, said Corporation has caused this certificate to
be signed by its Secretary on this 4th day of January, 1999.

CELLULARVISION USA, INC.

/s/ Shant S. Hovnanian
--------------------------------------
Shant S. Hovnanian
Secretary

-2-

CELLULARVISION USA, INC.
1995 STOCK INCENTIVE PLAN

(Amended and Restated as of December 2, 1998)

1. Purpose

The purpose of the Plan is to provide a means through which the Company
and its Subsidiaries may attract able persons to become and remain directors of
the Company and enter and remain in the employ of the Company and its
Subsidiaries and to provide a means whereby employees, directors and consultants
of the Company and its Subsidiaries can acquire and maintain Common Stock
ownership, or be paid incentive compensation measured by reference to the value
of Common Stock, thereby strengthening their commitment to the welfare of the
Company and its Subsidiaries and promoting an identity of interest between
stockholders and these employees, directors and consultants.

So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Phantom Stock Unit Awards, Performance Share
Unit Awards and Stock Bonus Awards, or any combination of the foregoing.

2. Definitions

The following definitions shall be applicable throughout the Plan.

(a) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock
Award, Phantom Stock Unit Award, Performance Share Unit Award or Stock Bonus
Award.

(b) "Award Period" means a period of time within which performance is
measured for the purpose of determining whether an Award of Performance Share
Units has been earned.

(d) "Cause" means the Company or a Subsidiary having cause to terminate a
Participant's employment or service under any existing employment, consulting or
any other agreement between
<PAGE>

the Participant and the Company or a Subsidiary or, in the absence of such an
employment, consulting or other agreement, upon (i) the determination by the
Committee that the Participant has ceased to perform his duties to the Company
or a Subsidiary (other than as a result of his incapacity due to physical or
mental illness or injury), which failure amounts to an intentional and extended
neglect of his duties to such party, (ii) the Committee's determination that the
Participant has engaged or is about to engage in conduct materially injurious to
the Company or a Subsidiary or (iii) the Participant having been convicted of a
felony.

(e) "Change in Control" shall, unless the Board otherwise directs by
resolution adopted prior thereto or, in the case of a particular award, the
applicable Award agreement states otherwise, be deemed to occur if (i) any
"person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange Act)
other than a Founder (as defined below) is or becomes the beneficial owner (as
that term is used in Section 13(d) of the Exchange Act), directly or indirectly,
of 30% or more of either the outstanding shares of Common Stock or the combined
voting power of the Company's then outstanding voting securities entitled to
vote generally, (ii) during any period of two consecutive years beginning on the
date of the consummation of the IPO, individuals who constitute the Board at the
beginning of such period cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for election by the Company's
shareholders of each new director was approved by a vote of at least
three-quarters of the directors then still in office who were directors at the
beginning of the period or (iii) the Company undergoes a liquidation or
dissolution or a sale of all or substantially all of the assets of the Company.
Neither the IPO nor any merger, consolidation or corporate reorganization in
which the owners of the combined voting power of the Company's then outstanding
voting securities entitled to vote generally prior to said combination, own 50%
or more of the resulting entity's outstanding voting securities shall, by
itself, be considered a Change in Control. As used herein, "Founder" means Shant
S. Hovnanian, Vahak S. Hovnanian or Bernard B. Bossard.

(f) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.

(g) "Committee" means the Board, the Compensation Committee of the Board
or such other committee of at least two people as the Board may appoint to
administer the Plan.

(h) "Common Stock" means the common stock par value $0.01 per share, of
the Company.

(i) "Company" means CellularVision USA, Inc.

2
<PAGE>

(j) "Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such authorization.

(k) "Disability" means disability as defined in the long-term disability
plan of the Company or a Subsidiary, as may be applicable to the Participant in
question, or, in the absence of such a plan, the complete and permanent
inability by reason of illness or accident to perform the duties of the
occupation at which a Participant was employed or served when such disability
commenced or, if the Participant was retired when such disability commenced, the
inability to engage in any substantial gainful activity, in either case as
determined by the Committee based upon medical evidence acceptable to it.

(l) "Disinterested Person" means a person who is (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, or any
successor rule or regulation and (ii) an "outside director" within the meaning
of Section 162(m) of the Code; provided, however, that clause (ii) shall apply
only with respect to grants of Awards with respect to which the Company's tax
deduction could be limited by Section 162(m) of the Code if such clause did not
apply.

(m) "Eligible Person" means any (i) person regularly employed by the
Company or a Subsidiary; provided, however, that no such employee covered by a
collective bargaining agreement shall be an Eligible Person unless and to the
extent that such eligibility is set forth in such collective bargaining
agreement or in an agreement or instrument relating thereto; (ii) director of
the Company or a Subsidiary; or (iii) consultant to the Company or a Subsidiary.

(n) "Exchange Act" means the Securities Exchange Act of 1934.

(o) "Fair Market Value" on a given date means (i) if the Stock is listed
on a national securities exchange, the mean between the highest and lowest sale
prices reported as having occurred on the primary exchange with which the Stock
is listed and traded on the date prior to such date, or, if there is no such
sale on that date, then on the last preceding date on which such a sale was
reported; (ii) if the Stock is not listed on any national securities exchange
but is quoted in the National Market System of the National Association of
Securities Dealers Automated Quotation System on a last sale basis, the average
between the high bid price and low ask price reported on the date prior to such
date, or, if there is no such sale on that date, then on the last preceding date
on which a sale was reported; (iii) if the Stock is not listed on a national
securities exchange nor quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System on a last sale
basis, the amount determined by the Committee to be the fair market value based
upon a good faith attempt to value the

3
<PAGE>

Stock accurately and computed in accordance with applicable regulations of the
Internal Revenue Service; or (iv) notwithstanding clauses (i) - (iii) above,
with respect to Awards granted as of the consummation of the IPO, the price at
which Stock is sold to the public in the IPO.

(p) "Holder" means a Participant who has been granted an Award.

(q) "Incentive Stock Option" means an Option granted by the Committee to a
Participant under the Plan which is designated by the Committee as an Incentive
Stock Option pursuant to Section 422 of the Code.

(r) "Interest Portion" has the meaning ascribed thereto in Section 9(g).

(s) "IPO" means the initial offering of Common Stock to the public through
an effective registration statement.

(t) "IPO Option" means Non-Employee Director Options granted upon the
consummation of the IPO.

(u) "IPO Price" means the price per share that the Common Stock is first
offered to the public in the IPO.

(v) "Non-Employee Director" means a director of the Company who is not
also an employee of the Company.

(w) "Non-Employee Director Option" means an Option granted automatically
to Non-Employee Directors pursuant to Section 8.

(x) "Nonqualified Stock Option" means an Option granted under the Plan
which is not designated as an Incentive Stock Option.

(y) "Normal Termination" means termination of employment or service with
the Company and all Subsidiaries and Affiliates:

(i) Upon retirement pursuant to the retirement plan of the Company
or a Subsidiary, as may be applicable at the time to the
Participant in question;

(ii) On account of Disability;

(iii) With the written approval of the Committee; or

(iv) By the Company or a Subsidiary without Cause.

(z) "Option" means an Award granted under Section 7 or 8 of the Plan.

4
<PAGE>

(aa) "Option Period" means the period described in Section 7(c).

(bb) "Option Price" means the exercise price set for an Option described
in Section 7(a).

(cc) "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award or a Non-Employee
Director who has received an automatic grant pursuant to Section 8.

(dd) "Performance Goals" means the performance objectives of the Company,
a Subsidiary or Affiliate during an Award Period or Restricted Period
established for the purpose of determining whether, and to what extent, Awards
will be earned for an Award Period or Restricted Period.

(ee) "Performance Share Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made under
Section 10 of the Plan.

(ff) "Phantom Stock Unit" means a hypothetical investment equivalent equal
to one share of Stock granted in connection with an Award made under Section 11
of the Plan, or credited with respect to Awards of Performance Share Units which
have been deferred under Section 9.

(gg) "Phantom Stock Unit Portion" has the meaning ascribed thereto in
Section 10(g).

(hh) "Plan" means the Company's 1995 Stock Incentive Plan.

(ii) "Restricted Period" means, with respect to any share of Restricted
Stock or any Phantom Stock Unit, the period of time determined by the Committee
during which such Award is subject to the restrictions set forth in Section 11.

(jj) "Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth in
Section 11.

(kk) "Restricted Stock Award" means an Award of Restricted Stock granted
under Section 11 of the Plan.

(ll) "Securities Act" means the Securities Act of 1933, as amended.

(mm) "Stock" means the Common Stock or such other authorized shares of
stock of the Company as from time to time may be authorized for use under the
Plan.

(nn) "Stock Appreciation Right" or "SAR" means an Award granted under
Section 9 of the Plan.

5
<PAGE>

(oo) "Stock Bonus" means an Award granted under Section 12 of the Plan.

(pp) "Stock Option Agreement" means the agreement between the Company and
a Participant who has been granted an Option pursuant to Section 7 which defines
the rights and obligations of the parties as required in Section 7(d).

(qq) "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code.

(rr) "Term" means the term of a Non-Employee Director Option as set forth
in Section 8.

(ss) "Valuation Date" means the last day of an Award Period or the date of
death of a Participant, as applicable.

(tt) "Vested Unit" shall have the meaning ascribed thereto in Section
11(e).

3. Effective Date, Duration and Shareholder Approval

The Plan is effective as of October 18, 1995, the date of adoption of the
Plan by the Board. The effectiveness of the Plan and the validity of any and all
Awards granted pursuant to the Plan is contingent upon approval of the Plan by
the stockholders of the Company in a manner which complies with Rule 16b-3
promulgated pursuant to the Exchange Act and 422(b)(1) of the Code. Unless and
until the stockholders approve the Plan in compliance therewith, no Award
granted under the Plan shall be effective. See Section 18 for the applicability
of the shareholder approval requirements of Section 162(m) of the Code.

The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be October 18, 2005; provided, however, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.

4. Administration

The Committee shall administer the Plan. Unless otherwise determined by
the Board, each member of the Committee shall, at the time he takes any action
with respect to an Award under the Plan, be a Disinterested Person. The majority
of the members of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is present or
acts approved in writing by a majority of the Committee shall be deemed the acts
of the Committee.

Subject to the provisions of the Plan, the Committee shall have exclusive
power to:

6
<PAGE>

(a) Select the Eligible Persons to participate in the Plan;

(b) Determine the nature and extent of the Awards to be made to each
Eligible Person;

(d) Determine the duration of each Award Period and Restricted Period;

(e) Determine the conditions to which the payment of Awards may be
subject;

(f) Establish the Performance Goals for each Award Period;

(g) Prescribe the form of Stock Option Agreement or other form or forms
evidencing Awards; and

(h) Cause records to be established in which there shall be entered, from
time to time as Awards are made to Participants, the date of each Award, the
number of Incentive Stock Options, Nonqualified Stock Options, SARs, Phantom
Stock Units, Performance Share Units, shares of Restricted Stock and Stock
Bonuses awarded by the Committee to each Participant, the expiration date, the
Award Period and the duration of any applicable Restricted Period.

The Committee shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any documents evidencing Awards granted pursuant thereto and all decisions
and determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the Board.

5. Grant of Awards; Shares Subject to the Plan

The Committee may, from time to time, grant Awards of Options, Stock
Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance Share
Units and/or Stock Bonuses to one or more Eligible Persons and, unless otherwise
determined by the Committee, Non-Employee Directors will automatically receive
Awards pursuant to the formula set forth in Section 8; provided, however, that:

(a) Subject to Section 14, the aggregate number of shares of Stock
made subject to all Awards may not exceed 1,250,000;

7
<PAGE>

(b) Such shares shall be deemed to have been used in payment of
Awards whether they are actually delivered or the Fair Market Value
equivalent of such shares is paid in cash. In the event any Option, SAR
not attached to an Option, Restricted Stock, Phantom Stock Unit or
Performance Share Unit shall be surrendered, terminate, expire, or be
forfeited, the number of shares of Stock no longer subject thereto shall
thereupon be released and shall thereafter be available for new Awards
under the Plan to the fullest extent permitted by Rule 16b-3 under the
Exchange Act (if applicable at the time);

(c) Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury of
the Company or may be purchased on the open market or by private purchase;
and

(d) Following the date that the exemption from the application of
Section 162(m) of the Code described in Section 18 (or any other exemption
having similar effect) ceases to apply to Awards, no Participant may
receive Options or SARs under the Plan with respect to more than 500,000
shares of Stock in any one year.

6. Eligibility

Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan and to
Non-Employee Directors who will receive automatic grants of Nonqualified Stock
Options pursuant to Section 8.

7. Discretionary Grant of Stock Options

The Committee is authorized to grant one or more Incentive Stock Options
or Nonqualified Stock Options to any Eligible Person; provided, however, that no
Incentive Stock Options shall be granted to any Eligible Person who is not an
employee of the Company or a Subsidiary. Each Option so granted shall be subject
to the following conditions, or to such other conditions as may be reflected in
the applicable Stock Option Agreement.

(a) Option price. The exercise price ("Option Price") per share of Stock
for each Option shall be set by the Committee at the time of grant but shall not
be less than (i) in the case of an Incentive Stock Option, and subject to
Section 7(e), the Fair Market Value of a share of Stock at the Date of Grant,
and (ii) in the case of a Non-Qualified Stock Option, the par value per share of
Stock; provided, however, that following the date that the exemption from the
application of Section 162(m) of the Code described in Section 18 (or any other
exemption having similar effect) ceases to apply to Options, all Options
intended

8
<PAGE>

to qualify as "performance-based compensation" under Section 162(m) of the Code
shall have an Option Price per share of Stock no less than the Fair Market Value
of a share of Stock on the Date of Grant.

(b) Manner of exercise and form of payment. Options which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option Price shall be
payable in cash and/or shares of Stock valued at the Fair Market Value at the
time the Option is exercised or, in the discretion of the Committee, either (i)
in other property having a fair market value on the date of exercise equal to
the Option Price, or (ii) by delivering to the Committee a copy of irrevocable
instructions to a stockbroker to deliver promptly to the Company an amount of
sale or loan proceeds sufficient to pay the Option Price.

(c) Option Period and Expiration. Options shall vest and become
exercisable in such manner and on such date or dates determined by the Committee
and shall expire after such period, not to exceed ten years, as may be
determined by the Committee (the "Option Period"); provided, however, that
notwithstanding any vesting dates set by the Committee, the Committee may in its
sole discretion accelerate the exercisability of any Option, which acceleration
shall not affect the terms and conditions of any such Option other than with
respect to exercisability. If an Option is exercisable in installments, such
installments or portions thereof which become exercisable shall remain
exercisable until the Option expires. Unless otherwise stated in the applicable
Option Agreement, the Option shall expire earlier than the end of the Option
Period in the following circumstances:

(i) If prior to the end of the Option Period, the Holder shall
undergo a Normal Termination, the Option shall expire on the
earlier of the last day of the Option Period or the date that
is three months after the date of such Normal Termination. In
such event, the Option shall remain exercisable by the Holder
until its expiration, only to the extent the Option was
exercisable at the time of such Normal Termination.

(ii) If the Holder dies prior to the end of the Option Period and
while still in the employ or service of the Company, a
Subsidiary or Affiliate, or within three months of Normal
Termination, the Option shall expire on the earlier of the
last day of the Option Period or the date that is twelve
months after the date of death of the Holder. In such event,
the Option shall remain exercisable by the person or persons
to whom the Holder's rights under the

9
<PAGE>

Option pass by will or the applicable laws of descent and
distribution until its expiration, only to the extent the
Option was exercisable by the Holder at the time of death.

(iii) If the Holder ceases employment or service with the Company
and all Subsidiaries and Affiliates for reasons other than
Normal Termination or death, the Option shall expire
immediately upon such cessation of employment or service.

(d) Stock Option Agreement - Other Terms and Conditions. Each Option
granted under the Plan shall be evidenced by a Stock Option Agreement, which
shall contain such provisions as may be determined by the Committee and, except
as may be specifically stated otherwise in such Stock Option Agreement, which
shall be subject to the following terms and conditions:

(i) Each Option issued pursuant to this Section 7 or portion
thereof that is exercisable shall be exercisable for the full
amount or for any part thereof.

(ii) Each share of Stock purchased through the exercise of an
Option issued pursuant to this Section 7 shall be paid for in
full at the time of the exercise. Each Option shall cease to
be exercisable, as to any share of Stock, when the Holder
purchases the share or exercises a related SAR or when the
Option expires.

(iii) Subject to Section 13(k), Options issued pursuant to this
Section 7 shall not be transferable by the Holder except by
will or the laws of descent and distribution and shall be
exercisable during the Holder's lifetime only by him.

(iv) Each Option issued pursuant to this Section 7 shall vest and
become exercisable by the Holder in accordance with the
vesting schedule established by the Committee and set forth in
the Stock Option Agreement.

(v) Each Stock Option Agreement may contain a provision that, upon
demand by the Committee for such a representation, the Holder
shall deliver to the Committee at the time of any exercise of
an Option issued pursuant to this Section 7 a written
representation that the shares to be acquired upon such
exercise are to be acquired for investment and not for resale
or with a view to the distribution thereof. Upon such demand,

10
<PAGE>

delivery of such representation prior to the delivery of any
shares issued upon exercise of an Option issued pursuant to
this Section 7 shall be a condition precedent to the right of
the Holder or such other person to purchase any shares. In the
event certificates for Stock are delivered under the Plan with
respect to which such investment representation has been
obtained, the Committee may cause a legend or legends to be
placed on such certificates to make appropriate reference to
such representation and to restrict transfer in the absence of
compliance with applicable federal or state securities laws.

(vi) Each Incentive Stock Option Agreement shall contain a
provision requiring the Holder to notify the Company in
writing immediately after the Holder makes a disqualifying
disposition of any Stock acquired pursuant to the exercise of
such Incentive Stock Option. A disqualifying disposition is
any disposition (including any sale) of such Stock before the
later of (a) two years after the Date of Grant of the
Incentive Stock Option or (b) one year after the date the
Holder acquired the Stock by exercising the Incentive Stock
Option.

(e) Incentive Stock Option Grants to 10% Stockholders. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Holder who owns stock representing more than ten percent of the
voting power of all classes of stock of the Company or of a Subsidiary, the
Option Period shall not exceed five years from the Date of Grant of such Option
and the Option Price shall be at least 110 percent of the Fair Market Value (on
the Date of Grant) of the Stock subject to the Option.

(f) $100,000 Per Year Limitation for Incentive Stock Options. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year (under all plans of the Company and its
Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be
treated as Nonqualified Stock Options.

(g) Voluntary Surrender. The Committee may permit the voluntary surrender
of all or any portion of any Nonqualified Stock Option issued pursuant to this
Section 7 and its corresponding SAR, if any, granted under the Plan to be
conditioned upon the granting to the Holder of a new Option for the same or a
different number of shares as the Option

11
<PAGE>

surrendered or require such voluntary surrender as a condition precedent to a
grant of a new Option to such Participant. Such new Option shall be exercisable
at an Option Price, during an Option Period, and in accordance with any other
terms or conditions specified by the Committee at the time the new Option is
granted, all determined in accordance with the provisions of the Plan without
regard to the Option Price, Option Period, or any other terms and conditions of
the Nonqualified Stock Option surrendered.

8. Automatic Grant of Options

Upon the consummation of the IPO each Non-Employee Director shall be
automatically granted an IPO Option to purchase 5,000 shares of Stock.
Thereafter, unless otherwise determined by the Committee, on the date any person
first becomes a Non-Employee Director, such person shall be automatically
granted without further action by the Board or the Committee a Nonqualified
Stock Option to purchase 5,000 shares of Stock. Thereafter, unless otherwise
determined by the Committee, for the remainder of the term of the Plan and
provided he remains a Non-Employee Director of the Company, on the date of each
of the Company's Annual Meeting of Stockholders, each Non-Employee Director
shall be automatically granted without further action by the Board or the
Committee a Nonqualified Stock Option to purchase 1,000 shares of Stock. All
such Options granted to Non-Employee Directors shall hereinafter be referred to
as Non-Employee Director Options.

(a) Option Price; Term. IPO Options shall have an Option Price per share
equal to the IPO Price. All other Non-Employee Director Options shall have an
Option Price per share equal to the Fair Market Value of a share of Stock on the
Date of Grant. IPO Options shall vest and become exercisable over a period of
two years at the rate of 50% of each grant annually on each of the two
consecutive anniversaries of the Date of Grant directly following the Date of
Grant provided the Non-Employee Director's services as a director continues
through each such anniversary. All other Non-Employee Director Options shall be
fully vested and exercisable as of the date of grant. The term of each
Non-Employee Director Option ("Term"), after which each such Option shall
expire, shall be ten years from the date of Grant.

(b) Expiration. If prior to the expiration of the Term of a Non-Employee
Director Option the Non-Employee Director shall cease to be a member of the
Board for any reason other than his death, the Non-Employee Director Option
shall expire on the earlier of the expiration of the Term or the date that is
three months after the date of such cessation. If prior to the expiration of the
Term of a Non-Employee Director Option a Non-Employee Director shall cease to be
a member of the Board by reason of his death, the Non-Employee Director Option
shall expire on the earlier of the expiration of the Term or the date that is
one year after the date of such cessation. In the event

12
<PAGE>

a Non-Employee Director ceases to be a member of the Board for any reason, any
unexpired Non-Employee Director Option shall thereafter be exercisable until its
expiration only to the extent that such Option was exercisable at the time of
such cessation.

(c) Stock Option Agreement. Each Non-Employee Director Option shall be
evidenced by a Stock Option Agreement, which shall contain such provisions as
may be determined by the Committee; provided, however, that such provisions
shall not be inconsistent with the formula grant provisions of Rule
16b-3(c)(2)(ii) pursuant to the Exchange Act.

(d) Nontransferability. Subject to Section 13(k), Non-Employee Director
Options shall not be transferable except by will or the laws of descent and
distribution and shall be exercisable during the Non-Employee Director's
lifetime only by him.

9. Stock Appreciation Rights

Any Option (other than Non-Employee Director Options) granted under the
Plan may include SARs, either at the Date of Grant or, except in the case of an
Incentive Stock Option, by subsequent amendment. The Committee also may award
SARs independent of any Option. An SAR shall be subject to such terms and
conditions not inconsistent with the Plan as the Committee shall impose,
including, but not limited to, the following:

(a) Vesting. SARs granted in connection with an Option shall become
exercisable, be transferable and shall expire according to the same vesting
schedule, transferability rules and expiration provisions as the corresponding
Option. An SAR granted independent of an Option shall become exercisable, be
transferable and shall expire in accordance with a vesting schedule,
transferability rules and expiration provisions as established by the Committee
and reflected in an Award agreement. Notwithstanding the above, an SAR shall not
be exercisable by a person subject to Section 16(b) of the Exchange Act for at
least six months following the Date of Grant.

(b) Automatic exercise. If on the last day of the Option Period (or in the
case of an SAR independent of an Option, the period established by the Committee
after which the SAR shall expire), the Fair Market Value of the Stock exceeds
the Option Price (or in the case of an SAR granted independent of an Option, the
Fair Market Value of the Stock on the Date of Grant), the Holder has not
exercised the SAR or the corresponding Option, and neither the SAR nor the
corresponding Option has expired, such SAR shall be deemed to have been
exercised by the Holder on such last day and the Company shall make the
appropriate payment therefor.

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<PAGE>

(c) Payment. Upon the exercise of an SAR, the Company shall pay to the
Holder an amount equal to the number of shares subject to the SAR multiplied by
the excess, if any, of the Fair Market Value of one share of Stock on the
exercise date over the Option Price, in the case of an SAR granted in connection
with an Option, or the Fair Market Value of one share of Stock on the Date of
Grant, in the case of an SAR granted independent of an Option. The Company shall
pay such excess in cash, in shares of Stock valued at Fair Market Value, or any
combination thereof, as determined by the Committee. Fractional shares shall be
settled in cash.

(d) Method of exercise. A Holder may exercise an SAR after such time as
the SAR vests by filing an irrevocable written notice with the Committee or its
designee, specifying the number of SARs to be exercised, and the date on which
such SARs were awarded. Such time or times determined by the Committee may take
into account any applicable "window periods" required by Rule 16b-3 under the
Exchange Act.

(e) Expiration. Except as otherwise provided, in the case of SARs granted
in connection with Options, an SAR shall expire on a date designated by the
Committee which is not later than ten years after the Date of Grant of the SAR.

10. Performance Shares

(a) Award grants. The Committee is authorized to establish Performance
Share programs to be effective over designated Award Periods determined by the
Committee. The Committee may grant Awards of Performance Share Units to Eligible
Persons in accordance with such Performance Share programs. At the beginning of
each Award Period, the Committee will establish written Performance Goals based
upon financial objectives for the Company for such Award Period and a schedule
relating the accomplishment of the Performance Goals to the Awards to be earned
by Participants. Performance Goals may include absolute or relative growth in
earnings per share or rate of return on stockholders' equity or other
measurement of corporate performance and may be determined on an individual
basis or by categories of Participants. The Committee shall determine the number
of Performance Share Units to be awarded, if any, to each Eligible Person who is
selected to receive such an Award. The Committee may add new Participants to a
Performance Share program after its commencement by making pro rata grants.

(b) Determination of Award. At the completion of a Performance Share Award
Period, or at other times as specified by the Committee, the Committee shall
calculate the number of shares of Stock earned with respect to each
Participant's Performance Share Unit Award by multiplying the number of
Performance Share

14
<PAGE>

Units granted to the Participant by a performance factor representing the degree
Of attainment of the Performance Goals.

(c) Partial Awards. A Participant for less than a full Award Period,
whether by reason of commencement or termination of employment or otherwise,
shall receive such portion of an Award, if any, for that Award Period as the
Committee shall determine.

(d) Payment of Performance Share Unit Awards. Performance Share Unit
Awards shall be payable in that number of shares of Stock determined in
accordance with Section 10(b); provided, however, that, at its discretion, the
Committee may make payment to any Participant in the form of cash upon the
specific request of such Participant. The amount of any payment made in cash
shall be based upon the Fair Market Value of the Stock on the day prior to
payment. Payments of Performance Share Unit Awards shall be made as soon as
practicable after the completion of an Award Period.

(e) Adjustment of Performance Goals. The Committee may, during the Award
Period, make such adjustments to Performance Goals as it may deem appropriate,
to compensate for, or reflect, (i) extraordinary or non-recurring events
experienced during an Award Period by the Company or by any other corporation
whose performance is relevant to the determination of whether Performance Goals
have been attained; (ii) any significant changes that may have occurred during
such Award Period in applicable accounting rules or principles or changes in the
Company's method of accounting or in that of any other corporation whose
performance is relevant to the determination of whether an Award has been earned
or (iii) any significant changes that may have occurred during such Award Period
in tax laws or other laws or regulations that alter or affect the computation of
the measures of Performance Goals used for the calculation of Awards; provided,
however, that following the date that the exemption from the application of
Section 162(m) of the Code described in Section 18 (or any other exemption
having similar effect) ceases to apply to Performance Share Unit Awards, with
respect to such Awards intended to qualify as "performance-based compensation"
under Section 162(m) of the Code, such adjustment shall be made only to the
extent that the Committee determines that such adjustments may be made without a
loss of deductibility for such Award under Section 162(m) of the Code.

11. Restricted Stock Awards and Phantom Stock Units

(a) Award of Restricted Stock and Phantom Stock Units.

(i) The Committee shall have the authority (1) to grant Restricted
Stock and Phantom Stock Unit Awards, (2) to issue or transfer
Restricted Stock to Eligible Persons, and (3) to establish
terms, conditions and restrictions applicable to such

15
<PAGE>

Restricted Stock and Phantom Stock Units, including the
Restricted Period, which may differ with respect to each
grantee, the time or times at which Restricted Stock or
Phantom Stock Units shall be granted or become vested and the
number of shares or units to be covered by each grant.

(ii) The Holder of a Restricted Stock Award shall execute and
deliver to the Company an Award agreement with respect to the
Restricted Stock setting forth the restrictions applicable to
such Restricted Stock. If the Committee determines that the
Restricted Stock shall be held in escrow rather than delivered
to the Holder pending the release of the applicable
restrictions, the Holder additionally shall execute and
deliver to the Company (i) an escrow agreement satisfactory to
the Committee, and (ii) the appropriate blank stock powers
with respect to the Restricted Stock covered by such
agreements. If a Holder shall fail to execute a Restricted
Stock agreement and, if applicable, an escrow agreement and
stock powers, the Award shall be null and void. Subject to the
restrictions set forth in Section 11(b), the Holder shall
generally have the rights and privileges of a stockholder as
to such Restricted Stock, including the right to vote such
Restricted Stock. At the discretion of the Committee, cash
dividends and stock dividends with respect to the Restricted
Stock may be either currently paid to the Holder or withheld
by the Company for the Holder's account, and interest may be
paid on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Committee. Cash
dividends or stock dividends so withheld by the Committee
shall not be subject to forfeiture.

(iii) Upon the Award of Restricted Stock, the Committee shall cause
a stock certificate registered in the name of the Holder to be
issued and, if it so determines, deposited together with the
stock powers with an escrow agent designated by the Committee.
If an escrow arrangement is used, the Committee shall cause
the escrow agent to issue to the Holder a receipt evidencing
any stock certificate held by it registered in the name of the
Holder.

(iv) The terms and conditions of a grant of Phantom Stock Units
shall be reflected in a written Award agreement. No shares of
Stock shall be issued at the time a Phantom Stock Unit Award
is made, and the Company will not be required to set aside a

16
<PAGE>

fund for the payment of any such Award. Holders of Phantom
Stock Units shall receive an amount equal to the cash
dividends paid by the Company upon one share of Stock for each
Phantom Stock Unit then credited to such Holder's account
("Dividend Equivalents"). The Committee shall, in its sole
discretion, determine whether to credit to the account of, or
to currently pay to, each Holder of an Award of Phantom Stock
Units such Dividend Equivalents. Dividend Equivalents credited
to a Holder's account shall be subject to forfeiture on the
same basis as the related Phantom Stock Units, and may bear
interest at a rate and subject to such terms as are determined
by the Committee.

(b) Restrictions.

(i) Restricted Stock awarded to a Participant shall be subject to
the following restrictions until the expiration of the
Restricted Period, and to such other terms and conditions as
may be set forth in the applicable Award agreement: (1) if an
escrow arrangement is used, the Holder shall not be entitled
to delivery of the stock certificate; (2) the shares shall be
subject to the restrictions on transferability set forth in
the Award agreement; (3) the shares shall be subject to
forfeiture to the extent provided in subparagraph (d) and the
Award Agreement and, to the extent such shares are forfeited,
the stock certificates shall be returned to the Company, and
all rights of the Holder to such shares and as a shareholder
shall terminate without further obligation on the part of the
Company.

(ii) Phantom Stock Units awarded to any Participant shall be
subject to (1) forfeiture until the expiration of the
Restricted Period, to the extent provided in subparagraph (d)
and the Award agreement, and to the extent such Awards are
forfeited, all rights of the Holder to such Awards shall
terminate without further obligation on the part of the
Company and (2) such other terms and conditions as may be set
forth in the applicable Award agreement.

(iii) The Committee shall have the authority to remove any or all of
the restrictions on the Restricted Stock and Phantom Stock
Units whenever it may determine that, by reason of changes in
applicable laws or other changes in circumstances arising
after the date of the

17
<PAGE>

Restricted Stock Award or Phantom Stock Award, such action is
appropriate.

(c) Restricted Period. The Restricted Period of Restricted Stock and
Phantom Stock Units shall commence on the Date of Grant and shall expire from
time to time as to that part of the Restricted Stock and Phantom Stock Units
indicated in a schedule established by the Committee and set forth in a written
Award agreement.

(d) Forfeiture Provisions. Except to the extent determined by the
Committee and reflected in the underlying Award agreement, in the event a Holder
terminates employment with the Company and all Subsidiaries during a Restricted
Period, that portion of the Award with respect to which restrictions have not
expired ("Non-Vested Portion") shall be treated as follows.

(i) Upon the voluntary resignation of a Participant or discharge
by the Company or a Subsidiary for Cause, the Non-Vested
Portion of the Award shall be completely forfeited.

(ii) Upon Normal Termination, the Non-Vested Portion of the Award
shall be prorated for service during the Restricted Period and
shall be received as soon as practicable following
termination.

(iii) Upon death, the Non-Vested Portion of the Award shall be
prorated for service during the Restricted Period and paid to
the Participant's beneficiary as soon as practicable following
death.

(e) Delivery of Restricted Stock and Settlement of Phantom Stock Units.
Upon the expiration of the Restricted Period with respect to any shares of Stock
covered by a Restricted Stock Award, the restrictions set forth in Section 11(b)
and the Award agreement shall be of no further force or effect with respect to
shares of Restricted Stock which have not then been forfeited. If an escrow
arrangement is used, upon such expiration, the Company shall deliver to the
Holder, or his beneficiary, without charge, the stock certificate evidencing the
shares of Restricted Stock which have not then been forfeited and with respect
to which the Restricted Period has expired (to the nearest full share) and any
cash dividends or stock dividends credited to the Holder's account with respect
to such Restricted Stock and the interest thereon, if any.

Upon the expiration of the Restricted Period with respect to any Phantom
Stock Units covered by a Phantom Stock Unit Award, the Company shall deliver to
the Holder, or his beneficiary, without charge, one share of Stock for each
Phantom Stock Unit

18
<PAGE>

which has not then been forfeited and with respect to which the Restricted
Period has expired ("Vested Unit") and cash equal to any Dividend Equivalents
credited with respect to each such Vested Unit and the interest thereon, if any;
provided, however, that, if so noted in the applicable Award agreement, the
Committee may, in its sole discretion, elect to pay cash or part cash and part
Stock in lieu of delivering only Stock for Vested Units. If cash payment is made
in lieu of delivering Stock, the amount of such payment shall be equal to the
Fair Market Value of the Stock as of the date on which the Restricted Period
lapsed with respect to such Vested Unit.

(f) Stock Restrictions. Each certificate representing Restricted Stock
awarded under the Plan shall bear the following legend until the end of the
Restricted Period with respect to such Stock:

"Transfer of this certificate and the shares represented
hereby is restricted pursuant to the terms of a Restricted Stock
Agreement, dated as of _________, between CellularVision USA, Inc. and
___________________. A copy of such Agreement is on file at the
offices of the Company."

Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.

12. Stock Bonus Awards

The Committee may issue unrestricted Stock under the Plan to Eligible
Persons, alone or in tandem with other Awards, in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine. Stock Bonus Awards under the Plan shall be granted as, or
in payment of, a bonus, or to provide incentives or recognize special
achievements or contributions.

13. General

(a) Additional Provisions of an Award. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in financing
the purchase of Stock upon the exercise of Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Stock
acquired under any Award, provisions giving the Company the right to repurchase
shares of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, and provisions to comply with Federal and state
securities laws and Federal and state tax withholding requirements. Any such
provisions shall be reflected in the applicable Award agreement.

19
<PAGE>

(b) Privileges of Stock Ownership. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.

(c) Government and Other Regulations. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental agencies as
may be required. Notwithstanding any terms or conditions of any Award to the
contrary, the Company shall be under no obligation to offer to sell or to sell
and shall be prohibited from offering to sell or selling any shares of Stock
pursuant to an Award unless such shares have been properly registered for sale
pursuant to the Securities Act with the Securities and Exchange Commission or
unless the Company has received an opinion of counsel, satisfactory to the
Company, that such shares may be offered or sold without such registration
pursuant to an available exemption therefrom and the terms and conditions of
such exemption have been fully complied with. The Company shall be under no
obligation to register for sale under the Securities Act any of the shares of
Stock to be offered or sold under the Plan. If the shares of Stock offered for
sale or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the transfer of
such shares and may legend the Stock certificates representing such shares in
such manner as it deems advisable to ensure the availability of any such
exemption.

(d) Tax Withholding. Notwithstanding any other provision of the Plan, the
Company or a Subsidiary, as appropriate, shall have the right to deduct from all
Awards cash and/or Stock, valued at Fair Market Value on the date of payment, in
an amount necessary to satisfy all Federal, state or local taxes as required by
law to be withheld with respect to such Awards and, in the case of Awards paid
in Stock, the Holder or other person receiving such Stock may be required to pay
to the Company or a Subsidiary, as appropriate, prior to delivery of such Stock,
the amount of any such taxes which the Company or Subsidiary is required to
withhold, if any, with respect to such Stock. Subject in particular cases to the
disapproval of the Committee, the Company may accept shares of Stock of
equivalent Fair Market Value in payment of such withholding tax obligations if
the Holder of the Award elects to make payment in such manner and, with respect
to a Holder subject to Section 16(b) of the Exchange Act, if at least six months
prior to the date such tax obligation is determined; provided, however, that
such six-month advance election shall not be required if it is not necessary in
order for the withholding election to be exempt from the application of such
Section 16(b);

20
<PAGE>

(e) Claim to Awards and Employment Rights. No employee or other person
shall have any claim or right to be granted an Award under the Plan or, having
been selected for the grant of an Award, to be selected for a grant of any other
Award. Neither the Plan nor any action taken hereunder shall be construed as
giving any Participant any right to be retained in the employ or service of the
Company or a Subsidiary.

(f) Designation and Change of Beneficiary. Each Participant may file with
the Committee a written designation of one or more persons as the beneficiary
who shall be entitled to receive the rights or amounts payable with respect to
an Award due under the Plan upon his death. A Participant may, from time to
time, revoke or change his beneficiary designation without the consent of any
prior beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no event
shall it be effective as of a date prior to such receipt. If no beneficiary
designation is filed by the Participant, the beneficiary shall be deemed to be
his or her spouse or, if the Participant is unmarried at the time of death, his
or her estate.

(g) Payments to Persons Other Than Participants. If the Committee shall
find that any person to whom any amount is payable under the Plan is unable to
care for his affairs because of illness or accident, or is a minor, or has died,
then any payment due to such person or his estate (unless a prior claim therefor
has been made by a duly appointed legal representative) may, if the Committee so
directs the Company, be paid to his spouse, child, relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person otherwise entitled
to payment. Any such payment shall be a complete discharge of the liability of
the Committee and the Company therefor.

(h) No Liability of Committee Members. No member of the Committee shall be
personally liable by reason of any contract or other instrument executed by such
member or on his behalf in his capacity as a member of the Committee nor for any
mistake of judgment made in good faith, and the Company shall indemnify and hold
harmless each member of the Committee and each other employee, officer or
director of the Company to whom any duty or power relating to the administration
or interpretation of the Plan may be allocated or delegated, against any cost or
expense (including counsel fees) or liability (including any sum paid in
settlement of a claim) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or willful bad
faith; provided, however, that approval of the Board shall be required for the
payment of any amount in

21
<PAGE>

settlement of a claim against any such person. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Articles of Incorporation
or By-Laws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.

(i) Governing law. The Plan shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.

(j) Funding. No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Holders shall have
no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.

(k) Nontransferability. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or transferred or
otherwise disposed of, mortgaged, pledged or encumbered except, in the event of
a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; provided, however, the Committee may, in its sole discretion,
allow for transfer of Awards other than Incentive Stock Options to other persons
or entities, subject to such conditions or limitations as it may establish to
ensure that Awards intended to be exempt from Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 under the Exchange Act continue to be so exempt or for
other purposes.

(l) Reliance on Reports. Each member of the Committee and each member of
the Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good faith,
upon any report made by the independent public accountant of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself.

(m) Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or any
Subsidiary except as otherwise specifically provided in such other plan.

22
<PAGE>

(n) Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.

(o) Pronouns. Masculine pronouns and other words of masculine gender shall
refer to both men and women.

(p) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.

(q) Termination of Employment. For all purposes herein, a person who
transfers from employment or service with the Company to employment or service
with a Subsidiary or vice versa shall not be deemed to have terminated
employment or service with the Company or a Subsidiary.

23
<PAGE>

14. Changes in Capital Structure

Awards granted under the Plan and any agreements evidencing such Awards,
the maximum number of shares of Stock subject to all Awards and the maximum
number of shares of Stock with respect to which any one person may be granted
Options or SARs during any year shall be subject to adjustment or substitution,
as determined by the Committee in its sole discretion, as to the number, price
or kind of a share of Stock or other consideration subject to such Awards or as
otherwise determined by the Committee to be equitable (i) in the event of
changes in the outstanding Stock or in the capital structure of the Company by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the Date
of Grant of any such Award or (ii) in the event of any change in applicable laws
or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
Participants in the Plan, or which otherwise warrants equitable adjustment
because it interferes with the intended operation of the Plan. In addition, in
the event of any such adjustments or substitution, the aggregate number of
shares of Stock available under the Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. Any adjustment in Incentive
Stock Options under this Section 14 shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of the
Code, and any adjustments under this Section 14 shall be made in a manner which
does not adversely affect the exemption provided pursuant to Rule 16b-3 under
the Exchange Act. Further, following the date that the exemption from the
application of Section 162(m) of the Code described in Section 18 (or any other
exemption having similar effect) ceases to apply to Awards, with respect to
Awards intended to qualify as "performance-based compensation" under Section
162(m) of the Code, such adjustments or substitutions shall be made only to the
extent that the Committee determines that such adjustments or substitutions may
be made without a loss of deductibility for such Awards under Section 162(m) of
the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.

Notwithstanding the above, in the event of any of the following:

A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is
received by shareholders of the Company in a form other than stock
or other equity interests of the surviving entity;

24
<PAGE>

B. All or substantially all of the assets of the Company are
acquired by another person;

C. The reorganization or liquidation of the Company; or

D. The Company shall enter into a written agreement to undergo
an event described in clauses A, B or C above,

then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash, the value of such Awards based upon the price per
share of Stock received or to be received by other shareholders of the Company
in the event. The terms of this Section 14 may be varied by the Committee in any
particular Award agreement.

15. Effect of Change in Control

Except to the extent reflected in a particular Award agreement:

(a) In the event of a Change in Control, notwithstanding any vesting
schedule with respect to an Award of Options, SARs, Phantom Stock Units or
Restricted Stock, such Option or SAR shall become immediately exercisable with
respect to 100 percent of the shares subject to such Option or SAR, and the
Restricted Period shall expire immediately with respect to 100 percent of such
Phantom Stock Units or shares of Restricted Stock.

(b) In the event of a Change in Control, all incomplete Award Periods in
effect on the date the Change in Control occurs shall end on the date of such
change, and the Committee shall (i) determine the extent to which Performance
Goals with respect to each such Award Period have been met based upon such
audited or unaudited financial information then available as it deems relevant,
(ii) cause to be paid to each Participant partial or full Awards with respect to
Performance Goals for each such Award Period based upon the Committee's
determination of the degree of attainment of Performance Goals, and (iii) cause
all previously deferred Awards to be settled in full as soon as possible.

(c) The obligations of the Company under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Company. The Company agrees that it will make appropriate
provisions for the preservation of Participant's rights under the Plan in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.

25
<PAGE>

16. Nonexclusivity of the Plan

Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either applicable generally or only in specific cases.

17. Amendments and Termination

The Board may at any time terminate the Plan. Subject to Section 14, with
the express written consent of an individual Participant, the Board or the
Committee may cancel or reduce or otherwise alter outstanding Awards if, in its
judgment, the tax, accounting, or other effects of the Plan or potential payouts
thereunder would not be in the best interest of the Company. The Board or the
Committee may, at any time, or from time to time, amend or suspend and, if
suspended, reinstate, the Plan in whole or in part; provided, however, that
without further stockholder approval neither the Board nor the Committee shall
make any amendment to the Plan which would:

(a) Materially increase the maximum number of shares of Stock which may be
issued pursuant to Awards, except as provided in Section 13;

(b) Extend the maximum Option Period;

(d) Change the class of persons eligible to receive Awards under the Plan;

and further provided, however, that provisions of Section 8 shall not be amended
more than once every six months other than to comport with changes in the Code,
the Employee Retirement Income Security Act, or the rules thereunder.

18. Effect of Section 162(m) of the Code

The Plan, and all Awards issued thereunder, are intended to be exempt from
the application of Section 162(m) of the Code, which restricts under certain
circumstances the Federal income tax deduction for compensation paid by a public
company to named executives in excess of $1 million per year. The exemption is
based on Proposed Treasury Regulation Section 1.162-27(f), in the form proposed
on the effective date of the Plan, with the understanding that such regulation
generally exempts from the application of Section 162(m) of the Code
compensation paid

26
<PAGE>

pursuant to a plan that existed before a company becomes publicly held. Under
such Proposed Treasury Regulation, this exemption is available to the Plan for
the duration of the period that lasts until the earlier of (i) the expiration or
material modification of the Plan, (ii) the exhaustion of the maximum number of
shares of Stock available for Awards under the Plan, as set forth in Section
5(a), or (iii) the year 2000 annual meeting of shareholders of the Company. The
Committee may, without shareholder approval (unless otherwise required to comply
with Rule 16b-3 under the Exchange Act), amend the Plan retroactively and/or
prospectively to the extent it determines necessary in order to comply with any
subsequent clarification of Section 162(m) of the Code required to preserve the
Company's Federal income tax deduction for compensation paid pursuant to the
Plan. To the extent that the Committee determines as of the Date of Grant of an
Award that (i) the Award is intended to comply with Section 162(m) of the Code
and (ii) the exemption described above is no longer available with respect to
such Award, such Award shall not be effective until any stockholder approval
required under Section 162(m) of the Code has been obtained.

* * *

As adopted by the Board of Directors of CellularVision USA, Inc. as of October
18, 1995, and as amended and restated as of December 2, 1998.

By: _____________________________

Title: __________________________

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statements on
Form S-3 (File No. 333-53517) and Form S-8 (File No. 333-11585) of SPEEDUS.COM,
INC. of our report dated March 30, 1999 appearing in this 1998 Form 10-K.

PricewaterhouseCoopers LLP

New York, New York
March 30, 1999

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